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Going Along or Going Independent? A Dynamic Analysis of Nonprofit Alliances

Author

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  • Chen Jiawei

    (University of California Irvine, Department of Economics, 3151 Social Sciences Plaza A,Irvine, CA 92697, USA)

  • Sacks Michael

    (West Virginia University, Department of Economics and Center for Free Enterprise, 1601 University Ave., PO Box 6025,Morgantown, WV 26505, USA)

Abstract

This paper investigates strategic alliances in the nonprofit sector in the form of franchising. Using a dynamic model of local public goods with endogenous affiliation and splitting, we show that local organizations may choose to affiliate with the national organization for faster capital accumulation. Temporary alliance occurs when a local organization strategically affiliates with the national organization only to break away after accumulating enough capital. Alliance is more likely to arise and persist when the local chapter is smaller, when the local chapter’s mission is closer to the national organization’s, when the national organization is more efficient in production, and when the local chapter is more patient. Moreover, regulation that requires the local chapter to be affiliated with the national organization would be welfare reducing when the local chapter is large, when the local and national missions differ substantially, and when production at the national organization is inefficient.

Suggested Citation

  • Chen Jiawei & Sacks Michael, 2018. "Going Along or Going Independent? A Dynamic Analysis of Nonprofit Alliances," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 18(2), pages 1-20, April.
    • Handle: RePEc:bpj:bejeap:v:18:y:2018:i:2:p:20:n:2
    DOI: 10.1515/bejeap-2017-0009
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    References listed on IDEAS

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    More about this item

    Keywords

    nonprofit; strategic alliance; breakup; industry dynamics; capital accumulation;
    All these keywords.

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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