Acquisitions, Stakeholder Economies of Scope, and Stakeholder Orientation

An acquisition brings multiple stakeholder networks together into one combined firm, which inevitably results in changes to the relationships and value propositions the firm has with its stakeholders, and ultimately to the value the firm creates for them. In this paper, we argue that stakeholder economies of scope are possible through managing the stakeholder relationships of multiple business units in a way that creates more total economic value for stakeholders than if those businesses were each managed separately. For example, a broadly stakeholder-oriented acquiring firm can create a stakeholder economy of scope by expanding its broad stakeholder orientation to a newly acquired business unit. The increase in total economic value this generates for the combined network of stakeholders is not recognized in other types of economies of scope. Alternatively, we argue that when an acquiring firm with a narrow stakeholder orientation expands its orientation to a newly acquired division that is broadly stakeholder-oriented, the combined firm experiences a reduction of total economic value, all else equal, due to what we term stakeholder diseconomies of scope. Stakeholder economies and diseconomies of scope have the potential to help explain more of the large variance in the performance of acquiring firms than has been explained previously.