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Journal of Business Ethics (2011) 101:297311 DOI 10.

1007/s10551-010-0723-7

Springer 2011

Together and Apart: Exploring Structure of the CorporateNPO Relationship

Dayna Simpson Kathryn Lefroy Yelena Tsarenko

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 CorporateNPO relationships from the NPOs 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: corporatenonprot relationships, social marketing, cross-sector relationships non-prot marketing

Relationships between corporations and non-prot 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 CorporateNPO relationships from the perspective of whether or not traditional interrm structures are being employed or are appropriate (Ireland et al., 2002). The manner in which a traditional inter-organizational relationship is governed

has signicant 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-specic, or issuebased examples of corporate philanthropy and its implications for the non-prot 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 nancial support and resources (Hoffman, 2009). Many NPOs, however, form these relationships to improve public awareness of issues, increase their inuence, or for their networking et al., 2009). Few empirical opportunity (Runte studies, however, have explored the structure of CorporateNPO relationships or how their diverse needs and interests are managed (Peloza and Hassay, 2008; Selksy and Parker, 2005). CorporateNPO relationships form a unique bridge between for-prot and non-prot goals. They hold signicant 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. partners as competition for public donations has intensied (Seitanidi and Crane, 2008; Selksy and Parker, 2005). The relative novelty and variety of these relationships, however, raises signicant implications for their management. Considering the inherent nancial, structural, and ideological differences in these partnerships, the potential for conict 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-rm relationships (Heide and Wathne, 2006). In reality, many rms 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).

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 nd largely informal arrangements in CorporateNPO 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 nancially 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 CorporateNPO 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.

Formal relationship governance The presence of institutions creates pressures that help one to inform an organizations 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-prot to for-prot relationships (Lambe et al., 2002). Structuring of interrm relationships through formal, codied governance mechanisms such as contracting has attracted signicant scholarly attention (Cousins et al., 2006; Kale et al., 2001). We use this literature in particular, as it is described in the for-prot to for-prot context, to establish a foundation for our exploration of CorporateNPO relationships. Contracts or mutually agreed sets of rules and procedures provide interrm relationships with a framework through which parties

Background and conceptual development Studies regarding CorporateNPO 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 nancial resources from Corporate

Exploring Structure of the CorporateNPO Relationship can protect themselves from opportunism and conict (North, 1990; Rondinelli and London, 2003; Williamson, 1985). The role of codied expectations is often to provide a set of rules in contexts where relationship norms may not already be established (Lawrence et al., 2002). CorporateNPO relationships differ from other types of inter-rm relationship because of their social-issue focus and more intangible, non-nancial 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 nancial integration and supporting ideology (Hoffman, 2009). Corporate provision of nancial 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-prot to for-prot relationship, governance depends largely on the level of nancial 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 CorporateNPO 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-prot to for-prot 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). CorporateNPO relationships, in particular, may require more exibility than what can be provided with formal governance mechanisms alone.

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Informal relationship governance Institutions can also consist of informally established rules that guide organizational actions. Informal governance mechanisms offer benets such as greater

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-rm 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 nancial 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 NPOs 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 fulll several roles when working with various partners (both corporate and non-corporate). Other scholars, however, have described the potential for substantial role conict 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 CorporateNPO 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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Dayna Simpson et al. 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 dened roles, outcomes, and remedies (i.e., contracting). Informal arrangements, such as interaction, knowledge-sharing, or lobbying regardless of how frequent they are, provide greater exibility. 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 NPOs other partners, we propose that NPOs will use formal governance mechanisms such as contracts. These are used to dene roles and performance outcomes. Thus, we initially propose that:
P1: CorporateNPO relationships that experience higher levels of investment will lead an NPO to employ formal governance (contracts) to manage the relationship.

2000). This may inhibit the functioning of a CorporateNPO relationship or lead to goal-based conicts.

The pressure of context A nal feature of CorporateNPO relationships is the pressure of context in which the relationship exists. CorporateNPO relationships are entered into for nancial 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 exibility. Greater levels of investment have been shown to improve trust and the capacity to align objectives within more traditional for-prot to for-prot 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 NPOs 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 nancial contribution of a Corporate partner as more valuable than stakeholder legitimacy. Social appropriateness in our study, concerns the extent to which the NPOs relationship with a corporation conforms to the values and expectations of its stakeholders (Samu and Wymer, 2001; Seitanidi and Ryan, 2007).

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

Study propositions We describe a conceptual model that guides our study of governance choices within Corporate

Figure 1. Model indicating the role of contextual pressure in NPO governance choice.

Exploring Structure of the CorporateNPO 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: CorporateNPO relationships that experience higher levels of investment will lead an NPO to employ informal governance forms (relational embeddedness) to maintain ideological convergence.
P2:

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Methods The area of CorporateNPO 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 CorporateNPO 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 et al., 2009). exceptions (Runte 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 dene relationships Corporations and NPOs (Berger et al., 2004). With respect to the selection of CorporateNPO relationships for exploration, we did not explore small resource contributions or contexts that did not present potential for conict or inuencing between the two organizations. We employed a relationship of a theoretic frame borrowed from the inter-rm relationship literature, which converges around two major types of relational form spot-market and purely transactional versus more engaged, invested, and collaborative. Any relationship-specic investment (both monetary and asset-specic) 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

Complications for NPOs may arise where an incongruence or cognitive dissonance occurs between the Corporate partners activity and the NPOs program and stakeholder goals. This may cause conict or breakdown for the relationship regardless of the presence of other governance mechanisms as described above (Hoffman, 1999). To avoid disabling conict 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 difculties 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: CorporateNPO 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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Dayna Simpson et al. non-prot relationships (four organizations total) and conned their study context to the United Kingdom. Martinez (2003) also conned their nonprot study context to Spain. Loza (2004) used a single CorporateNPO case study conned 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 AsiaPacic region. NPOs can be classied 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 nal NPO cases (Marshall and Rossman, 1999; Strauss and Corbin, 1998). We identied 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). Specic individuals at each NPO with responsibility for Corporate relationship management were then contacted and invited to participate. A nal 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 organizations corporate relationships. All of the NPOs were either subsidiaries of an international NPO (e.g., Oxfam or Red Cross) or were involved in signicant delivery of programs internationally. Depending on the size of the organization, these were either Chief Executive Ofcers (CEOs) at the smaller NPOs or Corporate Relationship Managers (CRMs) at the larger NPOs. Size classications for the NPOs were small (less than ve paid, full-time employees), medium (615 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

issue-specic, 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-prot to for-prot 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 identied experts, elites or decision-makers among the registered NPOs located in Australia.

Sample, data collection, and analysis NPOs with head ofces located in Australia were contacted and invited to participate in the study. The Australian Directory of Not-for-Prot 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 signicant 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-prot literature. Seitanidi and Crane (2008), for example, used only two case studies of

Exploring Structure of the CorporateNPO Relationship


TABLE I Characteristics of NPOs interviewed for study Sector (number of interviews) Culture and Recreation (2) Education and Research (1) Health (1) Social Services (10) Environment (1) Law, Advocacy and Politics (1) Volunteerism Promotion (3) Employee Associations/Unions (1) Size (by number of employees) 1 Small, 1 large Large Large 2 Medium, 8 large Medium Small 2 Small, 1 medium Small

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Direct-line managers role CEO CRM CRM CRM 7 9 CRM 3 9 CEO CRM CEO 2 9 CRM 1 9 CEO CEO

CEO Chief Executive Ofcer, 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 conrm the insights of the key informant. Further interviews were conducted over the phone post-site visit to conrm 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. Formal governance Formal governance mechanisms regulative institutions provide explicit rules for parties to follow and remedies for opportunistic acts (Williamson, 1985). Studies of for-prot to for-prot 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 CorporateNPO 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 dened handling procedures for the partnership. Informal governance Informal governance mechanisms normative and cognitive institutions are less formally dened and offer benets 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

Study measures Owing to a lack of established empirical measures within the area of CorporateNPO 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

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Dayna Simpson et al. that cannot be readily exchanged with or obtained from other partners (Dyer, 1997). Tied investments or relationship-specic 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 dened as value and importance relative to investments made within an NPOs other relationships. A relative scale was used because (a) not all investments could be dened 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 nancial and non-nancial contributions such as money, ofce space, exchanges of personnel, and training. NPOs were asked to dene both the relative value and the relative importance of the investments made by their major Corporate partner. Importance was described as the signicance of the investment to the NPOs broader operating goals. Very few studies exploring NPOs relationships used an explicit monetary value to dene 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 t 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 NPOs governance choices. Low social appropriateness was assessed through (a) the NPOs perception of cognitive t between its goals and the goals of its Corporate partner; and (b) whether the NPO perceived a risk that the Corporate partners public reputation might affect the reputation of the NPO. Informants were asked to verify their perception of a corporate partners 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

mechanisms such as regular meetings, frequent communication and interrm 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 anothers goals and behavior (Dyer and Nobeoka, 2000; Kale and Singh, 2007). We employed a more interpretive assessment of inter-rm 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-specic 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 conicts between nancial 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 NPOs: (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 conict. 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 dened as substantial investments dedicated to one relationship

Exploring Structure of the CorporateNPO 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 scal 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 partners 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

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assumption in the non-prot 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 CorporateNPO 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 signicant 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. Weve identied that these could benet 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

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TABLE II Results of the investigation of NPOCorporate relationships

Contextual pressure

NPO size

NPO organization

Formal governance (contracts)

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

Low pressure Low investment, high social appropriateness

Moderate pressure High investment, high social appropriateness

High pressure High investment, low social appropriateness

Small Small Small Medium Small Large Large Large Large Large Large Large Medium Large Large Medium Small Large Large Medium

5 7 8 9 14 15 16 1 3 10 12 17 18 19 2 4 6 11 13 20

Not-present Not-present Not-present Present Present Present Present Present Present Present Present Present Present Present Present Present Present Present Present Present

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 identied a practice of employing often greater levels of structure and ideological boundary denition 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 eld 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 dont want undue burdens put on us just to receive funding. Its a balancing act.

Three relationships in the moderate to highpressure category proved an exception to the rule

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 specic 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 Corporations 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 NPOs expertise.

TABLE III

Interview quotes from NPOs regarding informal governance choices within their CorporateNPO relationships Cognitive barriers

Relational embeddedness

Exploring Structure of the CorporateNPO Relationship

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 dont 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 youre 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 its 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 dont 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 doesnt 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) Weve 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. Weve learnt from that experience (Organization 9) One of the keys to success is the connection points between the organizations. So its not just my relationship with their marketing manager. That is important but its the relationship that is formed through other means as well (Organization 11)

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 rst 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 wouldnt be able to change that. We wouldnt let them. This is our integrity we are talking about (Organization 10) If you want to have a partnership with us, its 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 Ive got a deal for you. Im 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 wont partner with, but its difcult. Its very blurred and grey. Who are you really partnering with? If weve got any kind of relationship with a company that is producing something harmful then we wont do any promotion or media coverage. We dont want the backlash and often they dont either (Organization 17)

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Dayna Simpson et al. 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 nding that advances our understanding of CorporateNPO relationships, such that contrary ideologies can co-exist through the use of mainly informal governance mechanisms.

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 organizations commitment to its social goals as sufcient 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 nancial 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 wont 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 ndings 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 sacrice 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

Conclusions and further research CorporateNPO relationships place a unique set of demands on the NPO. Social issue variety coupled with differing relationship expectations in particular presents difculties 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 codied 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 nancial security and fulllment 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 difcult 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 CorporateNPO 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 nding 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 CorporateNPO 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 ndings also have implications for NPO practitioners who are embarking on, or currently managing, Corporate NPO relationships. The ndings of our study would benet 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 studys ndings should anticipate differences between countries in terms of public nancial support, operational restrictions, and underlying culture toward the use of Corporate philanthropy. References
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Dayna Simpson Department of Management, Monash University, Cauleld Campus, Melbourne, Australia E-mail: Dayna.Simpson@monash.edu Kathryn Lefroy and Yelena Tsarenko Department of Marketing, Monash University, Cauleld Campus, Melbourne, Australia E-mail: Kathryn.Lefroy@monash.edu; Yelena.Tsarenko@monash.edu

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