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Managerial nonpecuniary preferences in the market failure theories of nonprofit organisation

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  • Valentinov, Vladislav

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.

Suggested Citation

  • Valentinov, Vladislav, 2009. "Managerial nonpecuniary preferences in the market failure theories of nonprofit organisation," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 36(1/2), pages 81-92.
    • Handle: RePEc:zbw:espost:206876
    DOI: 10.1108/03068290910921208
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    References listed on IDEAS

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    Cited by:

    1. Patrick Gianfaldoni, 2019. "Social Business Economy versus Social Political Economy: The Social Firm in perspective [Économie sociale d'entreprise versus Économie sociale politique : La firme sociale en perspective]," Post-Print hal-03262366, HAL.
    2. Patrick Gianfaldoni, 2019. "Économie sociale d'entreprise versus Économie sociale politique : Un cheminement théorique," Post-Print hal-03555831, HAL.
    3. Jindřich Špička & Markéta Arltová & Petr Boukal, 2019. "Selected Socioeconomic Determinants of the Size of the Nonprofit Sector Serving Households in the OECD Countries," Prague Economic Papers, Prague University of Economics and Business, vol. 2019(3), pages 276-295.
    4. repec:prg:jnlpep:v:preprint:id:671:p:1-20 is not listed on IDEAS
    5. Ermanno C. Tortia & Florence Degavre & Simone Poledrini, 2020. "Why are social enterprises good candidates for social innovation? Looking for personal and institutional drivers of innovation," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 91(3), pages 459-477, September.

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