Big Decisions in Small Business: Stakeholder Priority

Author Faculty (Discipline)


Document Type

Conference Proceeding

Publication Date



Australian Academy of Business Leadership (AABL) International Business and Social Science Research Conference




150303 Corporate Governance and Stakeholder Engagement

Peer Review

Before publication


In an increasingly competitive environment, engaging with stakeholders is no longer an option but a necessity to ensure short-term success and long-term survival (Gibson & Myurnighan, 2010; McVea & Freeman, 2005; Porter, 1985; Freeman, 1984). This is particularly the case in small business, yet little is known about how small business owner-managers negotiate and make those decisions, often under uncertainty and time pressure.

Small businesses operate in networks of interdependent entities (ecosystem) where individuals are known to each other (McVea & Freeman, 2005). Such interdependence support relationship building, trust and reputation building thereby removing the separation between ‘business’ and ‘ethics’ and promoting a long-term focus (Clifton & Amran, 2011).

Limited resources and conflicting demands result in a need to prioritise some stakeholder demands over others. As suggested by Mitchell, Agle and Wood (1997), decision makers may priorities stakeholder’s perceived as more ‘salient’ than others. Stakeholder salience (Mitchell et al, 1997) is the combined effect of perceived levels of power, legitimacy and urgency. Although confirmed as a viable method used by managers to prioritise stakeholders (Agle, Mitchell & Sonnenfeld, 1999), in small business other factors may also be important for understanding how decisions regarding which stakeholder claim should be given immediate attention and which can be disregarded are made.

The key decision makers of nine Australian small businesses were asked about their relationships with important stakeholders, how decisions regarding the priority of various stakeholders and their expectations were made and what factors may affect such decisions.

Relationships with stakeholders were identified as dynamic and strategic resources and considerable time and effort was invested by the interviewees to build and maintain positive relationships. Consistent with Mitchell et al’s (1997) model of stakeholder salience, decisions were affected by perceptions of power, legitimacy and urgency. This research also found that intuitive perceptions about the stakeholder affected the decision-making process. These factors included level of commitment, dependence and potential exit costs as well as the decision maker’s perception of alignment with own values, thereby introducing a moral and ethical consideration that would sometimes take priority over other considerations.


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