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 19: Certification and Self-regulation of Nonprofits, and the Institutional Choice between Them

Andreas Ortmann and Jan Myslivecek


Andreas Ortmann and Jan Myslivecek Introduction Quality assurance of the services of nonprofits has been a long-standing problem for which various institutional solutions (such as regulation or reputation) have been proposed in the literature. The two institutional solutions that we are interested in here, certification and self-regulation of nonprofits, have been of some interest to researchers and practitioners in Europe but recently also in the USA. Certification is a process of quality assessment by an external firm that, for a fee, investigates the operations of an applicant (school, hospital, charity etc.). If the quality meets the required exogenously determined standard, the applicant is then allowed to use the certificate for a certain period of time, after which a re-evaluation is conducted. This re-evaluation is often simplified but does not prevent the certifier from investigating the certified organization if circumstances warrant it, as illustrated in a recent high-profile case in Germany involving German certifier Institute for Social Questions, DZI (www. dzi.de), and the German branch of UNICEF. In contrast, self-regulation is a process of quality assessment established by a voluntary organization, or club, that imposes an endogenously determined standard on its members and – ideally – monitors (and punishes) those who do not meet the standards. The utmost punishment is the expulsion from the self-regulatory organization (SRO). Membership in an SRO is supposed to have effects very similar to a certificate: an outward shift of the demand schedule for the firm’s services. (We’ll say more about the evidence in favor of this proposition...

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