Springer 2011
Journal of Business Ethics (2011) 101:297–311
DOI 10.1007/s10551-010-0723-7
Together and Apart: Exploring Structure
of the Corporate–NPO Relationship
ABSTRACT. Financially significant relationships between corporations and non-profit organizations (NPOs)
have increased in recent years. NPOs offer access to
interests and ideologies that are lacking within most forprofit organizations. These partnerships form a unique
bridge between for-profit and non-profit goals and offer
significant potential to produce innovative ways of ‘‘doing business by doing good.’’ Exploration of the structural
implications of these relationships, however, has been
limited. The potential for ideological imbalance in these
relationships, particularly for the NPO, has been poorly
described. We explore the structure of Corporate–NPO
relationships from the NPO’s perspective under high
pressure conditions such as large relational investments or
negative pressure from stakeholders. Using data collected
from 20 NPOs in Australia, we identified the use by
NPOs of both formal and informal governance mechanisms within their partnerships. These mechanisms acted
to align and defend important goals of the NPO. They
allowed the NPO and their corporate partners to be
simultaneously ‘‘together and apart.’’ Our study offers
important insight toward the study of cross-sector relationships and the role of governance mechanisms.
KEY WORDS: corporate–nonprofit relationships,
social marketing, cross-sector relationships
non-profit marketing
Relationships between corporations and non-profit
organizations (NPOs) are increasingly commonplace.
They have, however, been poorly researched with
respect to their structure or performance outcomes.
Very few studies have explored the governance
implications of Corporate–NPO relationships from
the perspective of whether or not traditional interfirm structures are being employed or are appropriate
(Ireland et al., 2002). The manner in which a traditional inter-organizational relationship is governed
Dayna Simpson
Kathryn Lefroy
Yelena Tsarenko
has significant impact on performance toward its goals
(Dyer, 1997; Rondinelli and London, 2003). This
research gap is surprising considering the growing
number of project-based, asset-specific, or issuebased examples of corporate philanthropy and its
implications for the non-profit sector (Hoffman,
2009; Rondinelli and London, 2003).
Major corporate motivations for forming relationships with NPOs include reputation enhancement (Falck and Heblich, 2007), sensitivity to
stakeholder concerns (Wood, 1991), opportunities
for employee volunteerism (Basil et al., 2009), and
product innovation. For the NPOs, these relationships offer very different opportunities and risks.
Evidence suggests that corporate partners are sought
by NPOs primarily for financial support and resources
(Hoffman, 2009). Many NPOs, however, form these
relationships to improve public awareness of issues,
increase their influence, or for their networking
opportunity (Runté et al., 2009). Few empirical
studies, however, have explored the structure of
Corporate–NPO relationships or how their diverse
needs and interests are managed (Peloza and Hassay,
2008; Selksy and Parker, 2005).
Corporate–NPO relationships form a unique
bridge between for-profit and non-profit goals. They
hold significant potential to create innovative ways
of ‘‘doing business by doing good’’ for both business
and communities (Falck and Heblich, 2007). For
broader management theory, these relationships
also offer insight for relationship management in
partnerships involving ideologically distinct organizations. NPOs, for example, predominantly use frequent but informal communication with stakeholders
(Casadesus-Masanell and Mitchell, 2007; Hoffman,
2009). Corporations on the other hand, tend to use
more formal processes for relationship management
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Dayna Simpson et al.
such as contracting (Heide and Wathne, 2006). The
study of NPO relationships generally, however, has
found a wide range of practices that vary by context
and partnership type. While many studies find largely
informal arrangements in Corporate–NPO relationships (Berger et al., 2004; Siebel and Anheier, 1990), a
smaller group of studies have found an increasing use
of contracts (Austin, 2000; Milne et al., 1996). More
formal governance (e.g., contracts) may be increasingly appropriate for NPOs that are financially
involved with corporate partners (Berger et al., 2004).
Informal governance, however, may remain a valuable resource for NPOs in the work that they
undertake (Nowak and Washburn, 2000).
An important outcome of the Corporate–NPO
relationship should be that both parties achieve their
intended goals. Governance mechanisms such as
structure and ideological convergence are likely to
play an important role in the achievement of outcomes. Yet, few prior studies have explored the role
of governance within these relationships and how
they might affect relationship outcomes. Our article
focuses on the relationship management practices
used by NPOs within their relationships with Corporations. We contribute to both the relationship
management and institutional theory literature by
describing how ideologically distinct partners effectively manage partnerships. We borrow from the
inter-organizational management and institutional
theory literature to explore the role of both formal
and informal governance mechanisms in these relationships. We employed qualitative research methods to explore such issues from the NPO
perspective, collecting data from 20 NPOs engaged
in relationships with Corporations.
Background and conceptual development
Studies regarding Corporate–NPO relationships
have used various lens to explore their management,
including the capacity of organizations to initiate
such relationships (Laidler-Kylander et al., 2007;
Plewa and Quester, 2007); implications for corporate competitive advantage (Hume and Margee,
2008; Rondinelli and London, 2003); and issues of
related NPO legitimacy (Lister, 2003). NPOs have
sought greater financial resources from Corporate
partners as competition for public donations has
intensified (Seitanidi and Crane, 2008; Selksy and
Parker, 2005). The relative novelty and variety of
these relationships, however, raises significant implications for their management. Considering the
inherent financial, structural, and ideological differences in these partnerships, the potential for conflict is
high (Nowak and Washburn, 2000). Inherent differences in ideology that exist between such distinct
partners, however, may also be an important advantage (Peloza and Hassay, 2008).
Traditional relationship theories (e.g., Coase,
1960; Williamson, 1985) suggest that organizations
that seek to align their goals and protect investments
in a relationship should use formal governance
mechanisms such as contracting or procedures. Less
traditional relationship theory, however, also suggests that more informal, cognitive mechanisms
(such as trust) can also be used to manage inter-firm
relationships (Heide and Wathne, 2006). In reality,
many firms use both types of governance with a
greater emphasis on one or the other depending on
the problem at hand or the industrial context
(Morgan and Hunt, 1994; Plewa and Quester, 2007;
Spall, 2000).
Formal relationship governance
The presence of institutions creates pressures that
help one to inform an organization’s choices and
actions (Granovetter, 1985; North, 1990). The
constraints that institutions provide can be both
positive and negative depending on a range of factors
(Ingram and Clay, 2000). The inter-organizational
management literature offers valuable insight regarding institutional mechanisms that shape performance
outcomes in typically for-profit to for-profit relationships (Lambe et al., 2002). Structuring of interfirm relationships through formal, codified governance
mechanisms such as contracting has attracted significant scholarly attention (Cousins et al., 2006; Kale
et al., 2001). We use this literature in particular, as it is
described in the for-profit to for-profit context, to
establish a foundation for our exploration of Corporate–NPO relationships. Contracts or mutually
agreed sets of rules and procedures provide interfirm
relationships with a framework through which parties
Exploring Structure of the Corporate–NPO Relationship
can protect themselves from opportunism and conflict (North, 1990; Rondinelli and London, 2003;
Williamson, 1985). The role of codified expectations
is often to provide a set of rules in contexts where
relationship norms may not already be established
(Lawrence et al., 2002).
Corporate–NPO relationships differ from other
types of inter-firm relationship because of their
social-issue focus and more intangible, non-financial
performance outcomes (Berger et al., 2006; Wymer
and Samu, 2003). These partnerships can vary widely
from one NPO to another in terms of the extent
of financial integration and supporting ideology
(Hoffman, 2009). Corporate provision of financial
resources to NPOs can range from single, small
contributions to larger, ongoing contributions that
bind the parties together for many years. Within the
more traditional for-profit to for-profit relationship,
governance depends largely on the level of financial
investment (Dyer, 1997; Williamson, 1985). Larger
investments tend to induce greater levels of goal
alignment, trust, acquiescence to the funding partner,
and performance innovation. Whether or not investment size produces similar effects in Corporate–NPO
relationships has been to date explored only through
conceptual studies (Berger et al., 2004; Seitanidi and
Ryan, 2007; Wymer and Samu, 2003). Corporate–
NPO relationships are focused on: ‘‘‘non-economic’
objectives … they can provide access to resources
that go far beyond cash contributions’’ (Berger et al.,
2004, p. 59). Thus, they are not necessarily likely
to employ the same types of formal governance
approaches that characterize for-profit to for-profit
relationships (Slater and Olson, 2000). Regulative
institutions, formal governance mechanisms, provide
clear standards of behavior. They often result, however, in ‘‘positional bargaining’’ within relationships
that focus on rules rather than relationship purpose
and partner identity (Wade-Benzoni et al., 2002,
p. 48). Corporate–NPO relationships, in particular,
may require more flexibility than what can be provided with formal governance mechanisms alone.
Informal relationship governance
Institutions can also consist of informally established
rules that guide organizational actions. Informal
governance mechanisms offer benefits such as greater
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levels of trust, information sharing and coordinated
routines (Barden and Mitchell, 2007; Plewa and
Quester, 2007; Spall, 2000). Normative institutions
can develop through interaction such as regular
meetings, frequent communication, and inter-firm
visits. These activities increase understanding of
partner activities and responsiveness and can lead to
a normalization of routines and belief structures
between partners (Koljatic and Silva, 2008; Scott,
1995). These types of governance mechanism –
relational embeddedness – reduce reliance on contracting (DiMaggio and Powell, 1983; Dyer and
Nobeoka, 2000). Greater interaction, however, can
also lead to a familiarity that limits independence and
objectivity (Heide and Wathne, 2006).
Cognitive institutions are highly informal governance mechanisms such as organizational and personal
ideologies that can assist, guide, or constrain managerial decision-making (Scott, 1995; Wade-Benzoni
et al., 2002). For NPOs, cognitive institutions, such as
ideological biases, can guide organizational choices
but may also induce habits and traditions that inhibit
relationship development (e.g., an ideological clash
between a financial analyst and a marine biologist).
NPOs must manage a diverse and complex set of
stakeholder relationships that cover a wide range of
interests and partner types (Abzug and Webb, 1999).
These relationships are often innately tied to the
achievement of an NPO’s social goals (Hoffman,
2009). Relationships between Corporations and
NPOs may present substantial challenges for the NPO
where relationship processes become starkly different
to those used with their non-corporate partners.
Hoffman (2009) described the use of role ‘‘heterogeneity’’ amongst NPOs, which allowed them to
fulfill several roles when working with various partners (both corporate and non-corporate). Other
scholars, however, have described the potential for
substantial role conflict for NPO managers, where
they form relationships with ideologically incongruous partners such as Corporations (Andreasen, 1996;
Wade-Benzoni et al., 2002). Cognitive institutions
are ideological biases that form over long periods of
time and are often highly resistant to change (Cosier
and Rose, 1977; DiMaggio and Powell, 1983). In the
context of Corporate–NPO relationships, these
might occur as long-held beliefs that NPOs should
not form relationships with corporations (Heide and
Wathne, 2006; Hirsch, 1997; Ingram and Clay,
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2000). This may inhibit the functioning of a
Corporate–NPO relationship or lead to goal-based
conflicts.
The pressure of context
A final feature of Corporate–NPO relationships is the
pressure of context in which the relationship exists.
Corporate–NPO relationships are entered into for
financial and social legitimacy reasons such as access to
greater resources, reputation enhancement, public
awareness, or networking. Large investments by one
partner in a relationship can both support the relationship yet also limit its flexibility. Greater levels of
investment have been shown to improve trust and the
capacity to align objectives within more traditional
for-profit to for-profit relationships (Dyer, 1997). It
can also however, lead to the incidence of coercion
by one partner over the other (Simonin, 1997;
Williamson, 1985). In such settings, one partner may
as a result feel that they have reduced bargaining
power.
Social legitimacy provides an organization with an
acknowledgement of congruence between its activity
and the established norms of its social system (Dacin
et al., 2007). For corporations, relationships with
NPOs offer improved legitimacy among more socially conscious stakeholders such as community and
consumers (Wymer and Sridhar, 2009). For NPOs,
however, relationships with Corporations that have a
negative reputation amongst its stakeholders may act
to reduce the NPO’s legitimacy. Some NPOs consider Corporate partners with low levels of stakeholder acceptance as inappropriate choices for
strategic relationships (Hoffman, 2009; Lister, 2003).
Other NPOs, however, may view the financial
contribution of a Corporate partner as more valuable
than stakeholder legitimacy. ‘‘Social appropriateness’’
in our study, concerns the extent to which the
NPO’s relationship with a corporation conforms to
the values and expectations of its stakeholders (Samu
and Wymer, 2001; Seitanidi and Ryan, 2007).
Study propositions
We describe a conceptual model that guides our
study of governance choices within Corporate–
NPO relationships. We base this model on two
relevant and under-researched relationship elements:
structure (formal and informal) and the pressure of
context (investment and social appropriateness).
Three propositions guide our study. Increasing
contextual pressure is proposed to encourage the use
of formal and informal governance mechanisms by
an NPO within its Corporate relationships. A choice
by the NPO to use informal governance mechanisms, however, will depend on the type of pressure.
Formal arrangements provide structure, through
defined roles, outcomes, and remedies (i.e., contracting). Informal arrangements, such as interaction, knowledge-sharing, or lobbying regardless of
how frequent they are, provide greater flexibility.
Our conceptual model is shown in Figure 1 and
described further below.
Increasing levels of investment, divergent organizational goals, or low stakeholder satisfaction lead
the NPO to employ both formal and informal
governance to manage issues of power imbalance or
incongruent goals. Where contributions from one
corporate partner increase beyond that of the NPO’s
other partners, we propose that NPOs will use formal governance mechanisms such as contracts. These
are used to define roles and performance outcomes.
Thus, we initially propose that:
P1: Corporate–NPO relationships that experience
higher levels of investment will lead an NPO to
employ formal governance (contracts) to manage the
relationship.
Contextual Pressure: High Relationship Investment
P1: NPO ↑ Formal Governance (Contracts)
P2: NPO ↑ Informal Governance (Relational Embeddedness)
A.
CORPORATION
B.
NPO
Contextual Pressure: Low Social Appropriateness
P3: NPO ↑ Informal Governance (Cognitive Barriers)
Notes:
A. NPO Goal = Maintain Ideological Convergence
B. NPO Goal = Maintain Ideological Distance
Figure 1. Model indicating the role of contextual pressure in NPO governance choice.
Exploring Structure of the Corporate–NPO Relationship
NPOs also tend employ less formal activities that
are more interactive to manage a diverse range of
stakeholders (Hoffman, 2009). NPOs use such
informal tactics in situations where the issue is highly
complex, political, emergent (such as crisis response), or where a stakeholder lacks experience
(Lister, 2003; Polonsky et al., 2004). For an NPO,
the use of informal mechanisms may be used to
support formal governance mechanisms rather than
replace them. We propose that NPOs will also use
informal mechanisms – particularly relational embeddedness – to moderate the social distance created
by formal governance mechanisms. As investment
levels increase, this mechanism offers not only an
assurance of increasing transparency for the NPO
and its stakeholders but also greater control over
ideological convergence. This leads to our second
proposition:
Corporate–NPO relationships that experience
higher levels of investment will lead an NPO to
employ informal governance forms (relational embeddedness) to maintain ideological convergence.
P2:
Complications for NPOs may arise where an
incongruence or cognitive dissonance occurs between the Corporate partner’s activity and the
NPO’s program and stakeholder goals. This may
cause conflict or breakdown for the relationship
regardless of the presence of other governance
mechanisms as described above (Hoffman, 1999). To
avoid disabling conflict or failure of the relationship
the NPO is proposed to revert to a cognitive ‘‘distance’’ such that NPO ideology may be more clearly
articulated and maintained (Andreasen, 1996; Berger
et al., 2007; DiMaggio and Powell, 1983). This may
be one way in which these unique relationships
overcome the difficulties inherent in social alliances
(Berger et al., 2004). Cognitive barriers, when used
as an informal governance mechanism, offer the
NPO greater capacity to maintain the relationship
yet also stay true to core mission or goals. In this
context, an NPO may choose to introduce an ideological distance between itself and the Corporate
partner. This leads to our third proposition:
P3: Corporate–NPO relationships that experience
lower levels of social appropriateness will lead an
NPO to employ informal governance forms (cognitive barriers) to maintain ideological distance.
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Methods
The area of Corporate–NPO relationship management is largely under-developed in terms of substantive data collection and theory development
(Selksy and Parker, 2005). Our study employed a
qualitative method to establish an inherent logic in
the governance choices made by NPOs within these
relationships. Qualitative method has been used
predominantly in studies of Corporate–NPO relationships, most recently with case studies (Koljatic
and Silva, 2008; Seitandi and Crane, 2008) and
‘‘elite’’ interviews (Berger et al., 2004). Study of
these cross-sector relationships, however, has been
predominantly from the corporate rather than the
NPO point of view (Berger et al., 2004) with a few
exceptions (Runté et al., 2009).
Selksy and Parker (2005) describe ‘‘partnerships’’
between Corporations and NPOs as arrangements
that are formed to address social issues or causes with
ongoing engagement: ‘‘Such projects may be transactional – short term, constrained, and largely selfinterest oriented – or integrative and developmental
– longer term, open ended and largely commoninterest oriented’’ (2005, p. 850). Partnerships,
relationships, social initiatives, non-business alliances, and cause-related marketing are also some of
the major terms used to define relationships Corporations and NPOs (Berger et al., 2004). With
respect to the selection of Corporate–NPO relationships for exploration, we did not explore small
resource contributions or contexts that did not
present potential for conflict or influencing between
the two organizations. We employed a relationship
of a theoretic frame borrowed from the inter-firm
relationship literature, which converges around two
major types of relational form – spot-market and
purely transactional versus more engaged, invested,
and collaborative. Any relationship-specific investment (both monetary and asset-specific) can create a
power differential that should be protected by one
or both parties against opportunism (Coase, 1960;
Williamson, 1985). Classic transaction theory assumes
that risks increase and both structural as well as social
mechanisms are required for protection of investments (Dyer et al., 2001; Williamson, 1985). The
relationships used for our study were founded on
more than simple, one-off, or small corporate contributions. They were also arrangements that were
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issue-specific, and could not be easily re-sourced by a
Corporate partner on the ‘‘open market.’’ A one-off
contribution from a Corporation, however, could
pose potential problems for the NPO where the
contribution is large relative to other contributions
made to the NPO. In for-profit to for-profit relationships, increasing investments or over-reliance on
one partner increases the risk of opportunism.
We narrow the focus of our investigation of
relationship management practices to the perspective
of the NPO. When developing theory in areas with
limited empirical data, scholars have described the
importance of context or the exploration of concepts
within the decision-making domain in question
(Marshall and Rossman, 1999; Strauss and Corbin,
1998; Wacker, 1998). We explore our conceptual
model within a decision-making domain through
selection of a sample of identified experts, ‘‘elites’’ or
decision-makers among the registered NPOs located
in Australia.
Sample, data collection, and analysis
NPOs with head offices located in Australia were
contacted and invited to participate in the study.
The Australian Directory of Not-for-Profit Organizations lists over 350 NPO organizations. As no
Australian database exists with information regarding
the involvement of NPOs in Corporate partnerships,
the public websites of listed NPOs were searched for
evidence of Corporate involvement. Based on this
information, a random sample of organizations were
contacted and invited to participate in the study, of
which 20 NPOs agreed. Use of the Australian
context was considered similar enough to developed
economy operating conditions to allow generalizability of context. Dolnicar and Lazarevski (2009),
for example, compared Australian, the United
Kingdom, and the United States NPOs and found
that despite perceived differences in the conditions
that NPOs operate under, no significant differences
existed in operations involving marketing to and
involvement with external partners. All the three
countries faced similar challenges of increasing
competition for volunteers and funding. It is common to see single country, small sample studies
within the non-profit literature. Seitanidi and Crane
(2008), for example, used only two case studies of
non-profit relationships (four organizations total)
and confined their study context to the United
Kingdom. Martinez (2003) also confined their nonprofit study context to Spain. Loza (2004) used a
single Corporate–NPO case study confined to the
Australian context. Most Australian NPOs operate
within a wide cultural range owing to the highly
diverse population of Australia and also operate
within countries throughout the Asia–Pacific region.
NPOs can be classified into 12 categories (see
Salamon and Anheier, 1996). During NPO recruitment, however, NPOs from only nine of the 12
categories agreed to participate in the study (see
Table I). Organizations were selected to provide a
broad cross-section of NPOs and diversity of perspectives in social or environmental issue (Denzin
and Lincoln, 2000). Strategic and convenience sampling procedures were used to select the final NPO
cases (Marshall and Rossman, 1999; Strauss and
Corbin, 1998). We identified an initial sample of 35
registered, Australia-based NPOs. These organizations represented a cross section across the 12 categories, varied in size from small to large and were
openly participating in major relationships with
Corporations (as described by their marketing
material). Specific individuals at each NPO with
responsibility for Corporate relationship management were then contacted and invited to participate.
A final total of 20 organizations agreed to participate.
From mid- to late-2008, semi-structured interviews were conducted at 20 different NPOs with
managers holding direct-line responsibility for the
management of the organization’s corporate relationships. All of the NPOs were either subsidiaries of
an international NPO (e.g., Oxfam or Red Cross) or
were involved in significant delivery of programs
internationally. Depending on the size of the organization, these were either Chief Executive Officers
(CEOs) at the smaller NPOs or Corporate Relationship Managers (CRMs) at the larger NPOs. Size
classifications for the NPOs were small (less than five
paid, full-time employees), medium (6–15 paid, fulltime employees), or large (over 16 paid, full-time
employees) in size. Table I provides demographic
details for each NPO included in the study.
Primary data were collected through two sources
at each organization: (a) 2-h semi-structured interviews with key informants (direct-line relationship
managers); and (b) viewing of any documents that
Exploring Structure of the Corporate–NPO Relationship
303
TABLE I
Characteristics of NPOs interviewed for study
Sector (number of interviews)
Size (by number of employees)
Direct-line manager’s role
Culture and Recreation (2)
1 Small, 1 large
Education and Research (1)
Health (1)
Social Services (10)
Large
Large
2 Medium, 8 large
Environment (1)
Law, Advocacy and Politics (1)
Volunteerism Promotion (3)
Medium
Small
2 Small, 1 medium
Employee Associations/Unions (1)
Small
CEO
CRM
CRM
CRM
7 9 CRM
3 9 CEO
CRM
CEO
2 9 CRM
1 9 CEO
CEO
CEO Chief Executive Officer, CRM Corporate Relationship Manager.
provided the structure of a ‘‘contract’’ for these
relationships (e.g., memorandums of understanding,
relationship management policy, and contracts).
Secondary data were collected through discussions
with at least two additional lower-level employees
involved also in relationship management at each
organization. This was used to confirm the insights
of the key informant. Further interviews were
conducted over the phone post-site visit to confirm
transcripts and clarify any data inconsistencies (such
as non-convergence between the direct-line manager and comments made by a lower-level employee). Interviews were taped and later transcribed
with a least two of the study authors coding and
analyzing collected data to reach agreement on
assessment against study measures. Final data analysis
employed pattern-matching techniques to establish
underlying themes (Miles and Huberman, 1984;
Yin, 2003).
Schutt, 2003; Yin, 2003). Interviewees were guided
toward consideration of at least two major corporate
relationships – one successful and one unsuccessful
relationship.
Study measures
Formal governance
Formal governance mechanisms – regulative institutions – provide explicit rules for parties to follow and
remedies for opportunistic acts (Williamson, 1985).
Studies of for-profit to for-profit relationships have
previously assessed formal governance mechanisms
through the use of contracts, monitoring or penalties.
Contracts produce more explicit guidance on outcomes and remedies (Dyer et al., 2001; Williamson,
1985). Milne et al. (1996) used a similar approach to
measure ‘‘formality’’ in Corporate–NPO relationships, by assessing use of contractual documents and
operating procedures. We asked NPOs to provide
evidence that documentation existed to support the
relationship, including a contract, a memorandum of
understanding, or defined handling procedures for
the partnership.
Owing to a lack of established empirical measures
within the area of Corporate–NPO relationships,
study measures were developed from metrics used in
alternative relationship management contexts. Study
measures were pre-tested during early interviews
with NPO relationship managers and with academics
familiar with NPO-based research (Chambliss and
Informal governance
Informal governance mechanisms – normative and
cognitive institutions – are less formally defined and
offer benefits such as greater levels of trust, information sharing and coordinated routines (Barden and
Mitchell, 2007; Plewa and Quester, 2007). Normative institutions tend to arise through interaction
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Dayna Simpson et al.
mechanisms such as regular meetings, frequent
communication and interfirm site-visits (DiMaggio
and Powell, 1983; Dyer and Nobeoka, 2000; Scott,
1995). Cognitive institutions are organizational or
personal ideologies that can assist, guide, or constrain
managerial decision making (Scott, 1995; WadeBenzoni et al., 2002).
Relational embeddedness represents the extent to
which the two organizations interact and informally
normalize or shape one another’s goals and behavior
(Dyer and Nobeoka, 2000; Kale and Singh, 2007).
We employed a more interpretive assessment of
inter-firm interactions to assess a level of ‘‘embeddedness’’ (Glaser and Strauss, 1967). Patterns and
frequency of interaction were assessed to establish
either: (a) high embeddedness – frequent, regular,
formalized, tailored, and fast response communication, or (b) low embeddedness – infrequent, irregular (once or annual) and highly standardized or
non-specific communication (Heide and Wathne,
2006; Hoffman, 2009).
NPOs typically bring to these relationships cognitive biases or beliefs that can either hinder or
smooth the likely conflicts between financial and
social goals (Berger et al., 2004; Hoffman, 2009;
Milne et al., 1996). Cognitive barriers provide a point
of reference for the NPO through which they can
make decisions that balance their more social goals
and search for equitable compromise (Scott, 1995).
We assessed the use of informal governance mechanisms in the form of belief structures and ideological
boundaries brought to the relationship by the NPO.
Cognitive Barriers were either present or not-present
depending on the NPO’s: (a) openness to innovations
provided by the Corporate partner; (b) willingness to
adapt to change or a more business-oriented model
for the relationship; and (c) tendency to revert to a
traditional charity structure or activism during conflict. Key informants were asked to indicate their
practical responses to the above situations within their
existing Corporate relationships. Cognitive barriers
were recorded as ‘‘present’’ where the NPO reverted
to core mission or belief structures during any or all
three of the scenarios stated above.
The pressure of context
Investments for these relationships are defined as
substantial investments dedicated to one relationship
that cannot be readily exchanged with or obtained
from other partners (Dyer, 1997). ‘‘Tied’’ investments or relationship-specific investments are widely
used as a proxy for control, power, or trust in interorganizational relationships (David and Han,
2004). Investment was assessed in terms of its relative
value for the NPO. This was defined as value and
importance relative to investments made within an
NPO’s other relationships. A relative scale was used
because (a) not all investments could be defined in
monetary terms; and (b) the NPOs varied in size:
Thus, a smaller investment at a small NPO could be
as valuable as a larger investment at a large NPO.
Investments made by Corporate partners included
both financial and non-financial contributions such
as money, office space, exchanges of personnel, and
training. NPOs were asked to define both the relative value and the relative importance of the
investments made by their major Corporate partner.
Importance was described as the significance of the
investment to the NPO’s broader operating goals.
Very few studies exploring NPO’s relationships used
an explicit monetary value to define level of
investment (Rondinelli and London, 2003; Seitanidi
and Ryan, 2007; Wymer and Samu, 2003).
With regard to the pressure of low Social Appropriateness, other studies have shown poor cognitive
fit or reputation spillover to encourage organizations
to erect ‘‘fences’’ between themselves and other
organizations (Barnett and King, 2009; Hoffman,
2009). Social appropriateness in our study was
assessed as the impact of perceived social network
incongruence on the NPO’s governance choices.
Low social appropriateness was assessed through (a)
the NPO’s perception of cognitive ‘‘fit’’ between its
goals and the goals of its Corporate partner; and (b)
whether the NPO perceived a risk that the Corporate partner’s public reputation might affect the
reputation of the NPO. Informants were asked to
verify their perception of a corporate partner’s reputation with objective information sources (such as
validation of negative reputation by other noncorporate partners or examples of ‘‘negative press’’).
Past research indicates close alignment between
perceptions of reputation and the opinions of media
and stakeholders (Deephouse and Carter, 2005).
Contextual pressure for these relationships
was coded as low pressure (low investment, high
social appropriateness), moderate pressure (high
Exploring Structure of the Corporate–NPO Relationship
investment, high social appropriateness), or high
pressure (high investment, low social appropriateness).
Results and discussion
Corporate partners tend to bring to their relationships experience in the economic traditions of fiscal
accountability and standard contracting. NPO partners tend to bring experience with social program
management and more social mechanisms of interaction such as engagement and political persuasion.
This may lead to a mismatch of expectations or poor
alignment of ideology and goals for the relationship
but also opportunity for substantial innovation
(Hoffman, 2009; Milne et al., 1996). As we have
proposed with our conceptual model, NPOs are
capable of employing unique relationship management techniques that allow them to both align and
co-exist with disparate partner ideologies.
The organizations in our sample provided detailed
information regarding their key relationships with
Corporations and their relationship governance
choices. Following data collection, pattern matching
produced a set of data from which a number of
consistent themes emerged. Many of the NPO
organizations described the importance of three key
elements in their corporate relationships: (a) personal
interaction and maintenance of relationships within
the corporate partner’s organization; (b) problems
when relying purely on such personal relationships
rather than more formal mechanisms (such as contracts); and (c) the importance of maintaining an
ideological distance with some corporate partners.
The results of data analysis against each of the study
measures are provided in Table II.
Across the three different levels of relationship
‘‘pressure’’ (varying investment and social appropriateness), almost all of the NPO organizations employed formal governance mechanisms such as
contracts or memorandums of understanding. Proposition 1, that NPOs would employ formal governance mechanisms as pressure increased, was only
partly supported, in that formal mechanisms were also
being used in low pressure contexts. Overall, only
three of the NPOs did not use formal governance –
each of these organizations was small in size and within
the Low-Pressure category. This counters a prior
305
assumption in the non-profit literature that NPOs
only use informal relationships with their corporate
partners or that they choose funds over principles. The
relationship governance tactics employed by NPO
organizations in the moderate-pressure and highpressure categories were highly convergent with
respect to the use of formal governance mechanisms.
The use of informal governance mechanisms,
however, was less convergent across the case studies.
Organizations within the low-pressure category were
less consistent in their use of informal governance
mechanisms. Greater convergence of use patterns for
informal governance mechanisms occurred in the
moderate to high-pressure category, with the exception of three relationships (discussed further below).
Also, most of the NPOs in the moderate to highpressure category used both relational embeddedness
and cognitive barriers in their relationships with
Corporate partners. Many described the importance
of gaining and retaining relationships with Corporations, whilst remaining conscious of the potential for
administrative and political differences. Illustrative
quotes drawn from discussions with NPO relationship
managers regarding their use of informal governance
mechanisms are provided in Table III.
High-pressure Corporate–NPO relationships, particularly where investment was the dominant pressure, also appeared to attract greater resources and
attention relative to other, low-pressure relationships,
at many of the NPOs. Several informants noted that
their less significant corporate relationships often
became problematic but were less visible and thus less
likely to be formalized. As one interviewee described
(Organization 1):
A lot of the relationships we set up are mandated so we
will have a fairly robust framework to work within in
terms of what both parties expect. That is at the larger
[investment] level. At the smaller level, there is no
account management framework… so a lot of stuff just
happens. We’ve identified that these could benefit
from a more comprehensive framework and that is
something that we are working on.
Consistent use of one (rather than both) informal
governance mechanism as contextual pressure increased (Proposition 2 and Proposition 3) was only
partly supported. The NPOs in our sample, both: (a)
employed these mechanisms more frequently than
expected, and (b) used both mechanisms of informal
Dayna Simpson et al.
306
TABLE II
Results of the investigation of NPO–Corporate relationships
Contextual pressure
Low pressure
Low investment, high
social appropriateness
Moderate pressure
High investment, high
social appropriateness
High pressure
High investment, low
social appropriateness
NPO size
Small
Small
Small
Medium
Small
Large
Large
Large
Large
Large
Large
Large
Medium
Large
Large
Medium
Small
Large
Large
Medium
NPO
organization
5
7
8
9
14
15
16
1
3
10
12
17
18
19
2
4
6
11
13
20
governance simultaneously in moderate to highpressure relationships. They were able to maintain an
ideal balance of ideological distance whilst integrating with their Corporate partners administratively.
Prior studies have also identified a practice of
employing often greater levels of structure and
ideological boundary definition in cross-sector
relationships (Austin, 2000). As one interviewee
described (Organization 2):
Sometimes Corporations come in and they want an
alliance and they want it on their terms. They want
regular reporting, they want this and they want that …
but if they realized what it was like out in the field –
that is really putting a big demand on our partners and
our organization to meet that. We recognize the need
to be transparent and accountable but within reason.
Certainly we don’t want undue burdens put on us just
to receive funding. It’s a balancing act.
Three relationships in the moderate to highpressure category proved an exception to the rule
Formal governance
(contracts)
Not-present
Not-present
Not-present
Present
Present
Present
Present
Present
Present
Present
Present
Present
Present
Present
Present
Present
Present
Present
Present
Present
Informal governance
Cognitive
barriers
Not-present
Not-present
Present
Present
Present
Present
Present
Present
Not-present
Present
Present
Present
Present
Present
Present
Present
Not-present
Present
Present
Present
Relational
embeddedness
High
Low
Low
High
Low
Low
High
High
High
High
High
High
High
High
Low
High
High
High
High
High
with respect to the simultaneous use of both types of
informal governance mechanism. Organization 6,
for example, did not actively maintain a cognitive
barrier (ideological distance) within its Corporate
relationship. Organization 6, however, was distinctive in its timeframe for the relationship (limited and
short) and its perception of a greater level of experience with these types of relationship. Contracts
were established, yet specific goals for the relationship and a short timeframe reduced the need for
ideological ‘‘vigilance.’’ Organization 3 (moderatepressure) was a long-running relationship where the
Corporate partner held a leadership role and was
heavily involved in day-to-day operations. In this
case, the NPO described clear alignment with the
Corporation’s ideology. For Organization 2 (highpressure), the NPO relied on the Corporation to
provide high levels of ongoing funding, however,
the Corporate partner made it clear that they did not
wish to be involved, implicitly trusted the NPO, and
relied heavily on the NPO’s expertise.
Obviously the better partnerships – but also the more involved ones – are
the ones where there is a long-term relationship. That is not to say that the
less involved ones affect us any less. There is a huge debate within our Board
about one partner with whom we don’t have an in-depth relationship but
who could potentially harm our cause (Organization 15)
I think that the interpersonal relationship is half the battle. It can make the
partnership a lot easier. But if that person leaves you’re back to square one.
You need to have other things to fall back on, not just a person in the other
organization that you have a relationship with (Organization 16)
In theory it’s really important to communicate, but that is often easier said
than done. We need to implement strategies for managing the alliance in
case the communication thing falls down. The partnership can be brought
down if people don’t know what is expected of them, so that is why we
have that conversation up front and document it (Organization 11)
Well we always try and establish relationships so that [corporate partner] has
a lot of exposure to our people. So that if a person leaves the relationship
doesn’t fall over. But we have other things too, like documents and contracts that could be used if the person that we are dealing with leaves
(Organization 12)
We’ve had a case where the one person that we communicated with from
the corporate partner left and we had to try and revive the partnership with
someone else. That was hard. We’ve learnt from that experience
(Organization 9)
One of the keys to success is the connection points between the organizations. So it’s not just my relationship with their marketing manager. That
is important but it’s the relationship that is formed through other means as
well (Organization 11)
Relational embeddedness
It would be great if they had similar values and wanted the same things as us,
but this is not always the case. We make sure that all the partnerships are
outlined in writing first and that each party clearly understands what is
expected. We have to stay focused on our mission and not get swept up in
what the corporate wants (Organization 20)
I would never compromise our values or our vision or anything like that.
There will always be negotiations and compromise for certain parts of the
project, but no, never for the things that make our organization who we are
(Organization 14)
What is immovable for us is the purpose of the program, if the corporate
partner is supporting a program. I expect that the corporate partner
wouldn’t be able to change that. We wouldn’t let them. This is our integrity
we are talking about (Organization 10)
If you want to have a partnership with us, it’s because of who we are, so if
we start changing that then we are not true to our values and no-one wins
(Organization 2)
We are not dictated by the donation dollar. If someone walked in today and
said ‘‘I’ve got a deal for you. I’m going to give you $1 million a year if you
will do this that and the other,’’ we will say ‘‘no thanks.’’ We are beholden
to no-one and we will roll out the programs that we believe will deliver the
best outcomes (Organization 13)
We have one relationship that I am ethically uncomfortable with, but the
board thinks that it is okay and they are comfortable with it because they can
justify the relationship (Organization 3)
We have guidelines as to who we will and won’t partner with, but it’s
difficult. It’s very blurred and grey. Who are you really partnering with? If
we’ve got any kind of relationship with a company that is producing
something harmful then we won’t do any promotion or media coverage.
We don’t want the backlash and often they don’t either (Organization 17)
Cognitive barriers
Interview quotes from NPOs regarding informal governance choices within their Corporate–NPO relationships
TABLE III
Exploring Structure of the Corporate–NPO Relationship
307
308
Dayna Simpson et al.
Most of the studied NPOs were capable of maintaining formalized, ideologically accountable, and
realistic communication with Corporate partners.
Many were willing to set boundaries for their Corporate partners and exercise the right to turn away
inappropriate investment (e.g., Organizations 13 and
14, Table III). Most NPOs within the high pressure
group employed informal governance mechanisms in
a way that enabled them to maintain socially inappropriate relationships regardless of stakeholder concerns (e.g., Organization 20, Table III). Interviewees
often described the strength of their organization’s
commitment to its social goals as sufficient support for
the decision to continue a relationship with a corporate partner that stakeholders viewed negatively.
For the NPOs in our sample, continuation of
the corporate relationship was a financial decision
that allowed them to continue to support other
social goals. The NPOs stabilized their corporate
relationships with contracts and protected themselves from ideological shifts through informal governance mechanisms (e.g., Organizations 10 and 20,
Table III). Belief structures for the NPO presumably
provide them with greater comfort that their legitimacy won’t be compromised by corporate relationships. This inter-operability of roles has been
described as a key strength of relationships established by the World Wildlife Fund (CasadesusMasanell and Mitchell, 2007) and for many newer,
emerging NPOs (Hoffman, 2009). Modern NPOs
operate with more than simple agreements and appear to be able and willing to employ additional
informal mechanisms to manage the more social and
embedded side of their relationships (Milne et al.,
1996).
The findings described above suggest that, contrary to other perspectives, NPOs commonly use
formal governance mechanisms in their relationships
with corporate partners. In fact, they tend to employ
both formal and informal mechanisms as a means to
balance divergent partner ideologies. They also do
not appear to sacrifice their principles for the sake of
resources. Most of the NPOs in our sample
emphasized the importance of ‘‘staying true’’ to their
social principles whilst facilitating successful relationships with Corporations. The limited impact of
social appropriateness on the governance choices of
NPOs, however, suggests that many Corporate–
NPO partnerships are still characterized by low
levels of trust. NPOs appear to still invoke formal
governance even where it seems almost unnecessary
(i.e., in contexts where social appropriateness is
high). This aspect warrants further investigation.
The importance of structure and communication is
recognized as important to highly invested relationships (Kale and Singh, 2007; Moran, 2005). We
describe an important finding that advances our
understanding of Corporate–NPO relationships,
such that contrary ideologies can co-exist through
the use of mainly informal governance mechanisms.
Conclusions and further research
Corporate–NPO relationships place a unique set of
demands on the NPO. Social issue variety coupled
with differing relationship expectations in particular
presents difficulties for NPOs within these relationships. To adapt to different organizational ideologies yet also remain true to independent goals is a
true challenge for all cross-sector relationships. In
this study, a general theme emerged whereby NPOs
managed their higher pressure corporate relationships with the use of governance mechanisms that
allow the partners to exist both ‘‘together and apart.’’
The NPOs we studied were able to employ traditional forms of contracting or codified rules while
also maintaining their social identity through tactics
that maintained an ideological distance from their
Corporate partners. This was most often the case
among the moderate-to-high-pressure relationships
where, higher levels of corporate investment, and
greater potential for erosion of stakeholder support
existed. These mechanisms allow NPOs to strike a
balance between financial security and fulfillment of
social objectives. Maintenance of an inherent ideological identity both within and outside of the corporate relationship is highly important for an NPO.
More involved relationships with Corporations
have proven a valuable resource for NPOs during
increasingly difficult economic and social times. Our
study indicates that it is feasible for an NPO to
maintain its principles and legitimacy with noncorporate stakeholders while also working with
corporate partners. The NPO, however, may still
become exposed to organizational risks and relationship failure if various governance mechanisms
are not consistently employed. NPOs require
Exploring Structure of the Corporate–NPO Relationship
continuing donor and partner acceptance to effectively operate within the social sector (Lyons, 2001).
NPO legitimacy depends on two key features: representativeness and performance toward social mission (Lister, 2003). Managing a diverse set of
stakeholders while continuing to attract and increase
corporate sources of funding represents a complex
yet achievable challenge for an NPO.
The use by NPOs of cognitive barriers in particular to sustain rather than reduce ideological distance in their relationships with Corporations was a
key finding of our investigation. Although generally
considered as a problem for the successful coordination of inter-organizational relationships, the
presence of cognitive barriers for the NPO acted as
an anchor point for their social function. The results
contribute to the small but growing discourse surrounding Corporate–NPO relationships. These
relationships provide a vital addition to the study
of stakeholder management and adaptive institutions
as well as the broader study of social marketing
and social issue management. Our findings also
have implications for NPO practitioners who are
embarking on, or currently managing, Corporate–
NPO relationships.
The findings of our study would benefit from
further investigation of the same concepts within a
much larger sample or with the use of a dyadic frame.
Further study is needed with respect to delineation
of differences between successful and unsuccessful
partnerships and investigation as to how these
mechanisms affect the attainment of outcomes. Furthermore, one institutional pressure might moderate
or dominate another in these relationships, which
issue was not addressed. Further interpretation of the
study’s findings should anticipate differences between
countries in terms of public financial support, operational restrictions, and underlying culture toward the
use of Corporate philanthropy.
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Dayna Simpson
Department of Management,
Monash University,
Caulfield Campus, Melbourne, Australia
E-mail: [email protected]
Kathryn Lefroy and Yelena Tsarenko
Department of Marketing,
Monash University,
Caulfield Campus, Melbourne, Australia
E-mail: [email protected];
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