James, Estelle & Young, Dennis, (2007) “Chapter 5: Fee Income and Commercial Ventures,” in Financing Nonprofits: Putting Theory into Practice (Ed. Dennis Young), Maryland: Altamira

Develops a firm theoretical foundation for the appropriate place of fee income in nonprofit finance. Focuses on two broad components of such revenue – fees derived from private payments associated with the delivery of mission-related goods and services, and revenues developed from profitable commerical ventures that may or may not have a close connection with the mission.

Reviews present patterns and trends in nonprofit fees and revenues, and examines variations of current fee practices in different parts of the sector. Analyzes the conceptual foundation for non-profit fee and commercial income. Identifies further research needed to verify the hypothesized relationships and connect the conceptual framework to management practices. Offers series of diagnostic questions for nonprofit managers seeking to enhance their fees and commercial revenues in pursuit of an expanded financial basde for their mission-related activities.

On the Menu du jour… 

Foster, William & Bradach, Jeffrey (2005), “Should Nonprofits Seek Profits?” Harvard Business Review, Boston: Feb 2005. Vol. 83, Iss. 2; pg. 92

Nonprofits increasingly feel compelled to launch earned-income ventures – not only to appear more disciplined and businesslike to stakeholders but also to reduce their reliance on fundraising. There’s plenty of hype about the value of earned-income ventures in the nonprofit world, but such projects account for only a small share of funding in most nonprofit domains, and few of the ventures make money. Moreover, when the authors examined how nonprofits evaluate potential enterprises, they discovered a pattern of unwarranted optimism. The potential financial returns are often exaggerated, and the challenges of running a successful business are routinely discounted. But the biggest downside of such ventures is that they can distract nonprofits’ managers from their core social missions and, in some cases, even subvert those missions. Earned-income ventures do have a role in the nonprofit sector, but unrealistic expectations are distorting managers’ decisions, wasting precious resources, and leaving important social needs unmet.

Toepler, Stefan, “Caveat Venditor? Museum Merchandising, Nonprofit Commercialization, and the Case of the Metropolitan Museum in New York,” Voluntas, 2006-06, Vol. 17, Issue 2

This paper reviews some of the underpinnings of the current commercialization debate in the nonprofit sector, based on an analysis of Metropolitan Museum of Art data from 1960 to 2002. The case suggests at least two avenues for additional research: First, while analysts tend to see the origins of the commercialization phenomenon in the fiscal setbacks of the 1980s, the economic crisis of the 1970s and the resulting erosion of endowment funds may also have been an as of yet unexplored driving force behind the commercialization trend. Second, current conceptual frameworks of the phenomenon adequately explain the motivations behind the observable rise of the museum’s commercial activities. However, the changing rationales as well as economic fortunes of commercial activities in this case highlight the need for a better understanding of the long-term effects and consequences of commercial activity by nonprofit organizations, particularly in light of the current push for increased entrepreneurialism.

Robinson, Andy, (2002) “Selling social change (without selling out): earned income strategies for nonprofits”, San Francisco: Jossey-Bass

Canada’s national newspaper The Globe and Mail recently featured this article on social enterprise, titled “Marry business and charity, Martin says”. Apparently, after 12 years of inaction in this area as finance minister, our former Prime Minister – the Rt. Honourable Paul Martin – is finally sold on the promise of social enterprise. The article falls in the typical traps of recent media coverage on the subject: it extols the potential of social enterprise and explains how public policy could better support hybrid organizations, but rarely questions whether ‘marrying business and charity’ itself is necessarily a good thing…

Martin’s speech, titled “Unleashing the Power of Social Enterprise”, is taking place, as I type, at the University of Toronto’s Munk Centre for International Studies. Event details are here, if any of you readers from the 416 area are interested.

Anderson, Beth & Dees, Gregory (2006), “Rhetoric, Reality, and Research: Building a Solid Foundation for the Practice of Social Entrepreneurship”, from Social Entrepreneurship (ed. Alex Nicholls), New York: OUP

This is a great piece – one which I felt I should have read earlier. Specifically, this essay raises a number of research questions typically overlooked by social entrepreneurship curriculums and practitioners when assessing the ‘effectiveness’ of earned income ventures. (Not surprisingly, these questions make great areas of inquiry for my thesis!) These include:

‘Self-Sufficiency’: What does it mean for an organization to be self-sufficient? Is it fair to describe organizations that depend on earned income as self-sufficient and those that rely on other sources as ‘dependent’? What are the value judgments that underlie the promotion of earned income?

“Dependency is generally regarded as bad – a sign of weakness and vulnerability. Self-sufficiency is regarded as unequivocally good – a sign of strength. What are the values implicit in the use of these terms? … Of course, the term earned income itself is value laden, seemingly implying that the donations, grants, and government support that social sector leaders work so hard to attract and use for important social services are not ‘earned’“

‘Sustainability’: Is earned income inherently more ’sustainable ‘ than other forms of income for social entrepreneurs? Under what conditions is it most likely to be sustainable? Is ’sustainability’ the right measure for assessing financial strategies?

‘Boschee nad McClurg claimed that, ‘As long as nonprofits continue to be dependent on contributions from individuals, grants from foundations, subsidies from government and other forms of largesse, they will never become sustainable or self-sufficient’; But it is not clear that earned income is intrinsically more reliable than all other sources; A few failures have been documented; A thoughtful research agenda would also explore the notion of sustainability in some depth; if we want to promote sustainability we would be urging the creation of endowments; even large multinational corporations can only expect to live forty or fifty years on average; the life expectancy for smaller businesses is much lower, with one survey estimating 12.5 years for all firms”

‘Financial Freedom’: Does earned income give social entrepreneurs more flexibility in how they spend their money? Is complete reliance on earned income optimal for social entrepreneurs? How difficult is it to generate profits from earned income ventures in the social sector?

Another alleged feature of earned income ventures that makes them attractive is the promise of financial freedom and flexibility. ‘The beauty of making a profit is that you can do a lot with the money, you can do what you want to do’; But in a business with 10 percent total return on sales that also requires half of those profits to be reinvested in the business (both generous estimates), it will take $1 million in sales to generate $50,000 in free cash flow. Especially if the venture is not completely aligned with the organization’s mission, social entrepreneurs must ask if this earned income strategy is the most effective way for them to generate $50,000 in unrestricted cash; A very different story can emerge when costs are fully taken into account; Without rigorous in-depth research, we have no idea about the level of financial ‘bottom-line impact’ business ventures are having on not-for-profit organizations. If total reliance on earned income truly were optimal for social entrepreneurs, one might expect to see far more social entrepreneurs adopting a for-profit form.

‘Scalability’: Does greater reliance on earned income make it easier to scale a successful social venture? How and under what conditions does earned income contribute to scalability?

Recently, proponents of earned income have started to emphasize another potential benefit – its scalability. But does reliance on earned income improve the scalability of social purpose organizations? Again, we have little systematic evidence one way or the other.

‘Social Impact’: How and under what circumstances can earned income strategies be used to improve social impact? Does the ‘double bottom line’ metaphor make sense? How should social entrepreneurs make decisions about the best funding strategy for maximizing their social impact?

Van Til, Jon (2000), “When the Business of Nonprofits is Increasingly Business” from Growing Civil Society: From Nonprofit Sector to Third Space, Bloomington: Indiana University Press

Chapter focuses on the role of nonprofit organizations in health care and education. Asks: for these enormously important social institutions, what difference does it make if one is for-profit or non-profit?

Notable Passages: “Over the past two decades, nonprofit organizations have been hectored to become increasingly businesslike. For-profit subsidiaries are created, and unrelated income increasingly comes to be earned. Increasingly, one confronts the worry: has the nonprofit sector become home to too many organizations which act essentially as tax-exempt businesses?”(113); “Kuttner argues that the process by which a community based non profit hospital becomes transformed into a chain-bought for-profit entity negates the fundamental legal criterion for a nonprofit organization: the non-distribution constraint” (114); “The concept of the ‘third space’ suggests that the third sector may not primarily be about organizational structures – nonprofits instead of corporations or governments. Rather, the special contribution of this realm of human activity may rest in a particular combination of spirit and organization.” (125)

Bennett, James & DiLorenzo, Thomas (1989), The Profits of Nonprofits, New York: Hamilton Press

Examines the privileges of nonprofits, the size of the commercial nonprofit sector, the rationales for special privileges (thin markets, market failure, public goods), and some legal and taxing issues (UBI tax, GAO study)

Notable passages: “This book investigates unfair competition. When two types of organizations engaged in identical commercial activities are treated differently under the law, there is unfair competition” (1); “Whenever a nonprofit produces goods and services in competition with for-profits, simple equity demands that the nonprofit be subject to the same tax laws, pay the same postal rates, and be governed by the same regulations as its profit-seeking counterparts. In short, if a nonprofit wants to operate a commercial enterprise, it should set up a for-profit subsidiary” (3); “To cope with these cuts, nonprofit organizations have turned to other sources of funds. In general they have managed to offset most of the government cutbacks in the process. However, the major source of net income has not been private charity but service fees and charges. In other words, forced by budget cuts to become less governmental, nonprofit agencies have responded not by becoming more charitable, but by becoming more commercial” (19)

Borchee, Jerr (2006), “Social Entrepreneurship: the Promise and the Perils” in Social Entrepreneurship: New Models of Sustainable Social Change (ed. Alex Nicholls)

Summarizes six historical forces that led to the emergence of social entrepreneurship in the USA (depleted reserves, diminished support from public sector, reduced giving by individuals and corporations, more competition for grants and contributions, more people in need, a dangereously frayed reputation)

Describes five basic principles that have evolved over time (sustainability vs. self-sufficiency, entrepreneurship vs. innovation, entrepreneurship vs. social entrepreneurship, earned income strategies vs. social purpose business ventures, innovators – entrepreneurs – professional managers);

Presents two unexpected outcomes experienced by not-for-profits adopting entrepreneurial strategies (‘organized abandonment’, loosening the chains of dependence)

Identifies four types of stakeholder objections (generic nightmares, logistical nightmares, nightmare of failure, nightmare of success)

Analyses the single greatest obstacle encountered by entrepreneurial not-for-profits (risk-aversion)

Reviews fourteen critical success factors emphasized by pioneers in the field (candour, clarity of purpose, courage, core values, a willingness to plan, building the right team, separation strategy, strategic marketing, visibility first not mission, focus, customer service, quality, aggressive pricing, strategic partnerships)

Firstly, a word of thanks to my friend Emma Hall (UPenn ‘08), who recommended Third Sector Development: Making Up for the Market by Christopher Gunn for my reading list — thanks Emma! =)

Then, several questions I encountered today while researching:

• Since there is no agreed upon definition of ’social entrepreneurship/enterprise’ in the current literature, what will my definition of ’social enterprise’ include?
• For example, should my thesis be limited to a certain organizational model of social enterprise over another? (i.e. a nonprofit with a for-profit subsidiary vs. a socially responsible business)
• What are the other senior theses out there that are related to my topic?

FYI, a couple friends and I will be driving up to Massachusetts for the weekend. That means thesis research -and this blog- will be on vacation as well. =) In the meantime, could anyone recommend any good & recent books-on-tape? (and it doesn’t have to be related to social enterprise)

Mair, Johanna et al. (ed.) (2006), Social Entrepreneurship, New York: Palgrave MacMillan

Contents include: ‘Perspectives & Agenda for Research’, ‘Opportunities and Intentions’, ‘Strategy, Structure, & Outcome’, & ‘Integrating Sustainability & the Environment’; Contains helpful abstracts of each article in ‘Introduction’ along with table of definitions of ’social entrepreneurship’ from authors; Chapter 4: ‘A Critical Appraisal’ by Albert Cho provides interesting critique of discourse of social enterprise

Nicholls, Alex (ed.) (2006), Social Entrepreneurship: New Models of Sustainable Social Change, New York: Oxford University Press

Contents vaguely include: ‘New Perspectives’, ‘New Theories’, ‘New Models’, & ‘New Directions’, written by such heavy hitters as Muhammad Yunus, Jeff Skoll, Bill Drayton, & Jed Emerson; Articles of interest include ‘3: For What it is Worth: Social Value & the Future of Social Entrepreneurship’ by Rowena Young, ‘4: Cultivating the Other Invisible Hand of Social Entrepreneurship: Comparative Advantage, Public Policy, & Future Research Priorities’ by Geoff Mulgan, ‘Social Entrepreneurship: the Promise & the Perils’ by Jerr Borschee, & ‘Moving Ahead Together: Implications of a Blended Value Framework for the Future of Social Entrepreneurship’ by Jed Emerson

Bates, Amy (2001), “Venture Philanthropy: Practicalities, Possibilities, & Prognosis”, Senior Thesis, WWS

Scanned this 136-page thesis today at Mudd Library; Chapters include: ‘Role of Nonprofit Sector & Emergence of Venture Philanthropy’, ‘Theory of Venture Philanthropy’, ‘State of the Field’, ‘Venture Philanthropy in Practice’, & ‘Lessons Learned’; Provides great introductory overview of nonprofit sector & theory, as well as comprehensive assessment of venture philanthropy along set proxies (e.g. attitudes towards risk, closeness of relationship, etc.); Interestingly enough, I talked briefly with Amy over email earlier this month – re: Bridgespan, mostly – Amy encouraged me to pursue the topic, since a lot has changed since her thesis was published (tech bubble bursting, rise of megafoundations…)

Henriques, Adrian & Richardson, Julie (ed.) (2004), The Triple Bottom Line: Does it all add up?, London: Earthscan

Anthology of writings on CSR (Corporate Social Responsibility); Emphasis on metrics & social value/cost accounting; First chapter ‘Enter the Triple Bottom Line’ by John Elkington provides good overview of CSR theory, illuminated with graphs & tables

Vogel, David (2005), The Market for Virtue: The Potential and Limits of Corporate Social Responsibility, Washington D.C.: Brookings Institution Press

Another primer to CSR; Relevant chapters include: ‘The Revival of Corporate Social Responsibility’, ‘Is There a Business Case for Virtue?’, & ‘What is the Demand for Virtue?’

Borzaga, Carlo & Defourny, Jacques (ed.) (2001), The Emergence of Social Enterprise, New York: Routledge

A survey of social enterprise across the European Union; Each chapter is devoted to a member state and its particular ‘comparative advantage’ or ‘brand’ of social enterprise (e.g. ‘Austria: social enterprises & new childcare services’ or ‘Spain: social enterprises as a response to employment policy failure’); May be useful when performing cross-country comparisons / case studies, especially answering the question: ‘What works?’; Also contains great introduction, ‘From third sector to social enterprise’ enterprise’

Alessandrini, Megan, “A fourth sector: The impact of neo-liberalism on non-profit organisations,” School of Government, University of Tasmania, Refereed paper presented to the Jubilee conference of the Australasian Political Studies Association at Australian National University, Canberra, October 2002

Billitteri, Thomas J., “Mixing Mission and Business: Does Social Enterprise Need a New Legal Approach? Highlights from an Aspen Institute Roundtable,” Nonprofit Sector Research Fund, January 2007, Available Online at:

Brink, Ben, “Strategic Alliances Between Businesses and Nonprofit Organizations for Increasing Impact of Philanthropic Work: Economic, Sociological, and Cultural-Anthropological Perspectives,” DEKKA, 2002, Available Online at:

Burrows, Gideon, “In Whose Interest?” The New Statesman, 9 Feb 2004

Business Link, “Crating a Community Interest Company,” Available Online at:

Center for Advancement of Social Entrepreneurship, Fuqua School of Business, “A Brief Guide to Understanding the Social Sector,” Duke University, February 2003, Available Online at:

“Creating Social Capital Markets for Fourth Sector Organizations: Opportunities and Challenges,” July 14, 2007 Forum at Google, NYC, Sponsored by: The Aspen Institute’s Nonprofit Sector and Philanthropy Program and the Fourth Sector Network

“EBBS & the Fourth Sector” Available Online at:

Emerson, Jedd, “The Blended Value Map: Tracking the Intersects and Opportunities of Economic, Social and Environmental Value Creation,” Available Online at:

Frankel, Carl, “Messin’ with the Engine: Re-Inventing Enterprise in a Time of Global Crisis,” Cornell University, 7 February 2003

“Frequently Asked Questions for Community Interest Companies,” UK CIC Regulator, Available Online at:

Gair, Cynthia, “If the Shoe Fits: Nonprofit or For-Profit? The Choice Matters,” REDF, December 2005, Available Online at:

Gibbs, Anthony, “The Rise of Philanthrocapitalism: What does it mean for charities in the years ahead?”

Gidley, Cheryl, “The Sustainable Nonprofit: The Best of Both Worlds,” Philanthropy News Digest, The Foundation Center, 15 April 2004, Available Online at:

Hamaoui, Jeff (host), “Creating a Hybrid For-Profit / Non-Profit Social Enterprise Structure,” Online Discussion, Social Edge, The Skoll Foundation, May 2005, Available Online at:

KaosPilot, “Fourth Sector,” Available Online at:

Lynch, Malcolm, “For and Against the Community Interest Company,” Investment Matters, Issue 28, January 2004

Newberry, Derek, “Bridging the Finance gap for a Generation of ‘Philanthropreneurs’,” 17 May 2007

Philanthro Media, “Special Treatment for the Emerging ‘Fourth Sector’?,” Available Online at:

Prewitt, Geoffrey D., “Towards a ‘Fourth Sector’? Social Enterprises as a New Hybrid for Employment Generation,” London School of Economics & United Nations Development Programme, July 2007

Robinsons Solicitors, “Community Interest Company,” Available Online at:

Shutkin, William, “The new, evolved capitalism,” The Boston Globe, 27 July 2007

Social Enterprise Coalition, “Community Interest Company,” Available Online at:

————- “CIC – Background,” Available Online at:

————- “CIC – Legislation,” Available Online at:

————- “CIC – The Regulator,” Available Online at:

“Social Enterprise Typology: The Hybrid Organization,” Virtue Ventures LLP, 2004, Available Online at: <http://www.virtueventures.com/setypology/index.php?id=HYBRID_ORGANIZATION&lm=0>

Strom, Stephanie, “Ex-Wall Street Executives Storm Nonprofit World,” International Herald Tribune Online Edition, 2 August 2007, Available Online at:

Tuckman, Howard, “The Strategic and Economic Value of Hybrid Nonprofit Structures,” Rutgers State University, [year], Available Online at:

Young, Dennis R., “Social Enterprise in the United States: Alternate Identities and Forms,” Case Western Reserve University Prepared for: the EMES Conference, The Social Enterprise: A Comparative Perspective, 13-15 December 2001, Available Online at:

From Stanford Social Innovation Review:

“What Works: Carving Out a Niche,” Will Tizard

“Social Enterprise 2.0: Moving toward a sustainable model,” Jim Schorr

“What Profits Do for Nonprofits: A rare study shows how earned income helps agencies – and how it doesn’t,” Alana Snibbe

“Letters: Article Needs a Reality Check,” Beth Bubis, Social Enterprise Alliance

“Pop Quiz: Define Social Entrepreneurship”

“The Pitfalls of Profits: Why Nonprofits should get out of commercial ventures. At the same time, the tax code needs to be changed to help nonprofits get more charitable donations,” by Burton A. Weisbrod

“The Price of Commercial Success: Minnesota Public Radio: Social Purpose Capitalism,” James A. Phills and Victoria Chang

“The Profitable Nonprofits: Almost half of revenue-seeking organizations are in the black,” Miguel Unzueta

“Reshaping Social Entrepreneurship,” Paul C. Light

“Capitalizing on Convergence,” James E. Austin, Roberto Gutirrez, Enrique Ogliastri, & Ezequiel Reficco

“Strategic Alliances: Managing the Collaboration Portfolio,” James Austin

“Social Entrepreneurship: The Case for Definition,” Roger Martin & Sally Osberg

“Philanthropy, Inc.,” Keith Epstein

“Invention for the Common Good: Four reasons corporations should engage in social responsibility,” Carly Fiorina

“The Myth of CSR,” Deborah Doane

“Investing in Society: Why we need a more efficient social capital market – and how we can get there,” Wiliam Meehan, Derek Kilmer, Maisie O’Flanagan

From The Economist

“The rise of the social entrepreneur,” 23 Feb 2006

“The fight over a big idea,” 20 July 2006

“Good for me, good for my party,” 24 Nov 2005

Other Sources: Chronicle of Philanthropy, Nonprofit Quarterly, The Nonprofit Times, Social Enterprise Reporter, Center on Philanthropy and Civic Society, The Foundation Center, The Skoll Foundation, The Urban Institute, Ashoka

The following is a rough copy-and-paste job from my ‘WWS Thesis Proposal Form’, which was signed and submitted in early October. I hope it gives you a better idea of my topic and where I’m planning on taking it.

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Provide a brief thesis topic (in no more than 10 words).

Social Enterprise in the United States: Possibilities, Prognosis, & Policy

Briefly describe the topic:

Though lacking a precise definition, ‘social enterprise’ refers to any mission-driven organization which trades in goods and services or uses market-based strategies to advance a social purpose. Social enterprise exists at the intersection of the for-profit and non-profit sectors, and promises to address society’s most pressing problems by harnessing the advantages of both those sectors.My thesis will take a critical look at the social enterprise movement in the United States, assess its current and future impact on American civil society, and determine the forms that an appropriate policy response / regulatory environment for social enterprise could take.

Briefly state the research question:

What is social enterprise? In which areas have social enterprises / hybrid organizations been most successful in advancing a charitable mission or in generating earned income for a nonprofit? And how can our public policies best support the expansion of social enterprises in these areas? These are just some of the broader questions that I intend to address in my thesis.

Briefly state your current working hypothesis.

The record of social enterprise in the United States to date is mixed. Most notably, without any clear designation under US federal or state law, social enterprises must negotiate a difficult terrain between maximizing profits and achieving a socially responsible mission – at the risk of exposing the organization to potential liability or alienating their traditional donors and shareholders. Should it wish to see a vibrant and sustainable ‘fourth sector’, the government needs to intervene, whether by acting as a clearinghouse of best practices and start-up support for social enterprises or by writing more flexibility into existing legal and tax regimes.

Briefly outline the nature of the research evidence that you expect to use to answer your question or test your hypothesis:

My research will draw on a variety of evidence and sources, including, but not limited to, the works of leading thinkers on the subject (e.g. Jedd Emerson’s “Blended Value”; Bill Dreyton of ASHOKA), scholarly journals and nonprofit publications (Chronicle of Philanthropy, Stanford Social Innovation Review), university curricula on social enterprise, and interviews with attorneys, academics, policymakers, and social entrepreneurs.

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It’s fall break here in Princeton. The air is crisp, the leaves are even crisper, and thesis season is in full bloom. =)

Enterprising Ideas is a blog for my senior thesis. Some might also call it an experiment. So far, I’ve been researching for my thesis for a few months now, and frankly, there’s got to be a better way to synthesize my research, catalogue my sources, storyboard chapters, solicit feedback from friends, keep myself accountable, and keep my adviser updated — all at the same time! After much consideration, I have decided upon a blog format, and precisely for those reasons. Here’s the top 10:

(1) Blog posts make for great summaries/abstracts/memos of what I’ve read and digested

(2) Tagwords make it easy to sift through all those memos later on

(3) Having everything on cyberspace means I don’t have to bring my flash drive every time I go to a computer cluster, or put all my eggs on the H: drive

(4) My thesis adviser can check on my progress anytime he’d like and provide me with immediate feedback

(5) My family can still feel connected to me, even when I don’t call them

(6) Blogs are meant to be updated often — this will surely keep me accountable over the next few months

(7) My thesis is password protected

(8) Seniors and alumni can respond with their thoughts and suggestions

(9) Juniors and underclassmen get to experience what writing a thesis entails — albeit, vicariously

(10) Finally, I get to educate you!

I must admit, this is not an original idea. So I must give due credit to my friend Adam (Harvard ‘08), who inspired me with his own thesis blog ‘Seine and Heard’. Check it out!

That’s all for now. If you’re reading this, thanks so much for checking in. I can’t promise you that this blog will be entertaining… but it will sure be enlightening!