Competition is the engine of a market economy, imposing discipline and efficiency on competitors that must meet the pace set by their rivals. The struggle for market share and profitability results in winners and losers?the failure of some is necessary to the success of others. Competition is desirable when it induces greater performance and accountability among market players. But as nonprofits are hastening to enter arenas where they compete with commercial firms, an increasingly important question becomes: in what contexts and under what conditions can competition promote preferred social outcomes?
The nonprofit sector enjoys tax-exempt status in the expectation that it will uphold the larger purposes of society by producing public benefits. Being organized for public benefit implies openness, sharing and cooperation with many parts of a community. Yet the logic of competition induces successful competitors to elevate market values above all others and thus, has the potential to distort nonprofits’ missions away from public purposes. How nonprofits can continue to meet the expectations for which they were designed in an increasingly competitive service environment is a significant challenge facing the sector.