Advocating for Innovation: The Role of Nonmarket Stakeholders

Prior research highlights that firms often collaborate with advocacy groups to address stakeholder conflicts, such as boycotts or protests. By incorporating stakeholder theory into a framework of collaborative innovation, we offer a novel explanation for these partnerships: enhancing innovation performance. We propose that advocacy groups can help firms by identifying issues of particular importance to stakeholders and by legitimizing their innovations. We argue that these benefits are amplified when firms are distant from the technological frontier or operate in industries characterized by high uncertainty about appropriate business conduct. Drawing on a unique dataset of innovation collaborations among German firms (2019–2023), we find evidence supporting these claims. Our study represents a theoretical shift, emphasizing the role of firm interactions with secondary stakeholders in fostering innovation rather than merely avoiding conflict.