Association for Public Policy Analysis & Management

This paper examines whether and how board interlocks between small arts nonprofits and their larger counterparts affect the overall organizational performance of the former. A board interlock takes place between firms when a board member of one firm sits on the board of another. The existing nonprofit literature on boards has extensively discussed the functions of boards and behavior of its members. However, the extent to which board linkages influence organizational performance remains understudied. This paper builds upon resource dependency theory which holds that board members play a crucial role in leveraging influence and resources to help organizations survive and thrive (Chambers et al., 2013). In line with the theory, this paper views board interlocks as a mechanism which nonprofits utilize to reduce external uncertainty and provide access to important strategic resources. Therefore, we hypothesize that the more board interlocks small nonprofits have with larger counterparts, the better organizational performance will be for the small organizations.

The business literature suggests that board interlocks are associated with greater access to diverse skills and resources, improved communication across firms, enhanced organizational learning, and greater access to information (Mizruchi, 1996). Furthermore, firms that have well-connected boards generally display higher future returns than those with poorly-connected boards (Larcker et al., 2013). In the nonprofit board literature, research also found that powerful and influential boards of directors in human service nonprofits have the potential to enhance the overall performance of nonprofits in terms of a board’s ability to attract funding sources (Provan, 1980). Despite the richness of the literature on boards, there is a distinct gap in the nonprofit context on the effect of board interlocks on organizational performance.

The data samples for this paper include 501c3 nonprofit arts and cultural organizations that participated in DataArts project between 2011 and 2014. The dependent variable “organizational performance” is measured in two aspects and using four measures. Artistic performance is measured by the number of invited performances or exhibitions and the number of people served in a given year. Administrative performance is measured by two ratios: ratio of earned revenue to total revenue and fundraising efficiency ratio. The independent variable is the number of board interlocks smaller arts nonprofits have to their larger counterparts. The model controls for year founded, size, the number of government grants awarded, and venue type (owned or rented). Preliminary findings show support for the main hypothesis.

This paper adds to the nonprofit board interlock literature by examining a relationship that has not been studied before. It contributes theoretically by refining existing theory on resource dependency in the nonprofit setting. In addition, this paper has practical implications as it provides advice for small arts nonprofits to seek board ties with larger nonprofits to mitigate the risk of losing government funding, a particular concern for arts nonprofits in the current government funding environment. Further, it encourages them to utilize the expertise and skills of board members coming from these larger nonprofits to further improve their capacities and programs, and ultimately enhance their overall performance.