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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

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
Keywords: nonprofits, financial vulnerability, sustainability, within-sector collaboration, cross-sector
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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