The determinants of non-profit growth: do social enterprise initiatives matter?

Abstract

Although there are an increasing number of academic articles on social enterprise, there is surprisingly little work regarding its impact on non-profit growth. We test if non-profits that adopt social enterprise, or strategies to generate their own revenues, are more likely to grow. We develop several predictions about potential factors that could affect non-profit growth based on existing non-profit, finance and business literature. We test our predictions using a sample of large non-profits spanning all sectors.The paper provides a better understanding of non-profit growth and the role social enterprise plays in that growth. Although social enterprise is positively correlated with growth, other factors seem to have a greater impact. We find that high growth non-profits are younger, possess greater average surpluses, but have higher fluctuation and therefore greater risk in these surpluses. They maintain greater cash holdings, do not rely on endowments and have smaller boards. High growth non-profits do invest in capacity building.

Sustainability orientation and firm growth as ventures mature

“…In contrast, due to the inherent characteristics, social firms tend to have less ambition to grow than most companies (Bacq et al, 2013). Social‐oriented firms face pressure from charity programs and stakeholders who often prioritize the accomplishment of a measurable social impact over maximizing financial returns (Ramirez & Ramirez, 2013). Consequently, most social organizations rely heavily on public funding to remain in business.…”