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

Abstract

AbstractWe 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.