Principle: Coase (1937), Williamson (1975, 1985) – Originating in economics, this school analyzes why organizations exist and how they structure their exchanges (transactions). Every transaction has a cost (information search, negotiation, contractualization, monitoring, guarantee). Organizations seek to minimize these costs by choosing the most appropriate form of governance (market, hierarchy/integration, relational contract, etc.). The key factors influencing these costs are uncertainty, transaction frequency, and asset specificity (investment that cannot be easily redeployed).
APPLICATION TO AFRICAN NGOs: #
- Seeking external funding involves very high transaction costs for African NGOs (time and expertise to write proposals, negotiate contracts, produce reports in complex formats, undergo audits, etc.).
- Strategic autonomy can be increased if the NGO succeeds in reducing these costs, for example by obtaining multi-year and less earmarked funding (which reduces the frequency of negotiations and the complexity of monitoring), or by developing long-term relationships of trust with certain donors (which reduce the need for monitoring).
- The development of income-generating activities or social enterprises can be analyzed as an attempt to internalize resource mobilization to reduce uncertainty and transaction costs associated with dependence on multiple external financing contracts.
Case Study / Evidence: The strong preference (and consistent advocacy) of NGOs for core funding (institutional funding) is largely driven by the desire to reduce the enormous transaction costs associated with managing a multitude of small, separately funded projects. The difficulties encountered by small, local NGOs in accessing international funding are often linked to their inability to bear the initial transaction costs (complexity of applications, need for co-financing, etc.). The establishment of locally managed pooled funds can be seen as an attempt to reduce transaction costs for both donors and recipient NGOs.
Critique / African nuance: TCE, which is very focused on economic efficiency, can neglect the dimensions of power, legitimacy, mission or solidarity, which are central in the non-profit sector. The evaluation of “costs” is complex (how to value the time of volunteers?). In African contexts marked by high institutional uncertainty (political instability, weak law enforcement), transaction costs can be structurally very high, limiting the relevance of some of the theory’s predictions. It can also underestimate the transaction costs related to the mobilization of local resources (relational time, management of community expectations, etc.).
