Why nonprofit? : nonprofit support organizations for NPO in mixed industries

In the course of professionalization in the nonprofit sector, specialized nonprofit support organizations emerge, which provide other nonprofit organizations (NPO) with strategic management competencies. These nonprofit support organizations coexist with forprofit consultancies in a mixed industry. In this paper, we follow the research question why the founders of nonprofit support organizations opt for a nonprofit - in contrast to a forprofit - legal status. Data from two case studies are analyzed. The analysis is guided by categories derived from theories on the emergence of NPO, linked with considerations on ideological entrepreneurs and resource dependency theory. We illustrate that the core consultancy services of the nonprofit support organizations exhibit similar characteristics compared to services provided by forprofits. Thus, classical demandside explanations for the emergence of the nonprofit legal status do not apply at first sight. What differentiates the nonprofit support organizations from the forprofit organizations are contributions to collective benefits for the nonprofit sector and society at large. The nonprofit support organizations use time donations as puffer to serve NPO with low purchasing power and thereby enhance the professional quality and impact of the nonprofit sector. In addition to the core consultancy services, the nonprofit support organizations engage in communication services which diffuse positive effects of nonprofit initiatives (e.g. promotion of volunteering, leadership excellence) in the wider society. In the light of dependency on scarce resources provided by nonprofit-specific stakeholders (donators of time, excellence, and credibility), the nonprofit legal status is more promising than the forprofit one for the examined support organizations for NPO. Interestingly, these nonprofit support organizations do not focus on alleviating market or state failures, but intend to provide solutions to voluntary failures, especially philanthropic amateurism. With these case studies, we contribute to the understanding of the emergence of nonprofit support organizations in the realm of increased pressure for professionalization. Nonprofit support organizations enhance the nonprofit sector's capability to cope with this pressure and might constitute a further differentiation of the nonprofit sector.