Sustainable Strategies
Session 4 - Sustainability Vehicles | Circular Business
18 February 2020, 15:00-17:45
Crilly, D., & Sloan, P. 2012. Enterprise logic: Explaining corporate attention to stakeholders
from the ‘inside-out’. Strategic Management Journal, 33: 1174-1193.
- Why are some firms more effective than others at addressing stakeholder concerns?
→ Conventional stakeholder theories focus on variables in the external environment and are
unable to explain variance across firms operating in the same context.
→ This article conducted a matched-pair study of eight global corporations, where they went
inside the firm and investigated the role of managerial cognition on corporate attention to
stakeholders.
→ They found that top management’s conceptualisation of the firm’s relationship with society
(i.e. enterprise logic) prompts distinct foci of attention and potentially constrains how well a
single firm can simultaneously attend to multiple stakeholders.
→ This shows the value of an inside-out perspective, centred on managerial cognition, in
explaining why some firms address stakeholder concerns more effectively than their peers.
- A stakeholder refers to any group or individual who can affect or is affected by the
achievement of an organisation’s purpose.
- Current literature focuses on the outside-in when explaining why certain stakeholders become
salient. Yet, this does not address the variance in attention to stakeholders. Therefore, this
study considers an inside-out explanation that considers heterogeneity in corporate attention
and in performance.
- Attention to stakeholders is not only the result of external influences but also rests on how
managers conceptualise their firm and its relationship to society. This requires a cognitive
explanation, anchored in the notion that firms’ actions are shaped by how managers
conceive their environments. The cognitive approach offers an alternative explanation for why
some managers perceive relationships with stakeholders as involving risk, conflict and trade-
offs, while others see opportunity, interdependence, and mutual benefit.
- The firm’s dominant logic is key in directing attention to stakeholders. Dominant logic is a
collective cognitive construct that reflects how top managers conceptualise their business. It
affects strategic decision making and directs attention.
- Attention denotes the noticing, encoding, interpreting, and focusing of time and effort by
organizational decision-makers on both issues and answers. In the context of stakeholders,
corporate attention represents the firm’s efforts to support the interests of shareholding and
non-shareholding stakeholders, such as employees, customers, communities, or the natural
environment.
Page 1 of 16
, Sustainable Strategies
- Two ideas throughout this work:
1. Attention to stakeholders is a strategic issue (one that requires interpretation)
Attention to stakeholders is a strategic issue for the corporation, where strategic issues are a
stream of events or trends that potentially affect the attainment of organisational objectives.
With that in mind, stakeholders can present both opportunity and threat to a firm:
• Threats can come from control over resources and can affect firm survival and performance.
• Opportunities can take the form of social capital and knowledge creation.
2. Firm's dominant logic aids in this interpretation and is reflected in firm efforts to attend to its
stakeholders
Dominant logic originates within the firm, reflecting a variety of internal factors such as the
characteristics of managers, their shared experiences, and organizational history. Firms are
likely to vary on these dimensions.
- Enterprise logic is the way in which top managers conceptualise their firm and its
relationship with actors in the firm’s economic and sociopolitical environment. The
corporation can be seen as an extended enterprise with obligations to multiple
stakeholders.
→ Proponents of the corporation as an extended enterprise focus on creating economic and
social value for a broad range of stakeholders.
→ Social value may include increasing social capital through health, education, and
environmental stewardship, or reducing social misery through, for example, human rights
initiatives.
- The enterprise logic exerts its influence on explaining the scope of corporate attention to
stakeholders through two related mechanisms.
1. It affects attention by shaping how managers classify the issue of attention to stakeholders.
2. The enterprise logic affects the degree of within-firm differentiation in attention to
stakeholders.
- Model of corporate attention to stakeholders:
Page 2 of 16
, Sustainable Strategies
- Some firms are better at addressing stakeholder concerns because their managers have
fundamentally different ways of conceptualising the firm and its relationship to society. There
are three distinct logics:
1. Firm-centric logic: conceives stakeholders as parties in contractual transactions.
2. Extended enterprise logic: the interdependence of stakeholder interests and the
sustainability of the firm.
3. Industry network logic: strategic intent focuses on economic value creation through
relational rents.
- An overview of the logics, describing strategic intent, favoured mode of interaction with
stakeholders, and logic structure, which reflects how the distinct components are connected:
- The three underlying dimensions of strategic intent, mode of interaction, and structure of
firm-stakeholder relationships are closely interrelated.
• The firm-centric logic is the simplest of the three logics, with the fewest connections and
the most trade-offs. The enterprise is seen as being in a situation of constrained
independence from society, where relationships are transactional. Strategic intent is aimed at
capturing and retaining economic value: social value creation is seen as detrimental to this.
• The industry network version situates the corporation within a more complex system, with
interdependence between the firm and its stakeholders. Economic value creation is central
and interactions with stakeholders provide the basis for this.
• The extended enterprise situates the corporation in a yet more complex system, with
significant interdependencies between the firm and a wide range of economic, social, and
Page 3 of 16
Session 4 - Sustainability Vehicles | Circular Business
18 February 2020, 15:00-17:45
Crilly, D., & Sloan, P. 2012. Enterprise logic: Explaining corporate attention to stakeholders
from the ‘inside-out’. Strategic Management Journal, 33: 1174-1193.
- Why are some firms more effective than others at addressing stakeholder concerns?
→ Conventional stakeholder theories focus on variables in the external environment and are
unable to explain variance across firms operating in the same context.
→ This article conducted a matched-pair study of eight global corporations, where they went
inside the firm and investigated the role of managerial cognition on corporate attention to
stakeholders.
→ They found that top management’s conceptualisation of the firm’s relationship with society
(i.e. enterprise logic) prompts distinct foci of attention and potentially constrains how well a
single firm can simultaneously attend to multiple stakeholders.
→ This shows the value of an inside-out perspective, centred on managerial cognition, in
explaining why some firms address stakeholder concerns more effectively than their peers.
- A stakeholder refers to any group or individual who can affect or is affected by the
achievement of an organisation’s purpose.
- Current literature focuses on the outside-in when explaining why certain stakeholders become
salient. Yet, this does not address the variance in attention to stakeholders. Therefore, this
study considers an inside-out explanation that considers heterogeneity in corporate attention
and in performance.
- Attention to stakeholders is not only the result of external influences but also rests on how
managers conceptualise their firm and its relationship to society. This requires a cognitive
explanation, anchored in the notion that firms’ actions are shaped by how managers
conceive their environments. The cognitive approach offers an alternative explanation for why
some managers perceive relationships with stakeholders as involving risk, conflict and trade-
offs, while others see opportunity, interdependence, and mutual benefit.
- The firm’s dominant logic is key in directing attention to stakeholders. Dominant logic is a
collective cognitive construct that reflects how top managers conceptualise their business. It
affects strategic decision making and directs attention.
- Attention denotes the noticing, encoding, interpreting, and focusing of time and effort by
organizational decision-makers on both issues and answers. In the context of stakeholders,
corporate attention represents the firm’s efforts to support the interests of shareholding and
non-shareholding stakeholders, such as employees, customers, communities, or the natural
environment.
Page 1 of 16
, Sustainable Strategies
- Two ideas throughout this work:
1. Attention to stakeholders is a strategic issue (one that requires interpretation)
Attention to stakeholders is a strategic issue for the corporation, where strategic issues are a
stream of events or trends that potentially affect the attainment of organisational objectives.
With that in mind, stakeholders can present both opportunity and threat to a firm:
• Threats can come from control over resources and can affect firm survival and performance.
• Opportunities can take the form of social capital and knowledge creation.
2. Firm's dominant logic aids in this interpretation and is reflected in firm efforts to attend to its
stakeholders
Dominant logic originates within the firm, reflecting a variety of internal factors such as the
characteristics of managers, their shared experiences, and organizational history. Firms are
likely to vary on these dimensions.
- Enterprise logic is the way in which top managers conceptualise their firm and its
relationship with actors in the firm’s economic and sociopolitical environment. The
corporation can be seen as an extended enterprise with obligations to multiple
stakeholders.
→ Proponents of the corporation as an extended enterprise focus on creating economic and
social value for a broad range of stakeholders.
→ Social value may include increasing social capital through health, education, and
environmental stewardship, or reducing social misery through, for example, human rights
initiatives.
- The enterprise logic exerts its influence on explaining the scope of corporate attention to
stakeholders through two related mechanisms.
1. It affects attention by shaping how managers classify the issue of attention to stakeholders.
2. The enterprise logic affects the degree of within-firm differentiation in attention to
stakeholders.
- Model of corporate attention to stakeholders:
Page 2 of 16
, Sustainable Strategies
- Some firms are better at addressing stakeholder concerns because their managers have
fundamentally different ways of conceptualising the firm and its relationship to society. There
are three distinct logics:
1. Firm-centric logic: conceives stakeholders as parties in contractual transactions.
2. Extended enterprise logic: the interdependence of stakeholder interests and the
sustainability of the firm.
3. Industry network logic: strategic intent focuses on economic value creation through
relational rents.
- An overview of the logics, describing strategic intent, favoured mode of interaction with
stakeholders, and logic structure, which reflects how the distinct components are connected:
- The three underlying dimensions of strategic intent, mode of interaction, and structure of
firm-stakeholder relationships are closely interrelated.
• The firm-centric logic is the simplest of the three logics, with the fewest connections and
the most trade-offs. The enterprise is seen as being in a situation of constrained
independence from society, where relationships are transactional. Strategic intent is aimed at
capturing and retaining economic value: social value creation is seen as detrimental to this.
• The industry network version situates the corporation within a more complex system, with
interdependence between the firm and its stakeholders. Economic value creation is central
and interactions with stakeholders provide the basis for this.
• The extended enterprise situates the corporation in a yet more complex system, with
significant interdependencies between the firm and a wide range of economic, social, and
Page 3 of 16
