Benefits and Drivers of Nonprofit Revenue Concentration

Abstract

Nonprofit organizations (NPO) rely on a diverse mix of revenue sources. The existing literature mainly supports diversification among different revenue sources as desirable because it enables organizational stability. Using a new data set of over 200 Swiss fundraising charities, we prove the opposite to be true: organizations that displayed a higher degree of revenue concentration grew stronger between 2005 and 2012. We identify factors influencing the organization’s capital and revenue structure. These factors can be divided into “nature” and “nurture” factors, which allows us to demonstrate which of them may be actively influenced by an organization’s management and which stem from conditions of the organization that cannot be readily overcome by managerial interventions (such as age, size, and legal form). Revenue concentration is positively influenced both by an organization’s geographical range of activity and dependence on its primary revenue source, and negatively influenced by board size and diversity.