Not-for-profit entrepreneurs

Edward Ludwig Glaeser and Andrei Shleifer

Scholarly Articles from Harvard University Department of Economics

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 stronger, 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 of the decisions of the non-profits.

Date: 2001
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Citations: View citations in EconPapers (207)

Published in Journal of Public Economics

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http://dash.harvard.edu/bitstream/handle/1/33078971/w6810.pdf (application/pdf)

Related works:
Journal Article: Not-for-profit entrepreneurs (2001)
Working Paper: Not-For-Profit Entrepreneurs (1998)
Working Paper: Not-For-Profit Entrepreneurs (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:hrv:faseco:33078971

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