Further Evidence on Competition in Nonprofit Donor Market

Abstract

This paper introduces a new empirical approach to the nonprofit literature which can measure competition between nonprofit organizations. Our approach provides a framework to determine when and how the number of firms may be incorporated in empirical competitive analysis. We then systematically estimate the average population needed to support a given number of nonprofits in a market. We find that, for the ten nonprofit industries examined, markets reach competitive levels once four or more nonprofits have entered. The results suggest that a relatively small number of nonprofits are needed to ensure robust competition. Our findings demonstrate that donor market competition is predictive in nonprofit entry decisions and remarkably similar to for-profit firms. We discuss several implications of these findings, both in terms of policy and future empirical research.