Public Organization Review

, Volume 7, Issue 1, pp 41–55 | Cite as

The Property Rights Approach to Nonprofit Organization: The Role of Intrinsic Motivation

Article

Abstract

The standard property rights approach to nonprofit organization claims that attenuation of property rights in the form of nondistribution constraint stimulates managerial shirking in nonprofit firms and thereby makes them less efficient than for-profit firms. This paper argues that this view neglects the important role played by intrinsic motivation in nonprofit organization. Intrinsically motivated stakeholders provide resources to nonprofit firms and thereby facilitate their economic survival. However, intrinsic motivation is subject to the crowding-out effect, i.e., the danger of being displaced by the use of extrinsic (monetary and administrative) incentives. The property rights structure in nonprofit organization is designed to minimize the crowding-out effect by dampening monetary and administrative incentives through nondistribution constraint and self-governance orientation, respectively. This facilitates not only economic survival of nonprofit firms but also maximization of utility of their intrinsically motivated stakeholders.

Key words

Attenuation of property rights Intrinsic motivation Crowding-out effect Pecuniary utility Nonpecuniary utility 

References

  1. Alchian, A. 1967. How should prices be set? Il Politico XXXII, 369–382.Google Scholar
  2. Alchian, A., & Demsetz, H. 1972. Production, information costs and economic organization. American Economic Review, 62: 777–795.Google Scholar
  3. Anheier, H., & Ben-Ner, A. 2003. The study of the nonprofit enterprise: Theories and approaches. New York: Kluwer.Google Scholar
  4. Barkema, H. 1995. Do job executives work harder when they are monitored? Kyklos, 48: 19–42.Google Scholar
  5. Baumol, W. (1959). Business behavior value and growth. New York: MacMillan.Google Scholar
  6. Becker, G. 1957. The economics of discrimination. Chicago: University of Chicago Press.Google Scholar
  7. Coase, R. 1937. The nature of the firm. Economica, 4: 386–405.CrossRefGoogle Scholar
  8. De Alessi, L. 1983. Property rights, transaction costs, and X-efficiency: An essay in economic theory. American Economic Review, 73(1): 64–81.Google Scholar
  9. Deci, E. 1971. Effects of externally mediated rewards on intrinsic motivation. Journal of Personality and Social Psychology, 18(1): 105–115.CrossRefGoogle Scholar
  10. Deci, E. 1975. Intrinsic motivation. New York: Plenum.Google Scholar
  11. Demsetz, H. 1969. Information and efficiency: Another viewpoint. Journal of Law and Economics, 12(1): 1–22.CrossRefGoogle Scholar
  12. Demsetz, H. 1988. Ownership, control, and the firm. Oxford: Basil Blackwell.Google Scholar
  13. Enzle, M., & Anderson, S. 1993. Surveillant intentions and intrinsic motivation. Journal of Personality and Social Psychology, 64: 257–266.CrossRefGoogle Scholar
  14. Fama, E. F., & Jensen, M. C. 1983a. Agency problems and residual claims. Journal of Law and Economics, 16: 327–349.CrossRefGoogle Scholar
  15. Fama, E. F., & Jensen, M. C. 1983b. Separation of ownership and control. Journal of Law and Economics, 16: 301–325.CrossRefGoogle Scholar
  16. Foss, N. 1993. Theories of the firm: Contractual and competence perspectives. Journal of Evolutionary Economics, 3(2): 127–144.CrossRefGoogle Scholar
  17. Frey, B. 1997. Not just for the money: An economic theory of personal motivation. Elgar: CheltenhamGoogle Scholar
  18. Frey, B. 2001. Inspiring economics: Human motivation in political economy. Elgar: Cheltenham.Google Scholar
  19. Frey, B., & Jegen, R. 2001. Motivation crowding theory: A survey of empirical evidence. Journal of Economic Surveys, 15(5): 589–611.CrossRefGoogle Scholar
  20. Furubotn, E., & Pejovich, S. 1972. Property rights and economic theory: A survey of recent literature. Journal of Economic Literature, 10: 1137–1162.Google Scholar
  21. Furubotn, E., & Richter, R. 1998. Institutions and economic theory: The contribution of the new institutional economics. Ann Arbor, Michigan: University of Michigan Press.Google Scholar
  22. Ghoshal, S., & Moran, P. 1996. Bad for practice: A critique of the transaction cost theory. Academy of Management Review, 21(1): 13–47.CrossRefGoogle Scholar
  23. Gibbons, R. 1998. Incentives in organizations. Journal of Economic Perspectives, 12(4): 115–132.Google Scholar
  24. Hansmann, H. 1980. The role of nonprofit enterprise. Yale Law Journal, 89(5): 835–901.CrossRefGoogle Scholar
  25. Hansmann, H. 1987. Economic theories of nonprofit organization. In Powell, W. (Ed.), The nonprofit sector: A research handbook. New Haven: Yale University Press.Google Scholar
  26. Hodgson, G. 1998. Competence and contract in the theory of the firm. Journal of Economic Behavior and Organization, 35: 179–201.CrossRefGoogle Scholar
  27. Holmstrom, B., & Milgrom, P. 1991. Multitask principal-agent analyses: Incentive contracts, asset ownership, and job design. Journal of Law, Economics, and Organization, 7: 24–52.Google Scholar
  28. James, E. 1983. How nonprofits grow: A model. Journal of Policy Analysis and Management, 2: 350–365.CrossRefGoogle Scholar
  29. James, E., & Rose-Ackerman, S. 1986. The nonprofit enterprise in market economies. Harwood: Chur.Google Scholar
  30. Kreps, D. 1997. Intrinsic motivation and extrinsic incentives. American Economic Review, 87(2): 359–364.Google Scholar
  31. Langlois, R., & Foss, N. 1999. Capabilities and governance: The rebirth of production in the theory of economic organization. Kyklos, 52(2): 201–218.Google Scholar
  32. Lepper, M., & Greene, D. 1978. The hidden cost of reward: New perspectives of psychology of human motivation. Hillsdale, New York: Erlbaum.Google Scholar
  33. Osterloh, M., & Frey, B. 2000. Motivation, knowledge transfer, and organizational form. Organization Studies, 11(5): 538–550.CrossRefGoogle Scholar
  34. Osterloh, M., Frey B., & Frost, J. 2001. Managing motivation, organization and governance. Journal of Management and Governance, 5(3–4): 231–239.CrossRefGoogle Scholar
  35. Peters, L. 1993. For-profit and nonprofit firms: Limits of the simple theory of attenuated property rights. Review of Industrial Organization, 8: 623–633.CrossRefGoogle Scholar
  36. Salamon, L. M., & Anheier, H. K. 1992. In search of the nonprofit sector. Voluntas, 3(2): 125–151.CrossRefGoogle Scholar
  37. Salamon, L., Sokolowski, S., & List, R. 2003. Global civil society: An overview. Baltimore: The John Hopkins University.Google Scholar
  38. Steinberg, R. 1987. Nonprofit organizations and the market. In Powell, W. (Eds.), The nonprofit sector: A research handbook. New Haven: Yale University Press.Google Scholar
  39. Titmuss, R. M. 1970. The gift relationship—From human blood to social policy. London: Allen & Unwin.Google Scholar
  40. Williamson, O. 1964. The economics of discretionary behavior: Managerial objectives in a theory of the firm. Englewood Cliffs, New Jersey: Prentice-Hall.Google Scholar
  41. Williamson, O. 1975. Markets and hierarchies: Analysis and antitrust implications. New York: Free.Google Scholar

Copyright information

© Springer Science+Business Media, LLC 2006

Authors and Affiliations

  1. 1.Institute of Agricultural Development in Central and Eastern EuropeHalle (Saale)Germany

Personalised recommendations