Altruism, ideological entrepreneurs and the non-profit firm

Ideology and altruism are central to understanding the non-profit charitable sector. This paper addresses three questions. Why do people make charitable gifts? Why do they usually give to non-profit organisations? When can non-profits run by committed ideologues compete with profit-oriented entrepreneurs in the provision of services? the altruistic motives of individuals and the ideological commitments of entrepreneurs come together to support charitable organisations. The non-profit form provides a weak guarantee that gifts are not being syphoned off as profits. Furthermore, independent non-profits can often better reflect donors' desires than public agencies constrained by majoritarian claims, and ideological entrepreneurs can use the non-profit form to reify their beliefs without being accountable to profit-seeking investors. A non-profit organisation can only survive, however, if it can attract money and customers. Sometimes its ideological character will facilitate both tasks. Non-ideological customers may, nevertheless, patronise an ideological non-profit if the entrepreneur's commitment helps to guarantee high quality.     

Stakeholder theories of the non-profit sector: One cut at the economic literature

This article examines and organises the economic literature dealing with non-profit institutions using the concept of ‘stakeholders’. In general, the literature identifies conflicts between various groups of stakeholders and then proceeds in two very different directions. The first is supportive of the non-profit sector, suggesting that non-profit organisations resolve those conflicts more effectively than other types of institutions. This provides a positive theory of the non-profit sector, explaining that non-profit institutions evolve when they are more effective in providing a particular good or service than other possible institutional arrangements. The second direction is more critical of the non-profit sector, suggesting that those conflicts will persist in non-profit institutions and will require some kind of resolution, including perhaps government intervention. Of course, a stakeholder approach to non-profit theory focuses on conflict and ignores some other views of the sector.     

Public good theories of the non-profit sector: Weisbrod revisited

Burton Weisbrod's 1975 article, Toward a theory of the voluntary non-profit sector in a three-sector economy, models non-profit organisations as suppliers of public goods which are undersupplied by government to heterogeneous populations. This article examines the implications, extensions and empirical tests of the Weisbrod theory. It also examines the theories of pure and impure altruism, the heterogeneity hypothesis, and the various ‘publicness’ indexes of non-profit output. The commonalities between the public good model and the trustworthiness model of non-profit organisations are also explored. He is also a Research Associate of the Mandel Center for Nonprofit Organizations at Case Western Reserve University.     

Non-profit-funding environment relations: theory and application

The relationships between funding heterogeneity and organisational structure and functioning were examined for a panel of non-profit organisations. Resource dependence and institutional theory were used to derive hypotheses predicting positive associations between funding heterogeneity and non-profit boundary spanning, modelling and participation in collective efforts. For non-profits which were less vulnerable to institutional aspects of their environments, funding heterogeneity was found to have a positive effect on boundary spanning, consistent with resource dependence theory. For non-profits which were more vulnerable to institutional factors, on the other hand, funding heterogeneity was found to have positive effects on modelling and participation in collective efforts; consistent with institutional theory. These results argue that resource dependence and institutional theory need to be combined for the analysis of organisation-environment relations and suggest how this could be accomplished.The research described in this article was sponsored by grants from the National Science Foundation, the Program on Nonprofit Organizations at Yale University, and the University of Minnesota. An earlier version of this paper was presented at the 1990 Meetings of the American Sociological Association, August 11–15, Washington, D.C.     

Competition between non-profits and for-profits: entry and growth

The non-profit sector in the United States relies on fee-paying individuals for a high proportion of its revenue. Given this fact, non-profits and forprofits coexist in the same industry when each type of firm can find a stable market niche that rewards its own special strengths: ideological commitment in the non-profit sector; access to capital and the profit motive in the for-profit. Coexistence is also possible when the non-profit form is superior but there is a shortage of non-profit entrepreneurs. The paper next considers the entry of non-profits into sectors dominated by for-profits. Here one must distinguish between purely commercial activities and those designed to further the charity's basic mission. In the former, non-profits should behave no differently than their for-profit competitors unless subsidies designed for mission-related activities are diverted to these activities. In the latter, the non-profits may have an advantage which reflects not unfair competition but a judgment that their activities are worthy of subsidy. In evaluating competition between non-profits and for-profits, one must separate the issue of the appropriateness of an organisation's tax-exempt status from the impact of its actions on for-profit firms.Prepared for the Research Conference on the Commercial Activities of Non-profits, New York University, November, 1988. I wish to thank Anne Buckholtz for helpful research assistance, and Woody Powell and Brad Gray for useful comments.     

The third sector in welfare policies in Italy: the contradictions of a protected market

The paper describes how the involvement of non-profit organisations (NPOs) in welfare politics in Italy has historically developed in a mutual accommodation with the state, which has prevented the growth and the public recognition of an independent third sector. Using data from official statistics and recent research on non-profits, three analytical dimensions of the relationship between State and the third sector are considered: the resource exchange; the division of responsibility for delivering public services; and the dynamics of social policy making. The study indicates that distinctive features of the ‘welfare mix’ in Italy have been: the attribution of public status to many NPOs as a consequence of an arrangement between Church and state; the weakness of state guidance, in spite of the generous economic assistance provided to NPOs by the state; the substitutive role of NPOs in providing basic public services; and the emergence of informal arrangements between public authorities and NPOs mediated by political patronage. I thank Ralph Kramer, Ugo Ascoli, Perri 6, and three anonymous referees ofVoluntas for helpful comments they provided on an earlier draft of this paper. My research was supported by a grant from the National Council of Research of Italy, and through facilities provided by the School of Social Welfare at the University of California, Berkeley. An earlier version of this paper is published in P. 6 and I. Vidal (eds)Delivering Welfare: Re-positioning Non-profit and Co-operative Action in Western European Welfare States, CIES, Barcelona, 1994.     

The promise of non-profits in Poland and Hungary: an analysis of third sector renaissance

The non-profit sector arising in Poland and Hungary bears little resemblance to its pre-war ancestors. The new non-profits are shaped by social and economic forces brought about by the state socialists. State socialist service policies have left the non-profits with substantial need for their services, but the organisations face several major constraints in meeting that demand. Current government policies towards services and non-profits are discussed. Government and foreign funders can play a significant role in fostering the new non-profits, but a careful prioritisation of objectives is necessary. The present situation shows that many theories about non-profit organisations are not internationally cross-applicable, although several hypotheses have partial relevance.The author recently submitted a longer version of this paper to the Woodrow Wilson School of Public and International Affairs at Princeton University. He is currently studying in the School of International and Public Affairs, Columbia University, New York.     

Overall evaluation of economic theories

This article evaluates economic theories of the non-profit sector by their ability to enlighten our understanding of the scope of inquiry, the determinants of the size and scope of the non-profit sector, and the behavioural responses of donors, volunteers, paid staff and non-profit organisations to changes in their external environment. Adherence to a non-distribution constraint has proven to be a useful way of delimiting economic analysis of non-profit organisations, but more attention should be paid to alternatives. Economists have been less successful at developing usable distinctions between voluntary action and exchange. The size and scope of the sector appear to be determined by entrepreneurial supply factors, donations (which in turn are influenced by tax policy, governmental spending, fund-raising, and the quality and mixture of organisational outputs, commercial or charitable), commercial activities, capital supply, the supply of labour (paid and volunteered), the marketability of outputs, and the distribution of consumer characteristics. Variations of James's (1983) model have proven useful to predict the reaction of non-profits to exogenous changes. I thank Symposium participants, especially Mark Schlesinger, Paul DiMaggio, Anne Preston, Avner Ben-Ner and Helmut Anheier for helpful suggestions.     

Revenue diversification among non-profits

Although the non-profit literature has grown substantially, the issue of how revenue diversification affects non-profits has not been fully explored. This paper presents several disciplinary perspectives regarding the financing of non-profits, what determines their ability to diversify, and the consequent effects on their behaviour. It first develops an index for measuring revenue diversification and applies it to a national sample of charitable non-profits. The results indicate that, while the perception that most non-profits rely on a single revenue source is exaggerated, the institutions in our sample have somewhat concentrated revenue. Our findings also suggest that the activity of a non-profit and the proportion of its expenditures that it devotes to fund-raising affect its ability to diversify its revenues concentration. While a number of anomalies exist, the weight of our evidence suggests that diversified revenue sources are more likely to be associated with a strong financial position than are concentrated revenue sources. Researchers interested in studying the life-cycle of non-profits, the factors that give rise to stability and growth, and the constraints on non-profit behaviour would do well to consider the diversification index presented in this paper.     

The role of Islamic and western foundations in education and research in the Arab world

This paper is an exploration of research funding by western, local and Islamic foundations in the Arab world. Arab and Islamic foundations supporting research present a very recent phenomenon, so their numbers are limited and basic institutional traditions are still being developed. At the same time, they do have their own ‘ideologies’ and their own experiences which are not the same as those of the West. The findings in this paper are largely drawn from three case studies of foundations in the Arab world. There are several differences among the cases, although all of them are acting as non-profit organisations funding research work and making grants to individuals and institutions. It is difficult to compare precisely the contribution of the three foundations in all aspects of grant-making, but we can build the comparison on the scope of activities and their final contributions in education and culture. This paper closes with a discussion of potential research agenda on the future role of foundations in this part of the world.     

Tax policy toward non-profit organisations: an eleven-country survey

The role of private non-profit organisations in modern economic systems is poorly understood. The tax and subsidy treatment of non-profits relative to private firms affects the competitive position of each, and thus their relative strength within any industry; in the United States, for example, non-profit organisations play major competitive roles in such industries as hospitals, nursing homes, day care centres, schools and arts organisations.This paper reports results from a survey of tax policies toward non-profit organisations in eleven countries. The major findings are: (1) the definition and scope of such organisations varies considerably; (2) non-profit organisations are typically regulated by the tax collection agency, but in some countries there is also involvement from the government agency responsible for the particular realm of activity, such as health or education; (3) tax subsidies to non-profits take many forms — not only exemption from corporate profits tax but, depending on the country, for land, buildings, mail and motor vehicles; (4) almost every country limits non-profit organisations' unrelated business activities; and (5) donors are generally permitted to deduct donations of money from taxable income, although there are typically both minimum and maximum limits. These findings point up the larger task of understanding why such differences exist across countries, and what are the effects.Burton Weisbrod is John Evans Professor of Economics and Director of the Center for Urban Affairs and Policy Research, Northwestern University, Evanston, Illinois.Elizabeth Mauser is a PhD candidate in Economics at the University of Wisconsin-Madison.We thank the Ford Foundation for financial support. We also thank those people who responded to the survey questionnaire: Christoph Badelt (Austria), Patrick De Bucquois (Belgium), Miklos Marschall (Hungary), Jimmy Weinblatt (Israel), Disiano Preite (Italy), Mark Robson (United Kingdom), Julia Montserrat (Spain), Ching-chang Yen (Taiwan), Somchai Richupan (Thailand), John Simon (United States) and Wolfgang Seibel (West Germany). In addition, we benefited from reading draft papers by Frits W. Hondius (Council of Europe) and Sheila Avrin McLean (McLean & Co. Ltd), both of whom have done related work on tax treatment of charities in various countries, and from comments by Christoph Franz on an earlier draft of this paper. A version of this paper will appear in a forthcoming volume published by the Center for Social Policy Studies, Jerusalem, Israel. The editors are grateful for the permission of Dr Yaakov Kop, Director of the Center, to publish this paper inVoluntas.     

Using NTEE to classify non-profit organisations: an assessment of human service and regional applications

The National Taxonomy of Exempt Entities (NTEE) constitutes a major contribution to the field of non-profit research, but is beset by conceptual and practical problems. The application of the taxonomy to the list of charitable organisations recognised by the US Internal Revenue Service (IRS) is also an important resource for research, although it has limitations as well, especially for industry-specific and regional analyses. Using survey data from the Chicago metropolitan region, I show that regional estimates for human services based on only those charitable organisations which are required to file tax returns may miss over 40 per cent of the total number of organisations and under-estimate total revenues by almost half. Finally, I point to conceptual, technical and institutional challenges that must be addressed if the NTEE is to gain maximum utility.     

Supervisory powers relating to foundations: A comparative analysis of foundation law

This paper compares legal approaches to foundations in six economically well-developed democracies (USA, England and Wales, Germany, Austria, France and the Netherlands). ‘Foundations’ refers to ‘non-governmental, non-membership, organisations, recognised as a legal category with a purpose in the general interest’. This covers the common field of the common law's charity and the civil law's foundation as a legal person. The countries organise public supervision of foundations in very different ways. Mostly there is governmental involvement or involvement of an independent body in the establishment and governmental supervision of foundations in action. In a few cases, the supervisory power—concerning the foundations' activities, not their establishment—is with judicial authorities. Access to information of foundations (registration) and possible requests for sanctions by interested parties are also rather different. Not all rules are in accordance with the freedom of organisation and some are less desirable. The conclusion is that a balance between the freedom of the foundation (board), the protection of the public order and the protection of the interests of others can be found in a system with systematic supervision at the establishment- and later practice—by governmental or independent authorities or in a system with good registration and incidental supervision by judicial authorities, also at the request of interested parties. Both have their advantages and disadvantages.     

Constraining campaigning: the legal treatment of non-profit policy advocacy across 24 countries

This paper presents a comparative analysis of the findings of a 24 country study of the legal restrictions on the freedom of non-profit and charitable organisations to engage in public policy campaigning. The countries are divided into those which organise the legal status of non-profit bodies around the concept of a charity, and those that do not. The central finding is that all and only charity law countries have constraints on campaigning which are specific to non-profit bodies. The paper reviews a number of possible explanations for this, at the level of jurisprudential rationales which might show that it is necessary or at least rational for only the charity law countries to have developed such restrictions. To varying degrees, all are found wanting. It is suggested that no explanation based on an ‘inner logic of the law’ will serve to explain the phenomenon, and that future research might concentrate on comparative political history rather than on jurisprudence. Planning Officer, Social Services Department, Royal County of Berkshire. formerfy Acting Head of Policy Analysis and Research, National Council for Voluntary Organisations, London, United Kingdom. (Most of the research for this paper was conducted when this author was Head of Policy Analysis and Research at the National Council for Voluntary Organisations, London, UK.) Full information about the research summarised here is given in 6 and Randon, 1994. This research was conducted with the support of the National Council for Voluntary Organisations. We are grateful to all our respondents for their time in answering a difficult questionnaire, provision of documentation and alternative contacts, patience and advice. They are too numerous to list here: a full list is available from the authors. Some, to whom we are particularly grateful, must remain anonymous because they work in countries or in professional positions where campaigning is a sensitive subject. The Nuffield Foundation made available a small grant to cover our translation costs; PROFTRANS undertook most of the translations for us. Martin Knapp, Marilyn Taylor and Nigel Tarling helped to identify potential respondents. Tymen van der Ploeg, Jacques Defourny and Lindsay Driscoll assisted in piloting the questionnaire. Lindsay Driscoll and Bridget Phelps read and commented on early drafts of part of the paper. The editors and anonymous referees for this journal provided important additional information and advice. The usual disclaimer of responsibility for our errors applies to all of them.     

Non-governmental organisations and philanthropy: The case of Argentina

The social, cultural and political activities of non-profit organisations in Argentina have a long history. They existed prior to the creation of the nation state. With a very strong religious influence, they expanded throughout the nineteenth century. National state provision of collective goods only started to develop at the end of the nineteenth century as a result of what Salamon (1987) has referred to as ‘voluntary failure’. The social, political and economic changes that have taken place in Argentina during the last decade had not only had an impact on non-profit organisations, but also on the traditional roles and responsibilities in the development of the state, the market and civil society. The political democratisation which started in 1983, along with the economic stability of the 1990s, were the two most relevant factors to affect non-profit organisations. The new social movements which had emerged during the previous decade (1976–1983) tended to disappear, leaving behind a wide array of organisations concerned with youth, women, human rights and neighbourhoods. With a focus on poverty issues, several state agencies now prioritise new strategies and mechanisms which involve the participation of civil society in social policies. The extent to which these will develop, how large the resources devoted to these programmes will be, and what kinds of controls over NGOs the state will implement are some of the main topics which will demand close attention.     

The regulation of American foundations: Looking backward at the Tax Reform Act of 1969

The American Tax Reform Act of 1969 represented a major watershed in the law of philanthropy, introducing a new classification scheme —one that sharply distinguished between ‘private foundations’ and other charitable organisations- and, for the private foundation category, a new regulatory system, new regulatory sanctions, a new tax on investment income and new restricitons on the deductibility of property gifts. After briefly tracing the origins of this legislation, the paper sets forth five norms that should characterise the legislative process, and proceeds to explore, albeit in abbreviated fashion, the extent to which each of these norms was respected by the Congress in 1969. The paper then turns from an examination of regulatory principles to a consideration of regulatoryimpacts, dealing with several ways in which the 1969 Act appears to have caused diversion of resources, including: diversion of charitable giving from foundations to non-foundation charities (with consequences for the ‘birthrate’ of foundations); diversion of resources from charitable to non-charitable uses; diversion of funds from charitable channels to the US Treasury; and a diversion of resources from certain grantees to others. The mitigating effects of recent forms of deregulation are described, followed by the suggestion that more deregulation is desirable, in order to sustain the health and strength of America's private foundation sector. This paper has its origins in a talk (never published) that was given at a conference entitledTwenty Years Under the 1969 Act: Private Foundations 1969–1989, held on 2 May 1989 at the Association of the Bar of the City of New York.     

The emergence of a voluntary sector and philanthropy in Vietnam: Functions, legal regulation and prospects for the future

A significant number and wide range of Vietnamese non-profit and voluntary organisations have developed since Vietnam embarked on a programme of economic reform in late 1986. Philanthropy has begun to grow as well, albeit more slowly. The non-profit and voluntary sector and the state, each face important challenges as development of the sector accelerates. The state has sought both to encourage growth of non-profit, voluntary and philanthropic institutions, but also to control the pace and directions of that growth. Those dual aims are reflected in the state's regulation of the sector since the mid-1980s. This article provides detailed information on the development of the non-profit sector in Vietnam. It examines some common problems many of the new non-profits and voluntary organisations face and discusses the rapidly changing environment for philanthropy in Vietnam. The article also reviews the developing legal environment for non-profits and philanthropy, compares the situation in Vietnam to other countries in transition, and situates the functions of the non-profit sector in Vietnam in the context of the emerging scholarly literature on functions and models of the non-profit sector and government/non-profit relations. formerly Program Officer for Vietnam, The Ford Foundation (1992–1995) The author is grateful to John Ambler, Nguyen Thi Van Anh, Mayusaki Ayuzame, Mary Jane Ballou, Barnett Baron, Christopher Bruton, Emmett Carson, Kathy Charlton, Le Trong Cuc, Ray Eaton, Mary Etherton, Virginia Foote, Peter Geithner, Neil Jamieson, Lisa Jones, Tim Kerr, Minh Kauffman, Viet Huong Kurtz, Borje Ljunggren, Toichi Makita, David Marr, John McAuliff, Noriko Ogawa, James Rockwell, John Rogers, Vo Quy, Tony Salzman, Yasuhiro Tanaka, Nguyen Van Thanh, Ngo Ba Thanh, David Thomas, Phan Toan, Mike Yeldham and Mary Zurbuchen, and representatives of the many Vietnamese groups interviewed for this article. This article represents the author's views and not those of the Ford Foundation nor any other organisation or individual. All translations from the Vietnamese, except as indicated, are by the author.     

An Examination of ‘Irregular Competition’ between Corporations and NGOs

The purpose of this article is to develop a theory which frames the demands of civil society in such a way as to better enable corporate subjects to manage and navigate ‘irregular’ engagement from activist organizations. Activist NGOs engage in advocacy at times by mounting, facilitating or encouraging popular social campaigns and actions against targeted corporations. In many cases, radical ‘direct action’ tactics are adopted, taking such approaches, NGOs may capitalise on the broader, more ethically diverse strategic possibilities open to them than are available to their corporate adversaries. We employ institutional theory to map out this asymmetric distribution of strategic possibility. We theorise NGOs and corporate subjects as effectively ‘competing’ with one another to maximise their own strategic possibilities and to minimise those of their opponents, in the perennial battle for hearts and minds that plays out between NGOs, corporate subjects, and broader civil society actors who ultimately determine boundary rules for NGO-corporate conflict. Within this context we explore the normative challenge arising from the possibility that corporate subjects might seek to tip the competitive balance by learning from how the military has adapted to successfully engage with ‘irregular’ adversaries through what is often termed ‘asymmetric’ or ‘irregular’ warfare. Should corporations follow a similar adaptive process, by mirroring the ‘irregular’ strategies of activist groups? Drawing evidence from the military experience, we suggest—perhaps counter intuitively—that such adaptations can create new opportunities for conflict resolution and for building sustainable cooperation between former adversaries.     

Part of the welfare mix: The third sector as an intermediate area

This article presents a conceptional framework which analyses the third sector as a part of a mixed welfare system, otherwise made up of the market, the state and the informal private household spheres. From this perspective, the third sector appears as a dimension of the public space in civil societies: an intermediate area rather than a clear-cut sector. Third sector organisations are understood as polyvalent organisations whose social and political roles can be as important as their economic ones; they are portrayed as hybrids, intermeshing resources and rationales from different sectors. In present policies of ‘welfare pluralism’ the emphasis is consequently more on ‘synergetic’ mixes of resources and rationales than on mere issues of substitution processes between different sectors of provision. The last section discusses the potential distinguishing features of such policies with respect to ‘pluralist’ approaches which try to safeguard the conventional hierarchies in a mixed economy of welfare. This paper draws in part on the author's introduction to Evers and Svetlik (1993).     

Tax-based research and data on non-profit organisations

Tax-exempt, non-profit organisations represent a significant and growing sector within the US economy. Between 1975 and 1990, assets of tax-exempt organisations increased in real terms by over 150 per cent while the revenue increased by over 227 per cent. This compares to a growth in real GDP of 52 per cent over the same period. A variety of tax policy issues on tax-exempt organisations and the non-profit sector can be addressed using several sources of data collected by the IRS from federal information and tax returns of exempt organisations. The Statistics of Income (SOI) Division, using sample data, conducts studies of many of the different components of the tax-exempt sector, including non-profit charitable organisations, organisations exempt under sections 501(c)(4)-(c)(9), private foundations and 4947(a) charitable trusts, and the unrelated business income of tax-exempt organisations. Income statement, balance sheet and other financial data, as well as a great amount of non-financial information, are collected in these SOI studies. The primary purposes of this article are: first, to document the role of the non-profit sector in the US economy and the evolving growth and change within the sector from the mid-1970s through to the present; and, second, to describe the ongoing SOI studies of tax-exempt organisations, the products and services available through SOI, and the future statistical plans at SOI for data collection and analysis of tax-exempt organisations and the non-profit sector.