Witold Henisz, Management, The Wharton School
Abstract: When the distribution of rents by a firm is perceived as unfair or illegitimate by its stakeholders, conflict obtains. Gurr (1970) argued that “the basic, instigating condition” for conflict is “discontent arising from the perception of relative deprivation.” Studies of the economic drivers of conflict have, however, necessarily focused on structural or objective measures of deprivation such as the presence of resource rents or the societal level of income inequality. I leverage a new dataset to return the focus to the subjective perceptions by stakeholders of the legitimacy of economic rent distribution. My empirical strategy compares the structural characteristics of media-reported stakeholder networks at a local level. Specifically, I compare networks of business initiated discourse and action to the overall media-reported network including political and social actors at a resolution of 0.5 by 0.5 decimal degree cells. Where business networks place greater relative emphasis on the core of a network than the periphery or an in-group faction(s) than out-groups, I argue stakeholders will perceive this variation from the overall structure of political and social relationships as illegitimate triggering a sense of deprivation which fosters conflict. My empirical analysis which controls for a battery of alternative drivers of conflict; uses both media-reported verbal and material conflict directed at business as well as deaths reported within the geographically defined area by the Uppsala Conflict Data Program as dependent variables; and includes fixed effects with standard errors clustered at the cell-level and, in some specifications, a lagged dependent variable, is strongly corroborative. Furthermore, I find that the effect of insular stakeholder relation structures of business on conflict is particularly pronounced during periods of abnormal growth in nighttime luminosity (i.e., rapid economic development). This finding is consistent with the causal argument that stakeholder perceptions of an illegitimate distribution of rents is triggering the ensuing conflict.