Nonprofit Economic Development Organizations and the Institutional Arrangement of Local Economic Development

Abstract

In the United States, local economic development is increasingly being managed by nonprofit organizations. However, the institutional arrangement of local economic development is an understudied topic in the scholarly literature on nonprofit management and leadership. This paper examines why communities select nonprofits to manage economic development and the effect this institutional arrangement has on local development policy. We hypothesize that the form of local government and the population size of a community are variables affecting the likelihood that a community will select a nonprofit organization for economic development. Additionally, we argue that nonprofit organizations manage economic development differently than agencies directly controlled by local governments. Thus, organizational types influence economic development policy outcomes. To examine the paper’s hypotheses, we use data from the International City/County Management Association’s (ICMA) 2014 economic development survey. The paper’s analysis provides evidence that smaller cities, compared with larger communities, are more likely to select nonprofit organizations to manage economic development, and it appears the selection of a nonprofit to manage economic development influences the type of development tools used by communities.