Dealing with Endogeneity to Understand the Societal Impact of the Third Sector: Why Should We Care and What Can We Do about It?

Abstract

Endogeneity is often regarded as a key barrier in establishing the causal relationship between the third sector and its societal impact in empirical research. Through a systematic literature review of the quantitative studies on the third sector's impact in the last two decades, we find that most quantitative studies of the third sector's societal impact are published in journals outside main third sector journals. We also offer specific examples of how recent methodological advancements in addressing endogeneity help third sector researchers better solve this problem.Based on the analysis of this literature review, we recommend that third sector scholars should (1) refocus on the big question of the third sector's impact on society, (2) catch up with the methodological advancement in addressing endogeneity, (3) be creative and transparent about addressing endogeneity, and (4) build better theories to link the third sector to broad societal outcomes.

Exploring the Moderators of the Relationship Between Nonprofit Sector Size and Its Societal Impact: A Meta-Analysis

“…One main problem with using OLS is its failure to address the issue of endogeneity. Cheng & Choi (2022) held that studies on the impact of the nonprofit sector on society "may suffer from the endogeneity problem, either through the self-selection of the creation of third sector organizations or some omitted variables that may drive both the creation of third sector organizations and community conditions." (p. 3).…”

“…Primary studies included in this meta-analysis specify various models to predict the influence of the nonprofit sector. Following Cheng and Choi (2022), we grouped the models into three categories: basic regression models (e.g., OLS, Poisson, or logistic), fixed-effects, and quasiexperimental designs (e.g., instrumental variable or propensity score matching).…”

“…As a meta-analysis is an analysis of primary (individual) analyses, the first step in conducting a meta-analysis is to select relevant quantitative primary analyses. We used 31 articles collected from a recent systematic literature review of the quantitative studies on the third sector's impact conducted by Cheng and Choi (2022) as the starting point to search for relevant studies. We reviewed the empirical details of each article and decided which candidate studies to include based on the following criteria.…”

“…Berrone et al (2016) built a seven-year panel dataset to assess how the changing number of nonprofits in 245 U.S. cities influenced income inequality in these communities. However, these efforts mainly depend on the main interest of the corresponding disciplines, and the field is rather fragmented based on disciplinary boundaries regarding whether and under what conditions the nonprofit sector creates one type of societal impact (Cheng & Choi, 2022;Ebrahim & Rangan, 2014;Flynn & Hodgkinson, 2001). There is little research consistently comparing the societal impact of the nonprofit sector across different policy domains, making it difficult to generalize policy domain-specific knowledge and reconcile competing theoretical arguments.…”

Nonprofit Density and Distributional Equity in Public Service Provision: Exploring Racial/Ethnic Disparities in Public Park Access across U.S. Cities

“…This article makes several theoretical and empirical contributions to the existing literature. First, despite a strong scholarly focus on the community racial composition and nonprofit density, existing studies have paid less attention to how nonprofits shape and impact the distribution of public services (Cheng and Choi 2021). Bridging literature from multiple disciplines, we provide one of the first attempts to articulate these possible pathways through which nonprofits may impact public policies and exaggerate or alleviate inequities embedded in the existing institutional environment.…”