Article

Trust but Verify? Voluntary Regulation Programs in the Nonprofit Sector

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Abstract

In this article we examine how information problems can cause agency slippages and lead to governance failures in nonprofit organizations. Drawing on the principal–agent literature, we provide a theoretical account of an institutional mechanism, namely, voluntary regulation programs, to mitigate such slippages. These programs seek to impose obligations on their participants regarding internal governance and use of resources. By joining these programs, nonprofit organizations seek to differentiate themselves from nonparticipants and signal to their principals that they are deploying resources as per the organizational mandate. If principals are assured that agency slippages are lower in program participants, they might be more likely to provide the participants with resources to deliver goods and services to their target populations. However, regulatory programs for nonprofit organizations are of variable quality and, in some cases, could be designed to obscure rather than reveal information. We outline an analytical framework to differentiate the credible clubs from the “charity washes.” A focus on the institutional architecture of these programs can help to predict their efficacy in reducing agency problems.

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... Nonprofit organizations are prohibited by law from distributing profits to private parties, and unlike their commercial counterparts, they do not have legal owners with residual claims [5,9]. The nonprofit character accordingly provides signals of trust that help the public and other nonprofit stakeholders to overcome uncertainty caused by agency problems regarding the organizations' behavior and quality [4,5,10]. In view of some of the most recent nonprofit scandals (e.g. ...
... In view of some of the most recent nonprofit scandals (e.g. SOS-Children Villages or Oxfam's scandals of misconduct), scholars yet question the effectiveness of Hansmann's [9] nondistribution constraint alone to mitigate these scandals' effects [10]. Where the nonprofit character by itself cannot offer assurance regarding the organizations' good intentions, and the public has difficulties assessing the organizations trustworthiness, additional trust signals are vital [2,11,12]. ...
... In view of recent nonprofit scandals, the reputation of nonprofit organizations has been tremendously threatened because it is influenced through monitoring problems. According to Prakash and Gugerty [10], "[i]t is not an exaggeration to say that the negative reputational effects of a few 'bad apples' are beginning to undermine the reputation of the sector as a whole", and the organizational reputation has distinct impacts on public trust [31]. In the nonprofit sector, reputation is conceptualized primarily with respect to the organization's competences and its likeability that accordingly acts as a basis for public trust [29]. ...
Chapter
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Trust in the nonprofit domain has been subject to a large interest both among scholars and practitioners over the past few years. Today, we differentiate between a range of different forms of trust, namely, organizational and sectoral trust as well as more generalized and institutional trust. Another differentiation in nonprofit literature relates to the subject that forms trust towards a nonprofit organization, reflected by the strength of the individual-organizational-relationship. In that, two forms of trust, namely, a narrow form of relational trust and broader trust among the public have evolved. While previous research provides varying conceptual approaches for explaining public’s trust in the nonprofit sector, most scholars, however, approach public trust from a rather narrow relationship management perspective. This chapter conceptualizes and operationalizes public trust from a broader perspective and emphasizes that to get public support to ultimately further their missions, nonprofit organizations should strive for building, maintaining, and restoring public’s trust. This chapter accordingly presents five mechanisms that are associated with public’s trust in nonprofit organizations: 1) promise of mission and values, 2) organizational reputation, 3) transparency and accountability, 4) performance and social impact, and 5) use of contributions. Thereby, recent trends in academic literature are identified—nonprofit branding and nonprofit accountability—that have great ability to address these mechanisms to successfully improve public trust. Results from this chapter provide nonprofit scholars with insights into a broader conceptualization and operationalization of public trust in nonprofit organizations, and with future research ideas. Nonprofit managers may benefit by gaining insights into how to sustainably improve trust among the general public by focusing on nonprofit branding and accountability strategies.
... Deliberative approaches mainly ignore the role of institutions and their incentive properties (Warren 2007), whereas existing rationalchoice approaches tend to disregard the role of normative ideas. In a nutshell: the literature on NGO accountability approaches institutions (Prakash and Gugerty 2010a) and normative ideas (Crack 2016; as independent research objects, and thus struggles to analyze their interplay. ...
... The explanations for accountability deficits vary depending on the theoretical approach. On the one hand, economic approaches (Prakash and Gugerty 2010a;2010b) emphasize that NGOs lack incentives to foster accountability because beneficiaries often only have weak sanction potential compared to donors and funders. On the other hand, sociological approaches , Crack 2014) diagnose a lack of awareness regarding the importance of NGO accountability or quote power asymmetries among stakeholder groups with diverging interests . ...
... However, they downplay or even neglect the incentive effects of institutions for NGOs to comply with agreed-upon accountability standards. In contrast, economic approaches often see mundane organizational self-interests, e.g., securing funding, as the main driver for NGOs to engage in self-regulation initiatives (Prakash and Gugerty 2010a;2010b). According to these scholars, NGOs create accountability standards to signal credibility and trustworthiness to funders and donors. ...
Thesis
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This quasi-cumulative dissertation analyzes the institutional and ideational challenges of organizations in public discourses. Academic scholars with different theoretical backgrounds assign NGOs a leading role to promote and fertilize public discourses in democratic societies. However, empirical research documents numerous cases, in which NGOs fostered discourse failure by launching controversial campaigns, the use of distorting framing strategies or even misinforming the general public. Following the ordonomic approach, this dissertation provides new counter-intuitive explanations for discourse failure and outlines feasible ideational and institutional reform proposals. The first article identifies the problem of discourse failure in the case of the public controversy (2015-2017) in Germany about two international trade agreements. The second article investigates existing solution approaches to discourse failure. In particular, it presents a longitudinal case study (2006-2018) about Accountable Now, which is the leading global initiative of international NGOs to promote the effectiveness and collective reputation of the NGO sector. The third article theorizes that discourse failure is the result of two different types of social dilemmas that require specific reforms. The following discussion links the empirical findings and theoretical contributions of the three previous articles to an ordonomic analysis of discourse failure in the NGO sector. This dissertation yields valuable theoretical implications for deliberative and rational-choice theory, the research on NGO accountability, and NGO self-regulation in practice.
... Notably, crises and scandals have become increasingly noticeable in the general public's view through news and social media coverage | 1 (Robert & Lajtha, 2002;Scurlock et al., 2020). In recent years, nonprofit or charitable organisations such as the Wounded Warrior Project, Oxfam, Time's Up or the National Rifle Association have endured crisis and the consequential reduction in financial and social capital (donations, funding and general support) and increased scrutiny by stakeholders (e.g., donors, volunteers, government and general public; Christensen, 2004;Hrywna, 2020;Lee, 2021;O'Neill, 2021;Prakash & Gugerty, 2010;Seck, 2019). These are nonprofits that rely on a combination of donations (of cash, grants and other gifts) and volunteer labour (e.g., in the case of shelter management) and any reduction in those potential assets can have damaging shortterm and long-term consequences. ...
... In the 21st Century alone, several prominent crises have occurred in the non-profit sector such as the Wounded Warrior Project, Oxfam, Time's Up and the National Rifle Association. These crises and scandals have focused attention on the non-profit sector as a whole, highlighting the bad lemons in a very diverse basket of organisations (Christensen, 2004;Hrywna, 2020;Lee, 2021;O'Neill, 2021;Prakash & Gugerty, 2010;Scurlock et al., 2020;Seck, 2019). ...
... There are several reasons why nonprofits are concerned about crises across the sector, which have highlighted an 'an erosion of faith' leading to a decrease in donations and less support for the non-profit sector (Bekkers, 2003;Hansmann, 1980;Prakash & Gugerty, 2010;Rose-Ackerman, 1996;Steinberg, 2006). Negative media coverage alone can damage non-profits' reputations and dry up oft-utilized funding sources (Cottle & Nolan, 2007). ...
Article
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Non‐profit organisations operate with the advantage of a generally positive social image. Workers and managerial employees of nonprofits are commonly thought of as altruistic, trustworthy and respectable actors who assist their communities. However, the non‐profit sector has faced several notable scandals and crises that have tested this positive social image. This paper reports on an analysis of the positive social image, which we call a sector ‘halo’ and its durability in the face of organisational crisis. Based on a sample from Amazon's Mechanical Turk, the analysis confirms the general positive social image of non‐profit organisations when compared to their private for‐profit and government sector peers, who possess lower levels of trust. However, a survey experiment reveals that given a crisis scenario regarding a data breach incident, the ‘halo’ entirely disappears. Our study improves on the literature regarding trust and organisational reputation and highlights the importance of sector ownership and perceived differences pre‐ and postcrisis.
... Hard accountability means that demands for changes from various stakeholders as a result of being transparent need to be implemented, but also that a CSO needs to have the necessary capacity to deal with such demands. If not, an important consequence of hard accountability could be a reduced level of support from stakeholders, for which the organization also should be prepared (Cordery and Baskerville 2011;Prakash and Gugerty 2010;Sargeant and Lee 2002). However, reduced or cancelled stakeholder support as a rather final and drastic outcome is but one end of a continuum of consequences. ...
... A concept crucial to the instrumental perspective on transparency and accountability is stakeholder trust, which, in turn, has been extensively discussed as a major mediator in the specific relationships that CSOs have with their supporting stakeholders (Farwell et al., 2019;Gandía 2011;Prakash and Gugerty 2010;Sargeant 1999;Sargeant andLee 2002, 2004;Saxton and Guo 2011;Willems et al., 2016). For example, Tremblay-Boire and Prakash (2015) suggested that the nondistribution constraint that defines many nonprofit organizations might itself not be a sufficient signal for stakeholders to completely trust the organization, and therefore, by being accountable and transparent, the organization aims to maintain and increase stakeholder trust levels (Radbournes, 2003;Sarstedt and Schloderer 2010). ...
... This means that CSOs need to make strategic decisions about which information to provide about themselves to the outside world in anticipation of stakeholders' needs (push), as well as reacting when their environment requests or demands information (pull). For instance, a special 58 stream in the area of proactive accountability examines the use of seals or certificates that provide outside stakeholders insight into the processes of the organization, and how these processes conform to a set of rules proposed by a third party as 'good practice' (Becker, 2018;Bodem-Schrötgens and Becker, 2019;Prakash and Gugerty, 2010;Saxton et al., 2012;Saxton et al., 2014;Saxton and Zhuang, 2013). ...
Chapter
Despite the vast repertoire of practitioner and scientific literature since the early 1990s on how civil society organizations (CSOs) should be governed, we continue to regularly hear stories of severe organizational crises. Even well-respected, internationally active CSOs sometimes find themselves in the middle of a media storm (Archambeault and Webber, 2018; Cordery and Baskerville, 2011; Harris et al., 2018; Willems, 2016; Willems and Faulk 2019). It is naïve to assume that such events will cease in the future or at least stop endangering the sustainability and continuity of CSOs. Nevertheless, an explicit evaluation of how crisis situations can be avoided and how their devastatingly negative effects can be mitigated through CSO governance processes makes it necessary to focus on CSO accountability and transparency. As a result, the clarification and elaboration of the concepts of accountability and transparency can strengthen theoretical and practical insights as to how CSOs can become more crisis-resistant and resilient (Brown, 2005; Helmig et al., 2014). In addition, insight into the inherent trade-offs that CSO leadership teams need to consider in their governance decisions can help both practitioners and researchers to (1) avoid more CSO crisis situations in the future, (2) more effectively overcome such crises when they occur and (3) identify the contextual and organizational factors affecting leaders' governance decisions. Against this background, the aim of this chapter is threefold: 1. Provide an elaborated definition of CSO transparency and accountability that takes into account the nature and role of CSOs in contemporary societies. After highlighting the uniquely defining characteristics of CSOs, the chapter identifies from the inter-disciplinary literature a set of circumstances that underpin the need for a multidimensional elaboration of transparency and accountability specific to CSOs. 2. Document governance responsibilities that CSOs have with respect to transparency and accountability. The chapter explains why transparency and accountability are necessary elements of the CSO governance function. 3. Develop propositions for further scientific elaboration and validation of how CSO governance practices encompass but also support and lead to CSO transparency and accountability. The output of the first two research aims is juxtaposed with five dimensions of a governance quality index, highlighting how governance quality dimensions include and relate to various aspects of CSO transparency and accountability.
... On the one hand, the economic approach suggests that selfregulation arises as a response to mitigate perception of opportunism within the sector and CSOs create and/or join 'voluntary clubs' to send a reputational signal of quality to the principal(s): donors, lawmaker, and other targeting stakeholders (Gugerty & Prakash, 2012). In terms of institutional architecture, two conditions typify credible self-regulatory initiatives: clear standards of behavior and stringent enforcement mechanisms (Prakash & Gugerty, 2010). Under this approach, a self-regulation is effective if a high number of CSOs comply with voluntary standards (which are, in turns, adequately enforced) and, simultaneously, a successful signalling is sent to the initiative's principal/targeting stakeholder, resulting either into an increase of public trust/funding for CSOs or into a decline of intrusive State regulation (Gugerty & Prakash, 2012). ...
... Comparative scholars have lately studied the interplay between State-based regulation and self-regulation (or co-regulation) looking at different jurisdictions (Breen et al, 2017). Drawing upon the economic approach, scholars have laid down an analytical framework to identify the ideal institutional architecture -in terms of monitoring and sanctioning -that typifies credible voluntary clubs (Prakash & Gugerty, 2010). Using the economic and the institutional approach as a theoretical outline, a recent study has investigated the perception of effectiveness of the INGO Accountability Charter exploring the motivations of NGOs in joining the Charter and to what extent participant NGOs perceive it as effective in enacting accountability (Crack, 2018). ...
... As to norm-compliance, researchers have put much of their intellectual efforts in understanding what factors account for the variation in the strength of monitoring and sanctioning mechanisms (Boire, Prakash & Gugerty, 2016), while, other scholars have measured to extent to which NGOs comply with regulatory standards focusing on the Global Reporting Initiative: findings point out low level of norm-compliance (Traxle, Greiling & Hebesberger, 2018). On a theoretical level, it was argued that noncompliance might result from willful/strategic shirking and from mere confusion or ignorance (Prakash & Gugerty, 2010). However, there is scant empirical research that investigates the reasons behind non-compliance. ...
... In short, such a marketplace is characterized by high information costs, "clientization" in the form of "repeatexchange relationships," and intensive bargaining. Personal connections, trust, voluntary codes of conduct, and self-regulation govern exchanges, and indeed these mechanisms are common in the nonprofit sector (Tremblay-Boire, Prakash, and Gugerty 2017; Gugerty and Prakash 2010;Prakash and Gugerty 2010;Gugerty 2009;Breen, Dunn, and Sidel 2017). ...
... In short, such a marketplace is characterized by high information costs, "clientization" in the form of "repeatexchange relationships," and intensive bargaining. Personal connections, trust, voluntary codes of conduct, and self-regulation govern exchanges, and indeed these mechanisms are common in the nonprofit sector (Tremblay-Boire, Prakash, and Gugerty 2017; Gugerty and Prakash 2010;Prakash and Gugerty 2010;Gugerty 2009;Breen, Dunn, and Sidel 2017). ...
Article
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Instrumental philanthropy has gained attention and popularity in recent decades as an approach to maximizing the impact of giving. This article evaluates the suitability of the nonprofit institutional form, specifically the US public charity, as a vehicle for instrumental philanthropy. The analysis identifies an incongruity between the informational requirements of instrumental philanthropy and the form and theory of the nonprofit. An alternative theory of licensure is proposed to illustrate the difficulty of the information problem. Analysis suggests that the viability of instrumental philanthropy hinges upon information costs. Several public policy options are considered as means of better supporting instrumental philanthropy, presuming that allocative efficiency in the production of public benefits is a desirable public policy objective.
... Thus, standard-setting documents are an important mechanism for articulating and disseminating norms. To the extent that standards have regulatory ambitions, they may also go beyond mere exhortation to require specific behaviors of signatories that can shape evaluation practice (Gugerty & Prakash, 2010;Scott, 1995;Trochim, 2009). The evolution of norms and practices concerning evaluation may take place through multiple channels. ...
... Second, from a political economy standpoint, standards may be viewed as a means of creating reputational signals for stakeholders. In this view, standards are designed and promulgated by NGOs to send a signal about organizational quality to key stakeholders, with the expectation that organizations that adhere to these standards will be rewarded with higher levels of funding and autonomy (Prakash and Gugerty, 2010). A related perspective highlights the normative pressures for legitimacy that many organizations face, suggesting that pressure from donors and authorizing stakeholders results in professionalization and managerialism among NGOs (AbouAssi & Bies, 2018;Ebrahim, 2005b). ...
Article
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For several decades, the aid effectiveness movement has called for more robust, informed and independent impact evaluation of aid activities, but the prevalence and adoption of these practices remain unclear. This article seeks to understand the current state of impact evaluation practice in the development field by examining standard-setting documents intended to guide the behavior of entities involved in development assistance. We explore these standards as representations of institutional logics that encode current norms, practices, and expectations for these actors and examine the extent to which impact evaluation norms and practices are enshrined within these standard-setting documents. To do so, we examine guidance from a diverse set of 42 standards to better understand how evaluation is conceptualized and what standards are being articulated. We find both convergence and divergence in the institutional logics employed and in how evaluation norms and practices are incorporated into standards. We see convergence in the adoption of a normative, process-oriented logic that appears across many entities in the widely articulated commitment to practices such as information sharing, participation, and listening. We find more divergence in the adoption of a results-oriented logic that implies a commitment to impact evaluation. These distinct logics give rise to two discrete discourses: an “evaluation generalist” discourse that conceptualizes evaluation in broad terms and an “impact centric” discourse that articulates a more comprehensive set of principles emphasizing causal attribution. We suggest that structural characteristics and positionality in the aid system may help explain the adoption of different institutional logics and associated evaluation practices.
... The virtue narrative fails to adequately appreciate that NGOs face principal-agency issues like any other organization (Berle & Means, 1932). As locally rooted actors, NGOs are supposed to work for the community (Prakash & Gugerty, 2010a). If local rootedness is assumed to hold, NGOs should view the communities they serve as their true principals (Tocqueville, 1969(Tocqueville, [1835. ...
... Another important NGO innovation is the emergence of accountability clubs (Bies, 2010;Prakash & Gugerty, 2010a). NGOs seek organizational survival and growth. ...
Article
An extensive literature identifies conditions under which markets and states work efficiently and effectively towards their stated missions. When these conditions are violated, these institutions are deemed to show some level of failure. In contrast to the study of market and government failures, scholars have tended to focus on non-governmental organizations’ (NGOs) successes instead of failures. This is probably because they view NGOs as virtuous actors, guided by principled beliefs rather than instrumental concerns, not susceptible to agency conflicts, accountable to the communities they serve, and working cooperatively with each other. A growing literature questions this “virtue narrative.” When virtue conditions are violated, NGOs could exhibit different levels of failure. In synthesizing this literature, we offer an analytic typology of NGO failures: agency failure, NGOization failure, representation failure, and cooperation failure. Finally, given NGOs’ important role in public policy, we outline institutional innovations to address these failures.
... Media exposes seek to inflict reputational damage on the implicated organizations, often creating negative reputational spillovers for other nonprofits (Gibelman and Gelman 2004). The reputational damage can lead to decline in donations, grants, and in the enactment of new regulations (Cottle and Nolan 2007;Prakash and Gugerty 2010;Berghmans et al. 2017). ...
... Because the quality of nonprofits' work is often difficult to observe (Weisbrod 1988), these organizations must assure their donors that donated monies are used appropriately. This is particularly important for international nonprofits (or INGOs): geography often impedes domestic donors' evaluation of the quality of their work (Prakash and Gugerty 2010). Trust is one of the most influential criteria donors-both government-based and private-use when deciding which nonprofits to support (Rose-Ackerman 1996;Bekkers 2003;Alhidari et al. 2018). ...
Article
We examine Twitter data to assess the impact of media exposes on the reputations of two international nonprofits, Oxfam and Save the Children (STC). Using a random sample of 6794 Tweets, we study the daily gap between positive and negative sentiments expressed towards these organizations. The “unweighted gap” and the “weighted gap” (weighted by the number of followers) of the Twitter handle follow broadly the same trajectory with high fluctuation in response to new negative or positive media stories. Twitter handles with large audiences amplify variability in weighted gap. While Oxfam’s reputation did not fully recover to pre-Haiti levels even 6 months after the scandal, STC’s reputation returned to pre-scandal levels in 8 days, although it fluctuated in response to new revelations. Overall, reputation recovery for both organizations was aided when they received celebrity endorsements and focused public attention on their positive activities, especially by linking to visible global events.
... At the same time, they are also intriguing from a theoretical perspective because of their inherent double nature. Prakash and Gugerty (2010) referred that MSIs offer voluntary regulation as a means to overcome the current global governance gaps, for example no company is obliged to join the MSIs and adhere to their standards. To avoid any discrepancy and interruption as well as directing sustainability metrics towards ones that are congruent with the existing business administrations and marginalize metrics that have the potential to disrupt regime processes (Konefal, 2015). ...
... Secondly, MSIs are considered as arenas for collective action (Pattberg, 2005). Touching on this matter, Prakash and Gugerty (2010) stated that MSIs offer voluntary regulations as a way to defeat the current global governance gaps; for instance, none of companies are compelled to join the MSIs and stick to their measures by any formal legal rules. On the contrary, Schouten, Leroy, and Glasbergen (2012) expressed that MSIs do not offer any regulatory aspects. ...
... Authors also presented a second view on why trust is declining for charities-this view shall be termed "monitoring complexity." The view stipulates that monitoring complexity has increased due to a widely discussed theory referred as either the accountability problem (Becker, 2018) or as the principal-agent problem (Gugerty and Prakash, 2010). The problem can be explained as follows. ...
... The non-profit structure poses monitoring challenges since there are few mechanisms to ensure that managerial and stakeholder incentives are aligned. Consequently, managers can abuse such regulatory deficits (Gugerty and Prakash, 2010). The principal rectifies this problem through precautionary arrangements, including contracts and monitoring controls. ...
Article
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This paper presents a literature review on the role of the distributed ledger technology in promoting stakeholder trust for charitable organizations. The purpose of this review is to capture existing knowledge on the relationship between the following key variables: charity, trust and accountability, and distributed ledger technology—with emphasis on blockchain technology as a primary example of this technology. After shortlisting the discovered literature pool to 35 papers, the following three themes were identified. The first theme presents the various definitions of key concepts in crypto-philanthropy literature. The second theme captures existing views on why stakeholder trust is declining in charitable conduct. These views include: (1) organizational boundary shifts; (2) monitory complexity; and (3) poor regulatory design. The third and final theme presents a hypothesis on how the distributed ledger technology can promote trust for charities. The technology is hypothesized to promote trust by drawing on the following three elements: (1) decentralization; (2) provenance; and (3) rule-enforcement. A number of shortcomings are then highlighted in the literature pool. The first shortcoming pertains to the inconsistent treatment of key concepts in crypto-philanthropy studies. The second shortcoming pertains to the lack of discussion on whether the distributed ledger technology may potentially decrease stakeholder trust if implemented irresponsibly by charities. In conclusion, a series of future research pathways are provided. These recommendations include: (1) clarifying key concepts; (2) suggesting “crypto-philanthropy” as a formal disciplinary title; (3) highlighting under-researched areas; and, (4) recommending strategies for building a new crypto-philanthropic theory. From an academic perspective, the findings contribute to literature by bridging the gap between crypto-economic, institutional governance and non-profit accountability theories. The findings may also guide charity managers, regulators and policy-makers in understanding the capacities of the distributed ledger technology in legitimizing charitable conduct.
... Due to the non-distribution constraint, according to which nonprofits are not allowed to distribute profit to private parties, the public ascribes them higher levels of trustworthiness compared to other institutions or sectors (Hansmann, 1980). A growing number of scandals in nonprofit sectors worldwide, however, challenges the notion of inherent nonprofit trust (Prakash & Gugerty, 2010). Recent incidences in some of the most respected organizations such as WWF International's allegations of human rights violations or Oxfam's Haiti scandal severely threaten public's perceptions of nonprofit organizations (Chisolm, 2008;Rimington, 2018;Willems & Faulk, 2019). ...
... The latest trend in trust research relates to the development of strategies and tools for organizational trust-building (Bekkers, 2003;Farwell, Shier, & Handy, 2018;Prakash & Gugerty, 2010). Particularly, nonprofit governance and accountability approaches are emerging that seek to send signals of quality and trustworthiness to an increasingly skeptical public (Slatten et al., 2011). ...
Article
Nonprofit organizations highly depend on the public’s trust for legitimacy and support, to ultimately further their missions. Despite its high importance, little is known about the trust-building processes of the general public. In this study, we develop and test a multilevel study design to provide deeper insights into the public’s trust in nonprofit organizations and its relevant determinants. We used a comprehensive data set of 4,072 dyads, with survey data from 1,686 individuals and organizational data related to 102 German NPOs to investigate the different trust-building components: (1) individual public trust evaluation in NPO, (2) individual (trustor) context, and (3) organizational (trustee) context. The results of the analysis reveal unexpected differences in the importance of the different components for explaining the public’s trust in nonprofit organizations. Results show that the individual context is as relevant as the individual public trust evaluation, but the organizational context is far less important.
... A credibilidade é um aspecto fundamental para o setor das organizações sem fins lucrativos, pois um equívoco administrativo pode comprometer os fluxos de caixa futuros ou até mesmo decretar o fim da organização (Conway et al., 2015). Assim, a redução dos recursos, advinda da redução da confiança nessas organizações, pode fazer com que estas, inclusive as que possuem boas práticas, fechem as portas, sendo uma situação indesejável tanto para as ONGs como para os doadores (Prakash & Gugerty, 2010). Além disso, prejudicaria a comunidade local favorecida pelos serviços prestados por estas organizações e, em sentido amplo, a sociedade. ...
... O processo de comparação de organizações é afetado pelo nível de transparência das informações financeiras, sendo um fator analisado, por exemplo, pelos doadores de recursos. Portanto, há um problema quando os doadores não conseguem distinguir as organizações mais eficientes e transparentes, pois o fluxo de recursos deveria ser direcionado para as organizações mais eficientes em detrimento das demais (Prakash & Gugerty, 2010). ...
Article
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Objetivo: Identificar o nível de diversificação de receitas das maiores Organizações Não Governamentais (ONGs) ambientais do mundo. Fundamento: A credibilidade é um aspecto fundamental para o setor das organizações sem fins lucrativos, pois um equívoco administrativo pode comprometer os fluxos de caixa futuros ou até mesmo decretar o fim da organização (Conway et al., 2015). Nesse sentido, a composição e o nível de diversificação das receitas dessas organizações estão relacionados com a continuidade destas. Método: O demonstrativo contábil que evidencia as receitas auferidas das 34 ONGs do setor ambiental, relativos aos anos de 2017, 2016 e 2015, foi analisado. As ONGs estrangeiras comumente divulgam essa informação no Statement of Activities. Por meio da análise dos tipos de receita, foram elaboradas quatro categorias agregadoras, a saber: "Receita Externa", "Receita Própria", "Investimento e Juros" e "Outros". A Receita Externa, por possuir características específicas, foi subdividida em três grupos, a saber: Doação, Subvenção e Híbrido. As receitas auferidas pelas ONGs da amostra foram classificadas nas categorias elaboradas e mensurada a sua representatividade. Com o objetivo de medir o nível de diversificação, foi utilizado o indicador Hirschman-Herfindahl (HHI). Resultados: Os principais achados evidenciaram uma ampla dependência de receitas externas, oscilando em aproximadamente 90% em relação à receita total do conjunto de organizações. A Receita Própria apresentou representatividade de aproximadamente 8% no período, enquanto a soma dos valores classificados como Investimento e Juros e Outros completa os 2% restantes. Os resultados indicam que as ONGs analisadas não apresentaram receitas diversificadas, tendo em vista que a maioria destas não apresentou indicador HHI superior a 0,50. Este nível de diversificação está alinhado com aqueles sugeridos por Carroll e Stater (2009), e acima daqueles indicados por Shea e Wang (2016).
... Charitable giving refers to any act of providing money, time, or goods with no value or monetary return for the donor [88]. Donors face a dilemma as they have to trust a charitable organization while not being fully able to monitor their performance and quality [67]. The actions of charities and outcomes of donations are perceived as highly intangible [65]. ...
... With media reports on charity scandals claiming donations not being used for their cause, the public increasingly demands greater accountability and transparency [24]. Donors face a dilemma as they have to trust a charitable organization while not being fully able to monitor their performance and quality [67]. Donor questionnaires increasingly state that charitable organizations should go beyond the (legal) required minimum of reporting to increase public trust [91]. ...
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The voluntary carbon market is an important building block in the fight against climate change. However, it is not trivial for consumers to verify whether carbon offset projects deliver what they promise. While technical solutions for measuring their impact are emerging, there is a lack of understanding of how to translate this data into interface designs that mediate the establishment of trust. With interaction between users and offset projects mainly happening online, it is critical to meet this design challenge. To this end, we designed and evaluated interfaces with varying trust cues for carbon offset projects in a randomized online experiment (n=244). Our results show that content design, particularly financial and forest-related quantitative data presented at the right detail level, increases the perceived trustworthiness, while images have no significant effect. We contribute the first specific guidance for interface designers for carbon offsets and discuss implications for interaction design.
... Against the background of information asymmetries between nonprofit organizations and its stakeholders, the effectiveness indicators have potential to provide important signals of quality to the public. Donors and other nonprofit stakeholders lack information and face uncertainty in the process of assessing the organization's behavior or the quality of nonprofit programs and services (Prakash & Gugerty, 2010). Along with their higher demands, nonprofit stakeholders seek for elaborate information about nonprofit organizations and its services (Prakash & Gugerty, 2010). ...
... Donors and other nonprofit stakeholders lack information and face uncertainty in the process of assessing the organization's behavior or the quality of nonprofit programs and services (Prakash & Gugerty, 2010). Along with their higher demands, nonprofit stakeholders seek for elaborate information about nonprofit organizations and its services (Prakash & Gugerty, 2010). One way to address stakeholders' demands and increased skepticism is the use of signals in overcoming information asymmetries (Moleskis, Alegre, & Canela, 2019;Willems, Waldner, Dere, Matsuo, & Högy, 2017). ...
Article
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This study contributes to recent discussions on voluntary disclosure as a signaling approach among nonprofit organizations and its effects on stakeholders’ decision-making. Focusing on nonprofit program effectiveness, we test how nonprofit campaigns providing information on three effectiveness indicators—outputs, outcomes, and impacts (as part of the logic framework)—influence donation and lending behavior. An online survey experiment (N = 271) reveals that donors value outcome and impact indicators more than output information, without any differences between the two. Moreover, the three indicators have no statistical influences on lending behavior. We also consider the moderating role of reflective decision-making and find no influence on either donation or lending behavior.
... Nonprofits are supposed to correct governance failures, not embody them. One argument is that governance failure is rooted in the lack of institutional oversight over internal operations, both by internal bureaucratic structures and external monitors (Prakash and Gugerty 2010). This oversight deficit is problematic, given the power asymmetries between nonprofit managers and the local actors they employ. ...
... Accountability also has seen to have different effects, however, with the argument that it may be good in reinforcing some forms of trust, but limits and damages deeper forms of relational trust (Keating & Thrandardottir, 2017). It is interesting as the links between the accountability agenda, transparency, and trust in non-governmental organisations have been referred to strongly by practitioners and academics (Burger and Seabe, 2014;Farrell and Knight, 2003;Grant and Keohane, 2005;Havrda and Kutílek, 2010;Phillips, 2012;Prakash and Gugerty, 2010;Prideaux, 2015;Sir Stuart Etherington et al., 2015;Steffek and Hahn, 2010;Szper and Prakash, 2011;Weisband and Ebrahim, 2007;Lee, 2004;Marschall, 2010;Sloan, 2009;Lloyd, 2005;Goddard and Assad, 2005). Hugo Slim (2002) argues that NGOs need to act positively on potential trust problems through accountability. ...
Technical Report
Trust is extremely important for the ICRC. It can assist in the facilitation of access and enables the ICRC to act more effectively by creating strong relationships with its employees, movement partners, national agencies, donors, and those effected by crisis. Understood as an interplay between positive expectations allowing for the acceptance of vulnerability in a context in which there is risk and interdependence, the literature shows there are many ways of thinking about the ways in which trust works.
... Charity institutions can increase the trust of its donors by increasing the information exposure and experience of the donor for what the institution has done in carrying out its mission [20]. Cases of fraud deny the trustworthiness signals of this sector, so that nondistrubution constraints are doubtful in shaping public trust [21]. When the power of this unique characteristics of nonprofit sectors is doubtful, increasing accountability is relevant in overcoming trust issues [14][22] [23]. ...
Conference Paper
Full-text available
In Islamic philanthropy sector, especially, the charitable sector called ziswaf (zakat, infaq, sadaqah, and waqf), increasing accountability is believed to be able to increase trust, reputation, and even a solution to increase donation as well. However, it is still lack of empirical evidence whether muslim donors do consider accountability of ziswaf institution. This is a quanitative study aimed to see the effect of accountability level to public trust, reputation, and donation. Data obtained from experiment of 158 muslim middle-income class respondents from Jabodetabek. Experiment is done online by providing five fictive cases based on five accountability level, from the lowest institution with no accountability to the highest institution with external accountability and accreditation. Respondents were illustrated within one of the cases and then they were asked about trust, reputation, and donation to the illustrated institution. Data analysis is done using SEM-PLS with the results validate the view that accountability affects trust and reputation. Donation revenue is affected by accountability only through mediation of reputation. Along with accountability, it is also clear that reputation has important role in increasing trust and donation.
... Reputational concerns are argued to be particularly important for nonprofits because, as Mitchell and Stroup (2017) note, their power derives from their ability to influence which is dependent on their perceived credibility, and in an information scarce environment reputation becomes a proxy for effectiveness. A popular means of enhancing reputation is to become part of an "accountability club" -a voluntary code or certification mechanism (Prakash and Potoski 2007;Prakash and Gugerty 2010;Potoski and Prakash 2013). The trustmark that accompanies membership in a club is a shorthand signal of quality that enhances their 'brand,' while the robustness of the standards and monitoring practices of the accountability club contribute to its legitimacy (Prakash and Potoski 2007;Gugerty 2009). ...
Article
Full-text available
Investigations of how Oxfam Great Britain (GB) managed its safeguarding systems and handled revelations of sexual exploitation by its staff highlighted a variety of internal governance and culture issues, and a lack of transparency as it sought to protect its reputation. The current models of reputation management do not fully explain its actions, however. This article argues that five systemic factors in the environment in which nonprofits operate create undue pressures for protection of reputations and contribute to poor assessment of risks, inadequate accountability systems and limited transparency. These factors include: a stress on success and related competition for market share and pressures for growth; expectations of low overheads; challenges of governance and risk management; lack of public awareness; and regulatory gaps. Drawing on media coverage and the commissions of inquiry, the analysis shows how all of these contextual factors were at play in the Oxfam case, and suggests potential reforms.
... These theoretical frameworks warrant future research to test measures of relevant constructs, such as nonprofit-donor goal alignment, changes in public donation trends, and organizations' motivations for self-regulation. For instance, AbouAssi and Bies's study (2018) of environmental nonprofits in Lebanon suggests that nonprofits' self-regulation and accountability practice are not simply driven by resource dependence or external parties' mandatory requirement; instead, it may be driven by nonprofits' selfmotivated responsiveness to donors, beneficiaries, and nonprofit peers (AbouAssi and Bies 2018; Prakash and Gugerty 2010;Tremblay-Boire et al. 2016). ...
Article
Organizational transparency has become a prominent concern for the nonprofit sector as it expands globally. Transparency is important to organizational accountability, which may be indicated by how nonprofits allocate their resources. In this study, we examine the relationship between nonprofits’ transparency and their resource allocation to programs, administration, and fundraising. Our study focuses on China, where a nascent nonprofit sector is playing increasingly significant roles in social development while facing public trust challenges. Based on Agency Theory and Resource Dependence Theory, we propose two hypothesized frameworks that link transparency to resource allocation, and use the 2013–2015 China Grassroots Organizations’ Transparency Survey data (n = 370) to test this relationship. Our results suggest that nonprofits with higher transparency allocate more resources to programs rather than administration, a possible result of the current public scrutiny of nonprofit accountability in China. Our findings provide implications for nonprofit practitioners and future research about the significance of organizational transparency, particularly in emerging nonprofit sectors.
... First, trust is fundamental in market functioning, particularly in situations of institutional change where new systems and relationships are put in place to coordinate activities between individuals and organizations in both horizontal and vertical networks (Adler, 2001;Bachmann and Inkpen, 2011;Hinrichs, 2000;McDermott, 2012;Prakash and Gugerty, 2010). The majority of institutional arrangements detailed in the 15 chapters in this book reflect Adler's (2001) notion of community/trust types of exchange (as compared with hierarchy/authority and market/price mechanisms). ...
Book
This edited volume has gathered together a collection of selected case studies fromaround the world, documented by the innovators themselves. The preceding chaptersdetail how each case has innovated within its organizational and institutional environmentsto create markets for its sustainable products. All the case studies in this volumeare considered “market-driven” innovations. We classify them as such becausethe innovators are relying upon innovative market instruments and institutions tosell products that are cultivated using sustainable agricultural practices. One of theselection criteria for the case studies was proof that the agricultural practices used bythe innovators were in line with the categories documented in FAO’s Save and growpublication (2011). We argue that the 15 cases presented in this book exemplify newways of organizing farmers who practise sustainable agriculture. These new wayshave changed the rules about how farmers and consumers can be linked throughmarket exchanges. In this chapter, we explain how we arrived at this conclusion.The chapter is organized as follows. First, we present our analytical frameworkof “institutional innovations”, which is followed by three sections that explainwhy and how institutional innovations work. We conclude by explaining how it isthrough these institutional innovations that markets act as incentives for the localuse of sustainable practices.
... While facilitating businesses' self-regulation, officials should be careful not to sponsor voluntary programs or production practices that enjoy low legitimacy among regulatees (Fiorino, 2009;Hu¨lsse, 2008), maintain lower standards than widely shared industrial norms (Berliner and Prakash, 2012), or allow for agency "slippage" given information asymmetry between regulators and regulatees (Prakash and Gugerty, 2010). At times, the approach requires officials to be "educators" (Carter, 2016;Lo et al., 2009), assimilating regulatory information for regulatees and providing them with technical assistance to promote behavioral modifications (Lee, 2011). ...
Article
How street-level organizations enforce regulations carries important governance implications. Through reviewing the regulatory enforcement literature and categorizing it into three broad governance modes, this article discusses the individual and organizational capacity prerequisites for street-level organizations to enact the corresponding government–society relationship and improve governance outcomes. Through analyzing enforcement challenges faced by street-level officers in Beijing’s recent food safety reform, the article also identifies the essential capacities for street-level organizations to regulate under a legal-hierarchical governance mode. The article hopes to inspire further research to uncover specific governance capacity requirements for other administrative organizations under different governance modes. Points for practitioners Apart from policy effectiveness, government regulators should also sometimes pay attention to their impacts on governance. Despite frontline regulators’ discretion, street-level organizations may improve governance outcomes by devising and implementing regulatory enforcement programs and strategies in line with the governance mode the government is engaged in as what they do enacts the specific government–society relationship in the governing process. Administrators in charge of street-level organizations may benefit from cultivating capacities essential to actualizing the respective governance mode. Absence of these capacities is likely to undermine governance effectiveness.
... They emphasize the proliferation of formal auditing organizations, with varying effects and characteristics depending on the countries or sectors involved (Power 2003). Most studies of audit in the domain of standards are actually concerned only with the certification activities, which are described as the means of verifying compliance with standards and therefore of building the trust that is the foundation of the system as a whole (Prakash and Gugerty 2010;Boiral and Gendron 2011;McDermott 2012;Hatanaka 2015). Few authors call into question the devices that produce the credibility and impartiality of certification, and therefore the very legitimacy of standards (Boiral 2012;Frankel and Galland 2017). ...
... Coercive isomorphism has a direct effect on mission drift, confirmed by the total effects analysis. This emphasizes that regulatory frameworks and the regulations or sanctions they impose can have ambiguous effects on organizations (Prakash & Gugerty, 2010). Standardization processes increase effectiveness through clarification and alignment, provided the NPOs involved have sufficient internal capacities to meet the demands (Bies, 2001). ...
Article
Full-text available
Nonprofit organizations (NPOs) have increasingly adopted business‐like practices as a response to institutional pressures. Some researchers argue that this development leads to mission drift, whereas others find a positive effect on organizational performance. However, the institutional pressures responsible for shaping the nonprofit sector have remained hard to distinguish from each other. This study explores the consequences of mimetic, normative, and coercive pressures, and looks at how they affect managerialism, organizational performance, and mission drift. We link these concepts through a structural equation model based on survey data and find that one aspect of managerialism, strategic behavior, is a key construct in influencing the response to isomorphic pressures and can positively affect organizational performance while holding off‐mission drift. Normative isomorphism even has a direct positive effect on organizational performance. Mission drift can take place when organizations are under coercive pressure without having strategies or internal processes in place. These findings imply that organizations should invest in their strategy and the professional development of their staff to increase organizational performance and avoid mission drift.
... Such information asymmetry also could be found in the nonprofit sector. Prakash and Gugerty (2010) point out that information problems can cause agency slippages and could be mitigated by disclosing full financial statements and governance structures to the public. Managers in nonprofit organizations have motivations for voluntary information disclosure because this action differentiates themselves from others and signal to their principals that they are deploying resources as per the organizational mandate. ...
Article
As the accountability movement is gaining momentum worldwide, nonprofit organizations are facing increasingly higher institutional requirements in terms of information disclosure. Nonprofit organizations need to disclose information to acquire legitimacy. However, information disclosure increases administrative costs, for which the upper limit is constrained by the law. In order to acquire legitimacy while reducing administrative costs, some of the nonprofit organizations selectively disclose their information. This paper examines the impact exerted on selective information disclosure by political labels. By using the interannual panel data of 4070 charity foundations in China’s Mainland from 2010 to 2014, this study finds out that the political label negatively influences selective information disclosure. This paper contributes to testing correlations between political labels and selective information disclosure in transition economy and provides solid evidence for studying selective information disclosure by nonprofit organizations.
... Self-regulatory standard setting has inbuilt weaknesses of course, because as Prakash and Gugerty indicate "the excludable nature of these benefits is crucial to prevent free riding". 40 Moreover, when self-regulatory mechanisms mean that NGO members pledge adherence without the use of verification or third-party verification (Prakash and Gugerty 2010), this potential weakness is ever more present. We also must have realistic expectations about board supervision as an effective formal check on real in-use behaviors. ...
Article
Full-text available
In recent years, leading international nongovernmental organizations (INGO) such as Oxfam International, Save the Children, and Amnesty International have been implicated in scandals about sexual abuse and other forms of abuse of power and harassment. I suggest focusing on organizational and sectoral culture as an explanatory variable for these crises, which are particularly hard hitting for purportedly value-based organizations. In the case of NGOs, in my observation as a practitioner and ‘pracademic’, these are driven by six factors:(1) particular individual leadership traits that may be prevalent especially in the emergency and humanitarian relief related sector; (2) the effect of power on leaders’ perspectives and behaviors ; (3) a culture of silence that makes it hard for NGO staff to speak up about toxic workplace behaviors ; (4) the presence of deep power structures within NGOs which are not openly acknowledged and therefore addressed; (5) the myth of own innocence that leads NGOs to treat wrong doing as aberrations instead of systemic problems; and finally (6) a culture of limited individual and team-level accountability practices . The extent to which these cultural failures can be addressed through formal policy and (self)regulatory measures is limited, given that culture is primarily about informal, covert belief systems. NGOs will have to do sustained and disciplined culture work themselves if the roots of the scandals are to be taken away.
... Hybrid (Berghmans, Simons, and Vandenabeele 2017) or diagonal (Ackerman 2004) accountability describes situations of mutual cooperation between NGO networks and donors and situations of interaction between horizontal and vertical accountability. According to Prakash and Gugerty (2010), NGOs voluntarily enter into accountability clubs in order to demonstrate credibility and encourage donor support. The INGO Accountability Charter, now known as Accountable Now, is an example of NGO self-regulatory efforts to define and abide by standards that no external actor (yet) requires (O'Dwyer and Boomsma 2015). ...
Article
Non-governmental organizations (NGOs) are pivotal actors in international affairs. They manage billions of dollars in funding, work all around the world, and shape global policies and standards. It thus comes as no surprise that the subject of accountability has drawn the interest of an increasing number of scholars across disciplines. Though there seems to be agreement about its desirability, accountability is also described as chameleon-like and ambiguous. And despite calls for more cross-disciplinary learning and conceptual clarity, there does not exist a comprehensive review of accountability conceptualizations across and within disciplines, or how the different meanings relate to each other. Based on the conceptual review of 217 research articles published within the last twenty years, this study identifies and analyzes conceptualizations of accountability in the major journals of five engaged disciplines: accounting, development studies, international relations and political science, organization studies and management, and public administration. Integrating this broad scholarship reveals that: (1) there exist 113 different conceptualizations of accountability, 90 of which are rarely used and appear in less than 5 percent of all analyzed articles, (2) scholars have used forty-three different conceptualizations in 2019 compared to seventeen conceptualizations in 2009, (3) many conceptualizations refer to same phenomena by different name (duplication), and different phenomena by the same name (conflict), and that (4) conceptual ambiguity contributes to ambiguity among the forty different terms used to measure and operationalize accountability. These findings illustrate a lack of cross-disciplinary learning and accumulation of knowledge, and suggest that new conceptualizations be introduced only if one or more of the 113 existing ones don't already capture an idea sufficiently. The purpose of this article is to serve as a concept map for scholars when debating and charting new directions for the study of accountability.
... Trust is an essential component for INGO sustainabilityfor many nonprofits, trust often translates into grants and donations (Coombs, 2007). Geography often impedes donors' direct evaluation of their work and trust is one of the most influential criteria that private donors use when deciding which nonprofits to support (Bekkers, 2003;Prakash and Gugerty, 2010). A lack of trust could be further fueled by legal trouble with the INGO host governmenta dynamic that individuals may not wish to enter with their dollars. ...
Article
The phenomenon of closing civic space has adversely impacted international non‐governmental organization (INGO) funding. We argue that individual private donors can be important in sustaining the operations of INGOs working in repressive contexts. Individual donors do not use the same performance‐based metrics as official aid donors. Rather, trust can be an important component of individual donor support for nonprofits working towards difficult goals. How does trust in charitable organizations influence individuals' preferences to donate, especially when these groups face crackdown? Using a simulated market for philanthropic donations based on data from a nationally representative sample of individuals in the United States who regularly donate to charity, we find that trust in INGOs matters substantially in shaping donor preferences. Donor profiles with high levels of social trust are likely to donate to INGOs with friendly relationships with host governments. This support holds steady if INGOs face criticism or crackdown. In contrast, donor profiles with lower levels of social trust prefer to donate to organizations that do not face criticism or crackdown abroad. The global crackdown on NGOs may thus possibly sour NGOs' least trusting individual donors. Our findings have practical implications for INGOs raising funds from individuals amid closing civic space. Research on international giving by individuals, especially in the era of closing civic space, is not meant to find answers that can act as substitutes for strategic policy responses, especially by official aid donors and foundations. However, many INGOs are under immediate threat, and individual‐level philanthropy can help support these organizations.
... This evaluation allows them to determine GVOs' performance. However, outcomes and results are difficult to discern in this sector (Prakash & Gugerty, 2010;Willems et al., 2016). In addition, GVOs are rather in difficulty in developing in their evaluation (Lee & Clerkin, 2017;Liket et al., 2014;Murtaza, 2012;Rey García, 2008;Svensson et al., 2017). ...
Article
French “associations” continue to grow in importance in society and the economy, while their financing is increasingly turning to private funds. New requirements in terms of governance are also being imposed on them. In order to support grassroots volunteer organizations in their evaluation, this research proposes to understand the role of the relationship with stakeholders in shaping the impact of an organization. This approach has been mostly theoretical until now and this study is one of the first of its kind to make an empirical contribution. Stakeholder theory and theoretical frameworks led to a questionnaire study and analysis using a structural equation model. The impact perceived by the stakeholders (in this case, the students) is explained both by the relationship quality with the organization and by the degree of their contribution to its success. This research proposes a reciprocal definition of relationship quality, and is about individual stakeholders little studied as members. This article remains exploratory given some of the difficulties with the measurement model and future researches should look into enhancing the measurement of the constructs. [Les associations françaises continuent de prendre de l'importance dans la société et l'économie, tandis que leur financement se tourne de plus en plus vers les fonds privés. De nouvelles exigences en termes de gouvernance s'imposent également à elles. Afin de soutenir les associations dans leur évaluation, cette recherche propose de comprendre le rôle de la relation avec les parties prenantes dans la formation de l'impact d'une organisation. Cette approche est restée jusqu'à présent essentiellement théorique et cette étude est l'une des premières du genre à apporter une contribution empirique. La théorie des parties prenantes et les cadres théoriques associés ont conduit à une étude par questionnaire et à une analyse utilisant un modèle d'équations structurelles. L'impact perçu par les parties prenantes (dans ce cas, les étudiants) s'explique à la fois par la qualité de la relation avec l'organisation et par le degré de leur contribution à son succès. Cette recherche propose une définition réciproque de la qualité de la relation, et concerne des acteurs individuels peu étudiés tels que les membres. Cet article reste exploratoire étant donné certaines des difficultés du modèle de mesure et les recherches futures devraient chercher à améliorer la mesure des construits.]
... Online disclosure has the function of reducing the information asymmetries between a nonprofit and its actual and potential donors at a limited cost. Hence, nonprofits competing for resources are assumed to have an incentive to signal their virtue and their superiority over other nonprofits by providing web-based information about their finances and performance (Blouin et al., 2018;Gandía, 2011;Gugerty, 2009;Harris & Neely, 2018;Haski-Leventhal & Foot, 2016;Prakash & Gugerty, 2010;Rossi et al., 2020;. ...
Article
Full-text available
Nonprofits that compete for charitable contributions often question which are the most effective factors that lead to high levels of donations. To date, the research has been dominated by linear models mainly based on the economic model of giving, and has reported mixed and sometimes conflictual findings about the net effect of certain individual organization-specific factors on donations. In this study, we introduce a configurational approach to explore how the factors considered by the economic model of giving may be combined with each other in multiple configurations with the goal of obtaining high levels of donations. Applying fuzzy set qualitative comparative analysis, we focus on a sample of British community foundations and identify four combinations that lead these organizations to collect large amounts of charitable contributions. The results show that, whereas young foundations should rely on high levels of program spending and large amounts of online disclosure combined with, alternatively, efficiency or aggressive fundraising, old foundations should contain administrative costs and strengthen fundraising efforts while, alternatively, spending the most part of their resources on programs or disseminating large amounts of information through their public websites.
... The public reporting of impact also appears consistent with what principal-agent theory suggests about accountability clubs such as the Imagine Canada standards: they are a means to signal to donors and funders (as principals) that they can trust an organization is using its resources in the manner intended by the principal. They also provide branding benefits to the participating organizations that outweigh the costs of participating in the signalling activity (Prakash & Gugerty, 2010). ...
Article
This article examines the public reporting of impact, defined as progress towards a charity’s mission and long-term objectives, by Canadian charities through their annual reports. The public reporting behaviour of those accredited under Imagine Canada’s Standards Program is compared with a matched sample of charities that have not sought accreditation. The objective is to explore whether trust-building activities like public disclosures of impact and third-party accreditation are convergent. The study finds that accreditation status correlates with impact measurement and reporting; both trends are linked to organizational size, and accreditation does not appear to be causing charities to increase their disclosures of impact, which suggests that there may be underlying factors driving both behaviours. These findings generally affirm earlier research that correlates organizational size with impact measurement, adding that the effect is weak. Cet article examine comment les associations caritatives canadiennes, dans leurs rapports annuels, rendent compte de leur impact, c’est-à-dire de leur progrès par rapport à leur mission et à leurs objectifs à long terme. Cette étude compare les comptes rendus d’associations accréditées par le Programme de normes d’Imagine Canada avec un échantillon apparié d’associations qui n’ont pas été accréditées. L’objectif est de déterminer s’il y a convergence parmi les démarches entreprises pour gagner la confiance du public telles que l’accréditation par un tiers et la divulgation d’impact. Cette étude observe que les associations accréditées sont plus enclines à mesurer et à divulguer leur impact; que ces deux pratiques sont plus communes dans les grandes associations; et que l’accréditation à elle seule n’entraîne pas forcément les associations caritatives à divulguer leur impact, ce qui suggère que des facteurs sous-jacents sont peut-être responsables pour les deux pratiques. En général, ces conclusions confirment des recherches antérieures trouvant une corrélation entre la grandeur d’un organisme et le désir de mesurer son impact, bien que ce lien semble être faible.
... On the other hand, trust and regulation can work as substitutes. By reducing the risk of opportunistic behavior, trust can be less costly than formal regulation and, hence, weaken the demand for regulation (Mellewigt et al., 2007;Prakash & Gugerty, 2010). People in trusting societies value their reputations and do not want top-down control. ...
Article
Full-text available
Building from the interest-group theory of regulation, we posit that trust alters the payoff from regulatory rent-seeking relative to profit-seeking. Trust reduces the costs of productive economic exchange by lowering transaction costs, thus raising the cost of rent-seeking behavior. In addition, trust increases political accountability, discouraging politicians from creating regulatory rents. We therefore hypothesize that trust reduces the extent of business regulation while simultaneously facilitating market efficiency. To test that hypothesis, we construct an overall business regulation index measuring procedures, time, and cost along eight dimensions of doing business in a country. The empirical results reveal that trust negatively relates to business regulation but positively relates to market efficiency. Interaction and split-sample results further indicate that trust and business regulation are substitutes. Collectively, the findings reported herein suggest that business regulation itself is not the root cause of market inefficiency, but rather lack of trust is the dominant factor.
... Scholars studying misconduct in the nonprofit sector in the United States have heavily focused on financial fraud committed by individual perpetrators. This makes sense, given that about 5% of revenue across all organizations, including charities, is estimated to be lost annually due to fraud globally (Association of Certified Fraud Examiners [ACFE], 2020), and many widely publicized charity scandals involve some form of financial wrongdoing (Prakash & Gugerty, 2010). The past literature in this vein provides detailed information regarding the types of fraud and other financial wrongdoing committed, characteristics of organizations that victimize the public or were victimized by their employees, sociodemographics of perpetrators, and financial losses caused by misconduct (Archambeault et al., 2015;Greenlee et al., 2007;Holtfreter, 2008). ...
Article
The purpose of our study is to broaden the investigation of nonprofit misconduct beyond financial fraud perpetrated by individual actors and to identify structural features that are more or less likely to be associated with actual misconduct. We utilize the Charity Navigator Advisory System and related press releases to identify 215 nonprofit organizations with confirmed or alleged misconduct. We also collect the IRS Form 990 information for 133 out of the 215 organizations with known misconduct and 150 organizations without known misconduct to compare their accountability structures. Our findings suggest that, while financial fraud committed by individual perpetrators against their organizations is the most frequently identified type of misconduct, a substantial number of other types of misbehaviors also commonly occur. Our comparison analysis indicates that organizations with known misconduct deviate significantly from scandal-free charities in several structural aspects.
... jako producentów usług i katalizatorów transakcji) są badania wskazujące na konieczność wypracowania certyfikatów jakości dla samych organizacji non-profit. Podobnie jak badania prowadzone na rynku turystycznym wskazują one jednak na niewielką wartość tych certyfikatów oraz problem samej asymetrii informacji pomiędzy jednostkami wspierającymi organizacje non-profit a samymi organizacjami (Prakash, Gugerty, 2010). ...
Book
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Głównym problemem badawczym w niniejszej pracy są niedoskonałości ekono­mii współdzielenia na rynku usług hotelarskich. Niedoskonałości rynku obejmujące istnienie kosztów transakcyjnych, asymetrii informacji oraz efektów zewnętrznych są istotne dla wyjaśnienia przyczyn ograniczonego zasięgu wymiany P2P na rynku usług hotelarskich przed rokiem 2010. Innowacje związane z redukcją niedoskonałości rynku były główną przyczyną wzrostu znaczenia platform EW. W monografii podjęto próbę weryfikacji dwóch równorzędnych i wzajemnie ze sobą powiązanych hipotez badawczych. Według pierwszej hipotezy poziom niedoskonałości współdzielonego rynku usług hotelarskich jest wyższy niż w przypadku tradycyjnego rynku usług hotelarskich. Hipoteza druga zakłada, że pośrednicy na rynku usług hote­larskich EW nie ograniczają tych niedoskonałości rynku, które związane są z efektami zewnętrznymi transakcji.
... First, the sector has low barriers to entry, making it easy for unethical entrepreneurs to enter the market. Second, donors (and other external stakeholders) often have no easy or costless mechanism by which to distinguish between trustworthy and untrustworthy organizations (Prakash and Gugerty 2010). Thus, charities that have good systems in place to be accountable to the public signal their trustworthiness to the broader public. ...
Chapter
Als maßgebliche Innovation der vergangenen Jahre im Rechnungswesen gilt die Entwicklung von Rechnungslegungsstandards für die Nachhaltigkeitsberichterstattung (NHB). Den vielfältigen Ansätzen zur NHB liegt die Idee zugrunde, dass zusätzlich zur finanziellen Berichterstattung auch über die ökologische und soziale Performance von Unternehmen Rechenschaft abgelegt wird und damit sich die Informationsempfänger ein Bild über die Nachhaltigkeitsleistungen von Organisationen machen können. Wie der Markt für Nachhaltigkeitsberichterstattung boomt, zeigt sich auch an den vielen internationalen und nationalen Berichterstattungsstandards zur NHB.
Thesis
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This research positions itself within the current debate of the third sector facing a crisis of public trust. Charities and philanthropic organisations are increasingly under public scrutiny, with demands of greater transparency and accountability. Innovative technologies such as cryptocurrency and blockchain have presented themselves as solutions to this issue, bringing at the forefront characteristics of traceability and irreversibility. This research aimed to explore and understand the relationship of cryptocurrencies and blockchain technology upon issues of trust and accountability in charities in the UK. It provides qualitative insights of how innovative technologies affect and shape non-governmental organisations and their environment. Methods consisted of a content analysis and interviews. The content analysis focused on online publicly accessible information such as home pages websites, user interface pages and annual and financial reports. Five semi-structured interviews were carried out with members of blockchain social startups or professionals in charities with extensive knowledge on these technologies. The research revealed how technologies such as cryptocurrencies and blockchain embody and further advance a rational understanding of trust and accountability. The ability of these technologies to openly display information caters to a logic of impact, where charities need to demonstrate results and efficiency. This is further inscribed in the neoliberalisation of charities, where these technologies serve demands of the market, revealing the complex position charities enact in our time. Finally, the research challenged some of the more optimistic narratives of technological innovation and its role in the charity sector; the desire for transparency appears to paradoxically bring opacity to those excluded from technical knowledge. The effects of these technologies on beneficiaries and local communities need to be further studied. The entanglement between micro understandings and macro structures render this topic of research fruitful and worth of future sociological investigation.
Chapter
Social economy sector (SES) organizations are dependent on their funders and, similar to non-profit organizations, are vulnerable to the risk of mission drift as well as to concerns about the extent to which they are accountable for their fund flows. This chapter explores the general public's perceptions of the relative importance of specific financial disclosures which the public believes SES organizations should publish as part of their provision of accountability. Using a survey questionnaire administered to a sample of 400 Australian individuals, the chapter observes that the public perceives financial disclosures relating to sources of funds, mission-related expenses, and the financial sustainability of SES organizations as important. It is recommended that SES organizations cater to the general public's information needs as a way of improving their accountability, reducing information asymmetry, and eventually increasing general trust and confidence in their operations.
Article
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The literature on NGOs under authoritarian rule largely attributes NGOs' receipt of government grants to their political connections. This article presents an alternative explanation by asking the question: Does nonprofit organizational legitimacy influence the receipt of government grants under authoritarianism? Applying logit regression to 2,021 Chinese foundations, this article proposes that passing the nonprofit evaluation, which is one of the major certification programs in the country's nonprofit sector, is positively related to the probability of receiving government grants. Subsample analysis reveals that nonprofit evaluation is influential for the receipt of government grants primarily among foundations formally affiliated with government agencies. This article provides for the first time evidence that contemporary authoritarian regimes appreciate nonprofit organizational legitimacy, albeit still in a highly politicized manner. ARTICLE HISTORY
Article
This article analyzes the web transparency of 76 Spanish Non-Governmental Development Organizations (NGDOs) in 2016. To do this, we build a transparency index composed of 119 items from the study of several measures used by previous literature and the Spanish Platform of NGDOs. Furthermore, we study several characteristics of the entity that influence its level of transparency, highlighting the positive effect of the size of both the ONGD and its board, the legal form of association, the religious ties and its international presence.
Article
State retrenchment, public input requirements, and local budgetary constraints make advocacy organization’s (AO) work vital to the adoption and implementation of local plans. Yet, the strategies AOs use to influence policies have gone understudied in planning literature. The current study fills this gap through a case study of how AOs exert influence in planning for affordable housing in four cities in Los Angeles County. Data were collected through interviews (AO leaders and city officials), document review (AO materials), and content analysis of Housing Elements. The study found that the range of tactics depends on the political context and organizational resources.
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In the absence of a statutory instrument to enforce payment of a regulatory fee, regulators must rely on a combination of “carrots” and “sticks” to encourage financial contributions by the organizations they oversee. In contrast to studies of public funding of nonprofits, this article empirically evaluates the effectiveness of a government policy to rely on nonprofit funding of statutory regulation. The authors exploit a sharp discontinuity in the eligibility threshold for charities contributing to the new Fundraising Regulator in England and Wales to estimate a causal effect of the levy on participation. The article shows that the regulator's threat to “name and shame” was effective at incentivizing regulatory participation and generating income, but it raises some concerns about the long‐term viability of this approach. The results are significant at a time when many jurisdictions are considering how best to fund the regulation of nonprofits.
Article
The nonprofit sector strives to be a virtuous and transparent space, one that is diverse, inclusive, and welcoming. Still, inappropriate and exclusionary behaviors can and do occur in nonprofits—one of which is sexual harassment (SXH). Currently, little research on SXH in the nonprofit sector exists, and even less is known about the steps taken by nonprofits to protect their employees and stakeholders from SXH. This study examines rates of SXH policy adoption among nonprofits and the relationship between SXH policy adoption and organizational characteristics. Drawing from a state‐wide survey, we find that there is wide variation among nonprofits in their adoption of a written SXH policy. Organizations that have full‐time employees, more revenue, and greater capacity are more likely to have a policy. Organizations that serve women are no more likely to have a policy; however, lesbian, gay, bisexual, and transgender‐serving organizations are more likely to have a policy. We discuss the implications of these results, including the conceptualization of SXH as part of the broader issues of discrimination, harassment, and bullying in nonprofits.
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This study develops and tests a model that evaluates eight antecedents of charity trust and its influence on volunteering and donating. Secondary data from a national Australian survey (N = 1,377) was collected and data was analyzed using partial least square path analysis. Key findings include identifying individual and organizational antecedents of charity trust and its influence on charity supportive behavior. Results show that organizational transparency is a very strong antecedent, followed by the individual awareness level of an individual towards the organization. We also examined the effect of gender as a moderating influence but did not find a significant effect. We conclude with managerial implications and areas for future research.
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We unpack trust and its underlying emotional and cognitive dimensions over time, based on a case study of a Colombian human-rights NGO and its donors. The emotional trust dimension is anchored in the values and interests that the NGO and its donors share. The cognitive trust dimension is grounded in the control and reporting practices of the NGO and its donors. We highlight the dynamic nature of trust by showing how the emotional and cognitive dimensions shape trust over time as the NGO-donor relationship progresses. Depending on the relationship stage, trust can be grounded relatively more or less in its emotional and cognitive dimensions. Across the different stages of the relationship, the two trust dimensions are complements and reinforce one another. Our study highlights that trust in NGOs is not replaced by accountability, as accounting and civil society research argues. Instead, accountability and trust, especially its emotional dimension, are mutually constitutive.
Technical Report
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This deliverable offers a systematic and comprehensive review of the literature on trust and regulation and their relations in three parts. Section 1 provides a brief overview of trust and distrust; their relationship; and antecedents (drivers) and positive and negative consequences. This second part of provides an overview of phases and processes of trust building, maintenance and repair as well as a review of how processes of distrust building or trust-reduction work. The third part suggests that the unfolding of trust relationships varies according to the type of involved actor, i.e. an individual, organisation, or system (such as regulatory regimes) and level of analysis. Section 2 moves to regulation. It reviews the main concepts of regulation and clarifies some of the most important questions around it. This should allow us, in later sections of this deliverable, to point on some of the possible directions that trust and regulation research may take. It starts with definitions and a distinction between narrow and broad approaches to regulation. It then clarifies the concept of regulatory regime; the regulatory agency, the regulatory state and regulatory capitalism. It concludes with an actor centered analysis of the regulation. Section 3 deals with trust and distrust in government. It starts with a summary of the drivers of the dis/trust relations. The main sub-section deals with reviews of the literature on trust and distrust in (a) political institutions and actors; (b) public administration; (c) among courts; (d) citizens by government and (e.) between public organizations. Section 4 brings out the critical aspects of the review. It focuses on the relations between trust and regulation and offer a new conceptualization of their relations. One that will serve as the basis for section 1.3. The first part of the section moves the discussion of the relations forward in an attempt to looking at the relations beyond the current literature by distinguishing between four types of relations: independent, competitive, substitutive and supportive. The second part of the section focuses on the relations of trust between the main actors of the regime. The third discusses the relations between trust and regulation, when they touching on explanations for the processes. The fourth revolves around on assessment of outcomes of the relations. Section 5 deals with the operationalization and measurement of trust. It deals with the ways in which trust between actors in regulatory contexts has been measured in recent scholarship. It informed by, and seeks to expand upon, the current knowledge by more specifically examining measures used in the study of regulatory contexts. It starts with a description of the systematic methodology used. It then summarizes the purely descriptive findings of the review and an overview of the number of studies on trust in regulatory regimes published in recent years. It then presents separate discussions on how trust in different kinds of actors in regulatory regimes has been measured. Section 5 closes with a reflective and critical discussion of the literature. We analyse prominent limitations and gaps in existing empirical work.
Thesis
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Objectif : La présente recherche explore la relation entretenue entre la gouvernance des organisations à but non lucratif et leur performance globale, qui inclut également leur impact sur leurs parties prenantes. Elle affiche donc des objectifs analytiques autour des liens avec les parties prenantes : avec qui œuvrer et à qui rendre des comptes ? comment rendre des comptes et raffermir les liens avec elles ? quels comptes rendre et quels sont les critères d’évaluation ? Les effets de la gouvernance, les formes prises par la reddition des comptes et la construction sociale de la performance et de l’impact organisationnels sont donc particulièrement étudiés.Approche et méthode : L’ancrage principal est la vision contingente des organisations, à laquelle appartiennent les théories des parties prenantes et de la dépendance aux ressources. A partir d’une démarche hypothético-déductive insérée dans le paradigme épistémique réaliste critique (PERC), les hypothèses issues de la littérature sont testées à partir de méthodes d’analyses de données textuelles, de régressions multiples logistiques et linéaires ainsi que de modèles d’équations structurelles. Les analyses ont porté sur les données des plus grandes associations françaises, sur un questionnaire auprès des dirigeants associatifs pendant la crise de la Covid-19, sur une enquête auprès de parties prenantes individuelles ainsi que sur le cas des Jeunes Agriculteurs.Résultats : Les études menées ont permis de montrer que les mécanismes de gouvernance s’expliquent notamment grâce au secteur et aux actions de l’association. En revanche, les liens entre gouvernance et performance globale sont à étudier au cas par cas. Il en va de même pour les effets de la reddition des comptes sur la performance. La performance à court-terme des associations, à savoir leur viabilité, est renforcée par le maintien des dispositifs de gouvernance tandis que l’adoption d’une orientation sociétale a des effets contrastés sur la viabilité. Enfin, globalement, la gouvernance améliore l’impact et la qualité de relation avec les parties prenantes qui elle-même a un effet positif sur l’impact organisationnel. Cependant, ces résultats doivent être étudiés dans le détail des mécanismes de gouvernance, des parties prenantes et des dimensions de la performance.Implications théoriques : Les résultats obtenus permettent de répondre aux objectifs fixés. Ainsi, la vision contingente de la gouvernance des organisations à but non lucratif conduit à une forte adaptabilité (dans chaque organisation et à ses parties prenantes). Le reporting est un mécanisme crucial de reddition des comptes mais la relation avec les parties prenantes est aussi particulièrement pertinente. Enfin, l'ensemble des concepts abordés sont contingents, permettant d'expliquer une vision émotionnelle et subjective de l’impact ainsi que la multidimensionnalité de la performance. Les théories mobilisées sont donc particulièrement adaptées pour les associations et leur opérationnalisation a été revisitée.Implications praticiennes et sociétales : Les résultats invitent à une mesure raisonnable et flexible de l’impact des organisations à but non lucratif et soulignent le caractère crucial de la gouvernance pour améliorer la performance et l’impact, en dépit des méfiances. La priorisation des parties prenantes est en outre cruciale, pour éviter les problèmes associés à la reddition des comptes holistique. Les composantes de la qualité de relation peuvent alors devenir des critères de hiérarchisation et de priorisation des parties prenantes, car elles varient selon les parties prenantes et ont un effet sur la performance et l’impact.
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Israel is characterized by weak governability and low-quality early childhood education and care (ECEC; birth to three years) services. This policy is characterized by four dimensional deficits: deficit in provision of services, deficit in legislation, deficit in quality, and deficit in funding. This paper probes the sources of the regulatory deficit and low public investment in ECEC services in Israel. I use historical institutionalism analysis along with bureaucratic politics theory to explore Israel's weak regulatory governance from the 1920s to the 1980s. The bureaucratic politics approach furnishes a good view of the role of bureaucrats and the bureaucratic power struggle in policy formation. The analysis indicates three tensions that have shaped ECEC policy: (1) support for working mothers versus disadvantaged children and families; (2) accessibility of services versus quality of services; and (3) form of provision (i.e., ECEC as a private service versus ECEC as a public service). Historical analysis shows that the ambiguity and duality that characterize ECEC policy regarding these issues has led to indecisive and inconsistent policies, weak regulatory governance, and poor public services. The conflict among ministerial offices has also contributed to the gradual change in policy. The study underscores the contribution of historical analysis to understanding policy trends and for designing future reform.
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This article deals with the relation between trust and the Third sector. The paper is divided into three passages: the first part briefly draws the fundamental lines of the crisis of trust in contemporary western societies, with a focus on politics and democracy nowadays. The second part defines the role of the Third sector in this context: if initially it was considered the solution to the crisis of trust, then it became part of the problem. The third part proposes to analyze the changes of the Third sector as a mean to understand the reasons of the public opinion's change and the increasingly restrictive policies concerning NGOs, associations and volunteers. Marketization and individualization of collective action have deeply reshaped the identity of the Third sector indeed, thus its privileged and trusted position is critically and reflectively questioned by the public and the institutions.
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Much has been written during the last two decades about the theory of nonprofit organizations (NPOs). Researchers, policy makers, and practitioners in NPOs have repeatedly asked themselves variants of the following set of questions: • What do NPOs do that for-profit firms (FPFs) and government agencies are not doing already? • Do NPOs operate as efficiently as their for-profit counterparts? • Do NPOs serve the same broad groups as government units do? • Should NPOs receive special tax treatment?
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Although accountability systems are established to ensure organizational adherence to financial and ethical standards for nonprofit organizations, the reality of whether such standards make a difference to donors has not been measured. This article discusses the current landscape of accountability systems and accountability ratings and describes a model for estimating the effect of ratings systems on donor behavior within the theoretical context of information asymmetry. Hypotheses are tested with nonprofit ratings for New York charities from the Better Business Bureau's Wise Giving Alliance to estimate the effect of accountability ratings on the amount of contributions an organization receives. Results indicate that the Wise Giving Alliance "pass" ratings have a statistically significant effect on the contributions received; however, "did not pass" ratings are nonsignificant. The study is important for academics as well as practitioners who are monitoring time and money spent on accountability issues.
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Non-governmental organisations (NGOs) are acknowledged to be pivotal to poverty alleviation, especially in African countries where government capacity and revenues are often very limited. Despite their prominent role in developing countries, little is known about how these organsations function. In theory and policy analysis circles, NGOs are often presumed to have altruistic and pro-social motivations. For instance, advocates for the self-regulation of the non-profit sector frequently present the case for self-regulation primarily as a case against government intervention, arguing that government monitoring would threaten the sector's independence (Jordan and Van Tuijl, 2006). Government attempts to regulate the sector are regarded with suspicion (Antlöv, Ibrahim & van Tuijl, 2006; Kwesiga and Namisi, 2006) in the literature on the accountability of non-profit organisations, while the risks associated with self-regulation are rarely mentioned. The narratives and rhetoric suggest that NGOs are generally presumed to be well-intentioned do-gooders. There appears to be a tendency to depict non-profit organisations as innocent victims and the government as a perpetrator, interfering with the noble work of the non-profit organisation. To balance such debates it is vital to acknowledge that non-profit organisations may in certain situations be prompted to make decisions that are devious, short-sighted or self-interested. In developing countries employment is usually scarce and aid flows and grants generally represent a big share of a country's revenue pool, which make NGO entrepreneurship or employment attractive options. Under such circumstances it may be imprudent to assume that only individuals with pro-social motivations and charitable missions select themselves into this sector. Fafchamps and Owens (2006) suggest that employees and managers in NGOs are often motivated by a complex and contradictory set of principles, aims and ambitions and that "many local NGOs seem to be created not with an altruistic motive in mind but for the purpose of obtaining grant funding" (2006:3).
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Losses due to fraudulent activities are particularly troublesome in the nonprofit sector because they directly reduce resources available to address tax-exempt purposes. The ensuing bad publicity also may reduce contributions and grants in subsequent periods. This article uses data provided by Certified Fraud Examiners to report on the types of fraud they identified in nonprofit organizations and the characteristics of both the victims and the perpetrators of the fraudulent activities. Based on the analysis of the data, the authors suggest ways that fraud losses can be prevented or mitigated. In particular, governing boards are urged to consider important controls in addition to the annual financial statement audit.
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Over the last ten years or so, an important new approach to the study of organizations has emerged within economics. It is perhaps best characterized by three elements: a contractual perspective on organizational relationships, a theoretical focus on hierarchical control, and formal analysis via principal-agent models. This paper provides political scientists with an overview of the "new economics of organization" and explores its implications for the study of public bureaucracy. So far, positive political theory has not contributed much to our understanding of public bureaucracy. In part this is due to the unsympathetic treatment that rational modeling and most other modes of quantitative analysis have long received from students of public administration. The other side of the coin, however, is that positive theorists have not made much of an effort to develop theories of bureaucracy. Their concerns have centered around two basic mechanisms of social choice, voting and markets, and they have devoted little systematic attention to a third mechanism that is clearly important for understanding how societies and other aggregates make collective decisions. This third and relatively unexplored mechanism is hierarchy. Movement toward a positive theory of hierarchies would fill a serious gap in the social choice literature, while at the same time making a theoretical contribution that strikes to the essence of public bureaucracy, indeed of all organizations. In fact, significant steps toward a positive theory of hierarchies have very recently been taken-but by economists, not political scientists. In small numbers, of course, economists made contributions to the study of public bureaucracy some time ago with the pioneering works of Downs (1967), Tullock (1965), and Niskanen (1971). But this new wave of theoretical work is different. It is already a large, complex body of literature that is the focus of innovation and excitement among a growing number of economists, and it reflects an unusual degree of theoretical coherence and cumulative effort. Work in this tradition tends to receive orientation from a distinctive economic approach to the analysis of organizations, an approach perhaps best characterized by three elements: a contractual perspective on organizational relationships, a focus on hierarchical control, and formal analysis via principal-agent models. This approach has emerged from recent attempts to move beyond the neoclassical theory of the firm, which assumes away all organizational considerations, to a theory of economic organizations that can explain why firms, corporations, and other enterprises behave as they do. Propo
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▪ Abstract With tools borrowed from the economic analysis of insurance, principal-agency theory has allowed political scientists new insights into the role of information asymmetry and incentives in political relationships. It has given us a way to think formally about power as the modification of incentives to induce actions in the interests of the principal. Principal-agency theory has evolved significantly as political scientists have sought to make it more applicable to peculiarly political institutions. In congressional oversight of the bureaucracy, increasing emphasis has been placed on negotiation of administrative procedures, rather than the imposition of outcome-based incentives, as originally conceived. Awareness of the problem of credible commitment has impelled more dramatic reformulations, in which agents perform their function only when their interests conflict with those of the principal, and they are guaranteed some degree of autonomy. The ‘political master’ finds himself in the position o...
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Debates about globalization have centered on calls to improve accountability to limit abuses of power in world politics. How should we think about global accountability in the absence of global democracy? Who should hold whom to account and according to what standards? Thinking clearly about these questions requires recognizing a distinction, evident in theories of accountability at the nation-state level, between “participation” and “delegation” models of accountability. The distinction helps to explain why accountability is so problematic at the global level and to clarify alternative possibilities for pragmatic improvements in accountability mechanisms globally. We identify seven types of accountability mechanisms and consider their applicability to states, NGOs, multilateral organizations, multinational corporations, and transgovernmental networks. By disaggregating the problem in this way, we hope to identify opportunities for improving protections against abuses of power at the global level.
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This study explores the development of communitarian regulation in the American chemical industry by focusing on the history and challenges facing Responsible Care, the leading example of regulation by an industry association on the environmental scene today.
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Stakeholders who seek to reward or punish businesses for their environmental programs often cannot observe these organizations’ internal policies and operations. To address these informational problems, and signal their beyond-compliance environmental commitments, some businesses are participating in voluntary environmental programs (VEPs). This article examines whether business managers associate the brand value of VEPs – due to their differing program sponsors – with the perceived preferences of their critical stakeholders. Drawing on a novel data set of nearly 300 organizations, we assess business’ participation in 19 government- and industry-sponsored VEPs. We find that managers who recognize the importance of stakeholder influences on their business’ environmental practices are more likely to participate in a VEP but that pressures from different stakeholders are associated with variations in organizations’ participation in either government- or industry-sponsored VEPs.
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Throughout the advanced countries of the world self-regulatory regimes are being introduced. This article suggests that, at least in some contexts, industry self-regulation can be an effective and efficient means of social control that has been largely ignored by economics (which has a focus on individual rather than group behavior) and prematurely discounted by mainstream regulatory theory. The article examines the strengths and to a lesser extent the weaknesses of industry self-regulation from five closely related yet distinct vantage points: mediating institutions; industrial morality; institutionalizing responsibility; institutions responding to external pressure; and the roles of the state and third parties.
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Traditionally, enforcement of consumer protection laws meant to provide quality assurance of goods and services was considered a responsibility of the state in its various guises. Unfortunately, enforcement is an expensive, and hence particularly problematic proposition in transition economies that have many competing demands on their very scarce resources. An alternative mode of enforcement is through reputation. Yet for reputation to be able to fulfill this disciplining role, a high degree of information flow, or transparency, is imperative. Transparency, of course, is not something that transition economies typically excel in. In this article we discuss a third form of enforcement that relies much less, or not at all, on the state, and that relies on the market only indirectly: Certification agencies force their members to reveal their (good) type through costly signals that can be "engineered" to induce a separating equilibrium. We discuss the viability of this system of enforcement in an environment (namely, fundraising) where state and market have failed to deliver a satisfying degree of quality assurance.
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This article examines the trust hypothesis: the claim that asymmetric information can explain the existence of non-profit enterprise in certain markets. We argue that this hypothesis, in order to be viable, has to meet three challenges: ‘reputational ubiquity’, ‘incentive compatibility’ and ‘adulteration’. Drawing on modern agency theory, we conclude that the trust hypothesis stands on shaky ground. It can be sustained only under particular conditions that have been neither carefully described in theory nor subject to empirical assessment. The available evidence, patchy and inadequate as it is, seems to suggests that there are some ownership-related differences in aspects of organisational performance connected with asymmetric information. However, there is little evidence that this relates to trustper se or provides a rationale for the existence of non-profit ownership in these industries. We conclude with a plea for substantial research on consumer expectations and provider motivations.
Book
Often described as a public policy “bible,” Weimer and Vining remains the essential primer it ever was. Now in its sixth edition, Policy Analysis provides a strong conceptual foundation of the rationales for and the limitations to public policy. It offers practical advice about how to do policy analysis, but goes a bit deeper to demonstrate the application of advanced analytical techniques through the use of case studies. Updates to this edition include: A chapter dedicated to distinguishing between policy analysis, policy research, stakeholder analysis, and research about the policy process. An extensively updated chapter on policy problems as market and governmental failure that explores the popularity of Uber and its consequences. The presentation of a property rights perspective in the chapter on government supply to help show the goal tensions that arise from mixed ownership. An entirely new chapter on performing analysis from the perspective of a public agency and a particular program within the agency’s portfolio: public agency strategic analysis (PASA). A substantially rewritten chapter on cost-benefit analysis, to better prepare students to become producers and consumers of the types of cost-benefit analyses they will encounter in regulatory analysis and social policy careers. A new introductory case with a debriefing that provides advice to help students immediately begin work on their own projects. Policy Analysis: Concepts and Practices remains a comprehensive, serious, and rich introduction to policy analysis for students in public policy, public administration, and business programs.
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This paper analyzes the survival of organizations in which decision agents do not bear a major share of the wealth effects of their decisions. This is what the literature on large corporations calls separation of 'ownership' and 'control.' Such separation of decision and risk bearing functions is also common to organizations like large professional partnerships, financial mutuals and nonprofits. We contend that separation of decision and risk bearing functions survives in these organizations in part because of the benefits of specialization of management and risk bearing but also because of an effective common approach to controlling the implied agency problems. In particular, the contract structures of all these organizations separate the ratification and monitoring of decisions from the initiation and implementation of the decisions.
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What makes for a good theory in economics? Tastes and opinions differ on this important issue, with some admiring the mathematical elegance and logical completeness of analysis, some admiring the metaphoric insight provided by deep description, and others admiring the development of new analytic tools rather than the application of those tools to nonprofit issues. In this Chapter, I choose to evaluate economic theories of the nonprofit sector by their ability to answer what I regard as the central questions in (a) describing the sector; (b) formulating governmental policy towards the sector; and (c) managing nonprofit organizations. More specifically, I discuss theories’ ability to enlighten our understanding of the scope of inquiry, the determinants of the size and scope of the nonprofit sector, and the behavioral responses of donors, volunteers, paid staff, and nonprofit organizations to changes in their external environment. I then turn, more briefly and selectively, to theories’ ability to inform tax policy towards donations, taxation of nonprofit entities, competition among and between organizations in the various sectors, and fundraising regulation. Finally, I briefly discuss theories’ ability to improve the pricing, fundraising, and evaluation functions of nonprofit management.
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Andreas Ortmann and Mark Schlesinger, in their article “Trust, Repute, and the Role of Nonprofit Enterprise,” examine what they term “the trust hypothesis,” namely “the claim that asymmetric information in the markets for certain goods and services can explain the existence of nonprofit enterprise in those markets” (this volume). There is much that is sensible in what they say, and they have performed a valuable service in pulling together some of the more recent empirical literature on asymmetric information in markets heavily populated with nonprofit firms. I have some concerns, however, both with respect to the authors’ formulation of the trust hypothesis and with their approach to its verification.
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Around the globe, people are forming private, nonprofit and voluntary organizations to pursue public purposes once considered the exclusive domain of the state. Economically, environmentally and socially, where the state has failed, nonprofit groups are taking advantage of revolutions in communications and bourgeois values to fill these gaps for themselves. This "associational revolution" may be permanently altering relations between states and citizens and prove as important to the latter twentieth century as the rise of the nation-state was to the nineteenth.
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Three years after the terrorist attacks on New York City and Washington, D.C., confidence in charitable organizations continues to languish well below its pre-September 11 levels. Despite hopes that the confidence would rebound with the mere passage of time, the controversies surrounding disbursement of the September 11 relief funds and subsequent nationally-visible scandals surrounding the Nature Conservancy and several private foundations appear to have left a durable imprint that has yet to fade. The number of Americans who express little or no confidence in charitable organizations increased significantly between July 2001 and May 2002, and remains virtually unchanged to this day. (See Tables 1 and 2 attached to this fact sheet.) As I argue in Sustaining Nonprofit Performance: The Case for Capacity Building and the Evidence to Support It, which is being released by the Brookings Press at the same time as this fact sheet, charitable organizations did not get any of the post-September 11 "rally" in confidence that boosted government and other civic institutions, but received all of the decline as America returned to a semblance of normalcy in 2002. As a result, confidence in charitable organizations stands roughly 10-15 percent lower today than it was in the summer of 2001.
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Brands have becoming increasingly important to many nonprofit organisations. Consequently, brand orientation has emerged as an attractive business philosophy in this sector. In this study, the relationship between nonprofit brand orientation (NBO) and organisational performance is examined. Findings suggest that there is a positive association between the dimensions of NBO and nonprofit organisational performance. Further, successful nonprofit organisations tend to be more brand-oriented than their less successful counterparts. Limitations of the study are noted and suggestions for ongoing research offered.
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Preface Acknowledgments List of Figures List of Tables Part 1: Introduction to Public Policy Analysis 1. Preview: The Canadian Salmon Fishery 2. What is Policy Analysis? 3. Toward Professional Ethics Part 2: Conceptual Foundations for Problem Analysis 4. Efficiency and the Idealized Competitive Model 5. Rationales for Public Policy: Market Failures 6. Rationales for Public Policy: Other Limitations of the Competitive Framework 7. Rationales for Public Policy: Distributional and Other Goals 8. Limits to Public Intervention: Government Failures 9. Policy Problems as Market and Government Failure Part 3: Conceptual Foundations for Solution Analysis 10. Correcting Market and Government Failures: Generic Policy Instruments 11. Adoption 12. Landing on Your Feet: Organizing Your Policy Analysis 13. Implementation Part 4: Doing Policy Analysis 14. Government Supply: Drawing Organizational Boundaries 15. Gathering Information for Policy Analysis 16: Goals/Alternatives Matrices: Some Examples from CBO Studies 17: Benefit-Cost Analysis 18: When Statistics Count: Revising the Lead Standard for Gasoline Part 5: Conclusion 19: Doing Well and Doing Good
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This paper relates quality and uncertainty. The existence of goods of many grades poses interesting and important problems for the theory of markets. On the one hand, the interaction of quality differences and uncertainty may explain important institutions of the labor market. On the other hand, this paper presents a struggling attempt to give structure to the statement: “Business in under-developed countries is difficult”; in particular, a structure is given for determining the economic costs of dishonesty. Additional applications of the theory include comments on the structure of money markets, on the notion of “insurability,” on the liquidity of durables, and on brand-name goods.
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Responsible Care is a voluntary code of conduct developed, enforced, and monitored by the Chemical Manufacturers Association. Voluntary codes could be designed and enforced by regulators, nonprofit groups, industry associations, and individual firms. They could vary in their scope, focusing on firms around the globe, in a given region, within a country, or in a given industry. This article focuses on Responsible Care’s self-regulatory services that pertain to establishing, monitoring, and enforcing industry-wide environmental, health, and safety standards. Employing insights from the club theory, stakeholder theory, institutionalist theory, and the corporate social performance perspective, it examines the demand and supply sides of voluntary codes. Finally, it discusses theoretical implications and the key challenges faced by Responsible Care in the future.
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Transparency concerns and the concomitant accountability challenges have motivated policy and legal scholars to explore information-based regulatory approaches. We examine their usefulness in the context of the nonprofit sector which tends to show signs of governance failure. Although nonprofits are required by law to disclose information on fund use, nonprofit donors face difficulties in accessing and interpreting information about how nonprofits are deploying resources. Charity watchdogs make this information available to donors in a convenient format. In theory, this should allow donors to reward nonprofits that devote resources to service delivery and to punish those that are less careful about controlling overheads. To test the relationship between charity ratings and donations, we examine 90 nonprofits in the state of Washington for the period 2004–2007. Drawing on ratings data provided by Charity Navigator, we find that changes in charity ratings tend not to affect donor support to these nonprofits. We explore this statistical finding via interviews with 10 charities located in Washington State. Supporting the statistical results, we find that charities believe that donors tend not to systematically embed ratings in their donation decisions. Instead, they believe that donors assess nonprofits’ effectiveness and trustworthiness via other means such as familiarity, word-of-mouth, or the visibility of the nonprofit in their community. In sum, the policy challenge is to provide information which users desire such as organizational effectiveness as opposed to basic fund allocation in the case of non-profits. What matters for policy efficacy is not how much information is provided but of what type.
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Examines the role that institutions, defined as the humanly devised constraints that shape human interaction, play in economic performance and how those institutions change and how a model of dynamic institutions explains the differential performance of economies through time. Institutions are separate from organizations, which are assemblages of people directed to strategically operating within institutional constraints. Institutions affect the economy by influencing, together with technology, transaction and production costs. They do this by reducing uncertainty in human interaction, albeit not always efficiently. Entrepreneurs accomplish incremental changes in institutions by perceiving opportunities to do better through altering the institutional framework of political and economic organizations. Importantly, the ability to perceive these opportunities depends on both the completeness of information and the mental constructs used to process that information. Thus, institutions and entrepreneurs stand in a symbiotic relationship where each gives feedback to the other. Neoclassical economics suggests that inefficient institutions ought to be rapidly replaced. This symbiotic relationship helps explain why this theoretical consequence is often not observed: while this relationship allows growth, it also allows inefficient institutions to persist. The author identifies changes in relative prices and prevailing ideas as the source of institutional alterations. Transaction costs, however, may keep relative price changes from being fully exploited. Transaction costs are influenced by institutions and institutional development is accordingly path-dependent. (CAR)
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This article reports on a theory-based experiment to determine whether there is an observable relationship between changes in charitable giving to an organization and changes in the proportion of revenue it spends on administration and fund-raising (“overhead ratio”). This article argues that overhead ratios are meaningless for comparing organizations, but changes in overhead ratios communicate useful, though incomplete, information to donors. Empirical studies have used organization-level data with mixed results. This research improves on past work by using donor-level information on federal employees in the Chicago area who donate through the Combined Federal Campaign with ready access to information on the overhead ratios of all participating charities. Donations are aggregated by charity and compared over time. Statistical tests give evidence of an inverse relationship between changes in overhead ratios and changes in giving that are robust with respect to model specification; however, collectively other factors are much more important.
Article
Property in transition (Book I, chapter 1) …The typical business unit of the 19th century was owned by individuals or small groups; was managed by them or their appointees; and was, in the main, limited in size by the personal wealth of the individuals in control. These units have been supplanted in ever greater measure by great aggregations in which tens and even hundreds of thousands of workers and property worth hundreds of millions of dollars, belonging to tens or even hundreds of thousands of individuals, are combined through the corporate mechanism into a single producing organization under unified control and management.… Such an organization of economic activity rests upon two developments, each of which has made possible an extension of the area under unified control. The factory system, the basis of the industrial revolution, brought an increasingly large number of workers directly under a single management. Then, the modern corporation, equally revolutionary in its effect, placed the wealth of innumerable individuals under the same central control. By each of these changes the power of those in control was immensely enlarged and the status of those involved, worker or property owner, was radically changed. The independent worker who entered the factory became a wage laborer surrendering the direction of his labor to his industrial master. The property owner who invests in a modern corporation so far surrenders his wealth to those in control of the corporation that he has exchanged the position of independent owner for one in which he may become merely recipient of the wages of capital.
Article
Globalization critics argue that international trade spurs a race to the bottom among national environmental standards. ISO 14001 is the most widely adopted voluntary environmental regulation which encourages firms to take environmental action beyond what domestic government regulations require. Drawing on a panel study of 108 countries over seven years, we investigate conditions under which trade linkages can encourage ISO 14001 adoption, thereby countering environmental races to the bottom. We find that trade linkages encourage ISO 14001 adoption if countries' major export markets have adopted this voluntary regulation.
Article
The major arguments of this paper are that there is a need for an integrating framework for the study of regulation, including the design of regulatory institutions, and that the theory of agency may provide such a framework. The paper provides a brief overview of this approach. The theory of agency is a general theory of social relationships of “acting for” that is now under development in several disciplines, particularly economics and accounting. Regulation is seen as a generic relation observed widely in social behavior, and as a particular type of agency relationship. The problems of agency relations–e.g., the problems of principals in controlling agents and of agents in acting according to the principals' desires–have their counterparts in regulation.
Article
Non-governmental organizations (NGOs) play an increasingly important role in public service provision and policy making in sub-Saharan Africa, stimulating demand for new forms of regulatory oversight. In response, a number of initiatives in NGO self-regulation have emerged. Using cross-national data on 20 African countries, the article shows that self-regulation in Africa falls into three types: national-level guilds, NGO-led clubs and voluntary codes of conduct. Each displays significant weaknesses from a regulatory policy perspective. National guilds have a broad scope, but require high administrative oversight capacity on the part of NGOs. Voluntary clubs have stronger standards but typically have much weaker coverage. Voluntary codes are the most common form of self-regulation, but have the weakest regulatory strength. This article argues that the weakness of current attempts to improve the accountability and regulatory environment of NGOs stems in part from a mismatch between the goals of regulation and the institutional incentives embedded in the structure of most self-regulatory regimes. The article uses the logic of collective action to illustrate the nature of this mismatch and the tradeoffs between the potential breadth and strength of various forms of NGO self-regulation using three detailed case studies. Copyright © 2008 John Wiley & Sons, Ltd.
Article
Largely as a response to critiques of top-down development and of a growing awareness of the low effectiveness of aid absorption in poor countries, the international donor community has recently adopted with enthusiasm and determination a new approach to fight poverty, called the community-based development approach (CBD). Such an abrupt shift in aid strategies is questionable, not because the approach is wrong (the opposite is actually the case), but because massive injections of aid funds in CBD projects, the entry into the field of numerous agencies with little or no experience in participatory development, as well as the pressing need for quick and visible results, threaten to undermine its effectiveness in reducing poverty. The cause for worry comes from the 'elite capture' problem that risks deflecting a large portion of the resources devoted to CBD into the hands of powerful groups dominating target communities. On the basis of a game-theoretical model, the main aim of the paper is to discuss the use of sequential and conditional disbursement procedures as a way of surmounting such a problem, and to examine how the share of CBD aid reaching the poor is influenced by various elements of the aid environment, including the pressure of competition among donor agencies and the availability of aid funds. Multilateral reputation mechanisms and intra-community competition for leadership are also assessed as possible alternatives to sequential disbursement procedures. 1 Our gratitude goes to all those who made useful remarks and suggestions in the course of seminar presentations of this paper, in particular, to François Bourguignon, Louis Hotte, Marcel Fafchamps, and Jan Gunning.
Article
Examines the role that institutions, defined as the humanly devised constraints that shape human interaction, play in economic performance and how those institutions change and how a model of dynamic institutions explains the differential performance of economies through time. Institutions are separate from organizations, which are assemblages of people directed to strategically operating within institutional constraints. Institutions affect the economy by influencing, together with technology, transaction and production costs. They do this by reducing uncertainty in human interaction, albeit not always efficiently. Entrepreneurs accomplish incremental changes in institutions by perceiving opportunities to do better through altering the institutional framework of political and economic organizations. Importantly, the ability to perceive these opportunities depends on both the completeness of information and the mental constructs used to process that information. Thus, institutions and entrepreneurs stand in a symbiotic relationship where each gives feedback to the other. Neoclassical economics suggests that inefficient institutions ought to be rapidly replaced. This symbiotic relationship helps explain why this theoretical consequence is often not observed: while this relationship allows growth, it also allows inefficient institutions to persist. The author identifies changes in relative prices and prevailing ideas as the source of institutional alterations. Transaction costs, however, may keep relative price changes from being fully exploited. Transaction costs are influenced by institutions and institutional development is accordingly path-dependent. (CAR)
Article
Voluntary environmental programs are institutions that seek to induce firms to produce positive environmental externalities beyond what government regulations require. Drawing on club theory, this paper outlines a theoretical perspective to study the relationship between program design and program effectiveness. Effective programs have rule structures that mitigate two central collective action problems inherent in producing positive environmental externalities: attracting firms to participate in the program and ensuring that participating firms adhere to program obligations. Because program efficacy can be undermined by collective action problems associated with free riding and shirking, effective voluntary clubs should be designed to mitigate these challenges.
Book
Can businesses voluntarily adopt progressive environmental policies? Most environmental regulations are based on the assumption that the pursuit of profit leads firms to pollute the environment, and therefore governments must impose mandatory regulations. However, new instruments such as voluntary programs are increasingly important. Drawing on the economic theory of club goods, this book offers a theoretical account of voluntary environmental programs by identifying the institutional features that influence conditions under which programs can be effective. By linking program efficacy to club design, it focuses attention on collective action challenges faced by green clubs. Several analytic techniques are used to investigate the adoption and efficacy of ISO 14001, the most widely recognized voluntary environmental program in the world. These analyses show that, while the value of ISO 14001's brand reputation varies across policy and economic contexts, on average ISO 14001 members pollute less and comply better with governmental regulations.
Book
This book presents a theoretical treatment of externalities (i.e. uncompensated interdependencies), public goods, and club goods. The new edition updates and expands the discussion of externalities and their implications, coverage of asymmetric information, underlying game-theoretic formulations, and intuitive and graphical presentations. Aimed at well-prepared undergraduates and graduate students making a serious foray into this branch of economics, the analysis should also interest professional economists wishing to survey recent advances in the field. No other single source for the range of materials explored is currently available. Topics investigated include Nash equilibrium, Lindahl equilibria, club theory, preference-revelation mechanism, Pigouvian taxes, the commons, Coase Theorem, and static and repeated games. The authors use mathematical techniques only as much as necessary to pursue the economic argument. They develop key principles of public economics that are useful for subfields such as public choice, labor economics, economic growth, international economics, environmental and natural resource economics, and industrial organization.
Article
This article examines the structure of nonprofit voluntary accountability and standard-setting programs, arguing that these programs can be understood as collective action institutions designed to address information asymmetries between nonprofits and their stakeholders. Club theory and the economics of certification suggest that such programs have the potential to provide a signal of quality by setting high standards and fees and rigorously verifying compliance. Such mechanisms can signal quality because higher participation costs may allow only high-quality organizations to join. The article examines the implications of signaling theory using an original dataset on the structure of 32 nonprofit accountability programs across the globe. While many programs set high standards for compliance, the key distinction between strong and weak programs is the use of disclosure or verification mechanisms to enforce compliance. Contrary to theoretical expectations, compliance standards and verification do not appear to be substitutes in creating stronger voluntary programs.