The Perceived Differences: The Sector Stereotype of Social Service Providers

Abstract

What difference does “nonprofitness” make is a fundamental question for nonprofit research. Although being held as the basic assumption of the contract failure theory, the sector difference perceived by individuals remains as an open question for multiple methodological problems. Here, we present evidence from three experiments for further empirical exploration of the perceived sector difference with improved research design. Our findings suggest a general pattern of sector stereotype: people perceive nonprofits as being warmer and slightly more competent than for-profits. More importantly, we show that such stereotypical understanding mainly results from people’s repugnance against profit-seeking intention instead of preferences toward nonprofits in the social service market. Such pattern differs slightly across three subareas being tested. Finally, we find more relevant information about the organization serves as a potential moderator that weakens the effect of being a nonprofit, which blurs the sector boundary in a given market.

Keywords

sector boundary sector stereotype nonprofitness public perception social enterprise

Introduction

Nonprofit organizations play distinct economic roles in social service markets (Hansmann, 1980). Theoretically, the “nonprofitness” not only diverse organizational behaviors of providers in certain social service market (e.g., Amirkhanyan et al., 2008; Beisland et al., 2019; Paul et al., 2020); it also evokes ideological reactions and public perceptions that determine the social service provider’s success in an ecological system in which nonprofits, for-profits, and public agencies compete (DiMaggio & Anheier, 1990). However, arguably, boundaries between the nonprofit and for-profit sector in social services have become increasingly blurred. Whereas Hansmann’s seminar contract failure theory suggests that people treat nonprofit and for-profit service providers differently according to their trustworthiness, our understanding of how the public perceives coexisting sectors differently in the market is limited by competing empirical evidence. Numbers of exploration of perceived sector difference between nonprofit and for-profit relied largely on traditional cross-sectional survey data (Ben-Ner et al., 2018; Handy et al., 2010), which might suffer from endogeneity problem. A growing number of experiments isolate the sector tag effect and suggest the existence of sector stereotype: people perceive nonprofit and for-profit in significant different ways only because of the sector the organization rests in (Aaker et al., 2010; Drevs et al., 2014; Lee et al., 2017). While these experimental evidences serve as a substantial improvement in understanding people’s perceived sector difference, our knowledge on the sector stereotype is still missing three important pieces of the puzzle. First, it is still not clear how the sector tag contributes to a perceived sector difference. To probe the causal mechanism that explains the effect of sector stereotype, it is important to understand people’s unique perception on the nonprofit and the for-profit organization. Methodologically, while previous evidence shows significant perceptual difference between two sectors, such difference contributes little insights about the mechanism without a controlled counterfactual. Second, as studies in sector difference usually take one service area as the context, the generalizability of the sector boundary is questionable. To contribute to the sector theory, it is important to consider the extent to which people’s sector stereotype holds a constant pattern and prevails across different service areas where nonprofits and for-profits compete. Third, given the competing evidence and debate on the sector boundary, potential moderators that blur the sector boundary are understudied. Following the philosophy of scientific evolution, evidence showing the increasingly blurry boundary between the nonprofit and the for-profit sector should serve as important anomalies against the sector difference paradigm, which implies a need for further refinement of the sector theory.

In this research note, we report findings from three online experiments to address aforementioned problems. Using the stereotype content model (SCM) to operationalize public perceptions, our experiments partially replicated previous experiments on sector stereotype but with substantial improvements. By adding a baseline condition in each experiment in three service areas where nonprofit and for-profit organizations coexist, we found new evidence suggesting unique roles of nonprofit and for-profit tag from a larger sample. The results show a consistent negative perception of the for-profit tag, while the effect of the nonprofit tag varies across service areas. Our findings from three experiments also reveal a context-based relationship between sector stereotype and the organization’s service area. It implies that the competitive advantage of nonprofit service providers in a given market may actually come from people’s consistent repugnance against the for-profit providers and the extent to which the nonprofit tag brings additional information that helps people to select between nonprofit and for-profit providers varies across service areas. Finally, because of its heuristic role, the sector tag can potentially be substituted by other information, such as crowdsourcing user evaluation systems showing other people’s judgment, which reduces the uncertainty as a result of information asymmetry.

Nonprofits and For-Profits: Perceptual Differences and Consequences

Public Perception: The Stereotype Content Model (SCM)

Public perceptions are crucial in establishing legitimacy and generating social service organizations’ resources. Indeed, legitimacy is defined as “ . . . a generalized perception of organizational actions as desirable, proper or appropriate within some socially constructed system of norms, values, beliefs and definitions” (Suchman, 1995, p. 574). A growing literature suggests that people make perceptual judgments based on two fundamental psychological traits, warmth (e.g., friendliness, trustworthiness, empathy, and kindness) and competence (e.g., intelligence, power, effectiveness, efficacy, and skillfulness), which lead to substantially different behavioral outcomes (Cuddy et al., 2011). While perceived warmth and competence have been introduced and proven to play significant roles in judging other people and social groups, recent literature has extended these traits to explain the way people judge organizations (Aaker et al., 2010; Drevs et al., 2014). Indeed, the modern institutional order personifies current organizations increasingly, and therefore, organizations are perceived as autonomous, coherent, and morally responsible actors (Zucker, 1987).

People’s perceived warmth and competence lead them to engage in different behaviors toward both individuals and organizations. For example, Todorov et al. (2005) found that political candidates’ facial appearance produces variations in voters’ perceptions of their competence, which influences voting outcomes causally. Cuddy et al.’s (2007) behaviors from intergroup affect and stereotypes (BIAS) map shows that different levels of a specific social group’s perceived warmth and competence form stereotypes, which then lead to relevant behaviors, such as helping and cooperation. Recent literature of sector stereotype reveals that people’s perceptions of warmth and competence differ from nonprofit to for-profit, which consequentially affect their behaviors with respect to the focal organization. For instance, both Aaker et al. (2010) and Lee et al. (2017) provided experimental evidence that people are more likely to purchase products from suppliers they perceive are more competent and warmer.

In summary, SCM has been proved as a valid measurement for research on prejudice and stereotype. More importantly, for nonprofit research, variations in the focal organization’s perceived warmth and competence determine largely whether people are willing to interact with it. Meanwhile, to operationalize the public perception on two unique dimensions will guide nonprofit managers to explore more specific managerial and communication strategies. Thus, to provide practical implications in nonprofit management and marketing, and to echo to previous studies on sector stereotype, we build our hypotheses upon people’s perceived warmth and competence.

The Sector Stereotype: Hypotheses

Sector Information and Stereotyping

Stereotyping is an automatic, effortless categorization process in people’s mind (Fiske & Taylor, 2017). Signaled by the for-profit or not-for-profit tag, people automatically categorize the organization into a group of organization with same tags. That is, being a nonprofit or for-profit represents a prototypical or stereotypical exemplar, and the properties of the exemplar are used to evaluate an extension of organizations of the same category. Therefore, following previous studies, this study posits that people will judge nonprofit and for-profit organizations differently based on their stereotypical understandings of the nonprofit and for-profit sectors, which loads on warmth and competence.

Nonprofit Versus For-Profit: Difference in Perceived Warmth

Both the nonprofit and for-profit tag of the organization can bring unique information that influence people’s perception regarding the warmth of the organization. Empirical evidence has shown that people perceive that nonprofit organizations are warm (Aaker et al., 2010; Drevs et al., 2014; Lee et al., 2017), and previous studies have elaborated two mechanisms that explain this perception. First, organizations registered as “nonprofit” are subject to non-distributive constraints, and therefore, they are less likely to take advantage of information asymmetry to reduce their services’ quality. Thus, nonprofit organizations are perceived to be more trustworthy in public service delivery (Handy et al., 2010) and are considered an effective remedy for contractual failure (Hansmann, 1980). The second mechanism of nonprofit organizations’ perceived warmth is the extant social cognition of the nonprofit sector. One of the important factors that grants the nonprofit sector positive perceptions is its reputation for charitable and benevolent missions and behaviors. This is particularly true in the United States because of nonprofits’ historically long-term efforts and activities in charitable issues and social services. Meanwhile, the government endorses such deeds by providing the sector with policy advantages, most importantly, tax-exempt status (Hansmann, 1981). Nonprofits’ reputation for benevolence also is established and disseminated through communications and marketing during fundraising campaigns, which social networks facilitate today. Therefore, although people have limited knowledge about their non-distributive constraints, empirical studies still show that people perceive that nonprofit organizations are warm and trustworthy.

In contrast, people have negative perceptions of for-profit organizations’ warmth because of their profit-making intention. Indeed, research has shown that people may use intention as a heuristic in judging outcomes (Fiske et al., 2007), and a for-profit intention often results in a zero-sum market exchange, in that the only way sellers can benefit more is to exploit value from buyers. Because people are sensitive and strongly motivated to avoid exploitation, defensive measures against the for-profit intention will be triggered (Campbell & Kirmani, 2000). Therefore, people hold anti-profit beliefs and perceive that profit-seeking intentions are socially immoral (Bhattacharjee et al., 2017). Considerable empirical evidence has confirmed people’s negative perceptions of for-profit firms (Aaker et al., 2010; Drevs et al., 2014; Handy et al., 2010; Lee et al., 2017; Schlesinger et al., 2004). Thus, it can be expected that:

Hypothesis 1 (H1): People perceive that nonprofit social enterprises are warmer than are for-profit social enterprises.

Nonprofit Versus For-Profit: Difference in Perceived Competence

The research on the competence, or the differential performance between the nonprofit and for-profit sector, has now developed two competing understandings. On one hand, nonprofit organizations are perceived to be incompetent. Salamon (1989) suggested that the nonprofit and voluntary sectors exhibit philanthropic amateurism because early beneficiaries require more “moral suasions and religious instruction but not medical aid or job training” (p. 42) from nonprofit organizations. Thus, other scholars have suggested that nonprofit organizations are incompetent because of their organizational culture—the nonprofit sector is known to be warm and friendly, while its competence and other related performance indicators are not included in the job promotion and evaluation systems (Aaker et al., 2010). On the contrary, for-profit organizations are usually suggested to be competent because market competition provides them important incentives to be efficient and innovative.

On the other hand, competing empirical findings have suggested that nonprofits sometimes are judged as more competent than are their for-profit counterparts. Two theoretical reasons may be able to reconcile this disparity, both of which relate to the specific service the organization provides. First, people make judgments based on cognitive heuristics that cue their related experiences (Kahneman & Frederick, 2002). A survey of U.S. patients in 14,423 nursing homes suggested that nonprofit organizations perform better than their for-profit counterparts with respect to service quality (Amirkhanyan et al., 2008). Such collective judgments of nonprofit or for-profit providers’ performance in a particular industry might create a social consensus upon which people make judgments. Second, compared with nonprofits, the perceived competence of for-profit organizations might suffer from its for-profit tag which are perceived as immoral, particularly in social service market. Recent evidence indicates that observing (or perceiving) immoral behavior such as profit-seeking leads to a perceived failure of adhering to social norms society holds deeply and values as most important (Stellar & Willer, 2018). In turn, organizations with overt prosocial missions will yield to negative moral judgments of their profit-seeking intentions, which ultimately undermine people’s perceived competence and intentions to support them financially (Lee et al., 2017). Considering the theories and evidence that support both sides of these competing arguments, we propose the following hypotheses to explore the complexity of perceived competence:

Hypothesis 2 (H2): People perceive that for-profit social enterprises are more competent than are nonprofit social enterprises.

Others’ Judgment as a Moderator

Debates on the role of the “nonprofitness” in people’s service choice imply that the uniqueness of the sector tag could be moderated by other information that offsets the information asymmetry between consumers, donors, and service providers. Indeed, despite the important heuristic function of sector information, people may place more weight on other information, especially that with social influence, such as other people’s judgments. Judgment from others is a typical cue of validity that people use to make judgments through a passive evaluation process to conserve cognitive energy (Tost, 2011). When information about the collective judgment of the focal organization is available, potential service recipients will tend to rely more on such information than on sector information to make an individual judgment that is highly congruent with the collective judgment. Given space limitations, this study focused only on the way positive collective judgment moderates the effect of sector information. In summary, we expect that a positive collective judgment of an organization moderates the perceptual difference attributable to variable sector information.

Hypothesis 3 (H3): The availability of others’ judgment weakens sector information’s effect on people’s perception.

Method

We use three online experiments to test our hypotheses. To examine the generalizability of sector stereotype, three experiments were set in three unique service areas which have not been experimentally tested, including daycare (Study 1), recycling (Study 2), and nursing home (Study 3).¹ A shared feature of these service areas is that neither the nonprofit nor the for-profit is the dominant type of service providers. Meanwhile, we focus on a specific type of organization, social enterprise. Because they do not fit any established organizational category that provides them an appropriate base for official legal incorporations (Galaskiewicz & Barringer, 2012), social enterprises can be registered as either a nonprofit or for-profit firm, which allows us to observe the way sector information matters to organizations with similar purposes and logics. Scholars also are facing challenges in conceptualizing social enterprise (see Young & Lecy, 2014, for a discussion). Without a consensus in the definition of social enterprise, people may be more like to rely on sector information and other signals to judge the focal organization.

Study 1: Daycare Industry

Design

Study 1 undertook a between-subject, 3 (no sector information vs. nonprofit vs. for-profit) × 2 (no collective judgment vs. positive collective judgment) factorial design. Sector information and collective judgment were manipulated through a vignette that included information about a hypothetical social enterprise in the daycare industry. Different sector information was applied in three groups: a baseline group without any sector information about the social enterprise, a treatment condition that identified the social enterprise as a nonprofit organization (nonprofit group), and a treatment condition that identified the social enterprise as a for-profit business (for-profit group). Including a baseline group ensured an appropriate reference point was available with which to observe the unique effect of nonprofit or for-profit status, which reveals the mechanism of the nonprofit-for-profit difference. The sector information was manipulated by showing unique organizational tags, domain names for each contact email address (Aaker et al., 2010; Lee et al., 2017), and mission statements. Collective judgment information was manipulated according to two conditions: one provided 54 evaluators’ four-star rating, and the other included no rating information. The 3 × 2 factorial design ultimately led to six experimental groups (see Supplemental Materials: Figure S1).

Participants

A total of 1,210 participants (43% female, M_age = 36) were recruited through Amazon Mechanical Turk (MTurk). A total of 27 participants were eliminated because their surveys were incomplete. The attention check question (“Please move the slide to 20”) did detect 103 problematic responses. We compared the results with and without these problematic responses and found no substantial alternative findings.

Procedure

Participants were required to take the survey experiment through the Qualtrics. After reading the introductory information, they were assigned randomly to one of the six groups. After reading the vignette, participants were asked to report their perceptions of the social enterprise about which they had just read with respect to 12 traits of warmth and competence with response options that ranged from −50 (not at all) to 50 (very much). Following Aaker et al. (2010) and Judd et al. (2005), the traits rated included three high and three low traits from each dimension. All traits appeared randomly in two question blocks to avoid the order effect. Based on these traits, we created high and low scales for warmth and competence (high warmth: warm, caring, generous, α = .80; low warmth: mean, unfriendly, selfish, α = .89; high competence: competent, effective, efficient, α = .86, low competence: slow, weak, disorganized, α = .90). Final measures of warmth and competence are the differences subtracting low warmth/competence scale from the high warmth/competence scale, thus both range from −100 to 100. In addition, the survey also measured people’s donation and purchase intentions (−50 = very unwilling to donate/purchase, 50 = very willing to donate/purchase). Demographic information was collected at the end of the survey.

Results

Sector information had a significant main effect on perceived warmth, while collective judgment represented by star ratings as well as the interaction between sector information and collective judgment were not statistically significant. The results suggested that people perceive that nonprofit social enterprises are significantly warmer than are for-profits, high rating: t(413) = 4.86, p < .001, d = 0.45; no rating: t(382) = 4.66 p < .001, d = 0.48. Importantly, when compared with the baseline group, there was no significant difference of warmth between the nonprofit and the baseline social enterprise in both rating conditions, high rating: t(426) = 0.50, p = .62; no rating: t(363) = 1.08, p = .28, while the for-profit social enterprise was perceived significantly less warm than the baseline one, high rating: t(385) = 4.15, p < .001, d = 0.42; no rating: t(385) = 3.66, p < .001, d = 0.37. See Figure 1 and Supplemental Materials: Table S1.

Figure 1.

Mean differences in day care vignette.

However, the sector information only had a moderate main effect on perceived competence. Although participants perceived that nonprofit social enterprises are slightly more competent than are for-profit social enterprises, t(413) = 2.12, p = .035, d = 0.21, but only when collective judgment information was available. It is also worth noting that from a perceptual perceptive, participants did not judge the competence of the nonprofit and the baseline social enterprise significantly differently. Therefore, rather than indicating that participants perceived nonprofit social enterprises more positively than for-profit social enterprises, they exhibited less preference for for-profit social enterprises compared to both nonprofit social enterprises and those without any sector information. Furthermore, the results showed that those in the nonprofit condition reported a statistically significantly greater willingness to purchase, high rating: versus for-profit: t(413) = 2.85, p = .0046, d = 0.28; no rating: t(382) = 3.40, p < .001, d = 0.35, and donate, high rating: versus for-profit: t(413) = 4.63, p < .001, d = 0.45; no rating: t(382) = 4.24, p < .001, d = 0.44, than did those either in the for-profit condition or the control condition, except that there was no significant difference between their willingness to purchase in the nonprofit condition and the control condition when there was no collective judgment information. Again, in general, the for-profit social enterprise in the daycare vignette was the one with which participants were least likely to interact.

Study 2: Recycling Industry

Design

Study 2 differed from Study 1 only by its service context—recycling industry. It examined the ability to generalize Study 1’s experimental results to other social service fields. It is possible that people’s stereotypical understandings of nonprofit and for-profit organizations differ because of the high heterogeneity across kinds of services (DiMaggio & Anheier, 1990). In addition, it is expected that moral judgments’ effect on competence is more pronounced when people judge competence in fields with substantial social aspects (services) than fewer social domains (physical products). Compared to daycare organizations, which provide human services, recycling is a technical service (Walker et al., 2018). Such a difference is associated with variations in moral standards that allowed us to test the complex role of perceived competence H2 proposed. Thus, Study 2 followed the design of Study 1, kept all manipulations the same, and used only a different logo, name, and mission statement for the hypothetical social enterprise (see Supplemental Materials: Figure S1).

Participants

Participants in Study 1 were also invited to participate in Study 2. The order of Study 1 and Study 2 were counterbalanced. The robustness check suggested that the order had no significant effect on the results (see Supplemental Materials: Table S4 and S5). Participants were compensated US$ 0.50 after finishing both studies.

Procedure

The procedure of Study 2 was identical to Study 1. The experiment was delivered through Qualtrics together with Study 1. Participants were randomly assigned into one of six groups to read the information of a hypothetical recycling firm. Afterward, scales of high warmth (α = .80), low warmth (α = .86), high competence (α = .85), and low competence (α = .91) were collected, based on which warmth and competence scales were calculated. People were also required to indicate their willingness to purchase from and donate to the social enterprise they read about.

Results

The results from Study 2 nearly mirrored those from the daycare vignette. The sector information had a statistically significant main effect on perceived warmth, as well as their willingness to purchase and donate. However, neither the collective judgment information nor its interaction with sector information was statistically significant. People reported a significantly lower level of perceived warmth in the for-profit condition than the nonprofit, high rating: t(397) = 4.82, p < .001, d = 0.48; no rating: t(395) = 4.81, p < .001, d = 0.48, and the baseline condition, high rating: t(388) = 2.57, p = .011, d = 0.26; no rating: t(390) = 5.70, p < .001, d = 0.58. On the contrary, we did not find the sector information and ratings have main effects on perceived competence. Figure 2 also shows that people in the for-profit condition reported significantly least willingness to purchase, versus nonprofit: t(794) = 3.85, p < .001, d = 0.27; versus baseline: t(780) = 3.22, p = .0013, d = 0.23, and donate, versus nonprofit: t(794) = 3.85, p < .001, d = 0.27; versus baseline: t(780) = 4.69, p < .001, d = 0.34, while there was no difference in willingness to do so between the nonprofit and control conditions (see Supplemental Materials: Table S2).

Figure 2.

Mean differences in recycling vignette.

Study 3: Nursing Home

Design

Study 3 extended the investigation in Studies 1 and 2 to three more specific questions: (a) whether the pattern of sector stereotype is generalizable in other service areas, (b) whether more detailed and direct judgment from other people can moderate the effect of sector stereotype, and (c) whether “social enterprise” serves as a unique label that influences people’s judgments. Therefore, Study 3 undertook a 3 × 2 × 2 between-subject factorial design using nursing home in the United States as a service context. Similar to daycare and recycling industry, nursing home in the United States is also a complex market where nonprofit and for-profit service providers coexist. We manipulated the sector tag following the strategy in Studies 1 and 2. Star ratings in Study 3 were presented with more detailed information. Different from Studies 1 and 2, in Study 3, other people’s judgment was manipulated by showing high rating stars for four categories related to the organization, including “warm staff,” “efficiency,” “skilled nursing,” and “environment.” The number of raters was omitted to isolate the effect of other people’s judgments. The purpose of this manipulation was to examine to what extent do sector tags act as a signal for decision-making when the uncertainty as a result of information asymmetry was lifted by providing more direct information. Finally, the presentation of a “social enterprise” tag was also randomized (see Supplemental Materials: Figure S3). Such manipulation strategy created 12 unique experimental conditions. People’s perceived warmth and competence of the organization, as well as their willingness to purchase and to donate, were measured following Studies 1 and 2.

Participants

A total of 1,302 participants were recruited from MTurk. After filtering out incomplete responses, the final sample size for Study 3 reaches 1,148 (57.7% female, M_age = 39). Participants were compensated US$0.50 after finishing the experiment.

Procedure

Study 3 was delivered to participants through Qualtrics. After reading the introduction, participants were randomly assigned into one of 12 experimental conditions to read the information of a hypothetical nursing home where information of organization’s sector, star ratings, and its social enterprise status were manipulated. Based on the information, participants were then required to answer same questions in Studies 1 and 2 regarding their perceived warmth, competence, willingness to purchase, and willingness to donate. Three following questions served as manipulation check to reaffirm the manipulated information had been delivered.

Results

Data were analyzed with three-way analysis of variance (ANOVA) (Figure 3) and difference-in-means test. The attention check question detected 71 problematic response; however, the result with and without these responses shows no substantial differences. Three-way ANOVA test suggested no main effect of the social enterprise tag on each dependent variable. The sector information has a significant main effect on perceived warmth, F(2, 1,136) = 39.52, p < .001, η² = .06, and competence, F(2, 1,136) = 4.90, p = .008, η² = .009. In particular, the nonprofit nursing home was perceived significantly warmer than the for-profit one, t(778) = 8.27, p < .001, d = 0.59. Different from Studies 1 and 2, it was also perceived warmer than the baseline organization, t(747) = 3.48, p < .001, d = 0.26. Meanwhile, the for-profit nursing home was perceived significantly less warmth than the baseline nursing home, t(765) = 4.62, p < .001, d = 0.33. A detailed analysis of competence showed that the nonprofit nursing home was reported more competent than its for-profit, t(778) = 2.87, p = .004, d = 0.21, and baseline counterpart, t(747) = 1.66, p = .096, d = 0.21, but no significant difference was detected between the for-profit and baseline nursing home, t(765) = 1.17, p = .24.

Figure 3.

ANOVA results in nursing home vignette.

The more elaborated star rating treatment showed different results (Figure 4). First, it had a significant main effect on warmth, F(1, 1,136) = 115.60, p < .001, η² = .09, and competence, F(1, 1,136) = 176.22, p < .001, η² = .13. Second, there was a moderate interaction effect between sector tags and star ratings on perceived warmth, F(2, 1,136) = 2.76, p = .06, η² = .005, but not on competence, F(2, 1,136) = 1.61, p = .20. In the no rating condition, the nonprofit nursing home was perceived significantly warmer than both the for-profit, t(353) = 7.20, p < .001, d = 0.76, and baseline nursing home, t(346) = 3.95, p < .001, d = 0.42. However, when high rating stars are available, the perceived warmth of nonprofit and baseline nursing home reached the equal level, t(399) = 1.27, p = .21. The effect of the sector information and the star rating on people’s willingness to purchase and donate follow the similar pattern. More detailed information is reported in the Supplementary Materials: Table S3.

Figure 4.

Mean differences in nursing home vignette.

Discussion and Conclusion

From a perceptual perspective, this study has provided important evidence that improves the understanding of sector stereotype by revealing the complexity of perceived sector difference. First, by including a baseline condition in each experiment, the evidence suggests that the for-profit tag acts as the major cue of people’s repugnance against for-profit service provider that contributes to the sector stereotype, and the difference on warmth trait is more salient than competence trait. Second, the effect of sector stereotype varies across service areas: while people hold constantly that for-profit service provider is cold in all three service contexts, their perceived warmth of nonprofit service provider is more significant than the baseline group in the nursing home scenario than in day care and recycling context. Third, our finding suggests that other people’s judgment about the service provider could serve as a signal that substitutes the role of the sector tag in people’s judgment process, which moderates the sector stereotype. It also confirms the information asymmetry assumption that explains the rationale why people might rely on the sector tag to select service provider. We discuss implications of these findings as below.

Findings from the experiment supported the previous hypotheses that there is a stereotypical sector difference from a perceptual perspective. Importantly, by adding a baseline condition in which no sector information was presented for the organization, the study found that the effect of sector information could be asymmetric—there was only a minor perceptual difference between an organization without sector information and a nonprofit. Thus, under some circumstances (in our case, in different service areas), people only downgrade for-profit service providers perceptually compared to other types of service providers. This finding is consistent with previous evidence of people’s repugnance against for-profits, which suggests that profit-seeking is perceived to be immoral (Bhattacharjee et al., 2017). As the profit-seeking intention competes with the moral value required in the social service market, especially when the social mission is salient, for-profit organizations are less likely to be accepted as appropriate social services providers. Thus, although our finding reaffirms Hansmann’s (1980) claim that people prefer nonprofit to for-profit service providers, the competition advantage of being a nonprofit will diminish when for-profit providers strategically conceal their for-profit status and behave in more prosocial ways. It implies that the blurry sector boundary can be explained by institutional isomorphism in the market, where for-profits are mimicking their nonprofit competitors to survive. The pressure from the audience who maintains stereotypical understanding of nonprofit or for-profit organization requires social service organizations to cover its profit-seeking intention. On the contrary, the positive element in profit-seeking, such as market competition, which stimulates innovation, seemed not to influence people’s perceived competence of for-profit providers.

While previous evidence with similar design shows that nonprofits are perceived warm but incompetent, our findings in three different service areas show that for-profit social enterprises were perceived to be least competent across the three experimental conditions, although the effect size was relatively small. Such inconsistent findings imply that the sector difference is not defined only by the institutional logic behind the sector tag, but also the audiences’ social cognition of different services (DiMaggio & Anheier, 1990)—people prefer the implicit notion of a nonprofit, which contains important moral and instrumental values in certain service industries where service quality is difficult to measure and low quality constitutes unacceptable risk (Hansmann, 1980). Thus, future studies probing the sector stereotype should first isolate the perceived sector differences probably by tracing the moral and cultural origin of “nonprofitness,” and then consider the theoretical interactions between service areas and “nonprofitness” in a more systematical way.

People rely on the sector tag to make judgment about the organization because of the information asymmetry. Thus, we suspected that when possible, people might turn to more detailed and legitimate information such as the star rating system which contains information about consumers’ experience to make judgments rather than relying only on the sector information. Although we did not find supportive evidence in Study 1 and Study 2, when we substantially increased the amount of information in Study 3, the effect of sector stereotype was slightly moderated. This finding implies that the sector tag is still a major signal that people rely on to make judgments of the organization, but the effect could be offset when other information is available. This finding has both theoretical and practical implications. Theoretically, it reaffirms the existence of the sector difference but in the meantime provides potential explanations for why the sector boundary is increasingly blurry, as we observed in some service areas. Practically, in a complex market with increasing amount of information, people might stop relying on the sector tag to select service providers when more trustworthy and direct information is available so that uncertainty is reduced. Information such as word-of-mouth information, accreditations, or frequent communication between organizations and users could be considered as effective tools to reduce the sector stereotype, which, however, needs further exploration and experimental testing.

Evidence from this study also provides important practical implications. We argue that the sector boundary will still exist until the public abandons its stereotypical understanding of the sector tag, changing the standard of legitimization, which diminish the conflict between profit-seeking intention and social missions; otherwise, nonprofit organizations have to maintain its nonprofit image without showing any behaviors abnormal to a nonprofit stereotype in people’s eyes. The significant difference in the warmth trait and limited difference in the competence trait might indicate that people’s preference for nonprofits in social service is highly emotional and unstable (Cuddy et al., 2011). The stereotypical cognition of high warmth might lead to a higher expectation of moral standards, and when immoral behaviors are disclosed, such as scandal, fraud, or profit-seeking intentions such as the most recent admission policy reform by Metropolitan Museum of Art in New York City, the loss of legitimacy and reputation might be more serious in the nonprofit than in the private sector. Thus, while high warmth might lead to more resources and legitimacy, it also indicates more resource investment in meeting the moral expectation by increasing financial transparency and accountability management.

The sector stereotype, or people’s repugnance against for-profit status in social service market, has important implications for the organizations’ resource generation. Findings from the experiment showed that, regardless of the vignette, people were more likely to interact (purchase and donate) with the nonprofit than the for-profit social enterprise. Therefore, compared to a nonprofit social enterprise, a social enterprise with profit-seeking intention might have significantly fewer potential customers and generate less financial support from fundraising events. The former is particularly important for service providers that generate major revenue from market transactions with customers. We conducted a bootstrap mediation tests and the results reported in the Supplemental Material: Figure S3 revealed that warmth is a partial mediator through which for-profit status influenced people’s willingness to purchase and donate adversely in all experimental contexts.

Limitations of this study provide insights for further development of the sector theory. First, without sophisticated exploration of the role of uncertainty owing to information asymmetry in people’s judgment process, two important questions remain open to scholars: what blurs the sector boundary when people select service providers, and to what extent do people rely on the sector tag to make their decisions? To address these questions, we call for more experimental research with conjoint design which directly manipulates the amount and types of information. Second, this research was bounded to dig deeper into the mechanism of the sector stereotype. Although we suspect that the sector stereotype is a result of people’s repugnance against profit-seeking intention embedded in the for-profit tag, alternative mechanism might also lead to a perceived sector difference. Considering the effect of the sector stereotype varies in different service area, it is possible that it is the combination between the subarea and the sector tag that contributes to people’s perception of the focal organization. Thus, future research should consider theorizing the relationship between service areas and their legitimate sector tag perceived by users and donors. However, it is also worthwhile to explore whether the perceived difference on sectors is an accurate reflection of the objective performance or survey quality of organizations in a given market, and whether people are willing to use the actual performance information to form their judgments of a given service provider.

Supplemental Material

Supplemental_Materials – Supplemental material for The Perceived Differences: The Sector Stereotype of Social Service Providers

Supplemental material, Supplemental_Materials for The Perceived Differences: The Sector Stereotype of Social Service Providers by Chengxin Xu in Nonprofit and Voluntary Sector Quarterly

Footnotes

Acknowledgements

I would like to thank Dr. Sebastian Jilke for his inspiration, Dr. Lindsey McDougle for her careful guidance, and Dr. Cleopatra Charles and Dr. Curtis Child for their valuable advices. I also gratefully acknowledge insightful comments from Editor Chao Guo, Area Editor Sara Konrath, and two anonymous reviewers, which improved this research substantially. All errors are my own.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

ORCID iD

Chengxin Xu

Supplemental Material

Supplemental material for this article is available online.

Notes

Author Biography

Chengxin Xu is an assistant professor of the Institute of Public Service at Seattle University. His research focuses on the sectoral relations of the social service market, including sector difference, competition, collaboration, and organization hybridization. He receives his PhD from Rutgers University–Newark.

References

Aaker

Vohs

K. D.

Mogilner

(2010). Nonprofits are seen as warm and for-profits as competent: Firm stereotypes matter. Journal of Consumer Research, 37(2), 224–237. https://doi.org/10.1086/651566

Amirkhanyan

A. A.

Kim

H. J.

Lambright

K. T.

(2008). Does the public sector outperform the nonprofit and for-profit sectors? Evidence from a national panel study on nursing home quality and access. Journal of Policy Analysis and Management, 27(2), 326–353. https://doi.org/10.1002/pam.20327

Beisland

L. A.

Pascal Ndaki

Mersland

(2019). Influence of ownership type and CEO power on residual loss: Evidence from the global microfinance industry. Nonprofit and Voluntary Sector Quarterly, 48(5), 998–1022. https://doi.org/10.1177/0899764019848498

Ben-Ner

Hamann

D. J.

Ren

(2018). Does ownership matter in the selection of service providers? Evidence from nursing home consumer surveys. Nonprofit and Voluntary Sector Quarterly, 47(6), 1271–1295. https://doi.org/10.1177/0899764018790698

Bhattacharjee

Dana

Baron

(2017). Anti-profit beliefs: How people neglect the societal benefits of profit. Journal of Personality and Social Psychology, 113(5), 671–696. https://doi.org/10.1037/pspa0000093

Campbell

M. C.

Kirmani

(2000). Consumers’ use of persuasion knowledge: The effects of accessibility and cognitive capacity on perceptions of an influence agent. Journal of Consumer Research, 27(1), 69–83. https://doi.org/10.1086/314309

Cuddy

A. J. C.

Fiske

S. T.

Glick

(2007). The BIAS map: Behaviors from intergroup affect and stereotypes. Journal of Personality and Social Psychology, 92(4), 631–648. https://doi.org/10.1037/0022-3514.92.4.631

Cuddy

A. J. C.

Glick

Beninger

(2011). The dynamics of warmth and competence judgments, and their outcomes in organizations. Research in Organizational Behavior, 31, 73–98. https://doi.org/10.1016/j.riob.2011.10.004

DiMaggio

P. J.

Anheier

H. K.

(1990). The sociology of nonprofit organizations and sectors. American Review of Sociology, 16, 137–159.

10.

Drevs

Tscheulin

D. K.

Lindenmeier

(2014). Do patient perceptions vary with ownership status? A study of nonprofit, for-profit, and public hospital patients. Nonprofit and Voluntary Sector Quarterly, 43(1), 164–184. https://doi.org/10.1177/0899764012458179

11.

Fiske

S. T.

Cuddy

A. J. C.

Glick

(2007). Universal dimensions of social cognition: Warmth and competence. Trends in Cognitive Sciences, 11(2), 77–83. https://doi.org/10.1016/j.tics.2006.11.005

12.

Fiske

S. T.

Taylor

S. E.

(2017). Social cognition: From brains to culture (3rd ed.). SAGE.

13.

Galaskiewicz

Barringer

S. N.

(2012). Social enterprise and social categories. In B. Gidron & Y. Hasenfeld (Eds.), Social enterprise (pp. 47–70). Palgrave Macmillan.

14.

Handy

Seto

Wakaruk

Mersey

Mejia

Copeland

(2010). The discerning consumer: Is nonprofit status a factor? Nonprofit and Voluntary Sector Quarterly, 39(5), 866–883. https://doi.org/10.1177/0899764010362113

15.

Hansmann

H. B.

(1980). The role of nonprofit enterprise. The Yale Law Journal, 89(5), 835–901. https://doi.org/10.1021/ja804069n

16.

Hansmann

H. B.

(1981). The rationale for exempting nonprofit organizations from corporate income taxation. The Yale Law Journal, 91(1), 54–100. https://doi.org/10.2307/795849

17.

Judd

C. M.

James-Hawkins

Yzerbyt

Kashima

(2005). Fundamental dimensions of social judgment: Understanding the relations between judgments of competence and warmth. Journal of Personality and Social Psychology, 89(6), 899–913. https://doi.org/10.1037/0022-3514.89.6.899

18.

Kahneman

Frederick

(2002). Representativeness revisited: Attribute substitution in intuitive judgment. In Gilovich

Griffin

Kahneman

(Eds.), Heuristics and biases: The psychology of intuitive judgment (pp. 49–81). Cambridge University Press. https://doi.org/10.1017/CBO9780511808098.004

19.

Lee

Bolton

L. E.

Winterich

K. P.

(2017). To profit or not to profit? The role of greed perceptions in consumer support for social ventures. Journal of Consumer Research, 44(4), 853–876. https://doi.org/10.1093/jcr/ucx071

20.

Paul

J. A.

Quosigk

MacDonald

(2020). Does hospital status affect performance? Nonprofit and Voluntary Sector Quarterly, 49(2), 229–251. https://doi.org/10.1177/0899764019877249

21.

Salamon

L. M.

(1989). Of market failure, voluntary failure and third-party government: Toward a theory of government-nonprofit relations in the modern welfare state. Nonprofit and Voluntary Sector Quarterly, 16(1–2), 29–49.

22.

Schlesinger

Mitchell

Gray

B. H.

(2004). Restoring public legitimacy to the nonprofit sector: A survey experiment using descriptions of nonprofit ownership. Nonprofit and Voluntary Sector Quarterly, 33(4), 673–710. https://doi.org/10.1177/0899764004269431

23.

Stellar

J. E.

Willer

(2018). Unethical and inept? The influence of moral information on perceptions of competence. Journal of Personality and Social Psychology, 114(2), 195–210. https://doi.org/10.1037/pspa0000097

24.

Suchman

M. C.

(1995). Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20(3), 571–610. https://doi.org/10.5465/AMR.1995.9508080331

25.

Todorov

Mandisodza

A. N.

Goren

Hall

C. C.

(2005). Inferences of competence from faces predict election outcomes. Science, 308(5728), 1623–1626. https://doi.org/10.1126/science.1110589

26.

Tost

L. P.

(2011). An integrative model of legitimacy judgments. Academy of Management Review, 36(4), 686–710. https://doi.org/10.5465/amr.2010.0227

27.

Walker

R. M.

Lee

M. J.

James

S. M. Y.

(2018). Analyzing the complexity of performance information use: Experiments with stakeholders to disaggregate dimensions of performance, data sources, and data types. Public Administration Review, 78, 852–863. https://doi.org/10.1111/puar.12920

28.

(2018, August 9). The effect of social enterprises’ sector information on people’s perceptions and behavioral intentions. AEA RCT Registry. https://doi.org/10.1257/rct.3104-1.0

29.

Young

D. R.

Lecy

J. D.

(2014). Defining the universe of social enterprise: Competing metaphors. Voluntas, 25(5), 1307–1332. https://doi.org/10.1007/s11266-013-9396-z

30.

Zucker

L. G.

(1987). Institutional theories of organization. Annual Review of Sociology, 13(1), 443–464. https://doi.org/10.1146/annurev.so.13.080187.002303

Supplementary Material

Please find the following supplemental material available below.

For Open Access articles published under a Creative Commons License, all supplemental material carries the same license as the article it is associated with.

For non-Open Access articles published, all supplemental material carries a non-exclusive license, and permission requests for re-use of supplemental material or any part of supplemental material shall be sent directly to the copyright owner as specified in the copyright notice associated with the article.

0.00 MB

1.52 MB