Chapter

Theories of Firm Behavior in the Nonprofit Sector

Edited by Anup Malani, Tomas Philipson and Guy David

in The Governance of Not-for-Profit Organizations

Published by University of Chicago Press

Published in print August 2003 | ISBN: 9780226297859
Published online February 2013 | e-ISBN: 9780226297866 | DOI: http://dx.doi.org/10.7208/chicago/9780226297866.003.0007
Theories of Firm Behavior in the Nonprofit Sector

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This chapter attempts to synthesize a few of the dominant theories of not-for-profit (NFP) firms into a common framework, and to connect existing empirical literature on NFPs to this common theoretical framework. It is organized as follows. Section 6.1 synthesizes existing theories of NFP behavior into a common empirical framework. The goal is to generate, for each theory, predictions regarding a common set of observable outcomes. Section 6.2 extends existing theories by generating predictions about industry-level behavior in equilibrium under perfect competition. Section 6.3 examines a large number of the existing empirical studies of NFP firms to determine the extent to which they provide evidence, comparing the behavior of NFP and FP firms on outcomes with regard to which existing theories generate different predictions. Section 6.4 concludes that, if forced to choose among existing theories, we would select theories which argue that the distinctive behavior of NFP firms can be explained by the altruistic motives of these firms' principals as most consistent with available evidence.

Keywords: not for profit; empirical framework; perfect competition; altruism

Chapter.  15437 words.  Illustrated.

Subjects: Financial Markets

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