In contrast with for-profit companies, many “multiaudience” organizations, such as universities, hospitals, and nonprofits, receive revenues not just from customers but from third-party funders. This distinction is most stark in donative nonprofits that receive all of their funding from noncustomers and have long been perceived to underperform because of persistent underinvestment in organizational capabilities. In this paper, we explore how the need to manage funder perceptions influences how managers allocate resources to investment in organizational capabilities versus programmatic spending. We develop a model of capability dynamics based on fieldwork with six nonprofit organizations that incorporates the mechanism of reputation management. We argue that difficulties communicating the impact of nonprofits to donors often leads managers to instead focus on the amount of work being done, creating a bias toward programmatic spending. Analyzing our model, we show that a capability tipping threshold exists: for nonprofits with low capabilities, it is boundedly rational for managers to underinvest in organizational capabilities in order to manage donor perceptions even when this practice is known to limit performance. Our findings suggest that building high-performance nonprofits requires coordinated action between managers and donors to allow capability investments to accumulate. Counterintuitively, deliberately restraining programmatic expenditure (i.e., serving fewer recipients) while the organization builds its capabilities may be the best strategy for nonprofits to achieve sustained high performance and impact in the long run.

The movement of goods through a supply chain depends on both the physical flow of goods and on the economic decisions of each entity along the chain, including price discovery and inventory disposition decisions. This paper presents a methodological contribution to the system dynamics and supply chain research communities by developing a novel framework for supply chain models by combining three classic modeling methods: co‐flow differential equation structures, spot price discovery, and multinomial logistic choice modeling. The relative economic values of possible dispositions of goods, including outright disposal, are considered. For work‐in‐progress, development is considered in terms of the economic value that an additional unit of time will bring to the finished good, and the interplay of these considerations drive goods through, or out of, supply chains. Incorporating these mechanisms can produce materially different behavior modes and can be applied to multiple levels of aggregation within a production process. © 2022 The Author. System Dynamics Review published by John Wiley & Sons Ltd on behalf of System Dynamics Society.

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