Dealing with Endogeneity to Understand the Societal Impact of the Third Sector: Why Should We Care and What Can We Do about It?

Endogeneity is often regarded as a key barrier in establishing the causal relationship between the third sector and its societal impact in empirical research. Through a systematic literature review of the quantitative studies on the third sector’s impact in the last two decades, we find that most quantitative studies of the third sector’s societal impact are published in journals outside main third sector journals. We also offer specific examples of how recent methodological advancements in addressing endogeneity help third sector researchers better solve this problem. Based on the analysis of this literature review, we recommend that third sector scholars should (1) refocus on the big question of the third sector’s impact on society, (2) catch up with the methodological advancement in addressing endogeneity, (3) be creative and transparent about addressing endogeneity, and (4) build better theories to link the third sector to broad societal outcomes.