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

Second Edition

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.
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Chapter 14: Internal organization and governance

Ermanno C. Tortia and Vladislav Valentinov

Abstract

We bring the theory of the for-profit firm to bear on the economics of nonprofit organization by re-examining the literature on the delineation of organizational boundaries and the determination of cost-effective governance mechanisms. This is enabled by explicit consideration of nonprofit firms’ mission orientation as nonprofits engage in activities that may be related or unrelated to their core missions. Decisions on both organizational boundaries and governance are made differently for these two activity types. Based on the re-examination of governance in nonprofits, in the second part of the chapter, we propose a new framework of analysis in which market, hierarchy and collective action represent the three fundamental coordination mechanisms that define the space of entrepreneurial action. While nonprofits do not exclude market and hierarchy to achieve coordination, they represent the organizational form nearest to collective action as dominant coordination mechanism.

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