Stakeholder cohesion, innovation, and competitive advantage

Purpose – The purpose of this paper is to contribute to a better comprehension of the relationships between corporate social performance (CSP) and corporate financial performance (CFP) through the development of a dynamic model that links together innovation and change, stakeholder cohesion, and competitive advantage.Design/methodology/approach – Theory building through the development of eight testable propositions.Findings – Stakeholder cohesion may have a “dark side” to the extent it results in inertia and resistance to change, thus reducing propensity to innovation and change. The latter, in turn, are vital for both competitive advantage and stakeholder cohesion itself. Therefore, propensity to innovation and change is the pivotal variable that helps explain the complex, non linear, often inextricable relationships between CSP and CFP. Furthermore, external (environmental dynamism) and internal (firm culture) variables moderate, respectively, the impact of innovation and change on firm performance and the impact of firm performance on its propensity to innovation and change.