Why Firm-NGO Collaborations Fail to Spread? An Answer from the Competitive Dynamics’ Perspective

Abstract

This paper investigates an empirical puzzle that only a small number of firms enter firm-NGO collaborations although such relationships have proved beneficial in many ways. To shed light on this, we focus on firm-NGO conflict that often precedes the collaboration and examine how it slows the spread of follow-on collaborations among peer firms. From the competitive dynamics’ perspective, firms pursue inter-organizational relationships, such as firm-firm alliances, to gain a competitive advantage. When firms observe industry peers forming new collaborations that potentially create a competitive advantage, they often imitate that move to avoid losing ground to those competitors. In this study, we propose that firm-NGO conflict preceding a collaboration is interpreted by peer firms as a signal that the collaboration is formed to address firm-NGO conflict instead of being a means to seek competitive advantage. Such perceptions decrease the competitive pressure felt by peer firms and lead to fewer follow-on collaborations. Using a 25-year dataset on interactions between environmental NGOs and Fortune 500 firms, we find that firms are less likely to form collaborations with NGOs following a leading firm when its collaboration is preceded by conflict with NGOs. We also find that firms will adjust their response based on their future expectations of NGO contention.