A comparative examination of the revenue structure of social enterprises and traditional nonprofits in Maryland
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Date
2014-02
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University of Baltimore. College of Public Affairs
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University of Baltimore. Doctor of Public Administration
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This item may be protected under Title 17 of the U.S. Copyright Law. It is made available by the University of Baltimore for non-commercial research and educational purposes.
Abstract
The debate over the viability of Social Enterprise echoes the broader inquiry into the merits of New Public Management (Light 2008). As with New Public Management, Social Enterprise presents an opportunity to increase the level of local control in the delivery of social services (Alvord, Brown et al. 2004; Nicholas 2005). It offers the opportunity to reduce the size of government (Light 2008), both as a direct actor and as a funder of contract services (Kucher 2011; Kucher 2012). Social Enterprise can also be subject to just as much ambiguity and loss of direction and control as the outsourcing and subcontracting aspects of New Public Management (Edwards 2008). If viable, an independent organization that is self-funding and not reliant on government funds to deliver social services may also represent a new manifestation of the concept of privatization, and change the nature of the relationships within public-private partnerships. There has been significant academic inquiry and debate in the field of social entrepreneurship regarding terminology and taxonomy. There has also been some work done in defining and determining qualitative distinctions between nonprofits and social enterprises (Di Domenico, Haugh et al. 2010). However, there has been little research done on specific quantitative differences in financing strategies among firms with a social focus. This research develops a model for determining if such systematic differences exist and then tests the potential for generalizability of the model by examining certain financial ratios for a sample of organizations taken from a population of 5,781 nonprofits within the state of Maryland. The model is examined through a series of financial ratio analyses that compare revenue sources for each entity and examine aspects of the financial condition of the organizations in the sample. These ratios because they are either generally accepted indicators of financial health in nonprofits (Zietlow, Hankin et al. 2007) or they are often used in the debate on social entrepreneurship (Dart 2004; Edwards 2008). Study findings indicate there are distinct differences in the financial conditions of a social enterprise as compared to either a high performing or average nonprofit. However, those distinctions do not support the idea that social enterprise is a unique practice. Further, the model has specific strengths but also a number of points where further research could refine this work. This study adds to the literature by helping to resolve the debate over the emergence of social enterprise and social entrepreneurship, specifically of there is any actual difference between organizations that consider themselves social enterprises and those that do not. It also aids in the evaluation of the potential usefulness of social entrepreneurship as a tool for social change, and may help inform administrative and policy decisions in both the public and the private sector.