Contact: Dr. Jeremy Thornton, Assistant Professor of Economics, 205-726-2128, jpthornt@samford.edu

Do donors care about nonprofit efficiency?

Far from their gentile image, nonprofit organizations face tough competition for donors.

"When money is scarce, nonprofits compete every bit as fiercely as for-profit businesses," says Dr. Jeremy Thornton, assistant professor of economics at Samford's School of Business. Thornton has spent the past several years studying the nonprofit sector.

Unlike for-profit businesses, however, nonprofit managers find it difficult to understand how potential donors make their decisions to give. Some fundraisers believe that only personal relationships matter, while others believe that spending money on fundraising is the best way to attract donors. Thornton's most recent study examines whether donors pay attention to relative financial efficiency among similar nonprofit organizations.

Thornton and his coauthors from the University of Kentucky study the behavior of over 200,000 nonprofit organizations in the U.S. They find that donors do indeed pay attention to nonprofit efficiency, but more scrutiny is paid to some types of nonprofit organizations than others. The study is forthcoming in the Journal of Law, Economics, and Organization.

"Our study goes a long way toward helping nonprofit directors understand their competitive position in the market for donations," says Thornton. "Those nonprofits who understand their competitive position best will be much more sustainable and effective in their mission going forward."