New Competitors for Small Business: The For-Profit Mentality of Nonprofit Organizations

Authors

  • Karen A. Froelich North Dakota State University

Abstract

This paper seeks to raise awareness of the increasing competition small business firms are experiencing due to commercialization of the nonprofit sector. The traditional notion of the nonprofit organization is one supported by· donations,  grants, and government funds. However, commercial revenue has grown from 25 percent of total sector income in 1980 to 39 percent by 1996. These statistics suggest the folly of ignoring the for-profit strategies and commercial activities of nonprofit organizations.

Characteristics of small business firms and nonprofit organizations are described to highlight their competitive similarities. An empirical exploration of the emerging for-profit mentality of nonprofit organizations suggests that nonprofits are becoming more capable rivals in the competitive marketplace. The paper concludes by considering the implications of this new competition for small business firms.

References

Adams, C., & Perlmuner, F. (1991). Commercial venturing and the transformation of America's voluntary social welfare agencies. Nonprofit and Voluntary Sector Quarterly, 20( I ), 25-38.

Andrews, K. R. (1980). The concept of corporate strategy. New York, NY: Richard D. Irwin.

Baril, C. P., Marshall, S. B., & Sartelle, R. F. (1997). Economic value added and small businesses. Journal of Small Business Strategy, 8(2), 67-78.

Boris, E. T. ( 1998). Myths about the nonprofit sector. In E.T. Boris (Ed.), Charting Civil Society, July. 1-4. Washington, DC: The Urban Institute.

Cain, L. P., & Meritt, D. A. (1998). The growing commercialism of zoos and aquariums. Journal of Policy Analysis and Management, 1 7(2), 298-3 12.

Crimmins, J. C., & Keil, M. ( 1983). Enterprise in the nonprofit sector. Washington, DC: Partners for Livable Places.

Dillman, D. A. (1978). Mail and telephone surveys: The total design method. New York, NY: John Wiley and Sons, Inc.

DiMaggio, P. J. (1986). I ntroduction. In P. Di Maggio (Ed.), Nonprofit enterprise and the arts, (pp. 3-13). New York: Oxford University Press.

Drucker, P. F. (1990). Lessons for successfu l nonprofit governance. Nonprofit Management and Leadersh i p, 1(1), 7-1 4.

Ebert, R. J., & Griffin, R. W. ( 1998). Business essent ials (2nd edition). Upper Sadd le River, NJ: Prentice-Hall.

Efendioglu, A. M. ( 1 997). State of information technology in small retail and service businesses: An exploratory study. Journal of Small Business Strategy, 8(2), 13-24.

Froelich, K. A. (1997, December). Strategies to raise entry barriers in the nonprofit sector. Paper presented at the annual Association for Research on Nonprofit Organizations and Voluntary Action (A RNOVA), I ndianapolis, I N.

Galbraith, J. R., & Kazanjian, R. K. ( 1986). Strategy implementation: Structure, systems, and process. St. Paul, MN: West Publishing Company.

Gronbjerg, K. A. (1993). Understanding nonprofit funding. San Francisco: Jossey-Bass. Hatten, M. L. (1982). Strategic management in not-for-profit organizations. Strategic Management Journal, 3 (2), 89-104.

Hambrick, D. C. (1981 ). Environment, strategy, and power with in top management teams. Administrative Science Quarterly, 26(2), 253-276.

Hodgkinson, V. A., & Lyman, R. W. (1989). The future of the nonprofit sector. San Francisco, CA: Jossey-Bass.

Hodgkinson, V. A., & Weitzman, M. S. ( 1986). Dimensions of the independent sector: A statistical profile. Washington, DC: The I ndependent Sector.

Hodgkinson, V. A., & Weitzman, M. S. ( 1988). Dimensions of the independent sector: A statistical profile {Interim update.2nd ed.). Washington, DC: The Independent Sector.

Hodgkinson, V. A., & Weitzman, M. S. (1997). Nonprofit almanac: Dimensions of the independent sector 1996-1997. San Francisco, CA: Jossey-Bass.

Hodgkinson, V. A., Weitzman, M. S., Noga, S. M., & Gorski, H. A. (1993). A portrait of the independent sector: The act ivities and finances of charitable organizations. San Francisco, CA: Jossey-Bass.

Internal Revenue Service, Statistics of Income Division. ( 1993). Compendium of studies of tax-exempt organizations, 1 986-1992, Volume 2. (U.S. Department of the Treasury Publ ication No. 1416). Washington, DC: Government Printing Office.

Jones, G. R. (1987). Organization-client transactions and organizational governance struc­ tures. Academy of Management Journal, 30( I ), 197-218.

Kanter, R. M., & Summers, D. ( 1987). Doing well wh ile doing good: Dilemmas of performance measurement in nonprofit organizations and the need for a multiple constituency approach. I n W. Powell (Ed.), The nonprofit sector: A research handbook, (pp. 154-166). New Haven, CT: Yale University Press.

Lederer, A. L., & Mau pin, D. J. ( 1997). A world wide web primer for small business. Journal of Small Business Strategy, 8(2), 1-1 I.

Mirvis, P. H., & Hackett, E .J. ( 1983). Work and work force characteristics in the nonprofit sector. Monthly Labor Review, 1 06, 3-12.

Newman, W. H., & Wallender, H. W. ( 1978). Managing not-for-profit enterprises. Academy of Management Review, 7(1), 24-31.

Ouchi, W. G. (1977). The relationship between organizational structure and organizational control. Administrative Science Quarterly, 22(1 ), 95-1 12.

Ouchi, W. G., & Maguire, M. A. ( 1975). Organizational control: Two functions. Administrative Science Quarterly, 20(3), 559-569.

Peterson, K. D. (1984). Mechanisms of administrative control over managers in educational organizations. Administrative Science Quarterly, 29(3), 573-597.

Peterson, P. A. ( 1986). From im presario to arts administrator. In P. DiMaggio (Ed.), Non profit enterprise and the arts, (pp. 1 61-1 83). New York: Oxford U niversity Press.

Pfeffer, J., & Salancik, G. R. ( 1 977). Organizational context and the characteristics and tenure of hospital adm inistrators. Academy of Management Journal, 20( I ), 74-78.

Powell, W. W., & Owen-Smith, J. ( 1 998). Universities and the market for intellectual property in the l ife sciences. Journal of Pol icy Analysis and Management, 1 7(2), 253- 277.

Prescott, J., & Miree, C. (1998). Small business solutions: Bu ilding and leveraging a competitive intelligence capability without going broke. Journal of Small Business Strategy, 9(2).

Preston, A. ( 1989). The nonprofit sector in a for-profit world. Journal of Labor Economics, 1. 438-463.

Siropolis, N. ( 1994). Small business management (5th edition). Boston: Houghton Mifflin.

Tolbert, P. S. (1985). I nstitutional environments and resource dependence: Sources of adm inistrative structure in inst itutions of higher education. Administrative Science Quarterly, 30( I ), 1-1 3.

Tuckman, H. P. ( 1998). Competition, commercialization, and the evolut ion of nonprofit organizational structures. Journal of Policy Analysis and Management, 1 7(2), 1 75-194.

The Wall Street Journal Reports: Small Business. (1997, May 22). p, R l -R28.

Weisbrod, B. A. ( 1988). The nonprofit economy. Cambridge, MA: Harvard University Press.

Weisbrod, B. A. (1997). The future of the nonprofit sector: I ts entwining with private enterprise and government. Journal of Pol icy Analysis and Management, 1 6(4), 541- 555.

Weisbrod, B. A. ( 1998). To profit or not to profit: The commercial transformat ion of the nonprofit sector. New York: Cambridge University Press.

Young, D. R. ( 1998). Commercialism in nonprofit social service associations: Its character, significance, and rationale. Journal of Pol icy Analysis and Management, 1 7(2), 278- 297.

Downloads

Published

2000-06-18

Issue

Vol. 11 No. 2 (2000)

Section

Articles

License

The Journal of Small Business Strategy (the “Publisher”) and the Author(s) agree as follows:
 
1.Author(s) hereby grant to Publisher all right, title, and interest in and to the Work, including copyright to all means of expression by any method now known or hereafter developed, including electronic format. If Publisher does not publish the Work within two (2) years of the Effective Date, copyright shall revert back to the Author. Publisher agrees to always credit Author(s) as the author(s) of the Work.
 
2.Publisher hereby grants Author a royalty-free, limited license for the following purposes, provided the Work is always identified as having first been published by Publisher.
    •The right to make and distribute copies of all or part of the Work for use in teaching;
    •The right to use all or part of the material contained in the Work in a book by the Author(s), or in a collection of the Author(s)’s work;
    •The right to use and distribute the Work internally at the Author(s)’s place of employment, and for promotion and any other non-commercial purposes;
    •The right to use figures and tables from the Work for any purpose;
    •The right to make presentations of material from the Work;
    •The right to use and distribute the Work on the Author(s)’s Web site and on the Author(s)’s university’s institute repository;
Such license shall be effective when the Work is first published in the Journal of Small Business Strategy.
 
3.The Author(s) represents and warrants that the Work: (a) is the Author(s)’s original work and that Author(s) has full power to enter into this agreement; (b) does not infringe the copyright or property right of another; (c) contains no materials which is obscene, libelous, defamatory or violates another’s civil right, right of privacy, or is otherwise unlawful; and (d) has not been previously published, in whole or in part. Author(s) shall indemnify and hold Publisher harmless against loss or expenses arising from breach of any such warranties.

How to Cite

New Competitors for Small Business: The For-Profit Mentality of Nonprofit Organizations. (2000). Journal of Small Business Strategy (archive Only), 11(2), 92-104. https://libjournals.mtsu.edu/index.php/jsbs/article/view/454