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NGOs and the creation of value in supply chains
Author(s) -
Chatain Olivier,
Plaksenkova Elena
Publication year - 2019
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.2938
Subject(s) - business , bargaining power , incentive , industrial organization , value (mathematics) , constraint (computer aided design) , investment (military) , matching (statistics) , supply chain , inclusion (mineral) , power (physics) , value capture , marketing , economics , market economy , value creation , microeconomics , computer science , machine learning , mathematics , law , gender studies , sociology , engineering , quantum mechanics , political science , mechanical engineering , statistics , physics , politics
Research Summary : Firms and nongovernmental organizations (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 frustration,” 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 Summary : This article analyzes interactions between firms and nongovernmental organizations (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 trade‐offs 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.