Professional Documents
Culture Documents
By Seth J. Marbin
Brown University, May 2005
Advisor: Professor Ann Dill, Ph.D. | Reader: Dean Michael Plater, Ph.D.
Abstract
Nonprofits across the nation are increasingly launching earned-income ventures to
support their social missions. Even though this is not a new strategy for many nonprofits,
for the sector as a whole it is a fundamental shift from traditional sources of revenue.
This study identifies and evaluates significant factors associated with nonprofits
operating earned-income ventures in Rhode Island and compares these results to data
collected for a recently published national study. New data collected from a web-based
survey of over 325 Rhode Island nonprofits is analyzed along with data from over 375
nonprofits in a national sample. This study also examines the types of earned-income
ventures organizations are operating, the perceived impact, how nonprofits define
themselves as “entrepreneurial,” and the reasons why some organizations have never
operated ventures. Insights from Rhode Island nonprofit leaders, academics, and funders
are also included in this mixed-methods approach, to help understand the motivations of
nonprofits launching and operating earned-income ventures. The findings suggest that
Rhode Island organizations are operating earned-income ventures at a rate of three times
the comparable national sample. Additionally the majority of ventures are related to the
organizations’ social missions, and the impacts are overwhelmingly positive.
Key Words
Rhode Island, entrepreneurial, nonprofit, organizations, earned-income, ventures,
social enterprise, social entrepreneurship.
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Table of Contents
ACKNOWLEDGEMENTS ............................................................................................. 4
INTRODUCTION............................................................................................................. 5
OVERVIEW ....................................................................................................................... 5
STATEMENT OF PURPOSE ................................................................................................. 6
RESEARCH QUESTIONS .................................................................................................... 6
DEFINITIONS .................................................................................................................... 7
WHY RHODE ISLAND? ................................................................................................... 10
LITERATURE REVIEW .............................................................................................. 14
BACKGROUND ................................................................................................................ 14
DESCRIPTION OF THE TREND: FROM THE 1980S TO TODAY ........................................... 15
BENEFITS ....................................................................................................................... 16
CAUTIONS ...................................................................................................................... 16
OPPOSITIONS .................................................................................................................. 17
RELATION TO MISSION................................................................................................... 18
SPECTRUM ..................................................................................................................... 20
PREVIOUS RESEARCH FINDINGS ..................................................................................... 20
WHY THE SEA CHANGE IS OCCURRING .......................................................................... 23
METHODS ...................................................................................................................... 27
THE WEB-BASED SURVEY ............................................................................................. 27
OVERVIEW OF WEB-SURVEY QUESTIONS ...................................................................... 28
RECRUITMENT OF PARTICIPANTS ................................................................................... 29
SURVEY INCENTIVES ...................................................................................................... 30
COMPARISON ANALYSIS ................................................................................................ 30
INTERVIEWS ................................................................................................................... 30
DATA ANALYSIS PROCESS ............................................................................................. 31
RHODE ISLAND FINDINGS ....................................................................................... 33
DEMOGRAPHICS OF THE RI NONPROFIT SAMPLE ........................................................... 33
CHARACTERISTICS OF THE RI EARNED-INCOME VENTURES .......................................... 34
DESCRIPTION OF THE RI EARNED-INCOME VENTURES................................................... 36
PROFILES OF THREE RI EARNED-INCOME VENTURES .................................................... 37
Cookie Place Cafe, Providence - An EIV from the Start .......................................... 37
Edward King House, Newport - Recently Launched an EIV .................................... 38
Crossroads Rhode Island, Providence – About to Launch an EIV........................... 39
RELATION OF VENTURE’S GOALS TO ORGANIZATION’S MISSION .................................. 40
REASONS FOR LAUNCHING (AND NOT LAUNCHING) AN EIV ......................................... 41
PERCEIVED IMPACT OF OPERATING AN EIV................................................................... 44
HOW NONPROFITS DEFINE “ENTREPRENEURIAL” .......................................................... 45
USEFUL SUPPORT AND ASSISTANCE............................................................................... 49
RECENT RHODE ISLAND DEVELOPMENTS ...................................................................... 50
Amos House, Providence in National Business Plan Competition........................... 50
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MBA Students Partnering with Nonprofits to plan EIVs .......................................... 51
Rhode Island Nonprofits Engaged in Learning Community..................................... 51
RHODE ISLAND COMPARED TO THE NATIONAL SAMPLE........................... 52
RHODE ISLAND DESCRIPTIVE STATISTICS ...................................................................... 53
NATIONAL DESCRIPTIVE STATISTICS ............................................................................. 53
BIVARIATE CROSS-TABULATIONS AND CHI-SQUARE TESTS .......................................... 54
“Entrepreneurial” Organizations ............................................................................ 54
Program Area ........................................................................................................... 54
Age of Organizations ................................................................................................ 55
Budget ....................................................................................................................... 55
LOGISTIC REGRESSION ................................................................................................... 56
“Entrepreneurial” Organizations ............................................................................ 57
Program Area ........................................................................................................... 57
Age of Organizations ................................................................................................ 58
Budget ....................................................................................................................... 58
LIMITATIONS ............................................................................................................... 59
ETHICAL CONSIDERATIONS ............................................................................................ 63
CONCLUSIONS ............................................................................................................. 64
SUGGESTIONS FOR FUTURE RESEARCH .......................................................................... 66
ATTACHMENTS ........................................................................................................... 67
1. INTERVIEW PARTICIPANTS ..................................................................................... 67
2. INTERVIEW GUIDE FOR NONPROFITS...................................................................... 68
3. INTERVIEW GUIDE FOR SUPPORTING ORGANIZATION ............................................ 68
4. INFORMED CONSENT FORM.................................................................................... 69
5. POSTCARD.............................................................................................................. 70
6. E-MAIL ................................................................................................................... 71
7. MEDIA RELEASE 1 ................................................................................................. 72
8. MEDIA RELEASE 2 ................................................................................................. 73
9. PROVIDENCE JOURNAL ARTICLE ............................................................................ 74
10. SOCIAL VENTURE PARTNERS OF RHODE ISLAND WEBSITE .................................... 75
11. TRANSCRIPT OF WRNI RADIO ANNOUNCEMENT ................................................... 76
12. E-NEWSLETTER - RI FOUNDATION ........................................................................ 76
13. E-NEWSLETTER - KNOWLEDGE EXCHANGE CENTER ............................................. 77
14. E-NEWSLETTER - PROVIDENCE DEPT OF ART, CULTURE & TOURISM .................... 77
15. SURVEY ................................................................................................................. 78
APPENDIX...................................................................................................................... 89
WORKS CITED.............................................................................................................. 99
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Acknowledgements
The following is a partial list of those who have provided generous support,
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Introduction
Overview
Nonprofits across the nation are increasingly launching earned-income ventures to
support their social missions (Frumkin, 2002; Massarsky & Beinhacker, 2002; W. Shore,
2003; Young & Salamon, 2002). Even though this is not a new strategy for many
nonprofits, for the sector as a whole it is a fundamental shift from traditional sources of
revenue. Instead of relying on donations, grants, and subsidies alone, nonprofits are
increasingly charging fees, contracting for services, selling products, leasing property,
launching and sustaining earned-income ventures, popular opinion and previous research
are both divided on the merits of these commercial activities. Some praise the leaders of
Others have voiced concerns about nonprofits straying from their social missions as they
attempt to generate financial capital in new ways, and in some cases, even earn profits.
nonprofits in Rhode Island, and compares data collected from these organizations to a
data1 gathered from over 375 organizations and of new data derived from a similar web-
based survey of over 350 organizations from across the state of Rhode Island. It also
incorporates qualitative findings from interviews with nonprofit leaders, academics, and
1
By Massarsky& Beinhacker (2002)
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funders. This mixed-methods approach provides insight into the motivations, pressures,
successes, and challenges that organizations face in launching and operating earned-
income ventures. It concludes with recommendations relevant for social enterprises and
Statement of Purpose
The purpose of this study is to examine earned-income ventures across the state of
Rhode Island, identify and evaluate significant factors affecting their development and
ventures.
Research Questions
3. What are the perceived barriers for organizations that are not operating ventures?
4. How do nonprofits in Rhode Island define and identify with the term
“entrepreneurial?”
5. What types of support and assistance would organizations interested in EIVs find
most useful?
7. How do the EIVs of Rhode Island nonprofits compare to the rest of the nation?
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Definitions
Because of the wide variety of terms and phrases that are commonly used to
discussion of key concepts and terminology. Brief definitions, for the sake of this study,
are offered for each concept, followed by explanations of important distinctions, and a
few of the many related phrases that are used in both literature and practice. Because this
study focuses on organizations in the United States, these definitions are based primarily
For the sake of this study, the term “nonprofits” refers to organizations defined as
“private institutions serving public purposes and not organized principally to earn a
profit” (Salamon & Anheier, 1997, p. 15). This term is often described as a misnomer,
and is widely misunderstood, because nonprofits are not actually restricted from earning
profits, as the name suggests. They are instead restricted from distributing profits to
and corporate) firms do (Hansmann, 1980). The tax status of nonprofits is another
defining characteristic that is often misunderstood. While there are currently 35 different
tax classifications for nonprofit organizations, this study focuses exclusively on those
organizations that are generally exempt from federal income tax and eligible to receive
classified as 501(c)(3) have been required to pay Unrelated Business Income Tax on
revenue from activities that are not significantly related to their missions (Hines, 1998).
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Within the U.S., nonprofits are also commonly referred to as charitable, tax-exempt,
The term “profit” is generally defined as the amount of money received (revenue)
subtracted from the money spent (costs) in a given time period. This definition is suitable
for the sake of this study. However, it is worth mentioning two other common definitions
of profit that highlight the complicated nature of this term. Accountants using the
“accrual basis of accounting” deduct explicit costs (those which can directly be
accounted for) from revenue that are “recorded in the period in which they are earned or
Line, n.d.). Using this definition a firm can record a “profit” despite receiving less money
than they spent in a given time period. The economists of profit definition begins with the
general definition above, yet they deduct both explicit costs (the costs that accountants
use) and implicit (or opportunity) costs which are defined as the value of a course of
action as measured by the costs associated with alternative courses of action (Mankiw,
2004). Both the accountants’ and economists’ definitions highlight complicating factors
activities initiated by nonprofits that generate revenue in direct exchange for products,
services, or privileges (Social Enterprise Alliance, 2005). While the phrase “social
enterprise” may be more commonly used today, Young (2001, p. 1) described it well
when he said social enterprise is an “imprecise concept in the United States.” To illustrate
this ambiguity, the term “social enterprise” can be found referring to a variety of
organizational forms in both the nonprofit and for-profit sector including: an earned-
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income venture; a nonprofit organization that operates an earned-income venture; a for-
profit business which supports a nonprofit, has adopted a social mission or philanthropic
strategy; and the emerging sector made up of these various organizational forms. For
further reading, Alter (2004) offers a review of various definitions as well as a helpful
social-purpose are also commonly combined with the words venture, enterprise, and
because of the evolving debate about its true meaning. Some advocate for a definition of
characteristic, emphasizing that innovation without income is not sustainable in either the
nonprofit or the for-profit sectors (Boschee & McClurg, 2003). Others advocate for a
specifically dependent on the profit seeking paradigm” (Young, 2003, p. 166) and a
method for creating social value that includes options “from pure philanthropy to the
commercial methods of the business sector” (Dees, 2001, p. 5). The working paper
“Social entrepreneurship: What are we talking about?” (Mair & Marti, 2004) highlights
many more definitions of this phrase currently in use and the evolution of this field of
study.
organizing a business. As one of the aims of this study is to better understand how Rhode
Island nonprofit leaders define and identify with the concept of “entrepreneurial” this is
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further discussed in the Findings section. According to Drucker (1993, p. 21), since
“entrepreneur” was first used almost 200 years ago to describe leaders in the for-profit
sector, there has been “total confusion” about its definition. In the United States, it is
often used to describe “one who starts his [or her] own, new and small business,”
however Drucker (1993, p. 21) makes that case that, “not every new small business is
also suggests that nonprofits can be entrepreneurial in ways that do not involve earning
This study focuses on Rhode Island nonprofits and compares these organizations
to a national sample. The following section discusses why Rhode Island is a good sample
ventures, it is representative of the national nonprofit sector in two key revenue streams;
and despite rapid growth in recent years, the small geographic size of the state helps
key revenue streams in similar proportions to all U.S. nonprofits. For Rhode Island
nonprofits 63% of their revenue comes from programs and services and only 14% from
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contributions (which include donations and foundation grants), while organizations
nationwide indicated 64% and 14% respectively. Other revenue streams including
investment income and government grants are also similar in proportions, although not
The nonprofit sector in Rhode Island has grown rapidly in recent years. From
1990-2000, the number of nonprofit organizations (with more than $25,000 in gross
annual receipts) grew by 71.4%, from 842 to 1,443 (Beauchemin & Gallo, 2003). By
comparison, the number of total business firms in Rhode Island grew by only .5%, from
25,110 to 25,243, in the same time period (U.S. Census Bureau, 2005). Yet, compared to
other states, Rhode Island’s small geographic size and resulting structural cohesion were
considered advantageous for this study. Because there is only one major newspaper, one
public radio station, and one community foundation for the entire state, news and
information are relatively easily shared among nonprofits in Rhode Island. This was
helpful in securing a higher response rate than previous national studies have achieved.
by the story of the nonprofit Rhode Island Hospital and its relationship to the for-profit
Rhode Island Hospital Trust Company. This relationship, as told by historian Joseph
venture.2
The effort to build a hospital in Rhode Island started in 1851 with a traditional
doctors sent a letter to all citizens “paying more than $100 in taxes a year” asking for a
2
This illustrative anecdote of the Rhode Island Hospital is based on Garland (1963) and oral history
provided by Rick Schwartz of the Rhode Island Foundation.
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contribution (Garland, 1963, p. 7). They then approached the City Council, asking them
to commit land to the hospital if the private funds could be raised. Neither the Council’s
support nor the private funds were secured, and to the frustration of many, the first
In 1857, upon observing “the desperate conditions under which his medical
friends attempted to treat the poor of Providence,” (Garland, 1963, p. 11) a young Brown
University graduate named Thomas Ives convinced his dying father to leave $50,000 in
his will to help establish a hospital. As wounded soldiers began to return from the Civil
War, the community need was magnified, and “sickness and suffering, wounds and death,
had become the common bonds of people in Rhode Island” (Garland, 1963, p. 11).
In 1863, the then Captain Thomas Ives returned from the war and revitalized the
effort for a hospital. Leveraging the bequest of his father, $25,000 from his uncle, and his
own donation of $10,000, Ives secured a state charter and 12 acres of land from the City
Council. Over the next year, a committee of Trustees raised $305,000 in donations, which
was “by far the largest amount that [had] ever been raised for any single object of charity
in the State,” according to Ives (Garland, 1963, p. 14). Despite the record-breaking
fundraising, and an additional $50,000 bequest from Captain Ives when he passed away
two years later, rising costs and shortages of labor and materials left the trustees wanting
for money to finish the construction so that the hospital could open.
hospital and their own financial interests” (Garland, 1963, p. 15). They leveraged the
community support of the hospital (as well as its cultural capital) to create a for-profit
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bank known as the Rhode Island Hospital Trust Company.3 This bank was required to
make annual payments to the nonprofit Rhode Island Hospital (equaling one-third of its
net profits above six percent), in lieu of normal taxes. Thus, over 135 years ago, a bank
The Hospital Trust Company has since been acquired (and no longer operates
under its original name) but in its time, it “proved to be a substantial source of income for
the hospital” (Garland, 1963, p. 16). The Hospital Trust Company also proceeded to
found the Rhode Island Community Foundation, the only community foundation serving
the state, and one of the collaborators on this research. The Rhode Island Hospital is now
a part of a nonprofit healthcare partnership which controls over $1.4 billion in assets,
provides over $50.4 million in uncompensated care, and employs more than 10,000
ventures, is comparable to the national nonprofit sector in key revenue areas, and the state
cohesion makes it a good population from which to sample. The following Literature
Review section will discuss previously published work in the field to help highlight the
3
The profit sharing structure of the Rhode Island Hospital Trust Company was based on a model
established by the Massachusetts General Hospital in 1814.
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Literature Review
Background
Most of those who have written about earned-income ventures in the U.S. start
with a reminder that “earning” income is not a new strategy for all nonprofits. Hospitals
and universities, which are recognized as the two largest revenue generators in the sector
today, have both historically “earned” income by charging fees for their services. Human
service organizations such as Goodwill Industries have operated retail stores for over 100
years (Goodwill, 2005), the National Geographic Society has been underwriting their
educational mission with magazine sales since 1888 (National Geographic, 2003), and
the Girls Scouts of the U.S.A. have been selling cookies for almost 90 years (Girl Scouts,
describe it, monks used to survive by copying manuscripts by hand and today they carry
on this tradition by selling toner and ink cartridges on the internet. They date the history
of revenue-generating activity in their religious order back 900 years (McCoy, 2004).
ventures they are operating, the resources available for guidance and support, and the
attention focused on these enterprising activities are all growing exponentially. The
following section describes how the trend has evolved over the last 25 years.
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Description of the Trend: From the 1980s to Today
During the 1980s, in one of the earliest studies seeking to understand the trend of
and Keil (1983) described a “sense of explosive activity in the sector.” Five years later,
Skloot (1988, p. 3) described a small yet growing “interest in and trend toward nonprofit
enterprise.” Government cutbacks in the 1980s, that caused both funding shortages and
increased demand for nonprofit services, are cited as the primary reasons that nonprofits
began adopting earned-income ventures in such large numbers during this decade
In the 1990s, Shore (1995) outlined a strategy for a “revolution” among nonprofit
leaders to create rather than simply re-distribute wealth. Speaking about the growth of
numbers of non-profits are developing enterprises to employ formerly homeless and other
In the new millennium, Massarsky and Beinhacker (2002, p. 13) observed, “the
trend to venture has increased significantly over the past twenty years,” and Shore (W.
promote social change, has expanded far beyond what has previously been reported, or
could even be imagined.” Just this year, Foster and Bradach (2005, p. 92) declared,
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“today it seems routine… earned-income initiatives are becoming accepted -- even
Benefits
Much of the previous literature focuses on benefits of operating earned-income
ventures. Advantages, often labled “halo effects” (Massarsky & Beinhacker, 2002) or
organization’s culture, current and prospective staff, reputation in the community, and
organizations “accomplish much more than they could by relying only on the limited
moving an organization towards self-sufficiency (Burns, 2003; King, 2003), while others
(Strickland, 2003; Walls, 2003). Boschee (2001, p. 1) stated that “entrepreneurship in the
Cautions
The majority of those who have discussed the benefits of earned-income ventures
also emphasize that these ventures are not right for all nonprofit organizations. Many
twenty years ago, Crimmins and Keil (1983, p. 32) predicted, “no matter how successful
enterprise ventures become in the sector, they will not be able to cure all of its financial
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ills.” That same year, in a book generally dedicated to promoting earned-income
ventures, Haycock (1988, p. 147) published ten case studies highlighting “pitfalls of
ventures including: goal displacement, competition with the for-profit sector, and
described earned-income ventures as “risky business.” And Dees (1998, p. 56) warned of
“many dangers for nonprofits” and said, “in the best of circumstances, nonprofits face
operational and cultural challenges in the pursuit of commercial funding. In the worst,
Oppositions
While many have expressed hesitation about nonprofits launching earned-income
ventures, Costello was one of the early voices of active opposition. In her review of
para 16) voiced concerns about a potential increase in nonprofits’ “dedication to feeding
Two articles that appeared within the last six months have raised similar concerns.
In “The Pitfalls of Profit,” Weisbrod (2004, p. 46) highlights case studies of ventures
gone bad, and encourages a “rebalancing of the tax-code” to provide more incentives for
Nonprofits Seek Profits?” (Foster & Bradach, 2005) tells the stories of a few incredibly
unprofitable and mission-detracting ventures, while casting doubts about the accuracy of
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financial accounting throughout the sector and questioning the “profitability” claims and
Relation to Mission
Foster and Bradach’s (2005) conclusion to “Should Nonprofits Seek Profits?”
calls for organization to put “mission first” when considering earned-income ventures at
the risk of harming “society itself.” While few have used such strong cautionary
language, the idea that ventures are better off when they are related to an organizations’
mission seems to be the one point about which almost everyone who has studied the topic
can agree. Yet determining what exactly relates to an organization’s mission is far from
easy or clear, and the current fundraising alternatives can have similar mission-detracting
effects. Froehlich (1999) wrote, “we worry and speculate about mission dilution and
endeavors. Yet, these are and always have been the facts of life for a nonprofit
organization.”
related organizations, and Frumkin (2002, p. 30) found that despite the worries of some
the new form of financing fueling the sector’s growth has significantly undermined the
ability of nonprofit organizations to fulfill their missions." Weisbrod (2004, p. 46) added
noting that it is difficult to determine if the mission has in fact been “distorted,” given
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As discussed in the Definitions section, the extent to which earned-income
nonprofits are required to pay taxes on income “not substantially” related to their
missions. The “relation to mission” question is also crucial in examining the diffusion of
earned-income throughout the sector because the missions of nonprofits are one of the
key justifications for their differential tax and legal status. As Brown and Slivinsky
(2003) wrote, “it is hard to overstate the importance of mission in shaping the economic
study of nonprofits.”
wrote, “the precise nature of sacrifices that nonprofits make to raise money is seldom
clear-cut” (1998a, p. 298). This was reiterated recently by Shuman and Fuller (2005),
who discussed the paradox of many fundraising efforts that nonprofits now engage in that
require catering to those with abundant resources, to shift small amounts of those
concluded with a call for nonprofits to embrace the power of entrepreneurship for social
ventures, Emerson and Twersky (1996, p. 13) reported, “our experience has been that,
when managed appropriately, sound business practice can help drive the realization of the
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Spectrum
Recognizing the vast array of program areas in which nonprofits operate, the
ambiguity of missions and the variety of activities that are considered earned-income
ventures, previous authors have tried to make sense of social enterprises along
continuums. Dees (1998) offers a “Spectrum of Social Enterprise” that relates venturing
activity to an organization’s mission, and Crimmins and Keil (1983) developed the
programmatic area. Both highlight the wide range of activities that any individual
organizations they discovered 42% of the organizations in their sample were currently
related; organizations operating EIVs tended to be older than those not operating EIVs;
and “arts and culture” organizations were more likely to operate EIVs than organizations
focused on other program areas. The study “Enterprising nonprofits: Revenue generation
in the nonprofit sector” by Massarsky and Beinhacker was the basis and inspiration for
the quantitative portion of this thesis. Through comparison to their results, this thesis
Massarsky and Beinhacker suggested that, “future research might answer the
question as to whether the differences [in the program area of organizations operating
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EIVs] stem from inherent properties of the kinds of goods and services produced in these
varied sectors, or whether they relate more to cultural and organizational differences
among the organizations” (Massarsky & Beinhacker, 2002, p. p3). They also identified
business planning as one of the key success factors of earned-income ventures and found
only 55% of the organizations operating EIVs had written business plans. They
concluded that this could be improved though focused attention and resources, which led
to the development of the first National Business Plan Competition for Nonprofit
from the sale of products and/or services to the customers beyond the organization’s
business ventures tended to be: social service organizations with employment and
training missions; at least 9 years old; and operating multiple ventures. Thrifts stores
were the most common ventures represented in their sample, 89% of respondents
indicated that their venture related directly or nearly-directly to the mission of their
organization, and 69% reported either making a profit or breaking even (Community
In industries such as day care, nursing homes, and hospitals, nonprofits are
already in direct competition with for-profit firms. Previous research suggests that
commercial” they continue to offer a variety of benefits which characterize them as more
mission-related than profit maximizing. Weisbrod (Weisbrod, 1998a) found that when
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compared to their for-profit counterparts, nonprofits continue to offer: higher-quality
services, lower prices, and continued access to services for those who can not afford to
pay.
income ventures might impact their ability to continue to attract donations and other
resources. Herman and Redina (2001) sought to answer this question through a
situational analysis study of 70 volunteers. They measured how donors would respond to
suggest that donors would be more likely to support “mission-related commercial income
sector including, “they are risk takers, come from financially secure backgrounds, have
access to childcare and support for household duties, and place a high premium on
independence” (Handy & Ranade, 2000, p. 2). And Dart (2004a) constructed a typology
of the related concept of being “business-like” which is used as a starting place for this
study’s examination of how nonprofits in Rhode Island identify with and define
“entrepreneurial.”
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Why the Sea Change is Occurring
As this study suggests, there is a sea change, or fundamental shift, occurring in
the nonprofit sector: nonprofits are operating earned-income ventures and social
enterprises at increasingly high rates. While there has been little empirical research about
why this change is occurring, Weisbrod (1998a, p. 305) offers one compelling reason: in
the nonprofit sector, “expanded commercial activities are the most promising revenue
sources.” Dees (1998) explained the “rising tide of commercialism” in the nonprofit
the organizations to model the independence they seek to instill in their clients, the search
for financial sustainability, the influence of funding agents, and competition among
nonprofits for limited funding. Dart (2004b) explored the emergence of social enterprise
through “legitimacy” and “institutional theories.” This section continues this exploration
organizations and the market-based environment in which they operate to add to these
(Scott, 1992, p. 114). Most of the resources that nonprofits need to operate are similar to
those needed by for-profits, including staff, electricity, and meeting space; yet, some are
perception or assumption that the actions of an entity are socially desirable, proper or
appropriate...”, can be seen as one resource which has a distinctive value for nonprofit
organizations. Because most nonprofits rely on donations for at least one source of
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funding, and people are less likely to donate money to an organization whose legitimacy
they have reason to question, nonprofits have a unique need to be seen as “legitimate” in
order to successfully raise donations. This is particularly true for nonprofit organizations
which suggests that all resources are in limited supply. While some resources might be
easily quantified and measured, most of what nonprofits produce (or provide as a service
to the community) are not. Because the price of these resources is the primary means of
measuring their value, the symbolic value of money itself is also important. As Smith
observed, “We say of a rich man that he is worth a great deal, and of a poor man that he
is worth very little money” (Smith, 1776, para. 1). In this sense, money is not only a
measure of assets; it is often a measure of “worth” as well. This can also be observed in
nonprofit that was unable to pay its bills would generally be thought to have little value
and ones that have more resources are often assumed to be “worth” more.
improve when its behaviors are aligned with the norms and social expectations of the
larger society (Tucker & Baum, 1992, p. 62). These are grounded in “open-systems”
theories which suggest that the environments in which organizations operate influence
their structure (Handel, 2003). These environments have been characterized as primarily
symbols and belief systems are of primary importance (Meyer & Rowan, 1977), while
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speed of production, and specific quality or financial metrics. Most nonprofits operate in
more symbolic ‘bottom line,’ represented by prestige, support, and legitimacy” (Dill,
which “look to profit margin and market share as indicators of success” (Dill, 1994, p.
351).
that organizations adapt their structure as a result of forces which can be characterized as:
that spread through professional networks or trade associations, and “mimetic” forces
in Rhode Island, the drivers of the institutionalization of earned-income ventures are far
from clear. There is little evidence to suggest that nonprofits are being formally
“coercion” (in the sense of influence across an unequal power structure) may be a factor.
Level-funding from the state was cited by multiple organizations as a specific reason for
The work of Social Venture Partners of Rhode Island and the Rhode Island
Foundation (both partners in this research) may also be having influencing effects on
local nonprofits. Both organizations have offered funding specifically for social
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enterprises and they have worked together to host several workshops and forums on
topics related to social enterprises and earned-income ventures. The chance that some
seen in a good light by these funding agents should not be overlooked, yet the data from
this study suggests that “mimetic” forces are the primary motivators of nonprofits
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Methods
This study was conducted in three parts: a web-based survey, semi-structured
interviews, and a comparison analysis. The survey was available online from February
1st -15th, 2005. The interviews were conducted in March and April, 2005 and the results
were then analyzed and compared to national data that was collected through a separate
initiative in 2002. The following section provides more detail about the methods used to
accessible through a link on the Social Venture Partners of Rhode Island website
[attachment 10]. The questions were based on those developed by Massarsky and
The survey consisted of 80 possible questions and skip-logic was used to reduce
the number of questions asked of any given respondent. Based on previous answers each
questions used in the skip-logic sequence were mandatory, and the other 72 were
optional.
The primary change between the survey used in this study and that of the previous
one was the result of a technical limitation of the software. The Massarsky-Beinhacker
survey asked detailed side-by-side questions about the two ventures that provided the
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greatest benefit to the organization. This survey only asked details about the one most
successful venture because the side-by-side method was not possible, and asking the
questions separately would have resulted in 15-20 additional questions. Other changes
involved very limited re-wording of questions, removal of answer choices, and the
addition of a few questions such as: What is the mission of your organization? Who
Informed Consent Statement and issues such as program area, mission, general budget,
organizational scope and size. As an example of how the skip logic worked, question #9
chose “yes” they were asked question #10: “In what ways is your nonprofit
entrepreneurial? What entrepreneurial strategies are you using?” If they chose “no” to
The answer to question #11 was the primary determinant in the length of the
survey and types of questions for each respondent. It provided a definition of earned-
questions about their organizations, the earned-income venture(s) they were operating
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and the effects of the ventures on their organization. Those who indicated that they had
The final questions, asked of all organizations, address issues including: plans to
start any ventures in the next year, types of support that might be helpful in doing so, how
participants heard about the study, and personal and organizational contact information.
Recruitment of Participants
The web-based survey was open to all 501(c)(3) organizations operating within
the state of Rhode Island. This population is estimated to be about 5000 organizations,
but because many smaller and religious nonprofits are not required to file tax returns the
exact size of this population is unknown. The mailing addresses for these organizations
were collected from one public database (Internal Revenue Service, 2005a) containing
4564 records, and two private databases. Duplicates, charitable trusts, and scholarship
funds were removed and the remaining 4652 addresses were then verified through the
National Change of Address (NCOA) and Coding Accuracy Support System (CASS)
services provided by Melissa Data Services. The final list consisted of 4342 organizations
that were each mailed a postcard [attachment 5] on 2/28/05 inviting them to participate.
6] was sent directly to 1691 organizations on 3/2/05. A total of 370 of these emails were
returned as undeliverable.
On 3/7/05 media releases were distributed from the Rhode Island Foundation
[attachment 7] and the Brown University News Service [attachment 8] to all local
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were also made on the WRNI radio station on the last day of the study, 3/15/05. E-
newsletters from three separate organizations [attachments 12, 13 and 14] contained
Survey Incentives
As incentives, recruitment materials highlighted that each participant who filled
Comparison Analysis
The results from the Rhode Island web-based survey were compared to data
Revenue Generation in the Nonprofit Sector” (Massarsky & Beinhacker, 2002). The
Rhode Island sample includes 329 organizations collected over a two-week period in
2005, and the national sample includes 519 nonprofits from across the country, collected
Interviews
A series of 22 interviews were conducted in March and April, 2005 [attachment
1]. Of these, 11 interviews were conducted with nonprofit leaders, most of which were
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based on attempts to balance a diverse set of organizational demographic considerations
including, size, location, budget, program area and venturing status. These interviews
were conducted over-the-phone, lasted about one half hour, and used a nine-question
organizations as supporters of the Rhode Island nonprofit sector. These interviews used a
separate question guide [attachment 3] that asked questions about their observations and
download of the report, and were considered for the Profiles section and quotes in the
final report.
through Zoomerang.com’s cross tabulation function. The Rhode Island and national were
data were then analyzed with STATA 8, the general-purpose statistical software package.
The open-ended responses were analyzed using the ThoughtSCAN keyword analyzer and
then through manual content analysis. The interviews were primarily treated as brief
exploratory case-studies.
The quantitative data analysis involved five steps. First, the research questions
were established and outcome and control variables were identified. Next the variables
were examined and collapsed into categories making sure not to distort the distribution of
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the raw data.4 Next the relationship of each independent variable was compared to the
dependent variable with Bivariate Cross Tabulations and Chi Squared Tests (on both the
Rhode Island and national data). The data was then pooled and compared for statistical
significance. And finally, logistic regression was run on the Rhode Island, national and
independent variables.
4
e.g. on the survey there were originally nine sub-categories for the program variable “human services”
These included “human services-employment and jobs” and “human services-youth development.” For
analysis, these were all collapsed into the one “human service” category.
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Rhode Island Findings
that responded to the Web-Based Survey. The largest groups of respondents had program
areas focused on “Human Services” (21%), had been in operation for at least 20 years
(52%), and had budgets less than $250,000 (44%). The majority of organizations self-
identified as “entrepreneurial” (53%), and they were currently operating one or more
The two program areas least represented in the sample were “International
with 1% and 2%, respectively. There were noticeably fewer organizations that had been
in operation for six to ten years, and they constituted only 13% of the sample.
Organizations with larger budgets, greater than $5 million, only constituted 12% of the
sample.
respondents, yet there was almost an equal number that identified as “non-
sample are currently operating at least one earned-income venture. Those which have
never operated an EIV constitute 32.3% and those that are “not currently, but operated
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Table 1: Self-Identification as “Entrepreneurial” (of Full RI Nonprofit Sample)
60%
Entrepreneurial % 40%
1. Yes 53
2. No 47 20%
N=298 100
0%
Yes No
80%
Operating EIV %
60%
1. Yes currently 62
2. Never 33 40%
3. Not currently but did 20%
6
so in the past
N=285 100 0%
Currently Never In Past
are operating more than one venture. Forty-Six percent of all the ventures (N=220) in
(N=140) report that service-related ventures are bringing the “greatest social and
financial benefits” to their nonprofit organization. As [Table 4] shows, the vast majority
of these ventures (80% of N=138) are structured as “in-house” operations, which means
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they are operated within the parent nonprofit organization, as opposed to being operated
60%
Number of EIVs %
40%
1. One 43
2. Two 23 20%
3. More than Two 35
N=142 101 0%
One Two > Two
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Description of the RI Earned-Income Ventures
Earned-income ventures provide products and services across a wide range of
houses constructed and then sold at-cost directly to home owners with an interest-free
mortgage. Examples of services include on-site medical and dental services for a
More sample descriptions of these ventures can be found in [Table 5] and [Table 6].
Houses constructed and then sold at-cost directly to Consulting fees and trademark licensing royalties for
home owners, with an interest free mortgage. organizing events across North America.
Culinary and nutrition education program designed to
promote locally grown produce and improve the nutrition
Magazine subscriptions
of low-income families through outreach and education
at RI farmers markets.
Graphic design studio that provides services for
Mailing house companies such as logo design, annual reports, and
stationery design.
Paintings, t-shirts, clocks, cards and poetry chap books Low-cost sterilization surgery for community pets
Publications, curriculum and other programmatic Marketing and box office service for arts and cultural
materials groups
Thrift store, and bulk clothing sales Restaurant and piano bar
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Table 6: Sample Descriptions of Property, Marketing/Licensing-Related, and Other EIVs
Property Marketing/Licensing
Apartment rentals Point of purchase candy sales @ banks
ourselves as a nonprofit,” says Cookie Place Cafe Executive Director William Monahan.
What Cookie Place is best known for is great cookies! For the last 23 years, Cookie
Place, located in downtown Providence, has provided employment and training for
“persons with psychiatric disabilities.” Cookie Place operates a cafe, which serves
breakfast and lunch, as well as a catering business that supplies pastries, sandwiches and
beverages to local companies and private events. They have been recognized by Rhode
Island Monthly Magazine for the “Best Cookies in Rhode Island” for four years.
earns about half its operating budget through product-related revenue and the other half
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from state grants through the department of Mental Health, Retardation and Hospitals.
For the last 6 years, as costs have risen, Cookie Place has received level funding from the
state. As a result, it has diversified its product line, with whoopee pies and birthday
cakes, to generate more revenue, and is developing a web site to raise awareness of the
organization.
The Edward King House is an historic mansion that was given “to the people of
Newport” as a gift in 1912 by George Gordon King. It has operated as a nonprofit library
and park, as well as a senior center with the mission “to provide program activities to
seniors.” It has a diverse revenue stream which includes six different sources of income:
service-related revenues, and endowment income. [Table 7] shows more details of the
funding mix, of which government grants constitute 40%. According to the director,
David Dean, “level funding from the state” has served as an incentive for Edward King
historic landmark building for weddings and events on weekends when it is not in use as
a senior center.
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Table 7: Funding Streams of the Edward King House
50
40
30
20
10
0
Foundation Government Donations Endowment Membership Service-
grants grants from income dues related
% of Funding 10 40 10 10 5 20
Crossroads Rhode Island, formerly known as Travelers Aid of Rhode Island, is the
largest homeless services organization in the state. According to Joe Potenza, the Director
throughout their 115 year history, they have never operated any “real” earned-income
ventures (which he distinguishes as ventures that seek to make money, rather than just
cover costs). Opening this spring, the Crossroads Copy Shop will provide bulk
photocopying, electronic printing, and publishing services, and possibly an offset press.
According to Executive Director, Ann Nolan, this “micro-business,” which will operate
as a program of the parent nonprofit, will enhance the organization’s ability to achieve its
mission. "We've learned that the chances for [our clients] success are greatly enhanced
when access to affordable housing is combined with social service intervention and
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vocational training for a period of six months to a year," said Nolan ("Crossroads Rhode
Island," 2005).
questions when examining the impact of earned-income ventures. Because missions are
often general, and evolve over time, it is difficult to examine how they may have drifted
nonprofit leaders have to say about the topic, it appears that the ventures they are
operating are highly related to their mission. As [Table 8] shows, eighty-seven percent
said that the goals of their venture are related “a lot” or “to a great extent” (4 or 5 out of a
Table 8: How Related the Goals of the EIV are to the Mission of the Organization
80%
Relation to Mission %
1. Not at all 3 60%
2. A little bit 4 40%
3. Somewhat 6
4. A lot 24 20%
5. To a great extent 63 0%
N=134 1 2 3 4 5
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Reasons for Launching (and Not Launching) an EIV
In order to fully understand the diffusion of earned-income ventures throughout
the nonprofit sector this study captured the perceptions of those that are currently
operating ventures as well as those that have never operated ventures. Sixty-six percent of
generating “income/surplus for programs” was a “very important” reason for launching
their earned-income venture. As [Table 9] shows, the second most important reason is
organization’s revenue stream (48% on N=117). The least important reason among the
constituents” which 50% (N=111) of the respondents indicated was “not important.”
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The following typify the range of responses about other reasons organizations
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As [Table 10] shows, there seem to be many organizations that are interested in
starting ventures, yet have not done so because of a lack of resources. Among those
organizations that have never operated an EIV, two of the most commonly identified
reason are the lack of “personnel resources to develop and manage the venture” (36% of
N=93), and the “lack financial resources” to start a venture (26%). Of particular interest
are the 22% that are concerned about “exemption status and/or tax issues.” It is also
surprising that 30% of this group “have never considered the idea.”
Table 10: Reasons for Not Launching an EIV (by Organizations That Have Never Operated)
Reasons %
1. Lack personnel resources to
develop and manage the 36
venture
2. Never considered idea 30 40%
3. Venturing not part of our
29
mission
4. Lack financial resources to 30%
26
launch
5. Concerned about exemption 20%
22
status and/or tax issues
6. Concerned about
13 10%
operational/financial risks
7. Restricted by funding 13
0%
8. Lack board interest/support 8
1 2 3 4 5 6 7 8 9
9. Other (please specify): 14
N=93
Note: Does not total to 100% because
respondents were asked to choose all
that apply.
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Perceived Impact of Operating an EIV
Overall, the leaders of nonprofits operating earned-income ventures perceive the
impact of the ventures to be very positive. This is consistent across the nine different
(N=116) report that operating an EIV has had a positive or very positive impact on the
positive impact on their “organization’s mission;” and 73% (N=115) indicate that
operating an EIV has had a positive or very positive impact on their “service and program
delivery.” Only 2% of respondents indicate any negative impact across the nine
categories of questions. See [Table 11] [Table 12] and [Table 23].
80%
Impact % 60%
Negative 2 40%
Neutral/No Impact 25
Positive 73 20%
Average N=115 0%
Negative Neutral Positive
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Table 12: Perceived Impact of Operating an EIV on Nonprofit Organizations
70%
60%
50%
40%
30%
20%
10%
0%
very somew hat neutral/no somew hat very
negative positive
negative negative impact positive positive
more earned-income venture as show in [Table 13]. Interestingly, the majority of those
that said they were “not-entrepreneurial” (56% of N=129), also indicate they are
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Table 13: The Relationship between "Entrepreneurial" and Operating an EIV
80%
60%
40%
20%
0%
Currently operating Never operated
1 or more EIV an EIV
Yes 74% 26%
No 56% 44%
behavior in terms of four distinct categories: goals, service delivery, management, and
the same thing, there appears to be an important distinction between these two concepts
The primary value of Dart’s framework for the sake of this study is the concept of
behavior. Nonetheless, the following themes emerged from the 140 responses collected.
topology would classify as “service delivery,” yet also includes activities outside of the
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When asked about entrepreneurial strategies, nonprofit leaders cited a wide range
of ventures that involve outputs of goods ors services in exchange for money, including:
selling products retail and wholesale (such as souvenirs, food, poinsettias and art),
purchasing and renting property, staging concerts and events, licensing, and charging fees
(often on a sliding scale). A small group of respondents also included planning for an
“looking into marketing a specialty food product,” “looking into construction and
quickly and effectively address new opportunities and needs,” “always improving,”
trends and customer feedback,” and “moving swiftly and adroitly, using the materials we
entrepreneurial and thus has no direct relation in Dart’s framework. For those that used
entrepreneurial in the “unique” sense, they described their organizations as the only one
in the state, or the country to focus on doing what they do or working with their specific
population. For others it involved a unique approach to partnering and collaborating with
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Typifying how some consider their organizations as entrepreneurial, despite never
having operated an earned-income venture, one leader said her nonprofit was:
entrepreneurial because it: “uses grant funds and specified donations as 'venture capital'
to try and test new program ideas.” Although he went on to say, “we are not
At the other end of the spectrum, the leader of an organization that is currently
Even if we could, we would not offer our programs completely for free because
people would not value them. Earning money from programs is just a matter of
fact…We don't think of it as being entrepreneurial at all. But we would fail if we
didn't charge for programs because we do not have enough un-earned income to
sustain operations and because donors would be less supportive if they thought
everyone was getting a free ride.
entrepreneurial. Yet for some, as evidenced by the last quote, earning income alone is not
necessarily entrepreneurial. There are at least three other distinct ways that nonprofits
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earned-income venture, a general approach to work and decision making, and “unique”
and “innovative” behavior. Thus in the nonprofit sector, as in the for-profit sector (as
discussed in the Definitions section) there still appears to be significant debate about
ventures (65% of N=118) and those that have never, but are interested in operating
ventures (86% of N=64) indicate that “access to capital / financial resources” would be
the most useful types of support and assistance to help them launch and sustain their
ventures. Peer support, mentoring and workshops/seminars rate last for both groups.
Table 14: How Useful Various Types of Support and Assistance Would Be to
Organizations Currently Operating EIVs
80%
60%
40%
20%
0%
Capital/ Technical Business
Market Peer Workshop/
financial assist/ plan Mentoring
research support seminars
resources consulting assistance
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Table 15: How Useful Various Types of Support and Assistance Would Be to Organizations
That Have Never, But Are Interested In Operating an EIV
80%
60%
40%
20%
0%
Capital/ Business Technical
Market Workshop/ Peer
financial plan assist/ Mentoring
research seminars support
resources assistance consulting
helped write business plans for five earned-income ventures, and other nonprofits have
joined together to form a learning community on the topic of social enterprise. The
“hospitality and direct services to the homeless and poor of Rhode Island”(Amos House,
2005). Amos House recently launched a “new micro business” called Amos House
Works that that provides job training programs for clients and healthy meals for area
schools and other customers. Their catering venture was recently selected as a finalist
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from over 450 entrants in the National Business Plan Competition for Nonprofit
While most of their business school peers were focused on learning how to
maximize profits, this spring, a group of University of Rhode Island MBA students spent
their final semester learning how to apply financial ratios and marketing techniques to
help nonprofit organizations. Five teams of students from Professor Deborah Rosen’s
Marketing course teamed up with local nonprofits to write business plans for their
earned-income ventures. These ventures include: a rest-stop cafe which will be opening
up along the state’s busiest bike trail operated by Corliss Institute, a service and job-
training organization focused on Rhode Island’s deaf community; and a plant design and
care service for corporations that may be launched soon by GroundWork Providence.
that through shared research, reflection, and analysis we will be able to embark on more
better serving our clients and meeting our missions” writes the facilitator, MJ Kaplan, of
Kaplan Consulting (2005). Led by Carol Malysz, Director of the Center for Women and
Island, the group recently applied for a planning grant through Third Sector New
England.
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Rhode Island Compared to the National Sample
In order to compare Rhode Island to the rest of the nation, bivariate cross-
tabulations, chi-square tests, and logistic regressions were run on both the Rhode Island
sample and the raw data from the national Massarsky-Beinhacker (Massarsky &
Beinhacker, 2002) study. Both data sets were coded to match the variables described in
[Table 16] and responses that had missing data for any of these variables were removed.
The resulting samples were comprised of 260 cases for Rhode Island and 389 cases for
5
Note: The data associated with the answer choice, “operated one or more earned-income ventures in the
past, but not currently” was excluded from this model.
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Rhode Island Descriptive Statistics
Of the relevant Rhode Island sample, 66% (N=260) of the organizations report
that they are “currently operating an EIV” and only 34% report that they have “never
operated an EIV.” There are an almost even number of those organizations that identify
as “entrepreneurial” (53%) as those that indicate they are not (47%). “Human services”
organizations make up the largest program area category (22%), and “religious”
organizations only comprise 2% of the sample. Organizations that are at least 20 years
old account for 51% of the population, and organizations that are 6-10 years old make up
only 13% of the sample. Organizations with budgets less than $250,000 are the most
represented category of budget size with 44%, and organizations with the largest budgets,
they are “currently operating an EIV” and 52% report that they have “never operated an
EIV.” Organizations that identify as “entrepreneurial” are the clear majority (75%) as
compared to only 25% that indicated they are not “entrepreneurial.” As with the Rhode
Island sample, “Human services” organizations make up the largest program area
category (32%), and “religious” organizations comprise the smallest group at 4% of the
sample. Also similar to the Rhode Island sample, organizations that are at least 20 years
old account for the largest age category, 36% of the national sample, and organizations
that are 6-10 years old comprise the smallest group in the national sample at only 17%.
Organizations with budgets less than $250,000 are the most represented category of
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budget size with 33%, and organizations with the largest budgets, over $5 million, only
Before using logistic regression to control for the effects of independent variables,
Cross-Tabulations and Chi-Square tests were used to examine the influence of the each
question variable on the outcome variable, and test for statistical significance. The
following descriptions are grouped by variable, and include explanations of the Rhode
“Entrepreneurial” Organizations
Among the Rhode Island organizations in this sample, 75% of those that identify
that are not “entrepreneurial. Pearson chi2(1) = 10.7208 Pr = 0.001 indicates that this is a
In the national sample, only 57% of those that identify as “entrepreneurial” report
currently operating an EIV and only 20% of those that are not “entrepreneurial.” This is
0.000.
Program Area
In the Rhode Island sample, organizations with either program areas focused on
“Arts / Culture / Humanities” and “Public / Society Benefits” are the most likely to be
operating earned-income ventures with 78% of N=37, and 77% of N=26 respectively.
Organizations with “religious” program areas are the least likely to be operating EIVs,
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33% of N=6, and religious organizations are the only organizations with more that have
“never” operated an EIV than those that they are “currently” operating an EIV. Pearson
in operating an EIV across program areas is no greater than might be observed by chance
alone.
humanities” organizations are again the most likely to be operating EIVs with 75% of
N=40, and “religious” organizations are the least likely with 75% of N=20.
Age of Organizations
significant factor in their likelihood in operating a venture. Even among the youngest
organizations, those that are less than 5 years old, 41% (N=44) report that they are
currently operating an EIV. Of the organizations which are over 20 years old, almost 75%
(N=135) report that they are currently operating an EIV. Pearson chi2(3) = 21.2400 Pr =
In the national sample, only 32% (N=146) of the organizations that are less than 5
years old, report currently operating an EIV. This is also a statistically significant
Budget
($250,000-$999,000 and $1-4.9 million) are the most likely to be operating EIVs, with
76% of N=78 and 68% of N=38). Organizations with the smallest budgets, of less than
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$250,000 are the least likely to be operating EIVs with 58% of N=115. Pearson chi2(3) =
7.1203 Pr = 0.068 indicates that there is not a significant difference across budget
categories.
size and likelihood of operating an EIV. Organizations with the smallest budgets, of less
than $250,000 are the least likely to be operating EIVs with 45% of N=170.
Organizations with the largest budgets are the most likely to be operating EIVs, with
64% of N=94 currently operating EIVs. Pearson chi2(3) = 38.8190 Pr = 0.000 indicates
that there is a significant difference across budget categories at the national level.
Logistic Regression
The advantage of logistic regression is the ability to control for certain factors to
operating an earned-income venture. The following section discusses the results of the
regression tests and run on the Rhode Island [Table 31] and national [Table 32] samples
by variable categories. With only one exception, the findings at the national and Rhode
Island levels were directionally identical.6 While the magnitude varied, once controlling
for other variables, the factors associated with operating an EIV at the Rhode Island and
national level appear to be similar. Once the results were pooled, and all variables were
6
In the case of directional variance, the organizations with the largest budgets (over $5 million) in Rhode
Island were actually the least likely of the budget categories, to be operating earned-income ventures.
However, this finding was not statistically significant. [Table 32] and [Table 33]
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[Table 33] national organizations were only .33 times as likely to be operating earned-
income ventures and this finding was statistically significant at the p<.01 level.
“Entrepreneurial” Organizations
In both the Rhode Island and the national samples, organizations that identified as
controlled for program area, age, and budget size. In Rhode Island, “entrepreneurial”
organizations were 2.8 times more likely to be operating an EIV than “non-
“entrepreneurial” were 5.6 times more likely. Both of these findings are statistically
Program Area
all seven other program areas are less likely to be operating earned-income ventures at
both the Rhode Island and National Level. This is only statistically significant for four
out of the seven categories at the national level, and two out of seven at the local level,
Table 17: Program Area - Odds of Operating an EIV at the National and Rhode Island Level
(Reference Category = Arts / Culture / Humanities)
1.0
0.5
0.0
Education Enviro Health Hum Serv Pub Ben Religion Other
National 0.2 0.5 0.4 0.3 0.4 0.2 0.4
Rhode Island 0.4 0.4 0.3 0.4 0.8 0.1 0.2
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Age of Organizations
ventures as shown in [Table 18]. At the national level, none of the age categories are
significantly different, but in the Rhode Island sample, there is a linear trend and the two
oldest categories are significantly more likely to be operating EIVs than the youngest
Table 18: Age - Odds of Operating an EIV at the National and Rhode Island Level
(Reference Category = < 5 years)
5.0
4.0
3.0
2.0
1.0
0.0
6-10 years 11-20 years >20 years
National 1.0 1.6 1.3
Rhode Island 1.2 3.0 5.0
Budget
operating ventures, as shown in [Table 19]. This is particularly true at the national level
where organizations with budgets of less than $250,000 are significantly less likely to be
operating ventures. Organizations with budgets of $250-$500,000 are 2.5 times more
likely to be operating EIVs and those with over $5 million budgets were 4.6 times more
likely to be operating ventures than the organizations with the smallest budgets. At the
Rhode Island state level, the relationship between budget and likelihood of operating an
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Table 19: Budget - Odds of Operating an EIV at the National and Rhode Island Level
(Reference Category = < $250k)
5.0
4.0
3.0
2.0
1.0
0.0
$250-$999K $1-$5M > $5M
National 2.6 2.5 4.6
Rhode Island 1.5 1.1 0.9
Limitations
This study has several limitations that should be considered when interpreting the
results. The primary limitations are threats to internal validity concerning sample bias,
and the reliability of the instrument. Caution should therefore be used when attempting to
Sample biases may have resulted from the use of the open-invitation method,
rather than stratified or random sampling techniques. While a random sampling technique
may have had some advantages, as discussed in the Methods section, the entire
random sample of this population would have resulted in a biased population, specifically
excluding those organizations that are not in any of three databases used for outreach.
size and program area might have also been preferable, however, there is no known
The relatively short amount of time the survey was active may have also biased
the sample. A previous national study on nonprofits suggested that “older, larger, and
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organizations more reliant on contributions take longer to return a survey” (Hager, 2002,
p. 9). Additionally, as [Table 20] shows, there was a small surge in responses during the
last two days the survey was available online. This suggests that with more time there
30%
20%
10%
0%
3/2 3/3 3/4 3/5 3/6 3/7 3/8 3/9 3/10 3/11 3/12 3/13 3/14 3/15
% 26% 9% 9% 3% 1% 7% 18% 6% 3% 4% 1% 1% 6% 5%
As shown in [Table 21], 54% of respondents found out about the survey through
email. This suggests that all participant recruitment efforts were not equally effective.
Because email invitations were available for less than half of the total population, this
could have significantly biased the results towards those organizations which received the
email invitation. The web-based nature of the survey may have also biased the results
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Table 21: How Respondents Found Out About the Survey
60%
40%
20%
0%
Friend/
Email Postcard Website Newspaper Other
Colleague
56% 33% 3% 1% 3% 4%
Additionally, the reliability of the survey instrument has not been empirically
tested. As discussed in the Methods section, the survey instrument for this study was
based on an instrument used in the Massarsky & Beinhacker (2002) national study which
As [Table 22] shows, there was a high rate or respondents that started, yet did not
fully complete the Web-Based Survey (43% of N=370). In this case “complete” meant
that the respondent reached the end of the survey, as opposed to actually providing an
answer to every question. Some the “completes” therefore included questions that were
left blank at the respondents’ discretion. The “incompletes” are assumed to be unfinished
as a result of the length of the survey rather than any meaningful difference between the
organizations that completed the survey and those that did not complete the survey. For
the descriptive statistics, the “incompletes” were included with the “complete” responses,
which explain the varying sample size. For the statewide and national regression models,
any cases with blank answers for the question variables were systematically excluded.
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Table 22: Complete vs. Incomplete Responses to the RI Web-Based Survey
60%
“Complete” %
1. Yes 57 40%
20%
2. No 43
0%
N=369
1 2
The relatively low number of respondents that indicated they were “not currently
but had operated 1 more ventures in the past,” (6% of total N=285) lends credibility to
the assertion that “failing organizations are less likely to volunteer [for this type of study]
than successful ones -- and ventures that have already closed their doors never do
[respond to surveys]” (Foster & Bradach, 2005, p. 95). While information was collected
While some inferential statistics were used, the value of this study is largely in the
for future studies concerning this topic include: systematically testing the reliability of the
Some of the results reported here appear to support and extend previous research
findings. At the very least, the consistency of these findings suggests that earned-income
because of the limitations outlined here, the findings in this report should be interpreted
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Ethical Considerations
The protocol for this study received approval through the Institutional Review
(category two) from the regulations at 45CFR46 regarding the use of human subjects in
research. According to the IRB, the other methods of data collection, including the
Interviews with Supporting Organizations and the Web-Based Survey did not warrant
interviewees and survey participants. Detailed measures were taken to ensure the privacy
and confidentiality of all subjects for the wed-based survey, including password
encrypted files and secure storage. According to IRB ethical guidelines for internet
research, “online survey instruments must explain at the outset what options are
available, if any, for retrieving and discarding responses, and must allow “no response”
as an option for every question” (Hicks, 2004). While the technology of skip-logic
required a few specific questions to be mandatory, all other questions were optional.
For the interviews, each participant was made aware that the purpose of the
individuals and organizations, and therefore the interviews were not considered
confidential. At the time of this publication, there are no known or anticipated risks to
any of the research subjects or their organizations as a result of their association with this
study.
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Conclusions
A fundamental shift is occurring in the nonprofit sector. This examination of 329
Rhode Island nonprofits demonstrates that a wide variety of them are operating earned-
income ventures to support their programs, generate positive community relations, and
help move their organizations towards self-sufficiency. It is also noteworthy that Rhode
Island organizations are operating ventures at three times the rate of a comparable
design studio, running a restaurant and piano bar, managing a revolving loan fund, and
This study extends the work of previous research by focusing on one state, using
statewide results to a national sample. Across 17 out of 18 categories, the Rhode Island
and national samples indicate similar trends in characteristics such as the age, program
For some nonprofits earned-income is nothing new, and like the rest of the nation,
Rhode Island has a long history of nonprofits operating earned-income ventures. This
study demonstrates the remarkable extent to which nonprofits are currently adopting this
form of revenue creation, characterizes the breadth of the organizations now operating
these ventures, and highlights support needed to continue to grow the social enterprise
sector.
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Many organizations that are not currently operating ventures are interested in
doing so, yet are limited by access to resources. One survey respondent contacted the
researcher to add:
We all could use money, but in this day and age… grants are hard to come by. Is
there any way that non-profits could apply for low-interest loans to
cover initial start-up expenses…? If the income generating proposals are strong
enough to be worthy of a reasonable loan, repayment of the loan is a given.
This suggests that targeted funding in the form of loans and grants could help nonprofits
Survey respondents also indicated that they generally lack information regarding
the potential implications of venturing on their legal and tax status. This suggests that
interested in venturing.
An example of one local resource addressing both the education and funding
McMahon, the Executive Director, indicates that the EDC has recently provided two
ventures with seed capital, and he also notes that the EDC has a largely untapped “talent
pool to help write business plans, and a staff with a wealth of managements expertise
who can help advise [nonprofits interested in venturing]” (McMahon, 2005). This type of
support and partnership has the potential to dramatically affect the way nonprofits
operate.
While it may be too soon to tell if the sea change towards earned-income is
ultimately a good thing for the nonprofit sector - or society as a whole - this study
demonstrates promising signs that this shift is being embraced by nonprofits. Staff
members from the organizations operating these ventures indicate that they are having
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overwhelmingly positive effects on their organizations. According to former nonprofit
director and current Rhode Island Secretary of State, Matt Brown, “it is a good thing that
people are exploring [earned-income ventures]. The work that the nonprofit sector does is
so important…. as a society we have to figure out a sustainable way to fund it” (M.
Brown, 2005).
into the trend of social enterprise within a state’s nonprofit sector. What is occurring in
Rhode Island appears to be sea change in the way nonprofits operate. Hopefully this data
can help enhance our understanding of the development of this vital sector and serve as a
guidepost for future research about nonprofits and earned income ventures.
nonprofits in other states. Thus, the primary suggestion for future researchers is to
conduct similar surveys in other states and then compare across states. Other suggestions
include: empirically test the reliability of the survey instrument used in this study;
earned-income ventures; and continue to survey stakeholders other than nonprofit staff
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Attachments
1. Interview Participants
Category Name Title Organization
Associate Professor of
Academic Sandra Enos, Ph.D. Rhode Island College
Sociology
University of Rhode Island
Academic Deborah Rosen, Ph.D. Kingston MBA Director
Business School
Director of Retail
Funder Peter Walsh Lending and Community Bank Rhode Island
Relations
Funder Tony Maione President / CEO United Way of Rhode Island
President/ South Providence Development
Nonprofit Joe Newsome
Executive Director Corporation
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2. Interview Guide for Nonprofits
For nonprofit organizations currently operating (or planning to operate) 1 or more earned income venture(s).
Note to all interviewees: The primary objective of this interview is to gather information on the story behind your
organization’s experiences operating (and/or planning) an earned-income venture in Rhode Island.
The interview will last about 30 minutes and will focus on the following:
For supporting organizations (local funders, consultants, and academics in the field).
Note to all interviewees: The primary objective of this interview is to gather information on the entrepreneurial
strategies and earned-income ventures undertaken by nonprofit organizations within Rhode Island.
The interview will last about 30 minutes and will focus on the following:
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4. Informed Consent Form
This is a Brown University research study in collaboration with Social Venture Partners
of Rhode Island and the Rhode Island Foundation.
The purpose of this interview is to learn more about your organization’s efforts operating and/or supporting social
enterprises. Information you provide in this interview may be attributed to you and your organization in our final
report which will be publicly distributed. If you do not wish to have your statements attributed to you or your
organizations, please let the interviewer know.
Participation in this research study is entirely voluntary, and you are under no obligation to participate.
There are no known or anticipated risks to you from participating in this research. Refusing to participate or
discontinuing the interview, will involve no penalty or loss of benefits to you which you are otherwise entitled and
will not affect your relationship with any of the organizations conducting this research. You may discontinue the
interview at any time, and you may choose not to answer any questions.
The full transcript, notes, and/or any recording of this interview will be kept confidential. All personally and
organizationally identifiable information will be removed, coded, and stored separately from your responses. These
data and codes will be stored in separate locked files accessible only to the principal investigator.
If at any time you have questions about your rights related to this research, please contact: Susan Toppin or
Dorinda Williams at the Office of Research Administration, Brown University, Box 1929, Providence RI, 02912.
Phone: 401-863-2777.
For any other questions about this research project, please contact the Principal Investigator, Seth Marbin of Brown
University by email at Seth_Marbin@brown.edu.
Do we have your permission to create an audio recording of this interview to assist in accurate note-taking?
( ) Yes ( ) No
By signing below you indicate you are over 18 years old, and that you have read and understood this information.
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5. Postcard
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 70 of 104
6. E-mail
RI Nonprofit Leaders:
You are invited to participate in a statewide survey for all 501(c)(3) organizations.
To join in, visit our website before March 15, 2005: http://www.rifoundation.org/svpri/survey.asp
This research study is being conducted by Brown University in collaboration with Social Venture Partners of
Rhode Island and The Rhode Island Foundation, and with assistance from The Yale School of Management –
The Goldman Sachs Foundation Partnership on Nonprofit Ventures.
The purpose of this research is to learn about the entrepreneurial and revenue-generating activities of nonprofits
in our state. This study will be the first of its kind comparing one state's efforts to a national research study.
If you want your organization to be represented and possibly highlighted in our final report, complete the
brief online survey by March 15th at 5 pm.
If you know of a RI nonprofit leader who did not receive this invitation, please help spread the word by forwarding
this email to your colleagues.
For any questions about this research study, please contact the Principal Investigator, Seth Marbin via email at:
smarbin@alumni.brown.edu or reply to this message.
This email is intended for leaders of nonprofit organizations operating within the state of Rhode Island who have
an established relationship with one or more organizations named above. If you are no longer affiliated with a RI
nonprofit or if you do not want to receive any more information about this study, please reply with "no thanks" in
the subject line and your address will be cleared from our list.
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7. Media Release 1
Wanted: a few good nonprofits that have started – or are thinking of starting – business enterprises
Survey underway through March 15 seeks to compare statewide efforts to a national study
A Rhode Island survey hopes to uncover a growing entrepreneurial spirit among the state’s nonprofit
organizations.
“We’re looking for nonprofits at all stages of entrepreneurial thinking and development: some are just
exploring the idea of launching a social enterprise, and others already have successful business models. But we
also want to know why some nonprofits are not participating in this growing national trend!” says Brown University
Senior Seth Marbin, who is leading the research.
The Rhode Island Foundation and Social Venture Partners of Rhode Island (SVPRI) are also
collaborating on this study. SVPRI is a group of philanthropists committed to investing time, expertise, and money
in innovative nonprofits to strengthen their organizations and promote social enterprises.
“This study will be the first to focus on the revenue-generating activities of an entire state,” explains
Deborah Schimberg, Executive Director of SVPRI. “And we will be comparing the data from Rhode Island to
results from a national study,” adds Kris Hermanns, Program Officer of The Rhode Island Foundation.
The national data is being provided by The Yale School of Management – The Goldman Sachs
Foundation Partnership on Nonprofit Ventures, which runs the National Business Plan Competition for Nonprofits
Organizations and is also providing assistance for this research.
All tax-exempt organizations with 501(c)(3) status are eligible to take the survey currently available on
the web at www.rifoundation.org/svpri/survey.asp and “participants can even win prizes,” promises Marbin. “We
sent out invitations to 4,000 nonprofit organizations across the state, but there are more out there we haven’t
reached yet,” explains Marbin.
As an example of a local entrepreneurial nonprofit, Marbin points to Amos House, a Providence social
services agency which recently launched a catering business that provides job training programs for clients and
healthy meals for area schools and other customers. “What distinguishes Amos House is their detailed strategy to
use profits from the new catering business to support their established social programs,” says Marbin. Amos
House was recently selected as a finalist from over 450 entrants in the National Business Plan Competition for
Nonprofit Organizations.
“The findings of this study could help support entrepreneurial nonprofits like Amos House throughout
Rhode Island and nationwide,” says Marbin.
Marbin says he first learned about “social entrepreneurship” as an AmeriCorps member with City Year,
a national nonprofit recently cited by Fast Company Magazine as one of the top “25 organizations using creativity,
business smarts, and hard work to invent a brighter future.”
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“I was surrounded by proactive leaders applying entrepreneurial skills and strategies to create positive
social change,” he remembers. After four years with City Year, Marbin came to Brown to study “social change
from an academic perspective,” he says. The vision for this research study was developed through conversations
between Marbin and his academic advisor Ann Dill, Director of the Public and Private Sector Organizations
program and Associate Professor at Brown University.
“Our report will be valuable if it increases understanding and awareness of entrepreneurial nonprofits,”
says Marbin. “They represent an alternative to what we have in America right now: businesses which are expected
to focus almost completely on financial profits, and nonprofits asked to solve our toughest social issues relying on
donations alone. ‘Social enterprises’ could be the best of both worlds, creating both social and financial value.”
Nonprofit leaders are invited to fill out the survey before it closes at 5 pm on March 15 and the final report
will be available in May on the SVPRI website at www.rifoundation.org/svpri/survey.asp.
###
The Rhode Island Foundation was founded in 1916 and is one of the nation’s largest and oldest charitable
organizations serving a specific geographic area.
8. Media Release 2
A second Media Release was sent out through the Brown University News Service on March 7th. This release
was identical to Media Release 1, with three exceptions: The main headline was replaced with “Nonprofit Leaders
Revealing Secretes of Business Enterprises;” the references to the Rhode Island Foundation were replaced with
references to Brown University; and the Foundation’s contact information was replaced with that of the principal
investigator: Seth Marbin, (phone) 401-465-0411 (email) smarbin@alumni.brown.edu
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9. Providence Journal Article
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 74 of 104
10. Social Venture Partners of Rhode Island Website
Hosted online at: http://www.rifoundation.org/svpri/survey.asp
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11. Transcript of WRNI Radio Announcement
Researchers are completing a survey of nonprofit organizations in Rhode Island today as part of an effort to
find out how they raise funds. Brown University researcher Seth Marbin says there are a growing number of
organizations that are supported by more than donations. "There is an assumption that nonprofits are only
looking for donations but many are now expanding and looking for ways to sell products and generate the
revenue they need." Researchers next plan to compare the results from Rhode Island to a national study.
A Rhode Island survey underway through March 15 hopes to uncover a growing entrepreneurial spirit among
the state's nonprofit organizations.
"We're looking for nonprofits at all stages of entrepreneurial thinking and development. But we also want to
know why some nonprofits are not participating in this growing national trend," says Brown University Senior
Seth Marbin, who is leading the research. The Rhode Island Foundation and Social Venture Partners of
Rhode Island (SVPRI) are collaborating on the study.
All tax-exempt organizations with 501(c)(3) status are eligible to take the survey by clicking
www.rifoundation.org/svpri/survey.asp and "participants can even win prizes," promises Marbin. "We sent
out invitations to 4,000 nonprofit organizations across the state, but there are more out there we haven't
reached yet," explains Marbin.
As an example of a local entrepreneurial nonprofit, Marbin points to Amos House, a Providence social
services agency which recently launched a catering business that provides job training programs for clients
and healthy meals for area schools and other customers.
Looking for additional resources? Check out the Foundation's Nonprofit Consultant Directory and our newest
resource, the Directory of Rhode Island's Nonprofits .
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 76 of 104
13. E-Newsletter - Knowledge Exchange Center
RI Nonprofit Leaders:
You are invited to participate in a statewide survey for all 501(c)(3) organizations.
This research study is being conducted by Brown University in collaboration with Social Venture Partners of
Rhode Island and The Rhode Island Foundation, and with assistance from The Yale School of Management
– The Goldman Sachs Foundation Partnership on Nonprofit Ventures. This survey is for you, if you have
ever: > Thought about diversifying your funding base > Tried to generate revenue to support your social
mission > Operated an earned-income venture or social enterprise. The purpose of this research is to learn
about the entrepreneurial and revenue generating activities of nonprofits in our state. This study will be the
first of its kind comparing one state's efforts to a national research study. If you want your organization to be
represented and possibly highlighted in our final report, please complete the brief online survey by March
15th at 5 pm. For any questions about this research study, please contact the Principal Investigator, Seth
Marbin via email at: smarbin@alumni.brown.edu All respondents have a chance to win valuable prizes! To
join in, visit our website before March 15, 2005: http://www.rifoundation.org/svpri/survey.asp
Attention RI Nonprofits:
You are invited to participate in a statewide survey for all 501(c)(3) organizations.
This survey is for you, if you have ever: thought about diversifying your funding base; tried to generate
revenue to support your social mission; or operated an earned-income venture or social enterprise. To
participate in the survey, visit the website here before March 15. The purpose of this research is to learn
about the entrepreneurial and revenue-generating activities of nonprofits in our state, and comparing them to
a national study. For more information contact Seth Marbin at smarbin@alumni.brown.edu
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 77 of 104
15. Survey
Sorry!
In order to participate in this survey you must indicate that you have read and understood the Informed
Consent Statement.
Please use your browser's "back" button, or right click and choose "back" to return to question # 1.
For any questions about this research project, please contact the Principal Investigator, Seth Marbin, of Brown
University by email at smarbin@alumni.brown.edu
Arts/Culture/Humanities
Education
Environment/Animals - Environmental Quality, Protection &
Beautification
Environment/Animals - Animal Related
Health – General & Rehabilitative Services
Health – Mental Health, Crisis Intervention
Health – Multipurpose Associations/Services Associated with
Specific Diseases/Disorders/ Medical Disciplines
Which of the following best describes
Health – Medical Research
your nonprofit organization's program
2 Human Services - Public Protection: Crime & Delinquency
area? (please check the one category
Prevention, Legal Administration, Legal Services
that best applies.)
Human Services - Employment/Jobs
Human Services - Food, Nutrition, Agriculture
Human Services - Housing/Shelter
Human Services - Public Safety, Disaster Preparedness &
Relief
Human Services - Recreation, Leisure, Sports, Athletics
Human Services - Youth Development
Human Services - Multipurpose & Other
International Foreign Affairs
Public/Society Benefit - Civil Rights, Social Action, Advocacy
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 78 of 104
Public/Society Benefit - Community Improvement/Economic
Development/ Capacity Building
Public/Society Benefit - Philanthropy/Grantmaking
Foundations
Public/Society Benefit - Volunteerism
Public/Society Benefit - Science and Technology Research
Institutes/Services
Public/Society Benefit - Social Sciences, Research
Institutes/Services
Public/Society Benefit - Multipurpose & Other
Religion
Miscellaneous Mutual/Membership Benefit Organizations
Other (please specify):
0-10
11-20
Please indicate the number of full time 21-30
4 equivalent (FTE) staff in your 31-40
organization. 41-50
51-99
More than 100
Local
Statewide
What is the geographic scope of your
8 Regional
organization?
National
International
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 79 of 104
In what ways is your nonprofit
entrepreneurial? What entrepreneurial
10
strategies are you using? (please
describe using the space below)
Foundation grants
Government grants
Corporate grants
Donations from individuals
What percentage of that total revenue Endowment income
came from the following sources: Investments
13 (Please enter a number in each box Government contracts
below to add up to 100%) Membership dues
(For any source which does not apply, Service-related revenue
please enter a "0"). Product-related revenue
Cause-related marketing or licensing
Renting or leasing property
Other
1
How many earned-income ventures is
15 2
your organization currently operating?
more than 2
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 80 of 104
Please indicate the type of earned- Service-related (fees for service)
income venture which you are currently Product-related sales/manufacturing
17 operating which provides the greatest Cause-related marketing/licensing
social and financial benefits to your Renting/leasing property (e.g., building rentals)
organization (check one only) Other, Please Specify
In-house operation
Separate nonprofit entity
19 What is the legal form of this venture?
Separate for-profit entity
Other (please specify)
How important are the following reasons Generate income/surplus for programs
for operating this earned-income Move organization towards self-sufficiency
venture? Please rate each reason on the Provide employment/training/therapeutic opportunities to
20 scale from 1 to 3 below. constituents
1= not important Generate positive community relations
2 = somewhat important Diversify revenue stream
3 = very important Help revitalize the neighborhood/community
Executive Director
Who is responsible for managing your
23 Business Manager
earned-income venture?
Other (Please specify):
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 81 of 104
Other (Please Specify):
Loss of $1 - $5,000
Loss of $5,001 - $10,000
Loss of $10,001 - $15,000
Loss of $15,001 - $20,000
Loss of $20,001 - $25,001
Loss of $25,001 or greater
For the last fiscal year, what was your $0 (Broke Even)
29
venture's financial net gain or loss? Gain of $1 - $5,000
Gain of $5,001 - $10,000
Gain of $10,001 - $15,000
Gain of $15,001 - $20,000
Gain of $20,001 - $25,001
Gain of $25,001 or greater
Don't know
Monthly
Quarterly
How often do you calculate the financial
33 Yearly
Return on Investment (ROI)?
Never
Other (please specify):
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 82 of 104
If YES, please briefly describe how you
35
calculate SROI:
Foundation grants
Government grants
Corporate grants
Donations from individuals
What percentage of your total revenue Endowment income
came from the following sources: Investments
40 (Please enter a number in each box Government contracts
below to add up to 100%) Membership dues
Service-related revenue
Product-related revenue
Cause-related marketing or licensing
Renting or leasing property
Other
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 83 of 104
1
How many earned-income ventures has
42 2
your organization operated?
more than 2
The following questions will ask you to comment on the 1 earned-income venture your organization operated
which provided the greatest social and financial benefits to your organization.
In-house operation
Separate nonprofit entity
46 What is the legal form of this venture?
Separate for-profit entity
Other (please specify):
Executive Director
Who was responsible for managing your
50 Business Manager
earned-income venture?
Other (Please specify):
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 84 of 104
Other (please specify):
Loss of $1 - $5,000
Loss of $5,001 - $10,000
Loss of $10,001 - $15,000
Loss of $15,001 - $20,000
Loss of $20,001 - $25,001
Loss of $25,001 or greater
For the last fiscal year it operated, what $0 (Broke Even)
56
was the venture's net gain or loss? Gain of $1 - $5,000
Gain of $5,001 - $10,000
Gain of $10,001 - $15,000
Gain of $15,001 - $20,000
Gain of $20,001 - $25,001
Gain of $25,001 or greater
Don't know
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 85 of 104
Private venture capital
N/A - venture never operated at a net loss
Other (Please Specify):
Monthly
Quarterly
How often did you calculate the financial
60 Yearly
Return on Investment (ROI)?
Never
Other (please specify):
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 86 of 104
Organizational consultant(s)
Funder(s)
Lawyer(s)
In developing your Business Plan, who Accountant(s)
68 did you receive advice or feedback Volunteer(s) from the corporate sector
from? (check all that apply) Other nonprofit organization(s)
College/university faculty or student(s)
Current or potential clients/customers
Other (please specify):
Yes
Are you interested in starting an earned-
74 No
income venture?
Not Sure
76
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 87 of 104
Please briefly describe any other ideas
for support or assistance that would be
valuable?
Email
Postcard
How did you learn about this survey? Website
77
(Please check all that apply) Newspaper
From a friend/colleague
Other (please specify):
Organization Name
So that we may verify we have received
Address
only one response per organization and
78 City
tabulate results by geographic location,
State
please provide the following:
Zip
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 88 of 104
Appendix
Table 23: Demographics of the Full Sample of RI Nonprofit Organizations
Demographic Factor Count %
1. Program Area
Arts/Culture/Humanities 46 14
Education 48 15
Environment/Animals 16 5
Health 40 12
Human Services 70 21
International Foreign Affairs 2 1
Misc. Mutual/Membership Benefit Orgs 5 2
Public/Society Benefit 32 10
Religion 9 3
Other (please specify): 61 19
N=329 Total 329 102*
2. Years in Operation
Less than 5 years 49 17
6-10 years 39 13
11-20 years 55 19
More than 20 years 152 52
N=295 Total 295 101*
3. Total Budget
Less than $250,000 126 44
$250,000 - $999,999 84 29
$1,000,000 - $4,999,999 42 15
More than $5,000,000 35 12
N=287 Total 287 100
4. Self-Identification as “Entrepreneurial”
Yes 158 53
No 140 47
N=298 Total 298 100
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 89 of 104
Note: * Does not equal 100% due to rounding
Negative 1 0 0 0 0
Somewhat negative 0 0 2 2 1
Neutral/no impact 33 50 46 40 38
Somewhat positive 25 21 19 29 30
Positive 33 25 29 29 22
Very positive 22 18 18 15 22
Negative 0 0 0 0
Somewhat
2 1 1 5
Negative
Neutral/No Impact 10 9 11 20
Somewhat Positive 14 11 19 28
Positive 35 27 38 31
Very Positive 56 68 46 30
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 90 of 104
Table 25: Rhode Island Sample Descriptive Statistics
Variable Obs Mean Std. Dev. Min Max
Entrep 260 .5269231 .5002375 0 1
Program 260 4.553846 2.384187 1 8
Years 260 3.053846 1.134312 1 4
Budget 260 1.938462 1.022933 1 4
Eiv 260 .6576923 .4753971 0 1
2. Years in Operation
Less than 5 years 42 16
6-10 years 34 13
11-20 years 52 20
More than 20 years 132 51
N=260 Total 260 100
3. Total Budget
Less than $250,000 114 44
$250,000 - $999,999 78 30
$1,000,000 - $4,999,999 38 15
More than $5,000,000 30 12
N=260 Total 260 101*
4. Self-Identification as “Entrepreneurial”
Yes 137 53
No 123 47
N=260 Total 260 100
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 91 of 104
Table 26: Rhode Island Sample Bivariate Cross-Tabulations and Chi-Square Tests
| entrep
eiv | no yes | Total
-----------+----------------------+----------
no | 57 35 | 92
| 44.19 25.18 | 34.33
-----------+----------------------+----------
yes | 72 104 | 176
| 55.81 74.82 | 65.67
-----------+----------------------+----------
Total | 129 139 | 268
| 100.00 100.00 | 100.00
| program
eiv | arts educ enviro health hservice | Total
-----------+-------------------------------------------------------+----------
no | 8 12 4 12 20 | 91
| 21.62 32.43 26.67 37.50 35.71 | 34.60
-----------+-------------------------------------------------------+----------
yes | 29 25 11 20 36 | 172
| 78.38 67.57 73.33 62.50 64.29 | 65.40
-----------+-------------------------------------------------------+----------
Total | 37 37 15 32 56 | 263
| 100.00 100.00 100.00 100.00 100.00 | 100.00
| program
eiv | public relig other | Total
-----------+---------------------------------+----------
no | 6 4 25 | 91
| 23.08 66.67 46.30 | 34.60
-----------+---------------------------------+----------
yes | 20 2 29 | 172
| 76.92 33.33 53.70 | 65.40
-----------+---------------------------------+----------
Total | 26 6 54 | 263
| 100.00 100.00 100.00 | 100.00
| years
eiv | <5yrs 6-10 11-20 >20 | Total
-----------+--------------------------------------------+----------
no | 26 17 15 34 | 92
| 59.09 50.00 28.85 25.19 | 34.72
-----------+--------------------------------------------+----------
yes | 18 17 37 101 | 173
| 40.91 50.00 71.15 74.81 | 65.28
-----------+--------------------------------------------+----------
Total | 44 34 52 135 | 265
| 100.00 100.00 100.00 100.00 | 100.00
| budget
eiv | <$250K 250-999 1-4.9 <5mil | Total
-----------+--------------------------------------------+----------
no | 49 19 12 10 | 90
| 42.61 24.36 31.58 32.26 | 34.35
-----------+--------------------------------------------+----------
yes | 66 59 26 21 | 172
| 57.39 75.64 68.42 67.74 | 65.65
-----------+--------------------------------------------+----------
Total | 115 78 38 31 | 262
| 100.00 100.00 100.00 100.00 | 100.00
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 92 of 104
Table 27: National Descriptive Statistics
Variable Obs Mean Std. Dev. Min Max
Entrep 389 0.745501 0.43614 0 1
Program 389 4.722365 2.063437 1 8
Years 389 2.619537 1.239067 1 4
Budget 389 2.298201 1.127684 1 4
Eiv 389 0.48072 0.500272 0 1
2. Years in Operation
Less than 5 years 111 29
6-10 years 67 17
11-20 years 70 18
More than 20 years 141 36
N=389 Total 389 100
3. Total Budget
Less than $250,000 127 33
$250,000 - $999,999 98 25
$1,000,000 - $4,999,999 85 22
More than $5,000,000 79 20
N=389 Total 389 100
4. Self-Identification as “Entrepreneurial”
Yes 290 75
No 99 25
N=389 Total 389 100
Notes:
* "Other" includes the categories: "Misc. Mutual/Membership Benefit Orgs" and "International Foreign Affairs"
*** The category "Not currently, but operated 1 or more in the past" was not included for the logistic regression
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 93 of 104
Table 28: National Bivariate Cross-Tabulations and Chi-Square Tests
| entrep
eiv | no yes | Total
-----------+----------------------+----------
no | 81 125 | 206
| 80.20 42.66 | 52.28
-----------+----------------------+----------
yes | 20 168 | 188
| 19.80 57.34 | 47.72
-----------+----------------------+----------
Total | 101 293 | 394
| 100.00 100.00 | 100.00
| program
eiv | arts educ enviro health hservice | Total
-----------+-------------------------------------------------------+----------
no | 14 43 13 24 79 | 269
| 35.00 64.18 54.17 51.06 54.11 | 55.35
-----------+-------------------------------------------------------+----------
yes | 26 24 11 23 67 | 217
| program
eiv | public relig other | Total
-----------+---------------------------------+----------
no | 42 15 39 | 269
| 54.55 75.00 60.00 | 55.35
-----------+---------------------------------+----------
yes | 35 5 26 | 217
| 45.45 25.00 40.00 | 44.65
-----------+---------------------------------+----------
Total | 77 20 65 | 486
| 100.00 100.00 100.00 | 100.00
| years
eiv | <5yrs 6-10 11-20 >20 | Total
-----------+--------------------------------------------+----------
no | 99 45 41 89 | 274
| 67.81 57.69 47.67 49.44 | 55.92
-----------+--------------------------------------------+----------
yes | 47 33 45 91 | 216
| 32.19 42.31 52.33 50.56 | 44.08
-----------+--------------------------------------------+----------
Total | 146 78 86 180 | 490
| 100.00 100.00 100.00 100.00 | 100.00
| budget
eiv | <$250K 250-999 1-4.9 <5mil | Total
-----------+--------------------------------------------+----------
no | 125 62 53 34 | 274
| 73.53 51.24 50.00 36.17 | 55.80
-----------+--------------------------------------------+----------
yes | 45 59 53 60 | 217
| 26.47 48.76 50.00 63.83 | 44.20
-----------+--------------------------------------------+----------
Total | 170 121 106 94 | 491
| 100.00 100.00 100.00 100.00 | 100.00
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 94 of 104
Table 29: Pooled Descriptive Statistics
Variable Obs Mean Std. Dev. Min Max
Program (art = ref category) 649 4.654854 2.197321 1 8
Educ 649 0.138675 0.345874 0 1
Enviro 649 0.050848 0.219856 0 1
Health 649 0.101695 0.30248 0 1
Hservice 649 0.278891 0.4488 0 1
Public 649 0.12943 0.335934 0 1
Relig 649 0.033898 0.181107 0 1
Other 649 0.163328 0.36995 0 1
Years (< 5 = ref category) 649 2.793529 1.216104 1 4
6 – 10 649 0.155624 0.362778 0 1
11 – 20 649 0.187982 0.390999 0 1
> 20 649 0.420647 0.494044 0 1
Budget (< $250k = ref category) 649 2.154083 1.100359 1 4
$250 k – 999 k 649 0.271186 0.444915 0 1
$1 mil – 4.9 mil 649 0.189522 0.392225 0 1
> $5 mil 649 0.167951 0.374111 0 1
Entrep 649 0.657935 0.474767 0 1
EIV 649 0.551618 0.497712 0 1
Sample 649 0.599384 0.490401 0 1
2. Years in Operation
Less than 5 years 153 24
6-10 years 101 16
11-20 years 122 19
More than 20 years 273 42
N=649 Total 649 101*
3. Total Budget
Less than $250,000 241 37
$250,000 - $999,999 176 27
$1,000,000 - $4,999,999 123 19
More than $5,000,000 109 17
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 95 of 104
N=649 Total 649 100
4. Self-Identification as “Entrepreneurial”
Yes 427 66
No 222 34
N=649 Total 649 100
| sample
eiv | 0 1 | Total
-----------+----------------------+----------
no | 89 202 | 291
| 34.23 51.93 | 44.84
-----------+----------------------+----------
yes | 171 187 | 358
| 65.77 48.07 | 55.16
-----------+----------------------+----------
Total | 260 389 | 649
| 100.00 100.00 | 100.00
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 96 of 104
Table 31: RI Logistic Regression Predicting Organizations Currently Operating 1 or More
EIVs (Reference Category = Never)
Predictor Odds Ratio Std. Err.
Budget (Reference category = < $250K)
$250-$999K 1.48 0.56
$1-$5M 1.14 0.54
> $5M 0.88 0.48
Age (Reference category = < 5 years)
6-10 years 1.23 0.65
11-20 years 3.02* 1.52
>20 years 4.96** 2.29
"Entrepreneurial" (Reference category = No)
Yes 2.85** 0.86
Program Area (Reference category = Arts/Culture/Humanities)
Education 0.41 0.24
Environment 0.39 0.29
Health 0.28 0.18
Hum Service 0.38 0.21
Public Benefit 0.82 0.55
Religion 0.09* 0.10
Other 0.21** 0.11
*p < .05 **p < .01
N = 260
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 97 of 104
Table 33: Pooled Logistic Regression Predicting Organizations Currently Operating 1 or
More EIVs (Reference Category = Never) controlling for Budget, Age, Entrepreneurial, and
Program Area
Predictor Odds Ratio Std. Err.
Budget (Reference category = < $250K)
$250-$999K 2.05** 0.47
$1-$5M 1.69 0.46
> $5M 2.47** 0.74
Age (Reference category = < 5 years)
6-10 years 1.17 0.33
11-20 years 1.94* 0.56
>20 years 2.15** 0.56
"Entrepreneurial" (Reference category = No)
Yes 3.91*** 0.80
Program Area (Reference category = Arts/Culture/Humanities)
Education 0.29** 0.11
Environment 0.44 0.21
Health 0.31** 0.13
Hum Service 0.33** 0.12
Public Benefit 0.50 0.19
Religion 0.15** 0.09
Other 0.26*** 0.10
Sample (Reference category = Rhode Island)
National 0.33*** 0.07
*p < .05 **p < .01 ***p < .001
N = 649
A Sea Change in the Social Sector: Examining Earned-Income Ventures and Entrepreneurial Nonprofits in Rhode Island
Seth J. Marbin | PPSO Senior Honors Thesis | Brown University | May 2005 | Page 98 of 104
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