Strategic transformations are likely necessary for all organizations at some point in their existence, but the role of external stakeholders in committing resources to support transformations has been largely overlooked. This paper aims to begin to fill this gap by developing a theoretical model detailing which factors increase the likelihood that financial stakeholders will commit resources to strategic transformation.
Neo-institutional and stakeholder theories are applied to the strategic transformation phenomenon to develop six propositions regarding financial stakeholders’ resource commitment to strategic transformation.
Moral legitimacy, pragmatic legitimacy and unfamiliarity with the firm directly affect the likelihood that financial stakeholders will commit resources to strategic transformation. Cognitive legitimacy or familiarity amplifies the positive effect of pragmatic legitimacy on resource commitment, and pragmatic legitimacy lessens the negative effect of unfamiliarity with the firm on resource commitment.
This paper lays out a clear conceptual model of the antecedents of financial stakeholders’ resource commitment to strategic transformation, aiding practitioners in securing critical stakeholder support and filling an important gap in strategic transformation/stakeholder literature.
The author thanks Associate Editor Ronaldo Parente and two anonymous reviewers for their very helpful guidance on this manuscript.
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