Further Evidence on Competition in Nonprofit Donor Markets

Abstract

This article introduces a novel empirical approach to the nonprofit literature that can measure competition between nonprofit organizations. Our approach provides a framework to determine how the number of organizations may be incorporated into 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 10 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 both predictive in nonprofit entry decisions and remarkably similar to competitive behavior among for-profit firms. We discuss several implications of these findings, in terms of both policy and future empirical research.