Retained earnings maximizing nonprofit enterprises

Abstract

Purpose – The purpose of this chapter is to present a new business model called the Retained Earnings Maximizing (REM) Nonprofit Enterprise. Specifically, the chapter details the nature of the REM enterprise's motivation, organizational control, market interaction with other firms, and obstacles to the growth for the REM enterprise. Additionally, the chapter outlines a research agenda for experimental and empirical inquiries into nonprofit organizations and the REM enterprise.

Methodology – This chapter utilizes standard industrial organization theory in a nonmathematical approach to explaining the nature of the REM enterprise.

Findings – The chapter seeks to establish the business model of the REM. By inquiring into the nature of the REM enterprise, the chapter provides the basis for future research.

Research Limitations – The research was limited in terms of potential case studies because this is a new business model that is being proposed.

Practical Implications – The chapter could have large practical implications for increased and more consistent revenues to philanthropic organizations. Since writing the chapter, we tried to implement our own REM business model in an on campus coffee shop. Other ventures are being established in a similar vein.

Value of the Chapter – The adoption of the L3C legal structure by a handful of states demonstrates the desire to establish new business models with charitable ends. Likewise, the REM business model hopes to increase levels of philanthropy while spurring innovative thought about the Independent Sector which has been underrepresented in economic research.

Citation

Norton, D.A. (2010), "Retained earnings maximizing nonprofit enterprises", Isaac, R.M. and Norton, D.A. (Ed.) Charity with Choice (Research in Experimental Economics, Vol. 13), Emerald Group Publishing Limited, Leeds, pp. 113-129. https://doi.org/10.1108/S0193-2306(2010)0000013007