Research Reports on Organizational Niche-Construction and Stakeholder

Description
Research Reports on Organizational Niche-Construction and Stakeholder Analysis Concepts and Implications:- Stakeholder analysis in conflict resolution, project management, and business administration, is the process of identifying the individuals or groups that are likely to affect or be affected by a proposed action, and sorting them according to their impact on the action and the impact the action will have on them.

Research Reports on Organizational Niche-Construction and Stakeholder Analysis: Concepts and Implications
A countless variety of stakeholder approaches are referenced by management scholars and practitioners, with theories on stakeholders divided into normative and descriptive categories and managerial and instrumental theories. This paper addresses the normative stakeholder approach and evaluates its strengths and weaknesses in the context of a new framework. We argue that stakeholder theory arose from a philosophical and scientific tradition where the object of scientific analysis was divided into constituent parts that made them easier to understand and to analyze. Although this process of 'reduction to the minimum' is powerful and has worked very well in the past, we argue that the excessive emphasis on elemental parts, while ignoring the whole, runs the risk of overlooking the actual nature of organization:environment relationships. Moreover, this traditional stakeholder approach can overlook change as a fundamental variable in management processes. The specific contribution of this paper is integrating stakeholder theories with an organization:environment approach grounded in nicheconstruction and specie preservation. Doing so allows stakeholder theory to not only embrace human agency as part of a broadened evolutionary dynamic but also to incorporate within this view an improved understanding of the co-evolutionary processes of organization:environment relationships and the nature of change. In this proposed niche-construction framework, stakeholders are explicitly identified as integral actors in, and co creators of, organizational-environmental change. The stakeholder approach was first introduced in the mid-sixties by the Stanford Research Institute (1965), with Ansoff referring to it in what is generally considered the book that founded modern strategic management. Thompson also came very close to this concept in his study of organizations.1 Notwithstanding the contributions of these early studies, it is with the publication of Edward R. Freeman's Strategic Management: A Stakeholder Approach that the idea became widespread among management scholars and practitioners. 2 We believe that the stakeholder approach has helped to expand the limited explanatory power of the stockholder approach and has contributed deeply to a more sophisticated view of organizations. Despite the many strengths of the stakeholder approach, however, we believe that its emphasis on groups and individuals has gone too far. The risk is to misunderstand the co-evolutionary process dynamics that actually define the complex set of relationships that characterize environmentorganization interaction. At the same time, we also believe that any strategic management theory that seeks to incorporate a stakeholder perspective within its purview must also incorporate the dynamics of change. Adopting a niche-construction perspective of evolutionary change, as we do in this study, does that. It recognizes the environment not as a fixed and static—and, at least in the eyes of some, determining—entity, but as a co-evolving pattern of relationships defined as much through its interactions with the organization as vice versa. In fact, in our proposed niche-construction framework (which will be explained later in the paper), both organization and environment are existentially defined through their interactions with the other. Thus, a niche becomes identified as that part of the organization:environment pattern of interactions whose change affects, and is affected by, the actions of the organization. And stakeholders represent fundamental agents in this ongoing pattern of interactions. Accordingly, with this approach we are placing stakeholder theory within both a niche- construction framework and the complex dynamics of evolutionary change.
Igor H. Ansoff Corporate Strategy New York McGraw-Hill 1965; J. Thompson Organizations in Action New York McGraw-Hill 1967 2 R. Edward Freeman Strategic Management. A Stakeholder Approach Marshfield MA Pitman Publishing 1984
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We structure our arguments in four sections. The first section is dedicated to the analysis of strategic management theories as they relate to stakeholder approaches. Here, the objective is to understand if and how contact is lost with business environment analysis. Then, in the second section, we look at the experience of Merck, a pharmaceutical company, and its handling of the drug Vioxx. We do this as both an interesting and an illustrative example of how stakeholder approaches in the past often have been applied in real-world analyses. The third section places stakeholder theory firmly within both a theory of change and a niche- construction approach to management. By integrating both strategic management and stakeholder theory into a dynamic and evolving theory of change we escape the limits of earlier views that tended to keep both stakeholder theory and strategic management embedded in out-of-date theories of the world. Finally, implications and conclusions are addressed in the fourth and concluding section.

Where Strategy and Stakeholders Analyses Converge
Stakeholder Theory: Normative or Descriptive?
In order to address the relationship between strategic management and stakeholder theory we must first define our basic terms.3 The question is one of perspective: Are we hoping to prescribe (normative) or describe? Is a particular view aimed at providing managers with guidelines to better understand the business environment and to then take appropriate actions or is it intended as a description of what one can find in the organizational world? If the stakeholder approach falls into this first category then it must provide us with significant guidance in relation to practical management problems. If it falls into the second it is descriptive and can then provide guidance in the same manner history does, or should do.4 There are two distinct positions that can be analyzed. The first is what the general understanding of stakeholder theory is and the second is what it ought to be. Literature on social responsibility, corporate social performance and stakeholder theory is useful for understanding what is common among these groups. One classical approach is that of Donaldson and Preston, who present and analyze three major components of the stakeholder theory of the corporation: (a) descriptive, (b) instrumental, and (c) normative. The 'descriptive aspect of stakeholder theory reflects and explains past, present, and future states of affairs of corporations and their stakeholders' 5 while the second, the instrumental view, connects stakeholder approaches to common corporate objectives and goals. The last one, the normative view, 'is not hypothetical but categorical; it says, in effect, "Do (Don't do) this because it is the right (wrong) thing to do." Much of the stakeholder literature, including the contributions of both proponents and critics, is clearly normative'.6 What, then, is stakeholder theory? We believe that evidence from the literature points out that it is a study on relations between corporate actors that maintains an ethical emphasis. Many scholars who write about stakeholders, including some of the field's most influential authors, such as Freeman and Donaldson, are business ethicists. It is clear to us, then, that stakeholder theory reflects underlying, normative values, 'although the fundamental normative principles ? are often
Thomas Donaldson and Lee E. Preston 'The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications' Academy of Management Review 20 (1) 1995 pp 65-91; Ronald K. Mitchell, Bradley R. Agle and Donna J. Wood 'Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts' Academy of Management Review 22 (5) 1997 pp 853-886. For us the term 'normative' has nothing to do with ethical values and is not connected to stakeholder literature that way; see Elisabet Garriga and Domènec Melé 'Corporate Social Responsibility Theories: Mapping the Territory' Journal of Business Ethics 53 2004 pp 51-71; we believe that the use of the word 'prescriptive' instead of 'normative' is more helpful. 4 I. M. Jawahar and Gary L. McLaughlin 'Toward a Descriptive Stakeholder Theory: An Organizational Life Cycle Approach' The Academy of Management Review 26 (3) 2001 pp 397-414; Elena P. Antonacopoulou and Jérôme Méric 'A Critique of Stake-Holder Theory: Management Science or a Sophisticated Ideology of Control?' Corporate Governance 5 (2) 2005 pp 22-33 5 Thomas Donaldson and Lee E. Preston 'The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications' Academy of Management Review 20 (1) 1995 p 71 6 Ibid p 72
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unexamined'.7 Thus, by definition, stakeholder theory ought to be normative and will, therefore, be all the more useful to management theory in general. Nonetheless, it is not our intention to emphasize this methodological issue. Rather, we wish to point out that stakeholder theory —especially in its relation to strategy —deals with the traditional challenge of understanding not only where the organization presently is, but also with where it is going in the future. In traditional mainstream management theory, 8 strategy has been about the position that the company occupies in respect to its competitors and to the environment, in general. This short digression is to point out that if we consider the stakeholder approach in the manner described above,9 it is apparent that it falls among normative theories. Therefore, this paper focuses on the normative aspects of stakeholder theory.

A Strategic Management Perspective
For at least a decade or more there has been a shared disillusionment with the value of strategy as an informing construct.10 As such, it has long-since ceased to be controversial to suggest that the earlier notions of strategy, as something controlled from the top-down, as a kind of mechanical problem seeking a 'fit' between the firm and its environment, or as a conscious effort in which first we plan and then we do, has been debunked. 11 Today, most researchers readily accept the notion that strategy is an adaptive process within which piecemeal decisions are made based on continuous feedback between formulation and implementation in an emergent pattern over time.12 But even here intellectual traps abound. For example, to what is one presumably adapting? The environment? Does that environment exist independent of what the firm does or is, or what the agents within that firm do? Isn't the firm, along with its agents—also affecting the environment, even as it is being affected by the environment, in return? Isn't the relationship between the firm and its environment one of mutual self-creation? And if that is the case, then is it still altogether helpful to talk as if the one were separate and independent from the other? From its very beginning, the field of strategy has been concerned with analysis and positioning and the presumed fit between the firm and its environment. It was what Ansoff13 described as an impedance match between the firm's internal strengths and weaknesses and its external threats and opportunities. Here, strategy was seen primarily as a mechanical matching problem; an engineering problem, as it were.14 Yet, it was within this context that it made preeminent good sense to talk of external stakeholders as those who either affected, or were affected by, the actions of the firm; that is, as those who had a metaphorical stake in that firm.15 Again, this was an especially useful insight when placed against the claims of those who would privilege stockholder claims ahead of all other claims.16
Idem Michael E. Porter 'The Five Forces that Shape Strategy' Harvard Business Review 86 (1) January 2008 p 7893. 9 Freeman 1984 op cit 10 D. Schendel 'Introduction to The Summer 1994 Special Issue—Strategy: Search For New Paradigms' Strategic Management Journal 15 1994 pp 1-4; Henry Mintzberg The Rise and Fall of Strategic Planning New York The Free Press 1994; H. W. Volberda and T. Elfring (eds) Rethinking Strategy Newbury Park CA Sage 2001 11 R. Hayes and W. Abernathy 'Managing Our Way to Economic Decline' Harvard Business Review July-August 1980 pp 67-77; Henry Mintzberg 'The Design School: Reconsidering the Basic Premises of Strategic Management' Strategic Management Journal 11 1990 pp 171-195; Henry Mintzberg 1994 op cit 12 Patrick Regner 'Complexity and Multiple Rationalities in Strategy Processes' in Volberda and Elfring 2001 op cit p 44 13 Igor H. Ansoff 1965 op cit 14 Henry Mintzberg 1990 op cit; Igor H. Ansoff 'Critique of Henry Mintzberg's 'The Design School: Reconsidering the Basic Premises of Strategic Management" Strategic Management Journal 12 1991 pp 449461 15 Freeman 1984 op cit p 46 16 Milton Friedman 'The Social Responsibility of Business Is to Increase Its Profits' New York Times Magazine 13 September 1970
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Ironically, the issues at play, here, echo a similar debate that played out within the field nearly two hundred years ago, albeit in a military context. It was between two of the field's most preeminent founders: Carl von Clausewitz (1780-1831) and Antoine-Henri Jomini (1779- 1869). At issue was the old bugaboo of 'control' and whether or not the commanding general could control events to the desired outcome. While Clausewitz and Jomini were concerned with military strategy, today's strategists are concerned with corporate strategy and market competitiveness. But the underlying issues of military and corporate strategy remain essentially the same. Within limits, Jomini viewed strategy as the key to warfare and believed that all strategy was controlled by invariable scientific principles. Further, if followed carefully, these principles would increase the likelihood of victory17. To that end, Jomini offered a set of prescriptive techniques for analysis and planning that continue to dominate our approach to strategy and organizational change to this day. For it was Jomini who most firmly established the practice of abstracting strategy from its political and social context and emphasizing simplified decision- making rules for accomplishing intended operational outcomes. Thus, he turned strategy into the metaphorical equivalent of a huge game of chess (1986, p 144); or what he termed, 'making war upon the map.'18 For this reason alone, it is Jomini, and not Clausewitz, who deserves the dubious title of 'founder of modern strategy.'19 It was also Jomini who saw war in such largely personal and heroic terms, always susceptible to the control of the masterful commander. Thus, from the beginning of the modern age, strategy20 has been seen primarily as the sole province of the commander, guided from the top-down; presumably by a commander who possessed not only a superior intelligence but also a better view of the battlefield than the troops at his command. At the same time, in an early preview of the cynical underpinnings of today's agency theory, troops in that age were poorly educated and fought primarily for money. Further, they were from a low social class and not altogether to be trusted. As a result, it was assumed that the only way to keep such troops in line was through iron will and discipline. Much as we see in corporate hierarchies today, their role was to obey; not to think; nor to take initiative. They were to be commanded and led; and above all, to execute as told. Thus, whatever genius was to come into play in the course of battle was up to the commander to provide. This brings us to yet another important distinction between Clausewitz and Jomini and our subsequent understanding of strategy and stakeholder theory as dynamic, evolving processes. Different from Jomini, Clausewitz saw war as a complex totality that always threatened to escape human control, no matter how remarkable the commander might have been. 21 Clausewitz also understood that each battle represented its own unique event22, and, therefore, its own unique, creative challenge. By this reasoning, strategy could not be reduced to the level of simple, generalizing maxims as implied by Jomini—or, in more modern times, by Porter23 and others of that 'school' in the world of corporate strategy.

J. Shy 'Jomini' in P. Paret (ed) Makers Of Modern Strategy From Machiavelli To The Nuclear Age Princeton NJ Princeton University Press 1986 pp 143-185 18 Antoine-Henri Jomini The Art of War El Paso TX El Paso Norte Press 1862/2005 p 54 19 Shy 1986 op cit p 144 20 Paret 1986 op cit 21 Shy 1986 op cit p 158 22 Claus von Clausewitz On War Princeton NJ Princeton University Press 1984 p 120 23 Michael Porter Competitive Strategy: Techniques for Analyzing Industries and Competitors New York NY Free Press 1980
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As with today's view of niche-construction, Clausewitz saw war as the continuous interaction of opposites24; not as between two lifeless masses, but as 'between two living forces'25—where we see life to greater or lesser degrees in all things26—versus largely mechanical and inanimate systems where life is greatly diminished. Clausewitz also understood that, 'o long as I have not overthrown my opponent I am bound to fear he may overthrow me.' Therefore—and this is the critical point—'I am not in control; he dictates to me as much as I dictate to him'27; and the reality that emerges arises through this coevolution. It is the same with the interactions among stakeholders and organizations. For it is these interactions, and the spontaneous order that emerges from them, that create the emergent realities we eventually identify as firm and environment. Each emerges through its creative interaction with the other. That is, they arise from their joint interactions in ways that are not, and cannot be, under any single entity's control. Thus, the focus within niche-construction shifts from an emphasis on control to an emphasis on co-creation. Thus, for Clausewitz, 'talent and genius [always] operate[d] outside the rules'28, where theory, of necessity, often conflicts with actual practice. Thus, as in niche- construction, the premium shifts from planning and analysis and control to instinct, judgment, experience and creativity and simple maxims and generic strategies fade into insignificance. For such maxims were what Clausewitz characterized as 'the wisdom of people who run out of ideas'29, '? the magic wands of armchair strategists'30 or, most damning of all, the type of banalities '?used by ignorant minds to justify their congenital incompetence'31. Conversely, for Jomini—as already noted—'trategy [was] the art of making war upon the map.'32 It was something that generals could plan and execute from afar; poised over their field maps, as it were, directing and allocating their troops at will. Of course, Mintzberg33 has long- since demolished that simplistic view of strategy and helped usher in a long-overdue re- evaluation of strategy as a whole. Yet, despite seemingly endless calls for new integrative thinking about the challenge of strategy34, the field remains doggedly committed to its received mechanistic, materialistic, and reductionistic frameworks. Yet such frameworks make it nearly impossible to move beyond what everyone otherwise recognizes must be abandoned. Too often, as Volberda and Elfring35 observe, we are left with little more than 'old wine in new bottles.' And even then the bottles are not always all that new. Thus, if we are not careful, stakeholder analysis can fall into this same mechanistic, materialistic, reductionistic trap. But if we proceed carefully, niche-construction can provide a means for not only re-framing and re-imagining strategy as a useful and creative construct in the 21st-century, but also as a means for re-framing stakeholder theory and for escaping the limits of some of our earlier views of organizations and organizational change.

von Clausewitz 1984 op cit p 136 Ibid p 77 26 C. Alexander The Nature of Order: An Essay on the Art of Building and The Nature of the Universe vol 1 Berkley CA The Center for Environmental Structure 2002; Henri Bergson Creative Evolution New York NY Henry Holt & Company 1937; Alfred N. Whitehead Process and Reality: An Essay in Cosmology New York NY The Free Press 1929 27 von Clausewitz 1984 op cit p 77 28 Ibid p 140 29 Ibid p 117 30 Ibid p 354 31 Ibid p 142 32 Jomini 2005 op cit p 54 33 Mintzberg 1994 op cit pp 107-114; Henry Mintzberg Managers Not MBAs: A Hard Look at the Soft Practice of Managing and Management Development San Francisco CA Berrett Koehler 2004 34 Volberda and Elfring 2001 op cit 35 Ibid
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10,000 Wedges: Stakeholder Analysis in a World of Darwinian Materialism
Though we often tend to overlook this fact, it was Darwin who lent such force to our present materialist view of the world. For it was he who analogized the world as a log with ten thousand wedges, with each wedge competing for its rightful place in the log 36. Each wedge represented a different species jammed tightly along the length of the log and the only way a new species could insinuate itself onto the log was by displacing another wedge in an ongoing 'struggle for existence'.37 This was the kind of Hobbesian 'war of all against all' (bellum omnium contra omnes) that underpins so much of today's notion of competitive strategy38 and organizational change. Like Darwin's example of the log, the presumption is that a firm's competitive space can only be maintained by displacing any other firm that would seek to occupy the same strategic space. But this perspective only makes sense in a fixed and material world. In a world that is infinitely creative—especially with regard to new niche-creation—the metaphor of the log is no longer particularly useful. It simply fails to capture the actual, living dynamics of real organizations and markets. At the same time, the claim—as we often hear in strategy—that someone, or some group, external to the firm, has some claim or affect on that firm—yet is considered otherwise separate and independent from that firm —simply makes little sense. By virtue of their mutual interactions they are, indeed, connected with each other. Remove that connection, change the context, or sever that relationship and there is simply no longer any reason to consider that entity as a relevant stakeholder. Stakeholders only become stakeholders for a given organization through their interactions with the organization. Remove the interaction —that is, remove the relationship—and they are no longer stakeholders.39 Thus, in today's understanding of niche-construction we now see that firms and their environments are not separate interacting entities. Rather, they are but parts of an emergent, interconnected whole; a whole that only comes into meaningful existence through ongoing and evolving interactions. As the noted evolutionary biologist Richard Lewontin 40 long ago observed, environments do not exist in some independent and abstract sense: 'Just as there is no organism without an environment, there is no environment without an organism'.41 What is more: 'Organisms do not experience environments. They create them.' In turn, they also are created by them. They create each other. At issue in so much of this debate is the age-old view of 'parts' and 'wholes' and which constitutes which. In the reductionistic, atomistic, materialistic worldview in which stakeholder analysis first took hold, 'wholes' are viewed primarily as being comprised of 'parts.' Thus, we heard the common refrain expressed by Margaret Thatcher42 years ago, 'There is no such thing as society. There are individual men and women, and there are families.' That is, society is made up of parts; the equivalent of individual social atoms, as it were. But in today's emerging, biological view of life, wholes increasingly are seen as the context in which the parts themselves emerge. Or, in Alexander's cosmology43, the parts are induced by the whole, usually
Charles Darwin The Origin of Species by Means of Natural Selection or The Preservation of Favoured Races in the Struggle for Life New York Penguin Classics 1859/1968 p 119 37 Steven J. Gould Wonderful Life: The Burgess Shale and The Nature of History New York W. W. Norton and Company 1989 p 228; Steven J. Gould Bully For Brontosaurus: Reflections in Natural History New York W.W. Norton & Company 1991 pp 328-329. 38 Michael Porter Competitive Strategy: Techniques for Analyzing Industries and Competitors New YorkFree Press 1980 39 Davide Secchi 'Utilitarian, Managerial, and Relational Theories of Corporate Social Responsibility' International Journal of Management Reviews 9 (4) 2007 pp 347-373 40 Richard Lewontin Biology as Ideology: The Doctrine of DNA New York Harper Collins 1991 p 19 41 Richard Lewontin 1991 op cit pp 9-11; Richard Lewontin The Triple Helix: Gene, Organism, and Environment Cambridge MA Harvard University Press 2000 42 David Harvey A Brief History of Neoliberalism New York Oxford University Press 2005 p 23 43 Alexander 2002 op cit pp 86-87
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through morphogenesis or other generative process. Thus, the argument we make here, and which challenges us to think differently about not only stakeholder analysis but also aboutorganizations and strategy in general, is that all living creatures partly create and partly destroy their own niches. And they do so on scales that range from the extremely local to the global44. Obviously, this changes our whole conception of evolutionary change and places human agency—not as a controlling mechanism but as a co-creator of evolutionary change over which no one entity or agent can have control—in a wholly different context. Properly understood, niche-construction can change the direction, rate and dynamics of evolutionary change 45. Furthermore, such change is decidedly not the sole province of a controlling and determining environment. At the same time, this change in perspective shifts the focus of strategic management and organizational change from one of control to one of creation —and that changes everything46. Ultimately, niche-construction is not seen as just a product of evolutionary change and a controlling environment, but as a co-contributor to evolutionary change. Further, following Odling-Smee et al's lead, 47 we are not seeking to replace a wholly externally-focused explanation of evolutionary change with an internally-mitigated constructionist view. Rather, we propose a combination of the two that arises from their feedback and interactions as they co-create what we now identify as the firm and its environment. Rather than seeing these as two separate entities, we now recognize them as but different aspects of a larger, more indivisible whole, with each cocreating and defining the other through their ongoing and evolving interactions. Thus, not only do stakeholders have a continuing and important 'part' to play in our understanding of organizations and organizational change, but without them we do not even have the 'wholes' we seek to talk about. It is in this context then that we next review a recent case in business administration to discuss the strengths and weaknesses of the normative stakeholder approach.

Stakeholder Approaches
In this next section we examine what changes when we go from a classical stakeholder analysis to a niche-construction view of stakeholder analysis. To make these differences clear we use Merck's experience with the drug Vioxx as an illustrative example. On September 30th 2004 the arthritis pain drug Vioxx was pulled from the shelves of United States pharmacies and stores. The day after this event Merck, the pharmaceutical producer of this drug, suffered a 27% fall in its share price. Vioxx was a blockbuster drug for the company with up to 84 million prescriptions issued since its introduction in 1999.48 Studies showed that patients taking the drug for 18 months were more likely to suffer from hearth attack than patients taking placebos. Based on this finding, the Food and Drug Administration (FDA) concluded that Vioxx might have contributed to more than 27,000 strokes. 49 The British journal The Lancet wrote that problems with the chemical component of the drug were
F. John Odling-Smee Kevin N. Laland and Marcus W. Feldman Niche-Construction: The Neglected Process in Evolution Cambridge MA Princeton University Press 2003 p 1 45 Ibid p 2 46 J. Kao Jamming: The Art and Discipline of Business Creativity New York Harper and Collins 1996; A. Robinson and S. Stern Corporate Creativity: How Innovation and Improvement Actually Happen San Francisco Berrett-Koehler 1997; Thomas Hench, 'Rediscovering Entrepreneurship in a Complex World: A Nonlinear Framework for Organizing.' Journal of Business and Entrepreneurship 11 1999 pp 1-26 47 Odling-Smee Laland and Feldman 2003 op cit 48 B. A. Masters 'Wall Street Batters Merck; Stock Price Falls 27% After Drug Firm Withdraws Vioxx' The Washington Post October 1, 2004 p E.01; C. Rowland 'Recall Another Step in Merck Slide; Latest Stumble Pummels Stock, to Hurt Earnings' Boston Globe October 1, 2004 p. D.1; E. Cavusgil 'Merck and Vioxx: An Examination of an Ethical Decision-Making Model' Journal of Business Ethics 76 2007 pp 451-461 49 As reported by The New York Times: 'F.D.A. Releases Memo on Vioxx' New York Times November 3, 2004 p C.8
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apparent in research published as early as 2000. 50 Thus, it is likely that top executives at Merck knew about this problem at that time but still decided not to do anything until new studies were published and the FDA compelled the company to take action. Why did management take this risk in the first place? And, can stakeholder analysis—classical or nicheconstruction—be a useful tool in this case? And what do we learn from our efforts?

Stakeholder Analysis: A Brief Overview
What follows is not an exhaustive list51 of competing stakeholder theories. Yet, it does provide a sufficient overview of these 'classical' views of stakeholder analysis to help identify the key elements among them in perspective. In the concluding section, we then compare these with the proposed organizational niche-construction view of stakeholder analysis. Traditionally, the first step in stakeholder analysis has been to identify and map stakeholders for a given firm.52 Next comes weight attribution, identifying how each stakeholder group affects, or is affected by, the firm in question. Yet, as simple as these steps seem, scholars cannot agree on how to conduct, first, (a) identification/mapping and, second, (b) weighting. On this point, Kaler 53 writes that 'there is a deep divide in definitions on what it is to be a stakeholder in a business', while Mitchell, Agle and Wood 54 identify 27 definitions throughout the literature describing what a stakeholder is. In light of this, we may face challenges about our own definitions of stakeholders in the Merck case, but believe that there are nearly a dozen different stakeholder groups involved in this case: (a) top executives, (b) product managers, (c) the R&D staff at Merck, (d) the FDA, (e) patients, (f ) doctors prescribing the drug, (g) customer associations, (h) professional doctors' associations, (i) shareholders, (j) the press, (l) lawyers, and (m) others. This last category is residual and contains those individuals or groups that can be classified as latent or dormant stakeholders. The basis for this category is that we listed only stakeholders that were directly involved in the specific case we are dealing with so that such stakeholders as banks or employees can and do matter, but are not considered separately, here. As Jawahar and McLaughlin suggest55, stakeholders may become more or less important depending on where the firm is in its own evolution. The second step following identification is weighting. We believe that Freeman's broad definition is particularly helpful in identifying stakeholders as 'any group or individual who can affect, or is affected by, the achievement of the organization's objectives'56. Here, however, it is apparent that different approaches lead to different results. On the one hand, the risk that managers at Merck took in 2000 may depend on a flawed evaluation of power, legitimacy (Freeman) and urgency (Mitchell, Agle, and Wood), while Freeman and Liedtka57 may explain managerial behavior on the basis of management's preference for the interests embedded in the web of relations that constitute the firm (i.e. what they call stakeholder proposition) over concerns for the others (i.e. altruism, generally speaking, or the caring proposition) or the idea that the organization offers a way to enhance individual creativity and self-esteem (i.e. the

Editorial 'Vioxx: an unequal partnership between safety and efficacy' The Lancet 364 (9442) 2004 pp1287-1288 51 It is very hard to find a list of stakeholder theories since the field is always expanding its borders and new perspectives, models, theories, and approaches are published every day. However, a list of the most important theories can be found in Garriga and Melé 2004 op cit pp 59-61; Secchi 2007 op cit pp 361-362. A chronological list 1963-1995 appears in table 1 of Mitchell Agle and Wood 1997 op cit p 858. 52 Freeman 1984 op cit 53 J. Kaler 'Morality and Strategy in Stakeholder Identification' Journal of Business Ethics 39 2002 p 91. 54 Mitchell Agle and Wood 1997 op cit p 858 55 Jawahar and McLaughlin 2001 op cit 56 Freeman 1984 op cit p 46 57 Edward R. Freeman and Jeanne Liedtka 'Corporate Social Responsibility: A Critical Approach' Business Horizons July-August 1991 pp 92-98
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pragmatic proposition). On the other hand, one could also argue that the drug was so profitable that selling Vioxx was worth the risk. However, this is nothing but the traditional stockholder perspective58, which is to say, a sub-system of the broader stakeholder approach.59 Nonetheless, normative theories suggest that values underpin the choices made in the name of stakeholder management. Following the integrated social contract theory 60 (ISCT), we argue that principles (or norms) that caused managers to sell the drug were part of an implicit contract between the firm, customers, the FDA, and shareholders, for example. Using the social contract lexicon, '[t]he analysis of corporation-stakeholder relations leads to the definition of hypernorms, macro- and micro-social contracts'.61 Thus, these norms are defined through the system of relations that exists among them, with each stakeholder gaining or losing importance depending upon their contribution to the establishment of these norms. This process could be thought of as a weighting procedure for co-determining what groups and individuals count the most. A different perspective is that of Jawahar and McLaughlin. They argue that resource dependence theory can be expanded to stakeholder analysis and that this 'seems to suggest that organizations will pay more attention to and be more concerned with issues of stakeholder groups who control resources critical to the survival of an organization'. 62 Therefore, the authors suggest that stakeholder power is a function of this dependence on resources and that it also varies depending on the company's life cycle stage. Since Merck & Co. is a large company that has been in the market since 1889, we suggest that it is in the mature stage. If this is the case, Jawahar and McLaughlin would argue that the company faces all primary stakeholders (except creditors) with a proactive strategy63. However, what happened at Merck does not appear to have been the result of proactive strategies on the part of Merck's managers, but a reaction to 'external' stakeholders to pull the product from the shelves. A recent work presents a new categorization of individuals and groups that affect or are affected by the organization. Fassin 64 proposes to distinguish stakeholders from stakewatchers and stakekeepers. In this view 'there are the real stakeholders, [which are] essentially the classic stakeholders in the original narrow approach - those who have a concrete stake: the dedicated stakeholders with a real positive and (or at least expected) loyal interest in the firm'. Then there are stakewatchers, 'such as pressure groups, who do not really have a stake themselves but who protect the interests of real stakeholders, often as proxies or intermediaries'. And finally there are stakekeepers, 'who are even further removed from the active, real stakeholders: the independent regulators, who have no stake in the firm but have influence and control. They impose regulations and constraints, while the firm has little reciprocal direct impact on them'. Although we see this approach as a variation of Mitchell et al.'s analysis of stakeholders (see above), we believe that the analysis of the Vioxx recall from Merck could vary one more time. In this case, the FDA can be seen as a remote stakeholder, or stake-keeper, who was not supposed to intervene before there had been enough evidence that the drug was dangerous. This explains what happened in the first part of the case while remaining vague (as in every stakeholder theory) about how a stakeholder changes its status from latent to active stakeholder. However, according to this tripartite analysis we see the role of the FDA (and maybe that of doctors) as the only variation to previous analyses. Following any one of these (or other) perspectives means framing the case through the way managers value stakeholders' pressure and claims and then considering their behavior as consistent with that evaluation. Yet, a few points remain unclear. For example, how did
Milton Friedman Capitalism and Freedom Chicago and London The University of Chicago Press 1962; Friedman 1970 op cit 59 This point is made clear in R. Edward Freeman Andrew C. Wicks and Bidhan Parmar 'Stakeholder Theory and 'The Corporate Objective Revisited" Organization Science 15 (3) 2004 pp 364-369 60 Thomas Donaldson and T. W. Dunfee Ties that Bind: a Social Contract Approach to Business Ethics Boston Harvard Business School 1999 61 Secchi 2007 op cit p 364 62 Jawahar and McLaughlin 2001 op cit p 402 63 Ibid p 409 64 Yves Fassin 'The Stakeholder Model Refined' Journal of Business Ethics 84 no 1 (2009) pp 113-135. Citations are from p 121
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Merck's corporate culture affect the way the decision was made? Why didn't the FDA access the data in 2000? What allowed this company to sell the 'flawed' drug that contributed to so many deaths? Can we analyze the case from broader societal, economic, political and cultural perspectives? What changed the way the FDA and Merck viewed the case?

Toward a Dynamic Model of Stakeholder Analysis
The major constraint we see in stakeholder theory is that it does not fully allow us to account for change in either stakeholder weightings or organizational behavior.65 Weights and maps are supposed to be defined in relation to a specific time-period. This means that if something changes in the relations between the main actors—as in the case of Merck and Vioxx—we, then, need to re-draw the map and to re-weight stakeholder relations. However, it is apparent that this is not a dynamic way to consider how Merck and its stakeholders changed over time. Metaphorically, we are comparing two pictures; we do not yet have a video. We believe that this is far from what is needed when analyzing the complex web of relationships that constitute the real world of business. We need a model that accounts for the description of how these relationships change over time, i.e. we need a video. This way we will then have a theory that offers more details on how the system of relationships actually works. At the same time, such thinking is not new to the field of strategic management. What Grant did with Porter's five forces model was basically to add the 'time' variable to account for dynamics of competition66. However, even if this is the simplest way to do it, we believe that change is not only related to time. We also need to relate change to the evolution of relationships that arise between the organization and the environment. The approach here is that of a theory where stakeholders are seen as an integral part of the nexus of relationships that actually define both what the firm is and what the environment is. In short, we reject a simple reductionist stakeholder theory that sees the organization as a fixed and static entity and propose instead a more complex and nuanced view that sees each as part of a more integrated and dynamic, evolving whole.67 This paper suggests that current stakeholder approaches fail to consider such dynamical environmental factors as demography, culture, institutions, society, politics and economy. Instead, current approaches limit their perspectives to groups or individual variables that overlook general 'social' effects. As such, these approaches run the risk of providing scholars and practitioners alike with a simple and easy-to-use framework that simply fails to incorporate the actual complexity of business-environment relationships. In the next section we integrate niche-construction with stakeholder theory to show how such integration can account for not only organizational change but also for the actual dynamics that constitute business environments.

Niche-Construction
The relationships that stakeholder analysis defines between a company and its constituents are based on a simple assumption: that stakeholders affect, or are affected by, 'the achievement of the organization's objectives'68. Our proposal is to switch that or to an and, with the main hypothesis being that the organization co-evolves with the external environment, of which each is an integral part of the other. Stakeholders are the actual agents that define not only the company, but, through their actions and interactions, also the environment. That is, they co- define each other. At the same time, this also brings the stakeholder approach back into the
Pietra Rivoli The Travels of a T-Shirt in the Global Economy Hoboken NJ Wiley and Sons 2005 Robert M. Grant Contemporary Strategy Analysis Oxford Blackwell 1992 see p 92f 67 Edgar Morin La tête bien faite. Penser la réforme, reformer la pensée Seuil Paris 1999; Ilya Prigogine and Isabelle Stengers La nouvelle alliance Paris Gallimard 1986 68 Freeman 1984 op cit p 46
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domain of strategic management. One could even argue that it returns us to the origin of the field since both Thompson and Ansoff wrote on the importance of the environment. Yet our proposal suggests far more than just this. We argue that (a) there is no external environment in the traditional sense of these words69 but there is an environment that emerges as a consequence of all the interactions of all the respective stakeholders. In this sense, the environment is embedded in the way organizations actually evolve and change over time. Also, (b) stakeholders, in this broadened sense of the word, become both the means and the vehicle for change in the co-evolutionary dynamic that defines both the organization and the environment. These issues are addressed in the following pages.

The Organization in the Environment
Our proposal is based on Odling-Smee, Laland and Feldman's 70 definition of nicheconstruction, which, in turn, builds on Lewontin's71 work in the same area. It is based on the insight that organisms and humans construct their environment as a means of co-evolving with their general environment. This idea is also consistent with Maturana and Varela's72 attempt to overcome some of the limits of neo-Darwinism. As they also point out, environmental change affects organisms, even as organisms also change their environments. Thus, there is a co- evolutionary process under way in which one can no longer determine which precedes which. In the same manner, recent studies also suggest that organisms do not affect all environmental variables; rather, only a smaller portion of them. Yet, it is this smaller portion of the environment that can be analyzed in terms of co-evolutionary patterns. Biologists call this portion of the environment a niche.73 The same biologists suggest that this interaction is useful for social sciences, too, in discussions of cultural niches,74 while others consider them useful in understanding both human learning in organization75 and co-evolution in a social evolutionary model.76 Yet, we don't want to go that far in this paper. Instead, we limit our attention to the relevance of niches in general. Whereas the concept of organizational niche is well known in the organization ecology literature,77 it has also been applied in what Baum and Singh78 refer to as 'microniches'. However, this concept has not yet been linked to stakeholder theory.

W. Richard Scott Organizations. Rational, Natural, and Open Systems 5th ed Englewood Cliffs Prentice-Hall 2003 70 Odling-Smee Laland and Feldman 2003 op cit 71 Lewontin 1991 op cit; Lewontin 2001 op cit 72 Humberto Maturana and Francisco J. Varela El àrbol del conocimiento Santiago de Chile Editorial Universitaria 1984 73 Odling-Smee Laland and Feldman 2003 op cit; Kevin N. Laland and Kim Sterelny 'Perspective' Seven Reasons (not) to Neglect Niche-Construction' Evolution 60 (9) 2006 pp 1751-1762 74 Odling-Smee Laland and Feldman 2003 op cit p 239ff 75 Herbert A. Simon 'A Mechanism for Social Selection and Successful Altruism' Science 250 (4988) 1990 pp 1665-1668; Herbert A. Simon 'Altruism and Economics' The American Economic Review 83 (2) 1993 pp 156-161 76 Davide Secchi 'A Theory of Docile Society: The Role of Altruism in Human Behavior' Journal of the Academy of Business and Economics 7 (2) 2007b pp 146-160 77 Michael T. Hannan and John Freeman Organizational Ecology Cambridge MA Harvard University Press 1989 78 Joel A. C. Baum and Jitendra V. Singh 'Organizational Niches and the Dynamics of Organizational Founding' Organization Science 5 (4) 1994 pp 483-501, see p 485
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As a general definition, we accept that a niche is that part of the organization:environment nexus whose change affects, and is affected by, the organization. From a formal perspective, we argue that we have a niche when equations (1) and (2) are considered together. 79 The niche is defined if these conditions are met in relation to the environment: (1) AUTHOR The images in the Word file as supplied for this and the following figure 2 appear to be cropped and do not import successfully. Could you please provide either separate uncropped image files of each or the formulae typed in an MS TrueType font? Thank you very much. where E is the niche (or environment); O is the organization; t stands for time that is, when the modification of the environment ( E) over time is a function of the modification of both the environment and the organization under analysis g(O,E). It is apparent that every niche is organization-dependent and factors such as size and industry may affect it widely. We expect that a small organization has a limited and defined niche that relates to its size different from that of a large enterprise, such as Merck. We also understand that, depending on size, we might have many sub-niches that relate to the same organization. However, we can still define a broader niche. The second step is that of considering the organization and, if a niche exists, we can state that FIGURE (2) where E is the niche (or environment); O is the organization; t stands for time the modification of status over time depends on changes in both internal (O) and external (E) environments. However, the distinction between inside and outside needs to be softened if we follow the logic proposed, here. These two equations show that the modification of organization and environment depends on both. Although very generic, we believe that these differential equations provide important insights for not only stakeholder theory, but also for strategic management, too (see below). According to these statements, our first propositions are as follows: Proposition 1.1. Substantial co-evolution emerges from an organization interacting with its environment. Proposition 1.2. Every organization modifies its environment to create a niche (and subniches) that contributes to its survival and preservation of core aspects over time. Theoretically, it is apparent that this can be developed further. For example, we could develop scales of influence that relate to the main characters of a given niche so that we can study their dynamics as they evolve. We can also identify spheres of influence that are in every social environment: (a) civic/non-civic society, (b) regulation/deregulation (institutional monitoring, 'checks and balances,' etc.), (c) fairness/corruption, (d) social awareness and participation, (e)

The importance of equations (1) and (2) becomes clear when we compare them to the original equations that were supposed to describe classical evolution theory. While equation (2) is the same for both systems of differential equations, in the classical system environmental change (1b) is a function of the environment only:
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(1b) where E is the environment;O is the organization; t stands for time According to classical evolutionary theory the environment is independent of the organism (for us, the organization) and is a constraint or a set of variables to which the organism (organization) must adapt. As wesuggest in the text, the niche perspective changes this internal-external divide into a view where boundaries are softened, variables are part of a complex interacting system, and outcomes of these interactions are less certain.

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education, (f ) capitalist/mixed/non-capitalist economy, (g) etc.80 Of course, our list can be far longer than this and it needs to fit a specific analytical context. This makes the list purely illustrative; but for now let us limit our attention to these. We can have these parameters range from 0 to 1 so that, for example, 0 is non-civic and 1 is civic, 0 indicates the lowest level of corruption and 1 the highest, and so on and so forth. These parameters express the tendency that society has to 'structure' particular issues such as corruption, social awareness, civilization level, and the like. From our perspective, however, these issues are not only related to the environment but can also be analyzed in the context of both the organization and the environment and the extent to which they affect each other. Equations (3) and (4) express the idea that the environment (niche) depends on both a series of parameters (Xi) and on the organization. The two variables in equation (3) account for forces that directly pertain to both the organization and to the forces that the organization may affect, but which otherwise remain externally defined. This is because every niche is a result of not only organizational and environmental forces, but also of how people that conduct the business perceive the variables that define the environment where they operate. (3) (4) where E is the niche (or environment); x1, x2, ?, xi are the specific parameters considered (e.g. corruption, regulation, etc.); Xi is a generic parameter for the organization:environment i; O is the organization. We should not consider individuals the same way we treat their social constructs such as culture, corruption, regulation, etc. For this reason, the two equations may include other parameters that take into consideration outcomes of individual behavior on a more direct basis. However, for every individual we may have to repeat the same system of equations that define a sub-niche since every one of us lives in a specific niche that is created and re-created every day. What we should notice is that we can specify individual interactions as manifestations of a specific parameter, Xi; thus we are not eliminating individual influence from the theory, we are providing them with the elements that allow their behavior to manifest. We are constructing a meaningful framework into which individuals can express themselves. This is a significant difference with the stakeholder approach: we are arguing that stakeholders' behaviors assume meaning only if they are inserted in the appropriate niche. Consider a simple action: Merck's managers recall the product. What if the system in which they operate is corrupt and they recall the product instead of paying a bribe? What is the meaning of that action? Does this meaning change depending on the context? Now, consider another simple example: the FDA overlooks studies on chemical components of Vioxx in 2000. Merck is a multinational company and we can guess that this product was sold elsewhere in the world. Why the issue emerged in the U.S.? What has this to do with culture? What has it to do with institutional 'checks and balances'? Are issues like this one the same independent of the context? What are the links between these stakeholders and the social, cultural, technological, ethical, and political variables? Niche-Construction allows us to locate stakeholders in a social system and define them according to the niche they contribute to define and re-define constantly. A more developed mathematical model should contain these interacting elements. Unfortunately, we do not have time and space to completely address these issues here but we believe they are important and need to be mentioned.

Examples of how to define these spheres of influence or variables are found in: Robert D. Putnam Robert Leonardi and Raffaella Y. Nanetti Making Democracy Work: Civic Traditions in Modern Italy Princeton Princeton University Press 1994; Geert Hofstede Culture's Consequences: Comparing Values, Behaviors, Institutions and Organizations Across Nations Thousand Oaks Sage 2001
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Broadly speaking, the environment (niche) may also be defined, in part, by its affecting parameters. Each one of these parameters is a function of the perception that both the organization and the environment have of them and of a random value that accounts for uncertainty.

Niche-Construction As a Framework for Stakeholder Analysis
What is the importance of niches for stakeholder analysis? We believe that the environment adds a general framework to stakeholder theory. In particular, the idea behind niche- construction stresses the fact that there is no usefulness in distinguishing internal and external aspects of the organization; thus we have a limited understanding of both the who and how of organization:environment processes. Nevertheless, individuals and groups still remain the main players in social settings. Our proposal is to see them as vehicles (or mediums) of organization:environment relationships and organizational niche-construction. This mediation is apparent when we consider for example, that there is no absolute divide between life of participants outside or inside organizations.81 An employee doesn't stop being a father because he is at work any more than a father stops being an employee when at home with his children; nor does a manager stop being a Catholic, Jew or Muslim because she is at work. Examples like these abound. What is worth noting here is that in this fundamental interconnectedness earlier distinctions between firm and environment no longer make much sense. Organization and environment are but two sides of the same greater phenomenon. Each affects the other as part of a larger, integrated whole. Proposition 2.1. Stakeholders are vehicles through which the environment and the organization change. Going back to the biological analogy, the interactions of individuals and groups are what create the organization. They change their 'environment' through niche-construction in order to be successful and to survive. From the perspective of what happened at Merck—which we look at later in this study—an example of this would be the attempt of top researchers and executives at Merck to discount evidence of potential dangers associated with the use of Vioxx. The result of such actions was a partial modification of the niche in which they operated in 1999-2000. As a result, the FDA was convinced that the drug was safe and the environment in which Merck was operating had thus been modified by the interactions of various organizational stakeholders: the FDA, doctors, patients and researchers at Merck, were otherwise convinced that the drug would be a good selling product and better than its competitors. It is also apparent in this example that when organizations modify their niches, the results of these modifications can be both temporary and unpredictable. The only thing we can say about such interactions, though, is that no organizational niche can be modified without the active involvement and engagement of relevant stakeholders. Even for facts that seem unrelated to them this relation can be uncovered. Take, for example, the emergence of new technologies; this requires someone, somewhere, to detect and apply that technology to the organization at hand. And the organization:environment relationship changes as a result of those stakeholder interventions.82 Proposition 2.2.Organization life and preservation depends on niche dynamics in which stakeholders of various sorts play the major role. Our definition states that a niche is that part of the organization environment whose change is affected by and, in turn, affects the organization. If we exclude the word 'change' the definition is very close to what is commonly known as stakeholders. In each case, both niches
Scott 2003 op cit chapter 1 That stakeholders are fundamental for organizational life is not new to the various stakeholder approaches; see for example R. Edward Freeman Jeffrey S. Harrison, and Andrew C. Wicks Managing for Stakeholders. Survival, Reputation, and Success New Haven & London Yale University Press 2003. What we are stressing here is that it is not only organizations that change but it is also the relation that links that stakeholder to the organization, and hence the environment and the resulting niche.
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and stakeholders affect, and are affected by, the organization. Where then, does the difference between these two approaches lie? The point is that the environmental niche both shapes, and is shaped by, the organization. This integrative shaping activity is performed by stakeholders of all sorts. This shaping activity never ends and varies in its intensity, depending on the factors (parameters) listed above. Within this perspective, stakeholders are the agents that bring a niche into existence.

Implications and Conclusions
What happens to the analysis of the example we used before if we use a niche-based stakeholder approach instead of a 'classic' stakeholder approach? Table 1 offers a summary of four possible steps in the analysis under the two frameworks where an attempt to see applications to the Vioxx example are offered.
step 1 identification step 2 mapping step 3 weighting step 4 implications

Classical stakeholder approach

stakeholders

relations between stakeholders and the organization

stakeholders ranking

what management should do?

The Vioxx example (limited to up to three factors per step)

management, doctors, FDA

power, influence, claims

management, FDA, doctors

focus on relevant (primary) stakeholders to take control again

Niche-based stakeholder approach

significant relations

variables involved in the processes (drivers of change)

defining the niche and/or sub-niches

what management should do?

The Vioxx example (limited to up to three factors per step)

template for drugs approval followed by Merck-FDA, doctors/customers trust the company, the management tends to overweight their knowledge and control of existing research

published research, customers/doctors awareness, FDA potential reaction

institutional processes alignment to research, dialogue with doctors/customers, managers don't control the boundaries of the niche

recast information flows between players (FDA, doctors, etc.) and recall before the FDA recommends (reshape the niche)

Table 1 Classical and Niche-Based Stakeholder Approaches: The Vioxx example revised

In the first step (identification) the problem is to define what is the object of the analysis. The classical stakeholder approach (CSA) offers a list of stakeholders while the niche-based stakeholder approach (NSA) suggests that relations among these interacting agents are the key phenomena of interest and are more important. Yet, we are not arguing that relations are not important in the CSA, since they are the core of any stakeholder approach.83 But we are stating that the analysis of such relations is not the starting point in the CSA approach. However, they are foundational in the NSA approach. The second step ( mapping) is that of defining the forces—or drivers of change—that shape the niche. Because of length limitations, Table 1 presents only three of the most relevant factors, for our purposes, per approach. Nonetheless, these three factors are key and help demonstrate how boundaries are continually reshaped by their ongoing interactions. In this particular case, the factors that helped reshape Merck's niche were (a) the visibility and acceptance of pharmaceutical and medical scientific research, (b) the doctors' and customers' awareness of the flaws of the drug, and (c) the receptiveness of the American FDA. Boundaries of this niche (or, more appropriately, sub-niche) were changing.
83

Secchi 2007 op cit

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We recognize that there are differences between agents (stakeholders) and other parameters (see above), however, in the table, we use them as a whole since we believe that the former operate as vehicles while interactions with the latter are part of the niche building process. As we have shown in one of the previous sections, the CSA offers a map that is based on selected factors (in the table, we selected power, influence, claims as examples). While the CSA looks for a stable framework, the NSA highlights changing relationships. Of course, power relations can change (and they do) but this is not the aim of the CSA; we argue that—and this is one of the reasons why we introduced this approach—for a niche-based approach to be effective change must at the heart of its analyses. The third step (table 1) is the weighting function. Through the importance given to each stakeholder the CSA is able to rank individuals and groups. This process provides management with a clear recommendation on to whom the appropriate course of action may be directed (step 4). One of the many ways through which the CSA approach may be used suggests that managers recall the product in order to re-gain the control that they lost. The NSA takes a different perspective. Step 3 is when the analyst puts relations together and tries to define the niche (or subniche) where they are operating. Within this perspective, there is no control in the traditional strategic management sense of this word. A niche is a complex plastic system where sometimes there are no simple cause-effect relations. The management at Merck (step 4) should have paid attention to the drivers of change (step 2) and to the processes that constitute the sub-niche (step 3) to understand how change was reshaping their niche. Their role was to adapt or to facilitate these changes instead of assuming an illusory control over the variables at play. Our proposal, then, is that organizational socio-economic niche-construction includes three elements: (a) organization, (b) environment, and (c) stakeholders. Its graphical representation in Figure 1 helps frame the idea that forces shape both niches and organizations in an irregular, unstable and uncertain way.84 The result is something that evolves constantly. It is apparent, therefore, that when we discuss organizational niches we include these three elements together: organizations, environment and stakeholders. This is reflected in the propositions; respectively 1.1 and 1.2 take into consideration organizations and its environment while 2.2 and 2.2 focus on niches and stakeholders.

Figure 1 Niche, Organization and Stakeholders

Figure 1 identifies the three constituents of the niche. Arrows define the intensity of the force that is carried by stakeholders in shaping the organizational niche. What we add to the idea of stakeholders is that not only can organizations not exist without stakeholders, but neither can environments. In our terminology (proposition 2.2), niches do not exist independent of
Figure 1 does not include sub-niches nor it includes the many varieties of shapes that these relations may generate (e.g. the fact that there may be a stakeholder that falls outside of the niche). It is only one representation out of thousands of potential relations. A concrete analysis and case may give parameters and variables a shape that could construct a more detailed and definite niche representation.
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stakeholders. The most important implication that derives from this analysis is that we need to get a larger picture when we study organizations: we need to study the niche where organizations are shaped, and how they, in turn, shape their environment. This perspective leads not only to an enlarged view of the organization:environment relationship, but also to the evolving dynamics that constitute that relationship across time. It is apparent in all this that we do not rely on any of the previous definitions of stakeholders. According to the meaning we attributed to the concept, stakeholders are those individuals, groups and organizations that define the shape of a given organizational niche . We believe there are a few interesting points in this definition. The first is that we need to include organizations among stakeholders. If we believe that stakeholders are vehicles of organizational change, then a significant part of such change is defined by structured and 'organized' transfer of information, i.e. other organizations (such as competitors, unions, etc.). Moreover, niches are emergent epiphenomena that arise from agent interaction, and in their emergence make manifest what we later identify as: 'Firm,' 'Environment,' and the like. On its own, this is not a significant addition to the original definition even though it doesn't mention organizations explicitly while we believe they are core in any organization:environment analysis. However, the second point is the fact that we consider stakeholders as vehicles of change (proposition 2.1). They are connectors, or mediators, between organizations and environments in a way that eliminates the need for distinguishing between inside and outside the firm. The only thing that is important is who or what is interacting with the firm. Ultimately, niche- construction theories allow us to consider the individual as a whole (proposition 2.1) and to value their contributions to the organization for what it really is: a complex system of interacting relationships. In this sense, we believe that management —and by extension, stakeholder theory— is about human beings in interaction; not employees, statically defined and labeled. Consider, for example, organizational culture or the ability of the individual to understand organizational norms. These two factors change constantly as they adapt every day to organizational life. Every individual of Hispanic, European, African, or North American origin brings their culture into the organization. Everybody contributes to the living and ever- changing organizational culture through the lenses of his or her culture, intelligence, psychology, emotionality and sociability. We suggest that there are many advantages deriving from the use of the term 'niche' when dealing with organization environment. Here follows a few implications and ideas for future research developments: (a) Specificity. The niche is different from the task environment 85 since the latter is limited to production relations while the former focuses on every relation that creates binding processes between the organization and the environment. This means that we have no niches that are the same. Every niche is organization:environment specific. However, this doesn't mean that analytical methods cannot be standardized and therefore offer an organization-specific approach to analysis. From this perspective a niche-construction view of stakeholder theory is very similar to the traditional stakeholder approach, with both views sharing a certain level of specificity. (b) Mutual influence. The whole idea is based on a two-way relation where more or less every process or flow of influence between the organization and the environment has feedback or returning flows. This is the way we describe systemic interrelation between the two entities that constitute a niche. (c) Structural analysis. The idea of niche is wider than that of traditional stakeholder theory in which it keeps structural elements in the analysis. We believe, together with sociologist, biologists, and social anthropologists, that there are variables that are not located in people's
W.R. Dill 'Environment as an Influence on Managerial Autonomy' Administrative Science Quarterly 2 March 1958 pp 409-443
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minds and are otherwise independent of them, i.e. they exist even if one member of the population dies. Culture is an example of such factors; the stakeholder approach is too focused on individuals and groups as the main carriers of cultural, social, ethnic and many other environmental elements. Niche-construction brings back in the analysis the idea that society is also structured and that the whole system (environment-organization) is more than the sum of its parts (stakeholders). (d) Formalization. We do not believe that the use of mathematics is more than a heuristic to use in further inquiry and analysis. To the extent to which it favors the creation of hypotheses that can be tested more easily, we support it. The niche-construction approach, in an analogy from biology, is generally formalized and offers easy ways to generate hypotheses. (e) Stakeholders. Stakeholder relationships are carriers (or vehicles) of environment- organization change. The major implication is that the web of stakeholder relations, the way it is constructed, and the way it develops and changes over time defines an organizational niche. Managing stakeholder relationships means to preserve the organizational niche that accounts for its survival. This is our proposal to bring environmental analysis back to strategic management theory and stakeholders analysis. Of course, further research needs to be done but we are confident that this perspective contributes to strengthening both theoretically and practically stakeholder approaches. By embracing a niche-construction framework, we are able to not only integrate the creative effects of human agency back into our understanding of the organization:environment relationship, but also to provide a means of integrating dynamic change into more traditional modes of stakeholder analysis.
Thomas J. Hench

Tom Hench is professor of management at the University of Wisconsin-La Crosse. He received his doctorate in management from the University of South Carolina in 1997, with an emphasis on management as an emergent, self-organizing process. His research focuses primarily on the changing nature of management thought and the evolving "frames" we use to understand management; not the least of which includes our growing recognition of business and management as enduringly ethical undertakings. Tom also holds Masters degrees in management and international relations from Vanderbilt University (1973) and Boston University (1971), respectively. Before earning his doctorate, he worked for nearly two decades for high-growth manufacturing firms, primarily in product management and product development. There, he experienced first-hand the challenge of "managing change" in real-world contexts.
Davide Secchi

Davide Secchi is Assistant Professor of Organizational Behavior at the University of Wisconsin, La Crosse. His primary area of interest is in decision making in organizations. He is active in the study of distributed cognition and its implications for management. His approach to human cognition passes through the study of 'docility.' This concept allows to make a straight connection between cognition—as it affects and is affected by decision making processes—and human behavior and decision making. He also studies theory and practice of social responsibility. In the last years, research focus had been on: (a) differences between European and American approaches to CSR, (b) the classification of CSR theories, (c) the analysis of discrimination in the banking industry and in the Italian home mortgage market. He has presented his research to several international conferences and published some of them in peer- reviewed journals and books. In 2004 he received his PhD in Business Administration from the University of Pavia, Alma Ticinensis Universitas 1361.

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