Association for Public Policy Analysis & Management

NGOs help facilitate discussions between business and governments on best practices and international standards which, in the long run, improve firm efficiency and productivity, and also help attract new investments, foreign and domestic. Beyond aiding corporations in their push for profits, greater NGO participation in such an institutional environment helps mitigate inefficiencies created by political, economic, and social inequities. Thus, NGOs are prominent socio-economic actors that play an important role in determining the trajectory of economic development in countries. Their active participation in the social regulation of the behavior of government and private sector has come to be seen as a necessary metric for the healthy development of regions and countries. Thus, governments, multinational corporations, local private businesses, and institutional investors look to NGOs for their support and validation in determining the new directions for sustainable growth.

With the role of NGOs explained, we provide a sweeping look at the literature on multi-stakeholder initiatives, and explain the differences between a virtually business-run corporate social responsibility structure versus a true multi-stakeholder one, by addressing the validation and legitimation factor of NGOs. We then empirically examine the role of NGOs in the UNGC. More precisely, we are looking at the way in which country-level NGO participation is a significant determinant of entry by new private sector firms in the initiative. We apply a Negative Binomial regression model with bootstrapping methods to estimate whether NGOs are associated with new private companies’ participation in UNGC. We also apply the same model to estimate heterogeneous associations between local and international NGOs inside and outside of the developing countries context. Our preliminary results show that the number of NGOs participating in the UNGC in a country is statistically significantly and positively associated with the number of new private sector entrants to the Compact from that country. However, we find that this association is driven almost entirely by local NGO participation in the Compact, rather than by international NGOs. This seems to suggest that locality matters, or, that stronger ‘local networks’ provide greater incentives for businesses to self-select into signing the Global Compact. Our work furthers literature on CSR, and sets up important future research trajectories on local NGOs as crucial stakeholders in global CSR.