Chapter 3: Nonprofit organizations and the commons environment
This chapter introduces the concept of the nonprofit organization (NPO) and the roles of different institutional forms in the proprietary and commons environments. The second section provides an overview of three primary institutional forms in two intellectual arenas, thus situating the study within current scholarship. Finally, a section will focus on NPOs’ social function in the commons environment NPOs, sometimes collectively referred to as the ‘voluntary sector,’ are private organizations that are restricted from distributing any profit to anyone associated with the said organizations. Scholars have regarded such a non-distribution constraint as NPOs’ most important institutional characteristic and developed NPO theories based on that characteristic. As a result, NPOs do not seek to maximize financial profit for distribution. Nonetheless, an NPO can still earn surpluses, and use them for its own purposes or for other charitable purposes. The U.S. law encourages NPOs by exempting them from certain taxes and by subsidizing them based on the belief that NPOs provide outputs that are not obtainable from proprietary firms.
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