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Firms, Nonprofits, and Cooperatives: A Theory of Organizational Choice

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Author Info

  • Herbst, P.
  • Prüfer, J.

    (Tilburg University, Tilburg Law and Economics Center)

Abstract

Abstract This paper formalizes the difference between firms, nonprofits, and cooperatives and identifies optimal organizational choice. In a model of quality provision, we find a clear ranking of quality produced: Firms provide lowest and nonprofits highest levels of quality. Efficiency, however, depends on the competitive environment, the decision making process and technology. Cooperatives are optimal when decision making costs are low. Else, cooperatives are increasingly dominated by either nonprofits or firms (depending on the incremental costs of quality production). Finally, changes in the competitive environment affect organizational choice: Increased competition induces a shift towards firm organization and away from nonprofits.

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Bibliographic Info

Paper provided by Tilburg University, Tilburg Law and Economic Center in its series Discussion Paper with number 2007-003.

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Date of creation: 2007
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Handle: RePEc:dgr:kubtil:2007003

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Web page: http://www.tilburguniversity.nl/tilec/

Related research

Keywords: Theory of the Firm; Cooperatives; Nonprofits; Organizational Choice; organizational change;

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References

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  1. Oliver Hart & John Moore, 1996. "The Governance of Exchanges: Members' Co-operatives Versus Outside Ownership," STICERD - Theoretical Economics Paper Series /1996/292, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  2. Oliver Hart & John Moore, 1998. "Cooperatives vs. Outside Ownership," STICERD - Theoretical Economics Paper Series 346, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  3. Glaeser, Edward L. & Shleifer, Andrei, 2001. "Not-for-profit entrepreneurs," Journal of Public Economics, Elsevier, vol. 81(1), pages 99-115, July.
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Citations

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Cited by:
  1. Prüfer, J., 2007. "Competition and Mergers among Nonprofits," Discussion Paper 2007-022, Tilburg University, Tilburg Law and Economic Center.
  2. Liang, Qiao & Hendrikse, George W. J. & Huang, Zuhui, 2010. "Quality provision and governance structure variety: Pooling versus double markup," IAMO Forum 2010: Institutions in Transition – Challenges for New Modes of Governance 52694, Leib­niz Institute of Agricultural Development in Central and Eastern Europe (IAMO).
  3. Filistrucchi, L. & Prüfer, J., 2013. "Faithful Strategies: How Religion Shapes Nonprofit Management," Discussion Paper 2013-052, Tilburg University, Center for Economic Research.
  4. Liang, Qiao & Hendrikse, George W. J. & Huang, Zuhui, 2010. "Value added and governance structure: Evidence from the pear industry in China's Zhejiang province," IAMO Forum 2010: Institutions in Transition – Challenges for New Modes of Governance 52708, Leib­niz Institute of Agricultural Development in Central and Eastern Europe (IAMO).

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