When governments seek to help less-developed countries, they often do so by awarding aid grants to meet some local need—hygiene, sanitation, infrastructure, or other demands that the country’s own government cannot satisfy—and hiring either a for-profit company or a nonprofit to do the work on the ground.

A working paper by two professors at HEC Paris (École des hautes études commerciales de Paris) examines the differences in behavior between these two types of organizations as...

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