Private Action in Public Interest: The Comparative Governance of Social Issues
Strategic Management Journal, Forthcoming
64 Pages Posted: 26 Apr 2016 Last revised: 29 Aug 2018
Date Written: August 25, 2018
We develop a theoretical framework to define the comparatively efficient organizational form for dealing with a social issue, based on the market frictions associated with it. 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 market 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. Our framework thus contributes 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: Suggested Citation