Panel Paper: Collective Reputations Affect Donations to Charities

Thursday, November 7, 2013 : 11:30 AM
3016 Adams (Washington Marriott)

*Names in bold indicate Presenter

Matthew Potoski, University of California, Santa Barbara and Laura Grant, University of Wisconsin, Milwaukee
Organizations are often linked via a common reputation within their industry or sector such that publicity about one organization can spill over to affect the reputation of its peers.  The linkages of common reputations may be particularly pronounced among nonprofit organizations because important dimensions of organization quality are difficult for potential donors to observe directly.  In this paper, we show that collective reputations affect nonprofits’ fundraising success.  We use a rigorous panel analysis procedures applied to data on thousands of nonprofits reporting IRS 990 forms and rated by the Charity Navigator website.  The analyses examine the effects of individual and collective reputations on nonprofits’ fundraising.  We find that, consistent with previous research, a nonprofit’s contribution receipts rise and fall with the positive and negative third-party rating it receives.  We further find that a nonprofit’s receipts also vary with the collective reputation its peers; a charity’s receipts increase when its peers receive more favorable third party ratings and decrease when its peers’ ratings declines.  The existence of such collective reputations among nonprofits has important implications for nonprofit management and governance.  Our research contributes to the conference theme – Power of the Past-Force for the Future – by identifying a previously undocumented collective action problem among nonprofits and proposing means for addressing it in the future.

Full Paper: