Research That Matters (January 17 - 20, 2008)

Purpose: As a result of a broad movement toward privatization, government has become the largest source of revenue for the United States nonprofit human services sector. In explaining the dynamics of government-nonprofit relationships, most empirical research has studied the effects of government funding on issues such as organizational autonomy, service activities, and internal structure. However, no quantitative studies have examined the factors that determine what nonprofit human service organizations pursue and receive government funding. This is an important oversight, because nonprofit human service organizations that accept government funds implement social policies designed to serve the public interest. Which nonprofits pursue and win grants determines where government dollars are channeled, who gets public services, and what those services look like.

This study examines the organizational and environmental factors that determine what nonprofit human service organizations a) receive and b) come to depend on government funding. Guided by a political economy/institutional perspective, the research proposes that organizations' ability to secure government funding is based on (a) their ability to garner legitimacy; (b) niche conditions, such as competition, institutional embeddedness, environmental affluence or poverty, and organizational form; (c) internal structure; and (d) external political strategies.

Methods: The data come from a survey of human service nonprofit organizations in Los Angeles County conducted in the summer of 2002(N=667). It is based on a stratified probability sampling of all nonprofit human services in the county and obtained data from the executive directors of these organizations about their resources, clients, services, relations with their external environment, governance, internal structure, and other organizational variables. Hypotheses are tested with maximum-likelihood probit and hierarchical multiple regression analyses.

Results: As hypothesized, competition from other nonprofit organizations, embeddedness in the institutional environment, engagement in advocacy, and collaboration with other nonprofit organizations were found to be significant determinants of receipt of government funds for human service nonprofits at the .001 level. Further, institutional embeddedness mediated the relationship between neighborhood poverty level and likelihood that the organization would receive government funding. Finally, consistent with expectations, dependence on government funding increased the larger the organization, when it served high poverty areas, the higher the costs per service unit, the greater the proportion of ethnic minorities in the organization's clients, the more professionalized the staff, and the more the organization innovated through the initiation of new programs. These relationships were significant at the .05 level.

Implications: The findings presented in this research underscore the critical role that government funding plays in enabling nonprofit human service organizations to serve devalued and disadvantaged groups and in extending legitimacy and survival benefits to recipient organizations at both the organizational and niche levels, and suggest that organizations that use of advocacy and collaboration with other nonprofit organizations improve their ability to secure government grants and contracts. Results are discussed within the context of a restructured resource environment marked by ongoing legislative efforts to suppress nonprofit advocacy and a neo-liberal ideology that values efficiency over care and advocates reduction in public spending and the privatization of public services.