Hostname: page-component-f554764f5-rvxtl Total loading time: 0 Render date: 2025-04-18T04:29:59.098Z Has data issue: false hasContentIssue false
  • English
  • Français

Political Stakeholder Theory: The State, Legitimacy, and the Ethics of Microfinance in Emerging Economies

Published online by Cambridge University Press:  05 December 2016

Tricia D. Olsen
Tricia D. Olsen*
Affiliation:
University of Denver
Get access Rights & Permissions [Opens in a new window]

Abstract:

How does the state influence stakeholder legitimacy? And how does this process affect an industry’s ethical challenges? Stakeholder theory adopts a forward-looking perspective and seeks to understand how managers can address stakeholders’ claims to improve the firm’s ability to create value. Yet, existing work does not adequately address the role of the state in defining the stakeholder universe nor the implications this may have for subsequent ethical challenges managers face. This article develops a political stakeholder theory (political ST) by weaving together the political economy, stakeholder theory, and legitimacy literatures. Political ST shows how state policies influence stakeholder legitimacy and, in turn, affect an industry’s ethical challenges. This article integrates the concept of agonism to address the perennial tension between markets and states and its implications for firms and their managers. Political ST is then applied to the case of microfinance, followed by a discussion of the contributions of this approach.

Keywords

business ethicspolitical stakeholder theoryagonismstatelegitimacymicrofinance
Type
Articles
Information
Business Ethics Quarterly , Volume 27 , Issue 1 , January 2017 , pp. 71 - 98
Copyright
Copyright © Society for Business Ethics 2016 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

REFERENCES

Abraham, R., Kast, F., & Pomeranz, D. 2011. Insurance through savings accounts: Evidence from a randomized field experiment among low income micro-entrepreneurs in Chile. Working paper, Harvard Business School.Google Scholar
Achen, C., & Snidal, D. 1989. Rational deterrence theory and comparative case studies. World Politics, 41(2): 143–169.CrossRefGoogle Scholar
Amsden, A. H. 1992. Asia’s next giant: South Korea and late industrialization. Oxford: Oxford University Press.CrossRefGoogle Scholar
Armendáriz, B., & Morduch, J. 2010. The economics of microfinance. Cambridge, MA: MIT Press.Google Scholar
Arnold, D. G. 2013. Global justice and international business. Business Ethics Quarterly, 23(1): 125–143.Google Scholar
Arnold, D. G., & Valentin, A. 2013. Corporate social responsibility at the base of the pyramid. Journal of Business Research, 66(10), 1904–1914.Google Scholar
Banerjee, A., Duflo, E., Glennerster, R., & Kinnan, C. 2010. The miracle of microfinance? evidence from a randomized evaluation. Working paper, MIT. http://econ-www.mit.edu/faculty/eduflo/papers.Google Scholar
Banerjee, A., Karlan, D., & Zinman, J. 2015. Six randomized evaluations of microcredit: Introduction and further steps. American Economic Journal: Applied Economics, 7(1): 1–21.Google Scholar
Barone, F. M., Lima, P. F., Dantas, V., & Rezende, V. 2002. Introdução ao Microcrédito. Brazil: Conselho da Comuniade Solidária.Google Scholar
Basu, K., & Palazzo, G. 2008. Corporate social responsibility: A process model of sensemaking. Academy of Management Review, 33(1): 122–136.CrossRefGoogle Scholar
Bateman, M. 2010. Why doesn’t microfinance work? The destructive rise of local neoliberalism. London: Zed Books.Google Scholar
Biswas, S. 2013. India’s microfinance suicide epidemic. BBC News , December 16.Google Scholar
Boatright, J. R. 2014. Ethics in finance. Sussex, UK: Wiley Blackwell.Google Scholar
Brune, L., Giné, X., Goldberg, J., & Yang, D. 2011. Commitments to save a field experiment in rural Malawi. Policy Research Working Paper No. 5748. Washington, DC: World Bank.Google Scholar
Buchholz, R., & Rosenthal, S. 2004. Stakeholder theory and public policy: How governments matter. Journal of Business Ethics, 51: 142–153.Google Scholar
Burawoy, M. 1991. Ethnography unbound: Power and resistance in the modern metropolis. Berkeley: University of California Press.Google Scholar
Christen, R., & Rosenberg, R. 2000. The rush to regulate: Legal frameworks for microfinance. Occasional Paper , No. 4. Washington, DC: CGAP.Google Scholar
Chu, M. 2007. Profit and poverty: Why it matters. Forbes , December 20.Google Scholar
Copestake, J. 2002. Inequality and the polarizing impact of microfinance: Evidence from Zambia’s Copperbelt. Journal of International Development, 14(6): 743–755.Google Scholar
Cull, R., Demiguç-Kunt, A., & Morduch, J. 2011. Microfinance trade-offs: Regulation, competition and financing. In Armendáriz, B. & Labie, M. (Eds.), The handbook of microfinance. Hackensack, NJ: World Scientific Publishing Company.Google Scholar
Deutsche Bank. 2012. Microfinance in evolution. Deutsche Bank , September 13.Google Scholar
DiMaggio, P., & Powell, W. W. 1983. The iron cage revisited: Collective rationality and institutional isomorphism in organizational fields. American Sociological Review, 48(2), 147–160.Google Scholar
Donaldson, T., & Preston, L. 1995. The stakeholder theory of the corporation: Concepts, evidence, and implications. Academy of Management Review, 20: 65–91.CrossRefGoogle Scholar
Dupas, P., & Robinson, J. 2010. Savings constraints and microenterprise development: Evidence from a field experiment in Kenya. Working Paper Series No. 111. Washington, DC: IPC.Google Scholar
Economic Times . 2014. RBI removes 26% interest rate cap on MFI loans. February 8.Google Scholar
Elms, H., & Westermann-Behaylo, M. 2012. Corporate social responsibility. In Baker, H. K. & Nofsinger, J. R. (Eds.), Socially responsible finance and investing: Financial institutions, corporations, investors, and activists: 39–54. Hoboken, NJ: John Wiley & Sons. Google Scholar
Elms, H., & Phillips, R. A. 2009. Private security companies and institutional legitimacy: Corporate and stakeholder responsibility. Business Ethics Quarterly, 19(03): 403–432.Google Scholar
Evans, P. B., Rueschemeyer, D., & Skocpol, T. 1985. Bringing the state back in. Cambridge, MA: Cambridge University Press.Google Scholar
Flores, L. 2000. La banca social no es solución contra la pobreza: BID. El Financiero , August 8.Google Scholar
Franco, A. 2002. Comunidade solidária: Fortalecendo a sociedade, promovendo o desenvolvimento. Rio de Janeiro, Brazil: Comunitas.Google Scholar
Freeman, R. E. 1984. Strategic management: A stakeholder approach. United Kingdom: Pitman Press.Google Scholar
Freeman, R. E. 1994. The politics of stakeholder theory: Some future directions. Business Ethics Quarterly, 4(4): 409–21.CrossRefGoogle Scholar
Freeman, R. E., Harrison, J. S., Wicks, A. C., Parmar, B. L., & de Colle, S. 2010. Stakeholder theory: The state of the art. Cambridge, MA: Cambridge University Press.Google Scholar
Gerschenkron, A. 1962. Economic backwardness in historical perspective. Cambridge, MA: Belknap Press.Google Scholar
Ghate, P. 2007. Indian microfinance: The challenges of rapid growth. Los Angeles: Sage Publications.Google Scholar
Ghosh, S., & Van Tassel, E. 2008. A model of mission drift in microfinance institutions . Department of Economics, Florida Atlantic University.Google Scholar
Helms, B., & Reille, X. 2004. Interest rate ceilings and microfinance: The story so far. Occasional Paper, No. 9. Washington, DC: CGAP.Google Scholar
Helms, B. 2006. Access for all: Building inclusive financial systems. Washington, DC: CGAP.CrossRefGoogle Scholar
Herbst, J. 1989. The creation and maintenance of national boundaries in Africa. International Organization, 43(04): 673–692.CrossRefGoogle Scholar
Hermes, N., & Lensink, R. 2011. Microfinance: Its impact, outreach, and sustainability. World Development, 39(6): 875–881.Google Scholar
Hill, C., & Jones, T. M. 1992. Stakeholder-agency theory. Journal of Management Studies, 29: 131–154.CrossRefGoogle Scholar
Hirschman, A. O. 1958. The strategy of economic development (Vol. 10). New Haven: Yale University Press.Google Scholar
Honig, B. 1993. Political theory and the displacement of politics. Ithaca, NY: Cornell University Press.Google Scholar
Hudon, M., & Sandberg, J. 2013. The ethical crisis in microfinance. Business Ethics Quarterly, 23(4): 561–589.Google Scholar
Hulme, D., & Arun, T. 2011. What’s wrong and right with microfinance—missing an angle on responsible finance? Working paper. Brooks World Poverty Institute.CrossRefGoogle Scholar
Karlan, D., & Zinman, J. 2010. Expanding microenterprise credit access: Using randomized supply decisions to estimate the impacts in Manila. The Review of Financial Studies, 23: 433–464.Google Scholar
Kashyap, A., & Gangadharan, R. 2011. RBI sets 26 pct cap on microfinance loans. Reuters , May 3.Google Scholar
Kaur, P. 2014. Outreach and sustainability of microfinance institutions in India in pre and post Andhra Pradesh microfinance crisis in context of South Asia. Global Journal of Finance and Management, 6(6), 569–574.Google Scholar
Kneiding, C., & Rosenberg, R. 2008. Variations in microcredit interest rates. Washington, DC: CGAP.Google Scholar
Kolk, A., Rivera-Santos, M., & Rufín, C. 2013. Reviewing a decade of research on the “base/bottom of the pyramid” (BOP) concept. Business & Society, 53(3): 338–377.Google Scholar
Kumar, A. 2005. Access to financial services in Brazil. Washington, DC: World Bank.Google Scholar
Ledgerwood, J. 1998. Microfinance handbook: An institutional and financial perspective. Washington DC: World Bank.Google Scholar
Levi, M. 1989. Of rule and revenue. Berkeley: University of California Press.Google Scholar
Lewin, A.Y., Long, C. P., & Carroll, T. N. 1999. The coevolution of new organizational forms. Organization Science, 10(5): 535–550.Google Scholar
MacFarquhar, N. 2010. Banks making big profits from tiny loans. The New York Times , April 13.Google Scholar
Mader, P. 2013. Rise and fall of microfinance in India: The Andhra Pradesh crisis in perspective. Strategic Change, 22(1-2): 47–66.Google Scholar
March, J. 1962. The business firm as a political coalition. The Journal of Politics 24(4): 662–678.Google Scholar
Marulanda, C. 2011. Microfinanzas en México: Estudio., No. 61538. Inter-American Development Bank. Washington DC: Inter-American Development Bank.Google Scholar
Meagher, P., Campos, P., Christen, R. P., Druschel, K., Gallardo, J., & Martowijoyo, S. 2006. Microfinance regulation in seven countries: A comparative study. Report from IRIS. College Park, MD: University of Maryland.Google Scholar
Mersland, R., & Strøm, R. O. 2010. Microfinance mission drift? World Development, 38: 28–36.Google Scholar
Migdal, J. S. 2001. State in society: Studying how states and societies transform and constitute one another. Cambridge, MA: Cambridge University Press.Google Scholar
Migdal, J. S., Kohli, A., & Shue, V. 1994. State power and social forces: Domination and transformation in the Third World. Cambridge, MA: Cambridge University Press.Google Scholar
Mitchell, R. K., Agle, B. R., & Wood, D. J. 1997. Toward a theory of stakeholder identification and salience: Defining the principle of who and what really counts. Academy of Management Review, 22: 853–886.Google Scholar
Morduch, J. 2000. The microfinance schism. World Development, 28(4), 617–629.Google Scholar
Mouffe, C. 2000. The democratic paradox. Brooklyn: Verso Books.Google Scholar
North, D. C. 1990. Institutions, institutional change and economic performance. Cambridge, MA: Cambridge University Press.Google Scholar
Olsen, T. D. 2010. New actors in microfinance lending: The role of regulation and competition in Latin America. Perspectives on Global Development and Technology, 9: 500–519.Google Scholar
Olsen, T. D. Forthcoming. Rethinking collective action: The co-evolution of the state and institutional entrepreneurs in emerging economies. Organization Studies.Google Scholar
Orts, E. W. 1992. Beyond shareholders: Interpreting corporate constituency statutes. George Washington Law Review, 61: 14–135.Google Scholar
Phillips, R. A. 2003a. Stakeholder legitimacy. Business Ethics Quarterly 13(1): 25–41.Google Scholar
Phillips, R. A. 2003b. Stakeholder theory and organizational ethics. San Francisco, CA: Berrett Koehler Publishers, Inc.Google Scholar
Phillips, R. A., Berman, S. L., Elms, H., & Johnson-Cramer, M. E. 2011. Stakeholder orientation, managerial discretion and nexus rents. In Phillips, R. A. (Ed.), Stakeholder theory: Impacts and prospects: 163–192. Cheltenham, UK: Edward Elgar Publishing.Google Scholar
Phillips, R., Freeman, R. E., & Wicks, A. C. 2003. What stakeholder theory is not. Business Ethics Quarterly, 13(4): 479–502.CrossRefGoogle Scholar
Polanyi, K. 1944. The great transformation. New York: Rinehart.Google Scholar
Porter, T. B. 2006. Coevolution as a research framework for organizations and the natural environment. Organization & Environment, 19(4): 479–504.CrossRefGoogle Scholar
Prahalad, C. K. 2004. The fortune at the bottom of the pyramid: Eradicating poverty through profits. Philadelphia: Wharton School Publishing.Google Scholar
Prina, S. 2013. Banking the poor via savings accounts: Evidence from a field experiment . Working Paper. Weatherhead School of Management. http://faculty.weatherhead.case.edu/prina/pdfs/prina_savingsaccounts_2013.pdf.Google Scholar
Reddy, A. A., & Malik, D. P. 2011. A review of SHG-Bank linkage programme in India. Indian Journal of Industrial Economics and Development, 7: 1–10.Google Scholar
Rhyne, E., & Guimon, A. 2007. The Banco Compartamos initial public offering. Accion Insight, 23: 1–20.Google Scholar
Rhyne, E. 2001. Mainstreaming microfinance: How lending to the poor began, grew, and came of age in Bolivia. Bloomfield, CT: Kumarian Press.Google Scholar
Roodman, D. 2012. Due diligence: An impertinent inquiry into microfinance. Washington, DC: Center for Global Development.Google Scholar
Rosenberg, R. 2007. CGAP reflections on the compartamos initial public offering: A case study on microfinance interest rates and profits. Washington, DC: CGAP.Google Scholar
Rosenberg, R., Gonzalez, A., & Narain, S. 2009. The new moneylenders: Are the poor being exploited by high microcredit interest rates? Occasional Paper, Vol. 15. Washington, DC: CGAP.Google Scholar
Rutherford, S. 1999. The poor and their money: An essay about financial services for the poor. Finance and Development Programme Working Paper Series, 3. Institute for Development Policy and Management, University of Manchester, UK.Google Scholar
Scherer, A. G., & Palazzo, G. 2007. Toward a political conception of corporate responsibility: Business and society seen from a Habermasian perspective. Academy of Management Review, 32(4): 1096–1120.Google Scholar
Scherer, A. G., & Palazzo, G. G. 2011. The new political role of business in a globalized world: A review of a new perspective on CSR and its implications for the firm, governance, and democracy. Journal of Management Studies, 48(4): 899–931.CrossRefGoogle Scholar
Sen, A. 1999. Development as freedom. Oxford: Oxford University Press.Google Scholar
Skocpol, T. 1979. States and social revolutions: A comparative analysis of France, Russia and China. Cambridge, MA: Cambridge University Press.Google Scholar
Srinivasan, Narayanan. 2012. Microfinance India: State of the sector report 2011. New Delhi: SAGE Publications India.Google Scholar
Starik, M. 1994. Management and the natural environment. Orlando, FL: Dryden Press.Google Scholar
Stiglitz, J. E. 1989. Financial markets and development. Oxford Review of Economic Policy, 55–68.Google Scholar
Suchman, M. C. 1995. Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20(3): 571–610.Google Scholar
Tashman, P., & Raelin, J. 2013. Who and what really matters to the firm. Business Ethics Quarterly 23(4): 591–616.Google Scholar
Tchakoute–Tchuigoua, H. 2010. Is there a difference in performance by the legal status of microfinance institutions? The Quarterly Review of Economics and Finance 50: 436–442.Google Scholar
Thirani, N. 2012. ‘Yunus was right,’ SKS Microfinance founder says. New York Times , February 27.Google Scholar
Wade, R. 1990. Governing the market: Economic theory and the role of government in East Asian industrialization. Princeton: Princeton University Press.Google Scholar
Weber, M. 1922. Economy and society. Berkeley: University of California Press.Google Scholar