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

Author

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  • Velamuri, Rama

    () (IESE Business School)

  • Venkataraman, Sankaran

    (Darden Graduate School of Business Administration)

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.

Suggested Citation

  • Velamuri, Rama & Venkataraman, Sankaran, 2005. "Why stakeholder and stockholder theories are not necessarily contradictory: A knightian insight," IESE Research Papers D/591, IESE Business School.
  • Handle: RePEc:ebg:iesewp:d-0591
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    References listed on IDEAS

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    Cited by:

    1. Argandoña, Antonio, 2005. "Firm, market economy and social responsibility," IESE Research Papers D/600, IESE Business School.
    2. Nicholas Dew & Saras Sarasvathy, 2007. "Innovations, Stakeholders & Entrepreneurship," Journal of Business Ethics, Springer, vol. 74(3), pages 267-283, September.
    3. Samuel Mansell, 2013. "Shareholder Theory and Kant’s ‘Duty of Beneficence’," Journal of Business Ethics, Springer, vol. 117(3), pages 583-599, October.
    4. 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.

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    Keywords

    Theory of the firm; corporate governance; entrepreneurship; business ethics; stakeholder theory;

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