Stakeholder Networks and Strategy: The Influence of Network Consistency and Network Diversity On Firm Performance

Abstract

As academic and practitioners continue to demand greater stakeholder acknowledgement
and engagement, firms must seek ways to move beyond dyadic interactions
and treat internal and external stakeholders as components of a holistic
network. This paper introduces two new constructs, Network Diversity and Network
Consistency, proposing that both the variety of stakeholder partners (Network Diversity)
as well as the uniformity of social performance across multiple stakeholder
constituencies (Network Consistency), will influence Corporate Reputation (CR)
and ultimately, firm financial performance. Using a sample of 158 firms, across a
five year time span,we find that while Network Diversity has no significant relationship
to CR, Network Consistency is in fact related to Corporate Reputation. Further,
high levels of Network Diversity may actually detract from, rather than enhance
financial performance, via increased cost and relationship management complexity.