Coexistence of nonprofit, for-profit and public sector institutions

If nonprofit organizations are superior institutions in resolving informational asymmetry and resulting contract failure, why do nonprofit (NPs), for-profit (FPs) and government/public institutions (GPs) survive in the same industry? This article explicitly models the nonconvex budget set for the consumer that arises through the juxtaposition of the inefficiencies and contract failures that occur in the three sectors. Because the consumer is willing to trade quality for efficiency and price, varying market shares for NPs, FPs and GPs can exist in the same industry. The theory offered complements the functionalist explanation of the existence of nonprofits advanced by Weisbrod and Hansmann using a micro-analysis.     

The shifting boundaries of the mixed economy and the future of the nonprofit sector

The nonprofit sector exists because it can solve better than for-profit firms problems associated with the provision of products with publicness (nonrivalry or nonexcludability) attributes, or those affected by asymmetric information between providers and customers. This advantage is likely to be eroded in the future by various technological advances, particularly in the area of information transmission, analysis, storage and retrieval, and by the increase in the effective size of markets. Consequently, the demand for nonprofit organizations will possibly decline in the future. On the other hand, the operational efficiency of nonprofit organizations is likely to improve due to possibilities of stricter audit of and control over management made possible by enhanced access by nonprofit stakeholders to budgetary and operational information. This will help nonprofit organizations respond better to various failures of for-profit firms and to the insufficiency of government correctives. It is difficult to forecast the net effect of the myriad factors that work in opposite directions on the demand for and supply of nonprofit organizations, although it appears to this author that the economic weight of nonprofit organizations and their distinctive features will wane.     

Toward a holistic nonprofit economics: insights from institutionalism and systems theory

The main thrust of the current nonprofit economics literature is that nonprofit organizations exist to correct market failures. However, the methodological individualism of the market failure theories of nonprofit organizations makes these theories unable to take account of the complex institutional embeddedness of the nonprofit sector. To fill this gap, the present paper outlines an approach of holistic nonprofit economics by building upon the insights from Thorstein Veblen’s institutionalism and Ervin Laszlo’s contribution to the general systems theory. From the Veblenian dichotomy, holistic nonprofit economics benefits by recognizing the limitations of the profit motive in ensuring a high quality of community life. From the systems theory conception of the multi-level universe, holistic nonprofit economics borrows the insight that the key to a high quality of community life is in the integration between man, society, and nature. Accordingly, holistic nonprofit economics locates the role of the nonprofit sector in ensuring this integration by counteracting the profit motive. Thus, in contrast to the market failure theories of nonprofit organizations, holistic nonprofit economics generates a research program exploring the embeddedness of the nonprofit sector into the encompassing societal and natural systems.     

Proximity Services in Belgium: An Analysis of Public and Nonprofit Relations

In this paper, we analyze the interaction between nonprofit organizations (NPOs) and government with regard to the provision of proximity services. Given the characteristics of these services and the organizational features specific to each sector, we argue that the relationship between the public and the nonprofit sectors is necessary but rather complex. We illustrate our analysis with some empirical evidence collected by the CERISIS-UCL in 1996 for the city of Charleroi (Belgium). This survey shows that NPOs are the major producers of proximity services but are, on average, largely subsidized by government. Public intervention is also significant in the production of these services but is the most striking in their financing. These results evoke the existence of a multifaceted interaction between the public and nonprofit sectors, that we try to understand in this paper. Our analysis highlights that the tension between the current focus of public policies on job creation for the low-skilled unemployed and the service-based mission of most NPOs might generate inappropriate responses to the needs of the community. It also suggests that this conflict of objectives, given the current organization of proximity services, is likely to threaten the autonomy and originality of the nonprofit sector.     

Stagflation as an Institutional Problem

The existence of nonprofit firms has been traditionally explained by two types of theories emphasizing the market failures that these firms address and the individual motivations to found these firms. To date, these theorizing strands have been mainly disconnected from each other. To fill this gap, this paper develops an integrative theoretical understanding of nonprofit organization by demonstrating the way market failures addressed by nonprofit firms are interrelated with the motivations of nonprofit entrepreneurs. Building on the arguments of Thorstein Veblen and the theory of the division of labor, it is argued that nonprofit organization embodies partial collective self-sufficiency necessitated by the limitations of the ability of market exchange to satisfy human needs.     

Is the Government Failure Theory Still Relevant? A panel analysis using US state level data

Abstract The purpose of this paper is to empirically examine the robustness of the government failure theory. A core feature of the government failure theory is demand heterogeneity. Previous studies have brought into question the robustness of the government failure theory, due to inconsistent results concerning the explanatory power of demand heterogeneity. Therefore, in this paper we revisit this important research agenda using US state level panel data. We find the two‐way fixed effects model a suitable model for testing the government failure theory's robustness and present findings which indicate that observable demand heterogeneity has a positive effect on the size of the nonprofit sector. This paper also empirically examines the relevance of the complementary financing hypothesis in terms of the cooperative nature of the governmental and nonprofit sector relationship; that is where governments delegate the production of quasi‐public goods to the nonprofit sector.     

THE IMPACT OF GOVERNMENT FUNDING ON PRIVATE CONTRIBUTIONS TO NONPROFIT PERFORMING ARTS ORGANIZATIONS

ABSTRACT ** :  This paper tests the crowding-out hypothesis for a balanced panel of nonprofit performing arts organizations between 1998 and 2003. This research uses a number of model specifications and estimating techniques to appropriately capture the relationship between government grants and private donations. Under alternative specifications, the relationship between government grants and private donations suggests crowding-in between $0.14 and $1.15. The crowd-in relationship does change according to art type: symphony orchestras and music companies experience a modest crowd-in while dance and ballet companies experience a small crowd-out. Although the crowd-in falls to zero under the strictest condition, there is a lack of evidence of crowd-out for nonprofit performing arts organizations as a group.     

公共物品非营利组织供给的经济学分析

非营利性组织可以弥补政府和市场在公共物品提供上的不足。文章分析了非营利性组织提供公共物品的必要性，深入探讨了我国非营利组织提供公共物品时存在的主要问题，在此基础上，提出了一些对策和建议，以更好地发挥我国非营利性组织的公共物品提供中的作用。     

THE EFFECTS OF ORGANIZATIONAL FORM IN THE MIXED MARKET FOR FOSTER CARE

ABSTRACT ** : This paper uses proprietary quality of care data to examine the consequences of organizational form in privatized US foster care services. The contract failure hypothesis generically proposes that nonprofits should provide higher quality services, relative to for‐profits, when output is costly to observe. Advocates argue that the nonprofits offer important consumer protections when public services are contracted to private agencies. Contrary to expectations, we find that nonprofit firms do not offer higher quality services. We explore the possibility that monitoring efforts by state regulators or competition among foster care agencies effectively mitigate the influence of organizational form in this particular mixed market.     

Understanding nonprofit social enterprises: Lessons from Austrian economics

There is a large literature on the role of nonprofit enterprises within society. This literature typically views nonprofits as either substitutes for government enterprises or complements to, and even necessary extensions of, these government efforts. While this literature has improved our understanding of the role and importance of nonprofit social enterprises, how social entrepreneurs identify opportunities, allocate resources, and adapt to changing circumstances has been relatively underexplored. Efforts to fill this gap within Austrian economics have categorized nonprofits and identified the limitations of calculation and coordination in the nonprofit sector and the characteristics of successful and unsuccessful nonprofit enterprises. This strand of literature focuses on the differences between economic calculation in for-profit enterprises and decision making in nonprofit enterprises. We argue that another meaningful aspect to determining the ability of nonprofit enterprises to coordinate plans is whether they are structured more like private enterprises and public enterprises. These insights from Austrian economics shed light on why some nonprofits are more effective than others at achieving social goals.

     

Coordinating China's economic growth strategy via its government-controlled association for private firms

Scholars in economics and political science argue that one major function of government is to overcome coordination failure in economic development, especially during times of rapid environmental changes. But, how and through what means does the state coordinate firms to follow the changing directions of its economic objectives? This paper focuses on the case of a government-controlled business association, namely the All-China Federation of Industry and Commerce (ACFIC), and shows that the ACFIC may be serving, at least partially, as a means of avoiding the kind of coordination failures that are often associated with policy reform programs in authoritarian regimes like China when the government deems it necessary to radically and suddenly change its policy objectives. It does so by comparing the activities of firms that are members of ACFIC with non-members before and after the world financial crisis of 2008–09 which induced a significant change in government objectives. Before that crisis when priority in government objectives was “outward” (to stave off balance of payments crises that had befallen many other developing countries), ACFIC member firms were able to engage in exports and foreign investment to a greater extent than non-member firms, and even than those whose owners are members of the Congresses or Chinese Communist Party. After viewing the crises in international markets, and government objectives had turned more “inward”, ACFIC members were more likely to focus on domestic sales and investments.     

The Interaction of Market Failure and Structural Adjustment in Producer Credit and Land Markets: The Case of Nicaragua

While nonprofit organizations serve the community in significant ways, their heavy reliance on philanthropic and government funding is increasingly not sustainable, especially in the wake of economic downturns. The application of social entrepreneurial principles — including social enterprise activities — can improve the sustainability of the business model of nonprofits, while bolstering management capacity and enhancing mission. This paper argues that the current funding model of the nonprofit sector should be disrupted in order to achieve a greater level of financial sustainability and mission-driven success.     

A Theoretical Model of the Effects of Public Funding on Saving Decisions by Charitable Nonprofit Service Providers

Why do charitable nonprofit, service‐providing organizations save? What are the tradeoffs between using income to build up cash reserves and serving more clients? Saving may generate income, protect the organization against a drop in donations, and increase the organization's chances of survival. Saving, though, may affect the likelihood that nonprofits receive private and public funding. We model the relationship among private and public income, economic conditions, and nonprofit savings. We find that anticipation of government help during difficult times tends to reduce the amount of saving done by the nonprofit. This effect is strengthened if government officials view unspent donations as indicative of a lack of need. Both these effects provide a strong incentive for nonprofits to spend on current consumption rather than to save for the future, and thus to increase the burden on the public purse.     

Globalization, Lobbying, and International Environmental Governance

Globalization may require supranational coordination of environmental policies to prevent strategic policy competition weakening environmental standards. This raises concerns about a democratic deficit at the supranational level, and the possibility of capture by special interest groups. The authors develop a model in which environmental policy can be set at the national or supranational level. Governments at each level act in the interests of the group they represent, and interest groups lobby to influence the probability of getting their type of government elected. Using asymmetries in lobbying costs, the authors analyze the effects of a democratic deficit and differential access to influence by different interest groups on the welfare of groups and nations. The paper shows: (i) asymmetries may have unexpected effects; (ii) asymmetries have greater effect when policy is set at the national rather than supranational level; and (iii) despite asymmetries groups and nations are better off when policy is coordinated at the supranational level.     

Team Incentives and Organizational Form

Conventional wisdom regarding nonprofit firms is that the absence of a profit motive renders them inefficient. However, the costs and product quality realized by profit-taking firms is determined by how well those firms deal with a variety of internal incentive and information problems, and this should be equally true for nonprofits. This article analyzes the team incentive problem in nonprofit organizations. Holmstrom (1982) showed that the introduction of a budget-breaker into a team permitted the creation of incentives to provide efficient effort when it is otherwise impossible. A similar result obtains for a nonprofit team, but the role of principal differs from that found in profit-taking teams. It is shown that any of: donors, government regulators, or Trustees can fulfill this role in a nonprofit team. One implication of this is shown to be that nonprofit firms may indeed pay employees less than otherwise identical employees earn in identical jobs in profit-taking firms.     

Repetition, Communication, and Coordination Failure

We examine repetition as an institution that affects coordination failure in a game with and without pre-play communication. We use probit regression with random effects to test hypotheses regarding the frequency and form of coordination failure in the presence of repeated play versus one-shot games. Our results indicate that repetition without pre-play communication results in a lower frequency of coordination failure relative to one-shot game outcomes. This result is reversed when pre-play communication is allowed. Our evidence also suggests that repeated play coordination failures tend to be suboptimal Nash equilibria, whereas one-shot game coordination failures are disequilibria regardless of the presence of pre-play communication.     

Rationales for Government Intervention in the Commercialization of New Technologies

The paper examines rationales relevant to the evolving roles of government intervention and private venture capital industry in the commercialization of new technologies. Specifically, government interventions may aim to mitigate market and systemic failures, eliminate structural rigidities, or respond to anticipatory myopia. Ex ante , constructive, and ex post evaluations are discussed in relation to the possibility that agencies responsible for policy implementation may intervene even in situations in which the benefits of their interventions are not necessarily transparent.     

Rationales for Government Intervention in the Commercialization of New Technologies

The paper examines rationales relevant to the evolving roles of government intervention and private venture capital industry in the commercialization of new technologies. Specifically, government interventions may aim to mitigate market and systemic failures, eliminate structural rigidities, or respond to anticipatory myopia. Ex ante , constructive, and ex post evaluations are discussed in relation to the possibility that agencies responsible for policy implementation may intervene even in situations in which the benefits of their interventions are not necessarily transparent.     

Managerial rewards and the behavior of for-profit,governmental, and nonprofit organizations: evidence from the hospital industry

Studies of mixed industries frequently focus on differential behavior between for-profit and either nonprofit or governmental producers. Substantially less is known about differences among governmental, religious nonprofit, and secular nonprofit organizations. We examine the compensation of hospital CEOs to assess the extent to which these three organizational forms pursue similar objectives. Compensation levels, the use of salaries versus bonuses as proxies for weak versus strong incentives, and the criteria organizations use to determine bonuses are analyzed. We conclude that the CEO incentive contracts at religious nonprofit, secular nonprofit, and governmental hospitals imply substantive differences in the behavior of these organizations.     

HUMAN RESOURCE MANAGEMENT PRACTICES AND EMPLOYEE JOB SATISFACTION IN NONPROFIT ORGANIZATIONS

The purpose of this study is to establish a measurement scale for human resource management (HRM) practices in nonprofit organizations and to analyze their impact on employee job satisfaction. An exploratory factor analysis (EFA) using a principal components was performed. The analyzed sample is composed of 62 organizations with 2,030 employees. The results demonstrate that 8 out of 20 analyzed variables determine the measurement scale of HRM practices in these organizations. These variables are related to psychological demands, active work and development possibilities, social relations and leadership, and the degree of coherence in the organization with its principles. According to the results, these practices have an impact on employee job satisfaction. We believe that these results are relevant due to the lack of similar studies and the relevance of nonprofit organizations as job creators in the European Union.