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Firms, Nonprofits, And Cooperatives: A Theory Of Organizational Choice

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  • Patrick HERBST
  • Jens PRUFER

Abstract

We formalize the difference between profit-maximizing firms, nonprofits, and cooperatives and identify optimal organizational choice in a model of quality provision. Firms provide lowest and nonprofits highest levels of quality. Efficiency, however, depends on the competitive environment, the decision making process among owners and technology. Firms are optimal when decision making costs are high. Else, firms are increasingly dominated by either nonprofits or cooperatives. Increased competition improves relative efficiency of firms and decreases relative efficiency of nonprofits.

Suggested Citation

  • Patrick HERBST & Jens PRUFER, 2016. "Firms, Nonprofits, And Cooperatives: A Theory Of Organizational Choice," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 87(3), pages 315-343, December.
    • Handle: RePEc:bla:annpce:v:87:y:2016:i:3:p:315-343
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    Cited by:

    1. 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).
    2. Jens Prüfer, 2011. "Competition And Mergers Among Nonprofits," Journal of Competition Law and Economics, Oxford University Press, vol. 7(1), pages 69-92.
    3. Julia HÖHLER & Rainer KÜHL, 2018. "Dimensions Of Member Heterogeneity In Cooperatives And Their Impact On Organization – A Literature Review," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 89(4), pages 697-712, December.
    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).
    5. Kwame Ohene Djan & Roy Mersland, 2022. "Are NGOs and cooperatives similar or different? A global survey using microfinance data," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 26(2), pages 641-683, June.
    6. Lapo Filistrucchi & Jens Prüfer, 2019. "Faithful Strategies: How Religion Shapes Nonprofit Management," Management Science, INFORMS, vol. 65(1), pages 188-208, January.
    7. Richard Meade, 2015. "Incentives, Efficiency and Quality in Regulated Monopolies under Customer Ownership," Working Papers 2015-05, Auckland University of Technology, Department of Economics.
    8. Canh Thien Dang & Trudy Owens, 2024. "Non-governmental organizations’ motivation to diversify: self-interest or operation-related? Evidence from Uganda," Oxford Economic Papers, Oxford University Press, vol. 76(2), pages 561-584.
    9. David Zetland, 2013. "Water managers are selfish like us," Chapters, in: John A. List & Michael K. Price (ed.), Handbook on Experimental Economics and the Environment, chapter 14, pages 407-433, Edward Elgar Publishing.
    10. Edwin Ricardo Flores-Hernández & María Luisa Rodero-Cosano & Ana Evelyn Perla-Cartagena, 2022. "Complexity of Family Businesses in El Salvador: A Structural Equation Model," Sustainability, MDPI, vol. 14(11), pages 1-18, June.

    More about this item

    JEL classification:

    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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