Stakeholder Influence and Radical Change: A Coordination Game Perspective

Organizations often find it hard to change their corporate strategy radically, even if the need for change is widely recognized as in the Asian crisis of 1997. Such change requires large numbers of stakeholders to change their individual behavior, yet complex governance structures limit the applicability of agency-based models of governance. Rather, the coordination of stakeholder is at the core of governance during radical environmental change. Based on the game-theoretic concept of a ‘coordination game’, the paper analyses conditions that may inhibit the coordination of stakeholders to shift from an existing corporate strategy to a new one. I thus consider coordination failure that inhibit restructuring, and argue that radical change requires leaders to communicate and create common knowledge about the organization's future strategy.