FIU Business Now Magazine
Large Corporate Donors Improve Efficiency and Performance of Nonprofit Organizations

Large Corporate Donors Improve Efficiency and Performance of Nonprofit Organizations

By Joseph A. Mann Jr.

Research carried out by a team that included an FIU Business professor sheds new light on the impact of large corporate donations on the efficiency and performance of nonprofit organizations (NPOs) in the U.S.

Published in the September 2021 issue of the Journal of Business Ethics, the study showed that corporate donations of $1 million or more “positively influenced NPO performance” by helping to generate “higher revenues per employee, a higher ratio of spending on programs and superior fundraising efficiency,” said Erica Harris, associate professor of accounting at FIU Business who conducted the study with three other researchers.

These large donations generate positive impacts when donors provide NPOs with monitoring and private-sector expertise that enhance their effectiveness and efficiency.

The researchers also said they “failed to find evidence that large foundation or individual donors have a similar impact” on NPO performance.

Corporate donations represent an important share of economic activity, reaching more than $21 billion in 2019, according to Giving USA 2020, a group that provides annual reports on charitable activity. The FIU Business research indicates that donations from large companies can improve the efficiency and performance at NPOs that are willing to accept corporate guidance. It also helps “alleviate corporate shareholders’ concerns that their resources are being deployed as artificial efforts to appear socially responsible,” the study found. The findings may also encourage more corporations to donate.

Corporate funding has a greater impact on NPOs that do not receive grants from government entities, the research showed, since government financing always requires external monitoring of NPO spending.

The researchers obtained their data from the University of Indiana’s School of Philanthropy Million Dollar List, which includes information on more than 70,000 publicly disclosed charitable gifts of $1 million or more from 2000 to 2018.

Harris conducted the research with Andrew R. Finley of Claremont McKenna College, Curtis Hall of Drexel University and Stephen J. Lusch of Texas Christian University.