Sborník příspěvků XVI. mezinárodní kolokvium o regionálních vědách Valtice 19.–21. 6. 2013
549
DOI: 10.5817/CZ.MUNI.P210‐6257‐2013‐69 
THE ROLE OF THIRD SECTOR ORGANIZATIONS IN
RURAL DEVELOPMENT
VÝZNAM ORGANIZÁCIÍ TRETIEHO SEKTORA VO VIDIECKOM
ROZVOJI
ING. GABRIELA VACEKOVÁ, PH.D.
ING. SIMONA ŠKARABELOVÁ, PH.D.
Katedra veřejné ekonomie
Ekonomicko-správní fakulta
Masarykova univerzita
Department of Public Economics
Faculty of Economics and Administration
Masaryk University
 Lipová 41a, 602 00 Brno, Czech Republic
E-mail: gabriela.vacekova@econ.muni.cz, simona@econ.muni.cz
Anotácia
Organizácie tretieho sektora reflektujú a vytvárajú komunitné podmienky. Za účelom preukázania ich
úlohy a významu vo vidieckom rozvoji prezentujeme teoretický a empirický prístup k rurálnemu
tretiemu sektoru. Predkladaný príspevok vychádza z novej ekonomickej teórie tretieho sektora, “teórie
rurality”. Túto teóriu formuloval Vladislav Valentinov a vychádza z predpokladu, že existencia
tretieho sektora je zapríčinená obmedzenou schopnosťou ziskových firiem uspokojiť ľudské potreby,
pričom dôvodom sú špecifické charakteristiky vidieckych oblastí a z nich vyplývajúce “ruralitné
špecifické náklady”. Základnou hypotézou teórie rurality je, že ruralitné špecifické náklady podnecujú
vznik vidieckych organizácií tretieho sektora. Existujú empirické dôkazy z rôznych krajín (napr. USA
a Belgicka), ktoré buď potvrdzujú alebo vyvracajú význam rozdielov medzi vidiekom a mestom ako
determinantu úlohy tretieho sektora v rurálnom rozvoji. V príspevku prezentujeme medzinárodný
výskumný projekt “Third sector organizations in rural development: a theoretical and empirical
analysis” v podmienkach Českej republiky. Výskumné aktivity predpokladajú prínos významného
množstva teoretického a empirického materiálu na testovanie opodstatnenosti teórie rurality.
Kľúčové slová
vidiecky rozvoj, tretí sektor, neziskové organizácie, teória rurality
Annotation
Third sector organizations reflect and shape community conditions. To show their role and
importance in rural development we present theoretical and empirical approach to the rural third
sector. The paper is based on a new economic theory of the third sector, the “rurality theory”. This
theory was formulated by Vladislav Valentinov and assumes that the existence of the third sector is
caused by the limitations of for-profit firms’ ability to satisfy human needs. The argument to their
limitations is characteristics of rural areas and the resulting “rurality specific costs”. Thus, the
rurality theory’s general hypothesis is that the rurality-specific transaction cost gives rise to the
emergence of rural third sector organizations. There is some empirical evidence from different
countries (e.g. USA and Belgium) either confirming or refuting the rural-urban distinction as a
determinant of the third sector`s role in rural development. The paper presents the survey outline
“Third sector organizations in rural development: a theoretical and empirical analysis” on the case
of the Czech Republic. The research activities are expected to deliver a critical mass of theoretical
and empirical material for testing the rurality theory.
Key words
rural development, third sector, non-profit organizations, rurality theory
Sborník příspěvků XVI. mezinárodní kolokvium o regionálních vědách Valtice 19.–21. 6. 2013
550
JEL classification: L31, R19
1. Introduction
Scope of third sector organizations is so diverse that it is impossible to find a single term to define
them. Therefore many authors (Anheier and Salomon, 1999; Bútora, 2011, Frič, Goulli, 2001, Haken,
2005, Hansmann, 1996; Hyánek, 2011; Ondrušek, 1998; Pestoff, 2006; Petijová, Woleková, 2006;
Rektořík, 2001, Rose-Ackerman, 1996; Toepler, 2003, Weisbrod, 1988, etc.) in a number of
publications prefer a broader description of the characteristics of non-profit organizations. The
structural-operational definition by Anheier and Salamon (1999) can be used. According to this
definition an NGO should comply five characteristics: institutionalization, independence, nondistribution
constraint, self-government, voluntary participation.
In many parts of the world, rural development is supported by third sector organizations, such as
NGOs, farmer associations, self-help groups, rural partnerships and cooperatives. Although the
contribution of these organizations to rural development has been widely recognized empirically (e.g.,
OECD 2006), the theoretical understanding of their economic rationale has remained unsatisfactory
(Valentinov, 2012).
There are some specific rural NPOs characteristics (compared to urban counterparts), such as
(Curtisss, 2012):
 mainly traditional NPOs (volunteer firemen groups, hobby clubs);
 nontraditional NPOs (community building, service, expressive) frequently organized by
newcomers (drift) to rural areas with urban experience;
 more closely watched due to strong social ties;
 smaller size, large scope of activities limited to activities manageable with voluntary labor;
 primary financial and material support from local government (small! grants, importance of
material support), complain about clientelism in connection to state funding;
 professionalization mainly by rural residents with urban experience (studies or employment in
a city) or weekend residents.
The respective gap in the literature is reflected in the major economic theories of the third sector
having been developed with no regard to the rural context (see Steinberg 2006 for an overview).
Indeed, neither of these theories, including the public goods theory, trustworthiness theory, consumer
control theory, ideological entrepreneurship theory, can appropriately account for the specificity of
rural conditions in explaining the existence of the rural third sector (Valentinov, 2012).
2. Research methodology
Formulating the rurality theory of the third sector will be done in three thematic areas (Valentinov,
2012):
 analyzing the effect of rurality on the institutional choice in rural areas;
 testing the alternative economic theories of the third sector in rural areas;
 rationalizing rural-urban differences in the structure and behavior of third sector
organizations.
Empirical testing will be based on econometric methods and case studies.
The data for conducting the empirical part of the research will be collected in Germany, Czech
Republic, and Ukraine. The research is conducted by IAMO (Leibniz Institute of Agricultural
Development in Central and Eastern Europe) from Halle, Germany. The partner in the Czech Republic
is CVNS (Centrum pro výskum neziskového sektoru) at the Department of Public Economics,
Masaryk University in Brno.
Sborník příspěvků XVI. mezinárodní kolokvium o regionálních vědách Valtice 19.–21. 6. 2013
551
Selection of rural areas in the Czech Republic utilized the typology of rural areas by Perlin et al.
(2010) and focused on two types of rural areas: “nerozvojovy sousedsky venkov” and “vybaveny
moravsky venkov”. Criteria for selection were as follows (Curtiss, 2012):
 Municipalities in the size of 200-1500 residents;
 Share of agricultural land >= 40%
 Distance to the border at least 20 km.
The questionnaire survey in the Czech Republic will be conducted in 250 municipalities from
Jihomoravský kraj and Vysočina (partly also Zlínský and Olomoucký kraj). The survey data will be
complemented with municipal statistical data. After the municipality level survey there will be a NPO
level survey. While the municipality level survey is aimed at understanding the scope, structure and
role of NPOs in rural governance and public good delivery, the NPO level survey will result in
understanding the incentives for establishment and conditions of effective operation of rural NPOs
(when compared to urban NPOs). To do that in appropriate way a control sample of urban respondents
will be needed.
The major innovation of the research lies in the proposition of a new economic theory of the third
sector and in substantiation of the rural-urban distinction as a determinant of the theoretical rationale
of the third sector. Related to this innovation there are two sources of risk justifying the five-year
duration of the research (Valentinov, 2012):
 ‘liability of newness’ of the rurality theory of the third sector;
 relative deficit of official statistics on third sector organizations.
The first source of risk would be addressed by accumulating a critical mass of research findings and
by active communication of these findings to the research community. The second source of risk
would be addressed by active networking with national and international third sector organizations
themselves in order to get access to the data and to disseminate research findings.
The research intends to create a new field of economic research located at the intersection of the
economic theory of the third sector and agricultural economics, thus extending the boundary of the
economic discipline ‘from within’ (Valentinov, 2012).
3. State of the art
In line with the overall trend of growing political relevance of the third sector in the modern world
(Salamon and Anheier 2006), the rural third sector enjoy increasing political recognition as well
(Valentinov, 2012). In the developed countries, the role of rural third sector organizations has been
enhanced by the shift ‘from government to governance’ involving the transfer of responsibilities from
the state to the private for-profit and third sectors (Goodwin 1998; Valentinov and Fritzsch 2009
forthcoming; Valentinov and Baum 2008). Accordingly, the recent trend in the rural development
policy in Europe has been toward increasing reliance on partnerships beyond the formal structures of
government, as has been articulated in the Cork Declaration and a number of other European rural
policy documents (Goodwin 1998). These partnerships, which bring together stakeholders of all three
societal sectors – market, state, third sector – themselves clearly represent third sector organizations.
In the developing countries, the importance of the rural third sector has been appreciated primarily as
a result of relatively low effectiveness of both state-led and market-led policies of agricultural and
rural development (Kydd and Dorward 2004; Valentinov 2008a).
3.1. Rurality theory
The author of the new third sector theory Rurality theory is Vladislav Valentinov. Based on his
assumptions, the recognized empirical relevance and the growing political popularity of the rural third
sector have not so far been matched by the corresponding development of the economic theory of the
rural third sector (Valentinov, 2012). Indeed, this theory has been missing at all. The traditional
general theories of the third sector emphasized its role in the provision of public goods (Weisbrod
Sborník příspěvků XVI. mezinárodní kolokvium o regionálních vědách Valtice 19.–21. 6. 2013
552
1991), gaining consumers’ trust (Hansmann 1987), ensuring better consumer control over production
of goods and services (Ben-Ner 1986), and serving as an outlet for ideological entrepreneurship
(Rose-Ackerman 1996). These theories have clearly been developed with no regard to the distinction
between rural and urban regions. Hence, neither theory is adequately positioned to take account of the
specificity of rural conditions in explaining the existence of the rural third sector.
The case for developing the economic theory of the rural third sector is not self-evident. It can be met
with the objection that rural third sector organizations, just like their urban counterparts, can be
satisfactorily explained in terms of the standard economic theories. However, there are two
interrelated arguments that justify the need for the rural third sector to be explained by an extra theory
different from the traditional ones (Valentinov, 2012). First, the traditional general economic theories
of the third sector agree that the third sector is generally caused by the limitations of the ability of forprofit
firms to satisfy human needs (Steinberg 2006; Hansmann 1987). Second, the literature on
international rural development strongly suggests that rural areas, in both developed and developing
countries, have a number of socio-economic characteristics that result in high transaction cost
constraining the operation of for-profit firms (Terluin 2001; Baum and Weingarten 2005).
Thus there are grounds to argue that spatial and socio-economic characteristics of rural areas create a
niche for rural third sector organizations and hence constitute a distinct theoretical reason for their
existence (Valentinov 2009a forthcoming). In the following, the argument that socio-economic
characteristics of rural areas create a niche for rural third sector organizations will be referred to as the
‘rurality’ theory of the third sector. The rurality theory of the third sector presents a logical
continuation of the applicant’s previous work on the sector-specific organizational economics
rationale of agricultural cooperatives (Valentinov 2007a) and the self-sufficiency theory of the third
sector (Valentinov 2008b).
3.2. Rurality transaction costs
The indicated characteristics of rural areas, while broad and stylized, follow from spatial and
territorial approaches to understanding rurality (Terluin 2001; Saraceno 1994; Cloke 1985).
Accordingly, in conducting empirical research, these characteristics may be supplemented with other
characteristics that are put forward by these approaches and that may be indirectly indicative of the
rurality-specific transaction cost - e.g., unemployment rate, employment share of agriculture, share of
built-up area, per-capita incomes, demographic structure (Valentinov, 2012).
While the traditional transaction cost theory of new institutional economics explains the existence of
the for-profit firm in terms of its transaction cost-economizing role (Coase 1937; Williamson 1996),
the rurality-specific transaction cost stems from those rural areas’ characteristics that cannot be altered
by for-profit firms. Hence, the rurality-specific transaction cost is most appropriately analyzed not
from the perspective of the traditional transaction cost theory, but rather from the perspective of the
theory of the social division of labor (Valentinov 2006a). The latter theory argues that transaction cost
may act as a constraint on the social division of labor and thus give rise to partially replacing of
market exchange with self-sufficiency. In yet another contribution, the applicant proposed that third
sector organizations must be generally viewed as institutional embodiments of partial collective selfsufficiency
in situations where market exchange, mediated by for-profit firms, is not possible
(Valentinov 2008b).
Various economic theories of the third sector have thereby been shown to refer to specific instances of
transaction cost acting as a constraint on the division of labor (ibid). Accordingly, the proposed
rurality theory of the third sector is concerned with the rurality-specific transaction cost. Thus, the
applicant’s previous work involved developing an integrative meta-theoretical framework that not
only reconciles the traditional theories (Valentinov 2009), but also integrates the proposed rurality
theory into the logical structure of the extant theoretical literature on third sector economics.
Sborník příspěvků XVI. mezinárodní kolokvium o regionálních vědách Valtice 19.–21. 6. 2013
553
3.3. Preliminary empirical findings
The empirical relevance and the growing political popularity of the rural third sector have been
already empirically recognized. We can demonstrate two different findings on two different research
outcomes concerning the rural development.
The first one uses data on Internal Revenue Service–registered nonprofits for Indiana counties. The
authors (Kirsten A. Gronbjerg, Laurie Paarlberg, 2001) from Indiana University (USA) examined how
theories of demand, supply and social structure predict the overall density of nonprofits in local
communities. The authors found substantial county-level variations in the densities of nonprofits
overall and of charitable, advocacy, and mutual-benefit nonprofits. Using multiple regression
techniques, they were able to explain 20 % to 46 % of overall variation (depending on legal category
involved) in nonprofit densities. Their findings support the supply and social structure but not
demand, explanations and reveal somewhat divergent patterns for the various types of nonprofits.
The second one was conducted in Belgium (Marc Hooghe, Sarah Botterman, 2009). Their goal was to
assess the impact of urbanization on participation in voluntary associations. The analyses, however,
did not support these alleged negative effects of urban life. Population density, city size, or belonging
to a metropolitan area did not have a significant impact on the intensity or the scope of participation in
voluntary associations. Their results therefore do not support the hypothesis of a rural-urban divide in
participation in voluntary associations.
To find out the situation in our conditions we will conduct the research “Third sector organizations in
rural development: a theoretical and empirical analysis” on the case of the Czech Republic. There was
CVNS representative survey conducted by Zuzana Prouzová from Masaryk University in Brno in
2012, which was aimed at the relationship between municipalities and NGOs, at the forms and reasons
for supporting NGOs from municipalities. But a similar research that would deal with the role of third
sector organizations in the Czech rural development has not been published yet.
4. Survey outline
The research is aimed at filling a research gap by formulating and empirically testing a new economic
theory of the third sector, the rurality theory. The objective of the proposed research project is twofold
(Valentinov, 2012):
 to formulate empirically testable hypotheses following from the rurality theory of the third
sector;
 to empirically test these hypotheses, particularly in contrast with hypotheses following from
the traditional general theories of the third sector.
It is planned to investigate the research objective on example of three countries, Germany, Czech
Republic, and Ukraine. The choice of these countries is motivated by three reasons, such as
(Valentinov, 2012):
 the opportunity to identify the effects of socialist transition (as a characteristic of institutional
environment) on the development of the rural third sector, as these countries exhibit varying
states of advancement of over the socialist past;
 the availability of reliable research partners in these countries;
 and the expectation of more extensive empirical results required for better empirical
justification of the theoretical framework.
Since the thematic areas will be pursued in three different countries, it is planned to develop an
integrated data collection procedure that will ensure cost-effectiveness of data collection and
comparability of data.
Sborník příspěvků XVI. mezinárodní kolokvium o regionálních vědách Valtice 19.–21. 6. 2013
554
4.1. Research areas
Based on the proposed approach, the thematic areas within which the rurality theory of the third sector
will be developed and empirically tested include (Valentinov, 2012):
1. Analyzing the effect of rurality on the institutional choice in rural areas. Institutional choice will
thereby be broadly understood as the choice between market, state, and the third sector. The overall
hypothesis following from the rurality theory is that the rurality-specific transaction cost (as well
potentially other rurality-specific characteristics) will be one of determinants of occurrence of the third
sector in rural areas. This thematic area is innovative because the major economic theories of the third
sector have been so far more focused on revealing this sector’s unique economic role than on
developing models of inter-sectoral institutional choice. At the same time, analyzing institutional
choice has been a major theme in the new institutional economics literature on the for-profit sector
(e.g., Williamson 1996). Yet, this literature’s implications for understanding the choice between the
three societal sectors in the development of rural areas remain largely unexplored. This thematic area
will aim at closing this research gap.
2. Testing the alternative economic theories of the third sector in rural areas. This thematic area will
be the central part of the proposed project. Empirical testing of competing theories has been an
important theme in the current third sector research literature (e.g. Salamon and Anheier 1998), yet it
has so far had little relevance to the rural third sector. Moreover, as mentioned above, the rurality
theory has not been tested along with the traditional theories. The proposed project will fill this gap in
the literature.
3. Rationalizing rural-urban differences in the structure and behavior of third sector organizations. The
rurality theory hypothesizes in this respect that structural and behavioral characteristics of rural third
sector organizations (and particularly of those organizations explained by the rurality theory) will
systematically differ from the respective characteristics of urban third sector organizations. This
thematic area is innovative since the traditional economic theories of the third sector do not examine
whether the general reasons for the emergence of the third sector are variously represented in rural and
urban areas.
4.2. Expected results
It is expected to make theoretically and empirically grounded statements about (Valentinov, 2012):
 the determinants of institutional choice between market, state, and the third sector and rural
areas;
 the relative validity of the rurality theory and other theories of the third sector in rural areas;
 the major variations in the structure and behavior of third sector organizations in urban and
rural areas.
The statements will be formulated for the Czech Rebulic and afterwards compared with conditions of
other involved countries. In the broader point of view the research is also aimed at generating
recommendations for public policy towards the third sector (Valentinov, 2012).
The realization of the research should help establishing the rurality theory of the third sector in the
multidisciplinary literature on the third sector. The research activities are expected to deliver a critical
mass of theoretical and empirical material for this purpose (Valentinov, 2012). Ideally, the rurality
theory would occupy the same status as the traditional theories of the third sector, at least in the
literature on the rural third sector.
5. Conclusion
In line with the traditional economic theories of the third sector, the rurality theory assumes that the
existence of the third sector is caused by the limitations of for-profit firms’ ability to satisfy human
Sborník příspěvků XVI. mezinárodní kolokvium o regionálních vědách Valtice 19.–21. 6. 2013
555
needs. The original contribution of the rurality theory is in the argument that some of the limitations of
for-profit firms located in rural areas are related to characteristics of rurality, such as low population
density, geographical dispersion, and poor infrastructure. These characteristics give rise to ‘ruralityspecific’
transaction cost that must be borne by for-profit firms located in rural areas. The ruralityspecific
transaction cost constrains the scope of operation of rural for-profit firms, thus diminishing
their ability to satisfy rural dwellers’ wants and creating a niche for rural third sector organizations
(Valentinov, 2012).
The aim of the paper was to present theoretical and empirical basis explaining the role of the third
sector organizations in the rural development. We described the research sample and the data
collection process within an international project “Third sector organizations in rural development: a
theoretical and empirical analysis” on the case of the Czech Republic. The major innovation of this
research project lies in the proposition of a new economic theory (rurality theory) of the third sector
and in substantiation of the rural-urban distinction as a determinant of the theoretical rationale of the
third sector. The fulfillment of the project objectives will be realized by analyzing the logical
relationship between the concepts of rurality and the third sector.
The presented paper opens the discussion by formulating and empirically testing a new economic
theory of the third sector, the rurality theory. We also try to point out where future research is needed.
Literature
[1] COASE, R.. The nature of the firm. Economica, 1937, 4. p. 386–405.
[2] CURTISS, J. Rural-Urban Divide in Funding and Accountability of NPOs A Regional Case
Study in the Czech Republic. In 10th ISTR International Conferences, Siena, 10-13 July 2012.
[3] GRØNBJERG, K. A.- PAARLBERG, L. Community variations in the size and scope of the
nonprofit sector: Theory and preliminary findings. Nonprofit and Voluntary Sector Quarterly,
2001, 30(4), p. 684-706.
[4] HANSMANN, H. Economic theories of nonprofit organization.In: Powell, W. (ed.). The
Nonprofit Sector:A Research Handbook. New Haven et al.: Yale University Press, 1987. p. 27–
42.
[5] HOOGHE, M., BOTTERMAN, S. Urbanization, Community Size, and Population Density: Is
There a Rural-Urban Divide in Participation in Voluntary Organizations or Social Network
Formation? Nonprofit and Voluntary Sector Quarterly, 2012, 41(1) p. 120–144. DOI:
10.1177/0899764011398297.
[6] HYÁNEK, V. Neziskové organizace: teorie a mýty. Brno: Masarykova univerzita, 2011. 132 p.
ISBN 978-80-210-5651-0.
[7] OECD. Das neue Paradigma für den ländlichen Raum: Politik und Governance (in German).
Paris: OECD Publications, 2006. 184 p.
[8] PROUZOVÁ, Z. Obce ČR a NNO. 2012. Dostupné z: <http://cvns.econ.muni.cz/projekty/53>.
[9] ROSE-ACKERMANN, S. Altruism, nonprofits, and economic theory. Journal of Economic
Literature, 1996, 34: 701–728.
[10]STEINBERG, R. Economic theories of nonprofit organization. In Powell, W. and Steinberg, R.
(eds.) The NonprofitSector: A Research Handbook, 2nd Ed. New Haven et al.: Yale University
Press, 2006. p. 117–139.
[11]VALENTINOV, V. (2009a). Third sector organizations in rural development: a transaction cost
perspective. Agricultural and Food Science, 2009, 18(1), 3-15.
[12]VALENTINOV, V. (2009b). Mapping the third sector in John R. Commons' typology of
transactions. Journal of Economic Issues, 2009, 43(4), 917-930. DOI: 10.2753/JEI0021-
3624430405.
[13]VALENTINOV, V. The meaning of nonprofit organization: insights from classical
institutionalism. Journal of Economic Issues, 2011, 45(4), 901-916.
[14]VALENTINOV, V. Understanding the rural third sector: insights from Veblen and Bogdanov.
Kybernetes, 2012, 41(1/2), 177-188.
Sborník příspěvků XVI. mezinárodní kolokvium o regionálních vědách Valtice 19.–21. 6. 2013
556
[15]VALENTINOV, V., & LARSEN, K. The meaning of non-profit mission breadth: A
constitutional economics perspective. The Social Science Journal, 2011, 48(1), 29-38.
[16]WEISBROD, B. A. The nonprofit economy. Harvard University Press, 1988.
[17]YOUNG, D. R. Alternative models of government-nonprofit sector relations: Theoretical and
international perspectives. Nonprofit and Voluntary Sector Quarterly, 1999, 29(1), 149-172.
[18]WILLIAMSON, O. The mechanisms of governance. Oxford: Oxford University Press, 1996. 429
p.
This article has been elaborated as one of the findings of research project CZ.1.07/2.3.00/30.0009
Employment of Newly Graduated Doctors of Science for Scientific Excellence.