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

Article


Omura, Teruyo and Forster, John. 2014. "Competition for donations and the sustainability of not-for-profit organisations." Humanomics. 30 (3), pp. 255-274. https://doi.org/10.1108/H-12-2012-0026
Article Title

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

ERA Journal ID41851
Article CategoryArticle
AuthorsOmura, Teruyo (Author) and Forster, John (Author)
Journal TitleHumanomics
Journal Citation30 (3), pp. 255-274
Number of Pages20
Year2014
Place of PublicationUnited Kingdom
ISSN0828-8666
Digital Object Identifier (DOI)https://doi.org/10.1108/H-12-2012-0026
Web Address (URL)https://www.emerald.com/insight/content/doi/10.1108/H-12-2012-0026/full/html
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.

Keywordsnot-for-profit; NGOs; oligopoly (Cournot) theory; organisational sustainability; social support; provision; replacing government; volunteers
ANZSRC Field of Research 2020380119. Welfare economics
380304. Microeconomic theory
350107. Sustainability accounting and reporting
Public Notes

File reproduced in accordance with the copyright policy of the publisher/author.

Byline AffiliationsSchool of Commerce
Griffith University
Institution of OriginUniversity of Southern Queensland
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