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This chapter discusses the arrival of new aid modalities and instruments that have led to the presence of new participants, including some from the private sector (firms, individuals, and foundations). Of note are the more recent aspects of international development finance: South–South Cooperation (SSC), and corporate social responsibility (CSR), both of which affect the mobilization of resources, aid, and international financing to a certain degree. SSC is becoming the new fashionable subject in discussions around reform of the international development cooperation system, which should be expanded and strengthened through the exchange of experiences, through the creation of funds to cover the incremental costs of cooperation, and through the involvement of developed countries in SSC via triangular cooperation. CSR and socially responsible investment, meanwhile, combine commercial and economic interests with altruistic and social benefit criteria.

Incentives for an aid agency’s staff to learn about sustainability of field activities is one of the most fundamental factors in that agency’s quest for sustainable development outcomes. It is essential for agencies to base their decisions about development cooperation programs on an ongoing learning and adjustment process. Drawing from the general discussion of collective-action problems in public organizations in earlier chapters, the IAD framework is employed to identify and analyze specific collective-action problems within the Swedish International Development Cooperation Agency (Sida), and its relationships with counterparts and contractors, both at the Stockholm headquarters and in the field.

Through an interesting dynamic, there is at present an interesting intersection of two literatures – that on conventional foreign aid and that on global externalities and public goods. Some of the key questions that emerge from this are (1) Could international public goods and cross‐border spillovers provide a revived rationale for old‐fashioned transfers intended to spur development in poor countries? (2) When faced with the choice of making transfers or contributing to an international public good, what should a donor country do – even if its objectives are governed by self‐interest rather than solidarity? (3) What happens to the many issues (like conditionality and ownership) in old‐fashioned solidarity‐driven aid, so exhaustively and exhaustingly debated over the past 20 years or more, in this new world of international public goods?

The objective of this chapter is to begin the discussion of these questions, which seem to have been neglected in the rush to embrace international public goods as a new rationale for maintaining international development cooperation and even traditional aid flows. We set out a simple model of interaction between two countries that share a common public good and pose the problem of the richer “donor” country deciding between making a transfer or contributing to a public good, while being concerned only about the impact of outcomes on its own well‐being. We next analyze the problem with different specifications of the public good. We conclude by discussing the implications of this analysis and the areas for further research.