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Nonprofit Fund-Raising in Competitive Donor Markets
Abstract
Fund-raising expenditures represent an important strategic decision for nonprofit managers in the face of scarced on or resources. Privately, nonprofit managers weigh the trade-off between reaching new donors and increasing the implicit price of output to its constituents. Socially, competition among nonprofit firms for donations may produce an excessive level of fund-raising. This article empirically examines nonprofit fund-raising decisions, privately and socially, under varying market conditions. Analysis of financial data reveals that as markets become more competitive, nonprofits follow their private incentives by reducing their fund-raising expenditures. However, the author finds evidence that, collectively, nonprofits may spend an inefficiently high share of their revenues on fund-raising. As such, the author offers alternatives to the common practice of collective fund-raising through institutions such as the United Way. Implications of the study include increasing price transparency to improve market discipline or raising legal and financial barriers to entry
Journal
(2006)
vol35
no2
pages204-224
Categories
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Fundraising
