by Daniela Pavel, Editor In Chief
published on March 20, 2015
Introduction
Non-profit organizations (NPOs) in the United States attempt to assist individuals under the poverty line with free or low cost advice, training, housing, and so on. However, as these organizations survive based on grants and donations from the government and/or charitable organizations, they often overlook that in essence, they must still follow business principles and should run their operations as for-profit organizations to gain financial sustainability over time and to have access to more funding options. In this dissertation, the author attempts to understand the synergy between the entrepreneurial orientation of nonprofit organizations and their performance indicators (Stoudt, 2012). Stoudt (2012) defines entrepreneurial orientation as bringing innovation, risk-taking, and proactiveness to the organization to achieve strategic goals consistently.
Clarity
Stoudt’s research problem is very clearly stated in the beginning of the Introduction. Analyzing the funding challenges of non-profit organizations, Stoudt (2012) believes that such organizations should look for alternate funding options in addition to the grants and donations their non-profit status gives them access to. Whereas these funds may seem to ensure the survival of non-profit organizations, Stoudt supports the idea that alternate funding should also be considered and entrepreneurial orientation could offer these firms a viable option for financial sustainability. Instead of thinking from a non-profit perspective, these companies should take risks, innovate their processes, services, and/or products, and aim for profitable operations that could offer them more opportunities for growth, without depending constantly on government funding or charitable donations.
Stoudt is also clear about the limitations non-profit organizations perceive in their attempts to become more entrepreneurial and Table 2 included in the study (p. 5) lists the elements of success identified in traditional businesses versus the non-profit organizations’ mindset of these elements.
Later in the Introduction, the author defines the purpose of the study as attempting “to explore the relationships among the level of EO behaviors within NPOs, the internal and external environmental pressures that exist for NPOs, and the level of revenues currently realized from SE strategies.” (Stoudt, 2012, p. 6). The author focuses the study on identifying the relationship between entrepreneurial orientation and internal and external factors, as well as discussing the relationship between past entrepreneurial culture and future financial sustainability, and the effect of business education on NPOs entrepreneurial orientation. The author continues the introduction by providing the rationale for the initial research problem suggested in the beginning, that of the importance of entrepreneurial orientation to NPOs’ growth.
Accuracy
Stoudt’s (2012) research problem is accurate. NPOs face difficulties in understanding that at their core they should act as for-profit organizations and should be managed efficiently and from an entrepreneurial perspective to gain financial sustainability beyond the assistance of government funding and donations from charitable organizations. The study is supported by extensive literature review included in chapter 2. The methodology used is a survey instrument administered to 119 leaders and decision makers of NPOs to capture their perceived challenges to managing with a more entrepreneurial perspective. Based on the literature review and the responses to the survey instrument, the study’s conclusion is that the NPOs who used entrepreneurial strategies in their operations also obtained higher revenues over time versus those NPOs who relied solely on external funding. The study also noted that in the cases when respondents used entrepreneurial terms to describe the culture of the NPO, the level of entrepreneurial orientation was identified as higher in that organization as well. Stoudt sporadically incorporates literature review in the conclusion portion of the study, forcing the reader to further analyze the literature available to determine the accuracy of the findings and overall study.
Precision
At first glance, reviewers of this study could conclude that the research problem and the findings are precise; however, the study relies on the responses of a relatively low sample of only 119 NPOs. Additionally, the details of the survey instrument show that the number of questions were focused on three elements earlier identified as being the primary characteristics of entrepreneurial orientation: innovation, proactiveness, and risk-taking. For the study to be more precise, the sectors of the 119 NPOs should have been clearly defined and questions should have been adapted to the specific sector to gain a more exact perspective of the level of entrepreneurial orientation per field of service, without assuming that the success of all NPOs is measured by the use of the same performance indicator.
Relevance
For the sample of 119 respondents, this study has a unique relevance. It provides them with their own specific level of entrepreneurial orientation that could be considered as a starting point that more could be done to improve their bottom line and gain financial sustainability. The study is also relevant to NPOs that understand the need for financial sustainability and would like to focus on the elements of success that are thought to be lacking or could improve.
Depth
In the description of the research problem, Stoudt (2012) reviews the existing literature available on this topic and defines the performance indicators used in the for-profit sector, which should be taken into account by non-profit organizations as being the entrepreneurial characteristics of their leaders, internal and external cultural factors that can create an entrepreneurial environment, external demands for products and/or services, and funding (Covin, 1991; Wiklund & Shepard, 2005 quotes by Stoudt, 2012).
Chapter 2 of study provides detail on the literature review process that led to the five research questions listed in the Introduction; chapter 3 goes into great depth on the methodology used to complete the study. In Chapter 2, Scoudt (2012) dissects all aspects of the study, starting with the definition and characteristics of an entrepreneurial environment, to the entrepreneurial opportunities identified by previous studies in the NPO sector, and ending the literature review with the use of social entrepreneurship to NPOs. Chapter 3 “offers an overview of the research design, provides the research questions, and describes the sample population, sampling procedures, data collection, validity and reliability issues, data collection, and data analysis procedures.” (Stoudt, 2012, p. 43) This chapter complements chapter three with a detailed description of the methodology used to complete the study.
Breadth
Whereas the Introduction of the study seems to move quickly from the research problem to a more developed study, the five questions of the study are proof of the breadth of the research topic and the findings of the study. Stoudt (2012) did not perform a limited study, but looked at the need of entrepreneurial orientation for NPOs from multiple angles. The five research questions decided upon and included in the study are proof of the applicability of the study from multiple perspectives: the need for entrepreneurial orientation for increased financial sustainability, the relationship between external factors and the level of entrepreneurial orientation of NPOs, the relationship between internal factors and the level of entrepreneurial orientation of NPOs, the relationship between the level of entrepreneurial orientation application now and the chances NPOs have to meet their goals in the future, and the relationship between the level of business education of leaders and the level of entrepreneurial orientation of NPOs (Stoudt, 2012).
Logic
The study attempts to understand the relationship between NPOs and the level of entrepreneurial orientation in each. The anatomy of the study follows a logical path: introduces the topic and the research questions, discusses the literature reviewed in the process, presents and analyzes the methodology used, presents its results, and suggests further research topics. The way the research questions were formulated follow sound logic as well as cumulatively they address the topic from outside in: generally from the NPO sector perspective, narrowing in from the perspective of external, then internal factors, and closing in even further by looking at level of confidence in future sustainability of NPOs with medium to high levels of entrepreneurial orientation, and the relationship between the level of business education and entrepreneurial orientation.
Significance
The study conducted by Stoudt (2012) is very significant to the overall sector of non-profit organizations. It provides a 360-view of what could improve the financial sustainability and social aspect of non-profit organizations by analyzing external and internal factors, level of expertise and entrepreneurial experience and education of decision makers and staff, and could incentivize them to analyze their future financial independence from government agencies and foundation grants taking into account their entrepreneurial efforts to date.
Fairness
Stoudt (2012) is not biased towards the study or its findings. The author does not make any reference to a possible personal connection to an NPO; in fact, the study is presented objectively and all points are supported by research and sound methodology. The study is fair to the sector of non-profit organizations that are known to struggle to meet grant requirements and find themselves having to organize charitable events to meet a grant’s match amount.
Conclusion
Non-profit organizations (NPOs) attempt to assist individuals under the poverty line with free or low cost advice, training, housing, and so on. Starting by analyzing the funding challenges of non-profit organizations, Stoudt (2012) believes that such organizations should look for alternate funding options in addition to the grants and donations their status gives them access to. In the description of the research problem, the author reviews the existing literature available on this topic and defines the performance indicators used in the for-profit sector. The author redefines the purpose of the study as attempting “to explore the relationships among the level of EO behaviors within NPOs, the internal and external environmental pressures that exist for NPOs, and the level of revenues currently realized from SE strategies.” (Stoudt, 2012, p. 6).
NPOs face difficulties in understanding that at their core they should act as for-profit organizations and should be managed efficiently and from an entrepreneurial perspective to gain financial sustainability beyond the assistance of government funding and donations from charitable organizations. This study has a unique relevance. It provides them with their own specific level of entrepreneurial orientation that could be considered as a starting point that more could be done to improve their bottom line and gain financial sustainability. The five questions of the study are proof of the breadth of the research topic and the findings of the study. The way the research questions were formulated follow sound logic as well as cumulatively they address the topic from outside in. The analysis provides a fair and objective 360-view of what could improve the financial sustainability and social aspect of non-profit organizations by analyzing external and internal factors, level of expertise and entrepreneurial experience and education of decision makers and staff, and could incentivize them to analyze their future financial independence from government agencies and foundation grants taking into account their entrepreneurial efforts to date.
References:
Covin, J. G. (1991). Entrepreneurial versus conservative firms: A comparison of strategies and performance. Journal of Management Studies, 28(5), 439-462.
Stoudt, H. D. (2012). Entrepreneurial orientation in nonprofit organizations and its effect on the development of social entrepreneurial strategies (Order No. 3509667). Available from Dissertations & Theses @ Capella University. (1020617152). Retrieved from http://search.proquest.com.library.capella.edu/docview/1020617152?accountid=27965
Wiklund, J., & Shepard, D. (2005). Entrepreneurial orientation and small business performance: A configurational approach. Journal of Business Venturing, 20, 71-91.
About the Author
Mrs. Daniela Pavel, the author and Editor in Chief of 66Entrepreneurs.com, is a doctoral candidate with a focus on Entrepreneurial Finance and an award-winner entrepreneur.
Read more about her experience here.
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