Corporate-NGO Collaboration:
Co-creating New Business
Models for Developing Markets
Nicolas M. Dahan, Jonathan P. Doh, Jennifer Oetzel
and Michael Yaziji
Multinational enterprises (MNEs) face a range of challenges when entering developing
countries, including the need to adapt their business models to local markets’ cultural,
economic, institutional and geographic features. Where they lack the tangible resources or
intangible knowledge needed to address these challenges, MNEs may consider
collaborating with non-profit nongovernmental organizations (NGOs) to help facilitate new
modes of value creation. In such cross-sector partnerships, parties contribute complementary
capabilities along each stage of the value chain to develop products or services
that neither could produce alone, creating and delivering value in novel ways while
minimizing costs and risks. Our conceptualization broadens the business model concept to
incorporate cross-sector collaborations, arguing such partnerships can create and deliver
both social and economic value, which can be mutually reinforcing. We highlight, in particular,
the competencies and resources NGOs can bring to such partnerships, including
market expertise, legitimacy with clients/customers, civil society players and governments,
and access to local expertise and sourcing and distribution systems. Beyond contributing
to particular value chain activities, NGOs and companies can offer missing capabilities
to complete each other’s business models, or even co-create new and innovative multiorganizational
business models. We stress four strategic imperatives for the success of
corporate-NGO developing market partnerships e innovative combinations of firm and
NGO resources and skills; the importance of trust-building, and of fit between the two
organizations’ goals; and supporting and understanding the local business infrastructure
and environment.
Ó 2009 Elsevier Ltd. All rights reserved.
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Introduction
Multinational enterprises (MNEs) face a range of challenges when entering and operating in developing
countries. Dominant business model logics from developed countries may need to be adapted
and adjusted to the cultural, economic, institutional, geographic and other features of these
markets e but multinationals may lack the tangible resources or intangible assets to address these
challenges successfully. Collaboration with a non-profit nongovernmental organization (NGO) may
provide a partial solution to developing appropriate, bespoke business models for developing countries.
In these joint efforts, NGOs and firms contribute complementary capabilities e both intangible
assets such as knowledge, reputation, and brand, and tangible resources, such as human
capital, production capabilities and market access e along each stage of the value chain and affecting
many aspects of the business model. These initiatives enable participating firms to create and
deliver value in novel ways, while minimizing costs and risks. We seek to highlight, in particular,
the competencies and resources that NGOs can bring to such partnerships, including market expertise
(needs identification, knowledge of certain market segments); the value of NGO brands to customers,
customer relationships, legitimacy with civil society players and governments; and
ownership of e or access to e local distribution systems and local sourcing abilities, which can
also enable them to contribute to formulating novel and viable business models.
NGOs e such as Amnesty International, CARE, Greenpeace, Oxfam, Save the Children, World
Wide Fund for Nature and hundreds of other smaller examples e that engineer campaigns with
the goal of advancing specific causes have become important actors in the global political, social, economic
and business environment. Recent statistics indicate a 450 percent increase in the number of
international NGOs between 1990 and 2000.1
The advocacy, operations and service delivery of
many NGOs is designed to ameliorate intractable social and environmental problems, working on
multiple issues including combating hunger, curtailing human rights abuses, countering environmental
degradation and improving health care. NGOs and for-profit corporations are also developing
more collaborative relationships of potential mutual benefit. Their relationships with NGOs can provide
corporations with access to different resources, competencies and capabilities than are otherwise
available internally, or which they might acquire from alliances with other for-profit organizations.2
These can enable corporations to overcome business model liabilities in developing countries by helping
them to identify market shifts and trends, accelerating market entry, and in some cases, co-developing
innovative new business models. Exhibit 1 outlines a handful of the hundreds of innovative
partnerships emerging between MNEs and NGOs around the world.
This article extends the business model concept in documenting the case of firm-NGO partnerships
as a particular response to a fundamental problem MNEs face in developing countries markets:
how to adapt existing, or develop new, products and services that are appropriate for the local
Exhibit 1
Innovative MNE/NGO partnerships
In May, 2008, Microsoft Corp (MS) and One Laptop per Child (OLPC) of Cambridge, MA,
announced an agreement to make a version of MS Windows available on the low-cost XO
laptops the non-profit is distributing around the world. In India, Unilever has teamed up
with NGOs to create Shakti, a rural network employing 31,000 women that sells products
adapted to customers in more than 100,000 rural villages. Electricite´ de France (EDF) is bringing
electricity to rural areas through a range of partnerships: its Energy Access program
involves collaboration with the World Bank, UN agencies, other multilateral and bilateral
donors and NGOs to create small, locally-run companies to provide electricity. The potential
in such basic infrastructure areas is enormous: two billion people worldwide still have no
access to electricity.
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context when critical information about those markets is difficult to acquire, marketing outreach
and distribution is inaccessible, and broader brand awareness and social reputation are hard to
come by.
Our conceptualization represents an extension of the business model concept in two ways. First,
we broaden the concept to incorporate cross-sector collaborations; previous business model
research has focused almost exclusively on business models as executed by single firms or, in
a few cases, by business partnerships. Second, business model research has traditionally identified
the purpose of the business model as generation and delivery of economic value: here we extend the
notion to argue that business models can be viewed as generators of social value, and that economic
and social value creation can be mutually reinforcing. The primary contribution of our article is to
extend the business model literature beyond the traditional focus on private sector value creation
towards models where businesses, NGOs - and other types of non-traditional partners - can work
together in cross-sector alliances or other collaborations to create new products and services, pioneer
new delivery methods, improve the quality of existing products and services, and generate new
value for the customers and clients of all parties. Business models resulting from these partnerships
may create economic value, social value, or both.
Our level of analysis is the partnership, alliance or other cross-sector initiative or project. These
collaborative formats are the vehicles through which new business models are developed, and facilitate
the creation of new products and services: we focus here on how this process works and offer
examples of the resulting project-level outcomes.3
Just as new technologies can enable businesses to
reach new customers, provide better products and services to existing customers - and at lower
cost - so too can cross-sector partnerships facilitate the creation of new business models. Unlike
the adoption of technologies like the Internet, which are readily available in the marketplace, the
new business models generated through these cross-sector partnerships are likely to be harder
for other firms to replicate.
Value creation through collaborative business models
The business model literature has a long and varied history, tracing its origin to Peter Drucker’s
classic 1954 book, The Practice of Management.4
The concept gained increased currency in the
late 1990s in the context of the development of new business models that took advantage of impressive
advances in information communication technology (ICT) and, of course, the internet,5
and
has subsequently been applied more broadly in a range of corporate settings.6
There is no one clear
and consistent definition of a business model - but a useful approach is to consider the concept as
a representation of a firm’s underlying core logic and strategic choices for creating and capturing
value within a value network.7
While the concept is not universal, most conceptualizations of business
models contain common definitional elements which we highlight here.
 First, we can distinguish a business model from a strategy, another concept with which it is
often confounded. A strategy can broadly be understood as a description, plan or process for
how to move from the current situation to a desired future state. By contrast, a business model
is a description of a state.
 Second, a good business model is a relatively comprehensive description of the organization’s situation.
A complete business model may include descriptions of organizational governance,
Strategy is how to move to a desired future state: a business model
describes that state. A good model will be relatively comprehensive,
and coherent - its attributes will fit together in a way that makes sense
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structures and capabilities, partners, the target market, the value proposition, who is creating and
capturing value, the value chain, as well as which activities will be conducted by the focal firm, by
partners, or through arm’s length transactions, as well as revenue and cost structures. It is important
to note that a business model will include not just a description of the organization
but also, critically, a description of its environment, including the broader (economic, social
and political) institutional context, competitors, customers, consumers, suppliers and - especially
relevant for our discussion - partners.
 Third, a good business model will be coherent - its various attributes will fit together in a way that
makes sense. For example, a ‘low price, high volume’ business model will make sense only if there
is an appropriate low-end target market and if the organization is optimized around cost minimization
so it can benefit from size-related economies.
 Fourth, given the requirement for coherence, some believe that there are a finite number of generic
business models e including, for example, those termed low-cost; open source; copy-cat;
‘bricks and clicks’; and differentiation business models, thus making a typology possible.
We contend that, just as firms do, NGOs use business models to structure and map the mechanisms
whereby they intend to deliver value - generally social rather than economic - to their target
public, and how the necessary costs and revenues will be structured. While NGOs have no mandate
to generate profits, they are concerned with balancing their economic needs with their various sources
of financing in order to sustain their operations and have maximum impact on the ground, and
are thus subject to the same forces and reasoning as for-profits when designing their business
models. While business model research has most often focused on value creation, it has also
addressed issues of value appropriation and capture. In this article, we are primarily concerned
with the value created by corporate-NGO alliances and partnerships, and - more specifically we
focus on both the economic and social dimensions of value creation. Economic and social values
are dual outcomes of several of our examples of MNE-NGO alliances.
We see three archetypal ‘scenarios’ in the evolution of how corporate-NGO collaborations restructure,
redefine or develop new business models, which are illustrated in Figure 1. The first situation
(Case 1) represents the situation where the corporation and NGO each have a complete
business model that they can fully carry out alone, obviating the need for any collaboration. In
Case 2, one or both parties possess preexisting business models that are incomplete e since they
rely on resources and skills the organization does not possess or fully control e and can only be
realized by accessing the capabilities of the other partner. By providing each other with access to
rare resources, the parties can make each other’s (separate) developing country business models
viable e NGO support can enable the implementation of a firm’s business model that generates
Corporation
NGO
Complete
Business
Model
Complete
Business
Model
Corporation
NGO
Corporation
NGO
New
Business
Model
Absent Business Model
Absent Business Model
Case 1:
No Collaboration
Case 2:
Restructure/ Redefine
BM Through Collaboration
Case 3:
Develop New BM
Through Collaboration
Incomplete
Business
Model
Incomplete
Business
Model
Figure 1. Corporate-NGO Collaboration for Developing Country Business Models
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and delivers economic value to customers, or assistance from a for-profit can facilitate the business
model of an NGO’s project for generating and delivering social value to its target public. Each business
model remains distinct - but both depend on the organizations acting complementarily, as neither
could succeed without the input of the other. In the third case (Case 3), there is no prior
business model, and a common one - based on resource contributions from both partners - is
developed for a joint project which is carried out by the two together, with the understanding
that each partner derives a distinct benefit from the collaboration, leading to financial earnings
for the firm, and enabling the NGO to deliver impactful social value. Thus a joint project’s business
model delivers both economic and social value concurrently.
Firm/NGO cooperation and co-creation in developing markets
The opening and liberalization of developing country markets presents new kinds of opportunities,
and also constraints. That the institutional conditions and idiosyncratic environments of developing
countries present formidable challenges for corporations entering and operating there has been
widely documented.8
At the most basic level, the unique institutional conditions in developing
countries preclude simply importing existing developed market business models. Adapting existing
or creating new business models for developing markets will often involve redesigning value delivery
systems, product attributes and cost structures in order e for instance - to supply a profitable
offer at prices much lower than the standard developed country offer.9
Research on alliances between for-profit firms in commercial environments suggests that each
partner benefits when one brings resources, capabilities or other assets that the other cannot easily
attain on its own. These ‘combinative capabilities’ allow the firm to synthesize its acquired resources,
and build new applications from them, so as to generate innovative responses to unfamiliar
or rapidly evolving environments.10
We extend this notion to include collaborative relationships
between MNEs and NGOs in developing country environments, a conceptualization that challenges
some established orthodoxies of international strategy, notably the assumptions that entry modes
and operational structures will closely follow the patterns of developed country markets. The inherent
differences in mission, governance, strategy and structure between corporations and NGOs
mean that business models emanating from their collaborations will usually be opportunistic, project-based
initiatives, as opposed to representing deep and fundamental transformational change at
the corporate level. Importantly, however, some of these project-based interactions will result in
prototypes which can form the basis for deeper, longer-term collaborations - and these may result
in more fundamental business model and strategic changes in both firms and NGOs.
In their review of corporate-NGO collaborative initiatives Selsky and Parker note that the terminology
for these cross-sector relationships varies,11
and includes social partnerships, intersectoral
partnerships, social alliances, issues management alliances and strategic partnerships.12
Regardless of
the vocabulary, collaborations between some combination of public authorities, nonprofit organizations
and MNEs may provide opportunities for the latter to address developing markets with
product or process innovations that would be less likely, or less successful, than they would without
the partnerships. Rondinelli and London note that ‘Alliance[s], in fact, may be the only option for
companies interested in accessing the knowledge held by (NGOs), since internal development of such
expertise may be too costly, inefficient and time-consuming for most companies and merger with or acquisition
of an (NGO) is highly unlikely,’ while Kramer and Kania support a similar view: ‘Nonprofits
often have a deeper understanding of the social problem, which enables them to help companies devise
more comprehensive strategies and set more ambitious and attainable goals’.13
A developing country business model will be incomplete unless it addresses the specific constraints
of the local context. However (as noted above) neither firms nor NGOs may possess, within
their own organizations, the full range of tangible and intangible capabilities or resources required
to compete successfully in such environments. Typically, MNEs possess capital, managerial capability,
large-scale and global production capabilities, legitimacy with other private sector-players,
global sourcing, purchasing power and brand value with customers. On their part, NGOs can offer
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competencies and resources of their own, such as market knowledge and expertise (needs identification,
knowledge of specific or new market segments); brand value with their own clients and the
trust of customers and gatekeepers; legitimacy with civil society players and governments; relationships
with global and local suppliers; as well as other local advantages such as sourcing ability and
ownership of (or access to) distribution systems. MNEs may need to form collaborations with a variety
of stakeholders - government agencies, indigenous civil society organizations, local suppliers
and customers - to access these NGO capabilities. But this process need not just be one-way: indeed,
combining and leveraging their relative strengths through collaborative efforts can allow all parties MNEs,
NGOs and other nontraditional business partners e to achieve their individual organizational
goals more fully.
We now examine our second case in Figure 1 in more detail, providing examples of how NGOs
and firms can work together, in varying degrees and in complementary ways, at each stage of the
value chain, to support the development of market business models that would be incomplete without
their partner’s support.
Firm/NGO contributions to market research
Most NGOs involved in social issues in developing countries have ‘on-the-ground’ facilities and
staff who will have first-hand experience of the cultural specificities, living conditions, typical hardships
and lack of infrastructure in a developing country.14
They will be acutely aware of its population’s
economic and social needs, as well as being in touch with social trends, and thus able to
identify potential local markets and products. Collaborating with NGOs possessing these insights
can allow a firm to develop a product or service offering better adapted to the local market context.
Ashoka e a foundation dedicated to promoting social entrepreneurship in developing countries e
has developed a Full Economic Citizenship Initiative (Ashoka/FEC) - an example of an NGO effort
specifically designed to bring local market research and technical expertise into partnership with businesses
to establish large-scale solutions for solving economic development problems in low-income
countries. One of their projects centers on expanding irrigation in Latin America. Ashoka discovered
that the 35 million smallhold farmers who live on less than two dollars a day in Latin America could
double or triple their incomes if their land were adequately irrigated. But only about 12 percent of
agricultural land is irrigated, and water rights are often controlled by a few wealthy landholders.
To try to democratize access to quality irrigation systems, Ashoka/FEC has brokered a commercial
partnership between a multinational water distribution system company and several citizen-sector
organizations working on rural issues. Ashoka reports that these efforts have led to the creation of
new delivery channels to serve low-income farmers, some of which have used new technologies
developed in Latin America. For the water distribution MNE involved, the 88 percent of farmers
without adequate irrigation represent a significant market opportunity.15
The local NGOs and other
organizational partners educate small farmers about new irrigation technology and promote its use,
identify sources of consumer financing for farmers and help link them to markets to sell their
increased production; in return, these groups earn a commission on sales to cover their
operational expenses and advance their social programs.
Without this corporate-NGO collaboration, it is highly unlikely that either the NGOs and local
citizen groups or the MNE could have succeeded on their own. The former lacked the technical,
Combining and leveraging their relative strengths through collaboration
can allow MNEs, NGOs and other nontraditional business partners to
each achieve their individual organizational goals more fully.
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organizational and financial resources to transform their market research and knowledge of newly
developed Latin American irrigation technology into a functioning water delivery system. On their
side, the multinational would have been unaware of the new irrigation methods and how they could
be utilized to create a profitable business opportunity, and would have found it exceedingly difficult
to reach potential customers and aggregate the consumer base into a viable market without the input
of the NGOs and citizens’ groups. Thus, key business model variables e including target customers,
the value proposition, the governance of activities and the distribution channels e were all
redefined in the specific new business model developed by the collaboration for this situation.
Firm/NGO contributions to product R&D
R&D efforts can be product- or technology-driven on the one hand - as when basic science leads to
new components or products being envisaged before a market is even identified (in fields such as,
for example, nanotechnology) e or market-driven, as when a solution is developed in response to
an identified need. In NGO/corporation collaborations, corporations are often involved in more
‘upstream’ R&D areas - i.e., actual product creation - whereas the NGOs are closer to the market
side of the process, identifying needs or providing feedback on the various options being considered
by the firm, either through their intimate knowledge of local needs or through test marketing in
a small market to fine-tune a concept before a broader launch.
Cemex e Mexico’s largest integrated building solutions company (and the third largest in the
world) e worked with Patrimonio Hoy, a self-financing nonprofit (created by Cemex itself, among
others), to ‘co-create’ a solution aimed at alleviating the dire housing deficit in Mexico, estimated at
four million homes affecting 20 million people. This joint effort developed a new offering in the
form of a sales, distribution and savings program aimed at serving Mexico’s self-construction housing
market. In collaboration with Patriomonio Hoy employees in the targeted communities, Cemex
developed a package of new products and services that reduced self-construction time by 60 percent
and costs by 35 percent, facilitated the timely supply of materials, and included - an important aspect
- a financing program aimed specifically at the low-income target market. By 2008, the Cemex
Patrimonio Hoy partnership estimated it had benefited more than 200,000 families in 22 states
throughout Mexico, and the program had also expanded to Colombia, Venezuela, Nicaragua
and Costa Rica.16
While foreign multinational firms often lack the level of local knowledge that can be critical to
developing and testing new products, they have a great deal of experience and expertise in product
R&D generally, and can prototype new products quickly and efficiently. In this case, Patrimonio
Hoy would not have the technical and manufacturing resources and expertise to provide construction
materials at affordable prices on its own, while e similarly - Cemex needed its nonprofit partner’s
local knowledge and access to understand the specific needs of self-construction consumers
and to develop and administer the collaboration’s microcredit system. This corporate-NGO effort
has resulted in economic value creation for Cemex - in terms of increasing its customer base and
enhancing its reputation - and has also delivered substantial social value by increasing access to
housing in the communities served by Patrimonio Hoy.
Cemex reduced self-construction time by 60% and costs by 35% and
Patrimonio Hoy developed a low-income financing program. By 2008,
the partnership had benefited more than 200,000 Mexican families and
expanded into Colombia, Venezuela, Nicaragua and Costa Rica.
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Firm/NGO contributions to procurement and production
Successful business models for lower income markets are usually based on low-cost, low-margin,
high volume patterns: legitimacy with suppliers and the buying power to secure high purchase volumes
and multiple product purchases can be critical to such low-cost business models. In these
matters, it is the corporations that tend to have the relevant resources and skills: global firms
can wield tremendous buying power and have on-going relationships and legitimacy with global
suppliers, who are more likely to have the scale to produce supplies at lower cost than developing
market providers, particularly in terms of physical supplies. For their part, NGOs can help with
procurement, particularly of low-cost labor, and can often both identify and develop the local labor
pool through training. This is especially important in service industries such as microcredit, where
low-cost labor is a critically important input for the model, and for the training and monitoring
activities involved in various fair trade and sustainability-focused business models. Where production
is local, as well as sourcing and developing local labor, NGOs can often manage it better than
can a foreign partner firm.
Nestle´’s cocoa initiatives in Africa are a good example of corporate-NGO collaborations along
a supply chain. Together with a dozen other major chocolate manufacturers, Nestle´ has partnered
with NGOs and local governments in setting up programs to improve labor conditions and promote
sustainable farming practices in West Africa. Nestle´ is at the forefront of the latter objective,
with its sponsorship of ‘farmers field schools’ in the Ivory Coast,17
which support both the production
of higher quality cocoa (thus ensuring Nestle´ has access to a valuable supply line), and the social
benefits of that production. Here again, substantial value is created on both fronts: Nestle´ gains
a strong and more skilled labor force as well as access to better ingredients, while the NGOs further
their mission to support sustainable farming and fair labor conditions, helping reduce abusive child
labor and slavery in the African cocoa industry.
Firm/NGO contributions to distribution
NGOs and corporations can often provide each other with complementary distribution capabilities,
with corporations providing global distributions systems and NGOs - who have knowledge of, and
access to, local networks and existing distribution systems and have built trust with various local
stakeholders - facilitating the ‘last mile’ local distribution.18
For example, ‘Doctors Without Borders’
extensive on-the-ground networks in developing countries make it a reliable, efficient and trustworthy
partner for pharmaceutical companies for distributing medications in such environments.
New products targeted for developing markets are often distributed as a bundle with an array of
complementary services - such as technical assistance, service and financing - that are critical to the
success of the venture. Providing this product/service bundle on the ground can be a shared responsibility
between the firms and NGOs. In the Cemex affordable housing case, participants enter a savings
and credit program, get assistance to plan construction work and benefit from services such as
material storage, delivery and guaranteed two-year fixed prices. This coordinated access to the
services of both Cemex and its NGO partners helps the company reach new customers it could
not serve otherwise, and poor families to improve their living conditions.
Again in the microfinance arena, HSBC Amanah (HSBC’s global Islamic banking division) has
partnered with the international development and relief organization Islamic Relief to offer Islamic
Microfinance in Pakistan: both microfinance and banking ventures provide financial services to devout
Muslims in accordance with Islamic Shariah law. HSBC Amanah provides funding and training
in microfinance to Islamic Relief, which, in turn, fulfils a role comparable to a local partner
marketing company, marketing microfinance to local entrepreneurs, identifying and screening
customers and their projects and tailoring the offering as needed.19
Firm/NGO contributions to marketing
NGOs usually have recognized expertise in a social issue and the public legitimacy to address it, and
the impact of commercial firms’ marketing messages is greatly enhanced by endorsements from nonprofit
organizations. This ‘co-branding’ brings tremendous credibility to the firm’s claims regarding
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the benefits of its product/service, increasing the perceived value of its offering.20
As developing market
customers often have little (or no) education, and illiteracy levels may be high, NGO staff can provide
much-needed local consumer education about how to use a product or service. Raising
awareness of the product’s existence, and convincing consumers that using it is both beneficial and
straight-forward, can be important prerequisites to a firm building a customer base.
Population Services International (PSI) is one of the largest social marketing NGOs in the world.
It uses commercial customer education and marketing techniques tailored to developing markets,
and has tremendous local expertise critical to successful marketing, as well as in market research
and product R&D. Working together with firms, it educates customers to increase uptake of products
such as malaria and AIDS treatment and prevention, birth control and water treatment. For
instance, unsafe water supplies and inadequate sanitation kill more than three million people
worldwide every year, making this problem collectively more lethal than AIDS. In 2003, a $20 million
Procter & Gamble (P&G) R&D and marketing project had reached a commercial impasse after
eight years of work.21
A decade earlier P&G had spotted an opportunity to supply a water-purifying
product it believed could save lives in the developing world by providing a simple way to purify
household and drinking water, and (it hoped) would increase the company’s share of the mass consumer
market in emerging economies. But it had no expertise or credibility in water access and
management, and reached out to various partners - including PSI e for social marketing expertise
and funding. PSI had previously been involved in the initial design and testing of the first safe water
solution trials, and had subsequently implemented safe water programs in 20 developing countries.
Thus it had fundamental expertise - which P&G lacked - about how water was viewed, used and
distributed in developing countries. In 2000, this relationship allowed P&G to develop and launch
PUR, a sachet of powder which, mixed into a 10-litre bucket of dirty water, would make it clean and
safe to drink. Pricing its product for a low-income commercial market at $0.08e$0.10, P&G has
since sold millions of units.22
In the area of microfinance, MasterCard builds on an affinity card relationship with Banco Popular
Dominicano and Asociacion para el Desarrollo de Microempresas, Inc. (ADEMI), a micro- and
small-scale lender in the Dominican Republic. ADEMI’s marketing efforts have drawn 15,000
owners of microenterprises, most of them too small to attract banks due to their lack of profit potential,
into the formal financial system. About 3,000 of these previously ‘unbankable’ entrepreneurs
are now using MasterCard-ADEMI-Banco Popular Dominicano credit cards at purchasing outlets,
to withdraw cash and to pay utility and other bills, thus building their stature in the local business
community. Citicorp, HSBC and other well-known financial institutions are following suit.
Firm/NGO contributions to new business model development
Beyond contributions to particular activities within the value chain (which corresponds to our second
case in Figure 1, where each organization supports the business model of its partner’s project),
some of the most exciting, challenging and innovative developments have been multiple-organization,
cross-sector partnerships, often involving national governments, transgovernmental organizations,
firms and NGOs. In these complex partnerships, the co-imagining and co-creation of
PSI had fundamental expertise about how water was viewed, used and
distributed in developing countries. In 2000, this [facilitated] P&G in
launching PUR, a sachet of powder that made dirty water clean and
safe to drink, which has since sold millions of units.
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complex multi-organizational business models has been as critical as the actual execution of the diverse
activities by various players. This co-creation by all the partners of a novel joint business
model corresponds to our third case in Figure 1.
One example of this type of complex collaboration is the Global Health Initiative (GHI) which
was initiated by Kofi Annan and the UN and is run by the World Economic Forum. GHI’s purpose
is to engage businesses in public-private partnerships to address global health concerns such as
AIDS, tuberculosis and malaria, and the initiative has received strong support e financial and otherwise
e from many firms, academics, NGOs and governments in both developed and developing
nations. One example of its work is the development of a GHI ‘toolkit’ entitled Protecting Your
Workforce and Surrounding Communities from Tuberculosis, targeted at employers and produced
in collaboration with the Lilly MDR-TB Partnership. The aim of this initiative is to boost the involvement
of Chinese companies in tackling the country’s tuberculosis crisis. If successful, the project
would create substantial value in terms of widespread public health benefits in China, while
private firms stand to benefit from having a healthier workforce.
Another example is the successful co-venture between NGOs and the private sector to produce and
distribute mosquito nets in Africa. This collaboration involves the AtoZ factory in northern Tanzania,
ExxonMobil and the Japanese pharmaceutical Sumitomo, together with the World Health Organization
(WHO), UNICEF and other non-profit groups. Working with Chinese engineers African
workers produce mosquito nets in the AtoZ factory, which are purchased by the WHO and distributed
across Africa using funds raised by the international community. The AtoZ factory uses a resin
supplied by ExxonMobil for the yarn for the nets - and ExxonMobil hands over its income from the
resin sales to UNICEF, which uses it to buy more nets. Sumitomo sells long-life insecticide to AtoZ,
but also donates production technology know-how to the venture, which it regards so favorably it is
planning a large joint-venture with the AtoZ factory to increase production.23
In each of these complex partnership examples, firms, NGOs, and other partners bring different
resources and capabilities, and different strengths and areas of expertise: in combination, these
allow public-private partnerships to co-imagine and co-create complex systems of value delivery
that would probably otherwise be inconceivable.
Social and economic value complementarities
We are primarily concerned in this research with the question of value creation as opposed to value
appropriation, capture or distribution among the collaboration partners. Most of the initiatives
documented here are at relatively early stages, and it would be difficult to quantify precisely the
benefits to the different types of collaborators. What we can see is that complementary social
and economic value is being created for intermediate or final customers (or adopters/users in
the case where third parties are purchasing goods or services distributed free or at low-cost). An
overarching goal on the part of many of the corporate partners is the desire to attain social
legitimacy in markets where foreign multinationals are often viewed with suspicion and skepticism.
By lowering costs, reaching new groups of customers, streamlining distribution and - more broadly
- by filling institutional voids through new product or service offerings, these collaborative initiatives
provide bundles of social and economic value that may be very difficult to disaggregate.
Through these collaborative efforts, MNEs - with their advantages of financial and organizational
size, managerial and marketing expertise and operational scale and scope - can enable NGOs to
An overarching goal of many multinationals is to gain social
legitimacy in markets which view them with suspicion or
skepticism.
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enhance their product and/or service offerings and improve their organizational performance and
thus create more social value for their constituents. Going forward, as these new business models
mature and become more formalized, we expect more specific contracting arrangements to be
developed, with corporate and NGO partners negotiating more comprehensive cost and revenue
sharing arrangements akin to alliance contracts among private partners.
Table 1 summarizes the specific contributions NGOs make to business models, noting the market
constraints facing corporate/NGO collaborations in addressing developing country markets and
how key NGO resources and capabilities made direct contributions to the generation of new business
models. It also highlights the specific ways in which NGOs contribute to the MNE business
model - in terms of value creation, value delivery, revenue generation and cost minimization and
how economic and social benefits are likely to be distributed by the partnership.
Corporate-NGO business models in developing countries: risks and
recommendations
Despite the potential opportunities and benefits we have documented, identifying and accessing
NGO capabilities may itself pose managerial and organizational challenges for MNEs. Rondinelli
and London note that corporations and NGOs have fundamentally different structures and values,
and that relations between the two have often been characterized by hostility and mistrust. They
point out that cross-sector collaborations face the additional challenge that the levels of common
experience generally required for successful organizational learning are often lacking (or are only
weak) in alliances between profit-making and nonprofit organizations.24
This lack of common experience,
trust and communication can sometimes result in conflict, even when partnerships appear
to have shared values and commitments. Indeed, partnerships with NGOs may sometimes open
a path to escalating (and potentially unrealistic) demands for firms to upgrade their commitment
to social development. There are also more specific threats and challenges around such partnerships.
One is that a company interacting with an NGO is likely to be providing it (and potentially
other interested parties, such as regulators and even competitors) with sensitive, proprietary information.
Knowledge of a company’s R&D projects, strategic plans and internal audits may help
NGOs be better partners, but could also turn them e or their other partners e into challenging
competitors. Companies should have strict disclosure policies and guidelines for their partnerships
with NGOs, just as they would for commercial joint ventures.
We believe there are four strategic imperatives for the success of sustainable long-term corporateNGO
alliances. The first two deal with internal issues to the alliance, while the other two address
external issues in its local environment: they are summarized subsequently in Figure 2.
 ‘Combinative Capabilities’ across Business Activities. Many NGOs can provide more than one
of the capabilities described above. For example, nonprofit partners in microfinance contribute
new product and service ideas, open up new distribution channels and offer insights for novel
marketing practices. Firms should seek to exploit the entire range of potential contributions
a partner NGO may be in a position to make.
 Organizational Fit, Cultural Compatibility and Trust: Key Elements for Comprehensive,
Ongoing Alliances. In some instances, corporations and NGOs may simply enter into a onetime
(or repeated) contractual arrangement. However, for more comprehensive and ongoing
alliances, organizational fit, cultural compatibility and trust are all critical to success, as they
are in alliances between private business organizations. There are many examples of failed
corporate-NGO partnerships where strategic integration and resource complementarity brought
the two parties together, but which were doomed by fundamental differences in organizational
culture and a lack of basic trust. These issues are especially challenging as private corporations
and NGOs have fundamentally different values and missions.25
 Supporting Local Business Environments. Developing markets commonly lack critical supporting
activities to enable firms to provide product or service offering successfully. Infrastructures,
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Table 1. Specific NGO Contributions to Business Models in Developing Markets
Business activities
and example
Market constraint
and NGO contribution
Relation of new model
to prior corporate
or NGO business model
Potential benefit(s)
to business model
Distribution of
social & economic
benefits
Market research: Ashoka/FEC
project to provide
irrigation to small
farmers in Latin America
Market constraint: Lack
of knowledge; overcoming
information asymmetries,
NGO contribution: Identifying
innovative technologies developed
for unique local
environment and market
conditions; identification and
aggregation of customer base
New co-created business
model that enabled
the provision of irrigation
service to farmers
resulting in a doubling
or tripling of their
incomes; enabled private
sector firm to reach
new customers that
would otherwise be inaccessible.
Generation of novel
Business Model
Social and
economic
R&D: Cemex’s
Patrimonio Hoy program
Market constraint: Lack
of appropriately priced
and designed construction
materials for self-construction
of housing and financing
NGO contribution: Market
testing of products,
incorporation of customer
feedback; use of internal
microcredit system to facilitate
purchase of newly
developed materials
New co-created business
model that enabled
Cemex to expand
its market to through
reconfiguration of its business
model and made it possible
for Patrimonio Hoy to expand
housing opportunities for low
income families.
Generation of novel
Business Model;
Value creation;
Cost minimization
Social and
economic
Procurement and Production:
Nestle´’s cocoa farming initiatives
Market constraint: Underdeveloped
human capital; need access to local
networks and supply chains
NGO contribution: Established
relations with local communities
and host-country governments
Extends Nestle´’s existing business
model (supply chain) and enables
local NGOs to increase
employment and other
social benefits for residents.
Value creation;
Value delivery;
Cost minimization
Primarily
economic
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Marketing: P&G/PSI
and the Safe
Drinking Water Alliance
Market constraint: Lack of knowledge
surrounding distribution and use of water
in developing countries
NGO contribution: Input
in product development,
co-branding, customer education
Extends P&G ‘s and PSI’s existing
business models by expanding
the market for and the affordable
availability of water-purification
products (P&G product development;
PSI’s distribution networks)
Value creation Social and
economic
Distribution: HSBC Amah
and Islamic Relief
Market constraint: Access to local
networks and supply chains
NGO contribution: May take
on the provision
of some services itself
Extends HSBC Amah’s
existing business model
Value creation;
Value delivery;
Cost minimization
Primarily
economic
Comprehensive: AtoZ
Mosquito Net Venture
Market constraint: No single
organization was able
to develop and distribute
affordable mosquito nets
NGO contribution: Holistic
and fundamental rethinking
of product/process and construction
of new model
tailored to specific context
Creation of new product
based on shared
technology and expertise.
WHO participation makes
product accessible
to many people
in Africa. Substantial
financial and social
value created.
Social and
economic
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marketing media, distribution channels, financing services may be unavailable or insufficiently
developed. Firms must move beyond their core offering and commit to organizing a wider array
of activities if they are to provide an integrated bundle of products and services successfully,
either by internalizing these additional activities or by coordinating with external partners
such as NGOs. Local businesses must be strengthened and supported if the potential benefits
of cross-country corporate-NGO partnerships are to be realized: strong local businesses are vital
to the continued growth of the private sector in developing countries, and for supporting corporate-NGO
alliances. They can provide products or services to both NGOs and foreign firms,
and can help train and develop a country’s human resources. Local businesses attempting to innovate
and develop new products and services can be strong partners for foreign firms and
NGOs because of their unique local market perspective. It is in the self-interest of businesses
and NGOs to support such private sector capacity development, and help local firms improve
the quality of their products and services so they can be globally competitive.
 Understanding the Unique Conditions of Developing Countries. There is no substitute for
first-hand experience in the developing world. Managers interested in developing cross-sector alliances,
and hoping to develop innovative business models for such countries, must understand
the dynamics of the local country. Consumer, producer and even NGO behaviors may differ substantially
between developed and developing countries, and may sometimes seem counterintuitive
to Triad country managers. Only through experience can managers begin to understand the
complexity of doing business in these environments.
Notwithstanding these challenges, we believe corporate-NGO partnerships hold great promise for
companies seeking to break free from conventional constraints in adapting existing business models
and developing new ones. By reaching out across sectors, well beyond their typical range of partners
and collaborators, companies can find avenues to overcome institutional constraints, pursue opportunities
of which they would otherwise be unaware, and approach problems in ways beyond their current
capabilities and vision. Not only may the strategies firms develop in such activities contribute to their
strategic renewal,26
butthe ability ofa firm toovercomethe challengeswedescribe and successfully partner
with an NGO may itself constitute a capability that can lead to competitive advantage for the firm.
Organizational
Culture Local
infrastructures
and SMEs
SupportFit
Resources
and skills
Innovative
combinations
Firm – NGO
collaboration
Local
conditions
UnderstandingI
N
T
E
R
N
A
L
E
X
T
E
R
N
A
L
Figure 2. Four Strategic Imperatives for Successful Corporate-NGO Alliances
It is in the self-interest of businesses and NGOs to support private sector
capacity development, helping local firms improve the quality of their
products and services so they can be globally competitive.
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In closing, our conceptualization represents an extension of the business model concept in two
ways. First, the means by which new business models are created is through cross-sector collaborations,
as opposed to the previous research focus on single firm business models or business-business
partnerships. We present two distinct mechanisms whereby firms and NGOs can collaborate in
improving their business models: where partners contribute to the completion of each other’s business
model (case 2 in Figure 1), or where they jointly create a novel business model (case 3). Second,
business model research has traditionally proposed that the purpose of business models is to
generate and deliver economic value. Here we extend this notion to include social value, stressing
that both types of value can be achieved concurrently, and can be mutually reinforcing.
Acknowledgements
We thank the Special Issue editors, Benoit Demil and Xavier Lecocq;the journal’s Editor-in-Chief,
Charles Baden-Fuller, and its anonymous reviewers for their guidance and encouragement.
Appendix
This article builds on our prior research on the emergence of NGOs and their contributions to global
governance and value creation, the capability of multinationals to leverage their unique resources and
combine them with those of NGOs to contribute to the process of development, and a comprehensive
project by two of the authors on NGO-corporate engagement. In developing our initial intuitions and
research questions we also drew, in part, on an earlier survey from one of the authors.27
Data for our cases was taken from two of the authors’ consulting and executive education work
(especially the examples related to HSBC and Nestle) as well as from publicly available archival
sources. We used an inductive approach to select our cases; that is, they were intended to illustrate
and punctuate our theoretical development, rather than to serve as a formal test of the validity of
that theory. This approach is consistent with a form of comparative case analysis that has been
termed ‘strategic narrative’, as used in a number of studies seeking to show new applications of
existing theory.28
Our goal was to generate and refine our theoretical insights as well as to draw
sound practical insights. Our conclusions and insights provide the conceptual basis for further
formal empirical testing via survey research, ethnographic studies and field research.
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Biographies
Nicolas M. Dahan is an Assistant Professor of Management at Long Island University and a Research Fellow
with Rouen Business School in France. His research interests include corporate political strategy, business ethics
and corporate social responsibility, as well as European business. He has most recently published in Journal of
Business Ethics, Human Relations and the Best Paper Proceedings of the Academy of Management. College of
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Management, Roth Hall 206, 720 Northern Blvd, Brookville NY 11548-1300 (USA). Tel: (001) 516-299-2360;
e-mail: nicolas.dahan@liu.edu
Jonathan P. Doh is the Rammrath Chair in International Business, Director of the Center for Global Leadership,
and Professor of Management at the Villanova School of Business. His research on international business strategy
and corporate social responsibility has been published in journals such as Academy of Management Review, Strategic
Management Journal, Organization Science, and Journal of International Business Studies. He is co-editor or author
of six books, including NGOs and Corporations: Collaboration and Conflict (with Michael Yaziji, Cambridge
University Press, 2009). Bartley Hall Rm 2079, 800 Lancaster Ave., Villanova, PA 19085 USA. Tel: 610-519-7798;
fax: 610-519-6566; e-mail: jonathan.doh@villanova.edu
Jennifer Oetzel is an Associate Professor of International Business in the Kogod School of Business at American
University. Her research focuses on business strategy in emerging markets and managing political risk, particularly
violent conflict risk. Jennifer’s work has recently been published in the American Business Law Journal, Journal
of Business Ethics, Journal of World Business, International Business Review and Development Policy Review. Kogod
School of Business, American University, 4400 Massachusetts Ave., N.W.Washington, D.C. 20016. Tel: (202) 885-1905;
fax: (202) 885-1992; e-mail: oetzelj@american.edu
Michael Yaziji is a Professor of Strategy and Organization at IMD International. His current research focus is on
relationships among corporations, NGOs and government. His most recent publications are the article, ‘Time to
Rethink Capitalism?’ in Harvard Business Review (2008) and the book NGOs and Corporations (with Jonathan
Doh) published by Cambridge University Press (2009). IMD, 3 Chemin de Bellerive, 1000 Lausanne, Switzerland.
Tel: +41 79-580-6243; e-mail: michael.yaziji@imd.ch
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