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2 - Competition, commercialization, and the evolution of nonprofit organizational structures

Published online by Cambridge University Press:  30 November 2009

Burton A. Weisbrod
Affiliation:
Northwestern University, Illinois
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Summary

Introduction

Competition among nonprofits and between nonprofits and for-profits is a present day reality. What is its impact on nonprofit behavior in the marketplace? To what extent does it lead to commercialization of nonprofit activities? Does it cause nonprofits to alter their organizational structures or for-profits to alter their services to copy nonprofit behavior? What effects does it have on nonprofits' ability to pursue their charitable missions?

This chapter analyzes competition among nonprofits in settings where only nonprofits compete, and in markets where both nonprofits and for-profits coexist. It begins with a definition of competition and then presents five competitive forces and uses these to examine competition in a market where only nonprofits compete. The conditions under which commercialization is likely to occur are discussed, and the nature of competition in settings where nonprofits compete with for-profits is explored. Examples from the health-care industry are used to explore the evolving legal structures that nonprofits are employing in settings where they compete with for-profits. The chapter ends with a discussion of the challenge that these changes pose for public policy: to ensure that the evolving institutional changes, as well as the pressures toward commercialization, do not diminish the unique charitable role of the sector.

The nature of nonprofit competition

Competition, the pursuit of the same objective by two or more firms, creates rivalry among nonprofits for capital, labor, customers, and/or revenues. This rivalry is normally not motivated by a desire for personal acquisition of profits, although equity accumulation may become a goal of an organization (Chang and Tuckman 1990; Brody 1996, 491).

Type
Chapter
Information
To Profit or Not to Profit
The Commercial Transformation of the Nonprofit Sector
, pp. 25 - 46
Publisher: Cambridge University Press
Print publication year: 1998

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