Activist nongovernmental organizations (NGOs) increasingly oppose firms' practices. We suggest this might be related to the vulnerability of public regulation to corporate influence. We examine a potentially harmful industrial project subject to regulatory approval. Under industry influence, the regulator may approve the project even though it is harmful. However, an NGO may oppose it. We characterize the circumstances under which NGO opposition occurs and under which it is socially beneficial. Our theory explains the role that NGOs have assumed in the last decades, and has implications for the social legitimacy of activism and the appropriate degree of transparency of industrial activities.
Daubanes, Julien, and Jean-Charles Rochet.
"The Rise of NGO Activism."
American Economic Journal: Economic Policy,
Firm Behavior: Theory
Conflict; Conflict Resolution; Alliances; Revolutions
Asymmetric and Private Information; Mechanism Design
Nonprofit Institutions; NGOs; Social Entrepreneurship
Economics of Regulation