Behavioral effects of nonprofitness

Organization Level

Research has centered on hospitals (Gray 1986, 1990) and schools (Levy 1986b, James & Levin 1986, James 1987a), with comparisons by organizational form in structure, services provided, clients served, and various measures of performance.

efficiency Contrary to orthodox economic theory, research on hospitals reports that NPOs are less expensive (in per-diem patient cost) and thus ostensibly more efficient than FPs; by contrast, nursing-home studies find that FPs are cheaper (Gray 1990, Marmor et al 1987). There are many reasons to question if such studies really tap efficiency (Steinberg 1987, Gray 1990). Weisbrod (1988) dismisses comparative efficiency research as systematically biased by failure to take into account subtle differences in output mix and clientele.

service and client mix Research on hospitals demonstrates that NPOs have lower prices and offer slightly more unprofitable services and care to nonpaying patients than do FPs (though not as much as publics), but care quality (as measured) is not systematically influenced by form (Gray 1986, 1990; Marmor et al 1987). Several studies report NP nursing homes superior to FP in care-quality measures (Gray 1986). Weisbrod suggests that FPs attend to easily observable aspects of quality (which may influence revenues), but economize (and are thus inferior to NPs) on less visible quality aspects: he and Schlesinger (1986) interpret findings that FP nursing homes have fewer code violations but more customer complaints than do secular NPOs as supporting this view. (Church-owned NPOs have fewer than either.) Private schools have lower student-teacher ratios than public, a sign of either higher quality or lower productivity (Levy 1987). Coleman et al (1982) found that comparable students learn somewhat more in NP than in public schools, although effects differ by student type and between Catholic and other NPOs. Institutional context is critical: NP hospitals accepting federal Hill-Burton construction funds were obliged to provide services to the indigent; by contrast, reliance of NP hospitals on bond issues for capital places a premium on minimizing financial risk (Gray 1990).

human resources Each of two contrary hypotheses receives some support. (Possible heterogeneity of samples and unmeasured sources of variation dictate caution in interpretation). Rent theories reason that NPOs use tax savings to pay higher wages than FP competitors. Most hospital studies find wages higher in NPOs than in FPs (Steinberg 1987); a New York study found NP wages higher in most industries, though FP wages were catching up (Ben-Ner & Van Hoomissen 1989). Recruitment theories hold that NPO employees are willing to work for less because their values differ systemati­cally from those of employees of FP firms: Religious nursing homes pay lower wages than FPs (or secular NPOs) (Borjas et al 1983); teachers forego much income to teach in NP rather than public schools (Chambers 1984). Using sophisticated estimation methods, Preston (1985, 1988) reports that NP employees value job quality more and wages less than FP staff.

Four studies of colleges and universities have explored the relationship between form and inequality. Tolbert found the ratio of female to male faculty members higher in NP than in public institutions (even controlling for female student-body share), but discovered no systematic relationship between form and gender inequality in salary (1982, 1986). Two studies (Pfeffer & Davis-Blake 1987, Pfeffer & Langton 1988) report significantly higher levels of overall salary inequality in NP than in public institutions.

structure Structural differences among forms reflect differences in institutional systems or environments that vary among industries (Scott & Meyer 1988). Public schools, for example, are much more likely than NPOs to be part of complex hierarchal systems; FP hospitals are more likely than NPOs to belong to large chains. Such variation has consequences at the organizational level: Public schools are structurally more complex, less coherent, and more intensely administered than NPOs (Scott & Meyer 1988). Research on structural differences in similar environments tends to report weaker effects. NP hospitals have larger and more diverse boards than do FPs (Fennell & Alexander 1987); anecdotal accounts suggest that NP board meetings are more contentious than those of FPs, and NP trustees more likely than FP directors to try to influence staff and administrators directly (Mid-dleton 1987).

strategy NPOs are believed to respond less readily than FPs to market changes, owing to different goals and less access to capital (Hansmann 1987, Steinberg 1987). California NP hospitals, for example, were slower than FPs or publics to adopt a wide range of technical innovations over a 20-year span (Zucker & Така 1987). Economists posit that NPOs are less prone to maximize net earnings or market share than FPs; what they do maximize is debated (Hansmann 1987, DiMaggio 1987). NPs are larger than FPs in most industries, perhaps evidence of relative generalism (Ben-Ner & Van Hoomissen 1989). Results of several studies suggest that NPOs are less central than FPs and publics in interorganizational exchange networks (Galaskiewicz 1979, Knoke & Rogers 1979, Knoke & Wood 1981); whether this reflects the NPOs' desire for autonomy or their unattractiveness as partners (Kramer 1987) is uncertain. NPOs pursue cartelization strategies that (because they aim at donors rather than consumers) are defined as cooperation rather than restraint of trade: united fund-raising bodies are prominent vehicles (Seeley et al 1957, Polivy 1982). Again, ecological factors appear more important than generic differences.

comment The research literature is vast and inconclusive. An exhaustive review [much less discussion of public/FP differences (Bozeman 1987)] is beyond this chapter's scope. When so much research yields such ambiguous findings, one must ask if the questions are posed correctly. We suggest that the quest for generalizable differences among NPOs, proprietaries, and public agencies is problematic for several reasons.

Heterogeneity Variation within populations defined by legal form may swamp variation between them. Public museums, for example, include municipal, state, and federal variants (most but not all of which are quasi-NPOs rather than line agencies) and branches of state universities. Differences in several kinds of services are greater among these subtypes than between NPOs or publics as a whole (DiMaggio & Romo 1984). NP hospitals include chains and independents; some NP hospitals have FP subsidiaries; some NPOs are managed by FPs (Gray 1990). Heterogeneity is also produced by variation among NPOs in resource-dependence patterns, e.g. extent of re­liance on private donations (and whether these are from a few big donors or many small ones), sale of services (and whether sales are to consumers or third parties), and government assistance [and the mechanisms-grant, contract, vouchers-through which such support is tendered (Kramer 1981, Salamon 1987)]. Studies that distinguish between religious and secular NPOs often find systematic differences between them.

Unclear boundaries Lines between public, NP, and FP enterprise are often unclear: indeed "publicness" is better viewed as a continuous variable than as a category (Starr & Immergut 1987, Levy 1987). Is a NP hospital run by a FP management company as "nonprofit" as one that is not? Are NPOs funded through closely monitored contracts as "private" as those receiving categorical entitlements with only superficial financial monitoring? When regulation is both detailed and uniform across provider types, behavioral correlates of form are likely to be weak.

Compositional effects Most important, differences in the behavior of NP and other firms in the same industry often flow from industry composition.

Cross-national research makes this especially apparent: Geiger (1986) and Levy (1986a) report dramatic variation in the niches occupied by NP and FP higher education in different societies. In industries with significant direct provision by government, NPOs tend to specialize by service and clientele, and measurable differences between NP and FP providers are modest. When the state delegates service provision to NPOs, they are more heavily regulated, provide a wider range of services to a broader clientele, and differ more sharply from FPs.

A corollary is that it is hazardous to extract policy implications even from well-designed comparative performance studies. Take, for example, the superior achievement of students in NP schools (Coleman et al 1982). As Murnane (1986) has argued, policy changes enabling more students to attend private schools would likely alter aspects of the niches (student-body composition, regulatory environment) publics and privates occupy, thus altering the conditions responsible for the findings on which such recommendations are based. Reviewing research on comparative performance of NP and FP hospitals and nursing homes, Gray (1990) warns that we cannot assume that processes generating differences and similarities will persist far into the future.

Goals and constituencies If generic NP/FP differences exist, they may derive from the greater number and abstractness of the former's goals and their more complex and varied constituencies. Multiple, ambiguous goals and environmental heterogeneity yield complex administrative structures (Scott & Meyer 1990), difficulty in evaluation (Kanter & Summers 1987), internal conflict and demanding publics (Zolberg 1986), concern with legitimacy (Gronbjerg 1986), weak external boundaries (Middleton 1987), and frequent goal displacement (Sills 1957, Powell & Friedkin 1987). Whether such differences, which vary by field with regulatory policy, influence the kinds of measures upon which research has focussed is unclear. Given available evidence, one can conclude only that legal form does make a difference, but the difference it makes depends on the institutional and ecological structures of the industry in question.

Industry Level

In most industries, routines, programs, goals, public accounts, and structures are subject to both competitive and institutional isomorphic pressures (Han-nan & Freeman 1989, DiMaggio & Powell 1983). Such pressures presumably dampen such behavioral consequences of legal form as might otherwise exist. Competition among FP and NP health-care providers, for example, is said to make the latter more socially responsible and the former more efficient than they would otherwise be (Gray 1991). Hollingsworth & Hollingsworth (1987) report declining differences on a range of structural and performance variables of NP, FP, and public hospitals between 1935 and 1979. Competition among NP and public universities yield advantages to those in each form that adopt fundraising structures pioneered by the other (Tolbert 1985).

Thus form-related differences might emerge more strongly in comparisons among industries with differing compositions in one society, or between the same industries in different places. The first approach, however, is likely to confound differences stemming from dominant forms with those caused by task environment and technology. The second risks confusing the effects of form with correlated variation in state structure and social organization. Nonetheless, the possibility that the division of labor among forms within an industry influences all firms in similar ways merits pursuit, perhaps through qualitative and quantitative historical studies of industries during periods of change.

Societal Level

NPSs are often described as sources of diversity and innovation. They contribute to pluralism by creating centers of influence outside the state and provide vehicles through which disenfranchised groups may organize. They enlarge the menu of models among which policy makers may choose when experimenting locally with solutions to social ills (Douglas 1983, 1987; Simon 1978).

Other authors portray NPSs as reflecting elite interests (Amove 1980, Cookson & Persell 1985, Stanfield 1984). Collins (1987) suggests that because of tax advantages accruing to donations, charity represents a form of regressive redistribution in which the rich exchange donations for entry into prestigious charitable activities; this entry in turn enhances and legitimates their social status (Ostrander 1984).

Each of these images can be amply illustrated: social movement organizations, progressive foundations, some religious schools and human-rights organizations boost diversity; boarding schools, business-supported policy research centers, and some arts organizations may reproduce patterns of inequality. (Many NPOs sustain diversity and privilege.) What is less clear is whether such varied activities have any net effect on societies, what the effect is, and how it varies cross-nationally.

Streeck & Schmitter (1985) argue that interest-mediating organizations (a category that overlaps NPOs) produce, as well as reflect, differentiated tastes and values. But the relationship between interest mediation and diversity depends on state and polity structures. Whereas in pluralist systems NPOs may enhance diversity, in corporatist systems they may develop "welfare cartels" or "supply oligopolies" of social services (Heinze & Oik 1981). Thus, under corporatism, structures meant to accommodate social conflicts and to integrate society also exercise domination and control. By contrast, in the consociational democracies of the Netherlands and Belgium, NPOs provide institutional infrastructure to segmented and potentially antagonistic publics. In corporatist and consociational democracies, NPO self-governance enables the state to delegate sensitive issues to specialized agencies outside the political center. Seibel (1989) describes the NPS's "mellow weakness" as a politically attractive but ineffectual safety-valve, to which the state offloads insoluble problems (e.g. the alleviation of poverty) that would otherwise threaten its legitimacy. Estes & Alford (1990) contend that service to the state has made US NPOs more bureaucratic and, at times, more market-oriented than they would otherwise be, thus undermining their legitimacy. At the other extreme, delegating public tasks to NPOs or QUANGOS (quasi-autonomous nongovernmental organizations) may result in the emergence of policymaking circuits that compete with government (Billiet 1984).

NPOs are active in politically sensitive policy areas in liberal polities, too (Jenkins & Eckert 1986, Laumann & Knoke 1988). Meyer (1987) views NPOs as rationalizers in societies (like the United States) with weak or weakened state centers: The often-latent political functions of voluntary associations become manifest in institutionalized negotiations of organizational status groups, in which NPOs, public agencies, QUANGOS, and firms are major actors. Several political theorists warn that dense networks of private associations may contribute to the paralysis of social and political action (Lowi 1969, Olson 1982).

A variant of this theme can be found in the work of European scholars who discuss NPOs under such rubrics as "the crisis of the welfare state" (Offe 1985). In order to maintain stability and legitimacy, so the argument goes, the Keynesian welfare state delegates more and more functions to private and semipublic organizations. The state, its sovereignty over specialized constituencies reduced, then faces "steering problems" and is unable to govern. Thus, whereas Tocqueville viewed voluntary associations as indicators of the robustness of liberal democracy, such theorists see in their proliferation a sign of legitimation crisis.

Research on the role of NPOs in nonwestern societies offers support for the "diversity" argument. Fruhling (1989, 1987) describes the role of NP human-rights organizations as vehicles for opposition to Latin American authoritarian regimes and their capacity to maintain networks that are mobilized during transitions to democracy. A large literature focusses on the role of Third-World "nongovernmental" organizations in social and economic development (Anheier 1987, Smith 1990).

Little research exists on NPSs in Eastern European nations, and fundamental differences in national-account statistics prevent comparison with the west. Such sectors have emerged throughout the region, however. Marschall (1990) describes the renaissance of the Hungarian NPS; Grosfeld & Smolar (1988) report on the growth of a Polish NPS, located not between state and economy but between a Communist-party-controlled sector and a relatively underdeveloped civil society represented by the Catholic church and the Solidarity movement. Like other Eastern European countries, the Soviet Union has introduced "association laws" in order to increase the number and scope of non-state, NP entities.

comment NPSs are seen as protectors of both pluralism and privilege, sites of democracy and control, sources of innovation and paralysis, instruments of and competitors to states. Such arguments must be formulated more rigorously for systematic cross-national research to assess their merits. We hazard only two generalizations. First, the extent to which such roles are played depends on the manner in which NPSs are constituted in particular societies and on their relationships to other sectors. Second, NPSs are unlikely to exert strong causal effects on features of states and polities. Elites may use NPOs to further their interests but usually have more effective vehicles, e.g. laws permitting the private mobilization of dynastic capital for public purposes seem more likely to stem from than to cause upper-class power.

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