Welfare impacts of a non-profit firm in mixed commercial markets

Utilizing a model that allows for the welfare of the commercial NPO’s stakeholders directly in terms of their consumer surplus, and indirectly in terms of NPO profits, we explore the impact of changes in the NPO’s “social concern” for consumers on market efficiency. Three separate Cournot mixed market scenarios are analyzed: competition between the NPO and a private for-profit firm, competition between the NPO and a public firm, and a market scenario that includes all three firms. We find that the technical efficiency of the NPO vis-à-vis the profit maximizer is crucial in determining whether social welfare rises or falls as the NPO places more weight on their stakeholders’ surplus. In particular, if the NPO is less technically efficient than the profit maximizer or public firm, somewhat paradoxically social welfare may fall as the NPO shows a greater social concern for consumers. In other words, a movement away from pure profit maximizing behavior by a NPO may well be detrimental in these mixed commercial markets. We also show the additional sources of revenue available to a NPO may decrease the overall welfare in these mixed market situations.     

Strategic Delegation in a Multiproduct Mixed Industry

We examine strategic delegation in a multiproduct mixed duopoly with nonprofit organization (NPO) and for‐profit organization (FPO). We will demonstrate that the nonprofitable mission service can reduce both the interest conflicts between the NPO and FPO owners and those between the NPO owner and self‐benefited manager. The profit orientation in the compensation schemes will vary with different relative costs. Although the NPO owner may have a different objective from the FPO owner, they all end up having their managers raise their prices and reducing competition in the profitable market. Moreover, as the regulated price of mission service increases, both firms will charge more for their profitable services, but the owner of NPO could still overcompensate her or his manager, when the indirect impact on increasing the conflict of interest is higher than the direct impact on price. Copyright © 2013 John Wiley & Sons, Ltd.     

Developing a measurement approach for reputation of non‐profit organizations

• As a result of the increasing adoption of private sector firms' values and concepts, non‐profit organizations (NPOs) are becoming more and more aware of intangible assets' importance for achieving competitive advantages. Even though reputation can be considered an organization's central intangible asset, there is still no appropriate measurement approach for reputation in this context. In this paper, we identify the dimensions of NPO reputation and develop indices to measure these components. We develop a model by means of a qualitative inquiry and a quantitative study using a large‐scale sample from the German general public. We find support for a two‐dimensional measurement approach comprising an affective and cognitive component as well as four antecedent constructs (“quality,” “performance,” “organizational social responsibility (OSR),” and “attractiveness”). The results of a second quantitative study in which we examine NPO reputation's relationship with important outcome variables, such as willingness to donate or work as an honorary member, provide support for the measurement approach's stability as well as criterion validity. Furthermore, the results reveal the affective dimension's importance regarding positively influencing donor behavior.

Copyright © 2009 John Wiley & Sons, Ltd.     

The relevance of reputation in the nonprofit sector: the moderating effect of socio-demographic characteristics

This paper extends prior research on the reputation of nonprofit organizations (NPOs) by investigating the moderating role of socio-demographic characteristics in forming NPO reputation and reputation's effects on donating and volunteering behavior. The findings offer new insights into the role an NPO's reputation plays and its effects on key outcomes such as willingness to donate and work as a voluntary member in specific subgroups. The results show that successful reputation management is specifically important for male, older, highly educated, and affluent respondents. Communicational measures aimed at strengthening an organization's social responsibility are particularly promising regarding triggering favorable donor behavior and voluntary support. Copyright © 2014 John Wiley & Sons, Ltd.     

The extent of excessive or insufficient fundraising among US arts organizations and the effect of organizational efficiency on donations to US arts organizations

• We estimate, for each nonprofit organization (NPO) in a sample of 606 US arts NPOs, whether the NPO's level of fundraising is ‘excessive,’ ‘insufficient,’ or neither, relative to the level that maximizes net donations. We find that the effect of a 1% increase in fundraising on net donations varies widely across the arts NPOs in our sample—from an increase in net donations of 8.91% of gross donations to a decrease of 3.82% of gross donations. Of the 100 NPOs in our sample with the highest donations, the estimated effect of a 1% increase in fundraising on net donations varies more narrowly—from an increase in net donations of 0.27% of gross donations to a decrease of 0.32% of gross donations. Of these 100 NPOs, we estimate that only 3 engaged in ‘excessive’ fundraising, but 83 engaged in ‘insufficient’ fundraising, and 14 did not engage in ‘excessive’ or ‘insufficient’ fundraising.We also provide evidence that reported organizational efficiency does not affect donations to arts NPOs. This finding may be useful to managers and directors of US arts NPOs who believe that organizational efficiency does impact donations and who, therefore, incorporate the effect on efficiency in their decisions to allocate resources across fundraising, administration, and program objectives.

Copyright © 2007 John Wiley & Sons, Ltd.     

Nostalgia and giving to charity: a conceptual framework for discussion and research

• Academic work involving nostalgia has shown it to evoke a basket of emotions. This paper proposes a conceptual model that links nostalgia to charitable giving. We argue that the nostalgia evoked by certain NPOs (not‐for‐profit organizations) is likely to have a bearing on both emotional and familial utility derived by the donor. This in turn is likely to drive the donor commitment to the NPO. Thus by evoking nostalgia, certain NPOs are likely to emotionally engage their current and potential donors, which could facilitate the creation of long‐term intimate relationships between them and their donors. However, the extent to which the NPO can evoke nostalgia is likely to depend upon the nostalgia proneness of the donor, the emotional importance of the past experiences evoked by the NPO, and the characteristics of the NPO such as the extent to which the NPO can alleviate the feelings of alienation, discontinuity, and the need for authenticity experienced by the donor. The paper provides a series of research propositions and proposes a research agenda.

Copyright © 2007 John Wiley & Sons, Ltd.     

Excessive,optimal, and insufficient fundraising among the Nonprofit Times 100

• Using a six-factor model of donations, we estimate the effect on net donations; i.e., donations less fundraising expenditures, of a one percent marginal increase in fundraising expenditures, for each sample nonprofit organization (NPO) from the Nonprofit Times 100 from 2000 to 2002. No prior study of U.S. NPOs estimates the effect of fundraising expense on net donations. We then use these estimates and what we argue is the correct benchmark, the ratio of fundraising expense to donations, to provide evidence, for each NPO, on whether the NPO's level of fundraising is ‘excessive,’ ‘optimal,’ or ‘insufficient,’ relative to the level that maximizes net donations. All prior studies using log-log models use what we suggest is an incorrect benchmark for evaluating NPO fundraising behavior.
• The estimated effect of a 1% increase in fundraising on net donations varies widely across NPOs in our sample—from an increase in net donations of 0.18% of gross donations to a decrease of 0.66% of gross donations. Of the 76 Nonprofit Times 100 NPOs with usable data in 2002, we estimate that 24 engaged in ‘excessive’ fundraising, 18 engaged in ‘insufficient’ fundraising, and 34 did not engage in ‘excessive’ or ‘insufficient’ fundraising; i.e., we could not reject the null hypothesis of ‘optimal’ levels of fundraising.

Copyright © 2006 John Wiley & Sons, Ltd.     

GREEN STAKEHOLDERS: INDUSTRY INTERPRETATIONS AND RESPONSE*

This paper argues that industrial responses to ‘green’ pressures may fruitfully be explored using a stakeholder framework. However, the common view of an objective configuration of stakeholders is replaced with one that favours an interpretive perspective. Managers are viewed as crucial mediators of stakeholder influence; how they identify, define and construct stakeholders is an important feature of the meaning of greening and an industry's subsequent response. A qualitative study of managers in four UK industries - supermarkets, automotives, power and chemicals - is reported. the effect of a small number of stakeholders - campaigners and regulators - is examined in some detail, distinguished differentially according to their perceived legitimacy and the threat they pose to industry. Also examined is the large group of traditionally powerful stakeholders - customers, creditors and employees - who fail markedly to impact on industry's greening. the implications of the findings for pro-environmental change and stakeholder theory are discussed.     

Responsibility accounting and asymmetry of information

This paper uses the principal-agent model to show that a manager's optimal compensation should generally include non-controllable factors of production such as the firm's investment in capital. This implies that the managerial accounting distinction between profit and investment centres is artificial. Examples are shown in which the ROI or RI criteria could be optimal for compensating managers implying that the optimal compensation criterion is very much specific to the firm's production and risk parameters. Thus, the debate about which criterion is more appropriate is vacuous.     

Stakeholder Relationship Bonds

Scholars and managers continue to seek a better explanation for the behaviours displayed by various stakeholders. An enhanced understanding of the drivers of these behaviours ought to improve an organization's ability to appropriately manage relationships with stakeholders, thereby improving firm performance. This paper provides a detailed look at the concept of a relationship, from the perspective of the stakeholder, by focusing on the perceived psychological bonds that drive a stakeholder to decide whether to continue a relationship with the firm and, if the relationship does continue, how much pro‐relationship behaviour to exert. Our analysis works out how the strength of the perceived psychological bond is measured and establishes the conditions under which bonds will be broken. We also develop conditions that either promote or quash stakeholders’ pro‐relationship behaviour.     

Bargaining over Managerial Contracts in Delegation Games: The Generalized Oligopolistic Case

The main purpose of this paper is to disclose the properties of the equilibrium outcomes in the differentiated‐products model with two stages: (i) owner‐shareholders negotiate managerial compensation with their managers that comprises their profits and sales (sales delegation) and (ii) they engage in their market competition. The other purpose of this paper is to study the differentiated goods model in which an owner bargains the managerial compensation with her/his manager that comprises her/his profit and her/his rival's profit (relative performance delegation). We further investigate the situation wherein the firm with sales delegation and the firm with the relative performance delegation coexist. Copyright © 2012 John Wiley & Sons, Ltd.     

Communicating Corporate Social Responsibility to Internal Stakeholders: Walking the Walk or Just Talking the Talk?

As organizations recognize the need to engage in CSR and sustainability initiatives, it is integral to success to communicate that they are doing so. However, the research focus is more often on communicating with external stakeholders to draw attention to corporate responsibility initiatives. Internal stakeholders as employees are not researched as often, despite their integral role in communicating the organization's CSR vision and sustainability as they interact with external stakeholders. In order to explore employee perceptions of CSR communication, a two‐phase mixed‐method study was undertaken, including semi‐structured interviews with 20 CSR managers in NZ organizations to provide content to inform an online questionnaire survey to seek feedback from employees in these same organizations. This paper contributes to research on internal stakeholders in revealing the influence of the perceived value congruence between managers and employees in influencing internal stakeholder perceptions of CSR and sustainability initiatives. The findings have implications for public policy, enhancing organizational communication, the need for authenticity and managerial recognition of their role in facilitating employee commitment to CSR initiatives. Copyright © 2015 John Wiley & Sons, Ltd and ERP Environment     

Intra-organizational legitimization strategies used by purchasing managers

This paper addresses the issue of how purchasing managers can develop the purchasing department's legitimacy within an organization. A qualitative exploratory approach based on six cases has been used since: (1) there has not yet been a research performed on this topic; and (2) an analysis of internal legitimization strategies must take into consideration the context and the nature of the relationships among departments. Our analysis shows that in order to create, maintain or increase the purchasing department's internal legitimacy, purchasing managers have to do very well about two complementary strategic orientations: (1) identify and attract the best suppliers; (2) identify and implement collaborative processes and coordination mechanisms that cannot be duplicated by competitors. In fact, supply managers actually develop legitimization strategies based internally and externally, since a higher level of internal legitimacy can also be supported partially by external stakeholders, who then influence the other departments' and top management's perceptions.Our study also shows that the strategies used by purchasing managers take different forms depending which legitimacy dimension (cognitive, pragmatic, or moral legitimacy) they are trying to influence. Moreover, a purchasing department's legitimacy strategy is developed based on a few important factors: (1) where the purchasing department stands at a given time in terms of the contribution perceived, similar to a "balance sheet" evaluation; (2) the purchasing personnel's technical and relational competencies; and (3) the extent of their implication in the strategic choices leading to the development of a competitive advantage for the organization they work for. It seems that any effort to take steps based on coherent legitimization strategies could help improve both a purchasing department's legitimacy level and its development level. From this standpoint, this study also shows that the purchasing department's internal legitimacy is a crucial driver of purchasing practices.     

Information Technology and the Organization of Firms

This paper seeks to understand why improved information technology (IT) might strengthen the case for decentralization, as recent empirical work suggests. We study a firm with a headquarters and two managers, each of whom gathers information about her changing local environment. The firm earns a gross profit that depends on actions taken as well as the current local environments. More information permits better actions, and information‐gathering costs drop as IT improves. When the firm is centralized, information‐gathering expenditures are first best, but after the firm decentralizes, each manager becomes a self‐interested player of a “sharing game” in which she collects a share of gross profit and bears the cost of her chosen information‐gathering activities. The firm's actions are determined by the information gathered at the equilibria of the game. As a result, the firm experiences a decentralization penalty, namely the change in net profit (gross profit minus informational costs) after decentralizing. If the penalty is small, then it is outweighed by the advantages of decentralizing—the vanishing of monitoring costs and perhaps the improved motivation of a decentralized manager's staff. To gather information a manager chooses (once and for all) a partitioning of her possible local environments and then searches to find the set in which her current environment lies. Our main measure of a manager's information cost is a technology parameter, θ, times the number of sets in her chosen partitioning. A second measure is θ times the partitioning's “Shannon content,” which may be interpreted as average search time when search is efficient. We ask whether improved IT, i.e., a drop in θ, indeed lowers the decentralization penalty. We obtain a strongly affirmative answer to this question for both cost measures in a class of examples and a mixed answer when we generalize so as to preserve some of the key properties of those examples. In a parallel manner we explore another conjecture suggested in the empirical literature, namely that better IT raises the coordination benefit, which we define as the increase in net profit when the firm bases its actions on pooled information, rather than letting each action variable depend on the information gathered by just one manager.     

Relative performance as a strategic commitment mechanism

Can managers' personality traits be of use to profit maximizing firm owners? We investigate the case where managers have a variety of attitudes toward relative performance that are indexed by their type. We consider two stage games where profit maximizing owners select managers in the first stage, and these managers, knowing each other's types, compete in a duopoly game in the second stage. The equilibria of various types of competition are derived and comparisons are made to the standard case where managers are profit maximizers. We show that managers' types can be used as a strategic commitment device that can increase firm profits in certain environments. Copyright © 2002 John Wiley & Sons, Ltd.     

Accounting Discretion in Goodwill Impairments: UK Evidence

This study examines managers’ use of discretion in determining goodwill impairment losses following the mandatory adoption of IFRS 3 “Business Combinations,” and whether this discretion reflects opportunistic reporting by managers or the provision of their private information. Although IFRS 3 was issued to improve the accounting treatment for goodwill and provide users with more useful and value‐relevant information regarding the underlying economic value of goodwill, it has been criticized on the grounds of the managerial discretion inherent in impairment testing. Therefore, ex‐ante, it is unclear how the impairment‐only approach has affected the reporting of goodwill impairment losses. After controlling for economic factors, empirical results reveal that managers are exercising discretion in the reporting of goodwill impairments following the adoption of IFRS 3. Specifically, goodwill impairments are more likely to be associated with recent CEO changes, income smoothing and “big bath” reporting behaviors. However, the results also indicate that goodwill impairments are strongly associated with effective governance mechanisms suggesting that managers are more likely to be exercising their accounting discretion to convey their private information about the underlying performance of the firm rather than acting opportunistically. These inferences are robust to various modeling specifications and variable definitions, suggesting that IFRS 3 has provided managers with a framework to reliably convey their private information about future cash flows consistent with the IASB's objectives in developing the impairment standard.     

A Business Sustainability Model for Government Corporations. A Belgian Case Study

A government's decision to tackle societal non‐sustainability problems by setting up a government corporation also necessitates the choice of a business model. This article seeks to contribute to this debate through an analysis of the (linkages between the key elements of the) business model of the Kringloopfonds (TKF), a Belgian government corporation set up in order to provide finance to sustainable companies. Based on documentary information and semi‐structured interviews with stakeholders TKF's business model is reconstructed which next is evaluated by means of program theory. It was found that TKF's portfolio allocation rule did not foresee in sufficient flexibility in order to cope with the shortage in financeable companies TKF was confronted with. This case thereby advocates for more business model flexibility in terms of portfolio allocation rules, time and asset requirements as well as for thorough sensitivity analyses testing business model's resistance to an initial and temporary shortage of sustainable companies. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment.     

Social and environmental reporting and the corporate ego

This paper reports on the results of a qualitative exploration into the target audiences for social and environmental reporting (SER). In spite of the wealth of literature on SER motivations, relatively few studies have sought to ascertain who the key target or actual audiences are for SER. The results of this study, based on interviews with UK SER managers, suggest that investors and employees are overwhelmingly the most important audiences targeted by SER managers. The paper draws on auto‐communication theory to question the extent to which SER serves as a means of engaging in dialogue with stakeholders. It is argued that, beyond sending risk management signals to the financial markets, SER primarily serves as a vehicle whereby organizations can communicate with themselves. Moreover, broader stakeholders might be targeted with SER only insofar as doing so serves as a perceived endorsement of organizational communications, thereby embellishing the corporate ego's fantasy of how it would like to be perceived. Copyright © 2007 John Wiley & Sons, Ltd and ERP Environment.     

“I'll donate money today and time tomorrow”: The moderating role of attitude toward nonprofit organizations on donation intention

Across two experiments, this study provides support for the concept that money and time are marked by psychologically distinct constructs. As temporal distance increases, preferences are more likely to be based on the value associated with a high‐level construal of options than the value associated with a low‐level construal of options. That is, as potential contributors are asked to donate later, high‐level featured resources (i.e., time) take focal precedent over low‐level ones (i.e., money) in judging preference for donation methods. This study also found that the match effect between temporal distance and construal level holds only when the level of attitude toward nonprofit organization (NPO) is relatively favorable. However, donation intention is enhanced under mismatch conditions when the level of attitude is less favorable. That is, when potential contributors hold relatively less favorable attitudes toward the NPO, those who are requested to make an expediting decision of donation are more likely to have higher intention to donate with a high‐level construal resource. This study attributed the finding to the shift of people's focal resource through their level of attitude toward the NPO.