ASSESSING THE IMPACT OF NGOS ON GLOBAL BUSINESS
Debora L. Spar Lane T. La Mure
n 1995, a group of Burmese and American graduate students at the University of Wisconsin at Madison created the Free Burma Coalition (FBC), a non-governmental organization (NGO) comprising a diverse mix of high school, university, environmental, human rights, religious, labor, and grassroots organizations. Reacting to the Burmese military government’s atrocious human rights record and disdain for democracy, the Coalition sought to cut the ﬂow of foreign currency provided by multinational investors and strengthen the country’s prospects for democratic leadership. In pursuit of these objectives, the FBC targeted ﬁrms that sourced or produced goods in Burma with peaceful protests, consumer boycotts, shareholder activism, and federal and state lawsuits. In one instance, activists handed out ﬂyers in front of Kenneth Cole’s New York City store, pressuring the company to eliminate its production facilities in Burma. In another case, the FBC posted a condemnation of Sara Lee Corporation on its web site, prompting the company to halt its manufacturing practices in the country. By 2002, at least thirty ﬁrms—including adidas, Costco, Wal-Mart, and Levi Strauss—had bowed to FBC pressure and shuttered their Burmese operations. However, a handful of companies—such as Unocal, Suzuki, and France’s Total—vowed to remain. Despite embarrassing public protests and an ongoing barrage of lawsuits and related forms of activism, these ﬁrms elected to maintain, even to augment, their businesses in Burma. Such a broad discrepancy raises an interesting puzzle: What accounts for the variation in how ﬁrms respond to activist pressure? Why do some ﬁrms take extremely proactive measures, engaging activist groups and anticipating their protests, while others stand deﬁant? Why do some ﬁrms capitulate to NGO demands while others refuse? In the analysis that follows, we explore the different ways in which ﬁrms respond to activism. Speciﬁcally, we ask why ﬁrms
CALIFORNIA MANAGEMENT REVIEW
VOL. 45, NO. 3
The Power of Activism: Assessing the Impact of NGOs on Global Business
choose one of three strategies—preemption, capitulation, or resistance—and what determines their response. Our evaluation is more exploratory than deﬁnitive, designed to advance hypotheses in this area rather than to test them. Still, drawing on existing studies and empirical cases, we suggest that the interaction between ﬁrms and NGOs can be systematically understood and even predicted. Firms respond differently to NGOs because they have different opportunities and constraints, different kinds of costs, and different modes of weighing them. While much of this analysis can be explained within a framework of proﬁt maximization and cost beneﬁt calculation, some ﬁrms’ responses demand a new kind of calculus, one that integrates non-ﬁnancial concerns and the personal preferences of key decision makers.
The Business of NGOs
Although they are often described as a distinctly modern (or even postmodern) phenomenon, NGOs are in fact rather old. If we deﬁne NGOs as nonproﬁt groups that combine resource mobilization, information provision, and activism to advocate for changes in certain issue areas, then NGOs have been a ﬁgure of the global economy for over four hundred years, starting with the Rosicrucian Order, an Egyptian educational organization founded in the sixteenth century.1 In their more current incarnations, NGOs run the gamut from small-scale, grassroots groups such as Earth First! to large and professionally managed institutions like Amnesty International and the World Wildlife Fund. What distinguishes this often-motley collection is largely a list of what its members are not: not government, not business, and not for proﬁt or political ofﬁce. Instead, NGOs and activists tend to organize primarily around ideas; around a collective...