Transaction Costs in Voluntary Social Organisations

Abstract

The increasing use of targeted social investments has led to relevant research interest in the transaction costs of social efforts. However, the majority of the research is characterised by the following two challenges: first, the analyses are often limited to public sources of revenue and, therefore, exclude private sources; and second, the transaction costs are measured based on self-declared information about administrative costs. The article contributes to the field of research in two ways. First, the contribution is made through an analytical model that brings together private and public revenue streams in a single model, providing a unique opportunity to compare the transaction costs from these two sources. Second, in this article, transaction costs are measured based on the actual development in the number of administrative academic full-time equivalents (FTEs) in the organisations. The latter attribute also achieves a better link to the theory in the field, which precisely focuses on administrative employees. The article derived data from a longitudinal dataset for 2012‒17 with the accounts for revenue in the nationwide voluntary social organisations and register data from Statistics Denmark on the education and working hours of employees in organisations. The article finds that targeted project funds (that is, earmarked funding) from private sources have significantly higher transaction costs than government project funds and general public operating grants. Smaller organisations were also shown to generally have higher costs when striving to secure funding than larger organisations with economies of scale.