The impact of the diversification of revenues on NGOs’ commercialization: evidence from Poland

  • Paweł Mikołajczak Poznań University of Economics and Business
Keywords: commercialization, NGOs, financial sources, revenue diversification


Research background: The commercialization of non-governmental organizations through undertaking an activity based on the commercial sale of services and products is a phenomenon which raises controversy among numerous researchers. Traditionally, NGOs act in a sector of social services to solve problems, such as homelessness, exclusion or social pathologies. They also provide different services which cannot be provided by the market, for instance in education, the healthcare system, culture, or art. Driven by a social mission, NGOs introduce their concepts, strongly relying on fees to perform their activity. They also obtain funds in the form of public donations or payments from private or institutional donors. Growing social needs and changes in the governmental policy aimed at reducing social-aid spending have put pressure on NGOs to develop entrepreneurial strategies to gain financial support.

Purpose of the article: The aim of the paper is to investigate how particular funding sources affect the probability of non-governmental organizations’ commercialization.

Methods: Data for the analyses have been collected from a national survey of Polish non-governmental organizations. In the analysis of logistic regression, a specially-developed model was used to estimate the probability of NGOs’ commercialization, depending on the selected categories of funding sources.

Findings & Value added: An analysis of the results indicates clearly that the likelihood of NGOs’ commercialization slightly decreases as a greater number of private external financial sources is used. In contrast with existing literature, which claims that government funding is crowding out commercial activity, this research finds that, to some extent, public funds positively stimulate the commercialization of NGOs. The contribution of this research is that it introduces the category of internal financing sources of non-profit organizations, which have been overlooked in previous studies. The article provides clear statistical arguments demonstrating that private internal revenues strongly affect the commercialization of the organizations surveyed. The paper is the first to present a model that comprehensively considers the probability of NGOs’ commercialization, including private external and internal, as well as public, sources of funding.


Download data is not yet available.


Carmin, J. (2010). NGO capacity and environmental governance in Central and Eastern Europe. Acta Politica, 45(1-2).

Carroll, D. A., & Stater, K. J. (2009). Revenue diversification in nonprofit organizations: does it lead to financial stability? Journal of Public Administration Research and Theory, 19(4). doi: 10.1093/jopart/mun025.

Chabotar, K. J. (1989). Financial ratio analysis comes to nonprofits. Journal of Higher Education, 60(2). doi: 10.1080/00221546.1989.11775021.

Chang, C. F., & Tuckman, H. P. (1994). Revenue diversification among nonprofits. Voluntas: International Journal of Voluntary and Nonprofit Organizations, 5(3). doi: 10.1007/BF02354036.

Chikoto, G. L., & Neely, D. G. (2014). Building nonprofit financial capacity: the impact of revenue concentration and overhead costs. Nonprofit and Voluntary Sector Quarterly, 43(3). doi: 10.1177/0899764012474120.

Dart, R. (2004). The legitimacy of social enterprise. Nonprofit Management and Leadership, 14(4). doi: 10.1002/nml.43.

Eikenberry, A. M., & Kluver, J. D. (2004). The marketization of the nonprofit sector: civil society at risk? Public Administration Review, 64(2).

Enjolras, B. (2002). The commercialization of voluntary sport organizations in Norway. Nonprofit and Voluntary Sector Quarterly, 31(3). doi: 10.1177/0899 764002313003.

Evans, J. L., & Archer, S. H. (1968). Diversification and the reduction of dispersion: an empirical analysis. Journal of Finance, 23(5). doi: 10.1111/j.1540-6261.1968.tb00315.x.

Fafchamps, M., & Owens, T. (2009). The determinants of funding to Ugandan nongovernmental organizations. World Bank Economic Review, 23(2).

Fischer, R. L., Wilsker, A., & Young, D. R. (2011). Exploring the revenue mix of nonprofit organizations: does it relate to publicness? Nonprofit and Voluntary Sector Quarterly, 40(4).

Foster, W., & Bradach, J. (2005). Should nonprofits seek profits? Harvard Business Review, 83.

Foster, W., & Fine, G. (2007). How nonprofits get really big. Stanford Social Innovation Review, 5(2).

Froelich, K. A. (1999). Diversification of revenue strategies: evolving resource dependence in nonprofit organizations. Nonprofit and Voluntary Sector Quarterly, 28(3). doi: 10.1177/0899764099283002.

Frumkin, P., & Keating, E. K. (2011). Diversification reconsidered: the risks and rewards of revenue concentration. Journal of Social Entrepreneurship, 2(2). doi: 10.1080/19420676.2011.614630.

Greenlee, J., & Trussel J. (2000). Estimating the financial vulnerability of charitable organizations. Nonprofit Management and Leadership, 11(2).

Guo, B. (2006). Charity for profit? Exploring factors associated with the commercialization of human service nonprofits. Nonprofit and Voluntary Sector Quarterly, 35(1). doi: 10.1177/0899764005282482.

Hager, M. (2001). Financial vulnerability among arts organizations: a test of the Tuckman-Chang measures. Nonprofit and Voluntary Sector Quarterly, 30(2). doi: 10.1177/0899764001302010.

Han, J. (2017). Social marketisation and policy influence of third sector organisations: evidence from the UK. Voluntas, 28. doi: 10.1007/s11266-017-9853-1.

Keating, E., Fischer, M., Gordon, T. P., & Greenlee, J. S. (2005). Assessing financial vulner - ability in the nonprofit sector. KSG Working Paper Hauser Center for Nonprofit Organizations Paper, RWP05-002. doi:10.2139/ssrn.647662.

Kerlin, J. A., & Pollak, T. (2011). Nonprofit commercial revenue: a replacement for declining government grants and private contributions? American Review of Public Administration, 41(6). doi: 10.1177/0275074010387293.

Khieng, S. (2014). Funding mobilization strategies of nongovernmental organizations in Cambodia. Volunas: International Journal of Voluntary and Nonprofit Organizations, 25(6).

Kilby, P. (2006). Accountability for empowerment: dilemmas facing non-governmental organizations. World Development, 34(6). doi: 10.1016/ dev.2005.11.009.

Larose, D. T. (2008). Metody i modele eksploracji danych. Warszawa: Wydawnictwo Naukowe PWN.

LeRoux, K. M. (2005). What drives nonprofit entrepreneurship? A look at budget trends of metro Detroit social service agencies. American Review of Public Administration, 35.

Mayer, W. J., Wang, H. C., Egginton, J. F., & Flint, H. S. (2012). The impact of revenue diversification on expected revenue and volatility for nonprofit organizations. Nonprofit and Voluntary Sector Quarterly, 43(2). doi: 10.1177/08997 64018807080.

McCleary, R. M., & Barro, R. J. (2008). Private voluntary organizations engaged in international assistance, 1939-2004. Nonprofit and Voluntary Sector Quarterly, 37. doi: 1177/0899764007313719.

McKay, S., Moro, D., Teasdale, S., & Clifford, D. (2015). The marketisation of charities in England and Wales. Voluntas: International Journal of Voluntary and Nonprofit Organizations, 26.

Mikołajczak, P. (2017a). Źródła i instrumenty finansowego wsparcia przedsiębiorstw społecznych. Poznań: Wydawnictwo UEP.

Mikołajczak, P. (2017b). Importance of funding sources to the scale of activity of social enterprises, Finanse, Rynki Finansowe, Ubezpieczenia, 4(88).

Mikołajczak, P., & Czternasty, W. (2015). Social enterprises versus globalization. Intercathedra, 31(2).

Nikolova, M., (2014). Government funding of private voluntary organizations: is there a crowding-out effect. Nonprofit and Voluntary Sector Quarterly, 44(3). doi: 10.1177/0899764013520572.

Nunnenkamp, P., Weingarth, J., & Weisser, J. (2009). Is NGO aid not so different after all? Comparing the allocation of Swiss aid by private and official donors. European Journal of Political Economy, 25.

Paśko, Ł., & Setlak, G. (2016). An examination of the quality of predictive market segmentaton. Studia Informatica, 37(1).

Plaček, M., Schmidt, M., Ochrana, F., & Půček, M. (2016). Impact of selected factors regarding the efficiency of public procurement (the case of Czech Republic) with emphasis of decentralization. Ekonomický časopis, 64(1).

Salamon, L. M. (2002). The state of nonprofit America. Washington, DC: Brookings Institution/Aspen Institute.

Salamon, L. M., Hems, L. C., & Chinnock, K. (2000). The nonprofit sector: for what and for whom? Working Papers of the Johns Hopkins Comparative Nonprofit Sector Project, 37.

Segal, L., & Weisbrod, B. (1998). Interdependence of commercial and donative revenues. In B. Weisbrod (Ed.). To profit or not to profit: the commercial transformation of the nonprofit sector. Cambridge, MA: Cambridge University Press.

Simpson, M., & Cheney, G. (2007). Marketization, participation, and communication within New Zealand retirement villages: a critical-rhetorical and discursive analysis. Discourse & Communication, 1(2). doi: 10.1177/1750481307076006.

Stankiewicz, J., & Seiler, B. (2013). The professionalization of nongovernmental organizations as a factor of their success. Zarządzanie i Finanse, 4(2).

Stone, M. M., Hager, M. A., & Griffin, J. J. (2001). Organizational characteristics and funding environments: a study of a population of United Way-affiliated nonprofits. Public Administration Review, 61(3). doi: 10.1111/0033-3352. 00030.

Svidroňová, M., & Vaceková, G. (2012). Current state of self-financing of private non-profit organizations in the conditions of the Slovak Republic. Technological and Economic Development of Economy, 18(3). doi: 10.3846/20294913. 2012.702695.

Vaceková, G., Valentinov, V., & Nemec, J. (2016). Rethinking non-profit commercialization: the case of the Czech Republic. International Journal of Voluntary and Nonprofit Organizations Voluntas, 28(5). doi: 10.1007/s11266-016-9772-6.

Weisbrod, B. A. (1998). The nonprofit mission and its financing. Journal of Policy Analysis and Management, 17.

Yan, W., Denison, D.V., & Butler, J.S. (2009). Revenue structure and nonprofit borrowing. Public Finance Review, 37(1). doi: 10.1177/1091142108321239.

Young, D., & Grinsfelder, M. (2011). Social entrepreneurship and the financing of third sector organizations. Journal of Public Affairs Education, 17(4).

Zielińska, A. (2011). Management strategies for non-governmental organizations. Master of Business Administration, 19(4).

How to Cite
Mikołajczak, P. (2018). The impact of the diversification of revenues on NGOs’ commercialization: evidence from Poland. Equilibrium. Quarterly Journal of Economics and Economic Policy, 13(4), 761-779.