Saturday, April 26, 2008

Ben-Ner and Ren Post Does Organization Ownership Matter?

Avner Ben-Ner (University of Minnesota's Carlson School of Management) and Tin Ren (a Ph.D. candidate at the same institution) have posted Does Organization Ownership Matter?  Structure and Performance in For-Profit, Nonprofit and Local Government Nursing Homes on SSRN.  Here is the abstract:

We compare the structure and performance of for-profit (FP), nonprofit (NP) and local government (LG) organizations. These organizations differ in their ownership structure, objectives and agency relations. We conjecture that, compared to NP and LG, FP firms (a) delegate less decision-making power to employees, (b) provide more incentives and fewer fringe benefits, (c) monitor less, and (d) rely less on social networks to recruit employees. We also hypothesize that, relative to NP and LG, FP firms (i) are more efficient, (ii) provide similar levels of service elements that observable to their customers, (iii) provide lower levels of less-well observable elements, and (iv) provide less of the relational elements. Differences in structure and performance are likely to be tempered by market competition and institutional pressures for similarity. Our empirical investigation of Minnesota nursing homes (utilizing state, federal and survey data) supports these hypotheses.

Interestingly, their findings appear to be similar to initial findings by other scholars, such as Jill Horwitz (University of Michigan Law School) in her article Does Nonprofit Ownership Matter?, 24 Yale J. Reg. 139 (2007) (SSRN version), that in the hospital field nonprofit institutions are qualitatively different from their for-profit counterparts with respect to such items as the mix of services provided.  The still open question for many considering these fields is whether this qualitative difference, if it exists, is sufficient in a quantitative sense to justify the legal benefits enjoyed by the nonprofit institutions such as federal income tax exemption, access to tax-exempt bond financing, and property tax exemption.


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