Nonmarket forces

In economics, nonmarket forces are those acting on economic factors from outside the market system. They include organizing and correcting factors that provide order to market and other societal institutions and organizations – economic, political, social and cultural – so that they may function efficiently and effectively as well as repair their failures.

Nonmarket (or non-market) forces are increasingly discussed in the literature of business, management, organization, strategy, social-issues, political-science and sociology.

The term has been employed since at least the late 1940s. A.O. Hirschman defined “exit and voice as market and nonmarket forces, that is, economic and political mechanisms” in 1970, quoting a 1963 article by Kenneth Arrow which referred to “nonmarket social institutions.”

In the business, management, economic and political-science literatures, nonmarket is typically associated with government, compared to other non-economic institutions, as in economist Baron’s (1995: 47) often quoted definition in the strategic-management field:

The nonmarket environment includes the social, political, and legal arrangements that structure interactions outside of, but in conjunction with, markets and private agreements. The nonmarket environment encompasses those interactions between the firm and individuals, interest groups, government entities, and the public that are intermediated not by markets but by public and private institutions. Public institutions differ from markets because of characteristics such as majority rule, due process, broad enfranchisement, collective action, and publicness. Activities in the nonmarket environment may be voluntary, as when the firm cooperates with government officials, or involuntary, such as when government regulates an activity or an activist group organizes a boycott of a firm’s product.

However, other researchers have related nonmarket to the equally important societal institutions of civil society (also called community) and culture as well as to command economies, traditional exchange and non-profit organizations.

Besides its reference to markets and firms in a capitalist economic system, nonmarket has also been applied to:

Nonmarket as well as its antecedents “non-economic” and “social” reflects the long search for a term that would encompass what is “not market” after the economic market institution had become the dominant exchange mechanism in modern capitalist economies. “Market” itself is a complex concept which Boyer (1997: 62-66) variously categorized as:

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