Stakeholders in small business: critical relationships for value creation

This research explored stakeholder relationships in small business with a particular focus on the concept of stakeholder salience (Mitchell et al, 1997). Stakeholder salience was defined by Mitchell et al as the combined effect of the decision maker’s perception of the stakeholders’ power, legitimacy and urgency. However, definitions of these three attributes were not developed to be of effective assistance for decision makers in the process of managing competing stakeholder expectations in practice. A multiple case study approach was used to gather insights and understanding of stakeholder relationships from the perspective of nine key decision makers in small business. It was found that although the term ‘stakeholder’ was not part of the interviewees’ everyday vocabulary, a stakeholder approach was nevertheless evident in their practices. The concept of power was found to be an ‘essentially contested concept’ with no clear, all encompassing definition. Refined definitions of power and legitimacy within the concept of stakeholder salience, were developed while the existing definition of urgency was found to be appropriate. Building on Mitchell et al’s stakeholder salience, the ValuePLUS model was developed. The ValuePLUS model incorporates the three attributes of stakeholder salience, with refined definitions, and adds two new attributes: ‘value’ to reflect the centrality of value creation to most business relationships, and ‘stake’ to reflect the inherent risk involved in assigning resources to that process. The SPIR model was developed and is proposed as a means to understand the subjective perceptions of whom may be a stakeholder and a practical tool is offered to provide a means for assisting decision makers to analyse the particular stakeholder environment. It was found that a focus on the attributes of the stakeholder relationships rather than the stakeholders, may provide a better understanding of the outcomes. The continuum of stakeholder relationships was developed to provide a framework for analysing and understanding the different types of relationships. This research provides new insights as well as a basis for further research to test the proposed new theories in different settings.