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58 Mapping the Field

Investors

Suppliers FIRM Customers

Employees

Figure 3.1 Input–output model of strategic management

Reporting Initiative (1997), the World Bank’s Business Partners for Development,
and the OECD Guidelines for Multinational Companies (2003) – all emphasizing
the wider responsibilities of organizations to all of their stakeholders, and indeed
society at large, that stretches beyond financial performance alone. The Social
Economic Council, a government think-tank and advisory body in the Netherlands,
illustrates this ‘wider’ responsibility by stating that an organization ‘has a visible role
in society that extends beyond the core business and legal requirements, and that
leads to added value to the organization as well as the society at large’. 2

The stakeholder model of strategic management
Conceptually, the widespread adoption of the stakeholder perspective in business
marks a move away from the neo-classical economic theory of the firm to a socio-economic
theory, within which the stakeholder perspective is embedded. A neo-classical
economic theory of the firm prescribes that the purpose of organizations is to make
profits in their accountability to themselves and shareholders, and that only in doing
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so can business contribute to wealth for itself as well as society at large. The socio-
economic theory suggests in contrast that the notion of accountability in fact looms
larger: to other groups outside shareholders, for the continuity of the organization
and the welfare of society. This distinction between a conventional neo-classical
‘input–output’ perspective and a stakeholder conception of strategic management is
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highlighted by the contrasting models displayed in Figures 3.1 and 3.2. In Figure 3.1,
the firm is the spill of the economy, where investors, suppliers and employees are
depicted as contributing inputs, which the ‘black box’ of the firm transforms into
outputs for the benefit of customers. Each contributor of inputs is rewarded with
appropriate compensation and, as a result of competition throughout the system, the
bulk of the benefits will go to the customers. It is important to note that within the
input–output model power lies with the firm, upon which the other parties are
dependent, and that the interest of these other groups and their relationship to the