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Private Action in Public Interest: The Comparative Governance of Social Issues

58 Pages Posted: 26 Apr 2016 Last revised: 22 Oct 2017

Aseem Kaul

University of Minnesota

Jiao Luo

University of Minnesota - Twin Cities - Carlson School of Management

Date Written: October 14, 2017

Abstract

What is the most efficient way to deal with a social problem? To answer that question, we map various types of market frictions to the organizational forms best suited to dealing with them. Specifically, we argue that for-profits have an advantage in undertaking innovation and coordinating production economies, non-profits in playing a fiduciary role given ex post information asymmetry, self-governing collectives in dealing with bounded externalities through private ordering, and state bureaucracies in governing general externalities. We build on these arguments to develop a mapping between combinations of these frictions and the comparatively efficient arrangements to govern them, including a variety of hybrid arrangements such as private-public partnerships, social enterprises, corporate social responsibility, etc. By providing a comprehensive and rigorous theory of why these various governance arrangements exist, and when they may be comparatively efficient in dealing with social issues, we contribute to research in strategy, organizations, and public policy.

Keywords: market frictions; externalities; information asymmetry; collective action; transaction cost; institutional economics; non-market strategy; non-profit; public-private partnerships; hybrid organizations

JEL Classification: D23, D6, G3, H4, L21, L3, M14, P32

Suggested Citation

Kaul, Aseem and Luo, Jiao, Private Action in Public Interest: The Comparative Governance of Social Issues (October 14, 2017). Available at SSRN: https://ssrn.com/abstract=2769368

Aseem Kaul

University of Minnesota ( email )

321, 19th Avenue S
3-412 Carlson School of Management
Minneapolis, MN 55455
United States

Jiao Luo (Contact Author)

University of Minnesota - Twin Cities - Carlson School of Management ( email )

321 19th Ave. S
CSOM 3-360
Minneapolis, MN 55455
United States
1-612-626-1907 (Phone)

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