CHAPTER 1

Introduction

In 1959, Berry Gordy Jr., a songwriter and producer, who was also
a former blue-collar auto plant worker, founded Motown Records in
Detroit, Michigan, United States. Motown became one of the most
successful businesses in the history of the music industry. Superstars like
Marvin Gaye, Michael Jackson, Smokey Robinson, Martha Reeves, Diana
Ross, Stevie Wonder, and groups like The Four Tops, The Jackson Five,
The Marvelettes, The Supremes, and The Temptations, to name a few,
sparked an esthetic revolution in the show business with their unique
songs and style.
The value created by Motown is immense. Now belonging to the giant
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Universal Music, Motown’s catalog, filled with soul and pop hits, has an
economic value that is hard to calculate. While Motown’s artists generated
economic rents for firm’s shareholders and executives and contributed to
social and economic inclusion by activating supply chains in the entertain-
ment industry, they have also influenced significant changes in modern
society. These artists played a crucial role in disseminating African Amer-
ican heritage across the world and breaking racial barriers present in
larger portions of US society in the decades of the 1960s and 1970s by
entertaining both Black and white audiences. Their high-quality artistic
expressions fostered feelings of pride and belonging within Black commu-
nities. These expressions played a supportive role in the efforts of the

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 4 S. CABRAL

Black Baptist church and other organizations in the civil rights movement,
aiming to promote integration and challenge racial stereotypes.
Although the value created by Motown was appropriated unevenly
among certain stakeholders compared to others, this organization serves
as a prime example of how for-profit firms can facilitate the creation of
both economic and social value.
Several factors explain Motown’s success. One obvious explanation is
the entrepreneurial and far-sighted orientation of Berry Gordy, who was
able to create a successful business model. Drawing from his experience
in Detroit’s assembly lines, he translated operational strategies proven
successful in the automotive industry to the music business. Specializa-
tion, standardization, division of labor, and processes to ensure quality
control were implemented at Hitsville, USA, Motown’s headquarters at
2648 West Grand Boulevard, Detroit, where most of the soul and pop
music hits of the 1960s were conceived, produced, and recorded. In addi-
tion to his business mindset, as a songwriter and producer, Mr. Gordy also
had an acute perception of music, enabling him to identify promising
artists, producers, and choreographers and to acquire the best equip-
ment for song production. In other words, he could identify, attract,
and orchestrate the necessary resources and capabilities to achieve the
envisioned goals.
A significant factor contributing to Motown’s success hinged on the
ability to engage with audiences beyond Detroit (indeed, the label’s name
alludes to Detroit as the Motor City in the United States—Motor Town).
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The so-called Motown Revue comprised tours featuring the label’s roster
in various Eastern and Southern locations in the US, fostering connec-
tions among both Black and non-Black audiences, including segregated
cities where Black artists faced violent assaults from white supremacists.
The capability to manage relationships with a myriad of stakeholders
and recognize shared and differing interests was crucial in disseminating
Black culture, even in racialized and hostile areas. And, of course, these
tours also helped to increase sales records, revenues from concerts, and
advertising.
Goal setting, a clear sense of mission, resources, and practices to
achieve expected goals and abilities to identify stakeholders’ needs and
manage relationships with relevant actors to assure the creation of value
represent, indeed, some strategic management concepts deployed by
several private organizations to attain their economic objectives. It is
true that a massive portion of Motown’s success can be attributed to

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 1 INTRODUCTION 5

the utilization of strategic management concepts, but it is essential to

acknowledge that value creation for Motown would not have occurred
without the contribution of public and nonprofit organizations.
The most invaluable asset of a music record company is its artists. In
the 1950s, Detroit had plenty of groups formed by young talented artists
singing in the streets without any instrumentation. Among them was the
influential artist Smokey Robinson, future leader of The Miracles, author
of hits like “The track of my tears” and “My Girl” who eventually became
Vice President of Motown. Duke Fakir and Levi Stubbs members of the
Four Tops as well as Otis Williams and Melvin Franklin, founders of the
Temptations, were also among the high-quality teenagers harmonically
signing loving songs with the doo-wop styles in Black neighborhoods of
the motor town, who eventually became Motown’s major stars in the next
decades.
But how was it possible to have such an amount of talented and musi-
cally liberated teenagers in the same city, at the same time? Was it just a
coincidence? Was it about something in the water people drank in Detroit
that gave musical gifts to anyone who drank those waters? None of these
possibilities seems to be plausible. Yet, the reason Motown in the 1950s
and 1960s was able to access highly qualified musicians has its roots
exactly to what inspired Berry Gordy to define the name of his company:
the auto industry in Detroit.
Driven by the booming automotive industry, in the first half of the
twentieth century, Detroit experienced a huge population increasing from
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around 300,000 in the 1900s to almost 2 million inhabitants in the mid-

1950s. Immigrants and migrants from other parts of the United States
have moved to Detroit in pursuit of better living conditions. The estab-
lishment of major firms like Chrysler, Ford, and General Motors has
increased the demands for public services, especially in education. A new
middle class in the city pressured the city council to invest more in educa-
tion over the first decades of the century, and more schools were built,
more teachers were hired, and innovative programs to assure that children
were well-educated were made, benefiting not only white populations,
which until the decade of 1970 comprised most of the population in
Detroit, but also Black populations living in underserved regions.1

1 For more information about the economic rise and fall of Detroit during the twentieth
century, please refer to Farley et al. (2000). A comprehensive history about how the
Detroit’s education system evolved can be seen in Mirel (1999).

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 6 S. CABRAL

Among these initiatives, a massive program of music education in

public schools played a leading role in the nurturing of future Motown’s
artists. Guided by high-caliber and professional music teachers, students
were exposed to music theory and classical European music, in addition
to the traditional marching-based music. Actions to incentivize students
to attend classic music and opera concerts and other artistic manifesta-
tions complemented the music training enabled by public investments and
fostered the emersion of a unique esthetic among young Black students
combining appropriate musical training, African heritage, and the cultural
background from the US Southern States. Most Motown performers and
songwriters of classical hits like the brothers Eddie and Brian Holland
were exposed to music in public schools. Groups like the Supremes, led by
Diana Ross, met, and rehearsed at their schools. Other Detroit’ artists not
attached to Motown, like Aretha Franklin, and artists outside of Detroit,
like Michael Jackson, born and raised in Gary, Indiana, benefited from
public investments in music education. Without public investments in
education for individuals with visual impairments, probably one of the
most talented artists ever, Steve Wonder, could not develop their abilities
in plenitude.2
Despite the importance of government investments in public educa-
tion in enabling private interests, in the case of Motown, a special type
of nonprofit organization also contributed to nurture gifted musicians:
the Black Baptist church. This nonprofit organization is one of the
most prominent Black institutions in the United States. It represents
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a substantial portion of the Black community in the country, not only

by influencing the values and the morality of communities but also by
addressing structural problems faced by African Americans, being a pivotal
institution in the Civil Rights movement. Churches also accompanied the
mass migration from southern to northern states in the twentieth century
and promoted support to Black communities in the regions where they
were settled, which included Detroit.3
Along with the preaching, the signing is central to worship in Black
Baptist churches. Both are “magnets of attraction and the primary vehicles

2 Early (2004) and McCarthy (2013) provide evidence on the role played by public
investments in music programs in Detroit’s schools for the development of Motown and
of the pop and Black music.
3 Refer to Soule and Dyke (1999) for depiction of the importance of churches in
political organization of Black communities in the United States.

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 1 INTRODUCTION 7

of spiritual transport ”4 and play a leading role in attracting audience to

churches. The vocal ornamentation that characterizes the soul music is
largely inspired by the gospels of Black Baptist churches. As several icons
of soul music, almost all of Motown’s artists had their first contact with
music in the wooden benches of churches and eventually became singers
during worship. In Black Baptist churches, since their childhood, future
musicians like Aretha Frankin, Marvin Gaye, and Diana Ross5 exercised
the moaning, the pitch glides, the syncopation, and the elongation that
were later transferred to the popular music.6
Although such a value-creating combination of business policies
conceived in the private sphere with public and nonprofit policies explains
a significant portion of the success of Motown, this story is not an isolated
case. The successful examples of Silicon Valley in California, Route 128
in Massachusetts, and the Research Triangle in North Carolina exhibit
the same pattern of complementarities between the entrepreneurial spirit
present in private enterprises, public investments, and nonprofit organi-
zations. Examples of nonprofits include Stanford, Duke, and Harvard, all
committed to education and research. Without cross-sectoral synergistic
efforts among organizations that are oftentimes seen as silos that do not
interact, though they do, several technological innovations present in our
lives from smartphones to solar energy would not be possible without
efforts from public, private, and nonprofit organizations.7
Complementary actions between organizations of several types also
contribute to addressing grand challenges such as climate change, health,
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and well-being. Effective responses to the unprecedent pandemic of

4 Abbington (2009, p. 40).

5 In an interview, Duke Fakir, the legendary singer of the Four Tops exemplifies the
role of churches to nurture musicians in Detroit: “first of all, Detroit is full of churches.
It’s one of those cities in which gospel music has always been prevalent, jazz music had always
been prevalent. Back in the day this was a jazz town. Big bands back in the day used to just
come and hang around Detroit because there were so many great musicians here. It’s been
like that, always down through the years. And when I was born we went to church, just like
a couple of the other guys, so we sang all our lives, pretty much. I’ve sang all my life! My
mother worked at church and my cousins and I, we all went to choir, we grew up there”
https://thequietus.com/articles/03956-the-four-tops-interview.
6 See Legg (2010) for more about the characteristics of music played in Baptist Black
churches.
7 See Adams (2005) and Mazzucato (2013).

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 8 S. CABRAL

COVID-19 hinged on intense coordination of efforts among govern-

ments, for-profit pharmaceutical companies, and nonprofit research insti-
tutes to perform research and development activities to obtain effective
vaccines. Without efforts involving public authorities, firms like Pfizer,
BioNTech, Astra Zeneca, and nonprofits like Oxford University, probably,
I would not be able to draft this book after the pandemic, and, probably,
readers would not be able to read it.
Coordinated actions led by for-profit firms articulating public and
nonprofit organizations have also been contributing to the attainment
of the United Nations Sustainable Development Goals (SDGs). Natura, a
world-class firm in cosmetics is known for engaging communities, and
public and nonprofit stakeholders in actions that reduce deforestation
in the Amazon Forest and promote economically and environmentally
sustainable supply chains through the principles of polycentric gover-
nance idealized by the Nobel Prize winner, Elinor Ostrom. In some cases,
shareholders can guide actions to help the firm reconcile financial and
social goals, creating private and public values appropriated by several
stakeholders beyond shareholders and financiers.8
Likewise, public organizations can engage firms and nonprofits in the
pursuit of several policy goals. Corfo, the Chilean agency of economic
development played a leading role in the development of the local
salmon industry by putting together nonprofit organizations, local firms,
and multilateral organisms and coordinating actions for technological
transferring, cultivation, and access to global markets that were key to
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make Chile one of the world leaders in the trout and salmon exports.9
Governments can also articulate firms and nonprofits for the provision
of services normally supplied by public authorities through public–private
partnerships10 and other contractual arrangements to benefit citizens, like
in social impact bonds, whereas governments can support cross-sector
alliances to address a major problem triggering payments to cross-sector

8 Anita McGahan and Leandro Pongeluppe (2023) as well as Aline Gatignon and
Laurence Capron (2023) illustrate how Natura can simultaneously pursue financial and
social goals through extensive collaboration with local communities, nonprofits, suppliers,
and governmental bodies. Evidence also suggests that shareholders play a pivotal role
in supporting relational strategies between Natura and the surrounding communities, by
blending instrumental and morally oriented principles. See Lazzarini et al. (2020).
9 Lazzarini (2015).
10 See Quelin et al. (2019).

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 1 INTRODUCTION 9

partners contingent to the attainment of goals.11 In a similar vein,

nonprofits can lead collaborative efforts with firms, governments, and
multilaterals to attain their missions and create public value as in the
case of the Médicins Sans Frontières providing healthcare in underserved
regions or Greenpeace in its actions to protect the environment.12
The examples above provoke significant reflections aligned with the
objectives of this book. Firstly, they underscore the critical role of strategic
management for public and nonprofit organizations. Despite having
distinct missions, objectives, and constraints compared to their private
counterparts, these organizations must strategize effectively to accom-
plish their organizational goals. As evidenced by the Motown example
mentioned earlier, whether strategizing independently or in collaboration
with private entities, the strategic processes of public and nonprofit orga-
nizations can carry profound implications for both public policies and
business strategies. These implications can enable the creation of value
for a broader range of stakeholders.
Likewise, either through collaborations with governments and
nonprofits or simply by considering the aspirations of these actors and
leveraging the externalities facilitated by public and nonprofit organi-
zations in their strategizing, for-profit firms can enhance their capacity
to pursue organizational goals and create value embraced by myriad
of stakeholders, including shareholders. Specifically, understanding how
government operates becomes crucial for firms reliant on governmental
support to achieve their financial objectives and, eventually, their socially
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oriented goals. Such enhanced understanding is key for effective business

policies in regulated sectors and in industries where public and private
interests overlap and coevolve.
Along these lines, in a world where boundaries between public,
nonprofit, and private organizations are blurred, and some degree of
cross-sector collaboration is needed, understanding the aspirations and
the potential of non-governmental actors, either private or nonprofit, is
necessary for public managers and policymakers responsible for designing,
implementing, and evaluating public policies. The accumulated knowl-
edge in strategic management can be instrumental for governments in

11 Lazzarini et al. (2021), Economy et al. (2023), and Faulk et al. (2020) discuss social
impact bonds and some of their economic and social implications.
12 More about cross-sector collaborations in Chapter 10.

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 10 S. CABRAL

identifying the conditions under which public service performance and

public value creation can be achieved concomitantly.

Why Do Public and Nonprofit

Organizations Need Strategic Management?
There is a vast number of definitions for the term strategy, and most of
them are crafted to deal with settings characterized by competition and
rivalry among firms, and built under behavioral assumptions that firms
are focused only on reaping financial goals, which may mismatch with the
public and nonprofit context. Within the integrative view of this book,
a general definition must be broad enough to encompass the peculiari-
ties of public, private, and nonprofit organizations, but narrow enough
to be actionable, meaningful, and senseful. In line with this approach, I
propose that the strategizing process is inherently scientific and theory-
based. Managers across public, private, and nonprofit sectors develop
theories and hypotheses to address organizational objectives, akin to equa-
tions where organization-specific theories, reflecting decisions and rules,
are placed on the right-hand side to achieve value creation objectives on
the left side.13
In this book, I define strategy as structured processes that assist organi-
zations of all types in identifying, acquiring, and preserving the distinctive
factors that enable them to translate their ambitions into superior perfor-
mance, while accounting for the interdependence between their internal and
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external environment.
While the definition above aligns well with organizations of all types,
it is particularly applicable to public and nonprofit entities. Consistent
with the theory-based view of strategy, these organizations can formu-
late theories of change to attain desired performance levels, considering
their specific goals and constraints. Notably, disparities exist between
private and public/nonprofit organizations regarding goals, incentives,

13 Teppo Felin and Todd Zenger (2017) provide an insightful portrait about the impor-
tance of strategies based on unique theories at the firm-level. In the “theory-based view”,
managers function as theorists by crafting theories to assist organizations in creating value.
There is a growing consensus regarding the role of the strategist within an organization
as someone responsible for guiding the organization towards a position of enhanced
value, supported by causal paths established by established theories and/or causal-based
evidence—see Lazzarini and Zenger (2023).

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 1 INTRODUCTION 11

constraints, and accountability standards.14 Recognizing these distinc-

tions when applying the accumulated knowledge in strategic management
to public and nonprofit sectors is crucial for enabling effective contribu-
tions to public policy.
Like private firms, public and nonprofit organizations may also benefit
from strategic planning to define their goals, identify the necessary
resources, and devise actions and processes conducive to achieve these
goals, eventually in collaboration with organizations from different
sectors.15
Formed by individuals typically acting in their self-interest and subject
to extrinsic and intrinsic sources of motivation, organizations of all types
can rely on structures of rewards and punishments to influence efforts
from employees, managers, and suppliers to achieve strategic intents.
Payments (or sanctions) contingent upon the attainment of expected
outcomes can occur in private organizations when salespersons meet (or
do not meet) expected sales goals, in nonprofits when managers attain
(or do not attain) fundraising targets, and in public organizations, such
as when bonuses are offered to police officers if homicides and street
robbery records in territories under their authority reduce. Similarly,
public, private, and nonprofits frequently provide non-pecuniary awards
and recognitions that induce efforts as effectively as monetary-based
accolades.
Organizational design and decisions related to the allocation of deci-
sion rights are strategic and can also exert a positive (or negative)
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influence on performance, whether in the context of public or nonprofit

organizations independently, or in tandem with incentives and perfor-
mance management systems.16
For instance, consider a scenario where a government alters the allo-
cation of decision rights, opting to enhance tax collection by granting
greater autonomy to revenue agents, allowing them to determine which
taxpayers are more likely to engage in tax fraud and evasion. While the
specific knowledge of these agents is pivotal for maximizing expected
results in a more decentralized setting, their efforts may be suboptimal if
the government does not implement payment systems that reward agents

14 Ring and Perry (1985).

15 John M. Bryson (2018).
16 See Brickley et al. (2001) for insights into the importance of the triad: incentives,
decision rights, and performance management for organizational performance.

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 12 S. CABRAL

for their additional efforts. It is important to note that in many coun-

tries, revenue agents and tax collectors are tenured civil servants with job
security and fixed salaries, regardless of their efforts. In the absence of
mechanisms rewarding extra efforts or penalizing a lack thereof, inducing
different behavioral responses from these agents is unlikely. Even if incen-
tives are promised, additional efforts might not be observed without
performance measurement systems capable of assessing the outcomes of
each agent. This situation can be even worse in the absence of incentives
(rewards and punishments) and performance management systems, which
is a common feature in public and nonprofit organizations. Without these
motivating factors, unless the agents are intrinsically motivated to perform
their duties, their fixed salaries and the absence of performance assessment
or consequences for lack of effort or misbehavior may not lead to public
value creation and the attainment of strategic goals.
While necessary to achieve strategic objectives, the existence of orga-
nizational structures to oversee the conduct of agents and hold them
accountable is not a sufficient condition to ensure the creation of
public value, especially when principals are uninterested or uninformed.
Consider the strategic problem of oversighting intelligence activities in
democratic settings, which involves handling sensitive information that
could potentially threaten the security of nations. Despite the secrecy
surrounding certain intelligence functions, such as covert actions in
foreign countries and anti-terrorism missions, effective oversight from
elected representatives—typically carried out by congressional members
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of the Senate and the House of Representatives—is crucial to ensure

that these activities are performed within the bounds of existing laws.
However, the effectiveness of oversight can face challenges not only
due to inherent information asymmetries between committee members
and intelligence officers but also as a result of inadequate monitoring
by disengaged or uninterested politicians. Historical trends of abuses by
intelligence agencies in the United States17 and more recently in Brazil,
where intelligence officers of the Brazilian Intelligence Agency (Abin)
were investigated for structuring an illegal apparatus within the agency
for personal and political benefits during 2019 and 2022,18 serve as

17 Johnson (2014).
18 For more details about the Brazilian intelligence issues, refer to https://apnews.
com/article/brazil-ramagem-bolsonaro-police-spying-18d039c5e111e18341afe8ee2fb
4428d and https://www.france24.com/en/americas/20240131-lula-fires-brazil-s-intel-
agency-no-2-over-alleged-illegal-espionage.

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 1 INTRODUCTION 13

illustrative examples highlighting the strategic importance of organiza-

tional design in the government context. Definitely, there is nothing
more favorable for malicious agents than having uninterested or unin-
formed principals. If the principals themselves are also malicious, the
issues become even more severe.
These examples also highlight why the lack of alignment between
incentives, organizational design, and performance management can
impede productivity and the delivery of goods and services with an
adequate cost versus benefit relationship. This mismatch often results in
government services being perceived as inferior to those provided by
the private sector. Strategic management lenses are crucial in helping
public and nonprofit organizations understand why certain configu-
rations, instead of being value-creating, are value-destroying. Under-
standing these aspects is essential for taxpayers, donors, and especially
for strategists responsible for designing, implementing, and evaluating
business and public policies to address pressing social needs. This is partic-
ularly important for policies targeting those who are more vulnerable in
society and lack the means to afford private services, relying instead on
public and nonprofit organizations.
In addition to emphasizing important aspects affecting performance
within the internal organization, strategic management lenses can also
prove useful for public and nonprofit organizations managing rela-
tionships with stakeholders beyond their boundaries and engaging in
cross-sector relationships. Similar to private firms, a strategic management
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orientation is crucial for public and nonprofit organizations when making

scope and diversification decisions. Over the past decades, several govern-
ments have adopted market-friendly reforms, promoting the involvement
of private and nonprofit actors in delivering goods and services that
were traditionally provided by public authorities. However, even as some
governments have reduced their scope and delegated functions to external
actors, they still play a leading role in providing various services. This
may involve regulating activities with positive and negative externali-
ties and natural monopolies or orchestrating cross-sector collaborations
with private and nonprofit organizations through a myriad of organiza-
tional arrangements, such as concessions, public–private partnerships, and
management contracts.

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 14 S. CABRAL

In this regard, governments need to understand the aspirations of

private and nonprofit organizations and reconcile these interests with
those of citizens, while also taking into account the inherent limitations
of the public sector in terms of incentives, flexibility, and accountability
standards. Furthermore, in a world where stakeholders are more aware of
their rights, there is increased pressure for improved visibility of govern-
ment functioning. This is more pronounced than ever, and in a context
where political and ideological polarization is widespread globally, the
management of stakeholder relationships has become even more relevant.
Governments that are genuinely committed to ensuring a more equi-
table appropriation of the public value created across stakeholders, espe-
cially those who are particularly disenfranchised, need to develop the
ability to map stakeholders and determine how they are affected by
policies and how they can influence the effectiveness (or ineffective-
ness) of the designed policies. This becomes central when policy changes
alter how the created value is distributed across stakeholders, particu-
larly when certain groups stand to benefit more than others or when
some stakeholders incur greater losses than others. In such cases, effec-
tively managing tensions involves nurturing coalitions among stakeholders
to support desired changes or block undesired ones, which underscores
the importance of increased attention by public and nonprofit actors on
strategic stakeholder-related features.

Why Do Private Organizations Need to Pay

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Attention to Public and Nonprofit Relationships?

Bridging strategic management with public and nonprofit perspectives is
also important for private for-profit firms. This connection can foster valu-
able insights into the creation of value by firms operating in regulated
industries, businesses significantly affected by government decisions, and
activities involving collaborative or adversarial relationships with public
and nonprofit organizations, with the potential to create or destroy value.
Enhanced attention to public and nonprofit organizations by private firms
is strategic. It enables firms to develop strategies based on features of
the institutional environment that are typically outside of regular market
arenas. This attention may allow firms to contribute to alleviating pressing
social problems and addressing major global challenges. Additionally, it
can help firms to navigate the complex landscape of myriad stakeholders,

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 1 INTRODUCTION 15

often with conflicting interests, and enhance the visibility of management

scholarship in police debates.
First, a closer examination of how public and nonprofit organizations
shape the institutional environment can help firms anticipate competitors
by devising successful strategies considering the influence of communi-
ties, public bodies, and other actors outside of regular market forces that
are conducive to improved overall performance. These institutional-based
strategies are known, for a lack of a better expression, as nonmarket
strategies (NMS). David Baron posits that “the nonmarket environment
includes those interactions that are intermediated by the public, stakeholders,
government, the media, and public institutions ” and that “these institutions
differ from those of the market environment because of characteristics such
as majority rule, due process, broad enfranchisement, collective action, and
publicness ”.19
To adapt to or influence the institutional environment, firms may adopt
several corporate political activities. These activities may include lobbying,
campaign contributions, and mobilization of stakeholders, among other
actions aimed at influencing government decisions on behalf of firms.20
Firms and business syndicates from regulated industries, for instance, tend
to achieve superior financial results by engaging with regulators and other
civil servants. This involves informing them about their actions, inten-
tions, and industry-specific knowledge, particularly when firms possess
accumulated experience in corporate political activities.21 In industries
prone to generating negative externalities for communities, firms may
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collaborate and promote self-regulatory institutions. This is particularly

true when misconduct by one firm harms others in the industry.22 For the
same reason, in a world where firms’ actions are increasingly visible and

19 Baron (1995, p. 51).

20 Katic and Hillman (2023).
21 The works of Bonardi et al. (2006) as well as Hadani and Schuler (2013) demon-
strate the importance of nonmarket strategies for improving the performance of firms in
regulated industries.
22 Barnett and King (2008) analyze the effects of the formation of self-regulation
institutions aimed at increasing safety standards in the chemical industry. Their study
focuses on actions taken by major chemical firms in response to a major accident in
a pesticide plant in India owned by Union Carbide, which resulted in the deaths of
thousands of citizens.

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 16 S. CABRAL

pressure for environmental, social, and governance (ESG) aspects is esca-

lating, firms can also pursue collaborations with social movements. This
can help restore their image and reputation with prominent stakeholders
through nonmarket strategies.23 Unique and differentiated investments
in corporate social responsibility (CSR) can even generate positive returns
for firms, especially in industries with a lower number of CSR areas that
are considered material.24 Overall, an enhanced understanding of public
and nonprofit organizations surrounding the firm and the industries in
which they operate is crucial for firms to navigate through the institutional
environment and devise adequate strategies.
Secondly, the combined knowledge from the fields of strategic
management and public and nonprofit sectors can aid organizations in
contributing to efforts addressing global challenges related to structural
violence, inclusion, gender and racial diversity, migration crises, natural
disasters, and poverty alleviation, among others. Of course, firms may not
need to address all the boxes of the United Nations’ sustainable develop-
ment goals (SDGs). This would be implausible, as even purpose-oriented
firms may lack the necessary capabilities to address major problems indi-
vidually. However, since “grand challenges” can often be tackled through
orchestrated and coordinated efforts by multiple actors, firms may choose
to engage in collective action efforts to address issues affecting at least
their surrounding communities, potential customers, or beneficiaries of
their goods and services. Paying attention to public and nonprofit orga-
nizations can help firms comprehend the limits (and possibilities) of
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actions oriented toward addressing these goals, while also ensuring their
long-term financial sustainability.
Along these lines, focusing on the grand challenge of healthcare,
Keyvan Vakili and Anita McGahan analyze the efforts of research and
development activities for neglected diseases. These are diseases that
primarily affect the poorest populations who cannot afford medical treat-
ment. They examine the role of a multilateral policy designed to protect
intellectual property rights, which is supposed to stimulate scientific
activity by securing producers’ rights. However, they have identified that

23 Odziemkowska (2022) analyze collaborations between firms and social movement

organizations (SMOs). With the support of 25 years of data involving environmental
movements and Fortune 500 firms, she finds conditions under which firms and social
movements collaborate.
24 See Nardi et al. (2022).

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 1 INTRODUCTION 17

although the United Nations World Trade Organization’s Agreement on

Trade-Related Aspects of Intellectual Property Rights (TRIPS) has led to
an increase in basic science research on neglected diseases, it did not result
in an increase in applied research on neglected diseases in low-income
countries. If delays in commercialization challenge the effectiveness of
intellectual property protection policies in providing healthcare for those
in need, these findings highlight the importance of firms working in
tandem with public authorities and multilateral organizations to craft
adequate business and public policies to address grand challenges.25 Like-
wise, strategic management scholars can play a decisive role in identifying
models and configurations that overcome organizational design prob-
lems and facilitate collaboration between firms, governments, nonprofits,
and multilateral organizations to address grand challenges in a viable
manner.26
Third, further attention to public and nonprofits can facilitate stake-
holder management strategies and assist purpose-oriented firms in identi-
fying suitable strategies to reconcile financial and social goals and ensure
the equitable distribution of value across multiple stakeholders. From
an instrumental perspective, mapping all stakeholders surrounding the
firm, including public and nonprofit organizations, and classifying them
according to their current and potential relevance can be a key aspect
for firms, regardless of their purpose. Recognizing which stakeholders
have legitimate claims, which stakeholders can affect or be affected by
actions or omissions of the organization, and understanding their respec-
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tive stakes are primary steps in the strategizing process. By interacting

with their public and nonprofit stakeholders, firms have the opportu-
nity to adapt and eventually revise their strategies, implementing different
courses of action that promote better alignment between the demands
of the external environment and the internal aspects of the organization
deemed necessary for the attainment of strategic objectives.
Firms can also engage with stakeholders based on normative grounds.
Instead of guiding their interactions with suppliers, customers, employees,
shareholders, governments, communities, and other organizations of civil
society solely based on instrumental and economic aspects, firms can

25 Vakili and McGahan (2016).

26 George et al. (2024) pay particular attention to SDG-17 “Partnership for the Goals”,
and focus on the existing barriers to promote further collaboration aimed at addressing
grand challenges affecting modern societies.

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 18 S. CABRAL

use corporate values and purpose to shape their decisions. The adop-
tion of relational approaches based on reciprocity and common values
and beliefs shared by firms and communities can help strengthen firms’
attachments with stakeholders. This, in turn, can increase trust levels
in the relationships and induce stakeholders’ commitment to projects
proposed by the firm. In a study conducted by Thomaz Teodorovicz,
Sergio Lazzarini, Anita McGahan, and myself, we analyzed the rela-
tionship between a major firm and two sets of stakeholders—managers
and employees under flexible arrangements. We found that investments
made by the firm in general human capital, which increase the outside
options of workers under flexible arrangements and may even benefit
competitors, result in improved performance and prolonged relationships
with these workers when the training opportunities are framed using
relational terms.27 Therefore, purpose-oriented organizations aiming to
foster collective action and address social problems can “…earn their legit-
imacy and competitive power from the utility that they represent for their
stakeholders ”.28 For that reason, managing relationships with public and
nonprofit stakeholders is crucial.
Last, by providing implications for both business policies and public
policies, this interdisciplinary view can also facilitate the education of
future managers with a mindset distinct from the financially-oriented
tradition. This, in turn, has the potential to increase the influence of
management lenses in addressing the major problems affecting the inter-
face between business and society. The management community must
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have a seat at the table for major decisions and occupy a space equivalent
to that of lawyers and economists.29 The organization-oriented mindset
inherent in management approaches can contribute to ongoing efforts to
improve conditions for certain groups without causing harm to others,
leading to win–win-win situations. In such scenarios, businesses, society,
and politicians sponsoring successful arrangements all benefit from the
outcomes produced.

27 Teodorovicz et al. (2023).

28 See Durand (2023, p. 153).
29 I owe the idea that “managers are out of the table” to my coauthor and friend Anita
McGahan, who mentioned it in a presentation in São Paulo, Brazil, in 2009. In large part,
my subsequent papers and this book would not be possible without that inspiring talk.

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 1 INTRODUCTION 19

Book Structure
This book is structured in three parts. Part I covers the foundations and
concepts that underpin the analyses and developments made throughout
the book (this chapters, Chapters 2 and 3). Part II focuses on aspects
related to the internal organization and how they can be articulated to
lead to improved performance (Chapters 4, 5, 6, and 7). Part III delves
into the strategic features of public and nonprofit organizations at the
external level (Chapters 8, 9, and 10).
While this chapter introduces this book, Chapter 2 examines why
conversations between strategy and public and nonprofit organizations are
necessary. It paints a portrait of the evolution of strategic management
scholarship and illustrates the convergences and divergences between
strategy and public and nonprofit fields.
Chapter 3 introduces the concepts of value creation and public
creation, both of which are cornerstones for the relationships between
public, private, and nonprofit organizations. The chapter also discusses
the forces shaping value creation and explores appropriation dilemmas
that arise when a myriad of stakeholders are present.
Chapter 4 inaugurates Part II of the book and addresses a central point
for the attainment of strategic objectives in public and nonprofit organi-
zations: the structure of incentives. Departing from the organizational
economics literature, the chapter offers readers information about the
potential (and limitations) of pay-for-performance schemes to incentivize
individuals and groups to exert superior efforts conducive to enhanced
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performance and public value creation.

Chapter 5 sheds light on performance management systems and
their importance for the attainment of strategic objectives in public
and nonprofit organizations, as well as in public–private arrangements.
Besides discussing the differences between subjective and objective perfor-
mance, the chapter highlights the potential of the theory of change in
choosing performance indicators that effectively assess the value created.
The chapter also maintains that appropriate indicators must reflect actions
from agents that are associated with performance, are not subject to
incentive distortions, and have reduced measurement costs.
Chapter 6 delves into the intricate dilemmas surrounding the allo-
cation of decision rights within public and nonprofit organizations. It
examines the advantages and drawbacks of both centralized and decentral-
ized structures, emphasizing the criticality of balancing between central

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 20 S. CABRAL

authority and autonomy. Furthermore, the chapter delineates the circum-

stances under which unitary, multidivisional, and matrix structures must
be invoked within the realm of public and nonprofit sectors.
Chapter 7 sheds light on the often overlooked aspect of strategy
implementation, contrasting it with the typically emphasized strategic
planning process. It outlines the essential components necessary for
successful strategy implementation. Moreover, the chapter underscores
the critical role of change management in ensuring effective implementa-
tion, stressing the significance of aligning the internal organization with
external contingencies (external fit), and identifying complementarities
among its internal elements (internal fit).
In Chapter 8, the pivotal importance of stakeholder management
is explored, particularly within the contexts of public and nonprofit
organizations, as well as within private organizations engaging with
governments and the potential for generating or destroying public value.
The chapter discusses the process of identifying pertinent stakeholders
and delineates effective stakeholder strategies under both normative and
instrumental approaches.
In Chapter 9, the drivers behind scope choices in governmental
settings are dissected through the lenses of organizational economics and
policy analysis. The chapter explores various modes of provision and expli-
cates the circumstances under which governments must select the most
appropriate modes, considering factors such as probity concerns, the avail-
ability of capable partners, and the challenges surrounding property rights
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and governance.
In Chapter 10, the focus shifts to how cross-sector collaborations
(CSCs) offer a viable approach to tackling wicked problems that chal-
lenge resolution or mitigation by individual organizations in isolation.
The chapter not only presents various forms of collaborations but also
delves into the distinctions and similarities between CSCs and strategic
alliances. Furthermore, it explores the significance of collaborative gover-
nance models, particularly in arrangements where governments assume
a substantial orchestrating role. It also emphasizes the crucial role of
public–public collaborations for fostering effective public–private partner-
ships.
Finally, Chapter 11 concludes by summarizing the main topics covered
in this book, explaining why strategists, policymakers, and researchers
can benefit from it, and shedding light on some important aspects that,
although not developed in this work, are crucial for those interested in

Cabral, Sandro. Strategy for Public and Nonprofit Organizations : An Applied Perspective, Springer International Publishing
AG, 2024. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/fgvbr-ebooks/detail.action?docID=31626138.
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 1 INTRODUCTION 21

strategies for public and nonprofit organizations. These aspects include

capability-based perspectives and nonmarket strategies.

References
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