Location Makes a Difference for Nonprofit Support, Says New Study
August 26, 2005
STANFORD GRADUATE SCHOOL OF BUSINESS—Although most nonprofit organizations are small, they collectively represent an important part of a region's economy. An important new study just released by the Center for Social Innovation at the Stanford Graduate School of Business finds that nonprofits in the San Francisco Bay Area are better-funded and spend more per capita compared to the rest of California and the nation. Yet, nonprofit leaders in the Bay Area feel stretched when marshalling resources to meet the needs or aspirations of their organization's mission.
These are among the key findings of the inaugural report from the Stanford Project on the Evolution of Nonprofits (SPEN), a ground-breaking research initiative launched in 2003 by the Stanford Graduate School of Business. A comprehensive study of the nonprofit sector, SPEN followed, and will continue to follow, a random sample of more than 200 San Francisco Bay Area operating charities over several years. Using data collected from tax filings beginning in 2000, the study examines the management of social sector institutions as well as the regional context in which they operate.
The first phase results of the SPEN study were released in detail to research participants and key stakeholders at a conference today at the Stanford Graduate School of Business.
The SPEN research breaks new ground in three ways. First, it is the first large-scale study from a business school, rather than a public policy institution, to examine the management structure of nonprofits to learn how they are founded, funded, and organized to meet their missions. Second, it is the first large-scale study to differentiate between program-providing and funds-providing organizations. And third, it analyzes the nonprofit sector in the context of regional and national economies.
"We find that location matters a great deal," said SPEN faculty director and study co-author Walter Powell, who is professor of education at Stanford's School of Education and professor of organizational behavior at the Business School. "Nonprofits are embedded in local infrastructures, dependent on their communities for a variety of resources, support and professional development."
In developing the report, SPEN managing director and study co-author Denise Gammal has been surprised at the level of interest from the nonprofit community. "Directors and managers at nonprofit organizations have been clamoring for data to help them better understand their sector as they strive to professionalize their enterprises and bring operations and strategies to the next level," she said. "There has been a tremendous interest in applying business practices to the challenges faced by today's nonprofits, yet little research has focused on whether these practices are either appropriate or effective—until now. This first report provides a launching off point for the next phase of our research."
Among the findings in the report:
- In 2000, Bay Area operating charities alone spent in excess of $41 billion, representing nearly 14 percent of the total regional gross domestic product of $295 billion. By contrast, nonprofits represent just 5 percent of the Los Angeles region economy, and 7 percent of the national economy.
- Typical human services nonprofits in the San Francisco Bay Area and Los Angeles both have budgets of about $1,285,000, yet the Bay Area nonprofits spend far more per resident living in poverty ($5,115) than do their Los Angeles counterparts ($1,327). Reasons for this disparity deserve further investigation.
- The profile of the nonprofit sector is broadly similar across regions, but some regions have sectors that are relatively better off. For example, San Francisco Bay Area nonprofits have both a higher median budget than those in Los Angeles, the state and the nation, as well as higher per capita spending.
- Nonprofit organizations are becoming increasingly professionalized as they build capacity to cope with the challenges of increased competition, increased need, and external calls for greater accountability.
Building on the Stanford Business School's 34-year commitment to public and nonprofit management, the Center for Social Innovation [Website] was founded in 2000 to promote solutions to social problems through a unique combination of multidisciplinary research and teaching that extends beyond the classroom. The Center bridges theory and practice, and dissolves traditional sector boundaries, bringing together nonprofit leaders, corporate executives, government officials, philanthropists, and scholars to discuss, debate, analyze, and take action to strengthen our communities.
The report titled, "Managing Through Challenges: A Profile of San Francisco Bay Area Nonprofits," is co-authored by Powell, Gammal, and SPEN researchers Caroline Simard and Hokyu Hwang (August 2005).
Related Links
Inaugural Report:
Managing Through Challenges: A Profile of San Francisco Bay Area Nonprofits 
Stanford Project on the Evolution of Nonprofits
Center for Social Innovation Speakers series
Research into social innovation issues
