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Why collaborate? Three frameworks to understand business-NGO partnerships

Kerina Wang's picture

Nowadays, forming strategic alliances across sectors has become the new operating norm. But the blurring of sectoral boundaries among governments, businesses and NGOs makes it increasingly difficult to assess functions traditionally performed by a certain sector, since conventional boundaries have dissolved, and power and influence are distributed in networks. One sub-set of such collaborations – business-NGO interactions – has attracted much attention, as NGOs begin to move away from their informal, social roles and venture into economic and political territories.

Business-NGO collaborations may come in many forms: NGOs could partner with firms to function as “civil regulators”, primarily by addressing market and government failures through the development of soft laws, social standards, certification schemes, and operating norms; leverage social capital to transfer localized institutional knowledge to firms; mobilize collective action between governments and firms; and serve as information brokers to connect otherwise disparate groups.

How do we assess business-NGO dynamics? Why are they are established? And in what forms are they governed? I source a few inspirations from business, political science, and public administration theories and offer three theoretical lenses through which we can examine business-NGO partnerships.

A Stakeholder Perspective

The first useful framework to study business-NGO relations originates from a stakeholder perspective. A corporation’s performance can be analyzed through its relationship with stakeholders, including shareholders, employees, customers, suppliers, and communities. An important aspect of stakeholder theories is that managers are expected to be more sensitive to influences that are external to a firm’s operations- including NGO groups, media, political movements, and government regulators. Companies would approach partnerships from a risk management perspective; they would collaborate with NGOs when there are concerns related to corporate reputation, brand identity, public relations or stakeholder stewardships.

The philanthropic endeavors of firms that give monetary donations to NGOs is one of the most traditional forms of NGO-business interactions in this respect. The difference in missions, strategies and social functions between businesses and NGOs is usually not actively resolved, as NGOs in such partnerships are considered an extra, add-on or peripheral dimension outside a company’s core strategy.  
A Rationalistic perspective
Interactions between non-state actors can also be evaluated from a rational choice perspective that underlies microeconomic theories. The efficiency-oriented perspective brings NGOs closer to the core strategy of a firm, because they are considered an important institutional force with increasing legitimacy and influence that shapes the business landscape. To pursue greater efficiency gains, partnerships are established to lower transaction costs and mitigate opportunism by combining resources and capacities through formal, contractual relationships in order to reap joint benefits.

NGO-business alliances developed through rationalistic calculations would actively seek possibilities of complementarities or collective capacities from their partners. They are willing to forfeit a portion of their independence to jointly cultivate a common ground with one another, in an attempt to outpace others outside the collaborative. The goal of these partnerships have gradually morphed from only pursuing economic bottom line (which is aligned with companies’ profit-driven nature), to creating both economic and social values which satisfy businesses and NGOs’ missions in a mutually beneficial fashion.

An important characteristic in these collaborations is the emphasis on complementarity. In this context, NGO-business coalitions are developed to improve corporate competitive advantage through the generation of combinative resources and capabilities, when a single organization is unable to produce a good, service, or “value” that would surpass their competitors on its own.  Similarly, value creation frameworks that deal with the co-development, capture, and sharing of economic and social values through collaborations between market and non-market actors are another great example.
A Governance Perspective
Political scientists have long been studying NGOs from a governance perspective. Posed as the “balance wheel” of the American political system, interest groups, including business elites, lobbying groups, industry associations, and other special interest coalitions that have a stake in public policy-making and administration, play an active role in influencing policy making, dispersing power, and acting as watch dogs to channel public sentiments and ideas.

Not surprisingly, businesses have also entered into the rule-making game against the backdrop of globalization.  For instance, when multinational corporations enter into developing countries, a variety of political and social challenges arise, especially in places where social institutions are ineffective and governance structures are weak. As host countries’ rules and regulations prove to be inadequate to govern corporate behaviors overseas, private entities- both businesses and NGOs - are stepping up the game and starting to intervene in the rule-making sphere that’s traditionally restricted to public organizations.  In this context, NGO-business relations have gradually shifted from being antagonistic to cooperative; they begin to partner up and leverage their comparative advantage to establish new rules collectively. Nevertheless, we should not view public and private regulations as a dichotomy, but as two ends of a continuum in the governance spectrum for solving social problems.

Cross-sectoral collaboration is an ever expanding concept. Understanding why and how organizations that are seemingly at odds would partner up might help us formulate strategies to ensure that partnerships last, function well, and achieve our intended results.

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