All other things being equal, are clients or donors of social businesses willing to pay a premium for nonprofit status? Social entrepreneurs and service providers currently operate in an environment in which the value of organizational form is ambiguous. Although most empirical studies that examine differences between the sectors are unable to find substantial sector-based differences between organizations that perform similar functions, some studies suggest that nonprofit organizations benefit from a “halo effect”.

This empirical paper examines whether the “halo effect” of nonprofits exists and if it extends to a willingness to pay. In the face of “hybridization,” “sector blurring,” and theories of the “fourth sector,” many scholars have sought to identify the distinct characteristics and advantages associated with nonprofitness. We extend this research to determine the extent to which clients and donors are willing to pay a premium for nonprofit status as compared with government or for-profit status. In an environment in which multiple organizational forms are viewed as viable delivery mechanisms for social services and achievement of social outcomes, answering this question will help us understand the market environment for nonprofit organizations.

This paper uses conjoint analysis to quantify the preferences of 1322 respondents. Conjoint analysis is a technique that allows for the examination of an individual’s choice process and the trade-offs that he or she makes while making that decision. This study contributes to the study of sector boundaries by identifying market-driven, empirical data about the value of nonprofitness.