New business models: Beyond the shareholder approach.
| Autor | Alcaniz, Leire |
1 Introduction
In the present socio-economic context, the neoclassical economic system has a growing number of detractors who are conscious about its limitations (Garriga & Mele, 2004). The dominant theory of the firm defends the maximization of shareholder value as a key element for decision-making (Jensen & Meckling, 1976). The maximization behavior endorsed by the dominant economic paradigm does not seem particularly oriented towards building a better and sustainable economy in the long-term. In fact, many economists have underlined the ethical deficit in economic structures (Naughton, 2015) or the need for a humanistic approach to economics and business, especially after the financial crisis (Mele & Schlag, 2015). In contrast with the traditional theory of the firm, stakeholder theory considers all stakeholders involved in an organization, promotes a decision-making system that considers different interests, and tries to maximize stakeholder value (Freeman, 1984).
In fact, it could be accepted that the stakeholder approach has, to a great extent, displaced the model focused on shareholder value maximization. As specified in a study of 100 firms taken from the Fortune 500, only 10 firms were found to champion an emphasis on shareholder value maximization. Another 22 endorsed a shareholder focus that was "legally and ethically designed," while 64 adopted the approach of "maximizing the welfare of all stakeholders," and 2 aimed to solve "social problems obtaining fair profit at the same time" (Agle et al., 2008). Today, it may seem that the trend in favor of stakeholder theory continues. However, this perception could be misleading. In 2007, the Academy of Management organized a symposium on the future of stakeholder theorizing in business, where it was discussed if stakeholder theory had generated a real change in management or had just facilitated the use of new terminology (Agle et al., 2008). Currently, the situation has not changed substantially. In almost all universities in the world, the classical microeconomic model prioritizing profit maximization and the creation of value for shareholders is still taught (Aguado, Alcaniz, & Retolaza, 2015). It could be acknowledged that stakeholder theory has been accepted by corporations from an instrumental point of view, but it has not been used in the construction of an alternative model to understand the functioning of the firm (a new theory of the firm) (Donaldson & Preston, 1995). In fact, the scholar that firstly developed stakeholder theory proposes in his latest papers the need for a new narrative for businesses based on stakeholder theory in order to understand how firms should be managed (Freeman & Ginena, 2015). In this new narrative, the search for existing cases with explanatory power is a key element (San-Jose, Retolaza, & Freeman, 2017).
With the intention of identifying business models that are helpful in implementing a stakeholder orientation, the first objective of this study is to analyze the main differences between the shareholder approach and stakeholder theory, and then explain and compare new business models that are currently being successfully applied worldwide which are close to stakeholder theory. The second objective is to carry out an empirical analysis to observe the perception of experts regarding those models, the differences between them, and their orientation towards this new narrative. through this analysis our final aim is to show that, according to a panel of experts, the principles of the new narrative for businesses are compatible with different business models. This could be a relevant contribution to stakeholder theory, and for managers looking for a way to implement the principles of stakeholder theory in their organizations
After the introduction, we will present a systematic analysis of both the current shareholder approach and stakeholder theory. In both cases we will use a microeconomic perspective, since that is the one that defines the behavioral patterns of firms, individuals, and families. We will consider the goal of the firm, property rights, contractual ties, value generation, trust, and governance, concluding that the two approaches differ regarding those elements. In section three, we will analyze the six most relevant business models that incorporate an orientation towards stakeholders as part of their own aims, and not only as an instrumental behavior to maximize shareholder value: economy of communion, social economy, solidarity economy, economy for the common good, B-Corps, and blue economy. In the fourth section, we will observe, through an empirical exploration, whether a group of experts share a consensus on the main characteristics of these new business models or not, and whether this consensus corroborates the analysis made in section 3. Finally, we will present our conclusions, recognize the limitations of this study, and propose future lines of research.
2 'The Shareholder Approach versus Stakeholder theory
Modern and unorthodox conceptions of the firm try to stress not only the importance of profits, but also the social responsibility of the firm, which should take into account customers, suppliers, workers, public administrations, and the social environment (stakeholder-based approach) (Freeman & Ginena, 2015); whereas the traditional neoclassical thinking proposed that the social responsibility of business is to increase its profits (shareholder-based approach) (Friedman, 1970).
Nevertheless, even within mainstream economics, some authors state that only taking shareholders' interests (maximizing short-term profit) into account may undermine a firm's productive potential, because this type of behavior does not offer incentives for stakeholders to make specific commitments to the firm (Keay, 2007). Along these same lines, other authors suggest that economic value in a given firm is created by the cooperation between the different stakeholders that converge in that firm (Mele & Schlag, 2015). therefore, the main objective of the firm should be to create value propositions that are interesting for all stakeholders (Freeman & Ginena, 2015). Profits would then be a consequence of developing value propositions that are appealing for stakeholders, and not the aprioristic aim of the firm (Aguado et al., 2015).
This reasoning has been echoed by many mainstream theorists, who now accept the need to consider broad stakeholders' interests and not only shareholders' interests (Jensen, 2001). As a result, some corporations have started to adopt a triple approach to performance measurement that includes indicators pertaining to three different dimensions: profit, people, and planet (Elkington, 1998).
There seems to be a growing consensus on the need for a transformation of the dominant social and economic model in order to promote higher levels of justice and equality. However, it is difficult to find coherent proposals to implement this shift. We believe that it is important to modify the basic ideas about the role, the mission, and the objectives of the firm by articulating an alternative theory of the firm.
A theory of the firm is understood to develop the conceptual framework that states what a firm is and what role it should have in society and in the economy. This theoretical development serves as a basis for the legal and cultural systems surrounding the firm. Currently, the dominant theories of the firm focus almost exclusively on the value generated for shareholders (Coase, 1937) and are based on four pillars: property rights theory (Demsetz, 1967), transaction cost theory (Coase, 1960), contract theory (Barnett, 1986), and agency theory (Jensen & Meckling, 1976) (see first column in table 1).
The following table (table 1) presents a comparison between the dominant theory of the firm (shareholder theory) and stakeholder theory. At the same time, we present the theoretical foundation of the new narrative for businesses based on stakeholder theory.
3 Emerging Business Models
The last few decades have witnessed the appearance of business models that differ from the traditional system. In this section, we will focus on six important alternative models to capitalist businesses: the economy of communion, the social economy, the solidarity economy, the economy for the common good, B-Corps, and the blue economy. These six business models have been identified through a bibliographical analysis considering results from the last 10 years in the Web of Science (WoS), considering all papers in management and economics which had in their keywords "model," "alternative," and "stakeholder." All of them are structured systemic alternatives and have been endorsed by practical experiences. We will briefly describe the main characteristics of each model and then analyze to what extent these new models are closer to stakeholder theory.
3.1 The economy of communion
The economy of communion (EC) has its roots in the Focolare Movement (part of the Catholic Church), created by Chiara Lubich in Trento (Italy) during the 2nd World War. This movement organized a community of sharing, based on fraternity and unity (Lubich, 2007). The EC was born when the Focolare Movement tried to fight against the structural inequalities of the economy by creating new businesses or transforming the existing ones. In doing so, the EC generated employment and resources that helped people to get out of poverty under the principle of profit sharing (Gold, 2013).
The main idea of this movement consists of creating profitable firms that contribute to decreasing income inequalities and benefit the poor through the market economy (Guitian, 2010). However, their profits are not delivered to shareholders, but instead allocated to three different objectives: one-third of the profit is invested in the firm in order to maintain or enhance its level of competitiveness; another one-third is used to help people in need, particularly those in...
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