Nonprofit Firms Research Articles

Does size matter? Hiring discrimination and firm size

PurposeThe purpose of this paper is to study the association between firm size and hiring discrimination against women, ethnic minorities and older job candidates.Design/methodology/approachThe authors merge field experimental measures on unequal treatment with firm-level data. The resulting data enable the authors to assess whether discrimination varies by indicators of firm size, keeping other firm characteristics constant.FindingsIn contrast with the theoretical expectations, the authors find no evidence for an association between firm size and hiring discrimination. On the other hand, the authors do find suggestive evidence for hiring discrimination being lower in respect of public or non-profit firms (compared to commercial firms).Social implicationsTo effectively combat hiring discrimination, one needs to understand its driving factors. In other words, to design adequate policy actions, targeted to the right employers in the right way, one has to gain insight into when individuals are discriminated in particular, i.e. into the moderators of labour market discrimination. In this study, the authors focus on firm size as a moderator of hiring discrimination.Originality/valueFormer contributions investigated this association within the context of ethnic discrimination only and included hardly any controls for other firm-level drivers of discrimination. The authors are the first to study the heterogeneity in discrimination by firm size with respect to multiple discrimination grounds and control for additional firm characteristics.

Social Impact Bonds: New Product or New Package?

This paper considers a relatively new form of financing for social services, the “social impact bond (SIB).” Proponents of SIBs argue that they present a solution to several problems in funding social services, including performance incentives and risk allocation. Using a simple model, we first demonstrate that, despite their apparent novelty, SIBs in concept need not produce any difference in outcome from standard financing arrangements with private nonprofit firms. We then argue that SIBs will lead to greater program success if investors’ effort responds to incentives and can positively influence outcomes, either directly (e.g., effort exerted in production) or indirectly (e.g., effort devoted to screening), but are unlikely to do so otherwise. We conclude that, as in the more general theoretical literature, the value of this particular application in terms of funding innovation will be strongly context-dependent.

Governance Structure and Exit: Evidence from California Hospitals

Most inpatient and emergency health care services in the U.S. are delivered by non-profit organizations. To understand the impact of policies that are designed to affect competitive outcomes in hospital markets, it’s important to understand whether the “non-profit” structure changes the behavior and competitive conduct of firms. Given the complexity of the product space within which hospitals operate, we focus on more easily interpreted decisions within the hospital market: entry and exit. Using comprehensive administrative data for the universe of California hospitals from 1980 to 2013, we document the observed entry and exit behavior. We estimate flexible exit policy functions and demonstrate a difference in behavior between for-profit and non-profit firms that exists after accounting for several observable characteristics of hospitals. We find differences in observed behavior: this is a finding that strongly suggests that there are differences in the underlying objective function of the various firms.

Keeping the Memory but Not the Possession: Memory Preservation Mitigates Identity Loss from Product Disposition

Nonprofit firms’ reliance on donations to build inventory distinguishes them from traditional retailers. This reliance on consumer donations means that these organizations face an inherently more volatile supply chain than retailers that source inventory from manufacturers. The authors propose that consumer reluctance to part with possessions with sentimental value causes a bottleneck in the donation process. The goal of this research is therefore to provide nonprofits with tools to increase donations of used goods and provide a theoretical link between the literature streams on prosocial behavior, disposition, memory, and identity. As such, the authors explore the effectiveness of memory preservation strategies (e.g., taking a photo of a good before donating it) in increasing donations to nonprofits. A field study using a donation drive demonstrates that encouraging consumers to take photos of sentimental possessions before donating them increases donations, and five laboratory experiments explicate this result by mapping the proposed psychological process behind the success of memory preservation techniques. Specifically, these techniques operate by ameliorating consumers’ perceived identity loss when considering donation of sentimental goods.

Strategic Use of Diversification and Centralization in High and Low Performance Healthcare Firms

To what extent does related diversification and extent of centralization explain financial performance? And are there strategic differences in related diversification and extent of centralization that distinguish high performing firms from low performing firms? These questions are addressed through the development of two structural equation models (SEM) representing two different loci of hierarchical authority and strategic decision making – centralized and decentralized. A sample of nonprofit health care provider firms is used to test hypotheses distinguishing high performing firms from low performing firms. Results suggest that related diversification explains 9 percent of the variance in financial performance for centralized firms and 13 percent of the variance in financial performance for decentralized firms. Strategic use of related diversification by high performing firms include: exhibiting consistency among business units, extent of centralization and revenue sources; determining when to own and w...

Knowledge management activities in social enterprises: lessons for small and non-profit firms

PurposeThis paper aims to explore what social enterprises (SEs) in the UK know and how they acquire, convert, apply and protect this knowledge. This will enable them to manage their knowledge effectively and, hence, improve their practices and maximise the creation of social, environmental and economic value.Design/methodology/approachThis study follows a qualitative approach, comprising 21 interviews with founders and senior members of SEs in the UK.FindingsThe results show that the investigated SEs have knowledge management (KM) practices similar to the already identified in SMEs, associated with informality, reliance on external sources and focus on socialisation activities, but they have unique challenges on managing their knowledge related to their hybrid mission, to include social and economic objectives and their closed relationship with stakeholders.Research limitations/implicationsAs there is limited research on KM practices in SEs; they were defined based on previous studies in large, private and public companies. Therefore, not all practices may be included. This research is a starting point in the study of KM in SEs.Practical implicationsThis study identifies knowledge activities that enable the creation of social, environmental and economic value in SEs. This allows SEs, small firms and non-profit organisations to review their current practices and develop plans for their further improvement.Originality/valueThis paper is one of the first empirical studies exploring KM practices in SEs, highlighting their informal nature as well as their impact in and on the enterprise.

Do For-Profit Managers Spend Less on Schools and Instruction? A National Analysis of Charter School Staffing Expenditures

This article takes advantage of a recently released national data set on school site expenditures to evaluate spending variations between traditional district operated schools and charter schools operated by for-profit versus nonprofit management firms. Prior research has revealed the revenue-enhancement, private fund-raising capacity of major nonprofit providers. For-profit providers may face greater pressure to reduce operating expenses. As such, we hypothesize that regardless of average differences in staffing expenses between district and charter schools, school site staffing expenditures are likely to be lower in for-profit than in nonprofit managed charter schools. Furthermore, school site instructional staffing expenditures may be lower yet. Applying national, then state-level models to compare spending for schools of similar size, serving similar grade ranges and students with similar attributes (income status, special education, and language proficiency status), we find these assumptions largely to be true. Specifically, on average across all settings (global model) we find that charters spend less per pupil on instructional salaries compared with districts; furthermore, for-profit charters spend less than nonprofits. Furthermore, for-profit charters spend statistically significantly less ( p < .05) on instructional salaries, compared with district schools in many states.

Donor governance and financial management in prominent US art museums

I study “donor governance,” which occurs when contributors to nonprofit firms place restrictions on their gifts to limit the discretion of managers. In a study of US art museums, I find that this practice has grown significantly in recent years, and it represents the largest source of permanent capital in the industry. When donor restrictions are strong, museums shift their cost structures away from administration and toward program services, and they exhibit very high savings rates, retaining in their endowments 45 cents of each incremental dollar donated. Retention rates are near zero for cash generated from other activities. Restricted donations appear to stabilize nonprofits and significantly influence their activities, but they reduce management flexibility and may contribute to lower profit margins. Rising donor governance in US art museums may represent a reaction by contributors to the industry’s high rates of financial distress, weak boards of trustees, and large private benefits of control enjoyed by managers.

Entry, donor market size, and competitive conduct among nonprofit firms

This paper empirically characterizes competitive behavior among charitable nonprofits where prices and output are difficult to observe. Using a model tailored to donative nonprofits and an empirical methodology that exploits cross-sectional variation in market size and various measurable demographic and cost characteristics applicable for nonprofits, this paper estimates the threshold number of potential donors required for nonprofit economic viability in five major charitable sectors. We find that our sample markets generally reach competitive levels once five or more nonprofits in a given nonprofit sector are observed. The paper offers several possible interpretations of these findings and directions for future research.

Competition between For-Profit and Non-Profit Firms: Incentives, Workerss Self-Selection, and Wage Differentials

We study optimal non-linear contracts offered by two firms competing for the exclusive services of workers, who are privately informed about their ability and motivation. Firms differ in their organizational form, and motivated workers are keen to be hired by the non-profit firm because they adhere to its mission. If the for-profit firm has a competitive advantage over the non-profit firm, the latter attracts fewer high-ability workers with respect to the former. Moreover, workers exert more effort at the for-profit than at the non-profit firm despite the latter distorts effort levels upwards. Finally, a wage penalty emerges for non-profit workers which is partly due to compensating effects (labor donations by motivated workers) and partly due to the negative selection of ability into the non-profit firm. The opposite results hold when it is the non-profit firm that has a competitive advantage.

Competition Between For-Profit and Non-Profit Firms: Incentives, Workers' Self-Selection, and Wage Differentials

We study optimal non-linear contracts offered by two firms competing for the exclusive services of workers, who are privately informed about their ability and motivation. Firms differ in their organizational form, and motivated workers are keen to be hired by the non-profit firm because they adhere to its mission. If the for-profit firm has a competitive advantage over the non-profit firm, the latter attracts fewer high-ability workers with respect to the former. Moreover, workers exert more effort at the for-profit than at the non-profit firm despite the latter distorts effort levels upwards. Finally, a wage penalty emerges for non-profit workers which is partly due to compensating effects (labor donations by motivated workers) and partly due to the negative selection of ability into the non-profit firm. The opposite results hold when it is the non-profit firm that has a competitive advantage.

How Do Nonprofit Firms Respond to Tax Policy?

We investigate the effects of variations in the value of the charitable contribution deduction on nonprofit firm behavior, including exploring for the first time the effects of the tax price of giving on fund-raising. We find that a 1 percent increase in tax subsidies is correlated with a 2.0 percent increase in fund-raising, while the elasticity of real charitable output to changes in tax price is less than one in absolute value for most firms. We derive a new equation for treasury efficiency in the presence of fund-raising and find that while our point estimates still support treasury efficiency, our confidence intervals are wide enough to allow some possibility that the deduction is not cost effective. Further, the modest elasticity of charitable output to tax price implies that tax subsidies can crowd out other revenue sources, such that the efficacy of the subsidy depends on the relative efficiency of these alternative sources.

Cost versus control: Understanding ownership through outsourcing in hospitals

For-profit hospitals in California contract out services much more intensely than either private nonprofit or public hospitals. To explain why, we build a model in which the outsourcing decision is a trade-off between cost and control. Since nonprofit firms are more restricted in how they consume net revenues, they experience more rapidly diminishing value of a dollar saved, and they are less attracted to a low-cost but low-control outsourcing opportunity than a for-profit firm is. This difference is exaggerated in services where the benefits of controlling the details of production are particularly important but minimized when a fixed-cost shock raises the marginal value of a dollar of cost savings. We test these predictions in a panel of California hospitals, finding evidence for each and that the set of services that private non-profits are particularly interested in controlling (physician-intensive services) is very different from those than public hospitals are particularly interested in (labor-intensive services). These results suggest that a model of public or nonprofit make-or-buy decisions should be more than a simple relabeling of a model derived in the for-profit context.

A multilevel study of structural resilience in interfirm collaboration

Purpose – The purpose of this paper is to develop the concept of a high performance alliance macro-culture as a multilevel construct reflective of resilient collaborative systems of exchange within strategic alliances and explores the distinct capabilities of this multilevel approach in predicting alliance outcomes. Design/methodology/approach – The hypotheses developed in this study are tested using primary data collected from 650 members of 15 non-profit organizations in two multi-organizational collaborative networks. Considering the multilevel nature of the study the structural hypotheses are tested using a multilevel confirmatory factor analysis and the predictive hypotheses are tested using multilevel structural equation modeling. Findings – All but one structural hypothesis are supported and all predictive hypotheses are supported suggesting that a multilevel macro-cultural conceptualization is effective in exploring the relationship between collaborative exchange systems and their outcomes. Research limitations/implications – Limitations stem from the generalizability of the data collected as the alliances formed by non-profit firms may not be wholly reflective of the alliance structures and goals of other firm types. Originality/value – This study primarily contributes to multilevel study of strategic alliances and the study of collaborative norms and structures of allied groupings. The results of this study lend support to the importance of taking a network governance perspective and illustrate the limitations of traditional single-level approaches when studying interfirm collaborative networks and structural resilience therein.

The relationship between innovation and performance in special nonprofit firms: Social and cooperative agrifood firms

AbstractFirms are continually trying to identify innovation sources in order to improve organizational performance, but the identification of such origins is a complex and poorly understood issue, particularly as far as nonprofit firms are concerned. The social and cooperative agrifood arrangement has become one of the main and newest types of nonprofit organization in China since the implementation of the law related to specialized cooperatives, on July 1, 2007. In this research, a conceptual model is proposed to show that the characteristics of innovative sources can determine a firm’s absorptive capacity, which in turn can impact its performance. Therefore, absorptive capacity can be expected to enable the mediation of the relationships of innovative sources with the performance of firms. By means of theoretical analysis and practical investigation, this paper provides an assessment of the use of innovation sources and finds critical factors that may foster competitive and sustainable advantages.

Institutional Pressures to Provide Social Benefits and the Earnings Management Behavior of Nonprofits: Evidence from the U.S. Hospital Industry

AbstractThis study examines the relationship between institutional pressures to provide social benefits and the discretionary accrual behavior of nonprofit firms. I examine this issue within the context of U.S. nonprofit hospitals, an economically significant and politically rich setting where firms face considerable institutional pressure to provide an important social benefit: charity care. I argue that institutional pressures on nonprofits to provide higher levels of social benefits imply that lower profits should be reported. I develop theory and provide evidence which suggests that, due to competing private incentives to report higher profits, nonprofit managers strategically use discretionary accruals to increase accounting earnings when the social benefits their firms have provided in the current period exceed external stakeholders' normative expectations. The findings from this study inform the ongoing political debate regarding the appropriateness of tax exemptions for U.S. nonprofit hospitals and should therefore be of interest to both regulators and policymakers. In addition, this study provides timely insights for researchers regarding how institutional pressures can affect managers' reporting behaviors in other settings where similar competing reporting incentives exist between managers' private benefits and stakeholder expectations related to social benefits.

Higher Education and the Market

<p>Neoclassical economists make the case for profit seeking firms in the private sector because they supply goods and services efficiently, meeting consumer demand at the least possible price and the highest quality. The government also supplies some goods and services directly, and also has made provisions for non-profit firms to do so, recognizing that in some cases for-profit firms will not supply them efficiently, because of a variety of market failures. In the United States, higher education has been one of those services that has traditionally been supplied to a large extent by non-profits and the government sector, and not by the for-profit sector. Over the last few decades, that has been changing radically, with much of the growth in enrollments in higher education taking place in the for-profit sector. Understanding the evolving roles of for-profits, non-profits and the public sector in the provision of higher education over the past several decades is important because they can have public policy implications. The government’s response to market failure, in particular, has welfare implications for both individuals and society.</p>

Investment Decisions of Nonprofit Firms: Evidence from Hospitals

ABSTRACTThis paper examines investment choices of nonprofit hospitals. It tests how shocks to cash flows caused by the performance of the hospitals’ financial assets affect hospital expenditures. Capital expenditures increase, on average, by 10 to 28 cents for every dollar received from financial assets. The sensitivity is similar to that found earlier for shareholder‐owned corporations. Executive compensation, other salaries, and perks do not respond significantly to cash flow shocks. Hospitals with an apparent tendency to overspend on medical procedures do not exhibit higher investment‐cash flow sensitivities. The sensitivities are higher for hospitals that appear financially constrained.

Administrative Privatization and Employment Outcomes in the Implementation of Temporary Assistance to Needy Families.

Welfare reform in the 1990s encouraged states and localities to contract out cash assistance services to for-profit and nonprofit firms operating within the private sector. Although privatized welfare delivery was heralded in the wake of Temporary Assistance to Needy Families (TANF), scant empirical research evaluates welfare privatization and its potential relationship with administrative quality and program outcomes. This study examines the relationship between administrative privatization and TANF program outcomes, including work participation activities, unsubsidized employment, employment closure, and monthly earnings, across a large sample of individual welfare clients in the state of Florida. The results of methodologically appropriate hierarchical linear models demonstrate that ownership variables seldom enhance the quality of TANF outcomes, suggesting that privatization alone is not an administrative panacea in human support services. Although direct privatization effects are often found to be substantively small and inconsistent in terms of service quality improvement, in closed-case models, there is evidence that nonprofit welfare delivery is associated with superior TANF employment closure outcomes.

SEX RATIOS, POLYGYNY, AND THE VALUE OF WOMEN IN MARRIAGE––A BECKERIAN APPROACH

Gary Becker's theories of marriage were mentioned as one of the reasons why he was awarded the Nobel prize in economics in 1992 and were emphasized by Becker: his first article on the family published in a major journal (Becker 1973) is a theory of marriage and the chapters on marriage in his influentialTreatise on the Family(Becker 1981, 1991) come first. Becker's theoretical models of marriage all view marriages as small non-profit firms engaged in household production, thereby featuring one of the basic tenets of theNew Home Economicsthat Becker pioneered with Jacob Mincer while both were at Columbia University in the 1960s (see Becker 1960, 1965; Mincer 1962, 1963).