In a new paper, we present a novel theory of “purposeful enterprise” to explain why nonprofit enterprises survive and thrive. We define nonprofit enterprises as nonprofits that generate revenue primarily through operations rather than donations. Patagonia, Novo Nordisk, IKEA, Carlsberg, Anthropic, OpenAI (for now), and most hospitals and universities fall into this category.
Nonprofit OpenAI’s announcement this fall that it would transition to a for-profit structure surfaced important questions about the nonprofit form, including an existential one: Why do operating companies choose to incorporate as nonprofits? Why do nonprofit enterprises exist and thrive across many industries, despite the inefficiencies that come from a lack of shareholder control?