Using U.S. state legislatures’ staggered adoption of constituency statutes over a 24-year period (1984–2007) as a quasi-natural experiment, we show that greater stakeholder orientation significantly increases firms’ inventory efficiency. Further analyses reveal that this result is stronger in firms that can benefit the most from stakeholder orientation: firms facing dynamic environments, high labor intensity, or low customer concentration. We also find that the positive association between inventory efficiency and financial performance strengthens with the adoption of constituency states. Our results survive a battery of robustness tests. 

Keywords: constituency statutes; stakeholder orientation; CSR; inventory efficiency; firm performance​