Understanding the factors that drive stakeholders’ sense of fulfillment and satisfaction (known as their “utility”) can help businesses maintain good relationships. Traditionally, stakeholder utility was believed to be based merely on the direct benefits derived from the relationship. More recently, scholars have taken a more socialized perspective on how stakeholders derive utility from their association with a company. According to HKUST’s Eunyoung Park and colleagues, however, this theory is still too simplistic. Taking a step further, the researchers model a novel socio-psychological explanation of stakeholder utility.

The traditional view of stakeholder utility focuses on the dyadic exchange relationship between business and stakeholder. However, stakeholders’ opinions may also be influenced by how a business treats fellow stakeholders. “For better or for worse,” say the researchers, “one stakeholder’s utility derives in part from their perceptions of how other stakeholders are being treated by the business.”

To date, however, the literature has not well explained what stakeholders are actually looking for in a business’s treatment of other stakeholders. “It is not always the case that a given stakeholder will have the best interests of other stakeholders in mind,” the researchers say. A stakeholder’s reaction to the unfavorable treatment of others may be more complex than previously assumed: it can be positive as well as negative. “Sometimes a stakeholder will appreciate a certain degree of unfairness in a business’s actions, especially if it benefits the self.”

Extending the literature, the researchers propose an innovative theoretical framework that models how another stakeholder can serve three different roles with respect to the focal stakeholder’s utility. This depends on the focal stakeholder’s outcome-based assessment of interpersonal equity/inequity and instrumental gain/losses.

First, they build on the literature on differences in stakeholders’ values by asking how a stakeholder’s “worldview” influences their responses to the treatment of other stakeholders. For example, a customer who values loyalty might not appreciate a company’s offering discounted rates exclusively to new customers. On this basis, the authors argue that the other stakeholder can serve “as a symbolic representation of the values the business prioritizes”—especially in comparison with the focal stakeholder’s worldview.

To theorize the second role of the other stakeholder, the researchers build on the literature on subjectivity in stakeholders’ equity judgments. A stakeholder may see the treatment of another stakeholder as being fair or otherwise depending on their view of the other’s contributions. “Even when two individuals have contributed equally in an objective sense to a shared endeavor,” say the authors, “each individual is likely to believe that they have contributed more than the other.” Therefore, the second role of the other stakeholder is to serve as a reference for equity comparisons.

Finally, helping to answer questions in the stakeholder literature with respect to assumptions about stakeholder solidarity, the authors argue that the other stakeholder can serve as either a perceived competitor for resources or a perceived facilitator. Stakeholders may “see one another as competitors for a finite pool of resources and returns.” Alternatively, the generous treatment of employees may be seen to maintain employee loyalty and boost productivity, resulting in a net gain for all stakeholders.

Importantly, the authors believe that the above factors dynamically interact and influence each other. Their more complex model of the socio-psychological nature of stakeholder utility explains both the altruistic behaviour of stakeholders and “a different kind of possibility, whereby stakeholders disapprove of the favorable treatment of other stakeholders or approve of their unfavorable treatment.”

This has important implications for practitioners. “Our model can provide managers with a bigger picture understanding of how their critical constituents assess the value of their interactions with the business,” say the researchers. “Businesses that recognize these nuances may be better positioned to take advantage of such situations.”