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The transaction cost theory of the nonprofit firm: Beyond opportunism

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  • Valentinov, Vladislav

Abstract

Building on the transaction cost theory of the for-profit firm, the article argues that the transaction cost-economizing role of the nonprofit firm has two distinct dimensions. One of them consists of reducing the cost of searching for, processing, and communicating information and the other minimizes opportunistic behavior by means of aligning incentives of concerned stakeholders. So far, the transaction cost theory of the nonprofit firm has been emphasizing the second dimension while largely ignoring the first one. The article fills this gap by demonstrating that nonprofit firms are able to economize on transaction cost not only by minimizing opportunism but also by facilitating cooperation among those stakeholders who derive utility from contributing to the realization of their nonprofit firm's missions and hence would not be interested in opportunistic behavior. The article concludes by emphasizing the complementarity of the two dimensions of the nonprofit firm's transaction cost-economizing role.

Suggested Citation

  • Valentinov, Vladislav, 2008. "The transaction cost theory of the nonprofit firm: Beyond opportunism," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 37(1), pages 5-18.
    • Handle: RePEc:zbw:espost:195126
    DOI: 10.1177/0899764007300408
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    References listed on IDEAS

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    1. Preston, Anne E, 1989. "The Nonprofit Worker in a For-Profit World," Journal of Labor Economics, University of Chicago Press, vol. 7(4), pages 438-463, October.
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    6. Handy, Femida & Katz, Eliakim, 1998. "The Wage Differential between Nonprofit Institutions and Corporations: Getting More by Paying Less?," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 246-261, June.
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    Cited by:

    1. Hielscher, Stefan & Pies, Ingo & Prinz, Aloys, 2015. "Umfassende Organisationsethik für die moderne Gesellschaft: Ein systematischer Vergleich gewinnorientierter und nicht-gewinnorientierter Unternehmen," Discussion Papers 2015-8, Martin Luther University of Halle-Wittenberg, Chair of Economic Ethics.
    2. Alejandro Agafonow, 2020. "From Hybrid Organizations to Social-purpose Hierarchies: Toward a Transaction Cost Economics of Social Enterprises," Journal of Interdisciplinary Economics, , vol. 32(2), pages 180-199, July.
    3. Tizian M. Fritz & Georg von Schnurbein, 2019. "Beyond Socially Responsible Investing: Effects of Mission-Driven Portfolio Selection," Sustainability, MDPI, vol. 11(23), pages 1-15, December.
    4. Panova, Anna A. (Панова, Анна), 2018. "Transaction Cost Theory: Origin and Development [Теория Трансакционнных Издержек: Логика Возникновения И Развития]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 4, pages 90-107, August.
    5. Tomáš Rosenmayer, 2013. "Comparing Profit and Nonprofit Institutions as Organizational Units," Ekonomika a Management, Prague University of Economics and Business, vol. 2013(1), pages 29-43.
    6. Alejandro Agafonow & Marybel Perez, 2023. "How A Social Enterprise Wanes: The Transaction Costs of Credible Commitments at Etsy.com," Journal of Interdisciplinary Economics, , vol. 35(1), pages 83-107, January.
    7. Agafonow, Alejandro & Perez, Marybel, 2024. "Overhauling multinationals for the Anthropocene: How a rogue subsidiary offers a blueprint for sustainable development," Ecological Economics, Elsevier, vol. 222(C).

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