The Nonprofit Starvation Cycle: Does Overhead Spending Really Impact Program Outcomes?

The nonprofit starvation cycle raises a fundamental question about the impact of overhead spending on nonprofit program outcomes and organizational effectiveness. We test this relationship using data on the U.S. nonprofit arts and cultural subsector from 2008 to 2018. Contrary to the conventional wisdom that lower overhead is better, the results of different model specifications consistently show an optimal level of overhead captured by an inverted U-shaped relationship between the overhead cost ratio and program outcomes. Increased spending on overhead can improve program outcomes up to the optimal point. Beyond this point, further spending on overhead can yield negative returns. The study contributes to correcting the unrealistic expectations surrounding overhead costs and argues for investing more in building sustainable nonprofit capacity. We discuss the implications of our findings for nonprofit charity monitors, donors, scholars, and other stakeholders concerned about nonprofit accountability and effectiveness.

Sometimes the unthinkable happens: How do catastrophic natural disasters impact the population of arts and culture nonprofits?

Arts and culture organizations face numerous threats, and many of them are economically based in nature. As governments increasingly leverage arts and culture for a variety of policy-based agenda, it is an opportune time to evaluate the vulnerabilities facing and the sustainability of the population of arts and culture nonprofits, particularly under a variety of conditions. This should include cases when the unthinkable happens, as there is a need to understand the characteristics of the population before and after a catastrophic disaster. This research examines the population of nonprofit arts and culture organizations (NPACOs) in the United Sates and answers the questions, “Do catastrophic natural disasters impact the population of NPACOs? Do they alter patterns of formation and exit?” using quantitative analysis.

Nonprofit Arts Organizations’ Pursuit of Public Interests: The Role of Board Diversity

Although nonprofit organizations are expected to contribute to public interests, their tax exemption does not necessarily entail serving the broader public. What, then, makes nonprofit organizations orient their work externally, serving the broader public, instead of internally, pursuing private goals? This paper examines this question by studying the link between nonprofits’ board governance, with a specific focus on boards’ racial diversity, and their contribution to public interests. The analysis of the 2015 US Local Arts Agency Census reveals that boards’ racial diversity is closely related with nonprofit arts organizations’ participation in serving the broader public through civic engagement and community development activities. The findings offer insights on how nonprofit boards, which are neither publicly elected nor publicly accountable, can be trusted to attend to broader issues of the public interest.

The Roots of Great Innovation

What is the relationship between a city’s entrepreneurial climate and the sustainability of arts and culture nonprofits? Business, the arts, and innovation do not exist in isolation. New York Times writer David Brooks (2011) opined, “The roots of great innovation are never just in the technology itself.” The significance and value of the arts as community assets has sparked public intervention to leverage the arts to generate a variety of instrumental benefits. The arts were famously positioned as being of significant value for knowledge workers, the creative class, and the entrepreneurs powering the knowledge economy. This has been portrayed, largely, as a one-way relationship in which the arts benefit cities economic pursuits. Such depictions fail to consider the influence of open systems and recognize how communities simultaneously influence the population of arts and culture organizations. This paper asks, “How do entrepreneurship levels affect the population dynamics of arts and culture nonprofits?” The interactions between the formation and exit of nonprofit arts organizations and entrepreneurial climate of the 50 US states for the period from 1989 to 2012 are analyzed using negative binomial regression. Higher entrepreneurial climates are associated with lower incidences of nonprofit arts and culture formations and lower exits. The implications of this and opportunities for additional research are discussed.