International NGOs as global institutions: using social capital to impact multinational enterprises and governments

Abstract

Abstract Due to institutional power and prevalence at the national (or subnational) level, certain global collective good exchanges do not comport well with a national institution model. Examples of such globally relevant exchanges include those concerning the natural environment and those pertaining to key human rights considerations such as health care/disease prevention. These global collective good exchanges entail the involvement of both multinational enterprises (MNEs) and national governments. The allegiance of MNEs to any particular country has been questioned; national governments are arguably driven by their perceptions of their specific nation's interests. These global exchanges encounter formal institutional failure due to the supranational venue of these exchanges, and concerns regarding institutional legitimacy are furthered by incompatibilities between public sector (national governments) and private sector (MNE) actors' interests. In this institutional chasm, the governance and promotion of effective exchange relations between and among these players is hampered. These market imperfections and resulting high transaction costs associated with collective goods [J. Law Econ. 3 (1960) 1.] prevent actors from efficiently engaging in exchange relations. It is in this context of formal institutional failure that “third sector” entities—international nongovernmental organizations (INGOs)—have emerged as informal institutions operating globally to significantly change the context within which governments and MNEs interact. A recent review of the concept of social capital by Adler and Kwon [Acad. Manage. Rev. 27 (2002) 17.] is used to theoretically support an empirically documented surge in activity by INGOs at the global level as a response to heightened transactions costs in this venue. I attempt to respond to the call by Leenders and Gabbay [CSC: an agenda for the future. In R.Th.A.J. Leenders and S.M. Gabbay (Eds.), Corporate social capital and liability, pp. 483–494, Boston: Kluwer, 1999.] to link this emerging global social structure (the rise of third sector institutions—INGOs) to the concept of the social capital that INGOs inherently possess as institutions that bridge and bond public and private sector actors. I provide an illustrative example of an INGO that utilizes social capital in filling an informal institutional role for global goods/services transactions: the Nature Conservancy and its work in a prototype Joint Implementation (JI)/Clean Development Mechanism project in Belize as called for under the Kyoto Protocol.