Non-governamental organizations (henceforth NGOs) and Non-profit organizations (henceforth NPOs) have, among their tasks, that of raising funds for their projects. Thus, they have to allocate their time/effort in at least two basic tasks, raising funds and realize their specific projects. The aim of this research is to investigate whether in such environment is advisable for them to have multiple decision layers, namely rationally delegate some of the organizations tasks to agents with different preferences, with the additional possibility to manipulate their objective functions through appropriate incentive schemes. There exists a broad literature on strategic delegation for profit maximizing oligopolistic firms (Vickers 1985, Freshman and Judd 1989, Sklivas 1989), but none has yet applied this framework to NGOs. In particular we are interested to study whether the choice to delegate arises endogenously in NGOs, and whether this is advantageous for NGOs. In this research project, after a survey of the existing managerial practices in NGOs, and a data survey on Italian NGOs (conducted by using Agenzia delle Entrate financial data on voluntary organizations and ISTAT most recent survey on nonprofits) we will investigate whether and when NGOs can receive benefits from delegation. For this purpose we will build up an explicative model to show when there is actually incentive to delegate for NGOs: is this occurring in highly competitive environments, namely when NGOs' projects are close substitutes or, conversely, when their projects are highly differentiated? Moreover, we intend to assess whether highly targeted fundraising activities, implying low fundraising spillovers and harmful fundrasing externalities for NGOs in competition with other NGOs for donations, favor or not a process of strategic delegation inside these organizations.
Non-governmental organizations (NGOs) are becoming major actors in development cooperation: they have increased both in number and in size in the last decades, as shown by e.g. Barro and McCleary (2006). The share of public aid channelled through NGOs has also increased: Werker and Ahmed (2008) report that World Bank projects involving civil society grew from 6% to 70% from the late 1980s to 2006. More recently, between 2004 and 2012 the share of Official Development Aid (ODA) that was core contributions to NGOs or public mandates to NGOs more than quadrupled from 3% to exceed 13%. This bears witness to both an increase in autonomous activities of NGOs, and in channelling of public aid through NGOs. Even larger and faster-growing is the role of charities and so called private aid, estimated to 45-65 US billions in 2014, which is more than the total of aid from the World Bank. This has important repercussions for aid partners and makes research on development NGOs and private aid extremely policy-relevant.
Also outside the developing world, NGOs, social enterprises and the other actors that exist in-between public and private sector are gaining increasing importance in areas such as public health, education, social inequality, and environmental pollution. Public and private initiatives increasingly recognize them as a means of addressing a wide range of social needs, and seek to encourage and support them (see for example the UK government' s "Big Society" and the European Commission's "Social Business Initiative").
An extensive research review (Short, Moss, & Lumpkin, 2009) suggests a dramatic rise in academic interest in the past two decades.
Studying and understanding the type of actors and organizations described above requires tools from different fields within economics.
Despite the increasing importance of the sector, there is lack of substantive and rigorous microeconomic theory to explain the incentives and choices of this type of actors in resource-constrained settings. Many empirical questions also remain in need of exploration, first and foremost what drives the creation, success and failure of such organizations and actors. A competition model, which would be appropriate for profit-seeking actors, does not offer guidance in this case, since measuring their performance is intrinsically difficult. Reasons include the public-good nature of the service delivered, the imperfect observability of outcomes, and the relevance of quality- and process-related variables ("how much" is delivered, but also "how").
The study of the internal organization of NGOs and NPOs is still at the initial stages and the effect of delegation in a context of competition for fundraising is still fully unexplored. This project is an occasion to provide the scientific community with a set of new results useful for both pratictioners and researchers in the field.
References:
Short, Jeremy C., Todd W. Moss, and G. Tom Lumpkin. "Research in social entrepreneurship: Past contributions and future opportunities." Strategic entrepreneurship journal 3.2 (2009): 161-194.
Barro, R., and R. McCleary. "US-Based Private Voluntary Organizations: Religious and Secular PVOs Engaged in International Relief and Development, 1993-2004." NBER Working Paper 12238 (2006).
Werker, Eric, and Faisal Z. Ahmed. "What do nongovernmental organizations do?." The Journal of Economic Perspectives 22.2 (2008): 73-92.