Will Proliferation Destroy the Nonprofit Sector? Evidence on the Effects of Nonprofit Competition from the Combined Federal Campaign (Job Market Paper)

The number of nonprofits in the United States is growing dramatically. Between 2003 and 2013, the United States experienced a 19.5% increase in 501(c)3 public charities. If aggregate giving does not increase proportionately, this trend could force nonprofits to operate with smaller average donations. Using aggregate and employee-level data from the Combined Federal Campaign (CFC), the nation’s largest workplace giving campaign, this paper asks if increasing the number of nonprofit organizations affects giving. I find that the addition of new nonprofits did not substantially increase the charitable resource pool. It did not increase the proportion of individuals who gave. Furthermore, although donors gave slightly larger gifts after new organizations entered, the amount was not large enough to prevent the average nonprofit from losing revenue. Unless it is accompanied by substantial efficiency gains, fragmentation will increase total sector spending on overhead and other fixed costs, leaving less for mission-related activities.

The Structure of Nonprofit Competition and Its Relationship to Overhead (NEW Version)

This paper proposes a new definition of nonprofit markets based on individual-level donor behavior and donor-nonprofit network ties. Empirically defining markets in the nonprofit sector has been difficult, because the well-established empirical industrial organization method of market definition uses price data, and it is therefore not applicable to nonprofit donations. Instead, nonprofit scholars rely on market definitions based on an organization’s subsector and geographic location. However, these definitions fail to capture important facts about donor behavior. This paper defines nonprofits as competitors if they have overlapping donors. The definition is validated with data from the Combined Federal Campaign (CFC). The validation exercise shows that the new market definition predicts donor substitution among organizations 58% more accurately than the standard nonprofit market definition based on an organization’s subsector and geographic location. The CFC data and this donor-based market definition are also used to examine an important nonprofit policy issue—the relationship between market concentration and nonprofit spending on overhead.

Efficiency Among Nonprofit Intermediary Service Providers—Fundraising Before and After Government Service Area Consolidation in the Combined Federal Campaign 

Nonprofit organizations in the United States provide a wide array of services on behalf of the government. In these situations, determining the optimal structure of the system is important—should more providers deliver services across smaller areas to increase local tailoring or should fewer providers deliver services across larger areas to take advantage of economies of scale? The answer depends on the tradeoffs between production efficiency and consumption efficiency. This paper examines nonprofit intermediaries implementing the Combined Federal Campaign (CFC), the workplace giving program for federal employees. I use a difference-in-differences analysis and nearly random consolidation timing to identify the effect of program structure on costs, fundraising outcomes, and fundraising efficiency. Surprisingly, I find that consolidated service areas experienced a decrease in average giving as well as a statistically insignificant decrease in average program costs. Combined, these effects yield no change in costs per dollar raised; the benefits of consolidation are more modest than CFC administrators had hoped.

Better Together? Experimental Evidence Regarding the Impact of Simultaneous Solicitations on Charitable Giving

Online, collaborative giving days, such as Giving Tuesday, are becoming an important part of the philanthropic landscape in the United States. These time-limited giving opportunities often involve a list of approved charities, and are arguably akin to other types of federated giving programs, such as workplace giving campaigns. Research has not explored how donor decisionmaking regarding lists of charities differs from their decisionmaking regarding a series of single-organization solicitations. This paper presents evidence from an online survey experiment on simultaneous (list) vs. sequential (one-by-one) solicitation decisionmaking. Simultaneous respondents gave to fewer organizations, although they did not donate statistically less in total. Simultaneous respondents were more likely to compare the organizations to each other, which tended to disadvantage low-familiarity organizations and those supporting disease research. These respondents also reported higher donor satisfaction and lower decisionmaking difficulty, which helps to explain the rising popularity of these giving schemes. Finally, simultaneous respondents were better able to remember the amount they donated, which indicates that sequential giving may benefit from charitable forgetting or a lower incidence of mental budgeting behaviors.

Which Nonprofit Industries are the Most “Local”? (Extended abstract and conference slides available, please email for more information)

Researchers studying nonprofit competition usually define markets based on geopolitical boundaries and, as a result, restrict their analyses to “local” nonprofit industries. This research note examines whether researchers are, in fact, using the most local industries for their analyses. It finds that some industries which are commonly assumed to be local actually have a substantial number of regional and national organizations. This paper uses data from the Combined Federal Campaign to evaluate nonprofit industries’ localness of operations and donations and rank the most local nonprofit industries. Incorrectly identifying local nonprofit industries may affect our understanding of nonprofit markets and competitive dynamics. Insufficiently-local industries should be excluded from future analyses relying on local markets.