Nonprofit Subsector Research Articles

How High Is Too High? An Experimental Analysis of Donors’ Aversion to Nonprofit Overhead

Despite the abundance of literature related to nonprofit overhead, the following questions remain unclear: (a) How high is too high for individual donors when considering an organization’s overhead? (b) Is there a difference between nonprofit subsectors in individual donors’ aversion to nonprofit overhead? Moreover, (c) Does trust play a role in individual donors’ overhead aversion? This study used a survey experiment and randomly assigned participants to one of four overhead ratio conditions (5%, 20%, 35%, and 50%). We find that individuals’ donations to human service nonprofits substantially decrease when the overhead reaches 35%. In contrast, their donations to health care nonprofits do not decrease until the ratio reaches 50%. In addition, we find that donors lose trust in nonprofits when overhead costs are higher, leading to decreased donations. The findings contribute to the theoretical understanding of donors’ giving behavior, offering practical implications for promoting sustainable giving.

Creating and Validating a Capacity Measure for Nonprofit Organizations

Currently, there is no standardized, validated measure of nonprofit capacity that makes cross-organizational comparisons and research studies almost impossible. In addition, these shortcomings impede suggestions for nonprofit practitioners and educators, hindering the development of professional and educational curricula. This paper presents a new measure of nonprofit capacity based on the utilization of exploratory and confirmatory factor analysis. With a national sample of U.S.-based nonprofit organizations (N=1,216), the six factor model explained 69.6% of total variance in nonprofit capacity. Those six factors and respective variance are: (1) board 14.8%, (2) the influence of the external environment 13.4%, (3) program development 11.9%, (4) mission centrality 11.4%, (5) management capacities 9.8%, and (6) funding 8.6%. A standardized measure, such as the one created here, allows research across nonprofit subsectors and for cross-organizational research in a more systematic way. Without cross-organization comparisons, we cannot know if we are truly teaching best practices.

Nonprofit Supply and Citizen Demand: A Spatial Analysis of the Market for Third Sector Services

Much prior research explores the relationship between nonprofit location and various community and market characteristics to determine whether citizen demand drives nonprofit supply. As a widely used “policy tool” of government, nonprofits are expected to be responsive to the needs of the communities they serve. However, results are mixed and it remains unclear whether nonprofit markets are ideally distributed. This article builds on previous scholarship by: first, improving the market characteristics under examination; second, introducing multidimensional constructs for modeling community need; third, applying methodologies that account for spatial dependencies; and fourth, replicating the sector-wide analysis in two nonprofit subsectors. Results indicate consistency across subsector and suggest greater nonprofit supply in areas with less even markets and greater population. Contrary to popular conception, findings indicate evidence of less nonprofit supply in areas with greater demand and some potential “crowding-in” where nonprofit supply rises coincident with for-profit supply.

Fiscal shocks and non-profit employment

ABSTRACT This paper uses novel data from the Quarterly Census of Employment and Wages (QCEW) to identify the impact of countercyclical fiscal policy on non-profit wages, employment, and entry in the non-profit sector. The paper extends an existing empirical literature that uses the ‘Great Recession’ (2007–2009) as a shock to identify the responsiveness of non-profit labour markets to aggressive fiscal policy. The paper adopts an identification strategy which exploits variation in the Federal Medical Assistance Percentage (FMAP) reimbursement rates across states in the context of the American Recovery and Reinvestment Act (ARRA) of 2009. An instrument is applied in the place of ARRA expenditures to avoid estimation bias. I find that non-profit employment and wages are less responsive to fiscal stimulus, relative to previous point estimates for all United States firms. Point estimates indicate estimated cost of $104,000 per non-profit job saved. However, there is wide variation across non-profit sub-sectors.

Surviving the Black Swan Event: How Much Reserves Should Nonprofit Organizations Hold?

Organizational survival is a primary current focus, as the unforeseen economic effects of the pandemic ravage the civil sector. Over time, however, we turn to questions of resilience: How can organizations prepare for rare, but devastating, financial shocks? Three months of funds to cover operating expenses are often described as a suitable savings target. However, organizations differ greatly in their revenue volatility, which suggests that “3 months” may severely underestimate the reserves that certain organizations should hold. We measure revenue volatility and calculate reserve fund targets for 25 nonprofit subsectors, showing sharp differences in optimal savings levels ranging up to 1 year of total expenses. We also explore organizational characteristics associated with revenue volatility. We argue for a resilience strategy that goes beyond optimizing the contents of the revenue portfolio. Funders and nonprofit practitioners should consider the broader context of financial resilience that includes correctly sized reserves as a stabilizing force.

Organizational capacity and entrepreneurial behavior

AbstractIn this research note, we examine the relationship between organizational capacity and entrepreneurial behavior in a global sample of 165 nonprofit organizations operating in a single, rapidly growing field of nonprofit activity. Our findings show a strong relationship between organizations' entrepreneurial behavior and levels of organizational capacity. We discuss our results relative to the importance of both organizational capacity and entrepreneurial behavior in a rapidly growing nonprofit subsector. The results contribute to the continued development and refinement of theoretical and empirical work on the causal links between organizational capacity and entrepreneurial behavior more generally.

Understanding Structuring and Variation in a Nonprofit Subfield: Examining Institutional and Regional Pressures in U.S. Historic Preservation Nonprofits

Public administration and management recognizes key subsectors in the public sphere as nested within and shaped by institutional fields. However, we know little about the forces that influence their development at different levels or how patterns in institutional fields and in forces shaping these fields vary by level and location. We therefore understand little about potential levels for shaping nonprofit advocacy, decision-making, and organizational capacity in nonhomogenous subsectors. This mixed methods study examines nested pressures shaping a U.S. nonprofit subsector, focusing on two ecological levels of influence in historic preservation nonprofits. I use data from 96 interviews with National Trust Partner organizations in 44 states to develop typologies of professional approaches to preservation and capacity. Findings indicate that both national and regional pressures shape scope and capacity in these nonprofits, underscoring the importance of considering institutional contexts structuring subsectors rather than assuming sector-wide patterns and behaviors. This study provides a baseline for future research on developments in the U.S. nonprofit historic preservation subsector and provides insight for practitioners and legislators into the levels that shape scope and capacity in nonprofit subsectors.

Are We All on the Same Page? Using Data and Dialogue to Understand Nonprofit Capacity Building

Although scholarly measurement of nonprofit capacities has been a key element in the search for effective and sustainable capacity building efforts, practitioners recognize and struggle with definitions and perceptions that remain ambiguous. To date, few studies have embraced these important conceptual tensions, especially from the perspectives of multiple stakeholders in an effort to integrate and triangulate findings in a more applied context. Our study provides a lens on why both research and practice may be applying highly contextual definitions that our data show as not being broadly generalizable across nonprofit subsectors and important stakeholder groups. Our analyses demonstrate that capacity building may not be one-size- fits-all, with no easy, transferable pattern stemming from a survey-driven assessment of nonprofit capacities. Our qualitative analyses of focus groups and a day- long dialog of stakeholders including foundation funders, business funders, government funders, individual donors, nonprofits, and nonprofit capacity building consultants illuminate that there is a meaningful need for a deeper understanding of multiple perspectives of both capacity and capacity building across stakeholder groups.

Foundations in Spain: An International Comparison of a Dynamic Nonprofit Subsector

The goal of this article is threefold. First, it aims at understanding the dynamic positions of foundations (institutional proximities and purposes, approaches and roles) relative to church, state, market, and civil society. The institutional factors behind the transformation of the small and heterogeneous set of foundations existing in the country in the late 1980s, under scattered and restrictive regimes, into a relatively sizeable and influential sector of formally homogeneous nonprofits are explored. Second, it approaches the conceptualization of foundations in Spain and describes the recent evolution and current configuration of the sector with 2009 (year of the first foundation census) and 2014 (latest estimate available) as reference dates—illustrating them in comparative perspective. Third, its goal is to shed light on their advantages and disadvantages for relevant stakeholders in the context of evolving institutional proximities, foundation models, and prevailing typologies. In order to structure the discussion, the purposes, approaches, roles, benefits, and drawbacks of Spanish foundations will be compared with the German and U.S. anchors as depicted by Anheier and Hammack in this issue.

The Democratizing Role of the Public Support Test in the Determination of Nonprofits’ Public Charity Status

The “public support test” is a set of provisions in the Internal Revenue Code determinative of public charity status for 85% of public charities (excluding houses of worship), requiring that at least one third of these nonprofits’ revenue come from the public broadly, government sources, or nonprofit funding intermediaries. Despite its importance in defining much of the nonprofit sector’s boundaries, no previous research describes the extent and sources of charities’ public support or how these vary by nonprofit subsector, size, and age. This article fills this knowledge gap based on analysis of 501(c)(3) public charities’ Form 990 and Form 990EZ data, finding most publicly supported charities greatly exceed the minimum public support requirements, but with wider variation in directness and breadth than “public support” might connote.

Charitable Giving as a Luxury Good and the Philanthropic Sphere of Influence

Using regression analysis, 41 years of charitable giving and income data was evaluated to determine if charitable giving is a luxury, normal, or inferior good, and to determine the income elasticity for separate nonprofit sectors. Total Giving to the nonprofit subsector as well as most nonprofit sectors (Religion, Education, Human Services, and Environment) is a normal good, while Arts and International giving are likely luxury goods. However, evidence suggests that Health and Public Benefit are likely inferior goods. This research makes three contributions. First, it offers quantitative data as evidence in the supply-side and demand-side debates. Second, owing to income elasticities, researchers propose the Philanthropic Sphere of Influence and postulate that as incomes rise, donors are more likely to give to causes from which they are less likely to personally benefit. Third, by evaluating charitable giving as a whole and then by each subsector, the research demonstrates that each nonprofit subsector responds uniquely to changes in income. Therefore, nonprofit sectors should be evaluated separately.

The Philanthropic Consequence of Government Grants to Nonprofit Organizations

Do government grants displace or leverage private donations to nonprofit organizations? Although research on this topic is flourishing, the findings remain extremely contradictory, creating difficulty in developing a cumulative knowledge available to scholars and practitioners. This study employs a meta‐analysis to systematically synthesize the competing findings from the existing literature. Using a sample of sixty original studies with 637 effect sizes, this study finds government grants have almost no correlation with private donations. In addition, this study demonstrates, through meta‐regression, that nonprofit subsector variation, organizational age as a control, longitudinal data structure, and endogeneity correction help explain the effect size heterogeneity within and across original studies. Nonprofits should be more concerned about the capacity of competing for different funding sources rather than the tradeoff among them.

Measuring Concentration and Competition in the U.S. Nonprofit Sector: Implications for Research and Public Policy

AbstractIn an era of dramatic financial challenges, pressure is growing for U.S. nonprofit organizations to consolidate. Yet, we know little about the current concentration of the sector and even less about the degree of competition in various nonprofit subsectors. In this paper we offer a detailed analysis of concentration patterns across the sector and analyze variations in these patterns by subsector and metropolitan areas. It is well known that measuring concentration is not identical to assessing effective competition and is but a starting point for a more thorough competitive analysis. An important distinction is made between the concentration of resources within larger subsector organizations and inequality in the distribution of resources across those organizations. Some subsectors may be concentrated yet behave competitively because resources are distributed relatively equally among several large organizations. By contrast, other concentrated subsectors may behave less competitively because resources are very unequally controlled by a few organizations. Understanding the patterns of both concentration and inequality in the nonprofit sector is likely a prerequisite to drawing defensible conclusions about the degrees of competition in the sector and the desirability of further consolidation. This analysis has implications for both public policy and philanthropy. It bears on the issues of whether antitrust policy should be forcefully applied to the nonprofit sector, whether government funding programs should encourage nonprofit consolidation or competition, and whether philanthropic institutions should implore nonprofit organizations to consolidate further or to compete more vigorously.

The End is Nigh: Limits to Growth of the Nonprofit Sector

The nonprofit sector has experienced exponential growth over the past three decades with nearly 50,000 new nonprofits created last year. Past examples of industry growth suggest that this rate of growth is not sustainable. Empirical population ecology studies of nascent industries show a period of rapid growth followed by market saturation, then consolidation of organizations and market share resulting in increased competition for small and new organizations. We use historical nonprofit data from the NCCS and apply ecological models to show that the nonprofit sector may be fast approaching growth limits. Market saturation varies by metropolitan area and nonprofit subsector.

Brazil: A For-Profit Giant

Brazil has become by far the largest higher education system in Latin America, with a large share of enrollments in the private sector. A recently established and fast growing for-profit sub-sector consolidates as one of the largest worldwide. It already surpasses the public sector in enrollment and its role is growing. Public policy has backed the for-profit growth, largely for tax revenue reasons but in recent years the federal government has taken social initiatives that include tax exemption policies for the sub-sector. As indicated by fields of study, the for-profit sub-sector shares some important characteristics with the nonprofit sub-sector, contrasting dramatically to the public sector.

Historical Milestones in the Emergence of Nonprofit Public Relations in the United States, 1900-1956

Public relations has gradually emerged as one element of American nonprofit management and pedagogy, albeit a second tier subject. This is an historical inquiry into the emergence of nonprofit public relations in the United States, both as a practitioner activity and a curricular subject. One of the earliest nonprofits to use public relations formally was Harvard in 1900. An early milestone was the spread of public relations from individual nonprofits to a nonprofit subsector, such as a paper at a national social service conference in 1909. Then public relations gradually spread to other subsectors, eventually evolving into somewhat of a generic sectorwide management activity. However, the failure to create a professional organization of nonprofit public relations practitioners in the late 1930s and the uncertain marketing of an arguably generic textbook in 1956 may have reflected the continuing uncertainty, if public relations was a common and similar activity throughout the U.S. nonprofit sector.

Public Confidence in Charitable Nonprofits

There has been much talk in recent years of a “crisis of confidence in charities” in the United States. This article presents a conceptual framework for analyzing the issue and reviews attitudinal and behavioral data relevant to public confidence in the nonprofit sector generally and major nonprofit subsectors. The article concludes that the “crisis of confidence” hypothesis is not supported by the evidence.

Income tax policy and charitable giving

AbstractMany studies over the past 20 years have looked at the response of charitable donations to tax incentives—the tax price elasticity of giving. Generally, authors have assumed this elasticity is constant across all types of giving. Using the 2001 Panel Study of Income Dynamics data on charitable giving, this paper estimates the tax price elasticity across six nonprofit subsectors, finding substantial variation. These results suggest that the fiscal effectiveness of tax deductibility depends on the type of donation involved. This has implications for both public policy and nonprofit management. © 2007 by the Association for Public Policy Analysis and Management

Market Orientation in the Nonprofit Sector: Taking Multiple Constituencies into Consideration

Although nonprofit organizations deal with multiple stakeholders, most nonprofit market orientation-organizational performance research to date has focused exclusively on client/customer market orientation in a single nonprofit subsector. This study investigates orientation towards client/customer and government funder markets in multiple nonprofit subsectors. Overall results, based on data collected from 453 nonprofit organizations in Canada and analyzed using structural equation modeling, confinn that nonprofit organizations hold multiple market orientations, that these orientations are independent constructs that vary substantially in strength across organizations, that orientations towards different markets impact different performance dimensions, and, finally, that different resource structures affect market orientation-performance relationships. Results also indicate that the implementation of the marketing concept provides different benefits in the nonprofit and for-profit sectors.

Child Care Center Quality Differences: The Role of Profit Status, Client Preferences, and Trust

This study uses the Cost, Quality, and Child Outcomes in Child Care Centers data set to investigate the view that in a mixed industry providing complex services to poorly informed customers, for-profit producers provide lower quality than nonprofit producers by skimping on quality characteristics that buyers cannot easily observe. Results indicateno significant difference between for-profit and nonprofit centers in overall quality or in their tendency to skimp, except in North Carolina with its less stringent licensing requirements. When for-profit and nonprofit sectors are subdivided by ownership, however, for-profit chains and nonprofit centers operated by churches or community agencies produce significantly lower hard-to-observe quality than other nonprofit subsectors. In North Carolina, all for-profits, especially chains, produce lower hard-to-observe quality, suggesting that for-profit firms take advantage of low state licensing standards. These results indicate the importance of subdividing for-profit and nonprofit sectors to gain insight into industry performance, to design effective public policy, and to address the underlying problems of information asymmetry in the industry.