Third Sector

The third sector is an intermediary realm between the private business sector, the public sector, and the personal sector comprising family and friends. As the sum total of not-for-profit enterprises and voluntary associations within a society, the concept of the third sector is often used interchangeably with two betterknown terms: the voluntary sector and the nonprofit sector.

A confluence of recent historical processes has increased the scope and depth of third-sector activity, making it an important arena of contemporary governance. The collapse of socialism and the crisis of the welfare state have diminished confidence in the capacity of the public sector to deal with contemporary economic pressures. At the same time, rapid advances in technology and communication and the growth of social movements have spawned greater public awareness of the rising social and environmental costs of expanding capitalist economies. Under these conditions, third-sector organizations provide a means of responding to the increasingly complex challenges facing modern societies.

The identification of third-sector organizations varies across disciplines. Sociologists tend to include all institutions joining individuals in voluntary association. Public administrators and economists tend to be more discriminating. The former generally equate the third sector with voluntary-based, governmentdirected service organizations, and the latter focus on cooperatives and nonprofit enterprises operating within the market economy. Despite the absence of a definitive, broadly accepted typology of third-sector organizations, they are generally understood as having some degree of institutionalization, formal autonomy [Page 965]from both the public and private sectors, and a nondistribution requirement that prevents profits from being passed on to members or owners.

There are two distinctive frameworks for understanding third-sector governance. The first situates the third sector within the context of welfare state development. Focusing on the fields of welfare, education, and health, this perspective examines the dynamics and effectiveness of service provision. In so doing, it explores issues of self-governance, such as organizational design and management, as well as issues involving public-private relations, such as regulation, financing, and accountability. The second framework emphasizes the third sector's relationship to the development of civil society. Emerging from a more sociopolitical perspective, it explores institutionalized patterns of cooperation and solidarity, the factors that affect these patterns, and their implications for democratic participation and social involvement.

While awareness of the third sector has broadened over the last decade, it continues to be underutilized as a research subject within the social sciences. As a result, key areas of interest, such as its role in policy making and its capacity and efficacy in pursuing public purposes, require further analysis.