Nonprofit Commercialization

In his article, The Future of the Nonprofit Sector: Its Entwining with Private Enterprise and Government, Burton Weisbrod underscores that increase in fiscal demands had led the nonprofit organizations into more creative commercial activity, blurring their positions to become more and more commercialized (Otto & Dicke, p. 328). Commercialization in itself is complex and broad term, however, the underlying notion of it is not new. Nonetheless, the acclimatization to the concept in recent years are far more dynamic than the past years. With these new undertone, there is a sense of uncertainty and unanswered questions such as, why are the nonprofit organizations expanding globally? What is the true motivating factor behind the growth and what

In this paper, the theories are generally divide into two lines of argument. The first focuses on the nonprofit commercial endeavors’ resemblance to business operations, and describes the development of social entrepreneurship. Accordingly, the social entrepreneurship literature stresses that the main purpose of nonprofit engagement in commercial activities is to achieve higher efficiency in its imitation of for-profit businesses. The second line of argument, generally concentrating on the financial needs of nonprofits, tends to note the perils of the shift and argues that commercialization is purely a reaction to a decline in funding. The social entrepreneurship line of argument bases its theories in the claim that commercialization seeks only to increase the efficiency of supplying the output for which it received its tax-exempt status—its “nonprofit” output. As more for-profit organizations enter markets traditionally led by nonprofits, such as health- care, education, orphanages, and low-income housing, nonprofits feel pressured to mimic their for-profit competitors. On the other hand, the larger constituency blames the nonprofit industry’s financial instability as the core cause of nonprofit organizations’ adoption of commercial activities. Generally, this view asserts that a decline of private and or public contributed revenues has forced nonprofit managers to

A major issue is that the sector's growth necessitates finding ways to increase revenues, and that has brought side effects, particularly as nonprofits have become more and more “commercial.” In the process, borders between the nonprofit and both the for-profit and public sectors are being crossed increasingly, and with consequences that often pose problems. Secondly, commercial ventures can distract nonprofit entrepreneurs from their core missions, and in the extreme, 'crowd out' these missions. Incorporating commercial to noncommercial concerns therefore requires a delicate balance between the urge for extra incomes and staying on course with original mission-related objectives. Thirdly, Commercialization has transformative effects on the goals, motives, methods, income distribution, and governance component of NGOs in the sample. At the same time, however, commercialization tends to sideline the social mission of NGOs. Finally, nonprofit managers may be hesitant to engage in commercial activities in light of tighter federal and local government restrictions on unrelated business income tax. Also, some nonprofits may have longstanding relationships with the government that entering into commercial activities would jeopardize the