Nonprofit Sector Growth and Density: Testing Theories of Government Support

Abstract

Theories of nonprofit density have assumed a variety of dispositions toward the state, including opposition, suspicion, indifference, and mutual dependence. In this article, we conduct the first large-scale simultaneous empirical test of the two most prominent nonprofit theories: government failure theory and interdependence theory. The former characterizes nonprofit activities as substitute or oppositional to state programs, accounting for the limitations and failures of government-provided services and more reflective of the heterogeneity of demand for services. The latter emphasizes the more complementary and collaborative nature of nonprofit activities, focusing on the overlapping agendas of nonprofits and the state and the mutual dependency that arises from partnership. The theories are difficult to test empirically because both predict the same relationship between state capacity and the size of the nonprofit sector, albeit for theoretically distinct reasons. A true joint test requires the separation of government support from private support for nonprofits. Using a newly constructed panel dataset in which we separate out nonprofit revenue sources normally agglomerated in the Internal Revenue Service 990 data, we examine the empirical merits of both theories to answer the question of whether human service nonprofit organizations thrive when government fails or when government collaborates. Our findings suggest that government funding has a more favorable effect on nonprofit density than private donations. The findings raise several policy and management implications that need evaluation.

Intersecting Sectors? The Connection Between Nonprofit Charities and Government Spending

“…Such behavior is similar to that articulated by Mosley (2012), in which social service providers advocate with government funders to ensure direct public financing for charities continues over time. In fact, several studies have found that government funding of charitable nonprofits leads to greater geographical concentration and/or survival of such organizations (Hager, Galaskiewicz, & Larson, 2004;Lecy & Van Slyke, 2013;Luksetich, 2008;Matsunaga &Yamauchi, 2004;Twombly, 2003).…”

Understanding Government Purchasing Public Services in China: Case Study of Guangdong and Yunnan

“…Governments benefits from stable relationships with nonprofits because risk is managed, goods are produced, services delivered, and the costs of rebidding contracts or awarding grants to new and potentially unknown recipients are lowered (2016) [21]. Therefore the social organization as the accepting side is the important parts in the process of government purchasing public services.…”

Increasing the Size of the Pie: The Impact of Crowding on Nonprofit Sector Resources

“…Harrison and Thornton (2014) point out that, due to the rate of nonprofit proliferation, the nonprofit sector is increasingly dense; there are more nonprofits per capita today than in the past. We know that proliferation is in part caused by free market entry (RoseAckerman 1982), increased government funding (Lecy and Van Slyke 2013), and the high survival rates of nonprofits (Harrison and Laincz 2008).…”