Academic journal article Academy of Strategic Management Journal

Strategic Responses of Non-Profit Organizations to the Economic Crisis: Examining through the Lenses of Resource Dependency and Resourced-Based View Theories

Academic journal article Academy of Strategic Management Journal

Strategic Responses of Non-Profit Organizations to the Economic Crisis: Examining through the Lenses of Resource Dependency and Resourced-Based View Theories

Article excerpt


Nonprofit Sector in the US

Nonprofit organizations include charitable, educational and religious organizations and have been around for thousands of years (Hall, 2010). They range vastly in terms of size, resources, influence and purpose but each has at its core some defined purpose to make a difference. In the United States, this general category of nonprofit organizations have emerged over time to fill gaps in services provided by government or business, to address problems others have not or cannot tackle or to solve the most complex and daunting of the world's challenges (Worth, 2012).

In the United States, at the time of this research, there are more than 1.41 million nonprofits recognized by the federal government as meeting the 501(c)(3) legal requirements for federal tax exemption (McKeever, 2015). However, there are more nonprofit organizations created to meet a public purpose than those that file for federal tax exemption in the U.S. For example, religious organizations with less than $50,000 in yearly revenue are exempt from registering with the federal government. Furthermore, the economic impact of this sector is significant, employing more than 9% of all workers in the U.S. and contributing more than 5% of the Gross Domestic Product (National Center for charitable Statistics, 2015). The largest nonprofits includes health and education systems such as public hospitals and universities.

Historically, nonprofits were funded by private donors and were seen as a creative vehicle for wealthy individuals to meet an obligation or duty to take care of others. Nonprofits flourished during the Industrial Revolution as some individuals' incomes burgeoned. The Industrial Revolution also generated a lot of social need due to poor worker conditions, child labor issues, and long hours. Following the Great Depression and the federal government's action to provide direct services, nonprofits often partnered with the government directly to receive federal grants to deliver services. This dependence on private support and the government were the mainstays of funding for nonprofits for many decades (Hall, 2010; Worth, 2012).

A change in government funding philosophy delivered a jolt to the nonprofit sector in the 1980s. Under the leadership of President Reagan, the federal government reduced and privatized funding for many social programs. Many nonprofits were heavily dependent on government funding to support their work (Hall, 2010). Nonprofits that were receiving government grants to deliver services could no longer count on that steady stream of income. The privatization of social programs often meant that less service were funded or provided which increased the request for services that nonprofits offered. The nonprofit sector had to adjust to compete for privatized government grants in this new landscape as well as develop new ways to rise funding (Hall, 2010).

Other changes involved a heightened demand for accountability and transparency. For many years, most nonprofits were evaluated for their mission and the good that they set out to do, rather than by their measurable impact. In the 1990s, there was a shift related to the funding source for nonprofits. The technology boom made some people wealthy, and a new donor emerged that was younger, outcome focused, and wanted to view their donation as an investment. They expected a return on that investment and required nonprofits to demonstrate their success and impact. At the same time, there were some scandals in the nonprofit sector that led to a call for accountability. The nonprofit sector was pushed, and often mandated, to adopt business operating procedures to provide evidence of results and accountability to deep pocket donors and the general public (Hall, 2010; Worth, 2012).

Most recently, there has been a growth in social innovation by for-profit companies addressing traditional "nonprofit" challenges in innovative, sustainable ways anchored around a for-profit or hybrid model. …

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