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Managerial nonpecuniary preferences in the market failure theories of nonprofit organisation

Managerial nonpecuniary preferences in the market failure theories of nonprofit organisation Purpose – Managerial nonpecuniary preferences have been emphasised by the behavioural theories of nonprofit organisation but only weakly related to this organisation's market failure theories. The present paper aims to fill this gap by examining the ways in which the market failure‐addressing capacity of nonprofit firms requires recourse to managerial nonpecuniary preferences. Design/methodology/approach – The paper proceeds by examining the ways in which the market failure theories of nonprofit organisation conceptualise this organisation's market failure‐addressing mechanism. Findings – It is shown that the market failure theories of nonprofit organisation can be logically complete only if they include an explanation of managerial motivation consisting in the gratification of nonpecuniary preferences. Practical/implications – Nonprofit firms are thereby shown to address market failures in a way different from that of for‐profit firms. Specifically, whereas for‐profit firms address market failures based on their advantages over market organisation in processing information and aligning incentives, nonprofit firms make the production of goods and services that are undersupplied due to market failures the object of nonprofit managers' nonpecuniary preferences. Originality/value – The economic theory of nonprofit organisation has been traditionally marked by a dichotomy of the market failure theories and behavioural theories, only the latter of which recognised the role of managerial nonpecuniary preferences. By demonstrating that these preferences are crucial to the former theories as well, this paper integrates these two theorising strands and thus deepens the theoretical understanding of the nonprofit sector. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Social Economics Emerald Publishing

Managerial nonpecuniary preferences in the market failure theories of nonprofit organisation

Vladislav Valentinov
International Journal of Social Economics , Volume 36 (1/2): 12 – Jan 9, 2009
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Publisher
Emerald Publishing
Copyright
Copyright © 2009 Emerald Group Publishing Limited. All rights reserved.
ISSN
0306-8293
DOI
10.1108/03068290910921208
Publisher site
See Article on Publisher Site

Abstract

Purpose – Managerial nonpecuniary preferences have been emphasised by the behavioural theories of nonprofit organisation but only weakly related to this organisation's market failure theories. The present paper aims to fill this gap by examining the ways in which the market failure‐addressing capacity of nonprofit firms requires recourse to managerial nonpecuniary preferences. Design/methodology/approach – The paper proceeds by examining the ways in which the market failure theories of nonprofit organisation conceptualise this organisation's market failure‐addressing mechanism. Findings – It is shown that the market failure theories of nonprofit organisation can be logically complete only if they include an explanation of managerial motivation consisting in the gratification of nonpecuniary preferences. Practical/implications – Nonprofit firms are thereby shown to address market failures in a way different from that of for‐profit firms. Specifically, whereas for‐profit firms address market failures based on their advantages over market organisation in processing information and aligning incentives, nonprofit firms make the production of goods and services that are undersupplied due to market failures the object of nonprofit managers' nonpecuniary preferences. Originality/value – The economic theory of nonprofit organisation has been traditionally marked by a dichotomy of the market failure theories and behavioural theories, only the latter of which recognised the role of managerial nonpecuniary preferences. By demonstrating that these preferences are crucial to the former theories as well, this paper integrates these two theorising strands and thus deepens the theoretical understanding of the nonprofit sector.

Journal

International Journal of Social Economics – Emerald Publishing

Published: Jan 9, 2009

Keywords: Market system; Strategic alignment; Non‐profit organizations

References

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    Ballou, J.
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    Ben‐Ner, A.
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    Brooks, A.
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    Hansmann, H.
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