Alliances between Firms and Non‐profits: A Multiple and Behavioural Agency Approach

• Author: C. Rufín,M. Rivera‐Santos,U. Wassmer
• Published date: 01 September 2017
• Date: 01 September 2017
• DOI: http://doi.org/10.1111/joms.12271

Alliances between Firms and Non-profits: A Multiple

and Behavioural Agency Approach

M. Rivera-Santos, C. Rufın and U. Wassmer

Babson College; Suffolk University; EMLYON Business School

ABSTRACT We analyse business-NGO (B2N) alliances through the lenses of multiple agency

and behavioural agency theories to identify the sources of agency problems and the most

effective choice of mitigation mechanisms. We contend that three types of agency relationships

constitute B2N alliances: the relationship between the firm’s managers and B2N alliance

employees; the relationship between the NGO’s managers and the B2N alliance employees;

and the novel ‘claimed principal-agent relationship’ involving the external beneficiary, the

NGO’s managers and the alliance employees. We argue that B2N alliances’ three types of

agency problems stem from (1) the relative emphasis on public vs. private goods, both at the

employee and at the partner levels, and (2) the level of the external beneficiary’s voice. We

then predict the mechanisms to mitigate these problems: hiring altruistic over self-interested

individuals; narrowly specifying the employees’ activities; emphasizing input-based and

intrinsic incentive mechanisms; and investing significantly into non-intrusive monitoring

mechanisms.

Keywords: alliances, behavioural agency theory, firm-NGO collaboration,

interorganizational collaboration, multiple agency theory, NGOs

INTRODUCTION

The main characteristic of the fast-growing number of alliances between businesses and

non-profits (B2N alliances) – being established by partners from different sectors to ben-

efit an external beneficiary represented by the NGO in the alliance (Seitanidi and

Crane, 2013; Waddock, 1988) – has important implications for the type of conflicts that

Address for reprints: Miguel Rivera-Santos, Babson College, 231 Forest Street, Babson Park, MA 02457-

0310, USA (mrivera@babson.edu).

In memoriam: Although Uli Wassmer could not be with us to see the publication of this paper, his con-

tribution was no less important than ours, and is a testimony to his scholarly talent and to his friendship.

He is greatly missed – Miguel Rivera-Santos and Carlos Rufın.

The authors contributed equally to this paper and are listed alphabetically.

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C2017 John Wiley & Sons Ltd and Society for the Advancement of Management Studies

Journal of Management Studies 54:6 September 2017

doi: 10.1111/joms.12271

can arise among the partners. This can set them aside from alliances between firms.

Although diverging partner objectives are characteristic of many types of alliances

(Parmigiani and Rivera-Santos, 2011), partners in alliances between firms typically pur-

sue the same overall goal for their organization: profitability through the provision of

private goods (Dalton et al., 2007). By contrast, partners in B2N alliances can diverge

not only in their objectives in the alliance, but also in their overall goals, as non-profits

typically pursue the provision of public, rather than private, goods as their overarching

goal (Anheier and Ben-Ner, 2003). This major difference manifests itself at the partner

and individual levels, as those working in the B2N alliance may also have differing

worldviews, highlighting the needs of diverse stakeholders, especially if they come from

a for-profit background (Seitanidi and Crane, 2013).

These characteristics create a particularly valuable setting for the study of boundary

conditions in agency theory. Because of their actors’ diverging objectives, B2N alliances

fit a multiple agency theory approach. This approach predicts that diverging objectives

among principals and agents lead to specific agency problems due to dual identity, tran-

scending relationships and differing time horizons (Hoskisson et al., 2012). As opposed

to typical cases of multiple agency, the differences among actors in B2N alliances go

beyond diverging objectives for the alliance, to include broader differences in overarch-

ing goals and worldviews. This specificity relaxes an important and implicit assumption

in multiple agency, with implications not only for B2N alliances but also, among others,

for current discussions of corporate governance with co-existing for-profit and govern-

mental shareholders (Bruton et al., 2015). Because these differences in overarching goals

and worldviews also exist at the individual employee level, B2N alliances also fit a

behavioural agency theory approach, which predicts that agents’ different intrinsic goals

and preferences will lead to different mechanisms to mitigate agency problems (Pepper

and Gore, 2015). Contrasting with typical cases of behavioural agency theory, however,

agents in B2N alliances originally come from organizations that also diverge in their

overarching goals and worldviews, suggesting two interconnected but distinct levels of

analysis that influence the agents’ intrinsic motivations. Finally, because B2N alliances

are typically designed to benefit an external beneficiary represented by the NGO in the

alliance (Seitanidi and Crane, 2013), the external beneficiary becomes an important

player in the alliance’s agency relationships, a point barely explored in agency literature

thus far (van Puyvelde et al., 2012). These B2N alliance characteristics, therefore, make

them an ideal setting to relax some important implicit assumptions and explore their

implications for the mitigation of agency problems. At the same time, through its focus

on agency problems and individual-level mechanisms, an agency theoretic approach

also complements other lenses used to explore B2N alliances, such as transaction costs

economics (e.g., O’Regan and Oster, 2000; Rivera-Santos and Rufın, 2011), social

exchange theory (e.g., Kolk et al., 2010), institutional logics (e.g., Vurro et al., 2010) and

ethical theories (e.g., Murphy and Arenas, 2010).

With the aim of identifying the valuable insights that an agency-theoretic analysis of

B2N alliances can provide, our research questions are thus: What are the characteristic sour-

ces of multiple and behavioural agency problems in B2N alliances? What mechanisms can be put in

place to shape the agents’ behaviour to mitigate these problems? To answer these questions, we

base our reasoning in multiple agency theory (Arthurs et al., 2008; Hoskisson et al.,

855Agency in Alliances between Firms and Non-profits

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C2017 John Wiley & Sons Ltd and Society for the Advancement of Management Studies