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Neoclassical economies relied on the widely held belief that organizations are primarily concerned to maximize their profits. There is no economic space for non-profit organizations (NPOs); however, modern economic concepts show that non-profits play an important social role that has a direct and indirect impact on economic growth.
Most of this impact may be indirect, such as promoting entrepreneurship, upgrading human capital, improving the educational level and reducing the gap between educational output and skills required in the market. However, the impact and contribution of NPOs to economy, like other organizations, are dependent on the firm’s behavior in the market and their productive efficiency.
In the mid-1940s, Schumpeter was one of the first to discuss NPOs impact on the economic growth process, in his article entitled “Theoretical Problems of Economic Growth.” In it, he analyzed non-economic factors in economic growth processes such as the physical environment, community institutions, organizational relationship to technology, and other multiple factors. However, the economy is a complex system that does not grow alone, but it is affected by many external direct and indirect factors.
Non-profit organizations have a direct impact on human capital and can raise self-efficiency through their indirect impact on economic growth. Therefore NPOs are an important factor to enhance entrepreneurial activities and widen the network of relationships for entrepreneurs in order to manage and use natural resources in new ways and methods driven by innovation and high productivity levels.
In recent years, the communications and information technology (ICT) sector has emerged as the leading driver of entrepreneurs and the dynamic engine of small and medium-sized enterprises (SMEs), distinguished by the proactive spirit and the rapid growth. The sector was the primary supporter that helped NPOs relationships, networks and initiatives to remain stronger in the face of the pandemic economic crises that hit the world last year.
HRH Crown Prince Mohammad bin Salman, the Founder and Chairman of Misk Foundation, announced the establishment of Mohammad bin Salman Nonprofit City, the world’s first non-profit project of its kind. The project will serve as an incubator for youth and volunteer foundations, as well as an inspiration to the rest of the world to develop the international non-profit sector. It will also share with global non-profits organizations a new concept that promotes economic growth and human benefits aiming to maximize utility rather than maximizing profit.
In this vital ecosystem, we will see a new era of modern economies driven by innovation, knowledge management, and entrepreneurship, as well as the enablement of future leaders by advancing training for young people and girls and embracing digital academies, science museums, and creative centers. These will bring together innovators of emerging technical sciences, capital venture investors, and enthusiasts of community work from all over the globe to the Kingdom to be part of the future and be in a country that invests in human capital.