The Mixed Economy of Child Care: An Institutional Analysis of Nonprofit, For-Profit, and Public Enterprises

Abstract

"Nonprofit theory predicts nonprofit enterprises will be more trustworthy than for-profit enterprises in the delivery of goods for which quality is difficult to determine because nonprofit enterprises are legally required to reinvest all profits back into the enterprise. Theoretically, consumers should demand these types of goods from the nonprofit sector or nonprofits should emerge to produce such goods for under served populations. However, empirically, mixed economies exist for the health care, nursing home, and child care industries. While there appears to be a large divide between theory and empirical reality, many public policies use sector as the basis for determining which types of enterprises can participate in public programs. However, if the theorized link between sector and trustworthy behavior (i.e., higher quality) is not supported empirically, then this brings into serious question preferential policies for nonprofit enterprises. This dissertation focuses on determining the factors most likely to produce quality service delivery and their relation, if any, to sector.

"Primary data from four states indicate three key findings. First, entrepreneurial motivations for starting child care centers vary within sectors; not all for-profit entrepreneurs are profit maximizers and not all nonprofit centers are trustworthy. Second, sector does not predict adoption of quality enhancing policies (QEP). However, once the sectors are divided into categories representing differences in governance structures, variations in QEP do emerge. Therefore, while the relationship between sector and QEP is not significant, there is significant intra-sectoral variation in mean QEP scores. This finding points towards intervening variables which are the focus of the third major finding. Data analysis reveals that those centers with institutional environments fostering adoption of QEP are ones in which: monitoring systems between the owner/board and the director are strong; budgets are sufficient; competition with other centers is based on quality rather than price; and, the director is well integrated into the early childhood professional community. Therefore, public policies favoring one sector over another are not likely to result in improving child care quality. Based on this research, effective public policies must encourage these institutional variables in order to positively impact center adoption of quality enhancing policies."