The meaning of non-profit mission breadth: A constitutional economics perspective

Abstract

Given the non-profit management imperative of formulating optimally broad mission statements, this paper explores the meaning and the determinants of non-profit mission breadth. By adopting a constitutional economics perspective, the paper argues that mission breadth is ultimately determined by the trade-off between costs of collective decision-making in non-profit organizations and transaction costs of creating and maintaining these organizations. Developing optimally broad missions is shown to result in minimizing the sum of these costs, thus leading to an expansion of the non-profit sector and to an improvement of its problem-solving potential.

Acknowledgments

The first author gratefully acknowledges the financial support from the Volkswagen Foundation. Both authors are grateful to an anonymous reviewer for helpful comments.

Notes

1 Tel.: [phone].

2 However, the results of the analysis are generalizable to the whole domain of voluntary collective action embodied in the non-profit sector, since mission breadth is relevant not only to members but also to other stakeholders whose support is required by non-profit organizations.

3 It should be noted that this function may also be assumed to be twice-continuously differentiable with a positive first order derivative and a positive second order derivative (meaning that B is increasing at an increasing rate as N increases), leaving the main conclusions of the analysis unaffected.

4 It must be noted that C_TC1 and C_TC2 converge as the mission breadth increases. The reason is that, at high levels of mission breadth (large number of members), the share of the total transaction costs confronted to each member will be close to zero. Thus, given large membership and broad missions, the total costs, C, will mainly consist of the decision making costs, which are assumed to increase at an increasing rate when the number of members increases (Eq. (4(4) $\text{DMC}=f_{\text{DMC}}(N),\frac{d\text{DMC}}{dN}>0,\frac{d^2\text{DMC}}{d{N}^2}>0$(4) )).

5 Naturally, Fig. 2 could also have been constructed so that the costs exceeds benefits at N = 1. In that case, a single individual would have a negative net gain of conducting the mission alone.