Managerial nonpecuniary preferences in the market failure theories of nonprofit organisation
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.
Keywords
Citation
Valentinov, V. (2009), "Managerial nonpecuniary preferences in the market failure theories of nonprofit organisation", International Journal of Social Economics, Vol. 36 No. 1/2, pp. 81-92. https://doi.org/10.1108/03068290910921208
Publisher
:Emerald Group Publishing Limited
Copyright © 2009, Emerald Group Publishing Limited