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The Property Rights Approach to Nonprofit Organization: The Role of Intrinsic Motivation

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Author Info
Vladislav Valentinov ()
Abstract

The standard property rights approach to nonprofit organization claims that attenuation of property rights in the form of nondistribution constraint stimulates managerial shirking in nonprofit firms and thereby makes them less efficient than for-profit firms. This paper argues that this view neglects the important role played by intrinsic motivation in nonprofit organization. Intrinsically motivated stakeholders provide resources to nonprofit firms and thereby facilitate their economic survival. However, intrinsic motivation is subject to the crowding-out effect, i.e., the danger of being displaced by the use of extrinsic (monetary and administrative) incentives. The property rights structure in nonprofit organization is designed to minimize the crowding-out effect by dampening monetary and administrative incentives through nondistribution constraint and self-governance orientation, respectively. This facilitates not only economic survival of nonprofit firms but also maximization of utility of their intrinsically motivated stakeholders. Copyright Springer Science+Business Media, LLC 2007

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File URL: http://hdl.handle.net/10.1007/s11115-006-0024-x
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Publisher Info
Article provided by Springer in its journal Public Organization Review.

Volume (Year): 7 (2007)
Issue (Month): 1 (March)
Pages: 41-55
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Handle: RePEc:kap:porgrv:v:7:y:2007:i:1:p:41-55

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Related research
Keywords: Attenuation of property rights; Intrinsic motivation; Crowding-out effect; Pecuniary utility; Nonpecuniary utility;

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Foss, Nicolai Juul, 1993. "Theories of the Firm: Contractual and Competence Perspectives," Journal of Evolutionary Economics, Springer, vol. 3(2), pages 127-44, May.
  2. Robert Gibbons, 1998. "Incentives in Organizations," NBER Working Papers 6695, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law & Economics, University of Chicago Press, vol. 26(2), pages 301-25, June.
  4. Fama, Eugene F & Jensen, Michael C, 1983. "Agency Problems and Residual Claims," Journal of Law & Economics, University of Chicago Press, vol. 26(2), pages 327-49, June.
  5. Gibbons, Robert, 1998. "Incentives in Organizations," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 115-32, Fall. [Downloadable!] (restricted)
  6. Hodgson, Geoffrey M., 1998. "Competence and contract in the theory of the firm," Journal of Economic Behavior & Organization, Elsevier, vol. 35(2), pages 179-201, April. [Downloadable!] (restricted)
  7. Demsetz, Harold, 1969. "Information and Efficiency: Another Viewpoint," Journal of Law & Economics, University of Chicago Press, vol. 12(1), pages 1-22, April.
  8. Furubotn, Eirik G & Pejovich, Svetozar, 1972. "Property Rights and Economic Theory: A Survey of Recent Literature," Journal of Economic Literature, American Economic Association, vol. 10(4), pages 1137-62, December. [Downloadable!] (restricted)
  9. Langlois, Richard N & Foss, Nicolai J, 1999. "Capabilities and Governance: The Rebirth of Production in the Theory of Economic Organization," Kyklos, Blackwell Publishing, vol. 52(2), pages 201-18.
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  10. Kreps, David M, 1997. "Intrinsic Motivation and Extrinsic Incentives," American Economic Review, American Economic Association, vol. 87(2), pages 359-64, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Sven-Olof Collin & Elin Smith, 2008. "Democracy and Private Property: Governance of a Three-Party Public–Private Partnership," Public Organization Review, Springer, vol. 8(1), pages 53-68, March. [Downloadable!] (restricted)
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