Given increased competition with for-profit firms, the issue of the comparative advantage of non-profit organizations is renewed. While non-profits may want to differentiate themselves when faced with additional non-profit competition, it is unclear whether they would want to differentiate themselves or converge towards for-profit competitors. This paper addresses this issue by considering the different financing models, human resource systems, and objectives of non-profit organizations, as compared to for-profits, in the mixed industry of microfinance.
In my first essay, I utilize an analytical model, where firms can choose profit status, sources of financing, and the borrowers they target with a given interest rate and loan size. I find that non-profit and for-profit organizations will segment the market, partly due to differences in profit status and partly due to differences in the sources of financing. I find support for the hypotheses using a large-scale panel dataset of microfinance organizations in Latin America.
The second essay focuses on a particular element of the business model considered in the first essay: deposit-taking. I show that non-profits that begin taking deposits only benefit financially if they also begin making larger loans. This suggests that changes in non-profits' activities may require a change in positioning to improve financial performance. More broadly, it supports the literature on the importance of fit between product market strategy and business model, which suggests extra managerial attention be paid to whether and how to adopt activities that change the business model.
The third essay considers another key distinguishing element between the non-profit and for-profit business model: the incentive and reward systems for employees. I merge the panel dataset with a cross-sectional survey on the dimensions along which the firms incentivize employees, and develop a proxy for the level of bonus pay. The results suggest that more mission-oriented firms reward employees on more dimensions, but with lower average salary and a smaller amount of bonus pay. This suggests that incentive pay may be used as a signal in more mission-oriented firms to clarify the expectations of employee behavior, whereas it is used to directly motivate and incentivize employees in less mission-oriented firms.
The three essays of my dissertation combine to examine the characteristics that distinguish non-profit organizations, even in industries in which they co-exist with for-profits. The results shed light on these increasingly common mixed industries, as well as provide insight into business model competition and the fit between elements that make up a business model.
| Identifer | oai:union.ndltd.org:harvard.edu/oai:dash.harvard.edu:1/32744407 |
| Date | 25 May 2017 |
| Creators | Wolfolds, Sarah |
| Contributors | Yao, Dennis A. |
| Publisher | Harvard University |
| Source Sets | Harvard University |
| Language | English |
| Detected Language | English |
| Type | Thesis or Dissertation, text |
| Format | application/pdf |
| Rights | open |
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