How to have the best of both worlds: Value-based decision-making through stakeholder value trade-offs

Abstract

By accounting for stakeholders' conflicting values, in this study, we argue that the conceptualization of stakeholder value trade-offs can theoretically explain how stakeholder-oriented managers can make value-based decisions in pursuit of long-term value creation for all stakeholders. Specifically, drawing on prospect theory and the value trade-offs framework, we develop a value-based decision-making perspective when organizations manage for their stakeholders. Our framework encompasses four types of trade-offs: taboo, routine, virtuous, and tragic each plays an important role in the value-creating decision process. This interdisciplinary study proposes that managers should ground their value-based decisions on the extent to which the chosen trade-offs are morally justifiable. The study contributes to the current understanding of relationships between organizations and stakeholders from a decision-making perspective.