EXPLAINING THE NONPROFIT RESPONSE TO RECESSION

This dissertation explores the response of nonprofit grantmaking foundations to recessionary pressures during the 2008-09 Great Recession, using Charles H. Levine's theory of Cutback Management as a lens. It incorporates the theory of organizational commitment and prosocial motivation to develop and introduces the concept of locus of associative concern to describe organizations' response strategy, particularly concerning grantee selection. This dissertation enhances current literature by quantitatively assessing the impact of recessionary pressures and subsequent behavioral changes in nonprofit organizations, employing large N quantitative methods. A unique dataset constructed using nonprofit tax records and grant records spanning from 2003 to 2014. Employing a fixed effects panel model, the findings indicate that adaptation strategies included reductions in administrative and personnel expenditures, while mission-centric spending remained relatively stable. This dissertation provides a more nuanced exploration of nonprofit behavior in response to economic downturns by incorporating data on both private grantmaking foundations and the nonprofit organizations they fund and examining their interactions over time. In his scholarly exploration, Charles Levine scrutinized the motivations and decision-making processes adopted by managers in public administration, offering predictions regarding their responses to fiscal constraints. Subsequently, this thesis sought to empirically evaluate these predictions within the realm of nonprofit grantmaking foundations. Despite the validation of the majority of hypotheses posited, the empirical evidence unveiled a momentary deviation from anticipated behaviors. In 2009, the foundations granted statistically significant higher amounts, targeting new entrants to their granting portfolios. This divergence is explained by the concept of the locus of associative concern, which I introduce in this dissertation and is built upon theories of prosocial motivation (Aquino & Reed II, 2002; Arshad, Abid, Conteras, Elahi, & Athar, 2021; Banuri & Keefer, 2016; Brief & Motowidlo, 1986; Lanfranchi & Narcy, 2022; Resh, Marvel, & Wen, 2018; Shao, Cardona, Ng, & Trau, 2017; Sheldon, Sheldon, & Osbaldiston, 2000; Wu, Feng, Zhang, & Na, 2022). Individuals driven by prosocial motivations are more inclined to engage in employment within the nonprofit sector. Such individuals exhibit a heightened concern for the welfare of humanity and demonstrate increased dedication in the face of challenges impacting their actions and normative values. Their alignment of personal normative values with the mission of their organization significantly influences their identification with the organization's objectives and pursuits. This phenomenon explains why individuals possessing empathetic and altruistic characteristics are disproportionately represented in the nonprofit sector and how their presence shapes the sector's nature (Weisbrod, 1972; Hansmann, 1980). The findings of this dissertation offer valuable insights for private grantmaking foundations and their grantees. The significance of relationships within the nonprofit sector is underscored, with the creation of the locus of associative concern. This concept measures the prosocial motivations that direct organizational relationships and quantifies the extent of effort an organization is willing to invest to support the objectives of its prosocial motivations. Understanding these dynamics can enhance the strategic collaboration and overall efficacy of nonprofit initiatives.