NGOs and the Creation of Value in Supply Chains


Strategic Management Journal

A paraître

Départements : Stratégie et Politique d’Entreprise, GREGHEC (CNRS)

Mots clés : NGO, Non-Governmental Organizations, Nonprofit, Firm-NGO collaboration, Value creation

Research abstractFirms and NGOs often collaborate to establish new supply chains. With a formal model, we analyze how NGOs can alleviate market failures and improve supplier economic inclusion while strategically interacting with firms. We account for the specific goals of the NGO and the need to induce collaboration between firms and their suppliers. The analysis reveals a "valley of disappointment", when NGO efforts benefit all actors but only marginally the firm. We also show that more powerful firms might prefer to internalize NGO functions, while firms with lower bargaining power and higher investment requirements are better off collaborating with NGOs. Finally, we study NGOs-firms matching patterns and find that firms with higher bargaining power match with NGOs holding stronger capabilities.Managerial abstractThis paper analyzes interactions between firms and NGOs aiming to improve the economic inclusion of suppliers or to promote the adoption of specific (e.g., sustainable) practices. For firm executives, this study shows the constraints and benefits associated with working with NGOs, the conditions under which integration of NGO functions is preferable, as well as the types of NGOs that offer better prospects for a successful collaboration. For NGO executives, it highlights the need to provide enough economic incentives to firms and suppliers alike to ensure their collaboration and the tradeoffs associated with this constraint, in particular if NGO capabilities are limited. Overall, the study provides a comprehensive understanding of how NGO activities can influence value creation in a vertical value chain.