ABSTRACT

There is no single, accepted theory that explains the existence of the nonprofit sector or the purpose of nonprofit organizations. Rather, there are several theories that seek to do so, which have different philosophical bases. The theories of the nonprofit sector can be grouped into two broad categories, however: economic theories and sociopolitical theories. Economic theories seek to explain the existence of nonprofits in relation to the marketplace while sociopolitical theories generally argue that nonprofits are vital to the development of democratic capabilities and to the maintenance of civil society. This entry provides a broad overview of these theories and their philosophical underpinnings, and discusses some of their virtues and drawbacks.