Developing a scale for stakeholder orientation

Purpose - Business practitioners are increasingly concerned about stakeholder issues. Although stakeholder orientation (StkO) has important bearings on a company's performance, to date no systematic attempt has been made to develop a valid scale of StkO, or to assess its influence on business performance. The present paper aims to look into ecological validity by attempting to construct and validate the StkO scale developed in China. Design/methodology/approach - Given the literature reviewed, a model is proposed of company performance based on StkOs, which is identified as a one-dimensional construct consisting of four components. Using a survey design, data were collected from 400 firms in three most important commercial cities of Mainland China with a response rate of 25 percent. Both item analysis and split-half method were used to purify the measurement scale and to assess its stability. An exploratory factory was used to assess the dimensionality. Its result was subject to a confirmatory factory analysis using AMOS 4.01, which examined the construct, convergent and discriminant validities of StkO. The nomological validity of the scale was assessed by constructing a structural equation model with encouraging indices of goodness of fit. Findings - The findings support the assertion that StkO is a multi-facet construct consisting of four dimensions. The data indicate that these components are convergent on a common construct and that the relationship of the scale developed in this paper has acceptable discriminant validity and nomological validity. Originality/value - For practicing managers, the findings reconfirm the long-held belief that StkO is a crucial factor for business performance. First, the proposed scale could be used as a diagnostic tool to identify areas where the specific improvements are needed and to pinpoint aspects of a firm's StkO that require work. Second, the four components in the StkO model may serve to identify training needs by helping human resources managers so as to better develop a relationship with various stakeholders. Finally, firms may use this framework to develop relevant and effective business strategies and tactics and to set clear policies that balance the relationships and benefits among customers, shareholders, and employees.