Organizational Mission and Revenue Diversification among Non-profit Sports Clubs

Pamela Wicker,Christoph Breuer,Svenja Feiler

doi:10.3390/ijfs1040119

Pamela Wicker, Christoph Breuer + Show 1 more

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https://doi.org/10.3390/ijfs1040119

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Abstract

The beneficial effects of diversified income portfolios are well documented in previous research on non-profit organizations. This study examines how different types of organizational missions affect the level of revenue diversification of organizations in one industry, a question that was neglected in previous research. Based on contingency theory, it is assumed that different missions are associated with different funding sources. Since missions can be complementary or conflicting, specific attention needs to be paid to the combination of missions. The sport sector is chosen as an empirical setting because non-profit sports clubs can have various missions while their overall purpose is promoting sport. Panel data from a nationwide survey of non-profit sports clubs in Germany are used for the analysis. The regression results show that revenue diversification is significantly determined by organizational mission. Historically, typical mission statements like promoting elite sport, tradition, conviviality, non-sport programs, and youth sport have a positive effect on revenue diversification, while clubs with a commercial orientation and a focus on leisure and health sport have more concentrated revenues. The findings have implications for club management in the sense that some missions are associated with higher financial risk and that the combination of missions should be chosen carefully.

Highlights

The concept of revenue diversification and financial portfolio theory have received increased academic attention in the non-profit sector during the last two decades with Chabotar [1], Chang and Tuckman [2], and Kingma [3] making significant contributions amongst others
The purpose of this study is to examine the relationship between different organizational missions and the level of revenue diversification of non-profit organizations within one industry
This value is similar to previous research on sports clubs where revenue concentration based on the Herfindahl Index was .518 leading to a diversification value of .482 [22]

Summary

Introduction

The concept of revenue diversification and financial portfolio theory have received increased academic attention in the non-profit sector during the last two decades with Chabotar [1], Chang and Tuckman [2], and Kingma [3] making significant contributions amongst others. The main idea of this theory is that organizations try to diversify their income portfolios to be less susceptible to financial crisis [1] and to increase their financial viability [2]. Previous research has mainly supported the beneficial effects of revenue diversification on the financial situation of non-profit organizations (e.g., [4]), a few studies refuted those benefits [5,6]. Chang and Tuckman [2] were the first to show that the level of revenue diversification (or concentration in their study) varies depending on the activity of the organization, a finding that was further supported by Kearns [13]

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