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The Handbook of Technology and Innovation Management by Scott Shane

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16.3. The Contributions of the Nonprofit Sector

The nonprofit sector is a set of institutions and organizations that are neither government nor business. There is no agreement on what to even call this phenomenon: the third sector, the independent sector, the philanthropic sector, the voluntary sector, nongovernmental organizations (NGOs), or civil society organizations. Typically these organizations have special tax status that recognizes their civic orientation[]. The only accepted fact is that this is a growing sector of the economy that is increasingly important for innovation and technical change, but is not very well understood. As government retrenches, this sector has become more important (Weisbrod, 1997, 1998).

[] For example, in the US these organizations are governed by Section 510(c) of the tax code and there are more than 25 subcategories. For example, hospitals and private universities are one type of nonprofit, foundations are another, and professional organizations yet another.

Foundations are one of the most complex components of the nonprofit sector. There are more than 100 000 foundations in the United States (National Center for Charitable Statistics, 2006) Private foundations usually have a single source of funding from an individual, a family, or a business, and use income from investments to make grants to other nonprofit organizations. The Sloan Foundation, The Gates Foundation, and the Robert Wood Johnson Foundation are well known examples of foundations ...

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