1. Nonprofit sector nature, origins, and structure:

Anheier (2005) offers an overview of various economic, sociological, and political science approaches that address the origins of the nonprofit sector. From an economic perspective, a number of demand and supply theories have been developed to explain the existence of nonprofit organizations in general, including the contract or market failure theory, the public goods or government failure theory, entrepreneurship theories, and stakeholder theories (see also, Anheier and Ben-Ner 2003). In contrast to these economic approaches, the interdependence or voluntary failure theory developed by Salamon (1987, 1995) argues that the relationship between the nonprofit sector and the government is not one of conflict or competition, but rather one of partnerships and extensive government support to nonprofit organizations. More specifically, given that voluntary action may be limited, sporadic, unorganized, and inefficient, there also exists ‘voluntary failure’ besides market and governmental failure. As a consequence the government may intervene by providing, for example, a more stable stream of resources.

In addition, the social origins theory, developed by Salamon and Anheier (1998), argues that cross-national variations in size and composition of the nonprofit sector actually depend on the type of nonprofit regime in each nation. In particular, they distinguish four types of nonprofit regimes (liberal, social democratic, corporatist, and statist) based on two key dimensions: extent of governmental social welfare spending and economic scale of the nonprofit sector. Each type reflects a particular constellation of social factors, policies, and policy-making, which leads to the development of a certain form of nonprofit sector. In sum, by taking a comparative-historical approach, the authors move away from the emphasis on microeconomic models and identify circumstances in which cooperative nonprofit-state relationships are most likely to emerge (Anheier 2005).

Finally, Smith has been developing and testing for 40 years a theory of association prevalence across territories using different data sets and territorial levels of analysis (Smith 1973, 2011, 2013a; Smith and Baldwin 1983, 1990; Smith and Shen 2002). Each of these publications reports analyses that explain substantial amounts of the variance in association prevalence, unlike many other theories, including that of Salamon and Anheier (1998) who provide no results from a multiple regression analysis. The most succinct version of Smith’s general theory of voluntary association prevalence (Smith and Shen 2002) sets out three broad types of societal factors: (1) societal background factors (greater population size and more favorable historical-cultural-environmental interface), (2) aspects of basic societal structure (more permissive political control, greater modernization, more developed organizational field, and greater ethno-religious heterogeneity), and (3) societal mobilization factors (aggregate resource mobilization for associations and aggregate social cohesion). Schofer and Longhofer (2011) later developed and tested a similar theory (they added some variables and omitted others). Both the latter research and that of Smith and Shen (2002) explained from 70 to 89 percent of the variance in association prevalence. None of the other theories mentioned above even comes close to this level of successful explanation/prediction.

2. Nonprofit sector’s relationship to the other sectors in society: The relationship of the nonprofit sector to other societal sectors has been studied and discussed by various scholars. First of all, Smith (1991) suggested that the nonprofit sector really consists of two distinct subsectors, or that these two subsectors can be seen as the fourth and fifth sectors of society: (1) the member-benefit sector and (2) the non-member benefit sector. The member-benefit sector consists mainly of nonprofit associations (Smith 2015a), while the non-member-benefit sector consists mainly of nonprofit agencies (Smith 2015b). Smith argues that these two sectors operate very differently, with their constituent groups/organizations usually having internally focused vs. externally focused goals.

Chapter 46 of this Handbook, by Wiarda et al., discusses at length the relationship of the nonprofit sector, particularly associations, to the larger political regime structure of a society (the government, public, or statutory sector). Pluralism, corporatism, and authoritarianism are three principal types of such relationships. In Chapter 8, Billis discusses differences among three sectors he identifies, including the associational sector and their interrelationships.

3. Non-Profit Organization (NPO) Incidence-Prevalence-Exit Rates

(a) Major perspectives on NPO prevalence: Three broad theoretical perspectives have been used to explain the existence of nonprofit organizations (NPOs) in general and the variations in size of the nonprofit sector across different geographical areas: demand theories, supply theories, and theories of social structure.

1. Demand theories suggest that nonprofit organizations arise in the economy to correct market and governmental failures. In brief, demand for nonprofit organizations exists because they can be entrusted to provide collective goods in case of demand heterogeneity and limited governmental supply and to guarantee the quality of services in case of information asymmetry (Anheier 2005; Hansmann 1987).

2. Supply theories argue that nonprofit organizations are typically formed by entrepreneurs who want to exercise control over the organization and maximize non-monetary returns (Anheier 2005; Badelt 1997).

3. Social structure theories suggest that variations in nonprofit sector size can be explained by factors such as population size, employment structure, political culture, and social cohesion (Corbin 1999; Grønbjerg and Paarlberg 2001; Smith and Baldwin 1983).

(b) Complications in NPO prevalence explanations:

As consumers may demand goods and services from nonprofit organizations for the same reason that entrepreneurs form a nonprofit firm, it may be necessary, when examining differences in nonprofit sector size, to analyze demand and supply factors simultaneously (Ben-Ner and Van Hoomissen 1991; Marcuello 1998). Socio-economic characteristics that may simultaneously affect demand for and supply of nonprofit organizations include income, education, and population heterogeneity (poverty, unemployment, and racial and religious diversity in the population). For example, a higher income and higher level of education may not only imply less demand for nonprofit organizations (higher capability to choose a reliable for-profit provider in case of information asymmetry), but also greater supply of nonprofit organizations (higher capability to create a nonprofit firm).

4. Association Incidence-Prevalence-Exit Rates

A detailed discussion of the topic of this sub-section is available in Chapter 50, which is mainly concerned with this issue. Theoretical and empirical literature on voluntary association prevalence has mainly focused on societal factors to explain differences in prevalence rates. The simplest summary is the following: Two key and substantially overlapping theories of association prevalence have been tested on data for one-third to two-thirds of the nations in the world (Schofer and Longhofer 2011; Smith and Shen 2002). Key factors leading to greater association prevalence in a nation were population size, educational levels, wealth levels (GDP per capita), civil liberties/democracy, non-associational organizational field, resource organizations/mobilization for associations, historical interface/momentum, state expansion, and political instability, Both were able to explain large amounts of the variance (70-89 percent of the R²) in prevalence, adjusting for statistical degrees of freedom. Other studies by Smith and associates at the societal and territorial levels (states/provinces, municipalities) have also born fruit (Smith 1973, 2011, 2013a; Smith and Baldwin 1983, 1990), as have studies by others at the county and municipality levels (e.g., Lincoln 1977; Wollebæk 2010). Nonetheless, there are few models or theories of association incidence (formation) or exit (death) rates.

(II) MESO-THEORIES: ALL-VOLUNTEER CONVENTIONAL ASSOCIATIONS