Handbook of Research on Nonprofit Economics and Management
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Handbook of Research on Nonprofit Economics and Management

Edited by Bruce A. Seaman and Dennis R. Young

Nonprofit organizations are arguably the fastest growing and most dynamic part of modern market economies in democratic countries. This Handbook explores the frontiers of knowledge at the intersection of economics and the management of these entities. The authors review the role, structure and behavior of private, nonprofit organizations as economic units and their participation in markets and systems of public service delivery, assess the implications of this knowledge for the efficient management of nonprofit organizations and the formulation of effective public policy, and identify cutting edge questions for future research.
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Chapter 13: Product Diversification and Social Enterprise

Sharon M. Oster


Sharon M. Oster Introduction: thinking about multi-product nonprofits Consider a moderate-sized regional art museum. In addition to its standing collection, the museum likely hosts visiting exhibits. Almost all such museums have at least a small gift shop, many hold classes for students, and most have a café. Some museums run summer programs, while others rent out space. In this sense, the typical museum produces a variety of goods and services, just as do most nonprofit organizations in other sectors. Indeed, in the nonprofit sector, in contrast to the private sector, it is difficult to find a single-product firm, for reasons we shall explore. Given the ubiquity of multiple products in the sector, understanding the way in which the various products and services of the typical nonprofit complement and compete with one another is important. At the end of this chapter, we shall focus on the earned-income venture as a particular category of new product found in many nonprofits. Before we look at the evolution and management of the multi-product nonprofit, it is helpful to think about some of the more general characteristics of nonprofit production. From the earliest work on the economics of the nonprofit structure, it has been recognized that the core mission product of most nonprofits is at least to some extent a collective or public good (James, 1983 and Schiff and Weisbrod, 1991). One of the features of public or collective goods is that a single unit of such good delivers simultaneous benefits to multiple people. The...

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