Mission-Based Objectives, Market-Based Funding: The Relationship between Nonprofit Enterprise and Service Delivery

Business: 3rd Place (The Ohio State University Edward F. Hayes Graduate Research Forum)This paper addresses the relationship between earned revenue activities and core service delivery in nonprofit organizations. Two key assumptions drive this study: (1) organizations are resource-dependent and (2) nonprofit organizations are mission-driven. Past studies have examined earned revenue as aggregate measures, i.e.: the sum of all market-driven income activities, or the sum of revenue from program/service related activities. Some of these studies argue earned revenue complements service delivery because organizations can use this financial resource to invest in the organizational technologies and acquire the resources needed to deliver their core services. Other studies have considered the potential negative effects because the pursuit of this type of income can crowd out income from other sources, in effect becoming a substitute for service activities. However, not all market-based activities may affect service volume and access in the same way. This study uses fixed effects regression to analyze data from 2115 arts and culture organizations over a period of four years in order to to assess the embeddedness (use of the same organizational technologies, targeting the same markets) of the market-driven activity relative to the core mission activity. Findings show that activities that are fully embedded are positively related to increases in service volume, but earned revenue activities that are not fully embedded – that is, that share some but not all organizational inputs or target markets – are negatively related to both service volume and service access. These findings may help nonprofit organizations considering the pursuit of earned revenue to determine the best strategy to complement service delivery.A three-year embargo was granted for this item