1. ANALYTICAL FRAMEWORKS
THAT INCLUDE THEORIES AND MODELS
FOR NMP 600- FOUNDATIONS OF NONPROFIT
MANAGEMENT.
BY: ANGELA MCINTYRE
NMP 650- LEADING CHANGE FOR NONPROFIT ORGANIZATION
PROFESSOR JEFF GREIM
NOVEMBER 6, 2013

2. THEORIES:
ECONOMIC THEORIES
VS
NON- ECONOMIC
THEORIES

3. List of the Economic Theories:
 Public Goods Theory
 Market Failure Theory
 Market Failure and High Transition Cost Theory
 Externality Theory
 Contact Failure Theory
 Subsidy Theory
 Consumer Control Theory
Source: Grobman, Gary. M. (1999). An Introduction to the Nonprofit Sector:
A Practical Approach for the 21st Century. 3rd Edition. White Hat
Communications: Harrisburg

4. Public Goods Theory:
 Nonprofit organizations are put together due to
government failure.
 Governments are unable to obtain enough public goods
due to the “structure of the democratic process”(p.53).
 For example: Leukemia and Lymphoma Society gather
private donations and put together fundraisers to pay for
research to find a cure for blood cancers.
Source: Grobman, Gary. M. (1999). An Introduction to the Nonprofit Sector:
A Practical Approach for the 21st Century. 3rd Edition. White Hat
Communications: Harrisburg
Leukemia and Lymphoma Society. (2013). Fighting Blood Cancers.
Retrieved from http://www.lls.org on November 4, 2013.

5. Market Failure Theory:
 This theory means that nonprofit organizations could form due to market
failure.
 Market failure can occur if a good or service is too low for a for profit business
and would benefit a nonprofit organization more because they can have
private donations and tax exemptions.
 For Example: Wayne ARC a nonprofit organization for indivudals with
disabilities has a transportation service that indivudals with disabilities can
utilize with a low fee per year paid by the indivudals with disabilities and
Wayne ARC receives funding through grants to pay for the service. Where if a
for profit business tried to run this service they would not be able to manage
the cost because the for profit would not have tax exempt or funding through
private donations or grants.
Source: Grobman, Gary. M. (1999). An Introduction to the Nonprofit Sector:
A Practical Approach for the 21st Century. 3rd Edition. White Hat
Communications: Harrisburg

6. Externality Theory:
The
Violence
Externalities occur whenever the actions such as “costs and benefits of a market transaction
accrues” to make a situation worse or better (P.56).
For Example:
An area in downtown Rochester, NY has started to become a violent area to live. This area is
not safe for families to live in these days.
The negative externalities might be increased health care cost in this area, decrease in property
values with real estate, and decrease in safety in the neighborhood.
The positive externalities would be financial support given to the community to make a safer
location for indivudals to live, nonprofit programs and organizations can be started to help at
risk youth not become involved in violent behavior, and this area could start a nonprofit
program that can help keep the neighbor hood safe such as a neighborhood watch nonprofit
organization.
Source: Grobman, Gary. M. (1999). An Introduction to the Nonprofit Sector:
A Practical Approach for the 21st Century. 3rd Edition. White Hat
Communications: Harrisburg

7. Contract Failure Theory:
 This theory is where indivudals can’t evaluate the quality or quantity of a
service or program.
 Nonprofit organizations will be chosen by the
indivudals to fulfill the service rather than a for profit business.
 For Example: Linda wants to loose weight. She can go to a for profit
organization to help her loose weight that will cost her a lot of money or
she can go to a nonprofit organization that can help her with choosing
healthy foods, help her prepare foods, and help her budget to get health
food. Where the for profit business would only be able to give her advice
or medication to loose weight. There is more opportunities at the
nonprofit then the for profit.
Source: Grobman, Gary. M. (1999). An Introduction to the Nonprofit Sector:
A Practical Approach for the 21st Century. 3rd Edition. White Hat
Communications: Harrisburg

8. Subsidy Theory:
•This theory shows that there is an “initiations of
nonprofits in some fields is encouraged because of
the government subsidies that are available” (p.
58).
•These subsidies are “government funding for
services, tax exempt, lower rates for postage, are
able to issue tax-exempt bonds, and have
personnel regulations”(p.58).
Source: Grobman, Gary. M. (1999). An Introduction to the Nonprofit Sector:
A Practical Approach for the 21st Century. 3rd Edition. White Hat
Communications: Harrisburg

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Source: Grobman, Gary. M. (1999). An Introduction to the Nonprofit
Sector: A Practical Approach for the 21st Century.
3rd Edition. White Hat Communications: Harrisburg

10. Non- Economic Theories:
•Pluralistic Theory
•Mediating Structures Theory
•Theory of the Commons
Source: Grobman, Gary. M. (1999). An Introduction to the
Nonprofit Sector: A Practical Approach for the 21st Century.
3rd Edition. White Hat Communications: Harrisburg

11. Pluralistic Theory:
 This theory states “ government does have the
political support to begin providing a collective good”
(p. 59).
 For Example: This is where the government starts a
program to help indivudals stop smoking. Nonprofit
organizations also can help provide the service to
help indivudals quit smoking by receiving funding
from the government.
Source: Grobman, Gary. M. (1999). An Introduction to the
Nonprofit Sector: A Practical Approach for the 21st Century.
3rd Edition. White Hat Communications: Harrisburg

12. Mediating Structures Theory:
 This theory is where mediating structures “help shape
cultural values in a positive way and receives
encouragement from government public policy” (p. 60).
 Mediating structures are “families, community, voluntary
associations, and institutions”(p.60).
Source: Grobman, Gary. M. (1999). An Introduction to the
Nonprofit Sector: A Practical Approach for the 21st Century.
3rd Edition. White Hat Communications: Harrisburg

13. Theory of Commons:
 This theory is where the communities design and create
social worlds.
 The common goods that are created include “religious
worship, contemplation, scientific inquiry, helping and
charity, expression through art, play and other projects
that’s are done by voluntary action groups” (p. 60).
 This theory also explains that what is produced by the
theory of commons is to “benefit individuals or groups
other than the producer” (p. 61).
Source: Grobman, Gary. M. (1999). An Introduction to the
Nonprofit Sector: A Practical Approach for the 21st Century.
3rd Edition. White Hat Communications: Harrisburg

14. Models Used in NMP 600:
•Weisbrod Model
•Market Failure and High Transaction Costs Model
Source: Grobman, Gary. M. (1999). An Introduction to the
Nonprofit Sector: A Practical Approach for the 21st Century.
3rd Edition. White Hat Communications: Harrisburg

15. Weisbrod Model:
 This model shows how there is an existence of the
nonprofit sector due to government failure.
 The Public Goods Theory goes under the Weisbrod Model.
Source: Grobman, Gary. M. (1999). An Introduction to the
Nonprofit Sector: A Practical Approach for the 21st Century.
3rd Edition. White Hat Communications: Harrisburg

16. Market Failure and High Transaction Costs
Model:
 This is the model where there is a market failure and the
government is not taken over the function of collective
goods (p. 55).
 This could be a lack of government not wanting to be
involved, government taking a long time to solve an issue,
and the cost of government acting quickly to issues could
cause indivudals to have to pay higher taxes for services
(p.55). This is where nonprofits come in to help with this
issue Grobman, Gary. M. (1999). An Introduction to
Source:to find services to fix problems quick.the Nonprofit Sector:
A Practical Approach for the 21st Century. 3rd Edition. White Hat
Communications: Harrisburg

17. Primary Learning Objectives:
#1: Articulate an understanding of the history, theory, scope, unique role, and
significance of philanthropy, voluntarism, and nonprofit sector organizations
within the North American and global context.
#6: Apply appropriate analytic methods to management problems in a nonprofit
organizational context and design solutions to problems.
#7: Analyze, design, implement, maintain, and evaluate problems/solutions in
the key nonprofit functional areas including fundraising, planning, financial
management, board governance, volunteer management, and information
management.
Source: Grobman, Gary. M. (1999). An Introduction to the Nonprofit Sector:
A Practical Approach for the 21st Century. 3rd Edition. White Hat
Communications: Harrisburg

18. ANY QUESTIONS?

19. Turnitin Statement:
“I submit that this paper is entirely my own work and
agree that it may be submitted to Turnitin for the purpose
of checking for plagiarism and further that it may be
maintained on the Turnitin database in order to check for
future plagiarism”.

20. Reference Page :
Grobman, Gary. M. (1999). An Introduction to the Nonprofit Sector:
A Practical Approach for the 21st Century. 3rd Edition. White Hat
Communications: Harrisburg
Leukemia and Lymphoma Society. (2013). Fighting Blood
Cancers. Retrieved from http://www.lls.org on November 4, 2013.