Research summary: While research has shown that good stakeholder relations increase the value of a firm, less is known about how specific types of stakeholder governance affect firm value. We examine the value of one such governance mechanism—community benefits agreements (CBAs) signed by firms and local communities—intended to minimize social conflict that disrupts access to valuable resources. We argue that shareholders evaluate more positively CBAs with local communities with strong property rights and histories of institutional action and extra‐institutional mobilization because these communities are more likely to cause costly disruptions and delays for a firm. We evaluate these arguments by analyzing the cumulative abnormal returns associated with the unexpected announcement of 148 CBAs signed between mining companies and local indigenous communities in Canada. Managerial summary: With firms across many industries facing escalating costs associated with social conflict, new tools are emerging to help firms mitigate these risks by seeking the support of the local communities in which they operate. Community benefits agreements (CBAs) are contracts in which a community provides consent for a new investment in return for tangible benefits, such as local hiring and revenue sharing. We argue that although CBAs are costly for the firm, they are particularly valuable when communities can cause costly disruptions and delays for a firm. Our study of investor reactions to the announcement of 148 CBAs signed between mining companies and local indigenous communities in Canada shows that investors value more CBAs signed with communities with strong property rights and histories of protest. Copyright © 2017 John Wiley & Sons, Ltd.
Collaborations between organizations from different sectors, such as those between firms and nonprofits or governments, can offer effective solutions to complex societal problems like climate change. But complications arise because organizations operating in different sectors rely on the approval of different audiences, who may not view these relationships positively, for resources and survival. I show how concerns about audience approval impede cross-sector collaborations forming between firms and social movement organizations (SMOs) despite their potential societal benefits. Firms wanting to signal their efforts in support of a movement’s cause may be eager to form collaborations with SMOs. But when SMOs’ supporters and/or peers define their identity in opposition to firms—when they are oppositional audiences—collaborations do not form. I argue and find that SMOs who cooperate, and don’t compete, with oppositional peers can better navigate the constraint of oppositional audiences. Firms, in contrast, aggravate the constraint of oppositional audiences. Firms’ inclination to seek collaborations to repair their reputations with their own audiences after being contentiously targeted by a movement compounds the challenge to SMOs of partnering with the enemies of their friends. My arguments on countervailing audience effects stifling collaborations are corroborated in 25 years of data on interactions between SMOs in multiple environmental movements and Fortune 500 firms.
Social movement organizations (SMOs) are increasingly using collaborative tactics to engage firms. Implications of this are not well understood by researchers. This study investigates one risk that looms over such collaborations: if the corporate partner is later implicated in an industry scandal. Ideas are investigated in the context of the Deepwater Horizon oil spill. First, we find that industry scandals differentially affect contentious and collaborative SMOs’ ability to mobilize resources. SMOs that had collaborated with the oil and gas industry before the spill suffered from reduced public support after the spill, and those that had contentiously interacted with the industry enjoyed increased contributions. Second, we find that industry scandals affect SMOs’ willingness to collaborate with firms in the future. We show that the Horizon oil spill produced a broad chilling effect on environmental SMOs’ collaborations with firms both within and outside of the oil and gas industry. Our findings show that there are risks inherent to a collaborative strategy that cannot be fully mitigated. Further, we demonstrate that industry scandals represent critical exogenous events that affect social activists’ tactical repertoires for engaging in private politics.
We analyze the relationship between the actions and interactions of secondary stakeholders with an interest in corporate social performance (CSP) and variation in firm-level CSP across countries. Our work represents a significant theoretical shift in research exploring comparative CSP, which, to date, has focused on cross-national variation in institutions. We propose that stakeholders can also drive cross-country heterogeneity in CSP by influencing the salience of the issues for which they advocate. Stakeholders raise salience of CSP issues through their interactions with important sociopolitical actors within a country, signaling their collective ability to change expectations on CSP. CSP issue salience is also heightened where heterogeneous stakeholder groups advocate for CSP issues, signaling that issues have garnered widespread acceptance or legitimacy. Managers are also more attuned to the urgency of issues through the direct actions that stakeholders take against firms in the country. We also argue and find that these effects are moderated by interstakeholder interactions, which signal the degree of consensus among stakeholders on issues and their ability to mobilize repeatedly against firms. We draw on a novel data set of 250 million media-reported events to identify secondary stakeholders with interests in the environmental and social issues that constitute CSP, their direct actions against firms, and their interactions with important sociopolitical actors and each other. We show empirically that variation in secondary stakeholder actions and interactions between countries, and within countries over time, is associated with differences in firm-level CSP among a sample of 2,852 firms spanning 36 countries from 2004 to 2013.
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