We examine stakeholder governance of common-pool resources and focus on the heterogeneity of stakeholders in terms of interests vis à vis the resource and time horizon, i.e. either they derive immediate value from the resource or they benefit from the value being protected in the long term. We ask how do communities of diverse stakeholders collectively design institutions to sustainably manage a common pool resource. While research on common-pool resource management has mainly focused on communities of homogenous stakeholders and notably direct users, we propose that the heterogeneity of stakeholders within a community positively impacts participation in the collective action process by increasing the incentives to be represented in the institutional design process and to defend one's specific interest. We further argue that coordination costs act as moderators such that stakeholders may be less likely to join the collective action process when similar stakeholders are present to defend the group’s interest and bear their share of the costs. To test our hypotheses, we use a unique empirical setting wherein local agencies representing the interests of different stakeholders are instructed to collectively design institutions to manage groundwater basins in California. Our results show that stakeholder heterogeneity leads to greater institutional membership, moderated by the transaction costs and the distribution of stakeholders. We offer further theoretical and empirical implications.