Poster #48 - Unrelated Business Income (UBI) and Financial Growth in U.S. Nonprofits

• In Event: Saturday Poster Luncheon

Abstract

Nonprofits increasingly engage in business-like activity as they seek to diversify revenue, reduce dependence on unstable funding streams, and strengthen organizational capacity. One important form of commercialization is unrelated business activity, which reflects income-generating activity outside an organization’s core exempt purpose. Although such activity is often discussed as a pathway to greater self-sufficiency and organizational expansion, evidence remains limited on whether it is associated with nonprofit growth and whether its effects vary across nonprofit subsectors. This question is important for public policy because nonprofits are major service providers in a decentralized federal system, and their ability to grow affects service reach, organizational stability, and the broader capacity of state and local service-delivery networks.

This paper asks whether engagement in unrelated business activity is associated with growth among U.S. nonprofits and whether that relationship differs across nonprofit subsectors. The study uses quantitative panel data from the National Center for Charitable Statistics Core dataset and focuses on U.S. public charities filing the full Form 990 from 2012 to 2022. The main explanatory variable is whether an organization reports unrelated business activity. The outcomes of interest are organizational growth trajectories, including changes in revenue and related measures of scale and expansion available in the Form 990 data.

The principal empirical strategy uses dynamic panel models with organizational and year controls to estimate whether unrelated business activity is associated with subsequent growth. Because growth may follow different patterns across organizational fields, the study will also use latent growth curve and latent class growth analyses to identify distinct developmental trajectories and assess whether commercialization is associated with different pathways of organizational expansion. This design is intended to distinguish between short-term revenue gains and more durable patterns of growth.

Empirical analysis is currently underway. The study will estimate whether unrelated business activity is associated with stronger organizational growth overall and whether that relationship varies across fields such as health, education, human services, and the arts, where market compatibility and commercialization opportunities differ. The analysis will also assess whether nonprofits sort into distinct growth trajectories over time, helping identify where business-like activity appears to support expansion and where its benefits are more limited.

The paper contributes to research on nonprofit commercialization by moving beyond broad normative debates and focusing on a concrete organizational question: under what conditions is unrelated business activity associated with growth? It also contributes to public affairs research by linking nonprofit strategy to the uneven institutional environments in which service-providing organizations operate. For APPAM audiences, the study speaks to how nonprofit adaptation interacts with decentralized governance and varied policy contexts across the United States.

Author

• Salman Bin Habib, University of Texas, Dallas
  Presenting Author