A compartive understanding of the commercialisation of the third sector, simon teasdale & domenico moro, sra seminar april 2013

A compartive understanding of the commercialisation of the third sector, simon teasdale & domenico moro, sra seminar april 2013

• 1.
  A comparative understandingof the commercialisation of the third sector Simon Teasdale and Domenico Moro 11 April 2013
• 2.
  Perceived wisdom? • “Fundingavailable to nonprofits in the United States has fallen at a time when the range of services they provide has expanded to include those previously delivered by government (Samu & Wymer, 2001). One consequence is that nonprofit organizations are being pushed into adopting a social enterprise model of trading for a social purpose (Zietlow, 2001).” (Teasdale, 2010: 90)
• 3.
  0 10 20 30 40 50 60 70 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Year PercentageofTotalRevenue Commercial Revenue Private Contributions Government Grants U.S. Nonprofit Revenue1982-2002 by Percentage of Total (Kerlin and Pollak, 2010) (excluding hospitals and higher education institutions)
• 4.
  England and Wales,all general charities, commercial and total income since 2000/01 (£ billions) (derived from NCVO, 2010) 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 Earned Total
• 5.
  Research question 1 •Consistent with resource dependence theory, at the level of individual charities, is commercial revenue a substitute (replacement) for grants and donations?
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  Research Question 2 •RQ2: How does a change in Commercial Revenue effect Grants and Donations? • Legitimacy, two perspectives: – Crowd out (substitutes) – Crowd in (complementary)
• 7.
  Data England / WalesUnited States 80,589 charities 335,936 nonprofits Data derived from annual returns to the Charity Commission for England and Wales between 2002-2008 Digitized financial data derived from IRS Forms 990 filed by 501(c)(3) public charities between 1995 and 2008 Does not include most smaller charities (Income < £100k); religious organizations Does not include exempt religious organizations and those with less than $25,000 in annual revenue. As outliers, Universities, Hospitals and Private Schools were removed As outliers, Hospitals and Universities were removed Commercial revenue= activities in furtherance of the charity’s objects+ activities for generating funds; trading subsidiaries (gross) + unspecified sales and fees from operating activities Commercial revenue = program revenue + membership dues + special events (gross rev) + sales of inventory (gross profit)
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  Econometric strategy (England/ Wales)
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  Econometric strategy (US) ln(CRi,t)=δ1,t+ α1 ln(CRi,t-1) + 1 ln(DRi,t) + 2 ln(DRi,t-1) + 1 NTEE+ρ1 T+ 1i + 1i,t (Eq1) ln(DRi,t)=δ2,t + γ1 ln(DRi,t-1) + τ1 ln(CRi,t) ) + τ 2 ln(CRi,t-1) + 2 NTEE+ρ2 T+ 2i + 2i,t (Eq2)
• 10.
  Notes: *= significantat 5%;**=significant at 1%. Commercial revenue as dependent variable (England/ Wales) (1) OLS (2) Fixed effects (3) Random effects (4) GMM-SYS Ln (isi,t-1) 0.84 [0.002]** 0.08 [0.043]** 0.70 [0.002]** 0.44 [0.021]** Ln (ivi,t) 0.018 [0.002]** -0.18 [0.036]** -0.01 [0.024] -0.31 [0.161]* Constant 1.75 [0.285]** 11.62 [0.061]** 3.30 [0.03]** 9.34 [1.748]** S Yes No Yes No T Yes Yes Yes Yes N Obs 77,624 77,624 77,624 77,624 R-sq 0.73 0.01 0.737 Within between 0.02 0.07 0.013 0.737 Hansen 6.22 p value 0.044 AR(1) -19.76 p value 0.000 AR(2) 2.03 p value 0.042
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  Notes: *= significantat 5%;**=significant at 1%. ICNPO Field Persistence effect Substitution effect (-) Social services 0.39* -0.69* Law, advocacy and politics 0.30* -0.56* International 0.59* +0.86* Overall model 0.44** -0.31* Some statistically significant variations by field of activity (England / Wales)
• 12.
  United States: CRas dependent variable ln(CRi,t)=δ1,t + α1 ln(CRi,t-1) + 1 ln(DRi,t) + 2 ln(DRi,t-1) + 1 NTEE+ρ1 T+ 1i + 1i,t Notes: *= significant at 5%;**=significant at 1%. GMM SYS (Column 4) is derived from a random sample of 1% of nonprofits bootstrapped 10,000 times. GMM-SYS α1 :Annual persistence of CR ln(CRi,t-1) 0.60 [0.03]** 1: Short-term crowd-effect -0.22 [0. 08]** 2 0.11 [0. 02]** δ1 4.42 [0. 05]** Longer-term crowd-effect (1+2)/(1- α1) -0.28 [0.145]* NTEE No T Yes N (Observations) 1,561,545 Hansen p value 140.30 0.28 Wald test for Granger causality (χ2 ce(2)) 7.57 AR(1) -10.10** AR(2) 1.44
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  United States: DRas dependent variable ln(DRi,t)=δ2,t + γ1 ln(DRi,t-1) + τ1 ln(CRi,t) + τ 2 ln(CRi,t-1) + 2 NTEE+ρ2 T+ 2i + 2i,t Notes: *= significant at 5%;**=significant at 1%. GMM SYS (Column 4) is derived from a random sample of 1% of nonprofits bootstrapped 10,000 times. GMM-SYS γ1 Annual persistence of Dr Ln (DRi,t-1) 0. 46 [0. 04]** τ1 Short-term crowd-effect ln(CRi,t) -0. 24 [0. 10]** τ2 ln(CRi,t-1) 0. 15 [0. 02]** δ2 5.87 [0.06]** Longer-term crowd-effect (τ1+ τ2 )/(1- γ1) -0.16 [0.08]* NTEE No T Yes Observations 1,561,545 Hansen 133.57 p value 0.38 Wald test for Granger Causality (χ2 ce(2)) 7.56* AR(1) -10.54** AR(2) 1.84
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  Statistically significant variationsby field of activity (US) NTEE field of activity Longer- term crowd-out effect (-) of DR on CR Longer-term crowd-out (-) effect of CR on DR Diseases, Disorders, Medical Disciplines -0.67** [0.16] -0.31** [0.08] Crime, Legal Related -0.60** [0.18] -0.18** [0.06] Health -0.18 [0.13] -0.26** [0.08] Mental Health, Crisis Intervention -0.27** [0.09] -0.37** [0.09]
• 15.
  Conclusions • Commercial revenueis a partial replacement for donative revenue in both countries • Commercial and donative revenue are interdependent • Commercial revenue also crowds out donative revenue (only measured in the US)
• 16.
  Making sense ofour data • Resource dependence theory? • Theories of declining legitimacy? • Simple micro-economic theories: – Much of the commercialization of the third sector in England was driven by state action making commercial revenue relatively ‘cheap’ to obtain. In the US the benign economic period since 2002 has seen grants and donations become ‘cheaper’. Nonprofits react to a change in the price of different revenues and adjust revenue mixes accordingly. They may over adjust in the short term and compensate over a two year period.
• 17.
  Implications • Future researchto understand different trajectories • Nonprofits considering whether to develop earned income strategies may be encouraged by the relatively high annual persistence of commercial revenue over time. This would appear more stable source than donative revenue, but is lower than has been found in other studies. • Nonprofits should exercise caution when deciding whether to prioritize commercial revenue over donative revenue (or vice versa). At the level of the individual nonprofit, decisions must be taken with reference to the relative costs of deriving commercial and donative revenues rather than “perceived wisdom”