The Benefits of Collaboration between For-Profit Businesses and Nonprofit Arts- or Culture-Oriented Organizations

By Weinstein, Larry; Cook, John | SAM Advanced Management Journal, Summer 2011 | Go to article overview

The Benefits of Collaboration between For-Profit Businesses and Nonprofit Arts- or Culture-Oriented Organizations


Weinstein, Larry, Cook, John, SAM Advanced Management Journal


Given the increasing importance of human capital in our knowledge-based economy, the business community can gain useful skills, including creativity, while meeting social responsibilities through alliances with arts-oriented nonprofit organizations. At the same time, the potential tax-deductibility of donations may help the bottom line. The nonprofit partner in such an alliance may gain financial support, managerial advice, a source of volunteers, and operational skills, to list some possibilities. Alliances may fail if the partners are not a good fit, but several organizations can help establish mutually beneficial collaborations.

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Introduction

This paper describes how a business ("for-profit" for purpose of this paper) may benefit from collaborating with a nonprofit or culture-oriented organization. Three arguments support this proposition. First, businesses today face increasing expectations to provide evidence of corporate social responsibility to their customers and stakeholders. Collaboration with a culture-oriented nonprofit provides an effective vehicle by which a business can demonstrate its commitment to meeting those expectations. Second, the market value of an organization today often is based more on its intangible rather than its physical assets. An organization relies more upon the knowledge and intellectual capital of its employees rather than its physical machinery of production. Collaboration with a culture-oriented nonprofit provides a means by which a business can foster creativity, empathy, and originality in its employees (Daum, 2003). Third, a business may realize significant tax benefits by collaborating with this type of nonprofit. For example, in the United States the tax deductibility of contributions to nonprofits increases private donations by lowering donors' costs at the expense of foregone tax revenues. In effect, the government provides matching grants to subsidize donors' gifts at their individual or corporate marginal tax rates.

Nonprofit Arts- or Culture-Oriented Organizations

Although arts- or culture-oriented organizations (subsequently referred to only as nonprofits) are present in all segments of the economy, most are the nonprofit sector. Their scope includes art galleries and museums, educational institutions, performing venues, symphony orchestras, chamber music ensembles, as well as opera, theater, and dance companies. The National Center for Charitable Statistics reports that in 2007 approximately 1.4 million nonprofit organizations were registered with the Internal Revenue Service, of which 32,056 were classified as arts, culture, and humanities organizations (Nonprofit Almanac, 2007). Although the majority of these groups is small, with fewer than 10 employees and budgets of less than $500,000 (O'Neil, 2002), the nonprofit arts or culture industry in the United States generates $166.2 billion annually in economic activity--$63.1 billion in spending by organizations and an additional $103.1 billion in event-related spending by audiences. In 2005, this economic activity provided 5.7 million full-time equivalent jobs and $12.6 billion in federal tax revenues (Weinstein, 2009).

Demonstration of Corporate Social Responsibility

McWilliams and Siegel (2001) define corporate social responsibility as actions that appeal" to further some social good, beyond the interests of the firm and that which is required by law. The theoretical literature presents a wide range of perspectives ranging from social responsibility activity as indicative of self-serving behavior by management and a misuse of corporate resources (Friedman, 1970) to the conclusion that some level of such activity--determined through cost-benefit analysis--will maximize profits while satisfying the demand for such activity from multiple stakeholders (McWilliams and Siegel, 2001). To the extent that firms' decisions aim to achieve value maximizing objectives, the level of social responsibility expenditures should be consistent with those objectives (Barnea and Rubin, 2010). …

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