Not-For-Profit Entrepreneurs

Edward Glaeser and Andrei Shleifer

Harvard Institute of Economic Research Working Papers from Harvard - Institute of Economic Research

Abstract: Entrepreneurs who start new firms may choose not-for-profit status as a means of committing to soft incentives. Such incentives protect donors, volunteers, consumers and employees from ex post expropriation of profits by the entrepreneur. We derive conditions under which completely self-interested entrepreneurs opt for not-for-profit status, despite the fact that this status limits their ability to enjoy the profits of their enterprises. When entrepreneurs have a taste for producing high quality products, the incentives are even softer, and, moreover, non-profit status can serve as a signal of that taste. We also show that even in the absence of tax advantages, unrestricted donations would flow to non-profits rather than for-profit firms because donations have more significant influence on the decisions of the non-profits.

Date: 1998
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Citations: View citations in EconPapers (12)

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Related works:
Journal Article: Not-for-profit entrepreneurs (2001)
Working Paper: Not-for-profit entrepreneurs (2001)
Working Paper: Not-For-Profit Entrepreneurs (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:fth:harver:1852

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