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Doctoral thesis
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English

Flexibility matters: Donors’ choices between companies, NGOs, and local partners in poor governance contexts

ContributorsPfanner, Cédric
Number of pages209
Imprimatur date2024
Defense date2024
Abstract

Non-state actors have taken a prominent role in implementing development aid projects. Neoliberal donors, in particular, choose to entrust the implementation of their projects to a diverse range of actors, including companies, international non-governmental organizations (INGOs), and local NGOs. This raises questions about how donors choose between companies and Non-Governmental Organizations (NGOs), as well as between international NGOs and local NGOs. By drawing on the principal-agent theory, the thesis argues that corruption and a weak rule of law are two factors that influence donors’ choices among non-state actors.

The thesis argues that donors have a choice between two implementation strategies when delegating project implementation to non-state actors. The first is a contractual approach involving ‘buying’ projects, and the second is a granting approach involving funding implementation partners. The second approach provides more flexibility to the implementation partner, as they can adjust the budget for unforeseen costs, change priorities, or even modify the project’s goal to account for changes on the ground. The thesis argues that in corrupt countries with a weak rule of law, this flexibility is crucial to achieving aid objectives. Donors are aware of the need for flexibility of the implementing partner and are, therefore, more likely to use the granting approach.

Donors are reassured of providing flexibility in countries with corruption and a weak rule of law because granting awards mainly go to NGOs. NGOs’ development motives reassure donors that flexibility will be used to improve the project’s outcomes. Inversely, donors are less willing to provide flexibility to companies because they perceive that companies will use flexibility to increase profits. The partnership approach also works better with NGOs because their socially motivated goals lead them to be present in countries with corruption and a weak rule of law, whereas companies tend to enter such environments after winning donor projects. Thus, NGOs can position themselves as partners and collaborate with donors on the design and implementation of projects.

Regarding the choice of donors to rely on international or local NGOs for implementation, it argues that donors adopt a de-risking strategy with INGOs. Donors mainly award projects to INGOs and compel them to include local NGOs for implementation. Donors use such a strategy to minimize their exposure to fraud risks because they perceive local NGOs as riskier than INGOs. Thus, in case of fraud, donors can attribute blame to the lack of oversight by INGOs rather than themselves, avoiding the political cost of corrup- tion. I argue that corruption and a weak rule of law exacerbate donors’ perception that local NGOs may commit fraud, intensifying their use of the de-risking strategy.

Using USAID as my case study, the thesis tests these hypotheses using interviews, archival research, and statistical methods. The results confirm the first hypothesis. Donors give more flexibility to non-state actors in countries with corruption and a weak rule of law and prefer giving that flexibility to NGOs. Although the results seem to validate the second hypothesis, there is not enough statistical confidence to confirm it. The results demonstrate that local NGOs are becoming more important in aid delivery and that donors’ localization results depend on how much willingness donors put in.

eng
Keywords
  • USAID
  • For-profit and nonprofit organizations
  • Aid delivery
  • Donor decision-making
  • Local NGOs
  • Bypass
  • Privatization
  • Contracts or grants
  • Localization
  • Beltway Bandits
  • INGOs
  • Foreign aid
  • Navigation by judgement
  • Delegation
  • Project implementation
  • Flexibility in aid projects
  • Corruption
  • Weak rule of law
Citation (ISO format)
PFANNER, Cédric. Flexibility matters: Donors’ choices between companies, NGOs, and local partners in poor governance contexts. 2024. doi: 10.13097/archive-ouverte/unige:176506
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Creation03/05/2024 12:04:36 PM
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