A Network Perspective on Stakeholder Management: Facilitating Entrepreneurs in the Discovery of...

Journal of Business Ethics (2005) 60: 221-232DOI 10.1007/S10551-005-0130-7

© Springer 2005

A Network Perspective on StakeholderManagement: Facilitating Entrepreneursin the Discovery of Opportunities

Wim VandekerckhoveNikolay A. Dentchev

ABSTRACT. The problem of opportunity discovery is atthe heart of entrepreneurial activity. Cognitive Umitationsdetermine the search for and the analysis of infomiationand, as a consequence, constrain the identification ofopportunities. Moreover, typical personal characteristics -locus of control, need for independence and need forachievement - suggest that entrepreneurs wiU tend to take acentral position in their stakeholder environments and thusfail to adapt to the complexity of stakeholder relationshipsin their entrepreneurial activity. We approach this problemby adopting a network perspective on stakeholder man-agement. We propose a heuristic approach of stakeholderanalysis, which requires two mappings of the entrepre-neurial constituents. The first mapping focuses on currentinteractions between the entrepreneur and their stake-holders, while the second focuses on a specific issue and thestakeholders that constitute it. In eect, such a stakeholderanalysis requires entrepreneurs to use the complexity ofstakeholder relationships in order to go beyond their cog-nitive limitations and thus facilitate the discovery of newopportunities. As we wiU argue, this has clear implicationsfor the ethics and activities of entrepreneurs.

KEY WORDS: Business ethics, entrepreneurship, net-work perspective, opportunity identification, stakeholdermanagement.

Wim Vandekerckhove holds a doctoral degree from GhentUniversity. He has published previously on the ethics ofwhistleblowing policies. He is currently a post-doctoral re-searcher at the Center for Ethics & Value Inquiry of theGhent University. His research interests are sensemaking,anti-corruption and civil society.

Nikolay A. Dentchev holds a doctoral degree from Ghent Uni-versity. He has published on the practical relevance of CSR.He is currently a post-doctoral researcher at the Department ofManagement and Organization ofthe Ghent University. Hisresearch interests are competitive aspects of CSR and the in-tegration of responsibility principles in business models.

Introduction

Searching for business possibilities is a major impetusfor entrepreneurs (Landstrom, 1999). The discoveryof opportunities is dependent on both the possessionof information and personal characteristics (Shaneand Vankataraman, 2000). However, cognitivelimitations (Simon, 1982) tend to constrain both thesearch for information (Dutton and Webster, 1988)and the interpretation of infomiation (Daft andWeick, 1984; Kahneman and Lovallo, 1993). Inother words, specific personal characteristics accountfor misinterpretation or failing to notice informationsignals of particular entrepreneurial opportunities(Dentchev and Heene, 2004). Allowing opportuni-ties to go unnoticed, or misinterpreting them, re-flects a failure of entrepreneurial activity.

Therefore, this paper proposes a method whichguides entrepreneurs to identify an increased num-ber of opportunities. We argue that a network per-spective on stakeholder management (Rowley,1997; Mahon et al., 2004) constitutes a powerfulinstrument in facilitating entrepreneurs to discoveropportunities. This type of perspective implies thatsome stakeholder groups are able to indirectlyinfluence the organisation. The contribution of thispaper is that it proposes that entrepreneurs use thecomplexity of stakeholder relationships in order tobreach their cognitive limitations and so facilitatethem in the discovery of new opportunities.

The paper is organised as follows. In the nextsection, we discuss the identification of opportuni-ties through an analysis of the entrepreneurial envi-ronment, approached from a stakeholder perspective(see Section "A stakeholder perspective on theentrepreneurial environment"). Then, we briefly

222 Wim Vandekerckhove and Nikolay A. Dentchev

discuss the typical personal characteristics of entre-preneurs (see Section "The personality of entrepre-neurs"), which suggest that they will tend to use thestakeholder hub-model for identifying entrepre-neurial opportunities (see Section "The hub-modelof the stakeholder environment"). As the assump-tions in the hub-model are somewhat problematic,we propose, in Section "A network perspective onentrepreneurship", a network perspective for anal-ysing entrepreneurial environments. In Section"Mapping for opportunities", we develop a heuristicapproach for locating entrepreneurial opportunitiesby comparing two distinct stakeholder mappings:one focusing on interactions between the firm andits stakeholders, the other focusing on symbohcpower relationships regarding a specific issue. InSection "Discussion" we discuss the implications forentrepreneurs and ethics, and make recommenda-tions for further research.

Identification of entrepreneurialopportunities

Although entrepreneurs are known for their abilityto develop new business ideas, the task of opportu-nity identification is found to be difficult (Hisrichand Peters, 1998, p. 39). This difficulty is attributedto the subjective analytical processes from whichopportunity recognition results (Shane and Venka-taraman, 2000, p. 220). Entrepreneurs tend to makechoices in accordance with their particular personalcharacteristics (Kahneman and Tversky, 2000). Inthis situation, the question arises of what are theimplications of the cognitive limitations of entre-preneurs for their activities?

However, the cognitive limitations of entrepre-neurs contribute to the richness of business ideas. Anentrepreneurial opportunity is recognised whensomeone considers it possible to organise a product ora service activity with higher customer value and/orat lower costs (Shane and Venkataraman, 2000). Thedifferences in personal characteristics lead to differentperceptions of what could constitute additional cus-tomer value and how entrepreneurial activities couldbe organised at minimum costs. Conversely, thecognitive limitations of entrepreneurs constrain boththeir analytical capacity and the flow of informationthey consult when searching for opportunities.

Constraints in analytical capacity. Daft and Weick(1984) would argue, are the result of specificity in theenvironment and in the interpretation experience ofentrepreneurs. The constraint resulting from con-sulting only certain infomiation is also known as theproblem of information selection (Stiglitz, 2000).This problem results from decision-makers beinginterested only in a particular range of issues (Duttonand Webster, 1988). Thus, the discovery of oppor-tunities is constrained by the personal limitations ofentrepreneurs in consulting and analysing the infor-mation in their environments. The next subsectionapproaches this threat to entrepreneurial activityfrom a stakeholder perspective.

A stakeholder perspective on the entrepreneurial

environment

One way to describe the environment in which anentrepreneur operates is to identify all the stake-holders or groups that affect or are affected by theactivities ofthe firm (Freeman, 1984). Informationconstraints are reflected in defining the stakeholders'boundaries. In the words of Phillips (1999), youhave to decide upon who is and who is not astakeholder of your activities. Such a decision isinfluenced by the importance of each stakeholder forthe firm, which is a function of their power, legiti-macy and urgency (Mitchell et al., 1997) or, putanother way, a result of the resource dependence ofthe business on that stakeholder (Frooman, 1999;Jawahar and McLaughlin, 2001). Such an analysiswill lead an entrepreneur to distinguish among pri-mary- , secondary- and non-stakeholders. Accordingto Clarkson (1995), primary stakeholders are thosethat significantly contribute to the survival of anorganisation, while secondary stakeholders make amore limited contribution to the firm. Stakeholdersin this second group are to some extent influencedby the entrepreneurial activities. Finally, there arethe non-stakeholders who are neither influenced bythe firm nor a factor in its survival. In theory, onceentrepreneurs have set the boundaries of theirenvironments (here described in stakeholder terms),they analyse in more detail the critical stakeholdercapabilities in order to identify entrepreneurialopportunities. However, the typical characteristics ofan entrepreneur's personahty can lead, in our view,to a shallow analysis of their environments.

A Network Perspective on Stakeholder Management 223

The personality of entrepreneurs

It would be a great chaUenge, if not an illusion, to beable to present the typical entrepreneur. Despite this,the relevant literature accepts that entrepreneurs havecertain distinctive personal characteristics. We referhere to personal qualities such as locus of control,need for independence, need for achievement andrisk taking (Hisrich and Peters, 1998). Locus ofcontrol refers to one's sense of control over devel-opments in your environment. Need for indepen-dence is the personal need not to have superiors.Need for achievement implies a desire for personaland professional recognition. Finally, risk taking re-flects making entrepreneurial decisions without fullknowledge ofthe consequences. This fourth personalcharacteristic has consequences for decision-makingto realise an opportunity, whereas the other threeinfluence the way entrepreneurs analyse their envi-ronments.

Tlte hub-model of the stakeholder environment

Personal quahties such as locus of control, need forindependence and need for achievement reflect de-sires to personally direct the developments thatinfluence one's professional activities. In otherwords, this implies a fuUy informed and controllingposition relative to stakeholders. Hence, entrepre-neurs tend to take a central position in their envi-ronments. From a stakeholder perspective, such aposition can be represented using Freeman's hub-model of stakeholder management. This model as-sumes that stakeholder relationships are dyadic,recasting the firm as a nexus of contracts between anentrepreneur and his/her stakeholders (Jones 1995).This asserts that an entrepreneur can influence allcontracts with the firm's stakeholders. From a stra-tegic perspective on stakeholder management, thisassumption is at odds with the reality of conflictingstakeholder interests (e.g. AnsofF, 1965). To resolvethese conflicts from the hub-model perspective, theentrepreneur has to control the stakeholders byinstantiating and controlling meanings through one-way communication models. However, this kind ofentrepreneurial control is seen as unrealistic (Craneand Livesey, 2003), and so the entrepreneurial desireto create an environment according to the hub-

model cannot be satisfied. If stakeholder manage-ment is the responsibility of only the entrepreneur,then weighing the interests of stakeholders has to bedone without any dialogue with these constituen-cies. This would imply that the entrepreneur hasexhaustive information about stakeholder expecta-tions and organisational possibilities and, moreover,that the entrepreneur is then able to take optimaldecisions. It is our view that, due to the earlier ex-plained cognitive limitations of entrepreneurs, theseimplications are unrealistic. We therefore develop,in this paper, a heuristic approach for identifyingopportunities for strategic stakeholder managementthat starts from a network perspective, and whichdoes not rely on unrealistic assumptions of dyadicstakeholder relationships and exhaustive informationabout stakeholder expectations.

A network perspective on entrepreneurship

Recent hterature on stakeholder management hasadopted a network perspective (Andriof et al., 2002,2003; Mahon et al., 2004; Rowley, 1997). This hasmeant abandoning the classical hub-model with itsgeneral assumptions of dyadic stakeholder relation-ships and the firm as a nexus of contracts. Rowley(1997) developed a network theory of stakeholderinfluences by using social network analysis, whichenabled him to move beyond dyadic relationshipsbetween individual stakeholders and a focal organi-sation. This was necessary because of the interde-pendent stakeholder interactions that needed to beintegrated in the theory, and reflects the fact thatstakeholders do not only interact with the firm, butalso with each other. Freeman and Evan (1990) hadalready argued for this in stating that the stakeholderenvironment of a firm consists of "a series of mul-tilateral contracts among stakeholders" (Freeman andEvan, 1990, p. 354). In this sense, "[firms] do notsimply respond to each stakeholder individually;they respond, rather, to the interaction of multipleinfluences from the entire stakeholder set" (Rowley,1997, p. 890).

This constituted an initial shift in perspective, awayfrom the hub-model that Freeman (1984) had origi-nally presented. However, Rowley took it one stepfurther, arguing that "the focal organisation is morethan simply the central point of its own stakeholders: it


is also a stakeholder of many other focal points in itsrelevant social system" (Rowley, 1997, p. 892). Inother words, stakeholders have stakeholders as well,and integrating these second order stakeholders morecompletely represents the value chain (Freeman andLiedtka, 1997) of entrepreneurship. Our concem isthat the 'need for independence' and 'locus of control'personal qualities will not allow such a complexrepresentation of the entrepreneurial environment.Further, people who attach much importance toachievement may question the relevance of secondorder stakeholders for their personal and professionalrecognition. In terms ofa graphical representation ofafirm's stakeholder network, the firm will no longer be ahub interconnecting all the relevant stakeholders. In-stead, the 'stakeholder environment' is depicted as bothdirect and indirect stakeholders and their relationships.The firm as the focal organisation is thus diluted.

Network characteristics

Rowley went on to develop a network theory thatprovided a means for examining how the pattem ofrelationships in a stakeholder environment influ-ences the behaviour of an entrepreneur. The stake-holder environment now consists of direct andindirect entrepreneurial stakeholders, and Rowleymade predictions regarding the influence strategiestowards stakeholders based on network characteris-tics: their density and centrality.

Nettvork density is a term used to denote theenvironment's interconnectedness, and is a measureo f t h e relative number of ties in the network thathnk actors together and is calculated as a ratio of thenumber of relationships that exist in the network(stakeholder environment), compared with the total'number of possible ties if each network memberwere tied to every other member" (Rowley, 1997,p. 896). A higher density results in more-efficientcommunication across the network and the pro-duction of shared behavioural expectations. In thissense, the entrepreneurial 'need for independence'characteristic should not lead to communicativeisolation from others.

Network centrality refers to an individual actor'spower in a network deriving from their positionrelative to others. Three types of centrality aredefined (Rowley, 1997, p. 899). Firstly, degree cen-

trality is defined as the number of ties an actor haswith other actors in the network. Secondly, closenesscentrality is defined as an actor's ability to directlyaccess all other members of the network. Thirdly,hetweenness centrality refers to the extent that the focalactor within a network is an intemiediary for otheractors to access each other. The greater the centralityof a firm as the focal point in a network, the morethe firm will be able to resist stakeholder pressures.Although the entrepreneurial 'locus of control' im-plies the pursuit of high centrality, it does not meanthat entrepreneurs have to be solely responsible ordominant with regard to specific issues.

The lower the density and the greater the cen-trahty, the more a network resembles Freeman'shub-model. In terms of power and the ability of anentrepreneur to resist stakeholder influences, thiswould be the ideal situation. However, given theproblematic impHcations of that model, as we havealready mentioned, in terms of conflicting interestsand unrealistic entrepreneurial responsibilities, weargue that entrepreneurs would mostly benefit froma network environment characterised by optimal^density and high centrahty.

A high-density. network has an efficient com-munication structure between stakeholders andproduces shared behavioural expectations. A highcentrality of a fimi within a network gives it aprominent position since it is able to influenceinformation flows. "Stakeholders can coordinatetheir efforts to monitor and punish the focal orga-nisation, and the focal organisation can influence theformation of expectations" (Rowley, 1997, p. 901).At first sight, the increased abihty of stakeholders toform coalitions might not seem a strategicallydesirable situation for entrepreneurs. However,when we consider the problem of conflictingstakeholder interests, a denser network is attractive asthe resulting shared behavioural expectations implyfewer conflicting stakeholder interests. Therefore, ahigh centrality ofthe firm, within an optimally densenetwork, is strategically the most desirable situationfor an entrepreneur. Identifying and engaging withstakeholders in such a way that this results in astrategically desirable network design is the entre-preneurial activity of network engineering.

In the remainder of this paper, we explain howthe network approach to relationships with theirconstituencies can help entrepreneurs to identify


opportunities for better engineering their stake-holder network.

Network opportunities

Earlier, we argued that the discovery of opportuni-ties is constrained by the personal hmitations ofentrepreneurs in terms of consulting and analysingthe information in their environments. We have alsoshown that the personal characteristics of entrepre-neurs and the way they perceive their relationshipswith their environment leads to them identifyingwith a hub-model of their stakeholder environ-ments. However, how one relates to one's stake-holder environment influences whether or notopportunities are discovered. In this sense, weargued that since the network perspective is morerealistic than the hub-model, changing one's stake-holder relationships in a specific way - throughnetwork engineering - can help entrepreneurs todiscover new opportunities. Naturally, one still hasto determine in what specific ways stakeholderrelationships ought to be changed; or, in otherwords, where are the 'network opportunities' to befound? Network opportunities can be found whennew relationships are created, as these increase thedensity ofthe network. However, not every increasein network density provides a network opportunity.In effect, we see an opportunity for entrepreneurs toestablish relationships with indirect or secondarystakeholders and, in so doing, to strengthen theircentrality in the network.

In terms of centrality, two types of entrepre-neurial opportunities arise, one that integrates indi-rect stakeholders in order to explore new businesspossibihties, and one that engages them aiming atefficient conflict resolution. The first type ofopportunity arises when an entrepreneur engagesclosely with indirect stakeholders. However, suchclose involvement of indirect stakeholders is at oddswith the entrepreneurial 'need for achievement'.Despite this, the purpose of closer involvement is togain a new perspective on the stakeholders' activitieswhich, according to Hart and Sharma (2004), resultsin the identification of new business opportunities.The second type of entrepreneurial opportunityresults from engaging stakeholders in a multi-stake-holder dialogue. The opportunities that arise from

multi-stakeholder roundtables result from a processthrough which diverse stakeholders come to realisethe potential incompatibility of their claims andadjust them, resulting in shared behavioural expec-tations that are feasible for the fimi. Whatever theoutcome of this process, it is not based on anindividual judgment and thus contradicts theentrepreneurial 'locus of control' and 'need forindependence'. However, the purpose is to instigatea creative leaming process by having access to dif-ferent impressions of the interests at play in a givensituation. To the extent that this process reduces thecognitive limitations of all parties, and recasts inter-pretations of information signals into mutuallyenforcing stakeholder expectations, engagementsand considerations, the stakeholder claims will be-come stable and feasible.

In this sense, it is important to note that 'inclu-siveness' enhances the identification of this secondtype of opportunity. The notion of inclusiveness im-plies that stakeholders selected for inclusion in multi-stakeholder dialogues should not be detemiined bystakeholder saUence (Mitchell et al., 1997) if oppor-tunities for collaborative stakeholder interactions andfeasible shared behavioural expectations are to result.Rather, it is precisely by selecting those stakeholderswith incompatible or unfeasible claims upon the fimithat the creative leaming process will be instigated.

Mapping for opportunities

Our concern is locating opportunity zones within thefimi's network environment. We have argued thatentrepreneurial network engineering aims to identifyopportunities in the existing network environment,and that this will eventuaUy result in a strategicaUydesirable network design. Such a network design ischaracterised by high centrahty and optimal density.The use of the term 'optimal density' highlights ahmitation in the sense that an organisation cannotmaintain fuU density, i.e. interactions between theentrepreneur and aU of their stakeholders, and amongaU stakeholders. The inabihty to achieve fuU densitycan be explained by two factors. Firstly, it is unlikelythat all stakeholders wiU naturaUy interact with allother entrepreneurial constituents, and nor is it Ukelythat an entrepreneur wiU be able to facilitate such anexhaustive interaction pattem. Secondly, as we have


TABLE I

Locating entrepreneurial opportunities

Map 2 Map 1

Direct Indirect Not

In control

Accommodating

Not

No opportunity(maintain good contact)

No opporttmity(maintain good contact)

Opportunity: help stakeholderto understand your overallissue involvement

(inform about issue involvement)

Opportunity: gain anunderstanding of adirect stakeholder'sbehaviour andexpectations(establish contact)Opportunity: create acollaborative environment(establish contact)

Opportunity:help stakeholder tounderstand your overallissue involvement(infonn about issue involvement)

Opportunity:possible mistake inmapping (rethink thestatus of all stakeholders)

Opportunity:

enrich knowledge andperceptions(establish contact)(empty)

already mentioned, it is instrunientally inappropriatefor entrepreneurs to maintain interactions with allstakeholders. Thus, optimal density involves thequestion: how to ensure efFective opportunity dis-covery"

In order to answer this, we propose a heuristicapproach that compares two stakeholder mappings.The first is a mapping of the stakeholder networkwith the entrepreneur as the focal point. The secondis a mapping of how the interactions betweenstakeholders constitute a social issue (Bigelow et al.,1991, 1993; Mahon et al, 2004) that is relevant tothe entrepreneur. Using these two distinct mappingsdoes not mean that we see stakeholder behaviourand issue evolution as mutually independent. On thecontrary, the opportunities to improve stakeholderbehaviour and expectations are to be found in theways that issues are constituted and managed.Therefore, our two mappings are different mappingsof the same environment that need to be compared,rather than similar mappings applied to distinctenvironments.

These mappings do not address the entrepre-neurial characteristics in order to change them, butrather to give insights into how they 'block' theentrepreneur from achieving a strategic stakeholder

environment. The mappings can show whichstakeholders might have a crucial influence withregard to a particular issue ('locus of control'), howpossible solutions are dispersed across the stakeholderenvironment ('need for independence'), and whomight be an important partner in achieving certaingoals ('need for achievement').

In what ways do the two mappings differ fromeach other? Networks are composed of ties linkingnodes in social systems. The nodes can be individ-uals, groups or organisations, and the ties designatethe interactions. Thus, if there is an interactionbetween two nodes, the nodes are linked. In ourheuristic approach, the two mappings differ in thetypes of interactions that qualify to link nodes.Nodes in Mapping 1 are linked if the interaction is atransaction, i.e. an exchange of money, information,products or services. The mapping starts from thefirm, which is regarded as the focal organisation, andidentifies its direct and indirect stakeholders. Thedirect stakeholders are those groups or organisationsthat interact with the firm. The indirect stakeholdersare those who interact with the direct stakeholders,but not with the firm itself

In the second mapping, qualifying interactions arethe attitudes, opinions and behaviours that actors


have towards one another with regard to a specificissue. Here, it is not the firm or any particularstakeholder that is the focal point of the mapping.Rather, we focus here on the issue itself Mappingthe relevant environment thus consists of looking forstakeholders of a particular issue and drawing uphow these stakeholders adopt a position with regardto that issue. It is the set of these positions thatconstitute the particular issue or, in other words,mapping the issue results in a set of power rela-tionships that define the issue. The identifiedstakeholders within these power relationships can becategorised as either 'in control' or 'accommodat-ing'. Stakeholders are categorised as 'in control' ifthey have - relative to the entrepreneur - moresymbolical power in terms of the specific issue. Bythis we mean that the stakeholder is generallyrecognised as an authority on the issue, is regarded asa representative of a particular group or valuescentral to the issue, and/or has the ability to generatedominant viewpoints and attitudes with regard tothat issue. In contrast, stakeholders are categorised as'accommodating' if they have — again, relative to theentrepreneur — less symbolical power.

Both mappings are limited. Mapping 1 is limitedto transactional links and to two levels distant fromthe focal organisation. Mapping 2 is limited to asingle issue. When the two mappings are compared,a number of stakeholders will appear in both. It iswith regard to these stakeholders that opportunitiesfor network engineering exist. There are a numberof possible combinations. Each combination can bequalified in terms of the opportunities it offers forstrategically desirable network design. We havesummarised the possibilities in Table 1.

In the table, we have indicated the networkopportunities in italics, and the suggested actionswithin brackets. It is impossible to say anythingabout stakeholders who do not appear in either ofthe two mappings, and therefore this category isconsidered to be empty.

As noted earlier, network opportunities existwhere both network density and centrality can beincreased. Stakeholders appearing in Mapping 1 asdirect stakeholders, therefore, do not constitutenetwork opportunities since there are already exist-ing interactions. Hence, irrespective of whetherthese direct stakeholders are 'in control' or 'accom-modating' with regard to a specific issue it is nec-

essary to maintain good contact in order to continuethe interaction. Although there is no opportunityhere, good management is stiU required.

If a direct or an indirect stakeholder does notappear in the issue mapping, then there are oppor-tunities for network engineering with respect to thatspecific issue. Since these stakeholders might appearin other issue mappings, it is advisable for theentrepreneur to inform them about his or herinvolvement in this particular issue, as this mighthelp those stakeholders to better understand thebehaviour and expectations of the entrepreneur. Inother words, the opportunity here is for stakeholdersto gain an understanding of the entrepreneur'soverall issue involvement.

As can be seen in Table I, there are networkopportunities to be found with regard to groups,organisations and individuals who appear in the issuemapping, as either 'in control' or 'accommodating',and also as indirect stakeholders in the interactionmapping. Making contact with these indirectstakeholders creates new relationships, and consti-tutes an increase in the network density and an in-crease in both the degree and closeness centralities ofthe entrepreneur, whereas the betweenness central-ity remains unchanged. What exactly does theopportunity consist of? If an indirect stakeholder isconsidered as 'in control' with regard to a particularissue, the behaviour and expectations of the directstakeholder towards the entrepreneur can be seen asa function of the behaviour and expectations of theindirect stakeholder towards the direct stakeholder.Hence, the opportunity created by getting intocontact with an indirect 'in control' stakeholder,stems from gaining an understanding of the behav-iour and expectations of the direct stakeholder.

If the indirect stakeholder is not 'in control', butrather 'accommodating', in terms of the mappedissue then getting into contact with that stakeholderwill not significantly help in understanding why thedirect stakeholder behaves in a particular way or hasspecific expectations. However, it can provide in-sights into how other actors in the network perceiveand experience the direct stakeholder. Thus, theopportunity created by getting into contact with an'accommodating' indirect stakeholder lies in creatinga collaborative environment through increasedknowledge about how actors within the environ-ment relate to one another. Note that both types of


'network opportunities' result in providing theentrepreneur with new information. This can helpthe entrepreneur to discover new opportunities forthe development of new ventures.

Table I also indicates that there are networkopportunities for groups, organisations and individ-uals appearing in the issue mapping but not in theinteraction mapping. Initially, it is hard to see how astakeholder in an issue who appears to be 'in control'can fail to appear in the interaction mapping. If thestakeholder is that important with regard to a par-ticular issue, then surely this stakeholder should beinteracting directly or indirectly with the entrepre-neur. In this sense, the opportunity lies in correctinga possible misalignment, and therefore it becomesadvisable to rethink the status of all stakeholders. As aresult, entrepreneurs will become more aware oftheir own cognitive limitations and open to regularlyanalyse possible changes in stakeholder sahence.

Getting into contact with a stakeholder whoappears as 'accommodating' in terms of an issue, butwho does not appear in the interaction mapping,could enrich the entrepreneur's knowledge and per-ception, not only of that particular issue, but also ofhow actors w ithin the environment relate to one an-other. This too could help the entrepreneur to dis-cover new opportunities for the development of newventures.

Discussion

Overall, the proposed heuristic approach shouldstimulate entrepreneurs to breach their cognitivelimitations in the search for information and in itsanalysis. This, in efFect, will lead to the discovery ofnew opportunities as the analysis of the stakeholderenvironment requires the comparison ofthe currentinteractions between an entrepreneur and thestakeholders, and the relative stakeholder importancewith respect to a specific issue. In the remainder ofthis section, we elaborate on the implications of ourideas for entrepreneurial activity and for ethics, andpropose recommendations for future research.

Implications for entrepreneurs

This theoretical analysis starts from the premise thatthe typical personal characteristics of entrepreneurs

(i.e. locus of control, need for independence andneed for achievement) will limit their abihty todiscover business opportunities. In terms of a par-ticular issue, these characteristics are Ukely to result,respectively, in (1) a reluctance to put anotherstakeholder in charge to resolve the issue, (2) areluctance to approach those issues that one cannotsolve alone, and (3) an unwillingness to establishcontacts with less important stakeholders. The pro-posed heuristic approach constitutes a method thatcan guide entrepreneurs in overcoming these ten-dencies. In other words, our work is not demandinga change in entrepreneurial personality; rather it isproposing an intentional analysis of entrepreneurialactivity.

Such an intentional analysis is desirable at thebeginning of any entrepreneurial project and whena new issue emerges. The analysis should be re-peated, from time to time, to captvire changes orcorrect mistakes. The proposed heuristic approachis, so to speak, a continuous leaming process. Wewould simply suggest three actions. Firstly, beaware of possible mistakes in evaluating stakehold-ers: rethink carefully their status. This may requiresome time for reflection and seeking the opinion ofothers. Secondly, entrepreneurs should get incontact with their less important stakeholders. Thisis often regarded as a waste of precious time andresources, but it can help you create collaborativeenvironments, and can enrich your knowledge andunderstanding of the behaviour and expectations ofimportant stakeholders. In our view, contacts withsecondary stakeholders should not consume exces-sive entrepreneurial time or resources: good tar-geting and short but systematic discussions aresufficient. However, this does require an openmindset to different opinions, ideas and commu-nication styles. Thirdly, we suggest that entrepre-neurs inform more broadly about their involvementin various issues. Many are hesitant to discloseinformation, especially to constituents who do nothave a clear stake in a certain issue. However, thedevotion of time and effort to a certain issue is asignal of its importance and your overall priorities.It could avoid misunderstandings as to what youreffort should be for those issues that are importantto others. Your openness could remove informa-tion asymmetry and contribute to a candid workingenvironment.


With all these actions, it is vital to have directcontact. This direct confrontation with differentinterests and competences can bring new entre-preneurial ideas. Hence, the challenge will be aimedat your eagerness to leam and your openness tochange.

Ethical implications of the network perspective

So far, in this paper, an important question remainsunanswered: what are the ethical implications of thestrategic use ofthe complex stakeholder relationshipsthrough a network perspective? We would like toaddress this question in two ways. Firstly, the shiftfrom the hub-model of stakeholder managementtowards a network perspective entails a shift inethical outlook in general terms. Secondly, theopportunities for network engineering, as laid out inour heuristic model, have specific ethical implica-tions for the relationships between entrepreneurs andtheir stakeholders.

Not only do we claim that the hub-model is clearlyunreahstic (cf Section "The hub-model of thestakeholder environment"), we also regard it asundesirable from an ethical point of view. The hub-model requires a power position that allows anentrepreneur to disregard stakeholder claims and therelevance ofa lack of information. From the networkperspective, however, an entrepreneurial idea isformed through interactions with stakeholders, fromwhich a stable and shared set of claims and behavio-ural expectations are created, providing the entre-preneur with a trusting stakeholder environment forthe realisation of an idea or a new venture. Thus, ingeneral terms, shifting from the hub-model to anetwork perspective implies a shift from confiict andpower to shared expectations, trust and collaboration.

We can further expand on this important ethicalimplication by looking at the opportunities fornetwork engineering in our. heuristic model(Table I). Three types of action result from theidentified opportunities: (1) informing about issueinvolvement, (2) rethinking the status of all stake-holders and (3) establishing contacts. The ethicalimplications of the first action is that, by informingothers about your overall issue involvement, aclearer perception is possible of your own identity interms of issue-related duties and responsibilities.

both for stakeholders and for the entrepreneurialventure itself The second action, i.e. rethinking thestatus of all stakeholders, can shed new light on theentrepreneur's relational environment. The ethicalimphcation is that correcting omissions is a necessarycondition for taking a stakeholders interest intoaccount, and that one has to know that a particularactor 15 a stakeholder and why.

However, it is the third type of action, in ournetwork perspective on stakeholder management,that has the most important ethical implication.Firsdy, communicating with indirect stakeholdersabout direct stakeholders can lead to an under-standing of why stakeholders behave in a certain wayand have certain expectations, and how they per-ceive one another. This can reduce power imbal-ances within a stakeholder environment and, as such,this has ethical implications. It is true that, in com-municating thus, an entrepreneur might very wellend up reducing any power advantage they mighthave had. However, we argue that the trade-off isworthwhile because with a more equitable balanceof power within a stakeholder environment comesan increase in shared behavioural expectations and adecrease in conflict. The second important ethicalimplication is that our heuristic model for stake-holder management deliberately goes beyondstakeholder 'salience' (Mitchel et al., 1997) inidentifying those stakeholders with which relation-ships should be established. Our heuristic modelencourages entrepreneurs to establish relationshipswith indirect and less powerful stakeholders. Thus,the ethical implication of adopting a network per-spective on stakeholder management, or more pre-cisely of applying our heuristic model, is that poweris not a criterion for taking a stakeholder into con-sideration.

Recommendations for future research

We have discussed the network opportunities thatcan become apparent as a consequence of applyingour heuristic. However, we have only briefly out-hned the kinds of actions that entrepreneurs can taketo realise these opportunities. We see at least threeopportunities for future research with a closer focuson building comprehensive strategies for realisingnetwork opportunities: i.e. research on (1) the


restriction on entrepreneurial actions due to pastbehaviour towards certain stakeholders; (2) possiblemisinterpretations of the entrepreneur's attention tosecondary stakeholders; and (3) building detailedportfolios of strategic actions. The first of these areasfor future research is concemed with the difficultythat entrepreneurs might experience in realisingcertain network opportunities as a result of paststakeholder relationships. Under certain circum-stances, such as having previously ignored a stake-holder, it seems unlikely that entrepreneurs will beable to immediately establish profitable interactionswith such a constituent. Interesting research ques-tions with respect to this are: Under what conditionscan an entrepreneur undertake immediate strategicactions to realise a network opportunity? Whatintermediate actions are necessary in order toeffectively approach a stakeholder who might besceptical (for whatever reason) about collaborationwith the firm?

This problem of restrictions on entrepreneurialactions is also reflected to a certain extent in oursecond suggestion for future research. Explorativeresearch has shown that responsible behaviour to-wards society and the natural environment canhave negative effects on organisations if stake-holders perceive such performance as windowdressing or simply because such a performanceinterferes with their interests and values (Dent-chev, 2004). Using an analogy, entrepreneurialattention towards secondary stakeholders could bewrongly perceived by primary stakeholders orcould interfere with their own interests. As this islikely to lead to adverse effects, we think that thefollowing question is relevant: What intermediateactions are required so that stakeholders correctlyperceive entrepreneurial attention towards sec-ondary stakeholders?

Finally, it is incumbent upon future research topropose more-detailed portfoUos of strategic actionsthat will provide better advice to entrepreneurs onhow to realise these opportunities. In this context,the foUowing questions appear relevant: Whichportfoho of strategic actions should an entrepreneurexecute so as to realise a particular network oppor-tunity? To what extent are the various portfohos ofstrategic actions similar and different from eachother? Can these various portfolios lead to a generalstrategy for realising any network opportunity?

Conclusions

We have argued that a network perspective onstakeholder management can facilitate entrepreneursin discovering new opportunities. In particular, wehave stressed that a strategic network environmentfor a firm is one that is characterised by high cen-trality and optimal density. Such a network designovercomes the unrealistic assumptions underlyingthe hub-stakeholder model, i.e. of dyadic entrepre-neur-stakeholder relationships and exhaustiveinfonnation about stakeholder expectations. Wehave developed a heuristic approach for the identi-fication of network opportunities that consists ofmapping the network environment in two distinctways: interaction mapping and issue mapping. Bycomparing the two mappings, network opportuni-ties can be identified.

The relevance for entrepreneurs of this heuristicmodel, and of a network perspective on the stake-holder environment in general, consists of facilitatingthem to discover opportunities for the developmentof new ventures by altering their perception of theirstakeholder environment and by structurally chang-ing the information flow about their stakeholderenvironment. This is achieved through networkengineering - identifying and engaging with specificstakeholders — as a process towards high centralityand optimal density.

Acknowledgements

This paper was initially presented at the 2004 EBENAnnual Conference and we gratefully acknowledgethe participants for their helpful comments and sug-gestions, as well as the members of the editorialboard of this special issue, David A. Frenkel, YotamLurie and Andre Nijhof We also wish to express ourgratitude to Dave Bouckenooghe, Dirk De Clercqand two anonymous reviewers for their insightfulcomments on an earlier draft of this paper.

Notes

For an illustration of primary stakeholder groups, werefer to Clarkson (1995, p. 106): "typically [primarystakeholders] are comprised of shareholders and inves-


tors, employees, customers, and suppliers, together withwhat is defined as the public stakeholder group: thegovernments and communities." Examples of secondaryand non-stakeholders can be easily given, however,such a classification is very individual and issue specific.

'Optimal density' refers to the minimum number ofstakeholder interactions necessary to instigate the sharedbehavioural expectations and reflection processes neededto move beyond cognitive limitations. This number willbe higher than in the hub-model, but lower than themaximum number of possible interactions, as both ex-tremes are unrealistic.

The distinction between 'in control' and 'accommo-dating' does not equate to the powerful-subordinate oractive-passive relationships. In mapping an issue interms of the behaviour, opinions and attitudes of a par-ticular actor towards another, it is more firuitful to con-ceive of power-plays rather than binary po^verrelationships. Power-plays leave open the possibility ofactions to further one's interests despite limitations im-posed by others. In this sense, the attitudes, opinionsand behaviour of an actor should be regarded as an ac-tive interpretation of the transactional relationships be-tween this actor and others. If power relations areconceived of as having a binary characteristic, then anactor is either active or passive. Conceiving of power aspower-plays, rather than as non-binary power relation-ships, is a characteristic of what is labelled a post-mod-em view^ of organisations, referring to the application ofa Foucauldian perspective on organisations (Barker andCheney, 1994; Clegg, 1989).

The first level is the set of links between the finn(focal organisation) and its direct stakeholders. The sec-ond level is the sets of links between the first-levelstakeholders and their direct stakeholders.

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Wim VandekerckhoveGhent University,

Blandijnberg 2,B-9000 Ghent,

BelgiumE-mail: [email protected]

Nikolay A. DentchevGhent University,Hoveniersberg 24,

B-9000 Ghent,Belgium

E-mail: [email protected]

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