Firm-nonprofit collaboration: Explaining the rationale behind firms’ cross-sector partner choices

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Abstract

Cross-sector partnerships between firms and nonprofit organizations (NPOs) are emerging at an unprecedented rate to address sustainability issues. Extant research on cross-sector partnerships explains the firms' motivations to engage in partnerships but little is known about what drives the firms' partner choice. We build on firm-firm alliance research, differentiating between network-reinforcing and network-broadening strategies for finding partners. Based on a qualitative study with 33 experts from 17 frontrunner companies and 14 partnering NPOs, as well as secondary data, we assess the trade-offs between these two strategies and explore firms’ partner search and selection decisions. We advance cross-sector partnership research by proposing three drivers to explain why firms in our sample preferred to reinforce (rather than to broaden) their networks when forming additional cross-sector partnerships for sustainability. Moreover, we propose two conditions to explain why frontrunner firms often rely on opportunity-driven (rather than search-driven) partnership formation. These insights shed light on the type of formation strategy used in the context of cross-sector partnerships for sustainability.

Introduction

Cross-sector partnerships with nonprofit organizations (NPOs) are considered an important instrument for firms to tackle complex sustainability challenges (Ashraf et al., 2017, Austin, 2000) and to jointly create social value (Dahan et al., 2010, Weber et al., 2017). Yet, forming such partnerships is difficult, because organizations must find each other in different societal sectors and need to bridge nonprofit and for-profit strategies and objectives (Bryson et al., 2006, Rivera-Santos and Rufín, 2010). Extant research explains the motivations of firms and NPOs to engage in partnerships in general (e.g., Den Hond et al., 2015, Selsky and Parker, 2005) and offers guidance on their successful implementation (e.g., Austin and Seitanidi, 2012, Berger et al., 2004). However, we still know little about what drives the firms’ specific partner choice (Ashraf et al., 2017, Seitanidi et al., 2010, Wassmer et al., 2012).

Addressing this gap is relevant because the formation phase determines whether an organization identifies and selects appropriate cross-sector partners, so it is a critical stage for the potential success of a partnership and ultimately for its potential to deliver social change (Austin and Seitanidi, 2012, Berger et al., 2004, Herlin, 2015). Related research streams on interorganizational relationships have put considerable effort to assess formation processes and to link them to performance outcomes, such as research on public-private partnerships between firms and governments (e.g., Kivleniece and Quélin, 2012, Villani et al., 2017) and research on firm-firm, for-profit alliances (e.g., Bierly and Gallagher, 2007, Goerzen, 2007, Holmberg and Cummings, 2009, Rowley et al., 2000). Firm-firm alliance research builds on social network theory and contrasts two dominant strategies on how firms form new ties: a network-reinforcing strategy, that is firms' reliance on existing partners to build repeated and third-party ties, and a network-broadening strategy, that is firms’ search for and engagement with previously unconnected partners (Beckman et al., 2004, Gulati, 1998, Lavie and Rosenkopf, 2006).

In this paper, we propose that insights on network-reinforcing compared to network-broadening strategies from firm-firm alliance research can be leveraged in the context of cross-sector partnership research (Rivera-Santos and Rufín, 2010, Wassmer et al., 2012), as firm-firm alliance formation is essentially similar to firm-nonprofit partnership formation: a firm needs to identify and select a partner among a broad choice of potential partners to enter into a collaborative agreement (Kale and Singh, 2009). Firm-firm alliance research provides valuable empirical insights on the benefits and downsides of the two formation strategies (e.g., Beckman et al., 2004, Gulati, 1995, Gulati and Gargiulo, 1999). Empirical studies focusing on how managers can build successful firm alliances caution against network-reinforcing tie formation, linking it to mediocre alliance (portfolio) performance due to “inefficient configurations that return less diverse information and capabilities” (Baum et al., 2000, p. 270; also Goerzen, 2007, Ozcan and Eisenhardt, 2009) and to alliance failure due to firms overvaluing trust in selection decisions rather than conducting a strategic analysis of the partners’ potential fit (Bierly and Gallagher, 2007, Holmberg and Cummings, 2009).

In contrast, initial conceptual studies in cross-sector partnership research recommend to choose partners within an organization's network: firms and NPOs should rely on prior partner experience and network connections to ensure the trustworthiness of partners and to safeguard against partners' potential opportunistic behavior (Bryson et al., 2006, Gray and Stites, 2013, Rivera-Santos and Rufín, 2010). This is puzzling, considering the downsides of network-reinforcing identified by firm-firm alliance research, and points to the need for empirical evidence about which formation strategy firms apply in which context (Lavie and Rosenkopf, 2006, Parmigiani and Rivera-Santos, 2011).

We argue that the trade-offs between network-reinforcing and network-broadening strategies need to be reassessed in the specific context of cross-sector partnerships for sustainability to better understand what drives firms' cross-sector partner choice. For instance, firms find it difficult to assess the competencies and reliability of NPOs due to their different organizational characteristics and skills (Dahan et al., 2010, Rondinelli and London, 2003). Accordingly, firms might greatly value the ease of relying on recommendations from their networks to find a trustworthy NPO partner, while considering a strategic analysis of the NPO partner's potential fit less important or not feasible. Moreover, it is critical to explore the formation dynamics faced by firms in the context of cross-sector partnerships (Kale and Singh, 2009, Rivera-Santos et al., 2017). For instance, recent research indicates the increasing dependency of the nonprofit sector on corporate funding (Herlin, 2015, Weber et al., 2017), which might force NPOs to be more active than firms in looking for new partners. At the same time, firms would potentially need to dedicate more attention to selecting instead of searching for NPO partners.

Against this background, this study asks what influences firms' cross-sector partner search and partner selection decisions, specifically, what drives firms to use network-reinforcing or network-broadening strategies to find cross-sector partners? We conducted and abductively analyzed 31 semi-structured interviews with 33 representatives from 17 firms and 14 partnering nonprofit organizations as well as secondary data on organizations' partnerships. We offer three main contributions. First, we develop an understanding of the rationale behind (frontrunner) firms’ partner choice, which is a critical yet underexplored topic in cross-sector partnership research (e.g., Austin and Seitanidi, 2012, Berger et al., 2004, Seitanidi et al., 2010). We demonstrate that frontrunner firms seem to prefer to reinforce (rather than to broaden) their networks when forming additional cross-sector partnerships for sustainability and often react to opportunities to partner (rather than search for partners). Our study advances cross-sector partnership research by discovering and explaining these preferences of frontrunner firms when choosing NPO partners and by discussing the effectiveness of this approach. Second, we answer to recent calls to build critical links between firm-firm alliance and cross-sector partnership research (Murphy et al., 2012, Rivera-Santos et al., 2017) by proposing one organizational driver (resource constraints) and two relationship drivers (recognition and main risk considerations) to explain why firms in our sample preferred to form partnerships within their networks. Moreover, we turn attention to formation dynamics in this context and propose two conditions (lack of strategic importance and NPO competition for corporate partners) to explain why firms in our sample often relied on opportunity-driven partnership formation. Third, we provide guidance to corporate managers on how to improve their partner search and selection decisions as well as to NPO managers on how to increase their chances of being selected as cross-sector partners.

The paper is structured as follows: first, we describe the findings of extant literature on network-reinforcing vs. network-broadening strategies to form interorganizational ties and apply them to the specifics of cross-sector partnerships. Then, we introduce our method of collecting and abductively analyzing the data from expert interviews and secondary sources. Finally, we present the results and discuss the implications of our findings for theory and practice.

Section snippets

Theoretical background

Authors applying social network theory to explain alliance formation highlight how firms can strengthen their networks by building on existing ties (network-reinforcing) or expand their networks by forming new ties (network-broadening) (e.g., Beckman et al., 2004, Parmigiani and Rivera-Santos, 2011)1

Method

We used a qualitative, abductive research design (Timmermans and Tavory, 2012, Van Maanen et al., 2007). Abduction builds on an inductive analysis of the data at hand, and, in addition, it calls for the necessity of an iterative process in which emerging conceptualizations are systematically combined throughout the research phase with existing theories (Dubois and Gadde, 2002, Timmermans and Tavory, 2012). Therefore, we deemed an abductive approach particularly suitable for our study to develop

Findings2

We will now briefly outline the pathways for partnership formation before analyzing in depth the underlying drivers for the two dynamics we observed in our data.

Discussion

Propositions on drivers for a network-reinforcing strategy to form cross-sector partnerships.

A key insight from our research is that the frontrunner companies in our sample pursued a network-reinforcing strategy to choose NPO partners for additional cross-sector partnerships for sustainability: companies encouraged and facilitated the formation of repeated and third-party ties whenever possible. Firm-firm alliance research links the formation of network-reinforcing ties largely to

Conclusion

A firm's choice of a nonprofit partner is a decision that greatly affects the latter success of a cross-sector partnership (e.g., Austin and Seitanidi, 2012, Seitanidi et al., 2010). Considering the specific challenges and trade-offs faced by firms when choosing a nonprofit partner (e.g., Dahan et al., 2010, Rondinelli and London, 2003), it is critical to better understand which formation strategy is suited to this context. Cross-sector partnership research has only recently started to explore

CRediT authorship contribution statement

Sylvia Feilhauer: Conceptualization, Methodology, Investigation, Formal analysis, Writing - original draft, Visualization. Rüdiger Hahn: Conceptualization, Methodology, Validation, Writing - review & editing, Supervision.

Declaration of competing interest

None.

Sylvia Feilhauer is an external research associate at the Heinrich-Heine-University Düsseldorf, Germany. Previously, she worked for a strategic management consultancy as a senior consultant with a focus on the consumer goods, food and retail industry (2012–2015). She holds a Master of Science in International Management (CEMS) from the Rotterdam School of Management, Erasmus University, Netherlands. Her research focuses on partnerships for sustainability between firms and nonprofit

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    Sylvia Feilhauer is an external research associate at the Heinrich-Heine-University Düsseldorf, Germany. Previously, she worked for a strategic management consultancy as a senior consultant with a focus on the consumer goods, food and retail industry (2012–2015). She holds a Master of Science in International Management (CEMS) from the Rotterdam School of Management, Erasmus University, Netherlands. Her research focuses on partnerships for sustainability between firms and nonprofit organizations.

    Rüdiger Hahn is the Henkel-Endowed Chair of Sustainability Management at the Heinrich-Heine-University Düsseldorf, Germany. He previously held positions as Full Professor at the University of Hohenheim and as Associate Professor at the University of Kassel, both Germany. He published in internationally renowned journals such as Business & Society, International Business Review, Journal of Business Research, Journal of Industrial Ecology, Organization & Environment and others.

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