International Security 27.1 (2002) 5-39

The NGO Scramble
Organizational Insecurity and the Political Economy of Transnational Action

Alexander Cooley and James Ron

Scholarly assessments of transnational actors are largely optimistic, suggesting they herald an emerging global civil society comprising local civic groups, international organizations (IOs), and international nongovernmental organizations (INGOs). This new civil society, moreover, is widely assumed to rest upon shared liberal norms and values that motivate INGO action and explain their supposedly benign influence on international relations. ¹ [End Page 5]

Although not entirely misplaced, this view does not adequately address the organizational insecurity, competitive pressures, and fiscal uncertainty that characterize the transnational sector. Powerful institutional imperatives can subvert IO and INGO efforts, prolong inappropriate aid projects, or promote destructive competition among well-meaning transnational actors. Attempts by IOs and INGOs to reconcile material pressures with normative motivations often produce outcomes dramatically at odds with liberal expectations.

This article develops a political economy approach to the study of contemporary transnational networks. We argue that many aspects of IO and INGO behavior can be explained by materialist analysis and an examination of the incentives and constraints produced by the transnational sector's institutional environment. We advance two theoretical propositions. First, the growing number of IOs and INGOs within a given transnational sector increases uncertainty, competition, and insecurity for all organizations in that sector. This proposition disputes the liberal view that INGO proliferation is, in and of itself, evidence of a robust global civil society. Second, we suggest that the marketization of many IO and INGO activities—particularly the use of competitive tenders and renewable contracting—generates incentives that produce dysfunctional outcomes. This claim disputes the popular assumption that market-based institutions in the transnational sector increase INGO efficiency and effectiveness.

In advancing these arguments, we do not criticize the normative agendas, moral character, or nominal goals of individual transnational groups. Rather we suggest that dysfunctional organizational behavior is likely to be a rational response to systematic and predictable institutional pressures. In many cases, uncooperative local actors will take advantage of the transnational sector's perverse incentives to further their own opportunistic agendas.

In making our argument, we draw on the New Economics of Organization (NEO), a body of theory that focuses on the incentives and institutional outcomes generated by contractual relations, incomplete information, transaction costs, and property rights. ² By applying these concepts to the environment in [End Page 6] which contemporary transnational actors operate, we identify sources of organizational insecurity and explain patterns of behavior that liberal theories of transnationalism either fail to acknowledge or cannot address conceptually. INGOs compete to raise money and secure contracts. These contracts, moreover, are often performance based, renewable, and short term, creating counterproductive incentives and acute principal-agent problems. Opportunism and dysfunctional outcomes are particularly rife when groups seek control over the same project, a phenomenon known as the "multiple-principals problem." Indeed we find that nonprofit INGOs respond to contractual incentives and organizational pressures much like firms do in markets.

To test our model, we examine three cases of transnational assistance. Although our theory is broadly rationalist, our method is necessarily qualitative and case based. Because we seek to go beyond the images, public documents, and prepared statements of IOs and INGOs, our three studies draw on in-depth interviews that seek to uncover hidden behavioral imperatives. The first case is based on more than thirty discussions with for-profit corporations operating in Kyrgyzstan under contracts from Western governments, international financial institutions, and the United Nations (UN). The case shows how reliance on one-year renewable contracts by Western donors created incentives for contracting INGOs to downplay government subversion of economic reforms, withhold information about ineffective projects, and tolerate bureaucratic opportunism. Our second case shows how inter-INGO competition in Goma, Democratic Republic of Congo (former Zaire), undercut the collective action necessary to protest misuse of refugee aid. This case draws on thirty-five discussions [End Page 7] with staffers from "Refugee Help," a respected nonprofit organization with a budget in the tens of...