Organizational Environment for Nonprofit Entrepreneurship Development

By Farid, Mamdouh | Academy of Entrepreneurship Journal, January 2005 | Go to article overview

Organizational Environment for Nonprofit Entrepreneurship Development


Farid, Mamdouh, Academy of Entrepreneurship Journal


ABSTRACT

The paper argues that entrepreneurship in an existing organization (intrapreneurship) is the outcome of the interlocking entrepreneurial activities of multiple participants, entrepreneurship is distributed throughout a structure, not mainly the strategic apex, and appropriate organizational settings are required to promote entrepreneurial behavior among organization members. The paper distinguishes among three types/roles of intrapreneurship in the nonprofit sector: social/human service, fund raising, and venture. A set of research questions is tested empirically to assess organizations' environment in fostering entrepreneurship. Survey result (219 nonprofit managers) shows that nonprofits are likely to develop organizational characteristic attributes of entrepreneurship and that certain organizational characteristics are associated with intrapreneurial behavior as measured by organization members' risk-propensity. Also, the result shows that aspects of organizational culture and management style (more controllable factors) seem to have more influence than the organizational structure and resource aspects (less controllable). Nonprofit managers are advised to establish organizational culture and context of receptive conditions for new ideas and the possibility of failure. This study fills a research gap of how nonprofit organizational characteristics foster entrepreneurship or retard it.

INTRODUCTION

There is a strong argument that entrepreneurship and innovation are essential characteristics of successful nonprofits (e.g., Brinckerhoff, 2000; Hisrich et al, 2000; Kanter, 1999). Nonprofit entrepreneurship is emerging as an innovative approach for dealing with a dynamic and competitive environment. The magnitude of environmental adversity (shrinking resources, competition) and social and economic changes create pressure on these organizations to adopt a model of nonprofit entrepreneurship as "a proactive style of management through which leaders of nonprofit organizations seek to implement change through new organizational and programmatic initiative" (Young, 2001, p. 218).

While the traditional role of nonprofit entrepreneur is about start-up activity and new nonprofit creation, not all entrepreneurial roles fit this mold (Shane & Venkataraman, 2000). Many individuals are attracted to the nonprofit mission of an existing organization and its working environment and to the idea of helping in building or revitalizing a failing organization. Frumkin (2002) asserts that the low rate of nonprofits closure is explained by entrepreneurial activities of individuals who join existing nonprofits. Low rate of nonprofits failure by its turn may contribute to the widely observed expansion of the sector.

The concepts of social entrepreneurship and social enterprise have been rapidly emerging as an integrating theme for entrepreneurship models or roles in achieving social mission (Renz, 2001; Johnson, 2000; Leadbeater, 1997). Social entrepreneurial activities blur the traditional boundaries between nonprofit and for-profit sectors and emphasize hybrid models for social and economic activities (Young, 2002). Broadly defined, "social entrepreneurship" refers to activities encouraging more entrepreneurial approaches in the nonprofit sector in order to increase organizational innovation and effectiveness (Thalhuber, 1998). According to this view, social entrepreneurship is a means by which nonprofits enhance the entrepreneurial abilities of their employees.

Several authors have argued that entrepreneurship in an existing organization is the outcome of the interlocking entrepreneurial activities of multiple participants, and that hospitable organizational settings and environmental opportunities are required for entrepreneurial behavior (e.g., Shane & Venkataraman, 2000; Sykes & Block, 1989).

Thompson et al (2000) note that the process of nonprofit entrepreneurship often happen when entrepreneurial people are linked with the visionary idea, appropriate autonomous organizational setting, and opportunity to act. …

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