Embedded Government Control and Nonprofit Revenue Growth

Abstract

This research combines insights from resource dependence and institutional theories to examine the growth of Chinese nonprofit revenues. The authors propose the concept of embedded government control ( EGC ) to capture the complexity of the government-nonprofit relationship along two dimensions: government regulation of nonprofits' public fund-raising qualifications and the political embeddedness of nonprofits with the government. Using a data set of 2,159 Chinese philanthropic foundations for the period 2005-12, the authors test hypotheses about the implications of EGC for nonprofit revenues in China following two major external shocks: the Wenchuan earthquake in 2008 and the Guo Meimei scandal in 2011. The empirical analysis shows that EGC can help philanthropic foundations obtain more government subsidies, donations, and market revenues. However, external shocks may either strengthen or weaken the enabling role of EGC in helping foundations acquire relatively more donations. Practitioner Points• The concept of embedded government control captures the complexity of the government-nonprofit relationship along two dimensions: government regulation of nonprofits' public fund-raising qualifications and the political embeddedness of nonprofits with the government. • Embedded government control can be witnessed in both Western and non-Western nations, but its political and regulatory implications may vary across nations. • Embedded government control may help nonprofits maintain a relatively good position in generating revenues. • External shocks, such as the occurrence of a natural disaster or nonprofit scandal, may strengthen or weaken the enabling role of embedded government control in helping nonprofits acquire relatively more donations. • Public policy makers and nonprofit leaders need to enhance nonprofit governance quality and transparency so that the nonprofit sector can gain public trust and drive sustainable growth.

Non‐profit organizations as a nexus between government and business: Evidence from Chinese charities

“…• Benefits: -market access (Frynas, Mellahi, & Pigman, 2006;Malik & Kotabe, 2009;Zhu & Chung, 2014) -influence on regulations (Gomez & Jomo, 1997;Zheng, Singh, & Chung, 2017) -legitimacy (Marquis & Qian, 2014) privileged access to resources e.g., access to credit (Haveman et al, 2017;Khwaja & Mian, 2005;Leuz & Oberholzer-Gee, 2006); government contract (Johnson & Mitton, 2003) -filling institutional void as intermediaries (Luo & Chung, 2005;Okhmatovskiy, 2010;Peng & Luo, 2000) • Costs/risks: -government intervention (Okhmatovskiy, 2010) -appropriation of firm wealth by blockholders (Sun et al, 2016) -closer monitoring by governments (Marquis & Qian, 2014) -hinders growth during political change (Siegel, 2007) -limits knowledge exchange with market actors (Li, Xia, & Zajac, 2018) • Benefits: -privileged access to resources (Johnson & Ni, 2015;Ni & Zhan, 2017;Zhan & Tang, 2016) -policy advocacy and broadened service scope (Zhan & Tang, 2016) • Costs/risks: -legitimacy concerns (Tortajada, 2016) -independence concerns (Brinkerhoff, 1999) a Cross-country studies (e.g., Faccio, 2006) are not included in this table. propose that ties with the government can help charities to raise funds from business. They do so by conferring political legitimacy to corporations that donate to approved causes.…”

“…The fall in foreign donations from 2011 to 2012 was a result of the Guo Meimei scandal (Ni & Zhan, ).…”

Turning Challenges into Opportunities: Advancing Studies of Nonprofit Organizations in China

“…Questions like how a nonprofit's mission influences employees' and volunteers' behavior, how to improve the performance and accountability of Chinese NPOs, and how to maintain the financial health of Chinese NPOs have not received sufficient scholarly attention. Only recently, scholars started researching the managerial issues facing NPOs in China, such as financial management (Ni & Zhan, 2017) and allocation of organizational resources (Wei, 2017). A large gap still remains between demand for nonprofit management studies based on organizations' practical managerial needs in China and supply of such research.…”

“…An early empirical study on Chinese NPOs was a descriptive analysis from survey data (Deng, 2001). Zhu (2012) used primary data and regression models to study Chinese think tanks; Ni and Zhan (2017) and Wei (2017) utilized secondary datasets and regressions to assess the impact of governmental control on the performance of Chinese charitable foundations. Mixed methods are rarely seen in Chinese NPO research (yet, see Li, Tang, & Lo, 2017).…”

Organizational Response to Changing Demands: Predicting Behavior in Donor Networks

“…In general, RDT suggests that organizations are resource insufficient and respond positively to demands by external stakeholders on which they are highly dependent for needed resources (Oliver 1991;Pfeffer 1982 ;Pfeffer and Salancik 1978 ). This theory is popular for understanding the funding, performance, and management of nonprofit organizations (NPOs) (see, e.g., AbouAssi 2015a ; Barman 2008 ;Dunn 2008 ;Guo and Acar 2005 ;Kim, Pandey, and Pandey 2017 ;Mosley 2011 ;Ni and Zhan 2017 ;Stone, Hager, and Griffin 2001 ;Thomson 2010 ). RDT's popularity is not surprising given that nonprofit organizations often rely on external funders, face instability in the flow of funding, and deal with volatile demands (Ebrahim 2005 ).…”