The value of formative investment in organizational federations

Public goods theories highlight an incentive system that rewards "free ridi ng" on the contributions of early contributors toward collective actions. H owever, because such theories focus on creation of the good, they may under estimate returns that accrue to early contributors subsequent to the good's realization. The concept of formative investment is introduced here to des cribe the extent to which organizations help to create public goods such as interorganizational linkages like participatory federations. Data from the CEOs of 48 organizations involved in a participatory federation were used to assess how an organization's level of formative investment is related to later patterns of dependency and interaction among federation members. Fin dings suggest that from a long-term perspective, and for goods that involve communication and interaction, the incentive structure may not be so favor able for free riders. To the Extent that organizations with high formative investment have the capability to envision the future and communicate that vision to potential federation partners, they may be able to both reduce fr ee riding and secure for themselves advantageous positions in the subsequen t network of relations.