The Impact of Corruption and Poverty on NGO-Private Sector Engagement in Mexico

Abstract

We examine the likelihood of collaboration between NGOs and the private sector in Mexico, where poverty, social inequality, and corruption prevail. Using social capital theory and the institutional void literature, we argue that, in an emerging economy, an NGO’s stakeholder relations act as a valuable resource in the formation of the organization’s social capital and raise its potential value as a legitimate business partner relative to NGOs with weak or few relations. These relations, however, are moderated by the context in which the NGO finds itself. Contextual elements such as corruption and poverty are examined. By employing data collected from a survey administered on a large, representative sample of Mexican NGOs, and corruption and poverty data from secondary sources; we find general support for our hypotheses, demonstrating not only the direct impacts of poverty and corruption on an NGO’s decision to collaborate with the private sector but also their indirect impacts on the intensity of NGOs stakeholder interactions. We find that greater poverty tends to weaken stakeholder interactions while more corruption strengthens such interactions. Our findings are relevant for future research on NGO-private sector relationships in emerging economies, especially for those relationships seeking solutions to social or environmental issues. We conclude with implications for future research as well as for practice.