Competition for donations and the sustainability of not-for-profit organisations

Omura, Teruyo and Forster, John (2014) Competition for donations and the sustainability of not-for-profit organisations. Humanomics, 30 (3). pp. 255-274. ISSN 0828-8666

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Abstract

Purpose - The financial sustainability of NPOs is problematic, both individually and in economy-wide terms, as they do not produce commercial saleable outputs. Instead they raise funds by either relying on government grants or competing for private donations. Sustainability of NPOs becomes an even greater issue when governments reduce their grant giving in times of stress - precisely the time when calls on NPOs' resources increase. Consequently the present purpose is to understand the nature of competition for private donations that occurs between Not-for-Profit Organisations (NPOs). This competition occurs because NPOs do not produce commercially viable outputs and therefore rely on donations.

Design/methodology/approach - The research asks the question, do donation raising expenditures by NPOs increase donations or do they damagingly divert donations from other NPOs? Using Australian data, competition between NPOs for donations is analysed using a modified oligopoly market model. NPO fundraising expenditures are central to this model, but other factors, including unpaid-volunteers, organisational size and age are also explanatory variables in determining success in fund raising. NPOs concerned with human welfare, other than specialised aged care, are the primary focus of this paper, although other NPOs such as those concerned with animal welfare, science and the arts are also modelled.

Findings - Crucially a NPO's fundraising expenditure has a direct and positive impact on its level of donations. A major influence on level of donations is the presence of volunteers within an NPO. There seems to be an interesting reciprocal relationship between the effect of size and age of organisations on their donations and the effect on fundraising. Critically for sustainability, NPOs competing for funds are established as having a negative effect on the level of donations to other NPOs with similar functions.


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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: © 2014 Emerald Group Publishing Limited. Published version deposited in accordance with the copyright policy of the publisher.
Faculty / Department / School: Current - Faculty of Business, Education, Law and Arts - School of Commerce
Date Deposited: 26 Sep 2014 06:17
Last Modified: 01 Jul 2016 04:00
Uncontrolled Keywords: not-for-profit; NGOs; oligopoly (Cournot) theory; organisational sustainability; social support; provision; replacing government; volunteers
Fields of Research : 14 Economics > 1402 Applied Economics > 140219 Welfare Economics
14 Economics > 1401 Economic Theory > 140104 Microeconomic Theory
15 Commerce, Management, Tourism and Services > 1501 Accounting, Auditing and Accountability > 150106 Sustainability Accounting and Reporting
Socio-Economic Objective: E Expanding Knowledge > 97 Expanding Knowledge > 970115 Expanding Knowledge in Commerce, Management, Tourism and Services
Identification Number or DOI: 10.1108/H-12-2012-0026
URI: http://eprints.usq.edu.au/id/eprint/24139

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