Embedded Government Control and Nonprofit Revenue Growth

• Author: Xueyong Zhan,Na Ni
• DOI: http://doi.org/10.1111/puar.12716
• Published date: 01 September 2017
• Date: 01 September 2017

730 Public Administration Review • September | October 2017

Public Administration Review,

Vol. 77, Iss. 5, pp. 730–742. © 2017 by

The American Society for Public Administration.

DOI: 10.1111/puar.12716.

Xueyong Zhan is associate professor

in the Department of Management and

Marketing, The Hong Kong Polytechnic

University, Hong Kong. He received his

PhD in public administration from the

University of Southern California. His

research examines public policy processes,

nonprofits, and public management. His

recent work has been published in

Journal

of Public Administration Research and

Theory, Policy Studies Journal,

and

Public

Administration Review.

E-mail: xueyong.zhan@polyu.edu.hk

Na Ni is associate professor at Shenzhen

Audencia Business School – Shenzhen

University, China. She obtained her PhD

in management from the University of

Manitoba. Her current research focuses

on corporate social responsibility and

nonprofit management. She has published

in

Strategic Management Journal, Strategic

Organization,

Journal of Business Ethics,

Business Strategy and the Environment,

International Public Management Journal,

Voluntas

, and

Research in the Sociology of

Organizations.

E-mail: na.ni@szu.edu.cn

Abstract : This research combines insights from resource dependence and institutional theories to examine the growth

of Chinese nonprofit revenues. The authors propose the concept of embedded government control ( EGC ) to capture

the complexity of the government–nonprofit relationship along two dimensions: government regulation of nonprofits’

public fund-raising qualifications and the political embeddedness of nonprofits with the government. Using a

data set of 2,159 Chinese philanthropic foundations for the period 2005–12, the authors test hypotheses about the

implications of EGC for nonprofit revenues in China following two major external shocks: the Wenchuan earthquake

in 2008 and the Guo Meimei scandal in 2011. The empirical analysis shows that EGC can help philanthropic

foundations obtain more government subsidies, donations, and market revenues. However, external shocks may either

strengthen or weaken the enabling role of EGC in helping foundations acquire relatively more donations.

Practitioner Points

• The concept of embedded government control captures the complexity of the government–nonprofit

relationship along two dimensions: government regulation of nonprofits’ public fund-raising qualifications

and the political embeddedness of nonprofits with the government.

• Embedded government control can be witnessed in both Western and non-Western nations, but its political

and regulatory implications may vary across nations.

• Embedded government control may help nonprofits maintain a relatively good position in generating

revenues.

• External shocks, such as the occurrence of a natural disaster or nonprofit scandal, may strengthen or weaken

the enabling role of embedded government control in helping nonprofits acquire relatively more donations.

• Public policy makers and nonprofit leaders need to enhance nonprofit governance quality and transparency

so that the nonprofit sector can gain public trust and drive sustainable growth.

Na Ni

Shenzhen University, China

Xueyong Zhan

The Hong Kong Polytechnic University, Hong Kong

Embedded Government Control and

Nonprofit Revenue Growth

I n developed countries, supportive institutional

factors such as social norms of voluntary

philanthropic donations, together with friendly

government policies in granting tax-exempt status,

contracting out public services, and providing

fiscal subsidies, are important conditions for the

development and functioning of the charitable

and nonprofit sectors (Lecy and Van Slyke 2013 ;

O ’ Connell 2000 ). Nonprofits in these countries

usually rely on a combination of revenues from

government funding, private contributions, and

commercial activities (Froelich 1999 ; O ’ Connell

2000 ). In non-Western and transitioning

countries such as China and Russia, however, such

supporting conditions are often less developed or

even nonexistent (Heurlin 2010 ; Kim and Kim

2015 ; Ljubownikow and Crotty 2014 ; Spires

2011a ). Indeed, while philanthropic and nonprofit

organizations in these authoritarian countries may

share a similar revenue structure to those of their

Western counterparts, they have been growing in a

more restrictive political environment with limited

resource opportunities.

In recent years, a limited but growing literature

has examined the development of the nonprofit

sector in non-Western settings (Kim and Kim 2015 ;

Ljubownikow and Crotty 2014 ; Salamon and

Anheier 1998 ; Zhan and Tang 2016 ), yet the long-

term impact of authoritarian government control

on nonprofit sector growth continues to receive

insufficient research attention. To prevent the rise

of a confrontational civil society that may endanger

political stability, authoritarian governments have a

strong incentive to control nonprofits, especially those

with foreign funding and donations (Ljubownikow

and Crotty 2014 ; Spires 2011a ). Maintaining such

government control, however, may not be easy in

countries experiencing rapid transitions in social

and economic parameters that may challenge the