Are Customers the Better Donators? Financing Dilemmas of Non-Profit-Organizations

Wednesday, 13 July 2016: 10:45
Location: Seminar 31 (Juridicum)
Oral Presentation
Sven KETTE, University of Lucerne, Switzerland
Since Non-Profit-Organizations (NPOs) cover their expenditures mainly by raising donations, they are strongly oriented towards donators. However, within the last 10-15 years the number of NPOs has been increasing significantly and, therefore, also the competition for donations (i.e. money) between NPOs. As an attempt to cope with this reinforced state of competition (at least some) NPOs try to exploit new ways of raising money—especially by engaging in own business activities or establishing collaborations with business firms (e.g. by providing consultancy services).

The paper focuses on the effects such an expansion of stakeholders has on NPOs. Drawing on statistical data concerning the German NPO sector as well as on the analysis of the case of World Wildlife Fund (WWF), it will be argued for three main outcomes: First a tendency towards professionalization within NPOs, second a tendency towards organizational narcissism, and third a financing dilemma. In sum, NPOs that attract a large number of donators (resp. a huge amount of donations) signal relevance and legitimacy to business firms, which makes them a favorable partner. On the other hand collaborations with business firms make NPOs suspicious in the eye of donators. Consequently, their success (large donation amount) becomes a precondition (in terms of establishing business models) as well as a threat (in terms of potentially decreasing the donation amount and, thus, relevance and legitimacy) to even more success.

By illustrating the (effects of the) inter-relationships between different stakeholders (i.e. donators and customers) and NPOs, this paper also directs attention to illegitimate forms of NPO financing, which - in conceptual respects - might make Neo-Institutionalism open to an analysis of the dark side of success.