Individuals creating new nonprofit organizations are often viewed as being driven by intrinsic and altruistic motives pulling them into becoming a nonprofit entrepreneur. However, individuals can also be pushed towards self-employment in the nonprofit sector because of negative external forces, a phenomenon labeled necessity nonprofit entrepreneurship.
This article explores necessity nonprofit entrepreneurs to illustrate how they differ from those not explicitly driven by necessity in starting up a new nonprofit, and what policy implications and questions necessity nonprofit entrepreneurship raises for nonprofit stakeholders. Keywords: nonprofit entrepreneurship ; necessity entrepreneurs. The notion that the earliest phase s of nonprofit organizational life is associated with specific attributes, activities, and challenges has long been recognized by nonprofit life-cycle scholars e.
Hasenfeld and Schmid ; Bess ; Simon ; Stevens Still, the process of new nonprofit venture creation remains relatively understudied, especially when compared to the massive research focusing on new business enterprise creation Van Slyke and Lecy The renewed interest in nonprofit entrepreneurship and nonprofit entrepreneurs is not surprising given the rising popularity and profile of the neighboring and often overlapping social entrepreneurship and social enterprise fields, and the asserted positive socio-economic impact generated by social entrepreneurial activity Harding ; Santos As observed by Stevens , 27 , the first life stage of a new nonprofit venture is often bewildering and unsystematic.
Social entrepreneurship researchers have also examined and reinforced the significance of intrinsic, and largely altruistic, motivations propelling social sector entrepreneurs to create new social ventures Germak and Robinson This article seeks to move beyond the notion of the nonprofit entrepreneur as inherently altruistic and intrinsically driven, to take into consideration more mundane and extrinsic motivations.
This depiction of the nonprofit entrepreneur is far removed from the sunny and fervent image often found in the social entrepreneurship literature see for example Bornstein Hence, this article argues that necessity nonprofit entrepreneurs represent a particular form or type of nonprofit entrepreneur. The concept and significance of necessity entrepreneurs and entrepreneurship have for the most part been linked to new small business creation, often in a developing world context Brewer , yet have received scarce attention in the nonprofit literature.
This author knows of no previous empirical studies examining necessity nonprofit entrepreneurs in a U. Still, if nonprofit entrepreneurship can be segmented, as inferred by Carman and Nesbit, then this heterogeneity may have implications for the design, funding, and success of nonprofit entrepreneurship policies. The purpose of this article is therefore i to examine closer the notion of necessity entrepreneurs and explore how necessity nonprofit entrepreneurs differ from nonprofit entrepreneurs not driven by necessity, and ii discuss policy considerations of necessity entrepreneurship in a nonprofit sector context.
Given the lack of research on necessity entrepreneurship in the nonprofit sector, this article will largely draw from necessity entrepreneurship research conducted by business scholars, but also seek to add insights from nonprofit organizational- and social entrepreneurship research. Thus, it is important to recognize that this is exploratory research and that the article is first and foremost a vantage point for additional research and discussion on necessity entrepreneurship in a nonprofit sector context. The role of motivation in explaining new business venture formation has a long history Segal, Borgia, and Schoenfeld New ventures do not emerge from nothing, they are created because entrepreneurs are interested and willing to engage in new venture creation Shane, Locke, and Collins Business entrepreneurship research recognizes that entrepreneurs start and operate new firms for many different reasons, both extrinsic and intrinsic in nature.
Scholars have sought to explore what motivations are more important to entrepreneurs and how they differ from individuals that do not undertake business venturing activity Shane, Locke, and Collins Nonprofit scholars have indeed recognized the role of individual motivation in new nonprofit venture creation Young ; Handy, Kassam, and Renade , but mostly focused on broader demand and supply dynamics to explicate why there is a nonprofit sector and why new nonprofit organizations are created Frumkin ; Child, Witesman, and Braudt However, more recently, researchers have started to investigate the motivation of individual social entrepreneurs finding a variety of motives for starting new social ventures e.
There is a common belief that entrepreneur motivations are not consistent across all types of venturing activity. For example, Handy, Kassam, and Renade , note there are many similarities among business- and nonprofit entrepreneurs with the main difference being their primary motivation: business entrepreneurs are motivated by making profits whereas nonprofit entrepreneurs are motivated by promoting a social cause. Hence, it is often assumed that nonprofit entrepreneurs are principally guided by intrinsic, and often altruistic, motivations Carman and Nesbit However, as discussed in the next section, it is perhaps time to start challenging this assumption.
The basis for comprehending what a necessity nonprofit entrepreneur is can be traced back to Young 's seminal contribution on what stimulates individuals to start new nonprofit activity. He classified nonprofit entrepreneurs into various types, and two types are of particular interest for this study: the searcher and the income seeker. What makes Young's observation significant is that it demonstrates how extrinsic motivations, including self-employment and income, indeed can play a role in explaining nonprofit entrepreneurship.
Moreover, it also recognizes not all nonprofit entrepreneurs are the same, and that the differences in the underlying driving forces of nonprofit entrepreneurs are likely to be accompanied by differences in output and performance that are central to sort out and understand. Three decades later, Carman and Nesbit examination of nonprofit entrepreneurs brings a complementary dimension to Young's work by showing how, within the group of income seekers, there is an additional important distinction to be made.
Carman and Nesbit note the desire for self-employment can indeed be a potent motivation when examining why new nonprofits emerge. This differentiation is vital because it acknowledges that nonprofit entrepreneurship, in some cases, is a self-employment choice out of necessity rather than a positive choice to take advantage of an opportunity.
Still, the notion of a social- or nonprofit necessity entrepreneur remains a bewildering concept. A basic argument for paying attention to necessity nonprofit entrepreneurs is that by distinguishing this group from other types of nonprofit entrepreneurs we can begin to make headway in understanding how various forms of entrepreneurship affect the nonprofit sector. For example, if nonprofit entrepreneurship comes in different guises, policy makers and other stakeholders could benefit from knowing more about the attributes of the various forms of nonprofit entrepreneurship to inform and guide strategic decision-making process and the allocation of resources.
Principal to the above argument is the idea that necessity and non-necessity nonprofit entrepreneurship are different. In addition to the motivational difference, this section highlights three further reasons to suppose necessity nonprofit entrepreneurship is different from its non-necessity peer. These differences, in turn, serves as the basis for a number of propositions regarding necessity nonprofit entrepreneurship.
It is important to note that the propositions are derived from the business entrepreneurship literature given the dearth of nonprofit research devoted to necessity entrepreneurship. This finding, along with certain similarities of entrepreneurs in the two sectors, underscores the likelihood that entrepreneurs share certain characteristics in general […].
An initial proposition is that nonprofit venture activities created by necessity nonprofit entrepreneurs are more likely to be short-term and short-lived entities. If self-employment in the nonprofit sector is not the preferred preference of the nonprofit entrepreneur, it is feasible to assume the new venture being created is not going to be looked upon as a long-term endeavor. In other words, the new venture functions as a stopgap activity that will be discontinued as soon as the necessity nonprofit entrepreneur finds a better opportunity Gibson Starting up a new nonprofit is no easy endeavor.
Andersson and Ford looked at new nonprofit voucher schools in Milwaukee and found seven of ten start-up efforts resulting in failure. Because necessity nonprofit entrepreneurs are pushed into starting new nonprofit ventures, they will be even less prepared Brewer , and therefore disadvantaged, to operate such a venture compared to those entrepreneurs who carefully plan their new nonprofit initiative and develops a more robust capacity for the start-up effort Andersson Nonprofit ventures created by necessity nonprofit entrepreneurs are likely to be small, but also postulated to remain small.
Private sector data has shown businesses created by necessity entrepreneurs are on average smaller and have lower growth expectations Poschke He further notes necessity entrepreneurs are less likely to expect having any employees in the future when compared to non-necessity entrepreneurs. Indeed, if necessity entrepreneurs operate and perceive their ventures using a short-term perspective, making upfront investments aimed at future growth are not going to be a main priority.
Finally, by operating on a small scale and actively seeking to stay small the necessity nonprofit entrepreneur can maintain greater control of the new venture. Gibson notes necessity entrepreneurs frequently pivot and make changes to their ventures, and to allow for such pivoting to take place, it is essential for the entrepreneur to have discretion and flexibility. The final propositions are that necessity nonprofit entrepreneurship will be less impactful and less innovative than other forms of nonprofit entrepreneurship.
Given the postulated smallness of necessity nonprofit ventures, it is likely their impact will also be rather limited.
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Gibson , 27 further underscores how necessity entrepreneurs are unlikely to utilize the tools and techniques necessary for creating a good foundation for generating major impact:. They are comfortable keeping their knowledge of their business in their head. Consequently, they do not have the data they need to make good business decisions. This is not to say necessity nonprofit entrepreneurs do not work very hard, or that necessity ventures do not produce any impact.
But if you lack many of the financial and strategic features necessary for making well-informed operational decisions, it will sooner or later undermine your ability to steadily generate impact. Necessity entrepreneurs are also less likely to be innovators.
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Instead, they will focus on and be limited to produce more standard or modest outputs, and seek to compete with a low-cost strategy. Hence, if the main goal is to secure an income it is safer to pursue something true and tested rather than jumping into the unknown. This assertion is supported by Gibson , 26 who posits necessity entrepreneurs […] tend to copy each other rather than differentiate their business.
Clearly the above propositions are tentative as this author knows of no empirical research comparing necessity and non-necessity nonprofit entrepreneurs. Therefore, with the goal of beginning to examine some of the propositions, an exploratory study was conducted using data from two surveys of a small sample of nonprofit entrepreneurs in Kansas City, MO.
Bloch School of Management at the University of Missouri-Kansas City that offers a variety of support and programs to the Kansas City nonprofit sector. As many individuals connected with MCNL with questions regarding how to start and support new nonprofit ventures, the center developed the Planning a New Nonprofit-workshop in targeting any individual expressing an interest in starting a nonprofit organization. Hence, this service is explicitly directed toward nascent nonprofit entrepreneurs, that is, those engaged in activities that are intended to culminate in a viable organization.
The workshop is free of charge; however, all participants must register before attending. MCNL promotes the workshop via its website, referrals, and newsletters. On average, six to seven sessions are offered annually, and each session attracts between fifteen to thirty nascent nonprofit entrepreneurs. Since , the center has collected a variety of data from participants in an effort to evaluate and improve the program.
MCNL's purpose with this specific survey was to capture information regarding early pre-organization start-up reasoning, intentions, and strategic considerations.
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The facilitators of the program distributed a questionnaire before the program started and explained the purpose of the survey. Sixty-nine nascent nonprofit entrepreneurs completed the survey. At this point it is vital to note this study has obvious limitations. First, as stated earlier, this is an exploratory study aiming for illumination rather than theory testing. Second, the measures used were designed by MCNL with a focus on simplicity and brevity rather than scientific rigor. For example, many of the measures are based on only one item designed with a practical mindset rather than including robust and empirically validated empirical measures.
The survey is meant to capture views from the workshop participants meaning the perspectives from other stakeholders related to the new venture were not considered. Hence, there are obvious self-report and overconfidence bias risks. The results are much in line with what current nonprofit scholarship posits, proposed, nonprofit creation is driven by both instrumental and expressive motives Frumkin However, it is also clear more extrinsic motivations is a driver of new nonprofits.
Those indicated wanting more autonomy also commented on a personal calling or need for personal fulfillment, supporting some of the findings by Carman and Nesbit and Germak and Robinson These thirteen respondents Perhaps not surprisingly, nine respondents in the necessity nonprofit entrepreneurs group indicated they were currently unemployed. Four respondents in the necessity nonprofit entrepreneurs group selected not to answer this question.
The necessity group did not differ markedly from the rest of a sample in terms of gender distribution and age. However, only one respondent in the necessity nonprofit entrepreneur group indicated having started a new organization before compared to seventeen among the other respondents. It was also previously noted that necessity business entrepreneurs tend to operate smaller ventures and may have low growth expectations.
If the main purpose of necessity nonprofit entrepreneurs is to secure employment, it seems plausible to think they will engage in well-recognized activities rather than undertake activities that are untested and therefore lacks legitimacy in the eyes of external stakeholders.
Entrepreneurial Motivating Factors: Internal and External Factors
Table 1 provides basic descriptive statistics for the commitment, scales, and innovation items. The results in Table 1 offer little support for the presumption that the nascent necessity entrepreneurs view their emerging organizations as a limited short-termed activity. It is also worth noticing how the group of necessity nonprofit entrepreneurs are more likely to be novice entrepreneurs planning to start a new organization by themselves rather than part of a start-up team. Yet, to gain deeper insight into the differences between necessity and non-necessity nonprofit entrepreneurs, it will be important to move beyond intentions and expectations to also examine the organization they create.
Consequently, with the support of MCNL, a follow-up email survey went out February to sixty-seven of the respondents of the nascent stage survey two of the contact email address lacked complete domain names. Fifty-four responded back, including all thirteen necessity nonprofit entrepreneurs from the initial survey. The first question in the follow-up survey asked about start-up status i. Four respondents none in the necessity group indicated they were still in the process of getting ready to launch their new venture.
More than half The respondents in the discontinued group were also asked to explain why they halted the founding process this was an open-ended question. Securing start-up funding was the most frequently highlighted reason among the necessity group respondents. Given ten or Yet, the failure notion is multifaceted, add comma and more research and nuance are certainly needed to explicate the nonprofit start-up failure process.
For example, an intriguing finding involved three of the necessity nascent nonprofit entrepreneurs highlighting employment elsewhere as one, albeit not the only, reason for discontinuation. One respondent even said he had founded a new nonprofit in but stopped operations in when hired by another nonprofit organization. This observation not only problematizes the notion of start-up failure, but gives a nudge to the idea that necessity nonprofit entrepreneurs are more likely to utilize new nonprofits as temporary solutions and not long-term endeavors. Turning to the twenty-two nonprofit entrepreneurs currently operating a nonprofit three being necessity entrepreneurs , each respondent was first asked to provide some basic characteristics of their new organization, including number of full-time employees, board size, and budget size.
Though there are only three respondents in the necessity group, the descriptive breakdown presented in Table 2 still yields some noteworthy observations. In particular, the organizations created by the necessity nonprofit entrepreneurs are small-scale operations. They only employ the founder and have small boards note that the minimum board size in Missouri is three, and in Kansas one.
Furthermore, the budgets for the organizations created by necessity nonprofit entrepreneurs tend to be smaller compared to most of the budgets for organizations created by non-necessity nonprofit entrepreneurs. Even the three organizations in the non-necessity group with no paid employees reported having larger budgets than the nonprofits in the necessity group.
Taken together, nonprofits founded out of necessity appear to be lean and with limited capacity for significant impact. Not only do they operate with limited manpower but also with limited financial resources to put toward programs and services. The resources available for programs and services will further depend on how much money will flow to the necessity nonprofit entrepreneur as compensation. At this point we can of course only speculate as to why nonprofits created by necessity nonprofit entrepreneurs have such a small footprint.
One possible reason is the founder wanting to maximize control, which is easier when operating a smaller and leaner organization. A third option is that necessity nonprofit entrepreneurs lack the know-how for how to build and operate a larger organization. The same five-graded Likert-scale from the nascent survey was utilized. Table 3 displays basic descriptives for all questions. The long-term commitment among the non-necessity nonprofit entrepreneurs has increased from the first survey, resulting in a more pronounced difference between the two groups. Hence, the proposition necessity nonprofit entrepreneurs are less likely to consider their new ventures long-term endeavors appears to have some support when looking at post-nascent stage nonprofit entrepreneurs.
The difference in the view on scale remains more or less unchanged, with necessity nonprofit entrepreneurs displaying less appetite for growth. The findings reported in Table 2 also suggest necessity nonprofit entrepreneurs prefer to operate small and lean organizations. Table 3 also reinforces the idea necessity nonprofit entrepreneurs are unlikely to launch new innovative ventures. However, the entrepreneurs in the non-necessity group were not particularly innovative either. Clearly the intent to innovate, displayed by the non-necessity group during the nascent stage, was not translated into innovative programs or services.
Ultimately, when looking at the three innovations items together, most new nonprofits appear to be replicators rather than innovators. Obviously, the empirical material presented in this article has many limitations. The data covers self-selected nonprofit entrepreneurs in one geographical region, hence, no generalizations beyond the discrete group of nonprofit entrepreneurs examined for this study can be made.
Also, in addition to the methodological limitations discussed earlier, it is important to remember the usual caveats regarding a small sample study and its consequent limitations. Still, this author believes the observable differences between necessity nonprofit entrepreneurs and non-necessity entrepreneurs, at a minimum, warrant more research. To initiate and progress the conversation about necessity nonprofit entrepreneurship, the second half of this article will focus on what policy questions arise from the observations reported in this article. This discussion is not meant to convey a normative policy stance, but rather to highlight various policy possibilities for future discussion.
Hence, a vital first step is to figure out just how many necessity nonprofit entrepreneurs there are, and where in the nonprofit sector they reside. If necessity entrepreneurship is found to be a fringe phenomenon, it will likely not get nor will it need much attention at a policy level. If, however, necessity nonprofit entrepreneurship turns out to be a more prolific phenomenon then it may have implications for the design, funding, and success of nonprofit entrepreneurship policies. Theoretically, one could suspect necessity nonprofit entrepreneurship to be quite common. Cowling and Bygrave predict the rate of necessity based entrepreneurial activity increases when the barriers to entry into a particular field or market is low and unemployment is high.
The combination of low barriers to entry and the effects of the recession point to necessity nonprofits potentially making up a sizeable fraction of new nonprofits being created over the past decade. Secondly, we also need to gain a better understanding of the outcomes and impact of nonprofit entrepreneurial activity. This is because policymakers and funders may want to target specific types of nonprofit entrepreneurship that yield particular gains.
Entrepreneurship and motivation
When estimating such gains, such as social innovation or job creation, knowing the overall volume of new nonprofits and the motivations underlying nonprofit entrepreneurship are not sufficient, as neither captures the actual consequences of the entrepreneurial activity. However, measuring nonprofit entrepreneurship is no easy task.
For example, in the past, nonprofit scholars have used the IRS tax exemption rule date as an indicator of when a new nonprofit is created e. Yet, empirical evidence indicates nonprofits can be operational for years before obtaining tax exemption Van Slyke and Lecy An alternative would be to measure newly incorporated nonprofits.
Although this approach still fails to capture informal nonprofit ventures, as well as congregations not electing to incorporate, the incorporation process at the state level precedes applying for federal tax exemption. The incorporation of a new venture thus represents one of the earliest opportunities to tap nonprofit entrepreneurs and create a reference point for future inquiry as the new nonprofit evolves. But incorporation is a state level act, meaning scholars and policy makers would need to collect and aggregate data from all states in order to gauge nonprofit entrepreneurship in the US.
A subsequent challenge is how to differentiate necessity- from non-necessity nonprofit entrepreneurship in the data. However, targeting the time of incorporation would mean convincing each state to include such measures into the incorporation process, a tall challenge indeed for any researcher or policy maker. Targeting the federal tax exemption process would be beneficial from the standpoint that the data would be collected and stored by the IRS.
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