The Nonprofit Sector

The Nonprofit Sector: A Research Handbook, Second Edition

Copyright Date: 2006
Published by: Yale University Press
Pages: 672
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  • Book Info
    The Nonprofit Sector
    Book Description:

    The second edition ofThe Nonprofit Sectorprovides a novel,comprehensive, cross-disciplinary perspective on nonprofit organizations and their role and function in society. This new, updated edition keeps pace with industry trends and advances as well as with the changing interests and needs of students, practitioners, and researchers. As before, every chapter has been written to stand on its own, providing sufficient background for the reader to follow the argument without referring to other chapters-allowing readers to selectively choose those chapters that are most relevant to a particular course, interest, or issue.The Nonprofit Sector: A Research Handbookincludes twenty-seven new or updated chapters. Relevant chapters from the previous edition have been refined, and new chapters have been added to fill in gaps, making this the authoritative reference for all who want an accessible, perceptive, and all-inclusive rendering of the nonprofit sector. The contributors-prominent scholars in their respective fields-carefully reflect upon the variety of changes in the rapidly growing world of nonprofits, examining a wide array of organizations, international issues, social science theories, and philanthropic traditions and covering a broad range of topics including the history and scope of nonprofit activities in the United States and abroad, the relation of nonprofits to the marketplace, government-nonprofit issues, key activities of nonprofits, aspects of giving to and joining nonprofits, and nonprofit mission and governance. For anyone who wishes to have a deeper understanding of the nonprofit sector, this remains the essential guide.From reviews of the first edition:"[This book] is the closest thing to a 'bible' of nonprofit sector research and state-of-the-art social science knowledge as currently exists."-Dennis R. Young,Public Administration Review"Invaluable to anyone currently engaged in research or policy decisions involving nonprofit organizations or, for that matter, considering becoming involved."-Jerald Schiff,Journal of Policy Analysis and Management"An exceptionally useful resource."-Mark D. Hughes,The Philanthropist

    eISBN: 978-0-300-15343-9
    Subjects: Business

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Preface to the Second Edition
    (pp. ix-x)
  4. Acknowledgments
    (pp. xi-xii)
  5. Introduction
    (pp. 1-10)

    Any society has a multiplicity of tasks and an accompanying variety of ways to accomplish them. Some tasks are undertaken by individuals, others by organizations, formal and informal. Organizations are multidimensional, and these dimensions vary widely from organization to organization. This volume focuses on one such dimension, the structure of ownership, and one kind of entity, the nonprofit organization. The chapters herein assess which tasks are undertaken by nonprofit organizations, either alone or in combination with or competition with other kinds of entities, and explore the reasons for these patterns. The authors analyze the common elements linking advocacy, charitable assistance,...

  6. Part I History and Scope of the Nonprofit Sector
    • 1 The Nonprofit Sector in Historical Perspective: Traditions of Philanthropy in the West
      (pp. 13-31)

      Although it can be claimed that the formation of a distinct nonprofit sector is a comparatively recent achievement in the political economy of modern Western states, the actors, values, and institutions driving that process forward have a long and neglected history. It is the purpose of this chapter to survey that history selectively, interconnecting those key agents of change over time that have contributed to forming major parts of the nonprofit sector as it now exists in the United States and abroad. This chapter also explores how ancient and innovative forms of Western philanthropy have shaped and continue to inform...

    • 2 A Historical Overview of Philanthropy, Voluntary Associations, and Nonprofit Organizations in the United States, 1600–2000
      (pp. 32-65)

      The termsnonprofit sectorandnonprofit organizationare neologisms. Coined by economists, lawyers, and policy scientists in the decades following World War II as part of an effort to describe and classify the organizational domain for tax, policy, and regulatory purposes, the meaning varies depending on the identity and intentions of the user.

      Defined narrowly, the terms refer to entities classified in section 501(c)(3) and 501(c)(4) of the Internal Revenue Code of 1954 and subsequent revisions: nonstock corporations and trusts formed for charitable, educational, religious, and civic purposes which are exempt from taxation and to which donors can make tax-deductible...

    • 3 Scope and Dimensions of the Nonprofit Sector
      (pp. 66-88)

      The nonprofit sector comprises a large and, by most measures, growing share of the U.S. economy. The sector is also extremely diverse. It includes religious congregations, universities, hospitals, museums, homeless shelters, civil rights groups, labor unions, political parties, and environmental organizations, among others. Nonprofits play a variety of social, economic, and political roles in society. They provide services as well as educate, advocate, and engage people in civic and social life. Given this diversity, conclusions about one type of nonprofit organization do not translate easily to other types. For example, large hospitals are complex organizations with a disproportionate share of...

    • 4 The Nonprofit Sector in Comparative Perspective
      (pp. 89-114)

      In 1987, in the first edition of thisHandbook,Estelle James (1987:398–399) noted in her seminal chapter, “The Nonprofit Sector in Comparative Perspective,” that “little has been written analytically about the role of the indigenous nonprofit sector … cutting across industries and/or countries and attempting to relate these facts to the theoretical paradigms of nonprofit growth and behavior.” She found that “data on the size of the nonprofit sector are not available for a large number of countries” and that these organizations tended to be overlooked in policy and academic debates. This made it difficult, she suggested, to take...

  7. Part II Nonprofits and the Marketplace
    • 5 Economic Theories of Nonprofit Organizations
      (pp. 117-139)

      Those unfamiliar with economics, nonprofit organizations, or both may wonder what one subject has to do with the other. Economics does not, of course, provide the reader with everything he or she ought to know but it does provide insight on virtually every problem relating to the role, behavior, management, and regulation of the nonprofit sector. In turn, economics has become a richer discipline for confronting the special challenges posed by analysis of nonprofit organizations.

      Economics is the study of choices under scarcity. This goes far beyond the study of things bought and sold and far beyond the financial consequences...

    • 6 Nonprofit Organizations and the Market
      (pp. 140-158)

      Economists think about markets by thinking about the behavior of the people and firms who populate them. These consumers and producers are modeled as rational agents who assess their circumstances and act to advance their own interests. For-profit firms are assumed to behave so as to maximize profit, while politicians and those working in government agencies are viewed as responding optimally to the incentives of their political environments. This chapter reviews what economists have learned about the behavior of nonprofit organizations, viewing them too as rational optimizers responding to the incentives of the marketplace.

      One distinctive feature of nonprofit firms...

    • 7 Work in the Nonprofit Sector
      (pp. 159-179)

      As world income and manufacturing productivity has risen and as the information economy has expanded, the service sector has come to dominate employment in the United States and other advanced industrialized nations. Because nonprofit entities are typically service sector organizations, they increasingly account for both a significant and a growing share of employment. Furthermore, the policy relevance of questions relating to the nonprofit labor force is growing. Changes in government policy in recent decades, in the United States and elsewhere, have increasingly shifted the burden of maintaining social safety nets to nonprofit workers, paid and unpaid.

      Along with the growing...

    • 8 Collaboration between Corporations and Nonprofit Organizations
      (pp. 180-204)

      In the United States nonprofit organizations and businesses have long been in collaboration. Collaboration has ranged from efforts to advance public welfare to simply making money for both parties. Even so, philanthropic partnerships are seldom purely altruistic, and commercial partnerships often have an element of altruism. This has been the case for well over a hundred years, and we suspect that it will continue. Since one type of organization has the goal to earn money for owners even as they are trying to do good, and the other to advance social welfare even as they are trying to increase revenues,...

  8. Part III Nonprofits and the Polity
    • 9 The Constitution of Citizens: Political Theories of Nonprofit Organizations
      (pp. 207-220)

      From the perspective of political theory, associations and organizations are problematic as well as potent. Incorporated or not, associations are potential sites and resources for political activity outside of formal political institutions. Whether or not they are operated for profit, corporations are political creations (Novak 2001). These creations are endowed with rights—of legal existence and property holding—but are not strictly accountable to the sovereigns or legislatures that bestow these rights.¹ Such organizations are political constructions but are not part of the formal political system. Consequently, analyses of voluntary associations and nonprofit organizations frequently develop at the margins of...

    • 10 Scope and Theory of Government-Nonprofit Relations
      (pp. 221-242)

      Government-nonprofit relations—in the United States and most everywhere else—are complex and dynamic. As other chapters in this volume demonstrate, they include exchanges of financial and other resources as well as efforts to influence one another through regulatory activities or political mobilization. As such, they both reflect and shape the nature of civic engagement. Moreover, they vary across time, space, and fields of activities. Nor do they occur in isolation, but are conditioned by economic and market structures and by activities carried out informally in households or local communities.

      The links between government and the nonprofit sector are evident...

    • 11 The Legal Framework for Nonprofit Organizations
      (pp. 243-266)

      Anglo-American philanthropy recently marked the 400th anniversary of the Statute of Charitable Uses (43 Eliz. ch. 4). The 1601 Statute of Elizabeth is celebrated for its preamble enumerating a long list of charitable purposes, ranging from “relief of aged, impotent and poor people” and “supportation, aid and help of young tradesmen, handicraftsmen, and persons decayed” to “maintenance of … schools of learning” and “repair of bridges, ports, havens, causeways, churches, sea-banks, and highways.” The Elizabethans also began the modern, secular legal system for overseeing charity. Unfortunately, the enforcement mechanism in the Statute of Elizabeth proved difficult to carry out, and...

    • 12 The Federal Tax Treatment of Charitable Organizations
      (pp. 267-306)

      In a society suffused with taxes and reliant on them as engines of social and economic policy, the union of charity and taxes is in reality indissoluble—and controversy therefore inevitable. Charity¹ seems destined to be enmeshed in tax policy debate not only because that is the fate in America of so much human activity, but also because, over the years, we have come to entrust to the tax system a central role in the nourishment and regulation of the charitable sector.

      It is a role that, for better or for worse, is unmatched in other lands. Legislation in other...

    • 13 Nonprofit Organizations and Political Advocacy
      (pp. 307-332)

      Echoing James Madison’s worries about the “mischief of faction” and Alexis de Tocqueville’s diagnosis of America as a “nation of joiners,” contemporary analysts have advanced conflicting assessments about the nature of nonprofit political advocacy and its impact on the health of the American political system. Where Madison worried that excessive interest advocacy (i.e., the “mischief of faction”) might undermine democratic government and prescribed expanding the crosschecks of broader interest group competition, de Tocqueville’s worry was that the “tyranny of the majority” would undermine minority voice and create a stultifying political conformity. These concerns are echoed by contemporary analysts of the...

    • 14 International Nongovernmental Organizations
      (pp. 333-352)

      As this volume illustrates, the nonprofit sector is usually associated with national societies. It comprises organizations and associations in the “third sector” that lies “between states and markets” (Wuthnow 1991), that is, outside the business and political realms: service organizations, soup kitchens, recreation clubs, nonprofit hospitals, animal rights groups, private schools, and so on. In world society, an analogous sector operates outside both the global economy (dominated by transnational corporations and managed by such intergovernmental organizations as the International Monetary Fund and the World Trade Organization) and the global interstate system (centered on the United Nations). This global third sector...

  9. Part IV Key Activities in the Nonprofit Sector
    • 15 Foundations
      (pp. 355-377)

      Foundations date to antiquity. They have flourished in some regions and been largely absent in others. They have generally been welcomed by the state, but not always and not everywhere, and at times have been prohibited. They have ranged from single-purpose institutions to those active across numerous sectors. Although “grant making”—what we now take to be a defining characteristic of most foundations—occurs early in foundation history, with medieval alms giving, the vast majority of foundations since antiquity have taken direct responsibility for their own programs rather than giving grants to other institutions. For more than two millennia, foundations...

    • 16 Nonprofit Organizations and Health Care: Some Paradoxes of Persistent Scrutiny
      (pp. 378-414)

      Our understanding of nonprofit health care is rife with paradox. Few aspects of American society are as salient for the general public as is medical care. Extensive media coverage of its successes and failures is followed with considerable interest by much of the public (Brodie et al. 2003). People have regular encounters with the health-care system, either for their own care or for the treatment received by their family and friends. From this media exposure and personal experience, many Americans have formed strong opinions about the performance of the healthcare system, simultaneously recognizing its remarkable accomplishments and persisting failures (Immerwahr,...

    • 17 Social Care and the Nonprofit Sector in the Western Developed World
      (pp. 415-431)

      Interest in nonprofit sector organizations providing social care has increased dramatically in recent years, a development generated both because of their institutional form (nonprofit sector) and because of the growing salience of formally organized social care as a policy field, stimulated by demographic and economic trends and changes in family structure (Organisation for Economic Co-operation and Development 1996).¹ The aging of the world’s population is especially pertinent, for older people account for the largest share of social-care resources. Increases in the proportion of older people living alone, linked to rises in divorce/separation and remarriage rates, and continued increases in the...

    • 18 Nonprofit Organizations and the Intersectoral Division of Labor in the Arts
      (pp. 432-461)

      This chapter takes stock of what we know about the role of nonprofit enterprise in the production and distribution of the arts (broadly defined), primarily in the United States. After briefly discussing measurement, I present data about the extent of nonprofit activity in a range of cultural subfields. I then review theoretical explanations of the prevalence of nonprofits in cultural industries and discuss some puzzles that existing theories do not adequately solve. After reviewing research and theory about behavioral differences between nonprofit and for-profit arts firms, I explore how the arts and culture sector is evolving in the face of...

    • 19 Higher Education: Evolving Forms and Emerging Markets
      (pp. 462-484)

      Comparing and contrasting private nonprofit organizations with for-profit and government organizations can bring into clearer focus various functions and behaviors of the different organizational forms. According to economists, nonprofits provide a more trustworthy alternative organizational form for the respective consumers in industries where performance and quality are difficult to evaluate. Differences in behavior are attributed to the absence of a profit motive and to professional norms that value prestige and other nonpecuniary rewards (Hansmann 1980, 1987). Political scientists emphasize the roles and behaviors of nonprofit organizations in relation to governmental provision of public services. Private nonprofit sectors allow for greater...

    • 20 Religion and the Nonprofit Sector
      (pp. 485-505)

      The study of religion has a long history in the social sciences, figuring prominently in the work of Max Weber, Emile Durkheim, Karl Marx, Alexis de Tocqueville, William James, and Sigmund Freud, among others. Building on these early contributions, social scientists generally regard religion as one of society’s core institutions, just as they do the family, the economy, or the system of government, rather than as part of the nonprofit sector. As a social institution, “religion” thus refers to suchorganizationsas churches, mosques, temples, denominations, and religious movements and thebeliefs and practicesassociated with these organizations, such as...

    • 21 Nonprofit Community Organizations in Poor Urban Settings: Bridging Institutional Gaps for Youth
      (pp. 506-520)

      Young people growing up in poor urban communities confront the same developmental tasks as do other American youth: they must acquire the social skills, attitudes, mental and physical competencies, and values that will carry them forward to successful adulthood (National Research Council and Institute of Medicine 2002). But poor urban youth must accomplish these developmental goals in the context of failed institutions and political, economic, and social isolation. Youth from affluent neighborhoods know more, stay in school longer, get better jobs, and have fewer pregnancies and less trouble with the law than do youth from poor neighborhoods; research makes it...

  10. Part V Who Participates in the Nonprofit Sector and Why?
    • 22 Nonprofit Membership Associations
      (pp. 523-541)

      Membership associations are a significant component of the nonprofit sector. Mutual benefit organizations, incorporated to serve their members’ interests, compose 33 percent of the nonprofit organizations registered in the United States in 2004 (NCCS statistics 2005). If we include registered congregations, the percentage goes up to 60 percent of the registered nonprofit organizations. Though the prevalence of nonprofit membership associations varies across countries (Baer, Curtis, and Grabb 2001), they play important and varied roles in many societies. If we want to understand the nonprofit sector, we cannot ignore the aspects of the sector related to nonprofit organization membership.

      Knoke (1986:2)...

    • 23 Charitable Giving: How Much, by Whom, to What, and How?
      (pp. 542-567)

      In this chapter we discuss four aspects of charitable giving by individuals: how much is given in total; the patterns of giving broken down by demographic and behavioral characteristics; how much is given to various areas of need; and how donors are giving, that is, through outright cash gifts, or through more formal and strategic methods. We define individual charitable giving more broadly than simply as those contributions that are eligible for the charitable deduction according to the IRS—that is, gifts made to qualified nonprofit organizations. In addition to contributions to and through charitable organizations, we also discuss several...

    • 24 Why Do People Give?
      (pp. 568-588)

      The vast majority of Americans make charitable contributions. In 2000, 90 percent of U.S. households donated on average $1,623 to nonprofit organizations.¹ Why do so many people choose to give their hard-earned income away? What motivates them to behave in this altruistic or seemingly altruistic manner? The objective of this chapter is to present a short summary of what economists have learned about the motivations for individual charitable giving.² This is a question of substantial importance, as individual contributions account for more than 80 percent of total dollars given.³ If we do not understand why people give, then how can...

  11. Part VI Mission and Governance
    • 25 Nonprofit Mission: Constancy, Responsiveness, or Deflection?
      (pp. 591-611)

      In a simple, elemental fashion, a mission is a clarion call for nonprofit organizations. The goals or agendas attached to a mission serve to rally, engage, and enroll workers, volunteers, and donors. They also serve as guidelines for how to go about the business of contributing to the public good, arguably the primary principle that motivates the nonprofit enterprise. In this sense, nonprofit mission operates as an inducement and, as a long tradition of organization theory stresses, inducements are essential for motivating participants to contribute to organizations (Barnard 1938; Simon 1947).

      Nonprofit organizations have both instrumental and expressive dimensions (Frumkin...

    • 26 Governance: Research Trends, Gaps, and Future Prospects
      (pp. 612-628)

      Boards are charged with ultimate responsibility for the nonprofit organizations that they oversee. Within the nonprofit world, they serve as an important channel for civic participation and play a critical role in connecting individual institutions to their larger environment. Accordingly, boards are a subject of enormous importance for those with scholarly, managerial, and public policy interests in the nonprofit sector. In 1987, however, a major assessment of the governance literature found that empirical studies and scholarly analyses of nonprofit boards were scarce (Middleton 1987). Twenty years later, major gaps in our theoretical and empirical knowledge about boards continue to exist,...

    • 27 Commercial Activity, Technological Change, and Nonprofit Mission
      (pp. 629-644)

      Many nonprofit organizations engage in commercial activities. Some sell goods or services as a sideline to supplement their main income from donations and government subsidies. Others have evolved to rely almost exclusively on commercial activities for revenue (Hansmann 1988). Still others engage in moneymaking pursuits to gain a more diversified revenue flow and reduce their vulnerability to external shocks such as a downturn in the economy or a drastic decline in government support (Tuckman and Chang 1991; Chang and Tuckman 1994). No matter what the motivation or degree of involvement is, commercialization can significantly impact the behavior of the nonprofits...

  12. About the Contributors
    (pp. 645-650)
  13. Index
    (pp. 651-659)