The Impact of stakeholder orientation on innovation: An empirical investigation on firm patenting activity

Framing of the research. The paper provides novel insights on how firms can boost innovation output by developing a corporatewide orientation towards stakeholders. It investigates the patenting activities of a sample of U.S. firms using a panel dataset. Purpose of the paper. The aim of the paper is to analyze the effect of firm stakeholder orientation, defined as the adoption of policies and management processes to identify, understand, and integrate the interest of stakeholders in firms’ decision making, on innovation output. Methodology. We validate our hypotheses using a panel dataset of 5.608 unique firm-year observation on firms’ patenting activity over the period 2002-2012. Results. We find support for our baseline hypothesis on the positive impact of increasing degrees of stakeholder orientation on the quantity of firms’ innovation output. Moreover, the degree of stakeholder orientation has a positive impact on innovation radicalness and originality, will decreasing the level of innovation generality. Research limitations. Our work contributes to an emerging debate on the innovation potential of stakeholder orientation. It is based on a direct measure of stakeholder orientation and, based on its methodology, it is not possible to exclude biases related to unobservable managerial preferences. Moreover, we use patents as a proxy for innovation output being aware of its limitation. Managerial implications. Our results suggest the importance of nurturing stakeholder relations to foster knowledge exchange and reciprocal learning, which are crucial for firms’ innovativeness. Moreover, our study highlights the importance of stakeholder orientation in the pursuit of radical and original technological trajectories. Originality of the paper. Studies on the innovation impact of stakeholder orientation are still limited and mostly focused on exogenous determinants in limited timeframe. Our study introduces the degree of stakeholder orientation as a key construct to predict innovation that accounts for heterogeneity across firms and stakeholder categories.