Non-profit sector plays a vital role in socio-economic development of countries especially those in the developing world. An effective non-profit sector can contribute immensely to the development goals of developing economies as these countries face severe and complex socio-economic issues which require massive efforts from all three sectors-government, business and non-profit. Studies show that innovation and innovation-related concepts such as capacity to innovate and innovativeness enhance performance of non-profit organizations. Therefore, innovation in non-profit sector merits more research attention especially in developing country context considering the potential contribution enhanced performance of organizations in non-profit sector can make to the progress of developing nations. This paper is a conceptual analysis of the concept of innovation in non-profit organizational settings in India. India, world's second most populous country, is home to more than three million registered non-profit organizations (CSO, 2009). This big and vibrant sector of the national economy has made significant impact on socio-economic spheres touching millions of lives. This paper seeks to analyse the prospects and challenges for innovation and organizational innovativeness in Indian non-profit sector in the light of existing literature on the concept of innovation in non-profit context and the prevalent environmental and organizational settings of Indian non-profit organizations.
NON-PROFIT SECTOR IN INDIA: GROWING CHALLENGES
Indian non-profit sector has had a long and proud history, having played a pivotal role in the Indian freedom movement and social reform movements in the 19th and 20th century. The prevailing social, political and cultural settings in the country sets for a continued growth and expansion of the sector. A striking feature of the emergence of the sector in the country is that both market failure and supply-side factors have contributed to the expansion of the sector. Market failure aids the emergence of non-profit organizations when unmet demand for public goods owing to government/private sector failure, results in non-profit organizations emerging to fill the gap (Salamon et al., 2010). The more diverse the society, the greater the possibility of some section of the society feeling unsatisfied, leading to a large number of non-profit organizations. Thus, the huge size of non-profit sector in India could be attributed partly to market failure. Supply side theories analyse the supply side of the market. Here the supply of entrepreneurial individuals or groups with social commitment ensures the entry of new organizations helping the expansion of both supply and demand. Non-profit arms of the religious groups in India are demonstrative cases in this context. In addition to the above factors, partnership theory can also explain the growth in the size and scope of the sector in India. Partnership theory posits that cooperation occurs when both non-profit organizations and government respond to the same social issues. In India, there exist very strong partnerships in non-profit arena-with both government and corporate sector. The Indian government envisages an active and constructive role for the non-profit sector in the socio-economic development policy of the nation and such resource and policy support from the government also work as catalysts for growth of the sector. Thus, given such favourable conditions in the environment, Indian non-profit sector looks all-set for further expansion in size and scope of its activities.
However, the growing size and scope presents several challenges to the existing organizations which they must meet effectively for growth and even survival. As is the case with organizations elsewhere in the world, Indian non-profit organizations now face challenges which are similar to those faced by business organizations. Competition within the sector is on the rise and this increased competition for donor funds, beneficiaries and volunteers have forced several organizations to look beyond conventional ways of functioning and interacting with its environment. One of the direct results of this trend all over the world is the increased acceptance and practice of business and management philosophies and techniques (Eikenberry and Kluver, 2004) . Scholars see these as manifestations that are part of a larger trend of non-profit organizations becoming more like business organizations (Maier et al., 2016).
Among management concepts that are gaining traction in non-profit sector, innovation has special significance because of its assumed ability to drive performance in non-profit domains (Zhang and Cai, 2017). Hurley and Hult (1998), in their empirical study, suggests positive role of innovation in market orientation and organizational performance models. Interestingly, the above article argues that in non-profit settings, given the external control relationship angle, innovation aided by learning and market orientation will benefit organizations more. Choi (2014) confirms the link among market orientation, learning orientation and innovation, where market orientation is an antecedent of innovation. Therefore, literature points to the direction of innovation playing a role as a performance enhancer (Choi, 2014).
Dover and Lawrence (2012) identifies innovation as a "centrally important issue for the management of non-profit organizations". Scholars consider innovation as something inherent to the nature of non-profit organizations because of the challenging operational environment and the changing nature of issues these organizations seek to address (Stevenson et al., 2007). A survey conducted among American non-profit organizations finds that innovation is widespread and non-profit organizations are important sources of innovation ideas in social sector (Salamon, et al., 2010). Literature in...