A firm\u27s orientation toward its stakeholders determines how it will use the discretion accorded to it by external and internal circumstances. The interaction between these two factors affects a firm\u27s ability to create value in the short term and influences the level of discretion available to the firm in the long term. We argue that the interplay of discretion and orientation create a vicious (or virtuous) cycle, in which the firm either creates or destroys goodwill with stakeholders, thereby making it more or less likely that stakeholders will grant discretion in the future. This argument suggests an account of stakeholder management that is sensitive to variation in managerial discretion, an account that is more constrained than typical moral and instrumental prescriptions about how firms should treat stakeholders and less constrained than descriptions premised on more deterministic theories
