Teresa D Harrison

We examine whether having at least a portion of an endowment free from donor restrictions (i.e., a board-designated endowment [“BDE”]) affects endowment objectives related to intergenerational equity, rainy-day funding, or accumulation. Our results provide some evidence consistent with restricted endowments serving accumulation or rainy-day funding objectives. Holding at least some funds in a BDE does not appear to influence the attainment of these objectives. Moreover, we find no evidence that a BDE incrementally affects a nonprofit organization’s (“NPO”) sensitivity of spending on programs, administration, or capital expenditures to operating revenue. Finally, we also do not find any evidence that BDEs alleviate agency conflicts associated with unrestricted net assets with respect to spending on programs or CEO compensation. While BDEs have unique features that should facilitate greater flexibility than donor-restricted endowments and greater board oversight than unrestricted net assets held outside an endowment, our results suggest they do not produce different outcomes in spending.

Patterns of nonprofit sector growth, organizational birth, and organizational dissolution continue to be at the forefront of the nonprofit management literature. We contribute to this line of research by examining entry, exit, and growth simultaneously, employing the longest panel of US nonprofits of which we are aware. We find estimates of entry ranging between four and 5%, while exit ranges between 1% and 2% per year. The combined rates result in positive sector growth every year, despite variations in regulatory and economic conditions. Our results indicate that lack of exit-not excess entry-is an important, and often overlooked, factor for continued growth of the nonprofit sector. Furthermore, we document the importance of including 990-N filers and addressing missed filings, demonstrating the bias introduced in metrics of sector growth and exit if we do not account for these issues. We conclude by providing guidance on best practices for scholars and practitioners when measuring nonprofit entry, exit, density, and growth metrics, along with suggested reframing of the mindset around sector growth to consider a lack of exit driving growth rather than exclusively focusing on the creation of new nonprofits.

This article introduces a novel empirical approach to the nonprofit literature that can measure competition between nonprofit organizations. Our approach provides a framework to determine how the number of organizations may be incorporated into empirical competitive analysis. We then systematically estimate the average population needed to support a given number of nonprofits in a market. We find that, for the 10 nonprofit industries examined, markets reach competitive levels once four or more nonprofits have entered. The results suggest that a relatively small number of nonprofits are needed to ensure robust competition. Our findings demonstrate that donor market competition is both predictive in nonprofit entry decisions and remarkably similar to competitive behavior among for-profit firms. We discuss several implications of these findings, in terms of both policy and future empirical research.

We analyze a class of linear regression models including interactions of endogenous regressors and exogenous covariates. We show how to generate instrumental variables using the nonlinear functional form of the structural equation when traditional excluded instruments are unknown. We propose to use these instruments with identification robust IV inference. We furthermore show that, whenever functional form identification is not valid, the ordinary least squares (OLS) estimator of the coefficient of the interaction term is consistent and standard OLS inference applies. Using our alternative empirical methods we confirm recent empirical findings on the nonlinear causal relation between financial development and economic growth.

Using data for California from 2005 until 2010, we investigate to what extent market competition and the presence of non-profits in the area may play a role in equilibrium uncompensated care (UC) levels, allowing those effects to differ according to the hospital's ownership type. Previous studies have not explored the potential spillover effects from non-profit hospitals into the hospital decision of UC provision. We find evidence that regions with more non-profits experienced larger increases in UC levels, and even more in less concentrated markets. Our results also indicate that UC provision by for-profit hospitals decreases the larger the presence of non-profits in the region, and this effect is magnified when competition is more intense. We, therefore, find no positive spillover effects of non-profits into the hospital decision of UC provision, which may help us to understand the recent trends in UC levels.

We investigate the importance of nonprofit tax exemptions to the structure of local fitness markets and to the nonprofit's decision to complement fitness offerings with youth programming. We estimate an equilibrium model of market structure of nonprofit and for-fitness centres. Our results suggest that the two ownership types serve different customer bases. We predict that a revocation of tax exemptions would lower nonprofit entry by 26%, leaving for-profit entry unaffected. This decline in nonprofit entry derives primarily from fitness facilities that jointly operate a youth programme. Tax exemptions thus aid in both the provision of the primary and auxiliary services.

•We empirically model competition between nonprofits who rely heavily on donations•We infer competitive behavior from donor market size changes necessary to induce entry•We find that nonprofit markets reach competitive equilibrium at five or more firms•These findings are largely consistent across several nonprofit industries. This paper empirically characterizes competitive behavior among charitable nonprofits where prices and output are difficult to observe. Using a model tailored to donative nonprofits and an empirical methodology that exploits cross-sectional variation in market size and various measurable demographic and cost characteristics applicable for nonprofits, this paper estimates the threshold number of potential donors required for nonprofit economic viability in five major charitable sectors. We find that our sample markets generally reach competitive levels once five or more nonprofits in a given nonprofit sector are observed. The paper offers several possible interpretations of these findings and directions for future research.

We examine the claim that nonprofit markets have become more crowded over time. A naïve examination of the data indicates that the number of nonprofits has increased rapidly over the past two decades. However, this approach does not account for increases in population, income, or other demand factors that would alter a population’s ability to support additional nonprofits. We attempt to quantify a standard unit of demand for nonprofits over time, by exploiting the panel nature of our data. Our findings indicate that nonprofit density, normalized for changes in demand, in 2005 is lower than it was in 1990. We are also able to examine the impact of incremental increases in population to absorb a nonprofit. Overall, we find that it takes far more people to support nonprofit entry in 2005 compared to 1990. It is likely that technological shifts in production and management techniques introduced since 1990 allow firms to serve larger numbers of people. Consistent with our findings, this type of change would result in fewer nonprofits per market, serving larger numbers of people. Our results therefore provide evidence that growth in the nonprofit sector has not necessarily implied increased density or greater competition in the sector.