Reputation spillover effects from grant‐providing institutions

• Author: Dominik Vogel,Jurgen Willems,Carolin J. Waldner
• Date: 01 September 2019
• Published date: 01 September 2019
• DOI: http://doi.org/10.1002/nml.21357

RESEARCH ARTICLE

Reputation spillover effects from grant-providing

institutions

Jurgen Willems | Carolin J. Waldner | Dominik Vogel

Department of Socioeconomics, Universität

Hamburg, Hamburg, Germany

Correspondence

Jurgen Willems, Universität Hamburg, Von-Melle-

Park 9 - Raum B 233, Hamburg 20146, Germany.

Email: jurgen.willems@uni-hamburg.de

There is a broad academic discussion about the impact of

funding grants from a foundation or a government depart-

ment on individual support intentions toward the nonprofit

organization receiving the grant. However, the role of the

grant provider's reputation has frequently been over-

looked. In this study, we experimentally tested whether

there is a reputation spillover effect of a grant-providing

organization. Based on a real-life example, we asked citi-

zens to rate their willingness to donate to a nonprofit orga-

nization, and we experimentally manipulated the available

information on funding sources. We test this for both a

government department and a foundation as a grant pro-

vider. Our results suggest that not the act of receiving a

grant, but the citizens' awareness about the funding

organization—at least in the case of a foundation—has an

impact on support intentions. In contrast, for a prominent

government department as a grant provider, we did not

find support for a reputation spillover effect.

KEYWORDS

crowding-in, experiment, government and foundation

funding, nonprofit reputation, reputation spillover effect

1|INTRODUCTION

The competition for scarce funding sources makes fund-raising one of the most pressing challenges

for leaders of nonprofit organizations (Ashley & Faulk, 2010). To provide public services, nonprofits

benefit from a diverse portfolio of income streams, including a solid base of individual stakeholders

who support the organization in the form of individual donations (Carroll & Stater, 2009). However,

recent trends show that an increasing number of organizations rely on collaborating with foundations

or government departments to obtain financial resources (Andrews & Entwistle, 2010; Mendel &

Brudney, 2014).

Received: 26 February 2018 Revised: 12 February 2019 Accepted: 13 February 2019

DOI: 10.1002/nml.21357

Nonprofit Management and Leadership. 2019;30:9–30. wileyonlinelibrary.com/journal/nml © 2019 Wiley Periodicals, Inc. 9

The consequences of government and foundation support on an individual's willingness to donate

have received much scholarly attention in the last few decades (for a recent overview, see Lu, 2016).

Several scholars have found evidence that individuals reduce donations when an organization

receives government or foundation funding (crowding-out effect) (Andreoni & Payne, 2003, 2011;

Brooks, 2000). However, there has also been evidence for the opposite reaction (crowding-in effect)

(Hughes, Luksetich, & Rooney, 2014; Okten & Weisbrod, 2000), in particular, if the individual has

limited information about the nonprofit organization (Heutel, 2014). Considering that government

departments and foundations have better knowledge about the organizations they support (Ashley &

Faulk, 2010; Rose-Ackerman, 1986), citizens may be more willing to give to an organization that is

institutionally supported. This argument might even be strengthened for grant providers with a high

reputation (Kim & Van Ryzin, 2014). In other words, when a stakeholder decides whether she/he

wants to support a nonprofit organization, she/he is likely to base that decision on her/his perceptions

of the nonprofit's partners, especially when explicit information about these partners is given. The

reputation of a well-known grand provider is, therefore, likely to spillover to a nonprofit partner

(Barnett & Hoffman, 2008; Houston, 2003).

This study aims to better understand the interplay between government and foundation funding

and individual stakeholder support by considering the grant provider's reputation. Concretely, the

research questions of this study are (a) does explicit information about government or foundation

funding leverage individual support intentions, and (b) does a high reputation of the grant provider

enhance this effect? Applying an experimental research design, we provide empirical evidence that

sheds light on an important, but unexplored aspect of nonprofit management that asks whether non-

profits can attract individual support by signaling organizational quality through prominent partner-

ships with grant-providing institutions. Concretely, our findings show that for foundation support not

the reception of a grant, but the reputation of the grant-providing foundation influences stakeholder

support intentions. For grants provided by a government department, no significant effects were

found, irrespective of its reputation.

This study contributes to the nonprofit management literature in at least three ways. First, we con-

tribute to the discussion concerning the relationship between individual and government and founda-

tion support, in particular, the impact of government and foundation funding on individual support

intentions (Ashley & Faulk, 2010; Heutel, 2014). We focus mainly on reputation spillover effects of

government or foundation partners on nonprofit organizations. Second, we contribute to research on

nonprofit reputation, showing that nonprofit organizations can influence their stakeholders' percep-

tions by making active partnering decisions—and communicate about it—based on the reputation of

funding institutions (Barnett & Hoffman, 2008). Third, we advance the fund-raising literature by

demonstrating that reputation spillover effects can serve as efficient mechanisms to trigger individual

support (Andreoni & Payne, 2011; Bekkers & Wiepking, 2011; Konrath & Handy, 2017).

2|LITERATURE AND HYPOTHESES

2.1 |Balancing revenue diversification

Managers of nonprofit organizations increasingly face the challenge to effectively deliver services to

the public, despite receiving limited financial resources that would provide the necessary “hard”

means to run operations (Lu, 2015). To ensure a substantial income, nonprofit organizations benefit

from diversifying their income streams (Carroll & Stater, 2009; Searing, 2018). This revenue diversi-

fication increases the organization's dependency on its public and profit counterparts (Bennett &

10 WILLEMS ET AL.