There has been substantial recent interest in bringing stakeholders into firm decision making, but current scholarship does not theorize both the costs and benefits of broadening stakeholder governance. We argue that expansion of governance rights to a larger and more heterogeneous set of stakeholders generates coordination costs and increased demands on organizational surplus, but also increases stakeholder willingness to compromise during moments of scarcity and invest in collaborative problem solving. As a consequence, we hypothesize that the broadening of stakeholder governance will be associated with declines in productivity and increases in organizational survival. To test these arguments, we examine the varied governance structures in the French context (conventional firms, worker cooperatives, and multi-stakeholder cooperatives) using longitudinal tax data (2001-2018). Our findings suggest that, as more stakeholders gain governance rights, productivity is diminished but survival likelihood is increased. Furthermore, stakeholders with governance rights both demand a greater share of firm resources during profitable times, and make greater sacrifices in their resource demands during economic downturns. Additionally, we observe evidence of both increased coordination costs and increased investments in innovation and adaptive ability in firms with broader stakeholder governance.
