Stakeholder Influence Strategies
Author(s): Jeff Frooman
Source: The Academy of Management Review, Vol. 24, No. 2 (Apr., 1999), pp. 191-205
Published by: Academy of Management
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Academy of Management Review
1999, Vol. 24, No. 2, 191-205.
t
INFLUENCESTRATEGIES
STAKEHOLDER
JEFF FROOMAN
University of Pittsburgh
When seeking to influence firm decision making, what types of influence strategies do
stakeholders have available, and what determines which type the stakeholders
choose to use? In this article I use resource dependence theory to investigate these
two questions. I propose that the resource relationship (who is dependent on whom)
determines which of the four types of strategies identified in this article will be used:
direct withholding, direct usage, indirect withholding, or indirect usage.
this missing part of stakeholder theory and ultimately enable managers to better understand
and manage stakeholder behavior.
Specifically, in this article I seek to investigate these two research questions regarding
stakeholder influence strategies:
Freeman's (1984) Strategic Management: A
Stakeholder Approach brought stakeholder theory into the mainstream of management literature. As clearly expressed in the title of the book,
one central purpose of stakeholder theory has
been to enable managers to understand stakeholders and strategically
manage them. As
Freeman states, "The stakeholder approach is
about groups and individuals who can affect the
organization, and is about managerial behavior
taken in response to those groups and individuals" (1984: 48). In developing such response
strategies, it seems that we need to answer
three general questions about stakeholders:
3a. What are the different types of influence
strategies?
3b. What are the determinants of the choice of
influence strategy?
In investigating these two questions, I merge
stakeholder theory with resource dependence
theory to propose that the types of influence
strategies can be understood in terms of resources and that a determinant of the choice of
strategies will be the type of resource relationship the firm and stakeholder have and where
the balance of power lies within that relationship.
1. Who are they? (This question concerns their
attributes.)
2. What do they want? (This question concerns
their ends.)
3. How are they going to try to get it? (This
question concerns their means.)
Here, I intend to suggest that although researchers have been addressing the first two
questions, they have given the third question,
regarding stakeholder means- or stakeholder
influence strategies-only
piecemeal attention.
Nowhere in the literature have scholars made
any systematic attempt to treat stakeholder influence strategies in the broadest sense-that
is, as phenomena that can be categorized and
built into a descriptive model. That is the objective of this article-to
build a model of stakeholder influence strategies that will address
MAJORCONTRIBUTIONS
OF THISARTICLE
Throughout much of this article, I use Freeman's (1984) work on stakeholders as my point of
departure. Although almost 15 years old now, no
one can underestimate this work's effect on the
management literature or undervalue its worth
today. In the work Freeman presents the stakeholder model as a map in which the firm is the
hub of a wheel and stakeholders are at the ends
of spokes around the wheel. This conceptualization has become the convention from which
stakeholder theory has developed. However, in
this hub-and-spoke conceptualization, relationships are dyadic, independent of one another,
viewed largely from the firm's vantage point,
and defined in terms of actor attributes. In presenting my theory of stakeholder influence strat-
I thank the following for their helpful comments during
the development of this work: Gaurab Bwardwaj, Craig
Caldwell, Ray Jones, Tim Rowley, Alyssa Sankey, and three
anonymous reviewers. I especially thank Barry M. Mitnick
for the guidance and insight he has provided me throughout
this project.
191
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192
Academy of Management
egies, I expand the stakeholder model in each of
these respects.
For example, in this article I discuss a conflict
involving StarKist, its consumers, and the Earth
Island Institute (EII). I argue that the StarKistconsumer relationship was not independent of
the StarKist-EII relationship; in reality, the two
dyadic relationships were imbedded in a triadic
one. To be meaningful for a firm intent on managing its stakeholders, then, stakeholder theory
needs to be able to place firms in their proper
context-that
of multiactor relationships, like
the one StarKist had with its consumers and the
EII. In this article I incorporate strategies of
stakeholders acting through allies to influence
firms, thereby explicitly introducing triads conand
sisting of nonindependent
relationships
suggesting that the same approach will work for
higher-order stakeholder combinations.
Regarding the theory's prevailing directionality-or the vantage point from which things are
viewed-Freeman's
original definition, which is
still widely used, provides insight. His definition
labels a stakeholder as "any group or individual
who can affect or is affected by the achievement
of the firm's objectives" (1984: 25). Goodpastor
(1991) has observed that this definition implies
and mortwo types of stakeholders-strategic
al-and so one way to view the stakeholder literature, broadly speaking, is in terms of two
branches.
With the strategic stakeholder (the one who
can affect a firm), there is a managing of interests; these stakeholders and their interests must
be "dealt with" (Freeman, 1984: 126) so that the
firm may still achieve its interests. Here, the
stakeholder literature intersects the strategy literature (e.g., Clarkson, 1995; Freeman, 1984; Hill
& Jones, 1992; Huse & Eide, 1996; Rowley, 1997).
The emphasis on managing the stakeholder
makes this approach unidirectional in nature,
with relationships viewed from the firm's vantage point.
With the moral stakeholder (the one who is
affected by the firm), stakeholder theorists seek
some balancing of interests. Here, the stakeholder literature intersects the ethics literature
and gives a more bidirectional account of the
firm and its stakeholders (e.g., Burton & Dunn,
1996; Cohen, 1995; Donaldson & Preston, 1995;
Evan & Freeman, 1988; Freeman & Evan, 1990;
Phillips, 1997; Wicks, Gilbert, & Freeman, 1994).
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April
Missing from the theory, then, has been an
account of how stakeholders manage a firm to
enable them to achieve their interests, possibly
at the expense of the firm's. Such an account is
unidirectional in nature, although with relationships viewed from the stakeholder's vantage
point. For anyone building theory, this should be
interesting in its own right, but even from a
pragmatic managerial standpoint, this has to be
of interest. After all, if firms such as StarKist do
exist in a stakeholder context, how such firms
act to achieve their interests must be, in part,
dependent on how they expect their stakeholders will act (Brenner & Cochran, 1991). And, if
what a firm should do is partly determined by
what its stakeholders will do, we need an account of what its stakeholders will do. Therefore,
to be really useful to a firm trying to manage its
stakeholders, stakeholder theory must provide
an account of how stakeholders try to manage a
firm. Again, that is the central purpose of this
article: to provide an account of how stakeholders try to act to influence the firm's decision
making and, ultimately, the firm's behavior.
Finally, stakeholder theory's emphasis, to
date, has been on the individuals in the relationon the relationships
themselves.
ships-not
Consider the simplest variant of a stakeholder
analysis: a firm with only one stakeholder. In
general, only the firm and the stakeholder have
been brought under the lens. There is, however,
common in the organization theory literature a
way to view a firm and a stakeholder so that
there is a third component to gain insight from:
the relationship between the two actors. In other
words, just as two actors have attributes, their
relationship does too. Indeed, the relationship
may tell as much or more about how the actors
will interact as the individual attributes of the
actors will.
In this article I consider the resource dimension of a relationship and the power that stems
from it, viewing power, then, as an attribute of
the relationship between the actors-not of the
actors themselves. This differs from previous accounts of power in the stakeholder literature
(e.g., Freeman, 1984; Mitchell, Agle, & Wood,
1997), where power has been treated as an attribute of the individual. In short, considering
the relationship between two actors means including a structural component in stakeholder
analysis that so far has been lacking, except in
Jones's (1995) work involving contracts and Row-
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Frooman
1999
ley's (1997) work on networks, and that may hold
further promise for future work in stakeholder
theory.
LITERATURE
REVIEW
Three research streams of strategic stakeholder theory suggest themselves in the form of
the three general questions stated earlier: (1) a
stream devoted to identifying stakeholder attributes, to answer the question "Who are they?"
(2) a stream focused on stakeholder ends, or
interests, to answer the question "What do they
want?" and (3) a stream directed toward stakeholder influence strategies, to answer the question "How are they going to try to get it?" I
discuss each of the three streams in the paragraphs that follow.
Many of the answers to the question "Who are
they?" have taken the form of lists of stakeholders and categorization schemes of stakeholders
(e.g., generic versus specific: Carroll, 1989; primary versus secondary: Clarkson, 1995). In recent years, however, stakeholder attributes
have received increasing attention. The most
comprehensive work to date is probably that of
Mitchell et al. (1997). The authors, in that article,
identify urgency, legitimacy, and power as the
three key attributes of a stakeholder, arguing
that in their various combinations these attributes are indicators of the amount of attention
management needs to give a stakeholder.
Although urgency has received little prior attention in the stakeholder literature, controversy
has surrounded the importance of legitimacy as
a stakeholder attribute. From a firm's strategic
planning standpoint, does it matter whether society deems appropriate a stakeholder's claims?
The appropriateness of a stakeholder's claim
may not matter nearly as much as the ability of
the stakeholder to affect the direction of the firm.
As Freeman (1984) notes, strategies for dealing
even with groups well beyond the fringe will be
put in place if those groups pose a threat to the
firm.
What this debate suggests is that although
disagreement may exist regarding the importance of legitimacy as an attribute, most scholars probably agree that power is an important
one. Various taxonomies have been suggested
to serve as the means of categorizing the types
of power, including formal, economic, and political (Freeman & Reed, 1983), as well as coercive,
193
utilitarian, and normative (Etzioni, 1964; Mitchell
et al., 1997). Rowley (1997) recently has defined
stakeholder power in terms of network structure
and position. In addition, Carroll (1989) has suggested that size in terms of budget and staff, as
well as amount of and source of funding, could
serve as measures of the degree of stakeholder
power. In this article I give another account of
power-one
yet untapped in the stakeholder litthat resource dependence
erature-suggesting
theory gives a useful account of stakeholder
power, although not in the form of a stakeholder
attribute but, rather, as a structural component.
In response to "What do they want?" authors
have generated numerous lists of stakeholder
interests, one of the most comprehensive appearing in Frederick, Post, and Davis's book
(1992). Wood (1994) has suggested various categorization schemes for these stakeholder interests, including concrete versus symbolic, economic versus social, and local versus domestic
versus international. There is no doubt that the
lists and sorting schemes are important. I suggest, however, that although simple in concept,
the mere recognition that stakeholder and firm
interests do diverge is as important a step toward managing stakeholders as is identifying
and classifying those interests. In other words, I
wish to surface here an assumption that I believe underlies all of stakeholder theory: stakeholder theory is about managing potential conflict stemming from divergent interests.
Although this does not seem to be discussed
much in the stakeholder literature, Freeman
does note that an early stakeholder scholar, Dill
(1975), was the first to extend the stakeholder
concept beyond such groups as shareholders
and customers to "groups who are usually
thought of as having adversarial relationships
with the firm," and that in doing so Dill "set the
stage for the use of the stakeholder concept as
an umbrella for strategic management" (Freeman, 1984: 38). In other words, it was upon applying the stakeholder concept to groups where
the potential for conflict existed that the stakeholder model became meaningful. I suggest,
then, that if the potential for conflict did not
exist-that is, if the firm and all its stakeholders
were largely in agreement-managers
would
have no need to concern themselves with stakeholders or stakeholder theory. In short, conflict,
resulting from the opposition of firm and stake-
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Academy of Management Review
194
holder interests, is an unstated premise of the
theory.
I want to make this assumption explicit and
an integral part of the theory, because this article can give an account of how that conflict
plays out, at least in terms of how stakeholders
exert their influence in accordance with their
interests. In addition, part of this article draws
on the bargaining literature, which is an appropriate approach for resolving some conflicts,
and, therefore, belongs in the stakeholder literature, from which it has been missing.
Finally, answers to the question "How are
they going to try to get it?" have always taken
the form of analyses of particular stakeholder
influence strategies. The first such analysis was
probably Vogel's (1978) work, which focused on
such strategies as proxy resolutions and boycotts. In recent years stockholder resolutions
(Davis & Thompson, 1994), boycotts (Paul & Lydenberg, 1992), and modified vendettas (Corlett,
1989; Shipp, 1987) have all been subject to theoretical treatment. Researchers have performed
empirical studies on many of these same stakeholder influence strategies. In these empirical
studies scholars generally have considered the
effectiveness of the strategies, or the market's
reaction to such strategies, and have included
examinations of boycotts (Garrett, 1987; Pruitt,
Wei, & White, 1988), divestitures (Davidson, Worrell, & El-Jelly, 1995), and letter-writing campaigns (Smith & Cooper-Martin, 1997).
As already noted, however, nowhere has anyone attempted to go beyond the listing and discussion of particular influence strategies to construct a model of those strategies. In this article
I aim to do just that, presenting a model that will
specify the types of stakeholder influence strategies available and identify one determinant of
the choice amongst those strategies. As a first
step toward a more comprehensive answer to
how stakeholders go about getting what they
want from management, this model develops
the third research stream of strategic stakeholder theory, which, to date, has been left
largely unattended.
THEARGUMENT
The argument of this article proceeds as follows. First, I propose that open systems theories
may be a sensible starting point for understanding stakeholder influence strategies, and I jus-
April
tify my choice of resource dependence theory
from among those. Because power is a central
theme in the argument, I review that construct
as it exists within resource dependence theory
and distinguish that theory's conceptualization
of power from the closely related, but different,
conceptualization that exchange theory takes.
Second, I use resource dependence theory to
generate four types of stakeholder influence
strategies: withholding, usage, direct, and indirect. This section, Types of Influence Strategies,
then, provides an answer to the first research
question: "What are the different types of influence strategies?"
Third, I derive four types of firm-stakeholder
relationships from resource dependence theory:
firm power, high interdependence, low interdependence, and stakeholder power. Fourth, then,
I demonstrate how resource dependence theory
provides an argument for mapping the types of
influence strategies onto the types of relationships, thereby suggesting that the type of relationship is a determinant of the choice of influence strategy. These two sections combined
provide an answer to the second research question: "What are the determinants of the choice of
influence strategy?"
Last (and fifth), I put forward propositions and
discuss empirical methods for testing them. The
article ends with a concluding section summarizing the article's key points.
The example I refer to throughout this article
is the clash that took place between the EII, an
environmental organization, and StarKist. The
confrontation between the two had been simmering throughout much of the 1980s, because
the foreign tuna fishing industry, from whom
StarKist purchased much of its tuna, was using
a very efficient method of netting tuna, called
"purse-seining." This method was also trapping
and killing over 100,000 dolphins yearly. As a
result, the United States had banned this
method of catching tuna, so the domestic fleet
was using other methods of netting tuna.
In January of 1988, the EII announced its intention of ending StarKist's practice of canning
purse-seined tuna purchased from the foreign
tuna fishing fleet. First, the EII called upon consumers to boycott StarKist. In conjunction with
this call, the EII produced an 11-minute video
full of gruesome scenes of half-drowned dolphins being mangled in a ship's net-hauling
machinery and then being heaved overboard as
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Frooman
shark bait. The video ended with the call for the
boycott.
In March of 1988, the video was aired in parts
or in its entirety on all the major networks. The
EII then mass produced the video and began
distributing it to schools around the country.
During the rest of 1988 and 1989, first the environmental media and then, gradually, the general media began reporting on the story.
By March of 1990, 60 percent of the public was
aware of the issue and the call for a boycott of
StarKist tuna (Ramirez, 1990). In the following
month, StarKist announced it would purchase
only tuna caught by methods other than purseseining and would insist that foreign tuna boats
carry on-board impartial observers (from the Inter-American Tropical Tuna Commission) to
monitor the methods the crews were using.
THEPOWERTO EXTERNALLY
CONTROL
ORGANIZATIONS
The questions this article addresses, regarding available influence strategies and selection
amongst them, constitute a narrowed version of
a broader question in the management literature: How can external entities influence an organization's behavior? This framing of the question suggests looking to the open-systems (Katz
& Kahn, 1966) theories as a possible approach
for understanding influence strategies, because
these theories examine how the environment
affects organizations.
Among these theories,
agency and resource dependence (and, to some
degree, network) focus more on how particular
social actors within the environment affect a
focal organization and assume that the focal
organization can actively respond to those social actors (Donaldson, 1995; Nohria & Gulati,
1994; Oliver, 1991).
Although agency theory (Hill & Jones, 1992)
and network theory (Rowley, 1997) have been
shown to be productive approaches to developing stakeholder theory, in this article I have
chosen the yet untapped theory of resource dependence as a framework, for as Pfeffer and
Salancik (1978) have argued,
Because organizations are not self-contained or
self-sufficient, the environment must be relied
upon to provide support. For continuing to provide what the organization needs, the external
groups or organizations may demand certain actions from the organization in return. It is the fact
195
of the organization's dependence on the environment that makes the external constraint and control of organizational behavior both possible and
almost inevitable (Pfeffer & Salancik, 1978:43).
In short, it is the dependence of firms on environmental actors (i.e., external stakeholders) for
resources that gives those actors leverage over
a firm.
Because those situations where the interests
of a stakeholder and a firm are in conflict form
the more interesting class of stakeholder-firm
interactions, and because, as already argued,
they seem to lie at the core of stakeholder theory, I focus on them. Now, in those cases where
interests diverge and the firm is unwilling to
change its behavior to accommodate a stakeholder, power is likely to decide the outcome
(Pfeffer, 1981, 1992, 1997). Of course, there are
many treatises on power; however, exchange
theory (e.g., Blau, 1964; Emerson, 1962, 1972, 1981)
and resource dependence
theory (Pfeffer &
Salancik, 1978) have focused on power in the
context of resource exchange and dependence;
thus, their perspectives on the sources of power
are the most relevant to this article.
Exchange theory and resource dependence
theory are closely related. The latter is essentially a customized version of the former, designed largely to explain the external control of
organizations, which is why it is the more suitable theory of the two for this article's purposes.
The theories are similar in how they define a
resource and how they define dependence: a
resource is essentially anything an actor perceives as valuable, whereas dependence is a
state in which one actor relies on the actions of
another to achieve particular outcomes (Emerson, 1962; Pfeffer, 1992).
Operationalized, resource dependence is said
to exist when one actor is supplying another
with a resource that is marked by (1) concentration (suppliers are few in number), (2) controllability, (3) nonmobility, (4) nonsubstitutability
(Barney, 1991; Emerson, 1962; Jacobs, 1974; Pfeffer
& Salancik, 1978), or (5) essentiality. Essentiality
of a resource is itself a function of two factors:
(1) relative magnitude of exchange and (2) criticality. The relative magnitude of exchange has
to do with the percent of inputs/outputs accounted for by an exchange. In other words, if
organization A supplies a large proportion of
inputs to organization B, or absorbs a large proportion of outputs from B, then B will be depen-
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196
Academy of Management
dent on A. The criticality of a resource has to do
with whether an organization can exist without
it, if the resource is an input, or exist without a
market for it, if the resource is an output (Jacobs,
1974; Pfeffer & Salancik, 1978).
Power in both theories could be defined as
"the structurally determined potential for obtaining favored payoffs in relations where interests are opposed" (Willer, Lovaglia, & Mark1997: 573). Power is structurally
ovsky,
determined in the sense that the nature of the
relationship-that
is, who is dependent on
whom and how much-determines
who has
power. However, although exchange and resource dependence theorists may agree on this
definition of power, they disagree on how to
operationalize it. Proponents of exchange theory, the earlier of the two theories, state that the
power of agent A over agent B is "equal to, and
based upon, the dependence of B upon A" (Emerson, 1962: 33). Power, then, is stated in absolute
terms; to find if A has power over B, one need
only look to see if B is dependent on A.
However, proponents of resource dependence
theory operationalize power as follows: "For the
dependence between two organizations to provide one organization with power over the other,
there must be asymmetry in the exchange relationship" (Pfeffer & Salancik, 1978: 53). So, in
order to know if A has power over B, one must
verify both that B is dependent on A and that A
is not dependent on B. Power, thus, is defined in
relative terms-that is, A has power over B if B is
more dependent on A relative to A's dependence
on B (Lawler & Yoon, 1995). Because I feel that
resource dependence theory is customized for
the purposes of this article, I draw upon its notion of relative power later in the article when
characterizing the types of relationships organizations can have.
TYPESOF INFLUENCESTRATEGIES
Central to resource dependence theory is the
notion that a firm's need for resources provides
opportunities for others to gain control over it. In
discussions of resources, a simple input-output
model can be a useful way to conceptualize the
flow of resources. That resources flow into a firm
and are then converted by that firm into outputs
suggests that there are two ways in which others can exert control over a firm: (1) in determining whether the firm gets the resources and (2) in
Review
April
determining whether it can use them in the way
it wants. These I term resource control strategies, which I consider to be one type of influence
strategy.
In addition, because I seek to expand stakeholder theory beyond the simple hub-and-spoke
conceptualization with its independent dyadic
ties, and to recognize that resource relationships
can be and often are embedded in other relationships, I assert that there may be more than
one route of influence for a stakeholder to follow: direct, or indirect via another stakeholder.
These I term pathways of influence, which I consider to be a second type of influence strategy.
Both resource control strategies and pathway
strategies are detailed in the sections below.
Types of Resource Control
As indicated above, actors providing resources to a firm are said to have two general
means of control over a firm: (1) determining
whether the firm gets the resources it needs and
(2) determining whether the firm can use the
resources in the way it wants. These two ways of
manipulating resources were characterized as
discretion over resource allocation and discretion over resource use by Pfeffer and Salancik
(1978) and Pfeffer (1992). I refer to them in this
article as withholding and usage strategies.
In the exchange theory literature, my withholding and usage strategies differ mainly in
terms of emphasis from the hostile and conciliatory tactics found in Lawler and Bacharach
(1987) and Lawler (1992). Their terminology tends
to refer to the emotive quality of the tactics (e.g.,
Lawler & Yoon, 1993, 1995, 1996), whereas my
terminology focuses more on the means of leverage the stakeholder has over the firm.
Withholding strategies. Discretion over allocation translates to a stakeholder influence
strategy only if a stakeholder chooses not to
allocate-that
is, it withholds-its
resource. In
other words, a stakeholder with discretion over
allocation only has power if it has the "ability to
articulate a credible threat of withdrawal" of
those resources (Pfeffer & Leong, 1977: 779). Withholding strategies are defined quite simply,
then, as those where the stakeholder discontinues providing a resource to a firm with the intention of making the firm change a certain behavior. Of course, every stakeholder providing a
resource to a firm has a method of withholding
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Frooman
it, and a different term is used to label the
method of practically every stakeholder. For example, employees withhold labor by striking,
and creditors withhold debt financing by nonrenewal of loans. In the StarKist-EII example, it
was a consumer boycott-customers
withholding their dollars-that
influenced StarKist's decision to confront the foreign tuna fishing industry over its practices.
I should probably note that the mere threat of
using withholding (or any of the influence strategies) may be as effective a tool for influencing
firm behavior as the actual use of the strategy.
In this article, however, I do not really examine
the factors determining
effectiveness
but,
rather, the factors determining choice of strategy. For the purposes of this article, then, it
really does not matter whether the stakeholder
actually ever withholds or simply threatens to
do so.
Usage strategies. Usage strategies are those
in which the stakeholder continues to supply a
resource, but with strings attached. In the
StarKist-EII example, StarKist employed a usage
strategy against the foreign tuna fishing industry: while StarKist continued to purchase tuna, it
did so with the conditions that the industry use
other types of nets besides purse-seins and that
observers be on board tuna boats to assure this.
So, in short, withholding strategies determine
whether a firm obtains a resource, whereas usage strategies seek to attach conditions to the
continued supply of that resource.
Now, in either case (withholding or usage
strategies), the stakeholder demands that the
firm change some behavior. In either case, the
stakeholder uses its resource relationship with
the firm to leverage that demand. And, in either
case, if the stakeholder is successful in employing its strategy, the firm will change its behavior. From the firm's point of view, then, withholding and usage strategies may appear to acmount
to the same thing. From the stakeholder's point
of view, however, withholding and usage strategies differ markedly: they differ in their approach, they differ in what ultimately makes
them credible threats (Schelling, 1956; Williamson, 1983), and they differ in terms of the provisions they include regarding who pays the costs
that may accrue to a firm if the firm is to change
its behavior according to the stakeholder's demands.
197
Quite simply, in terms of approach, a stakeholder that employs a withholding strategy is
prepared to shut off the flow of resources to a
firm, whereas a stakeholder that employs a usage strategy is not. Clearly, what will make the
threat of withholding credible is the ability of
the stakeholder to simply walk away from the
relationship with no harm to itself. This will
occur when the firm is unilaterally dependent
on the stakeholder.
In other situations, however, such as one in
which there is reciprocal exposure-that
is,
when the stakeholder and firm are mutually dependent-the
stakeholder will not be in a position to walk away from the relationship (Lawler
& Bacharach, 1987; Williamson, 1979, 1983). In
such a scenario the welfare of each will be
linked to the other, so each will do well only by
attending to the needs of the other.
In the StarKist-EII scenario, for example, the
sales of the foreign tuna fishing industry were
linked to the sales of StarKist. That industry
knew that if a boycott were to begin affecting
StarKist's sales, the fleet's sales to StarKist
eventually would have to be affected too. Thus,
the industry could do well only by acceding to
StarKist's demands regarding choice of netting
and on-board observers.
Finally, provisions
for which party pays
costs is also a distinguishing
characteristic
between withholding and usage strategies. If
we assume that a firm seeks profits and, therefore, chooses efficient actions, then a stakeholder that requests a change in firm behavior
is implicitly asking the firm to choose a less
efficient means to its end. Economic costs,
thus, will presumably be involved in a change
of firm behavior. Indeed, in the StarKist-EII
case, the reason the foreign tuna fishing industry purse-seined was that it was the most
efficient method of netting tuna, so any deviation from that practice was going to be costly
to that industry. Similarly, the reason StarKist
canned purse-seined
tuna was that from an
efficiency standpoint, as the lowest-costing
tuna, it was the preferred tuna to can, so any
deviation from that practice was going to be
costly to that company.
In addition to economic costs, negotiating,
monitoring, and enforcement costs also could be
involved. Costs of changing behavior, then, will
be a major issue in any given stakeholder-firm
dispute; in fact, from the firm's point of view,
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Academy of Management
198
again assuming that firms are first and foremost
profit maximizers, it will be the major issue.
Authors of the social exchange literature that
pertains to bargaining (Bacharach & Lawler,
1981; Lawler, 1986, 1992; Lawler & Bacharach,
1987) would predict that with withholding strategies, it would typically be the firm that would
be expected to pay the greatest portion of the
costs, whereas with usage strategies, costs
would tend more to be shared. As will be demonstrated later in this article, this is because
withholding strategies are used when the balance of power lies on the side of the stakeholder.
In other words, when the firm is more dependent
on the stakeholder than the stakeholder is on
the firm, the stakeholder can afford to withhold
and try to push costs onto the firm. Usage strategies, however, are used when power lies more
evenly between the two, and, thus, costs are
more evenly divided.
Types of Influence Pathways
A second source of power that exists in resource dependence is the one that arises from
relationships with others who supply resources
to a focal firm. In other words, withholding and
usage do not have to be performed by a stakeholder but, instead, could be performed by an
ally of the stakeholder with whom the focal firm
has a dependence relationship. The existence of
such allies determines the pathway of influence
the stakeholder can use to exercise resource
control. Gargiulo (1993) has divided these pathways into "direct" and "multistep" and has demonstrated that they do exist as interorganizational power strategies and do occur within the
context of resource dependence theory. In this
article I refer to the pathways as direct and
indirect.
Direct strategies. Direct strategies I define
simply as those in which the stakeholder itself
manipulates the flow of resources to the firm
(again, either by withholding or usage). In the
StarKist-EII example, when the consumers did
choose to boycott StarKist tuna, they were exercising a direct strategy against that firm.
Indirect strategies. Indirect action against a
target organization is a notion that exists elsewhere in the open systems theories. For example, in agency theory Mahon (1993) has used the
term manufactured agents to refer to indirect
agents-those
that work in concordance with a
Review
April
principal, although there is no formal agency
relationship between them. In network theory
Rowley (1997) has used the term indirect stakeholders to refer to influential agents of a focal
organization that do not have direct relationships with that organization, but still work in the
focal firm's interests. In the context of resource
dependence theory, I define indirect strategies
as those in which the stakeholder works through
an ally, by having the ally manipulate the flow
of resources to the firm (by either withholding or
usage).
Taking an ongoing resource relationship and
embedding into it a new relationship is the essence of the indirect strategy. The purpose of
adding this new relationship is to shift the balance of power to favor the weaker actor. This is
akin to both the process described by Granovetter (1985), where organizations gain control over
economic transactions by embedding them in
social relationships, and the social structure
analysis approach of Burt (1982, 1992), where
constraint results from dependence on coordinated actors.
As indicated, in the StarKist-EII controversy,
the EII's efforts to organize consumers to boycott
StarKist was an example of a stakeholder group
(the EII) using an indirect strategy against a
firm. Of course, the first step in any indirect
strategy has to be a communication strategy,
which the stakeholder directs at the ally. Specifically, communication
strategies
are those
where the stakeholder informs a potential ally
about (1) a firm's behavior, (2) why the stakeholder perceives that behavior to be undesirable, and (3) what the ally ought to do (i.e., initiate a resource strategy against the firm or a
communication strategy directed at an ally of
the ally).
In the StarKist-EII example, the 1 -minute
video EII filmed on the Panamanian tuna boat
formed the center of the EII's communication
strategy. Aired on all of the major television
networks and then mass produced and distributed, the video was the primary vehicle by
which the EII communicated its request for a
boycott to consumers. In short, the indirect strategy employed by the EII against StarKist entailed a communication strategy between the EII
and consumers and a direct strategy (the boycott) between consumers and StarKist.
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Frooman
1999
TYPESOF RESOURCERELATIONSHIPS
To begin to address the second research question posed in this article's introduction, "What
are the determinants of the choice of influence
strategy?" I introduce, in this section, a typology
of stakeholder-firm relationships based on retheory. As already sugsource dependence
a central determinant of
be
gested, power will
where a stakein
those
situations
outcomes
interests
a
opposed. In
firm
find
their
and
holder
literature,
power
and
exchange
the resource
stems from the dependencies of the two parties
on one another; in other words, power is structural in nature, arising from the relationship
between the two parties. How, then, can the different types of resource relationships be characterized in terms of dependencies?
Pfeffer and Salancik posit that "when the net
entities is
exchange between organizational
asymmetrical, some net power accrues to the
less dependent organization. This power may
be employed in attempting to influence or constrain the behavior of the other more dependent organization" (1978: 53). However, if the
net exchange is symmetrical, so that the two
organizations are equally dependent on each
other, neither "possesses a particular power
advantage, reducing the likelihood that one
organization will dominate interorganizational influences" (1978: 53). This argument suggests a typology of the possible relationships,
between two organibased on dependencies,
and a
zations (e.g., between a stakeholder
firm). Pfeffer and Salancik never presented
such a typology, but the one that appears in
Table 1 stems directly from their work (1978:
52-54).
Each axis has to do with dependence, which,
of course, can range from low to high. For simplification purposes, however, dependence is
treated as a dichotomous variable here, such
TABLE 1
Typology of Resource Relationships
Is the stakeholder dependent on the firm?
No
o
ffi
Yes
tl No
Low interdependence
Firm power
5
Stakeholder power
High interdependence
4
C1-0
Yes
199
that each party either is or is not dependent on
the other. The horizontal axis has to do with
dependence of the stakeholder on the firm and
the vertical axis with dependence of the firm on
the stakeholder.
Two quadrants along one diagonal (northeast
and southwest) capture Pfeffer and Salancik's
notion of asymmetry in the exchange relationship leading to power. I label these stakeholder
power and firm power. The former, for example,
occurs when the stakeholder is less dependent
on the firm than the firm is on the stakeholder.
The other two quadrants along the other diagonal illustrate Pfeffer and Salancik's conception
of interdependence, which occurs when there is
symmetry in the exchange relationship-either
both parties are highly dependent on one another, or both parties are not very dependent on
each other. I label these high interdependence
and low interdependence, accordingly.
In the StarKist-EII example, using the essentiality of a resource as a criterion for determining dependency, I argue that the relationships
between the adversaries
were as follows.
and
StarKist, neither
First, between the EII
was dependent on the other for a resource, so
this indicates that a low-interdependence
relationship existed between them. Second, in
the relationship
between
and
consumers
StarKist, StarKist was highly dependent on
tuna consumers for sales revenues, because
StarKist's only business line is tuna products.
Consumers, however, were not dependent on
tuna, and many appeared to be happy doing
without it for months at a time. This combination of dependencies
suggests a relationship
that can be characterized
as one of stakeholder power. Third and last, between StarKist
and the foreign tuna fishing industry, I believe
a high-interdependence
relationship existed.
At the time, StarKist was the largest tuna canner in the world-canning
35 percent of the
tuna consumed in the United States (Lancaster, 1990)-so StarKist was the primary customer of the foreign tuna fishing industry. The
foreign tuna fishing industry, in turn, was the
primary supplier to StarKist, providing it with
70 percent of its tuna (Oceans, 1988). This sugbegests a high level of interdependence
cause, given the huge volume of business
moving between the two parties, neither could
have replaced the other easily or quickly.
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Academy of Management
200
CHOICEOF STRATEGY
The second research question posed in this
article, "What are the determinants of the choice
of influence strategy?" remains unanswered at
this point. The preceding two sections, however,
have laid the groundwork for an answer by first
defining the types of influence strategies that
exist and then defining the types of resource
relationships that exist. In this section I demonstrate how resource dependence theory suggests that relationship drives the choice of strategy.
Level of Firm Dependence
Pathway Chosen
Determines Type of
First, as Pfeffer notes, organizations will be
responsive to others in their environment who
provide them with valuable resources:
Resource dependence theory suggests that organizational behaviors become externally influenced
because the focal organization must attend to the
demands of those in its environment that provide
resources necessary and important for its continued survival. . .organizations will (and should) respond more to the demands of those organizations or groups in the environment that control
critical resources (Pfeffer, 1982:193).
Put another way, a low level of dependence of a
firm on a stakeholder implies that the firm does
not need to be responsive to the stakeholder.
The firm, then, is somewhat impervious to stakeholder influence. Thus, the stakeholder will tend
to use indirect strategies (i.e., act through an
ally on whom the firm is more dependent and,
therefore, more responsive to) to influence the
firm.
Level of Stakeholder Dependence Determines
Type of Resource Control Chosen
Pfeffer and Salancik (1978) also note that when
resource dependence exists, it means that the
welfare of the focal firm is linked to the organization providing key resources. As the degree of
dependence increases, the more tightly the focal
firm's outcomes become tied to its resource providers. Therefore, a high level of dependence of
the stakeholder on the firm means that the welfare of the stakeholder is closely tied to the
welfare of the firm. The stakeholder, then, will
not wish to see the firm's success threatened
and, therefore, will not choose to withhold a
April
Review
critical resource from the firm; rather, the stakeholder will tend to focus on usage strategies as
its means of influence.
Typology of Influence Strategies and Resource
Relationships
Using these two assumptions regarding strategy choices, one can construct a simple two-bytwo typology of strategies of the four possible
strategies and the circumstances under which
each will be chosen (see Table 2).
The high-interdependence cell is of particular
interest. As already noted, the foreign tuna fishing industry and StarKist were in this category.
Their relationship was a mixture of mutual dependence and conflict: they were partners in
that neither could do well without the other and
that both stood to lose by a successful consumer
boycott, and, yet, as firms in the same valueadded chain, they were adversaries-each
trying to extract from the chain as much profit as
possible at the expense of the other. Schelling
(1960) labels actors in such situations as "mixedmotive" (mixed, that is, in their relationship to
one another-half-partner,
half-competitor-not
in terms of their clarity of mind regarding preferences).
Common sense would suggest that such
mixed-motive players would negotiate and find
a mutually acceptable solution regarding behaviors they engage in jointly, in order to avoid
mutual disaster. Recent empirical studies in the
social exchange literature on bilateral deterrence (Lawler, 1992; Lawler & Bacharach, 1987;
Lawler & Yoon, 1995, 1996) support this intuition
about mixed-motive players.
Common sense might also suggest that in
high-interdependence
relationships the costs
that accompany behavioral changes will be
shared by both parties. Game theory literature
TABLE 2
Typology of Influence Strategies
Is the stakeholder dependent on the firm?
r
No
Yes
No
Indirect/withholding
(low interdependence)
Direct/withholding
(stakeholder power)
uC 0
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Yes
Indirect/usage
(firm power)
Direct/usage (high
interdependence)
1999
201
Frooman
supports this intuition: in game theory the highinterdependence relationship would be characterized as a two-person, non-zero-sum, explicitbargaining game (Lawler, 1992; Schelling, 1960;
Straffin, 1993). Researchers have shown, in such
games, that in any round of bargaining, the
player with the lower ratio of cost of concession
to cost of exit must rationally concede to the
other (Zeuthen, 1930/1968) and that, after enough
rounds, players eventually will move away from
all-or-nothing solutions and arrive at a compromise point. Where, theoretically, this point exists is a matter of controversy (e.g., Gauthier,
1986; Hampton, 1991; Harsanyi, 1977; Nash, 1953).
What everyone agrees on, however, is that a
compromise solution does exist and that rational players will seek it. In short, two actors finding themselves in a high-interdependence
relationship can be expected to bargain over the
costs involved and eventually to agree to share
those costs in some manner.
StarKist-EII Example
As an illustration of the theory, consider the
StarKist-EII confrontation again. Given the relationships among the players, does the theory
account for what strategies the players chose to
try?
Consider the first pair of adversaries-the
EII
and StarKist-which, I have argued, was an example of a low-interdependence
relationship.
Accordingly, the theory would predict that the
EII would try indirect withholding.
The EII
sought out consumers as an ally and communicated to them (via its video) its desire for a
boycott-an indirect withholding strategy.
The second pair of adversaries-consumers
and StarKist-was
engaged in a relationship
marked by stakeholder power. The theory would
predict, then, the use of a direct withholding
strategy by the consumers. The consumers, in
large numbers, did boycott tuna-a direct withholding strategy.
Finally, consider StarKist versus the foreign
tuna fishing industry, which were in a highinterdependence relationship- one we have observed is marked by both partnership and competition. The theory would predict a direct usage
strategy here. StarKist, never once threatening
to withhold its business, informed the foreign
tuna fishing industry that it wanted tuna netted
by methods other than purse-seining and that it
wanted observers on the boats to verify the practices the boats were using. This is a direct usage
strategy: StarKist attached strings to its business with the foreign tuna fishing industry.
Foremost among the costs associated with the
above change in behaviors by StarKist and the
foreign tuna fishing industry would be the economic costs involved with the switch to netting
methods less efficient than purse-seining and
the monitoring costs associated with the maintenance of on-board observers. These costs were
split roughly evenly between StarKist and the
foreign tuna fishing industry. (The cost per ton of
tuna at the dock increased only slightly, even
though it cost the industry more to catch it, and
the cost per tin of tuna on the supermarket shelf
remained the same, even though it was costing
StarKist slightly more to purchase it at the dock.)
So, where StarKist was the target of a withholding strategy by consumers, the balance of
power lay with the stakeholder (the consumers),
and the costs of behavioral change fell on the
firm-StarKist. When StarKist turned on the foreign tuna fishing industry, however, and made
it the target of a usage strategy, the balance of
power lay more evenly between the two, owing
to the nature of the relationship (high interdependence); thus, the costs were ultimately split
between the two, as would be predicted in a
two-person, non-zero-sum, explicit-bargaining
game.
PROPOSITIONS
In this article I have been arguing that who is
dependent on whom and by how much determines the type of influence strategy that will be
chosen. The questions "Is the stakeholder dependent on the firm?" and "Is the firm dependent on the stakeholder?" determine the independent
variable:
the type of resource
relationship. The dependent variable is the
choice of influence strategy.
Corresponding, then, to each of the four cells
in the second typology (Table 2) is a testable
proposition. Each proposition identifies the relationship between the stakeholder and firm in
terms of their dependence on one another (the
independent variable) and then states which
strategy the stakeholder would choose to influence the firm's decision making (the dependent
variable):
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202
Academy of Management
Proposition 1: When the relationship is
one of low interdependence,
the
stakeholder will choose an indirect
withholding strategy to influence the
firm.
Proposition 2: When the relationship is
marked by firm power, the stakeholder will choose an indirect usage
strategy to influence the firm.
Proposition 3: When the relationship is
marked by stakeholder power, the
stakeholder will choose a direct withholding strategy to influence the firm.
Proposition 4: When the relationship is
one of high interdependence,
the
stakeholder will choose a direct usage
strategy to influence the firm.
In an empirical test of this article's four propositions, the dependent variable could be categorical-withholding,
usage, direct, or indirect-or
could be, in part, numeric, with a proportion of the
cost of behavioral change borne by the firm serving as a proxy for withholding and usage strategies. In other words, we can distinguish between
withholding and usage operationally by determining whether almost all of the costs involved
are absorbed by the firm (withholding) or whether
the costs are more evenly split between the firm
and stakeholder (usage).
Most of the methodological
issues, then,
would probably revolve around the independent
variable. Although determining who is dependent on whom may not be problematic, determining the extent of that dependence may be.
The simplest way of addressing this problem
would be through a laboratory study in which
the level of dependence could be manipulated
straightforwardly. For example, games similar
to the prisoner's dilemma have been devised,
where the level of dependence of each party on
the other is varied systematically across four
versions of the conflict scenario (Ford & Blegan,
1992; Lawler & Yoon, 1993).
Many have questioned the generalizability of
results garnered from such laboratory experiments (Gilbert, 1996), and several have performed studies using business data (Pfeffer,
1972; Randall, 1973; Salancik, 1979). In one study
Pfeffer and Leong (1977) examined allocations to
members of local United Ways to see if allocations were a function of dependence. Depen-
April
Review
dence of the members on the United Way was
measured in terms of the proportion of the member's own budget received from the United Way,
whereas dependence of the United Way on the
members was a function of the size of the member.
These studies all make use of nonprofit and
public sector data, presumably because they are
publicly available. Resource dependence studies with for-profit data are lacking, however,
except at the industry level (e.g., Pfeffer &
Nowak, 1976), despite criticism that resource dependence theory is an organization theory and,
therefore, should not be tested at the industry
level (Davis & Powell, 1990; Nohria & Gulati,
1994).
A better approach, then, might be to look at
the work done on wholesaler-sponsored
voluntary chains (Kotler, 1997), such as True Value
hardware stores. Retailers join such voluntary
chains to achieve buying economies and to
standardize their products. Within these chains,
each store carries national brands, in addition
to the wholesaler's private label, and the owner
of each store decides that mix. Although there is
effort at standardization, special deals and advertising arrangements may be negotiated between a retailer and the wholesaler on a caseby-case basis, and participation in wholesalerorganized advertising, for example, may vary
from store to store.
Given the existence of such chains, the influence strategies used by the wholesaler to enforce initiatives (e.g., use of advertisements picturing minorities) could be examined.
The
dependence of the wholesaler on any given retailer could be measured by the proportion of
the wholesaler's revenues provided by that retailer (note that some individuals own two or
more retail stores), whereas the dependence of
the retailer on the wholesaler could be measured by the percentage of total purchases the
retailer obtains from the wholesaler. In short,
the approach would be similar to that taken by
Pfeffer and Leong (1977), except the researcher
would use data from the for-profit sector as opposed to the nonprofit sector.
CONCLUSION
When stakeholders seek to influence corporate behavior, what types of influence strategies
do they have available and what factors can
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Frooman
1999
explain which strategies they choose to use?
The theory in this article suggests the following:
(1) that four types of stakeholder influence strategies- direct withholding, indirect withholding,
direct usage, and indirect usage-exist;
(2) that
four types of resource relationships-stakeholder power, high interdependence, low interdependence, and firm power- exist; and (3) that
the balance of power implied by the relationship determines which of the types of strategy a
stakeholder will use. High dependence of the
stakeholder on the firm implies the stakeholder
will employ usage strategies; low dependence
implies the use of withholding. High dependence of the firm on the stakeholder implies the
use of direct strategies; low dependence implies
indirect ones. The theory, then, provides one
possible answer to the question regarding how
stakeholders go about trying to get what they
want from firms-one of three key questions this
article's introduction suggested lay at the heart
of strategic stakeholder theory.
As I have argued in this article, putting the
focus on the influence strategies of stakeholders
instead of on the response strategies of firms
(Oliver, 1991) may, at first, seem a counterintuitive approach to strategic stakeholder theory.
After all, if stakeholder theory is managerial in
orientation (Donaldson & Preston, 1995), it seems
that articles ought to focus on firm actions-not
stakeholder actions. However, knowing how
stakeholders may try to influence a firm is critical knowledge for any manager. After all, for
managers to act strategically and plan the actions they intend their firm to take presupposes
that they have some idea of how others in their
environment will act.
In short, I have contended in this article that
understanding the actions of those one may
need to respond to is a part of good management and, thus, is rightfully part of stakeholder
theory. I believe this approach to strategic
stakeholder theory holds promise for the ongoing development of stakeholder theory.
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Jeff Frooman is a Ph.D. candidate at the University of Pittsburgh. His current research
interests include business ethics, corporate social performance, stakeholder theory,
and interorganizational relations.
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