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Edited by Bruce A. Seaman and Dennis R. Young

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Joseph J. Cordes and Katherine Coventry

The activities of nonprofit organizations are increasingly subject to performance evaluation. This chapter discusses the possibilities and limitations of using social benefit cost analysis as a framework for measuring nonprofit performance. Cost–benefit Analysis (CBA) and the closely related methodology of cost-effectiveness analysis (CEA) have become increasingly common means of evaluating the outcomes of a wide range of government regulations and public spending. Because there is considerable overlap between the outcomes that CBA is intended to measure and those that are the focus of a social return on investment (SROI) analysis, CBA offers a potentially useful framework for assessing non- profit performance. One pay-off from undertaking a CBA is that monetizing outcomes produces a single money metric that can facilitate comparisons among different program impacts. This feature of CBA, however, is also controversial, and both practical and conceptual objections have been raised to the monetization of nonprofit outcomes.

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Woods Bowman, Thad Calabrese and Elizabeth Searing

The nonprofit charitable sector owns more than $3.3 trillion of assets – resources used in the provision of goods and services. Here, we describe the various types of assets used by nonprofits, and how these assets are distributed among industries. We then outline theories about asset composition in the nonprofit sector; as the sector changes and increasingly reflects the entrepreneurial spirit of social enterprise, theories about asset composition also are changing. Nonprofit organizations have unique asset ownership issues. Specifically, nonprofits own privileged assets – those resources that nonprofits might be unable to alter; restricted assets – those resources that donors limit to use or time; and endowments – those investments that are expected to generate further revenues for the nonprofit. Research on nonprofit assets is limited by both positive and normative elements. On the one hand, data are of limited availability; on the other, asset accumulation in nonprofits is widely viewed with skepticism.

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Marc Jegers

A nonprofit organization’s capital structure is defined as the amount of own funds (equity) compared with debt. The different components of equity (internal and external sources) and categories of debt (market debt and non-market debt) are discussed, as well as the diversification (and its measurement) of funding sources, and their respective implicit or explicit costs. Cost of equity and cost of debt are shown not to be the only determinants of capital structure (as they would imply an all equity capital structure): other relevant mechanisms such as equity constraints, potential agency costs between board and management, and borrowing constraints may also play a role. The available empirical results are discussed, as well as still existing gaps in our theoretical and empirical knowledge.

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Teresa D. Harrison and Renée A. Irvin

This chapter delineates a framework for judging the usefulness of collaborative strategy in the nonprofit/nongovernmental sector. Collaboration among nonprofit organizations is often promoted as the dominant strategy for operating under severe resource constraints. Ignoring the influence of competitive forces while promoting preferred collaborative strategies, however, can lead to recommendations for nonprofits that are well intentioned yet impractical. This chapter introduces benefits and potential detriments of both competition and collaboration within the nonprofit industry structure. Because many nonprofit goods are collective, society often pools resources in order to provide these services. These are also the topic areas where we often see duplication of services. However, collaboration is unlikely to occur owing to the separation between funding and direct outcomes. This chapter is therefore intended to inform funders and policy makers how to determine the best situations in which to foster either collaboration or competition among nonprofit organizations.

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Salvatore Alaimo

Nonprofit organizations in the United States contract out for services annually for an estimated total of more than $1 trillion, and contract management has grown as a profession, yet this activity has not garnered much attention from researchers and scholars. The purpose of this research is to help establish a research agenda and raise management concerns for this activity driven by performance, legal, social, economic, political and ethical implications. It examines examples of nonprofits contracting out for services, the dynamics of those contractual relationships, and fiscal year data from 22 945 501(c)(3) nonprofit organizations. Types of services contracted, their cost, subsector trends, and the impacts of organizational size and specialization are revealed. Recommendations for nonprofit management practice and suggestions for how researchers and scholars can fill the existing gaps in our knowledge are discussed.

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Edited by Bruce A. Seaman and Dennis R. Young

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Dennis R. Young and Lewis Faulk

This chapter examines the economic and organizational factors underlying the formation, structure and functioning of multi-site nonprofit organizations. We characterize such organizations as associations in which the members are themselves organizations rather than individuals. Multi-site nonprofits are manifested in various forms including federations, franchises, membership associations, systems, leagues, decentralized corporations, and networks. Such organizational structures are seen as mechanisms for nonprofits to achieve efficient scale in promulgating their missions and services. Various growth scenarios are considered including expansion, imitation and affiliation, and agglomeration and networking of single cell organizations over time. The particular structures that these organizations assume are determined by a variety of factors including economies of scale and scope, transactions costs, principal–agent considerations, and inter-organizational externalities. In light of new technologies, the study of inter-organizational networks is seen as an important frontier of research on multi-site nonprofit organizations.

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Stefan Toepler

This chapter provides a broad overview of government funding policies, first tracing the rise of government support for nonprofits in the post-World War II period that contributed to changing the sector from a small cottage industry into a significant economic force. It then discusses the conceptual underpinnings and the prevailing theory of the government-nonprofit relation- or partnership. However, there is not necessarily consensus on whether or not this partnership has turned out to be a good thing for nonprofits. This is followed then by a review on the literature on the drawbacks of government support on nonprofits, including government dependency, loss of autonomy, mission deflection, and bureaucratization. The chapter concludes with a general assessment of the evidence, suggestions for additional conceptual considerations to come into play to help shape the debate going into the future, and a brief outlook of possible implications of the Trump presidency.

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Edited by Bruce A. Seaman and Dennis R. Young

Building on the success of the first edition, this thoroughly revised and expanded edition explores (1) areas of general agreement from previous research; (2) areas of conflicting results and unexplored questions; (3) the relative roles of theory, data availability and empirical analysis in explaining gaps in our knowledge; and (4) what must be done to improve our knowledge and extend the literature. Selected original chapters addressing especially challenging topics include the value of risk management to nonprofit decision-making; nonprofit wages theory and evidence; the valuation of volunteer labor; property tax exemption for nonprofits; when is competition good for the third sector; and product diversification and social enterprise; international perspectives; the application of experimental research and the macroeconomic effects of the nonprofit sector.