NGOs and the Creation of Value in Supply Chains

Abstract

Firms 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.

Keywords: NGO; Non-Governmental Organizations; Nonprofit; Firm-NGO Collaboration; Value Creation