The effect of organizational inefficiency on donations to U.S. nonprofit organizations and the sensitivity of results to different specifications of organizational size

Eleven studies examine the effect of the reciprocal of a certain well-publicized measure of nonprofit organizational (NPO) efficiency, "price of giving", on donations to U.S. NPOs in models of donations as a function of NPO characteristics. Some of these studies include a size control in their model, with some studies specifying size as total assets and others specifying size as total revenues. Another study, which tests an alternative measure of efficiency, specifies size as program expense. No study examines the sensitivity of results, from a given model, to these three different specifications of size. Furthermore, the latest data used in any of the prior studies is from 2001. We update the literature by testing the Marudas and Jacobs (2006) model using 2004-5 data on the Nonprofit Times 100 and specifying organizational size as total assets, as total revenues and as program expense. We compare the results from using these different specifications of organizational size. Surprisingly, results are extremely sensitive to specification of organizational size. The "price of giving" is significantly negative and large, -4.26, when total assets is used, but not significant when total revenues or program spending is used. Thus, choice of specification of organizational size is crucial. The model with the highest adjusted coefficient of determination is the one that includes total revenues, suggesting that results from this "best" model indicate that organizational efficiency has no significant effect on donations to the largest U.S. NPOs, a finding that is inconsistent with most prior studies.Godkänd; 2008; 20080310 (keni