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The aim of this paper is to describe the arena in which managers of small size Brazilian municipalities make decisions as constrained by stakeholder influence.

Four case studies were carried out with municipalities in the State of Minas Gerais, Brazil. The investigation was carried out using grounded theory. Data were gathered through in‐depth interviews with managers and with the main stakeholders. Data were analysed using content analysis, supported by QSR N6 software.

The contribution of this paper to theory is based on a description of the arena in which Brazilian municipal districts make decisions. In so doing, it endeavours to model this arena as comprised of five clusters of stakeholder concerns: limitation, collaboration, orientation, legitimacy, and inspection. The paper raises some issues that are helpful in explaining the relationship between stakeholder influences and public organisations. In other words, it helps to label stakeholder influences and to make stakeholder influence more manageable by public organisations at the local government level. In practical terms, the paper concludes that the number of stakeholders is less important than the sort of influence they are supposed to exert upon organisations.

The limitations of this investigation relate to the features of the case study methods employed. The results show the particular situation of the State of Minas Gerais (at the southeast of Brazil) and represent the situation of small municipalities.

There has been very little prior analysis of stakeholder influence focusing on local government. This investigation is the first with a specific focus on identifying the arena in which Brazilian municipalities make decisions and the relationship of those municipalities with stakeholders.