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Public-Interest Supply Functions of Non-Public Funding Foundations: A Typology, Supply Pathways and Optimal Policies*

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Abstract Since 2004, non-public funding foundations have developed rapidly. They have had important effects on resource mobilization, public-interest services and grant incubation. This study affirms non-public funding foundations’ role as “public-interest suppliers”. After an analysis of the entire supplier – that is, non-public funding foundation – industry’s development, a typology of non-public funding foundations as public-interest providers is presented and the concept of “agent foundations” introduced. Then, five foundation supply methods are discussed, including direct supply of funds, direct supply of services, indirect supply of funds, indirect supply of services and supply by foundation agents. The last type, in particular, is characterized by a unique principal-agent relationship. Then, from the angles of transaction costs, field effectiveness and optimal scales, it analyzes issues related to non-public funding foundations’ optimal supply decisions, including optimal methods, fields and scales of supply. Lastly, it identifies two major challenges from the demand side that non-public funding foundations face as they vigorously develop – homogeneous competition and insufficient effective demand – and offers policy responses.

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