Hands in the Pockets of Mercurial Donors: How Three Theories Explain Ngo Responses to Shifting Funding Priorities

The NGO-donor relationship has become understood as exceptionally volatile. Nongovernmental organizations (NGOs) in developing countries rely heavily on foreign donor funding and potential over-reliance on donors becomes apparent. The research at hand concentrates on the relationship between environmental non-governmental organizations (NGOs) and international donor agencies in the local setting of a developing country. It explores the potential impact of changing funding priorities on NGO behavior and decision-making. It raises two questions: How do NGOs respond to changes in donor funding objectives? Why do NGOs react the way they do? NGOs react to changes in the external environment in different ways (Thompson 1967; Pfeffer and Salancik 1978; Scott 1981; Pfeffer 1982). The first phase of the dissertation explores the NGO-donor relationship when donors revise funding priorities and partner NGOs try to adapt. There is a variation in the way NGOs respond to changes in funding manifested or applied in a variety of ways. The study draws on qualitative research to study the decisions of four NGOs in response to shifts in funding, and analysis reveals the following variations in NGO responses to such shifts: suspend the relationship, reach common ground and maintain the relation, automatically execute the donor’s interests, and voluntarily and deliberately adapt to the situation. The research builds on Hirschman’s (1970) individual self-interest theory and considers NGOs as ‘consumers’ in their relationship with donor agencies. Using Hirschman’s (1970) typology, three modes of NGOs’ response are identified: exit, voice, loyalty, and a fourth mode, adjustment, is proposed. Furthermore, the dissertation integrates resource dependence theory (Pfeffer and Salancik 1978) and the theory of weak ties (Granovetter 1973, 1983) to construct a more parsimonious theory to predict organizational responses to changes in the surrounding environment. Each of the two theories is reviewed separately to provide a theoretical justification for NGO behavior in a changing funding environment. Resource dependence determines NGO behavior. Therefore, we expect that NGOs characterized with high resource dependency will comply with donor interests. Furthermore, the behavior of the NGO could also be determined by the presence of strong or weak ties, such that an NGO centrally located in a dense network with strong ties is likely to comply with donor interests. This investigation also recognizes that organizations vary in terms of tolerance for resource dependency and the nature and structures of their network relations. The study accepts Salancik’s (1995) argument that control over resources is not the only source of power in an inter-organizational relationship; network positions are related to power. Accordingly, the study presents an alternative perspective that integrates the two theories, stipulating that an organizational response to changes in its external environment depends on the level of resource dependence tolerance as well as the strength of ties in a network of actors. The likelihood of an organization adopting exit as a response to shifts in donor funding is higher with lower resource dependence and weaker network ties. The likelihood of an organization practicing voice is higher with lower resource dependence and stronger ties. The likelihood of an organization practicing adjustment is higher with higher resource dependence and weaker network ties. Lastly, the likelihood of an organization adopting loyalty as a response to shifts in donor funding is higher with higher resource dependence and stronger ties. The integrated theory is supported with in-depth qualitative analysis of multiple cases of NGOs and their relations with stakeholders, specifically donors. It is verified by translating propositions into hypotheses. These key hypotheses are tested using multinomial regression analysis based on measurements derived from network analysis that plots network maps of environmental NGOs in Lebanon. The results provide good support for the predictions of the integrated theory. Variation in resource dependence has no effect on the choice of voice over exit, while higher centrality increases the tendency towards voice. There is a higher tendency for adjustment with higher resource criticality and concentration while tie strength has a weak effect on the choice of adjustment over exit. HANDS IN THE POCKETS OF MERCURIAL DONORS: HOW THREE THEORIES EXPLAIN NGO RESPONSES TO SHIFTING FUNDING PRIORITIES