Foundations and innovation in the nonprofit sector

• DOI: http://doi.org/10.1002/nml.21312
• Author: Kristina Jaskyte,Olivia Amato,Rachel Sperber
• Date: 01 September 2018
• Published date: 01 September 2018

RESEARCH ARTICLE

Foundations and innovation in the nonprofit sector

Kristina Jaskyte | Olivia Amato | Rachel Sperber

School of Social Work and Institute for Nonprofit

Organizations, University of Georgia, Athens,

Georgia

Correspondence

Kristina Jaskyte, School of Social Work and

Institute for Nonprofit Organizations, University

of Georgia, Wilson Street, Athens, GA 30602.

Email: kjaskyte@uga.edu

Using a sample of 17 foundations that are at the forefront

of encouraging innovation this study explored founda-

tions' motivations behind funding innovation, their per-

ceived ability to impact the levels of innovation in

nonprofit organizations, and strategies that foundations

are using or can use to encourage innovation in nonprofit

organizations. The results showed that among the major

motives behind funding innovation were leveraging the

capital, honoring the foundations' core identity (mission

and values), and desiring to encourage innovation in non-

profit organizations. Five strategies/mechanisms that

foundations are using/can use to encourage innovation in

nonprofit organizations were identified: (a) offering inno-

vation awards/grants as catalysts for innovation, (b) pro-

viding risk capital and supporting early stage idea

development, (c) educating other foundations on the

value of innovation and serving in a convener role,

(d) serving as thought leaders, and (e) increasing non-

profit organizations' capacity for innovation. Implications

for practice are discussed along with recommendations

for future research.

KEYWORDS

foundations, innovation, strategies

1|INTRODUCTION

The literature on the role of foundations as supporters of change and innovation reflects several per-

spectives with very different conclusions (Ferris, 2009). Some scholars consider foundations' work

as central for advancing innovation in nonprofit sectors. They believe that philanthropic foundations

have the capacity and the ability to be innovative and exercise great power and influence, which

extend beyond their wealth and founders' imaginations (Dowie, 2001). Faber and McCarthy (2005)

suggest that foundations can champion fundamental social and institutional changes that are needed

Received: 24 May 2017 Revised: 9 February 2018 Accepted: 14 February 2018

DOI: 10.1002/nml.21312

Nonprofit Management and Leadership. 2018;29:47–64. wileyonlinelibrary.com/journal/nml © 2018 Wiley Periodicals, Inc. 47

to transform the structures of profit and power. Because they can operate on a longer time horizon

than do other businesses and institutions, have freedom from marketplace and accountability, and

contain endowments that can exist across generations, foundations are believed to be uniquely posi-

tioned to engage in innovation and experimentation (Reich, 2016). Porter and Kramer (1999) note

that foundations can generate social impact that goes beyond the amount of their grants by selecting

the best organizations to fund; educating and attracting other funders through matching grants, edu-

cating foundations on effective grantee selection process, and so on; improving the performance of

grant recipients; and advancing the state of knowledge and practice through funded research and a

systematic progression of projects.

Conversely, critics consider foundations to be “cultural imperialists”seeking to maintain social

order, not to change it, and claim they are overly cautious and passive (Arnove, 1982; Dowie, 2001;

Roelofs, 2003). While being in a position to use their resources to serve as risk absorbers, founda-

tions are believed to have lost their zeal for experimentation and risk and are being criticized for

behaving conservatively in providing funding for conventional services (Kasper & Marcoux, 2014;

Knott & McCarthy, 2007; Minkoff & Agnone, 2010; Ostrander, 2007). One of the most common

criticisms of foundations is that they can utilize their particular ways of viewing the world to “influ-

ence a society's norms, morality, perspectives, and political principals”(Jensen, 2013, p. 107). It has

been suggested that they do not have a strategy of social change and are on the trailing edge of

change (Reich, 2016). There is a concern over the foundations' abilities to improve the public good

and address the most urgent issues (Lenkowski, 2002), as well as the inadequacy of their grantmak-

ing strategies for solving pressing social problems (Faber & McCarthy, 2005).

Beyond the arguments for or against foundations and their potential to impact social change and

innovation, we know little about how foundations operate or the impact of their work (Ostrander,

2007; Scherer, 2017; Zoltan & Phillips, 2002). Kasper and Clohesy (2008), in their report to Kel-

logg Foundation on how to improve philanthropy and increase social impact through intentional

innovation, note that “not enough funders have a clear sense of what innovation really means or

how to intentionally and consistently make it happen”(p. 1).

Because foundations can exert powerful influence, they need to be taken seriously and given

greater attention (Viederman, 2005). Ostrander (2007) notes that research on foundations is critical

at this point in time, as these establishments are called to take on more responsibility for addressing

serious issues. Zoltan and Phillips (2002) add that new work is needed because foundations are sig-

nificant institutions, which, without adequate understanding of their work, can be in danger of unin-

formed criticism. Additionally, if foundations in fact have the potential to influence innovation in

nonprofit organizations, we need to have a better understanding of the strategies that foundations

can use and are using to support innovation in nonprofit sector. Unfortunately, despite foundations'

support for numerous innovations, the topics of social innovation and institutional entrepreneurship

within foundations have received little attention (Lagemann, 1999).

The purpose of this qualitative research was to contribute to the emerging body of literature on

foundations' role in supporting change and innovation. More specifically, this research explored the

following topics: (a) how foundations define innovation, (b) foundations' motivations behind fund-

ing innovation, (c) foundations' perceived ability to impact the levels of innovation in nonprofit

organizations, and (d) foundations' strategies to encourage innovation in nonprofit organizations.

The contribution of this study and its insights are significant at this particular time, when founda-

tions' roles and impacts on change and innovation are questioned. The results can enrich our discus-

sion of where foundations can progress toward enhancing innovation in the nonprofit sector.

48 JASKYTE ET AL.