Exploring the Dynamics: The Relationship Between Unrestricted Resources and Nonprofit Efficiency

Abstract

Many donors restrict their contributions to ensure that nonprofits deliver services that are aligned with their expectations. While restricted resources offer advantages, it may introduce inefficiencies within nonprofits. This concern prompts an important research question: Is there a relationship between having unrestricted resources and organizational efficiency? This study explores the connection between unrestricted resources and the efficiency of nonprofits, and investigates whether factors like organizational size, age, commercialization, and leverage influence this relationship. Using longitudinal data from 2010 to 2016 sourced from Habitat for Humanity in the United States, our results suggest a positive link between unrestricted resources and organizational efficiency. Moreover, the findings reveal that this positive association is stronger for small organizations than for larger ones, and stronger for organizations with lower leverage than for those with higher leverage. These findings align with resource dependence theory, suggesting that reducing donor influence and increasing managerial autonomy can improve organizational efficiency. They also underscore the importance of donor-nonprofit relationships based on mutual understanding and alignment of objectives.

Keywords

unrestricted resources organizational efficiency organizational age organizational size nonprofit commercialization leverage

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