Relationships between Nonprofit and for-Profit Organizations: A Stakeholder Perspective

Abstract

The purpose of this article is to provide a new, more comprehensive stakeholder theory of the relationships between nonprofit, for-profit, and government sectors. This theory combines aspects of neoclassical economics and principal-agency theory to complement the traditional notions that these organizations either compete or exist in a vacuum relative to one another. The article discusses nonprofit organizations that are employee groups (unions and professional associations), shareholders (institutional investors including pension funds and endowments), community and other interest groups, government contractors, competitors, consumers, and suppliers. By viewing these organizations as agents relative to a principal for-profit (or government) organization, it is possible to hypothesize about relationships and behaviors between organizations of different sectors of the economy. This new perspective allows a better understanding of the many relationships observed in the nonprofit sector and of a much greater range of nonprofit stakeholders than is currently possible given existing theory.