Microfoundations of Entrepreneurial Stakeholder Strategy: The Role of Political Threat Perceptions

Abstract

We examine the role of political institutions in determining a firm's stakeholder orientation. We propose that divergence between an entrepreneur's own political ideology and the political environment triggers a threat reaction that induces entrepreneurs to embrace a different stakeholder model then their preferred model. For example, liberal entrepreneurs in a conservative environment will narrow their orientation to focus on financial stakeholders, while conservative entrepreneurs in a liberal environment will broaden their orientations to focus on workers, customers, suppliers, members of the local community, the environment, and so on. We also suggest that stakeholder activism and investor protection moderate the relationship between this threat perception and entrepreneurial action. We test our hypotheses on a sample of entrepreneurs leading newly public firms (ten years or fewer following a successful IPO) from 2009 to 2015, finding preliminary empirical support for our proposed relationship and mechanism.