The Effects of Capital Campaigns on Other Nonprofits’ Fundraising

• Published date: 01 March 2017
• Author: Jill Nicholson‐Crotty,Joanna Woronkowicz
• Date: 01 March 2017
• DOI: http://doi.org/10.1002/nml.21255

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N M  L, vol. 27, no. 3, Spring 2017 © 2017 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/nml.21255

Journal sponsored by the Jack, Joseph and Morton Mandel School of Applied Social Sciences, Case Western Reserve University.

 e Eff ects of Capital Campaigns on

Other Nonprofi ts’ Fundraising

Joanna Woronkowicz, Jill Nicholson-Crotty

Indiana University

This study focuses on the effects of capital campaigns on the fundraising performance of

other nonprofits within the same geographic region. Drawing from research in organiza-

tional ecology and charitable giving, we offer a theory of capital campaign impact that says

any impact of a campaign must be looked for in a carefully circumscribed area or popula-

tion of organizations, and that campaigns raise awareness of the need for services within a

particular area. We use data on capital campaigns at arts nonprofit organizations in forty-

eight counties across the United States between 1999 and 2007, coupled with financial

data on nonprofits in the arts in the same county to test our hypotheses. The results from

our analyses show that a major capital campaign positively affects other nonprofits’ fund-

raising, and the effect varies depending on the phase of the capital campaign. We discuss

possible mechanisms that drive the positive effects of capital campaigns, and conclude with

a short illustration.

Keywords: capital campaign , fundraising , arts

CAPITAL CAMPAIGNS HAVE THE GOAL of attracting large amounts of funds in short peri-

ods of time (Pierpont 2011 ). Thus capital campaigns are qualitatively different from annual

drives or the near-constant cultivation of donations that organizations rely on to maintain

operational and programmatic activities. As a result of these differences, campaigns can be

potentially disruptive to the natural distribution of funds to area nonprofits by disproportion-

ately directing area donations to a single organization.

The literature explicitly on capital campaigns is quite limited. Pierpont ( 2011 ) has examined

the structure and process of capital campaigns. Woronkowicz ( 2016 ) examines the effects of

nonprofit facilities projects on financial vulnerability and finds that, for organizations that

build new facilities, capital financing can potentially have adverse impacts on overall financial

vulnerability, though it is unclear whether these effects are long term. To date, however, no

study has examined the impact of large capital campaigns on the fundraising success of other

nonprofit organizations, and studies of how (and whether) the fundraising activity of one

nonprofit affects the success of another nonprofit in the same market (Lyons 2003 ; Omura

and Forster 2014 ; Twu 2007 ) have produced mixed results.

Correspondence to: Joanna Woronkowicz, Indiana University, School of Public and Environmental Aff airs, 1315 E 10th

Street, Bloomington, IN 47404. E-mail: jworonko@indiana.edu.

Nonprofi t Management & Leadership DOI: 10.1002/nml

372 WORONKOWICZ, NICHOLSONCROTTY

This study makes the argument that capital campaigns offer a unique opportunity to increase

our understanding of fundraising competition among nonprofits. Drawing from research in

organizational ecology and charitable giving, we offer a theory of capital campaign impact

that says any impact of a campaign must be looked for in a carefully circumscribed area

or population of organizations, and that campaigns have positive spillover effects that may

arise from an increased awareness of the need for services within a particular area. As such,

campaigns may actually increase fundraising success for nonprofits in the same area as the

organization fielding the campaign. We tested this expectation in analyses of hundreds of arts

organizations across forty-eight counties in the United States, where another arts nonprofit

organization fielded a major capital campaign between 1999 and 2007. The results from our

analyses show that a major capital campaign positively affects other nonprofits’ fundraising,

and the effect varies depending on the phase of the capital campaign. We discuss possible

mechanisms that drive the positive effects of a capital campaign on other nonprofits’ fun-

draising, and conclude with a short illustration that helps illuminate some of these causal

mechanisms.

A Theory of Capital Campaign Impact

Capital campaigns often represent the largest single fundraising effort for a nonprofit organiza-

tion. They are typically conducted to raise money for capital costs such as a building renova-

tion or expansion, but can also contribute to other types of capital costs. A capital campaign

is an extremely resource-intensive type of fundraising initiative for a nonprofit because the

goal is to raise a very large amount of money in a short period of time, often relying heavily

on large gifts. Pierpont ( 2011 ) suggested that for a capital campaign, approximately 40 to 60

percent of the total goal should come from just around ten to fifteen gifts. Thus conservatively

speaking, a $20 million capital campaign will require at least fifteen individual gifts of more

than $500,000 each, and a $100 million capital campaign will require fifteen gifts of more

than $2.6 million each.

There are a few distinct phases in a capital campaign, which are common across the nonprof-

its that pursue them. The two major stages are known as the “public” and “private” phases.

The former concentrates on campaign planning and soliciting lead and family gifts, while

the latter focuses on soliciting smaller gifts (Pierpont 2011 ). For a capital campaign that is

also a bricks-and-mortar campaign, there are usually six distinct phases: (1) the time at which

the board or staff starts exploring the idea for a capital project; (2) the year the organization

starts fundraising for the project; (3) the time at which an organization first spends money

on a project; (4) when the board and staff formally approves a project plan; (5) the year the

project breaks ground; and (6) the year the project opens to the public. The private phase of

fundraising tends to occur in phases 2 and 3, and the public phase of fundraising occurs in

all phases thereafter. The campaign is usually complete upon the bricks-and-mortar project

opening to the public.

Ultimately, any question about the impact of capital campaigns on donations to other similar

organizations is a question about fundraising competition. Unfortunately, the existing lit-

erature in this area does not offer much insight regarding expectations. A large portion of

the literature on contributions to nonprofit organizations has focused on the relationship

between fundraising activity and donations—in other words, fundraising efficiency. That

work has found that money spent on fundraising has both positive and negative effects on