Communal focused or market focused: Moral judgment on business practices in nonprofit organizations

Abstract

Although the adoption of business‐like practices, such as commercialization and managerialization, may enhance the capacity and sustainability of nonprofit organizations, these practices may elicit negative reactions from the general public. This tension poses a challenge for nonprofit organizations as they seek to strike a balance between implementing practices that promote growth and survival and maintaining public support. This study focuses on people's moral judgment of nonprofits' practices and offers a social psychological explanation for why some business‐like practices may be viewed as inappropriate by the public. Specifically, we illuminate the significance of people's normative preferences for communal‐ or market‐focused principles as a basis for determining how an organization should operate and deliver its services. Using an online experiment with a sample size of 1255 participants, we found that: (1) people express a relatively high level of moral acceptance of business‐like practices, but this level is significantly lower than that of nonprofits' societal practices; (2) individuals are more likely to rate business‐like practices that have revenue‐seeking intentions as less acceptable when they believe that an organization should operate and deliver services based on communal principles. Moreover, our findings reveal that people's normative preferences differ more based on the service (e.g., health, microfinance, art) than on the organizational ownership (nonprofit vs. for‐profit).