Web of Ties: The Effect of Relationship Ties on Government Funding for Nonprofit Organizations

Chapter 1 raises the research question guiding this study. Do relationships that board members of nonprofits have to officials in other agencies affect the likelihood of acquiring grants? The objective of this study was to examine the role that relationship ties played in the nonprofit sector’s ability to receive grants. Chapter 2 ties the research agenda to existing research. Nonprofit organizational and financial behavior was explained in terms of resource dependence. Since nonprofit organizations face uncertainty in resource allocation, the behavior of the organization and the board members change in reaction to uncertainty. The relationships that board members possess serve as social capital for the nonprofit through a series of formal and informal ties. Chapter 3 provides a theoretical framework for measuring relationship ties as well as other variables to funding. Ties that were measured included previous work experience in government agencies, nonprofit agencies, for-profit organizations, and universities. Relationships ties also included previous appointment to a nonprofit board and membership in professional associations. Additional variables such as financial and organizational measures were considered that had an effect on funding likelihood. Expected funding then became a function of all of these variables. This framework led to the hypothesis that nonprofits with a greater number of relationship ties, controlling for appropriate variables, will receive more funds from a government agency. Chapter 4 describes the methods used. The sample of organizations included 176 nonprofit community healthcare organizations over the span of five fiscal years. Board member names, financial and organizational data, and relationship ties were collected as they were expected to affect funding outcomes. Information on relationships was obtained from three sources: LinkedIn profiles, Who’s Who profiles, and agency websites. Financial and organizational variables were obtained from nonprofit organizations’ 990 tax forms. Chapter 5 details the analyses and the results from the collected data. Conducted analyses included a series of multiple regressions, a probit regression, and fixed-effects and between-effects panel data regression models. The findings partially supported the hypothesis. While there were some relationship ties that were correlated to anticipated funding, the effects were small across analyses. Financial and organizational variables overshadowed the effects of relationship ties. There was evidence of mediation in that a number of variables were significant only if board members were in an organization receiving funds prior to the examined time period. Ties to other nonprofits mattered only when an agency already had funding. Chapter 6 concludes with possible explanations, policy implications, and further directions