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Why stakeholder and stockholder theories are not necessarily contradictory: A knightian insight

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Author Info
Velamuri, Rama () (IESE Business School)
Venkataraman, Sankaran (Darden Graduate School of Business Administration)

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Abstract

The normative foundations of the investor centered model of corporate governance, represented in mainstream economics by the nexus-of-contracts view of the firm, have come under attack, mainly by proponents of normative stakeholder theory. We argue that the nexus-of-contracts view is static and limited due to its assumption of price-output certainty. We attempt a synthesis of the nexus-of-contracts and the Knightian views, which provides novel insights into the normative adequacy of the investor-centered firm. Implications for scholarship and management practice follow from our discussion.

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Paper provided by IESE Business School in its series IESE Research Papers with number D/591.

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Length: 19 pages
Date of creation: 30 May 2005
Date of revision:
Handle: RePEc:ebg:iesewp:d-0591

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Postal: IESE Business School, Av Pearson 21, 08034 Barcelona, SPAIN
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Related research
Keywords: Theory of the firm; corporate governance; entrepreneurship; business ethics; stakeholder theory;

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References listed on IDEAS
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  3. Boatright, John R., 2002. "Contractors as stakeholders: Reconciling stakeholder theory with the nexus-of-contracts firm," Journal of Banking & Finance, Elsevier, vol. 26(9), pages 1837-1852, September. [Downloadable!] (restricted)
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  6. Langlois, Richard N & Cosgel, Metin M, 1993. "Frank Knight on Risk, Uncertainty, and the Firm: A New Interpretation," Economic Inquiry, Oxford University Press, vol. 31(3), pages 456-65, July.
  7. Dew, Nicholas & Velamuri, S. Ramakrishna & Venkataraman, Sankaran, 2004. "Dispersed knowledge and an entrepreneurial theory of the firm," Journal of Business Venturing, Elsevier, vol. 19(5), pages 659-679, September. [Downloadable!] (restricted)
  8. Arrow, Kenneth J, 1974. "Limited Knowledge and Economic Analysis," American Economic Review, American Economic Association, vol. 64(1), pages 1-10, March.
  9. Edward Freeman, R. & Evan, William M., 1990. "Corporate governance: A stakeholder interpretation," Journal of Behavioral Economics, Elsevier, vol. 19(4), pages 337-359. [Downloadable!] (restricted)
  10. Demsetz, Harold, 1983. "The Structure of Ownership and the Theory of the Firm," Journal of Law & Economics, University of Chicago Press, vol. 26(2), pages 375-90, June.
  11. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April. [Downloadable!] (restricted)
  12. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-83, June. [Downloadable!] (restricted)
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  13. Reinhard H. Schmidt, 1997. "Corporate Governance: The Role of Other Constituencies," Working Paper Series: Finance and Accounting 3, Department of Finance, Goethe University Frankfurt am Main. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Nicholas Dew & Saras Sarasvathy, 2007. "Innovations, Stakeholders & Entrepreneurship," Journal of Business Ethics, Springer, vol. 74(3), pages 267-283, September. [Downloadable!] (restricted)
  2. S. Certo & Catherine Dalton & Dan Dalton & Richard Lester, 2008. "Boards of Directors’ Self Interest: Expanding for Pay in Corporate Acquisitions?," Journal of Business Ethics, Springer, vol. 77(2), pages 219-230, January. [Downloadable!] (restricted)
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