Government-Created Nonprofit Organizations and Public Service Turnaround: Evidence from a Synthetic Control Approach

Abstract

Abstract Theories of sectoral advantage and failure suggest that collaborations between public and nonprofit organizations can create new collaborative capabilities that compensate for sector-specific weaknesses. Drawing on these perspectives, we investigate whether government-created nonprofit organizations (GCNPOs) can turn around public services regarded as “failing” by government agencies. In doing so, we analyze the transfer of all of the functions of a “failing” inner London local education authority (Hackney) to a specially created not-for-profit organization (the Learning Trust) responsible for all the primary and high schools within its jurisdiction (circa 60 schools, with about 25,000 pupils). Using a synthetic control method approach to investigate the performance effects of this intervention, we find that educational outcomes improved in Hackney during the years following the creation of the Learning Trust. Documentary evidence suggests that the nonprofit form of the Learning Trust may have enabled it to develop better relations with the local community and access new revenue streams, which helped to improve outcomes. Our findings highlight the breadth and depth of the contribution that GCNPOs can make to the delivery of public services and to their potential effectiveness in helping to turnaround those that are failing.