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Nonprofit Commercialization



Both in practice and in academia, nonprofit commercialization is a highly debated topic. Conditions under which NPOs decide to commercialize can vary greatly, and adding to the complexity, commercialization seems to produce equivocal effects. In this chapter, we take stock of the literature by discussing the key drivers and effects associated with this phenomenon.
Nonprofit Commercialization
Ben Suykens and Bram Verschuere
Department of Public Governance and
Management, Ghent University, Ghent, Belgium
Nonprot commercialization refers to the process
of nonprot organizations (NPOs) becoming
increasingly reliant on income resulting from the
protable sale of services and goods (Brown
2018; Guo 2006), thereby becoming more like
for-prot enterprises (Suykens et al. 2019b). Non-
prot commercialization is commonly viewed as
a key element of both NPOs becoming business-
like(Dart 2004a; Maier et al. 2016) and social
entrepreneurship (Defourny and Nyssens 2010;
Khieng and Dahles 2015). Nonprot commercial
income is a catch-all concept for both mission-
related and mission-unrelated streams of revenue
(Toepler 2006; Weisbrod 1998) as it generally
includes program service fees; the sale of prod-
ucts not directly associated with the charitable
activity; contracts to deliver services on behalf of
a third party; prots from for-prot subsidiaries;
and fees for endorsing products(McKay, Moro,
Teasdale, & Clifford, McKay et al. 2015, p. 340).
Typical examples of mission-related income are
services fees,while mission-unrelated income
can include income generated through rafes, sale
of gadgets, and renting out organizational space
(Suykens et al. 2020b). Ebrahim et al. (2014) refer
to organizations relying primarily on the former as
integrated hybrids(i.e., NPOs with commer-
cialized core activities), and to those relying on
the latter as differentiated hybrids(i.e., NPOs
with commercial ancillary activities). When
operationalizing commercial income, it is impor-
tant to consider the institutional particularities of
the research context at hand. In contrast to Anglo-
Saxon countries for instance, income generated
through public service contracts is considered an
integral part of the public welfare mix in corpo-
ratist welfare states, and thus is viewed as public
instead of commercial income (Evers and
Laville 2004).
Both in practice and in academia, nonprot com-
mercialization is a highly debated
topic. Conditions under which NPOs decide to
commercialize can vary greatly, and adding to
the complexity, commercialization seems to pro-
duce equivocal effects. Below, we take stock of
the literature by discussing the key drivers and
effects associated with this phenomenon.
© Springer Nature Switzerland AG 2021
R. A. List et al. (eds.), International Encyclopedia of Civil Society,
Key Issues
Drivers of Nonprofit Commercialization
In the nonprot management literature, commer-
cialization tends to be framed as a massive
change(Weisbrod 2000, p. 1) and a profound
force shaping the nonprot sector at present time
(Anheier 2005, p. 211). Although not new to the
nonprot sector (Brown 2018; Child 2010), it is
often argued that this phenomenon is on the rise
due to decreasing levels of public and private
funding (Salamon 1993). In this entry, we use
the concept donative incometo refer to public
and private funding when considered together.
Rooted in resource dependence theory, two
major points of criticism have been raised against
this crowding outargument. First, the direction-
ality of this relationship is rather ambiguous
(Young 1998). Does a decline in donative income
lead to commercial venturing or does commercial
venturing cause a drop in public grants and private
giving? The latter is equally likely at play, as
resource holders might perceive NPOs with com-
mercial income as capable of acquiring their own
funds, and thus shift focus to other NPOs in need
of nancial support. Second, although some
small(er)-N studies show that dwindling donative
revenue can go hand in hand with the rise of
commercial income (e.g., Guo 2006), this effect
seems to lose ground when tested on a national
scale. Drawing on quantitative, longitudinal ana-
lyses of large-scale databases, both McKay et al.
(2015) and Kerlin and Pollak (2011)nd little
evidence that the rise of commercial revenue can
be attributed to decreasing government grants and
private donations. Accordingly, Kerlin and Pollak
(2011, p. 701) conclude that this argument is
ultimately unable to explain the long steady rise
in commercial income,thereby pointing to the
need to broaden the theoretical lens.
Staying within the realm of resource depen-
dence theory, one could argue that apart from
changing levels of donative income commer-
cialization can be propelled by rising levels of
resource competition (Tuckman 1998), which in
turn fuels resource uncertainty. Resource compe-
tition can be the consequence of (a) an overall
increase in the number of NPOs (Kerlin and
Pollak 2011), as well as (b) an increasing empha-
sis on competitive tendering by policy makers as a
means to outsource public service delivery (Bode
2006). From this perspective, NPOs anticipate the
possibility of losing donative funding by
Institutional isomorphism offers an alternative
explanation. Rather than driven by resource con-
cerns, this theory lends support to the idea that
NPOs might commercialize out of conformation
to the idea that social entrepreneurship increas-
ingly constitutes a norm for external stakeholders
when it comes to nonprot organizing (Dart
2004b). Several studies for instance nd that
donors are more likely to donate to organizations
that present themselves as social enterprises,
instead of nonprot organizations(Andersson
and Self 2015; Willems et al. 2017). Similarly, the
work of Dey and Teasdale (2013,2016) suggest
that governmental actors increasingly prefer to
collaborate with NPOs that (seemingly) conform
to the normative premises of social
Finally, in addition to the organizational envi-
ronment, organizational characteristics are
equally important to take into account when
explaining the variation in the extent to which
NPOs commercialize (Suykens et al. 2019a).
Indeed, organizational characteristics such as
size, task, and origins arguably inuence the orga-
nizational ability or will to commercialize. In
terms of size, several studies report a positive
correlation between professional capacity and
nonprot commercial income (Adams and
Perlmutter 1991; Guo 2006), indicating that hav-
ing sufcientprofessional capacity serves as a
precondition for nonprot commercialization.
Inversely, nonprot commercial income might
strengthen the capacity to recruit nonprot staff,
thereby contributing to organizational size (Dart
2004a; Guo 2006). In terms of task, current
research suggests that nonprot service providers
are most prone to commercialization, as services
can in contrast to advocacy efforts be conve-
niently excluded from free public use, and gener-
ate broad market demand (cf. Enjolras 2002).
Lastly, in terms of founding origins, Suykens
2 Nonprofit Commercialization
et al. (2019a, p. 347) nd that the founding origins
can act as an institutional stampthat accelerates
or hinders nonprot commercialization.Here the
argument is that NPOs that emerge close to the
market domain might consider commercial activ-
ity as a natural reex, while NPOs emerging in
market-critical environments (e.g., alter-
globalization movements) might consider com-
mercialization intuitively as a no-go scenario.
Effects of Nonprofit Commercialization
Commercialization is arguably a double-edged
sword for NPOs (Suykens et al. 2020b). On the
one hand, improved organizational autonomy
vis-à-vis institutional stakeholders (Khieng and
Dahles 2015; Vaceková et al. 2017) as well as
increased nancial stability by means of cross-
subsidization and revenue diversication are
often lauded as positive outcomes of nonprot
commercialization (Dart 2004a; Enjolras 2002;
Khieng and Dahles 2015; Toepler 2006). Gras
and Mendoza-Abarca (2014) compute that nan-
cial diversication by means of commercializa-
tion bolsters the survival chances of NPOs. Using
the metaphor of Icarus, however, they nd that
overreliance (more than 50%) on commercial
income in turn increases the probability of orga-
nizational demise.
This said, the overarching tone of the literature
is critical, as commercial activity can lead to mis-
sion drift. For instance, the introduction of service
fees can induce a creeping shift from those in need
to those who can afford the service (Eikenberry
and Kluver 2004; Khieng and Dahles 2015). Here,
James (2003, p. 33) theorizes that the underlying
mechanism is that as people are hired to whom
monetary goals and skills are relatively more
important, to pursue the protableactivities in
the nonprot, it is possible that the ethos and value
structure of the entire organization will change.
In a similar vein, the sale of goods that are
unrelated to the social mission of the organization
(e.g., sale of gadgets) might present itself as a
nancial quick win, but can distract the organiza-
tion from its core activities. In line with these
concerns, Thompson and Williams (2014)nd a
negative relationship between commercial
income and goal fulllment. Although unable to
explain the rise of commercial income over time, a
recent meta-analysis by Hung (2020) concludes
that nonprot commercial income is to a mod-
erate extent likely to crowd out donations.
Adding to this, studies warn that dependency
on commercial income exposes NPOs to market
competition dynamics in their eld of activity
(Cooney 2006; Toepler 2006). In this regard, the
concern has been voiced that some NPOs might
be in fact turning into for-prots in disguise,as
they benet from both tax and trust advantages,
while in practice behaving like a for-prot entity
(Weisbrod 2000). In the long run, they might be
harmful for the nonprot sector as a whole, endan-
gering, for example, its tax benets. As pointed
out by Tuckman (2010), for-prots in disguise are
difcult to recognize and are often a matter of
In conclusion, nonprot commercialization
arguably demands a balanced approach from non-
prot managers in order to reap possible benets,
while avoiding potential pitfalls. In terms of
resources, commercial income can contribute to
the nancial stability of a NPO, and thus organi-
zational survival, be it up to a certain point
(cf. Gras and Mendoza-Abarca 2014). In terms
of legitimacy, NPOs that have commercial income
can claim social entrepreneurship, with the
knowledge that the public perception can shift to
afor-prot in disguisewhen (too) strongly rely-
ing on commercial income (cf. Weisbrod 2000).
Future Directions
Much ground remains to be covered. Although
often posited, longitudinal empirical testing of
the claim that nonprot commercialization is
indeed on the rise is largely lacking to date for
research contexts outside of the Anglo-Saxon
region. This is important, as recent studies con-
tend that different patterns of commercialization
hold true for different institutional contexts (e.g.,
Suykenset al. 2020a; Vaceková et al. 2017; Yu and
Chen 2018), which in turn might be explained by
different drivers and produce other effects than
reported in Anglo-Saxon centered studies.
Adding to this, future studies could examine the
Nonprofit Commercialization 3
explanatory power of and the interaction between
different theoretical explanations as to why some
NPOs commercialize (more) and others do not.
A particularly salient question in this regard might
be to what extent nonprot commercialization is
perceived by NPOs as an imposed(i.e., driven
by environmental constraints) or a voluntary
choice (i.e., driven by opportunity). The former
is often implied in both the academic and public
debate, while the latter is arguably under-
examined. Doing so, this avenue for further
research could shed light on the conditions under
which commercial income can produce positive
outcomes for (particular types of) NPOs
(in particular institutional contexts).
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Nonprofit Commercialization 5
... The phenomenon of commercialisation of NGOs may affect their reputation (Suykens & Verschuere, 2021), reduce volunteers' work, and limit access to public funding (Mikołajczak and Bajak, 2020). As SEs combine market logic with social well-being, they may also submit to the pressure to employ workers with flexible forms of employment, similar to commercial enterprises that operate with the aim to maximise profits. ...
The problem of precarious employment in social enterprises has not been thoroughly researched in scientific literature. This study addresses this gap by examining the factors that impact precarious employment in social enterprises in emerging economies. Based on a Polish case study of 200 social enterprises, the findings indicate that this impact differs depending on the scope of the use of flexi-forms of employment in an organisation. The study emphasises that policymakers should pay particular attention to reducing bureaucratic obstacles and complicated formalities related to the use of public money in social enterprises. This study provides managers with real evidence about the causes of precarious employment in organisations.
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Recent literature on commercialization in the American nonprofit sector attributes increased reliance on fee income to neoliberal policies. This trend is often depicted as an invasion of market forces that debase civil society by reducing social values and interpersonal relations to commodities and transactions. My article challenges these beliefs by presenting historical data that have been largely ignored in recent writing. Examining a series of multicity financial reports, I demonstrate that the U.S. nonprofit human services sector increased its fee-reliance significantly before neoliberal policy changes. Drawing on social work literature, I show that the practice of fee-charging reflected an ethos of communal inclusiveness rather than mere profit-seeking. In light of this evidence, I argue that fee-charging should be understood as a long-standing and multivalent feature of the nonprofit human services sector rather than as a recent incursion of profit-driven rationalities.
With the rise of the global associational revolution and the expansion of neoliberalism across the world, nonprofit organizations (NPOs) have increasingly tended to adopt market values and approaches in many countries. A recent debate has concerned the impacts of nonprofit marketization on the civil society sector. A primary concern among Western scholars is the potential harm that marketization may cause to the traditional roles of NPOs, especially in their ability to create and maintain a strong civil society. This article joins the debate by engaging in a comparative analysis of China and the USA to answer the following question: Are the same concerns in the West applicable to non-Western countries, particularly those gradually liberalizing but still highly controlled authoritarian countries? By exploring the variations in objectives, models, and effects associated with the marketization taking place under different political–social systems, we find that unlike the nonprofit marketization in the USA, the similar yet distinct process in China is facilitating rather than inhibiting the development of civil society. On the other hand, our findings also provide nonprofit practitioners with a contextual guideline to help them devise more effective service strategies tailored to fit diverse sociocultural settings.