توضیح دادن محدودیت های بنیادهای خیریه: روش هزینه معامله

This paper extends a transaction costs framework to the nonprofit sector where information asymmetries are typically acute. I explore the decision of charitable foundations to place material restrictions on grants to nonprofits. Foundations often place constraints on grant use to limit cross-subsidy of projects or ex-post opportunism by nonprofit managers. In contrast, nonprofits prefer fewer restrictions to smooth income across revenue streams or compensate for shifts in demand. The paper utilizes a pseudo panel of 6000 grant contracts to examine the relationship between the various costs of those restrictions and the observed characteristics of grant contracts. Empirical results confirm received theory that high contracting costs will reduce the probability of grant restrictions.

In the U.S., nonprofits provide key services such as healthcare, education, the arts, and human services. Arrow (1963) noted that nonprofit organizations flourished in industries where the quality or quantity of output was particularly difficult to observe. In such industries, stakeholders face a hidden-action problem where profitmaximizing firms have an incentive to shirk on non-contractible elements of the production process. Hansmann (1980) later characterized the nonprofit organizational formas a mechanismfor stakeholders to mitigate hidden-action or hidden-information problems, particularly when complete contracts are difficult to write. Presumably, the legal commitment by nonprofit managers to a non-distribution constraint softens the incentives toward opportunistic behavior. Contract failure remains a central theoretical rationale for nonprofit formation (Glaeser & Shleifer, 2001). Yet, empirical evidence supporting the theory has been more difficult to obtain. This paper contributes to understanding the role of incomplete contracts in nonprofit formation by analyzing the particular issue of a charitable foundation's choice in offering restricted grants to nonprofit organizations. Institutional characteristics of the grant-making process allow us to observe some important components of incomplete contracts among nonprofits that are more difficult to observe elsewhere. This paper presents a unique dataset of grant contracts between private foundations and recipient charities. To interpret variation in contract structure, a transaction cost economics (TCE) framework is applied to generate testable hypotheses about conditions where foundations will likely place restrictions on the use of grant funds. The paper extends empirical analysis of incomplete contracts to the nonprofit sector, which is largely unexplored. Consistent with TCE, empirical results indicate that foundations are more likely to place restrictions on grants as the costs of monitoring/enforcing grant restrictions decline or as the propensity for opportunistic behaviors rise. An empirical examination of contractibility within the nonprofit sector opens the door for an improved understanding of nonprofit formation, capitalization, and behavior.

This paper examines the structure of grant contracts between charitable foundations and recipient nonprofit firms. While theoretical advances in understanding the role of incomplete contracts in nonprofit formation have been made, demonstrating empirical evidence has been more difficult. The empirical literature has bypassed the nonprofit sector, whose very existence is theoretically tied to incomplete contracts. The nonprofit context is unusual because it examines contractual information among nonprofit firms without direct profit maximization objectives. Furthermore, nonprofit institutions face idiosyncratic institutional constraints distinct fromtheir forprofit counterparts. This paper lends empirical support to a transaction costs framework for interpreting variation in grant contracts. Foundations place material restrictions on the use of grants to mitigate opportunistic behaviors by nonprofit managers. These behaviors may include perquisite consumption or cross-subsidization of programming. However, grant restrictions are not costless to construct or enforce. Restrictions may force nonprofit managers to allocate gifts suboptimally as operating conditions change. I propose that foundations will economize on these transaction costs in a predicable way. While far from complete, this approach opens the door to a more systematic understanding of a wide variety of issues within the nonprofit sector including: nonprofit finance, firm growth, and incentive alignment within and among nonprofit agencies. Using proxies for contractibility, the paper finds that foundations indeed follow the predictions offered by a TCE framework. More restrictive contracts are offered as output becomes increasingly contractible or as the potential for ex-post opportunism rises. More importantly, the findings are robust across a broad spectrum of nonprofit types and empirical specifications. While empirical results match up reasonably well with the predictions of TCE, several limitations in this analysis should be noted. Given the current structure of the data offered by the Foundation Center, a true panel structure (where an individual grant is observed longitudinally) for the data is not viable. A true panel would allow for the observation of relationship-specific capital. Similarly, true panel data would allow for the possibility that grant contracts may be renegotiated. Currently, the contract (grant) is observed only at the time of the gift while subsequent renegotiations of the gift are not. The analysis conceives of the case where foundations offer a take-it-or-leave-it contract. In fact, nonprofits or foundations could maintain bargaining power to negotiate or renegotiate the grant restrictions. The Foundation Center does not track the status or duration of the grant after the initial bequest. Should this data ever become available, a complete panel structure would be a natural extension to this work. Second, the dependent variable itself is an imperfect measure of contractibility. Not all restricted grants are completely constrained, nor are all grants for general operating support fully flexible. The fungible nature of grants categorized as “general operating support” makes them, for the purposes of this analysis, ex-post unrestricted. Discriminating among finer gradations of program restrictions on foundation grants would also be a fruitful avenue of future research. This study likely masks differences among the wide variety of charities operating within this market. It appears that many of the empirical predictions originally proposed by TCE in a for-profit context can be extended to the nonprofit sector. Given the limitations described above, the analysis should be considered an initial test, rather than conclusive evidence, of the concept's applicability. That TCE can be applied as a robust framework for understanding grantsmanship is good news for both foundations and nonprofits. There clearly exists both asset specificity and the potential for opportunism in the grant-making process. As such, the full elimination of grant restrictions is not a reasonable objective by either party. Indeed, the implication of applying a TCE framework is not the reduction of grant restrictions, but to increase their efficiency. The policy consequences of the approach are that improvements in transparency and more robust legal environments should enhance the donor's ability to offer more efficient restrictions.