Nonprofit Collaboration And The Resurrection Of Market Failure

Abstract

Collaboration is among the core values of many in the nonprofit sector (Oster 1995, Huxam and Vangen 2005. Though research has examined the prevalence of collaboration and network governance in the nonprofit sector, little empirical work has examined the potential economic outcomes of a resource sharing environment. This paper uses Monte Carlo simulation methodology to demonstrate that while collaboration and resource sharing can maximize achievement of social objectives in resource-rich environments, it may be detrimental to the achievement of social objectives in a limited resource environment. These findings suggest that some social objectives that are not met in market or government settings may also not be met in nonprofit settings when collaboration is encouraged. This result has key implications for the matching of social institutions and social objectives.