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Brazil Research Proposes Strategy for Stakeholder Capitalism Implementation

researchA lot of research over the past decades has focused on the theory, economics, and framework for stakeholder capitalism. This study addresses the implementation process of stakeholder management at the practical level based on research conducted in Brazil.
 
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Understanding how firms manage multiple stakeholders and the processes used to implement a stakeholder value creation system in Brazil is the purpose of the recent paper, “Stakeholder Value Creation System: Understanding the Process,” by Silvia Ferraz Nogueira De Tommaso, Department of Administration, and Felipe Mendes Borini, School of Economics, Administration and Accounting, at the University of São Paulo, São Paulo.
 
The paper was recently published in Sustainability, Accounting, Managing and Policy.
 
The authors say they based their investigation on a conceptual framework extracted from a literature review. From there, they report that they “conducted qualitative empirical research designed as a multiple-case study through in-depth interviews with 47 people from 11 different firms” in Brazil.
 
The recommendations in their research, they say, “guide managers to align multiple stakeholders in the same direction to achieve superior performance and perennity.”
 
This paper proposes a framework demonstrating how a “firm can implement a stakeholder value creation system pointing to three processes: value creation, distribution, and capture. Value distribution mechanisms are drivers for both value creation and capture processes. The system is a set of multiple flow relationships between the firm and its stakeholders.”
 
Their proposed stakeholder value creation system is composed of seven elements: “1) walk-the-talk organizational behavior, 2) stakeholder business model, 3) societal non-attended needs, 4) stakeholder preference matrix, 5) stakeholder bargaining power, 6) retention of rents, and 7) governance mechanism. Managers may design their firm’s unique processes using these elements as drivers.”
 
From an economic strategy approach, they explain, “the firm’s economic value creation is the positive difference between the willingness of its customers to pay for its products or services and the total cost of producing those products or services through transactions. The firm’s value appropriation is the economic profit acquired from part of the effort and the economic value created in the transactions.”
 
According to the authors, “the existing literature is not clear about how a firm develops a stakeholder value creation system, which seems to be a central element in management. Besides, we cannot separate daily business activities into fixed and closed boxes. Business activities are intertwined and transversal within the whole company’s daily activities and operate as an open system rather than a cause-effect linear sequence production line. Thus, our research question is: how does a firm implement a joint value creation and appropriation system for multiple stakeholders?”
 
In this sense, they explain, “this paper aims to describe a firm’s processes to develop a stakeholder value creation system...The kickoff step is top managers’ mindset change, which pushes an organizational behavior reformulation and a business model redefinition. Both aspects incorporate societal issues, which are material themes in the stakeholder preference matrix. To ensure that the firm and multiple stakeholders take part in the stakeholder value creation system in a fair and trustworthy manner, top managers must learn how to manage stakeholders’ bargaining power and establish retention of rent mechanisms disclosed in transparent and reliable governance mechanisms.”

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