Competition, commercialization, and the evolution of nonprofit organizational structures

This article explores competition both in settings where nonprofits compete among themselves and where they compete with for-profits. Growing competition among nonprofits raises questions as to the impacts of this rivalry. How does competition affect nonprofit behavior and does it cause nonprofits to become more commercial in orientation? Does it alter organizational structures and does it cause nonprofits to become less focused on their charitable missions? The answers to these questions can influence public policy toward the nonprofit sector. A definition of competition is presented and Porter's five competitive forces are introduced and used to explore competition in nonprofit marketplaces. Conditions under which commercialization is likely to occur are discussed and the nature of competition is then examined in settings where nonprofits compete in mixed (for-profit/nonprofit) markets. Organizational structures from the health care industry are then used to highlight the evolving legal structures that nonprofits employ in competition with for-profits. Five policy implications of the analysis are examined and the need for additional information is highlighted.