Faithful Strategies: How Religion Shapes Nonprofit Management

Abstract: This paper studies the strategies employed by Catholic and Protestant nonprofit hospitals in Germany and traces them back to the theological foundations of those religions, which shape managers' values. We find that Catholic nonprofit hospitals follow a strategy of horizontal diversification and maximization of the number of patients treated. By contrast, Protestant hospitals pursue a strategy of horizontal specialization and focus on vertical differentiation, putting in more sophisticated inputs and producing more complex services. The results are consistent with the predictions of our model, which supports the differences between Catholic and Protestant values identified in the literature.