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

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  • Vladislav Valentinov

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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

Suggested Citation

  • Vladislav Valentinov, 2007. "The Property Rights Approach to Nonprofit Organization: The Role of Intrinsic Motivation," Public Organization Review, Springer, vol. 7(1), pages 41-55, March.
  • Handle: RePEc:kap:porgrv:v:7:y:2007:i:1:p:41-55
    DOI: 10.1007/s11115-006-0024-x
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    References listed on IDEAS

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    Cited by:

    1. Massimiliano Gambardella, 2011. "The Scope of Open Licenses in Cultural Contents Production and Distribution," EconomiX Working Papers 2011-26, University of Paris Nanterre, EconomiX.
    2. Sacchetti, Silvia & Tortia, Ermanno, 2013. "The Silver Lining Of Cooperation," AICCON Working Papers 125-2013, Associazione Italiana per la Cultura della Cooperazione e del Non Profit.
    3. Martha A. Starr, 2010. "Recession and the Social Economy," Working Papers 2010-08, American University, Department of Economics.
    4. Gagalyuk, Taras, 2012. "Goal achievement in supply chain networks: A study of the Ukrainian agri-food business," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 64, number 64.
    5. Sacchetti, Silvia & Tortia, Ermanno, 2012. "The internal and external governance of cooperatives: the effective membership and consistency of value," AICCON Working Papers 111-2012, Associazione Italiana per la Cultura della Cooperazione e del Non Profit.
    6. Claudio Balestri, 2014. "The Other Side of Ownership in Nonprofit Organizations: an Economic Rationale for Democracy," Public Organization Review, Springer, vol. 14(2), pages 187-199, June.
    7. Silvia Sacchetti & Ermanno C. Tortia, 2010. "A NEW FRAMEWORK FOR THE ECONOMIC ANALYSIS OF COOPERATIVE FIRMS: Self-defined rules, common resources, motivations, and incentives," Econometica Working Papers wp21, Econometica.
    8. Carlo Borzaga & Riccardo Bodini & Chiara Carini & Sara Depedri & Giulia Galera & Gianluca Salvatori, 2014. "Europe in Transition: The Role of Social Cooperatives and Social Enterprises," Euricse Working Papers 1469, Euricse (European Research Institute on Cooperative and Social Enterprises).
    9. 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.

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