Competition, Coordination, and Civic Wealth Creation

Abstract

“Civic wealth” emerges from the joint efforts of many stakeholders. Yet, while governments are tasked with investing in civic organizations (i.e. fire and police departments, schools, and homeless shelters) to improve community well-being, some local actors are able to capture disproportionate benefits. We propose a model of how competitive and coordinative incentives faced by civic organizations moderate the effectiveness of external support on community outcomes. We suggest that coordination improves outcomes for the community, but organizational incentives to coordinate eventually level-out with increasing organizational density, while incentives to rent seek increase because of greater competition over resource dependencies. Therefore, we hypothesize an inverted-U shaped relationship where the effectiveness of external resources increases with more civic organizations up to a point, beyond which it declines as competition for survival exceeds incentives to cooperate. Further, we hypothesize that this relationship is moderated by the incentives faced by different types of organizations (i.e. public, private, and nonprofit organizations). To test our theory, we construct an original longitudinal dataset linking civic organizations in communities at high-risk of wildfires in Northern California to their government grants for fire prevention, and subsequent outcomes in terms of property loss. Our results provide evidence that the effectiveness of external support is indeed moderated both by the number and type of organizations in a community.