Sector Choice

Abstract

This article advances scholarship on the institutional choice literature by examining how, when both options are available, entrepreneurs choose between establishing for-profit and nonprofit organizations. The article accounts for a fuller range of motivations that shape entrepreneurial decisions than is typically recognized in the scholarship. Data come from semi-structured interviews with founders of businesses and nonprofits in the fair trade industry, where both organizational forms are common. We find support for some, but not all, of the assumptions that are built into prevailing theories of the nonprofit sector and find that founders are motivated by factors not often addressed in the relevant scholarship—especially the normative and symbolic meanings they attach to organizational form. Based on these findings, we propose a new supply theory that focuses on four motivations for sector choice.