An Empirical Test of Stakeholder Influence Strategies Model: Evidence from Business Downsizing in Taiwan

Frooman’s (1999) model of stakeholder influence strategy uses levels of resource dependence to determine the power of stakeholder influence. Our study provides initial empirical tests of his model applied in business downsizing. Data from 18 recently downsized firms in Taiwan, including 9 multi-national firms (MNC’s), were plotted against the Frooman model. We found that resource-dependence along as Frooman theorized could not explain the influence strategies stakeholders (in this case the employees) took in response to firms’ downsizing decisions. Further investigation revealed that the institutional factors had a significant effect on how firms structured their downsizing initiatives and hence changed the way the employees reacted to firm decisions. We proposed a new model using both resource-dependence and institutional legitimacy as determinants of stakeholder influence strategy and suggested relationships between these determinants and stakeholder actions. This proposed model has profound research implications for the strategic stakeholder theory, as well as practical implications for human resource management.