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Human Services in a Market Economy: Implications of Program Fee Reliance among Nonprofit Human Service Organizations


Nonprofit human service organizations (NHSOs) play an integral role in a broader social service infrastructure that, along with government and for-profit agencies, provides basic needs, mental health and substance abuse treatment, child care, and numerous other forms of assistance to a variety of client and community populations. Over the past 30 years, the nonprofit human service sector has undergone a transformation characterized by an increased reliance on commercial revenue--from client fees, product sales, business ventures, and other earned income.

Though scholars have explored the potential benefits and downsides of commercialization since the 1980s, much of the research has relied solely on qualitative explorations and case studies; quantitative empirical investigations have been scarce and limited in scope. There is a need to further explore the extent to which this phenomenon is taking place and how these trends impact the ability of service providers to fulfill their charitable obligations.

The purpose of this study is to examine the influence of reliance on program fees from private sources--one form of commercial income--on a variety of organizational characteristics among NHSOs. From the perspectives of resource dependence theory and institutional logics, I posit the following research questions: (1) What differences exist, if any, between fee-reliant NHSOs and those funded more heavily by government and individual donations?; and (2) In what ways, if any, does reliance on program fees and charges affect the organizational characteristics of NHSOs?

Based on survey data from a stratified random sample of NHSOs in Los Angeles County (n=639), key findings from a series of logistic regression analyses indicate that as NHSOs rely more heavily on program fees and charges, they are less likely to: (a) serve non-white clients; (b) offer non-English language services; and (c) rely on volunteers. In addition, program fees and charges predict a higher probability of engaging in competition with for-profit providers. Results suggest that if organizations are forced to rely more heavily on a fee-paying clientele, some marginalized populations may need to seek services elsewhere. Ultimately, however, findings only modestly support concerns about potential negative impacts of commercialization on the nonprofit human service sector.

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