Search results

The stakeholder theory encompasses instrumental and normative varieties whose mutual relationship remains unclear and exhibits a classic tension between rational self-interest and moral motivation. The purpose of this paper is to develop a strategy for navigating this tension.

Niklas Luhmann’s social systems theory is concerned with the limited ability of social systems to codify, and be receptive to, the complexity of the environment. Drawing on this theory, the paper juxtaposes the codification problems of two types of social systems: the for-profit firm and the economic function system.

This juxtaposition allows to identify four firm behavior patterns, two of which can be aligned with instrumental and normative stakeholder theories. If the codification capacity of the economic function system is assumed to be sufficient, the codification problems of the for-profit firm are shown to specify the range of applicability of the instrumental stakeholder theory. Dropping the above assumption is shown to specify the range of applicability of the normative stakeholder theory.

The argument offers a fresh way of understanding the institutional economics foundations of the stakeholder theory. Given that the systems-theoretic idea of codification reflects the functioning of the real-world institutions, the argument shows that both instrumental and normative stakeholder theories reflect the institutional texture of the modern society in distinct but equally legitimate ways.

Many nonprofit missions and the goals of socially responsible corporations are often found to refer to similar moral ideals related to improving the quality of human life. To take account of this salient fact, the paper aims to theorize the functional equivalence between corporate social responsibility (CSR) and the nonprofit sector.

The argumentative strategy is to draw on the conceptual construct of the complexity-sustainability trade-off to develop a systems-theoretic interpretation of Roger Lohmann’s vision of the commons as an embodiment of collective voluntary action.

The emerging conceptual imagery is that of corporations and nonprofits as social systems continually seeking to sustain themselves by processing and codifying their societal environment which includes the commons in which Lohmann took a central interest. The possible functional equivalence of corporations and nonprofits is traced back to their struggling to develop and improve their responsiveness to the respective commons.

This argument is shown to cut across a range of issues in the modern nonprofit sector scholarship, while shedding new light on the ongoing debates on CSR and stakeholder theory.

The economic theory of the firm apparently concurs with Niklas Luhmann’s theory of social systems with regard to the primary function of the firm to be complexity reduction, i.e. the alleviation of the cognitive burden on agents whose cognitive capacities are limited. At the same time, however, the theory of the firm ignores the attendant issues of societal sustainability emphasised by Luhmann. The paper aims to fill this gap.

Taking a theoretical approach, the paper builds on the conceptual construct of “the complexity-sustainability trade-off”, which combines two contrasting aspects of the relationship between a system and its environment, namely, the precariousness highlighted by Luhmann and the embeddedness highlighted by open systems theory. These themes are respectively reflected in the principles of complexity reduction and environmental dependence which constitute the trade-off.

Drawing inspiration from the classic Marshallian presentation of supply and demand in modern economics, the paper argues that the principles of complexity reduction and critical dependence translate into the demand for and supply of social systems. In the proposed systems-theoretic interpretation of the theory of the firm, demand and supply refer to the imperatives of achieving coordination and securing cooperation within the firm, respectively. Thus, in the theory of the firm, the complexity-sustainability trade-off manifests itself as a trade-off between coordination and cooperation.

The implicit focus of the theory of the firm on complexity reduction disregards the nature, importance and fragility of cooperation in real-world firms. In so doing, it impedes the authors’ understanding of unconventional types of business organisation, such as cooperatives. These defects can be corrected by reorienting the theory of the firm according to the proposed systems-theoretic approach, which holds that firms should not be governed or studied in isolation from their environment, as they too often are – and, accordingly, that apparently anomalous forms of organisation should be taken seriously, as they too often are not.

Are entrepreneurial opportunities discovered or created? The debate around this question has crucial implications for successful organizational change management in the business world. The present conceptual paper transcends this debate by embedding the concept of the entrepreneurial opportunities within a Luhmannian systems – theoretical framework which accentuates the unique role of organization and change in the age of functional differentiation. The purpose of this paper is to show how the strategic navigation of the borders between function systems such as politics, science, education, religion, art, or, of course, economy leads to the discovery or creation new opportunities for both business and social entrepreneurship.

The paper combines Niklas Luhmann’s theory of social differentiation with Kim and Mauborgne’s Blue Ocean Strategy. The key argument is that the alternative regimes of social differentiation, such as segmentation, centralization, stratification, and functional differentiation, create distinct pools of entrepreneurial opportunities to be discovered, created, and exploited by adequate business models. (Business) Organizations, therefore, need to strategically adjust the amount of attention they devote to the different forms of social differentiation. The argument is buttressed with illustrative examples of business models related to the regime of functional differentiation.

A paradoxical finding is that the multifunctional business models which explicitly draw on the value creation potential of the most recent form of social differentiation, functional differentiation, remain little known even though they infuse business organizations with a unique capacity of new venture discovery and creation in the modern society.

Multifunctional business models have so far remained unexplored in entrepreneurship theory and practice. This paper develops a first strategic approach to the discovery or creation of both multifunctional business models and a broader framework of multifunctional organization models.

The rise of the general systems theory in the twentieth century would not have been possible without the concept of feedback. Of special interest to the present paper is Niklas Luhmann’s reconstruction and critique of Wiener’s cybernetic approach to the feedback concept. Luhmann has suggested that the operation of the feedback-controlled systems potentially poses problems of sustainability. The purpose of this paper is to explore this suggestion in more detail.

The reconstruction of the arguments of Luhmann and Wiener shows that both scholars approached the feedback concept from the “system-environment” perspective. Luhmann takes system-environment relations to be inherently precarious. Wiener underscores the importance of the sensitivity of the feedback-controlled systems to their environment.

Drawing on Norbert Wiener’s and Niklas Luhmann’s ideas, the paper shows that every specification of the feedback mechanism implies the drawing of the moral boundary that demarcates those parts of the environment to which the relevant system is sensitive from those to which it is not. A likely outcome of this boundary drawing is the maintenance of intra-systemic complexity at the cost of the deteriorating sustainability of the system in its environment.

Until today, the general system theory has sought to explain organized complexity and rightly underscored the role of feedback in maintaining it, thereby inadvertently creating the chasm between the complexity and sustainability dimensions of human civilization. The present paper pleads for reorienting of the systems-theoretic analysis of the feedback concept toward closing this chasm.

The purpose of this paper is to deepen the understanding of adaptive governance, which is advocated for as a manner to deal with dramatic changes in society and/or environment. To re-think the possible contributions of organizations and organization theory, to adaptive governance.

Based on social systems theory this study makes a distinction between “governance organizations” and “governance communities.” Organizations are conceptualized as the decision machines which organize and (co-)steer governance. Communities are seen as the social environments against which the governance system orients its operations. This study considers the adaptive mechanisms of organizations and reflect on the roles of organizations to enhance adaptive governance in communities and societies.

Diverse types of organizations can link or couple in different ways to communities in their social environment. Such links can enhance the coordinative capacity of the governance system and can also spur innovation to enable adaptation. Yet, linking with communities can also slow down responses to change and complexify the processes of deliberation in governance. Not all adaptive mechanisms available to organizations can be used in communicating with communities or can be institutionalized, but the continuous innovation in the field of organizations can inspire continuous testing of small-scale adaptive mechanisms at higher levels. Society can thus enhance its adaptive capacity by managing the role of organizations.

The harnessing of insights in organization theory and systems theory for improving understanding of adaptive governance. The finding that both experiment and coordination at societal level are needed, toward adaptive governance, and that organizations can contribute to both.

Stakeholder theory understands business in terms of relationships among stakeholders whose interests are mainly joint but may be occasionally conflicting. In the latter case, managers may need to make trade-offs between these interests. The purpose of this paper is to explore the nature of managerial decision-making about these trade-offs.

This paper draws on the ordonomic approach which sees business life to be rife with social dilemmas and locates the role of stakeholders in harnessing or resolving these dilemmas through engagement in rule-finding and rule-setting processes.

The ordonomic approach suggests that stakeholder interests trade-offs ought to be neither ignored nor avoided, but rather embraced and welcomed as an opportunity for bringing to fruition the joint interest of stakeholders in playing a better game of business. Stakeholders are shown to bear responsibility for overcoming the perceived trade-offs through the institutional management of social dilemmas.

For many stakeholder theorists, the nature of managerial decision-making about trade-offs between conflicting stakeholder interests and the nature of trade-offs themselves have been a long-standing point of contention. The paper shows that trade-offs may be useful for the value creation process and explicitly discusses managerial strategies for dealing with them.

The complexity of the modern world calls for the increasingly complex (i.e. containing more concepts) and systemic (i.e. containing more causal connections between the concepts) conceptual systems, such as theories and mental models which may exist at varying levels of complexity and systemicity. Yet, these systems are often found to be impervious to data and counter-arguments. Examples of such disputes are found in arguments over global warming and in the many debates between political groups. The purpose of this paper is to review the reasons behind this imperviance and identify ways to move forward.

The paper brings together the insights from the burgeoning science of conceptual systems as well as selected ideas from the moral philosophies of Niklas Luhmann and Jürgen Habermas. The science of conceptual systems is utilized to unearth the cognitive reasons for the imperviance of conceptual systems, while the work of Luhmann and Habermas is brought to bear on the moral reasons.

The most salient cognitive reasons for this imperviance are shown to be related to the questionable validity of data, the situational inappropriateness of conceptual systems, as well as their low complexity and systemicity. The effect of the moral content of conceptual systems on their imperviance is ambivalent. For Luhmann, moral communication may enhance imperviance and induce conflicts. In contrast, the Habermasian discourse ethics may counteract imperviance by stimulating the rational moral argumentation.

The science of conceptual systems is uniquely positioned to analyze the pervasive problem of their imperviance, especially if this problem is aggravated by moral reasons.

The purpose of this paper is to shed new light on the issue of preference heterogeneity in cooperatives.

Drawing on the ideas of Habermas and Luhmann, this paper interprets preference heterogeneity of cooperative members in terms of the precarious relationship between the categories of “system” and “lifeworld.” The argument is buttressed with a case study of an agricultural cooperative recently founded in Central Greece.

The sensitivity of cooperatives to the lifeworld contexts of their members exacts the price in the form of the member preference heterogeneity problem. If this sensitivity is taken to be the constitutive characteristic of cooperatives, then the proposed argument hammers home their fundamental ambivalence, as they are necessarily fraught with the potential for internal conflict.

The paper urges for a radical rethinking of Georg Draheim’s thesis of the “double nature” of cooperatives. “Double nature” is shown to aggravate the member preference heterogeneity problem.

The results of this study inform the cooperative leaders’ quest to strike a balance between the interests of their members and the demands of the external socio-economic environment.

This research contributes significantly to the literature on collective decision-making costs incurred by cooperatives. The failure of cooperatives to balance the sensitivity to members’ interests and to the external environment is exposed as the root cause of the divergence and heterogeneity of member preferences. This heterogeneity is shown to boost collective decision-making costs.

This paper aims to probe the limits of the empirical-normative divide as a conceptual framework in business ethics.

A systems theory perspective debunks this divide as a false distinction that cannot do justice to the conceptual complexity of the field of corporate social responsibility (CSR) scholarship.

Drawing on the systems-theoretic ideas of Niklas Luhmann and the “Laws of Form” by George Spencer Brown, the paper shows that the divide may be dissected into a four-cell matrix constituted by two other distinctions-descriptive vs prescriptive and categorical vs hypothetical-the latter of which was seminally suggested by Donaldson and Preston (1995).

The emerging four-cell matrix is shown to centrally embrace the multiplicity of normative, empirical and instrumental approaches to CSR. This multiplicity is exemplified by the application of these approaches to the phenomenon of CSR communication.

A more general implication of the proposed argument for the field of business ethics is in tracing the phenomena of moral diversity and moral ambivalence back to the regime of functional differentiation as the distinguishing feature of the modern society. This argument drives home the point that economic operations are as ethical or unethical as political operations, and that both economic and political perspectives on ethical issues are as important or unimportant as are religious, artistic, educational or scientific perspectives.

In contrast to the empirical-normative divide, the perspective is shown to centrally embrace the multiplicity of normative, empirical and instrumental approaches to CSR.