Research

Nonprofit collaboration and the resurrection of market failure: How a resource sharing environment can suppress social objectives

Eva Witesman and Andrew Heiss, “Nonprofit Collaboration and the Resurrection of Market Failure: How a Resource-Sharing Environment Can Suppress Social Objectives,” Voluntas: International Journal of Voluntary and Nonprofit Organizations, 2016, 1–29, doi: 10.1007/s11266-016-9684-5.


Abstract

Collaboration and its promotion by funders continue to accelerate. Although research has identified significant transaction costs associated with collaboration, little empirical work has examined the broader, societal-level economic outcomes of a resource-sharing environment. Does an environment that encourages collaboration shift our focus toward certain types of social objectives and away from others? This paper uses agent-based Monte Carlo simulation to demonstrate that collaboration is particularly useful when resources are rare but a social objective is commonly held. However, collaboration can lead to bad outcomes when the objective is not commonly shared; in such cases, markets outperform collaborative arrangements. These findings suggest that encouraging a resource-sharing environment can lead to inefficiencies even worse than market failure. We also demonstrate that failure to account for transaction costs when prescribing collaboration can result in quantifiably lower outcome levels than expected.

Figure

Figure 1: Simulation results

Figure 1: Simulation results

BibTeX citation

@article{WitesmanHeiss:2016,
    Author = {Eva Witesman and Andrew Heiss},
    Doi = {10.1007/s11266-016-9684-5},
    Journal = {Voluntas: International Journal of Voluntary and Nonprofit Organizations},
    Pages = {1--29},
    Title = {Nonprofit Collaboration and the Resurrection of Market Failure: How a Resource-Sharing Environment Can Suppress Social Objectives},
    Year = {2016}}