What Is a Nonprofit Organization?

A non-profit organization is an organization that is not for profit. Its goal is usually to support or deal with issues or events of personal concern or public concern. Non-profit organizations cover a wide range of fields, including art, charity, education, academics, environmental protection and so on. Its operation is not to generate benefits. This is usually regarded as the main characteristic of such organizations, and it also has important characteristics such as non-profit, folk, autonomy, voluntary, non-political, and non-religious.

Non-profit organizations are sometimes referred to as the third sector, forming three main forces affecting society with the government sector (first sector) and the private sector (second sector) of the business world. Non-profit organizations must still generate revenue to fund their activities. However, its income and expenses are limited. Nonprofit organizations are often funded by donations from the public and private sectors, and are often tax-exempt. Private donations to nonprofits are sometimes tax deductible.

Non-profit organizations refer to all voluntary groups, social organizations, or non-governmental associations other than government departments and for-profit enterprises. They are the "third sector" between the government and for-profit enterprises.

The evolution of non-profit organizations

Causes of non-profit organizations

After the Second World War, on the one hand, people reflected on the two wars. The war caused unprecedented disaster to society.

Representative non-profit organizations (3 photos)

Difficulties and huge waste; on the other hand, differences and contradictions among nationalities, regions, and countries continue to exist and may intensify. It is found that the two major sectors of society can no longer meet the needs of balancing socio-economic activities and public needs. As a result, the form of social organization began to fade, and the third sector gradually appeared: non-profit organizations, that is, the social welfare sector. Such as the emergence of the United Nations to coordinate relations between countries; the establishment of the World Bank to assist poverty-stricken loans to underdeveloped countries and regions; the establishment of the World Health Organization to focus on supporting health and health issues in underdeveloped countries and regions ; WTO organizations also belong to such non-governmental organizations. The emergence and development of these organizations is greatly conducive to the development of the world and the harmony of society. The strength of these non-profit organizations is also getting stronger and larger, and their influence is getting greater and greater.

However, with the continuous development and progress of society, the three major sectors of society have also undergone internal changes. Reconstruction and construction were gradually carried out in accordance with market requirements, and market-oriented reforms were carried out. Due to market-based election competition and the implementation of rules, government corruption has been gradually eliminated, and social service levels have been greatly improved. Non-profit organizations promote the transparency of public welfare markets, promote the efficiency of public welfare organizations, and promote social civilization and harmony through fair competition and the self-discipline and mutual discipline of public banks.

Nonprofit Organization Research Theory

Since the 1970s, research in non-profit organizations has increased dramatically in North America and Europe, and even in Eastern Europe, non-profit organizations have given high attention. According to statistics from Kramer et al., The research results of non-profit organizations since 1970 are even more comprehensive than in the past 50 years ^[1] , and many representative theories have emerged.

(1) Theory of government failure and market failure

Weisbrod first explained the reasons for the existence of non-profit organizations from the perspective of government failure and market failure. He adopted a residual analysis strategy to demonstrate the necessity of non-profit organizations. He believes that the government, the market, and the non-profit sector are mutually replaceable in meeting the needs of personal goods, including private goods and public goods. Public goods cannot be provided by individual consumers and producers through market transactions, that is, market failures.

However, Meyer believes that the quantity and quality of any public goods provided by the government are determined by the political decision-making process, and the government's provision of public goods tends to reflect the needs of the median voters, leading to the The oversupply of voters and the undersupply of other voters at the same time led to government failure ^[2] .

In the analysis framework of Wiesbod, the government, the market, and the non-profit sector have an alternative relationship to meet the individual's needs for public goods. Non-profit organizations are supported by donor funding and unpaid labor by volunteers and government support. To exist ^[3] , the government and non-profit organizations coexist in the context of meeting the needs of the public and are complementary.

(B) the theory of contract failure

Hansmann first proposed the theory, starting from the limitations of for-profit organizations, to analyze the functional needs of non-profit organizations ^[4] . Existing economic theory believes that, under the premise that certain specific conditions are met, for-profit organizations will provide goods and services in quantities and prices that reflect maximum social efficiency. These conditions are: 1. The transaction cost is zero, including consumers' prior search costs, negotiation costs, etc. 2. Information is perfect. 3. The soundness of the law, that is, if the producer does not comply with the agreement, compensation can be obtained. Although in many cases, the above conditions do not need to be fully established, such as low transaction costs, etc., in some areas, consumers and producers have obvious information asymmetries on the quality and quantity of products and services. In this case, for-profit companies are likely to use their dominant position in information asymmetry to deceive consumers, maximize their own profits, and cause contract failures.

For the first time, Hansman's theory focused on the characteristics of non-profit organizations and carried out a detailed analysis. However, when analyzing the necessity of non-profit organization shapes, he still started from the perspective of institutional needs and had a strong functional analysis. Color does not make a more detailed and comprehensive analysis of the characteristics, scale, and system supply of non-profit organizations.

(Three) charity theory

Rose-Ackerman explained the reason for the existence of non-profit organizations from the perspective of supply. They believed that the leaders of non-profit organizations passed on their values and ideas by creating non-profit organizations, in order to spread their values and ideas. They established a non-profit organization, which also became an incentive for non-profit leaders ^[5] . Yang (1986) believes that this type of people is sometimes more reflected in non-profit organizations. Non-profit organizations may provide lower labor compensation, even including voluntary behavior. Some volunteers are willing to provide non-profit organizations with unpaid services. ^[6] .

Philanthropy theory believes that non-profit entrepreneurs provide this product for altruistic motives. In economic terms, the utility of non-profit entrepreneurs is achieved through charitable acts, or the good reputation and society brought by donations. Status makes them feel satisfied ^[7] .

(4) Self-interest theory

Contrary to the theory of charity, the theory of self-interest believes that donors are also consumers after the implementation of donation behavior. Donation behavior is regarded as a manifestation of self-interest behavior, so-called "donation control". Donation behavior makes donors Like the for-profit organization's stakeholder participation in corporate governance, the incentive for agent fraud is weakened, so this may also be the reason for the existence of non-profit organizations. In this case, the donor has an incentive to implement the donation, and the donor It is also possible to obtain tax exemptions ^[8] .

(5) Other theories

It mainly includes the three-sector model of state, market, and non-profit organization first proposed by Wuthow ^[9] . Wu Yi defined the state as "the scope of activities organized and legalized by formal and compulsory power." The state is characterized by coercive power. The market is positioned as "the range of activities involving the exchange of for-profit goods and services." Market entities operate mainly on non-mandatory principles. The non-profit sector is positioned as "the remaining range of activities that are neither formal coercion nor profit-oriented exchange of goods and services", and he operates mainly on a voluntary basis.

Definition of non-profit organization

Legal definition of non-profit organizations

Many countries in the world have legally defined non-profit organizations differently.

The definition of a non-profit organization in the United States law is determined by whether the organization has tax exempt status, that is, the organization that meets the tax exemption conditions is legally recognized as a non-profit organization.

The criteria for identifying non-profit organizations in the UK are as follows: the organization is established for the public rather than private interests; the organization hires some volunteers and does not receive salaries; salaries give up due remuneration Low salaries); surplus should not be distributed to members; directors of unpaid members are responsible for managing the organization's affairs; their funds come from different organizations.

According to Japanese law, non-profit organizations refer to social organizations that are not for profit and that their income cannot be used for distribution to members, but non-profit does not mean that they cannot participate in profit-making business activities, but must use all kinds of income For public welfare.

The UN's definition of non-profit organizations is based on the funding sources of non-profit organizations. If more than half of an organization's income does not come from goods and services sold at market prices, but from contributions paid by its members and donations from supporters, it is a non-profit organization. Due to the large differences in the funding source structure of such organizations in various countries, this standard is not universal.

Academic definition of non-profit organizations

Levitt defines non-profit organizations from the perspective of sector division, and uses the term Third Sector to collectively refer to these social organizations between government and private enterprises ^[10] . Non-profit organizations show more social responsibility, have the vitality to continuously update social values, beliefs and norms, gain insight into the moral orientation of society, predict social trends, and develop new social service methods to meet the needs of the people. He believes that this Quasi-organizations are characterized by organizational missions and are public missions ^[11] .

McLaughlin defines non-profit organizations from the perspective of management behavior. He compares the management behavior differences between non-profit organizations and government organizations and for-profit organizations to define what is a non-profit organization ^[12] .

Professor Salamon of Johns Hopkins University defines non-profit organizations based on organizational characteristics. He believes that the following six basic characteristics are met: formality, folk, non-profit, autonomy, voluntary, and Non-profit organizations can be called non-profit organizations ^[13] .

Anthony Y defines the connotation of non-profit organizations from the characteristics of organizational operations. He believes that non-profit organizations have the following 12 characteristics compared to government organizations and for-profit organizations ^[14] : For the purpose of profit; 2. Mainly provide public goods and services; 3. The conflict between fairness and efficiency is more intense; 4. Objectives and development strategies have more constraints than for-profit organizations; 5. Income has non-price The nature of the source; 6. There are special regulations on taxation and laws; 7. There is dysentery that fails to manage and control; 8. The behavior of members of the organization is difficult to examine; 9. Professional and technical personnel occupy a dominant position; 10. Various types of non-profit organizations The internal structure is quite different; 11. the financial dependence on customers is small; 12. it is moving towards commercial operation.

Nonprofit organization classification

Saramon has established an international non-profit organization classification standard based on a comparative study of 26 countries: 1.

Non-profit organizations Education and academics; 2. Medical treatment; 3. Social welfare; 4. Cultural leisure; 5. Professional groups; 6. Housing development; 7. International affairs; 8. Citizens initiative; 9. Environmental protection; 10. Charity; 11. Religion; 12. Others. This classification is easy to identify which organizations are non-profit, but it is not conducive to in-depth academic research, and the background of each country is different.

The United Nations International Standard Industrial Classification System divides non-profit organizations into 3 categories and 15 categories. They are: Education: Primary Education, Secondary Education, University Education, Adult Education, and Others; Medical and Social Work: Healthcare, Veterinary and Social Work; other community and personal services: environmental health, chambers of commerce and professional organizations, trade unions, other member organizations (including religious and political organizations), entertainment agencies, news agencies, libraries, museums and cultural institutions, sports and leisure.

The European Economic Activities Industry Classification System divides non-profit organizations into 5 categories and 18 items: education: higher education, primary and secondary education, vocational education and nursing education; research and development; medical and health: hospitals, clinics, other medical institutions, Dentists and veterinarians; other public services: social work, charity, professional organizations, employers' associations, unions, religious organizations and societies, travel agencies; leisure and culture: entertainment agencies, libraries, archives, museums, zoos and sports organizations ^{[15 ]} .

The role of nonprofit organizations

General role of non-profit organizations

social service

Provide intermediary services and direct services to members of society. (Such as consulting services for studying abroad and various nursing homes, private schools)

Social communication

Act as a bridge between government and business, government and society. On the one hand, it reflects the opinions and suggestions of enterprises and society to the government and provides information for the government; on the other hand, it assists the government in propaganda, guidance, and supervision. (Such as various industry associations)

Social evaluation

Make a fair evaluation of production and consumer goods (such as various investigation agencies).

Social arbitration

Mediation of disputes between members of society, such as consumer protection associations.

Political role of non-profit organizations

Resource providers for government legitimacy

Legitimacy is people's commitment to the status of people with authority and their obedience to their orders.

Supervisor of government power

Non-profit organizations provide self-organization space for people's free association. These organizations aim at public interest and protect the overall interests of human beings. Through organized activities, they awaken the public's public awareness and influence government's public decision-making.

Cultivator of democratic values

Conducive to fostering the public's correct outlook on politics.

Facilitator of citizens' participation in politics

Improving the quality of citizens' participation in politics in the practice of democratic participation in a large number of non-profit organizations is a proven and effective method.