EME 444
Global Energy Enterprise

Supply of Nonmarket Action

Woman with justice sign around neck and another sign with illegible words in her hand
Woman holding "Justice" sign

The supply of nonmarket action depends on the cost of taking the action and the ability of the stakeholder to be effective in taking action. To make a difference on an issue, a stakeholder needs to have the resources necessary to execute and have enough influence to be effective.

The cost of organizing includes those costs "associated with identifying, contacting, organizing, motivating and organizing those with aligned interests. If the number of affected individuals or groups is small, the costs of organizing are likely to be low. When the number is large, those costs can be high. Taxpayers are costly to organize because they are numerous and widely dispersed, whereas pharmaceutical companies are relatively easy to organize. The costs of organization can be reduced by associations and standing organizations. Labor unions, the Sierra Club and business groups such as [Chambers of Commerce] reduce the cost of organizing for nonmarket action." (Baron, 2010, p. 156)

Effectiveness is the impact a stakeholder's nonmarket action will have on the outcome of an issue. Nonmarket action is more effective when a stakeholder group has more members, their resources are greater and when the group has extensive coverage of legislative districts.

Effectiveness can be understood in terms of three factors:

Importance of Coverage in Nonmarket Action

Automobile assembly plants are concentrated in a relatively small number of congressional districts, but the coverage of the auto companies' dealer and supplier networks is extensive. General Motors CEO Rick Wagoner attended the national auto dealers convention in 2008 to deliver a message and generate coverage of state political jurisdiction. The issue of concern to Wagoner was the possibility that states would enact their own regulations on greenhouse gases emissions to force large increases in automobile and truck fuel economy. Wagoner's message was, "We need to work together to educate policymakers at the state and local levels on the importance of tough but national standards." Wagoner explained why dealers were important in implementing General Motor's strategy at the state level, "Dealers are very effective in the political process because we don't have a plant in every state. We have dealers in every state." (San Jose Mercury News, February 10, 2008) The greater the coverage by members of an interest group, the more effective is its nonmarket action. (Baron, 2010, p. 157)

  • The greater the number of members in a stakeholder group, the greater its potential effectiveness.
  • Coverage is a measure of the geographic location of interest group members relative to the scale of the issue. For example, if the issue is national in scale, then having most stakeholders in one or two states means that coverage is minimal. Particularly for issues addressed in legislative arenas, the effectiveness of nonmarket action depends on the geographic location of interest group members. "Nonmarket strategies based on the constituency connection between voters and their representatives are more effective the greater the number of political jurisdictions covered by the group. Although small businesses do not have the resources of large businesses, they are politically effective because they are numerous and located in every political jurisdiction" (Baron, 2010, p. 157).
  • And finally, effective nonmarket action requires resources to fund and execute research, lobbying, legal services, grassroots campaigns and the group's administrative staff. Resources can be financial, or power-/knowledge-/skill-based. A poorly funded organization that has powerful, highly skilled, and/or politically connected members still has a significant resource base despite not having finanical resources. The greater a group's stake in an issue (the more it stands to win or lose), the greater are the resources that potentially would be contributed to a nonmarket strategy.

A stakeholder's effectiveness--ability to impact the outcome of an issue--depends on the number of members, their geographic location and resources available to support nonmarket activities.