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4 J. Mgmt. & Sustainability 1 (2014)
Nonprofit Response to Financial Uncertainty: How Does Financial Vulnerability Shape Nonprofit Collaboration

handle is hein.journals/jms4 and id is 367 raw text is: Journal of Management and Sustainability; Vol. 4, No. 3; 2014 ISSN 1925-4725 E-ISSN 1925-4733 Published by Canadian Center of Science and Education Nonprofit Responses to Financial Uncertainty: How Does Financial Vulnerability Shape Nonprofit Collaboration? Heather MacIndoe1 & Felicia Sullivan 1 John W. McCormack Graduate School of Policy and Global Studies, University of Massachusetts Boston, Boston, Massachusetts, USA Correspondence: Heather MacIndoe, Department of Public Policy and Public Affairs, John W. McCormack Graduate School of Policy and Global Studies, University of Massachusetts Boston, Boston, Massachusetts, 02125 USA. Tel: 1-617-287-4861. E-mail: heather.macindoe ttumb.edu Received: May 13, 2014 Accepted: June 6, 2014 Online Published: August 29, 2014 doi: 10.5539/jms.v4n3pl URL: http://dx.doi.org/10.5539/jms.v4n3pl Abstract Nonprofit organizations are a vital part of the U.S. social safety net providing a wide range of services in the modem welfare state. While many individuals and families turn to nonprofits for help during economically challenging times, these organizations themselves often face turbulent funding environments and uncertain financial futures. Nonprofit stakeholders urge within-sector collaborations (with other nonprofits) and cross-sector collaborations (with for-profit firms and government agencies) as a means to achieve efficiencies in service delivery, stretch donation dollars, and increase the long-term fiscal sustainability of the nonprofit sector. While increased financial stability is a presumed outcome of nonprofit collaborations, we know little about the antecedent effect of nonprofit financial vulnerability on collaboration. Using data from a survey of nonprofit executive directors in Boston, Massachusetts, this paper examines how nonprofit financial vulnerability influences nonprofit collaborations. We find that nonprofit financial vulnerability decreases the likelihood of both within- and cross-sector collaborations. Resource dependence on private funding increases within-sector collaboration with other nonprofits, while reliance on government funding increases the likelihood of cross-sector collaboration. Cross-sector board linkages also increase the likelihood of collaborations. Nonprofit stakeholders should consider these findings when promoting collaboration as a path to nonprofit fiscal sustainability. Keywords: nonprofits, financial vulnerability, sustainability, within-sector collaboration, cross-sector collaboration 1. Introduction As greater numbers of individuals, families, and communities turn to nonprofit organizations for assistance during economically challenging times, these organizations themselves face increasingly turbulent funding environments (Besel, Williams, & Klak, 2011; Miller, 2010). Nonprofits must navigate fragmented funding streams, weather economic fluctuations, and contend with a variety of changes to traditional revenue sources (Young, 2007). For example, a recent Urban Institute report found that government support for human service nonprofits often fails to cover the full costs of services. As a result, nonprofits respond by reducing their level of services, raising additional funds, or reducing staff (Boris, de Leon, Roeger, & Nikolov, 2010). Private funding is also changing. The rise of donor control, through donor-advised funds and other mechanisms, means that donor preferences, rather than nonprofit relationships and expertise, increasingly dictate the distribution of private donations (Ostrander, 2007). Given the importance of nonprofit service providers to the social safety net, stakeholders including philanthropic funders, practitioners, and public managers are concerned about fiscal sustainability in the nonprofit sector. The Boston Foundation (TBF), one of the largest community foundations in the U.S., recently issued several reports examining the financial health and sustainability of the Massachusetts nonprofit sector (Keating, Pradhan, Wassall & DeNatale, 2008; Pradhan & Hindley, 2009; Pradhan & Keating, 2012). (Note 1) The reports confirm the importance of nonprofits as service providers and underscore the sector's role as an economic engine (Werkema, Leiserson, & Ansel, 2005), employing more than 16 percent of the Massachusetts workforce in 2011 (Moore, 2012). However, this research revealed that many nonprofits are caught in a current services trap in

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