Social Capital and the Vitality of Community-Based Organizations

This paper examines the extent to which various forms of social capital impact community-level organizational vitality. My hypothesis is that, controlling for other relevant social, political and economic factors, communities with higher levels of social capital should experience more robust organizational and financial growth, and less failure, in their for-profit and nonprofit sectors. I test this hypothesis here in regard to the nonprofit sector, using 2001year data from three sources—Harvard’s Social Capital Community Benchmark Survey, the US Census Bureau, and the IRS’ “charitable organization” Business Master Files—to measure organizational foundings, organizational failures, total revenues, and financial vulnerability in the nonprofit sectors of 284 US counties. Using a combination of negative binomial event count models and OLS regressions, I find that the different dimensions of social capital do not manifest a uniform effect. Only three core dimensions of social capital—social trust, political engagement, and “bridging” social ties—have a consistent, significant impact on the different facets of county-level nonprofit vitality. The results further demonstrate that the health of a community’s not-for-profit sector is dependent on a mix of ecological and environmental factors, especially pre-existing organizational density, median household income, levels of governmental spending, and the proportion of residents aged 65 years and over. Also noteworthy is the finding that those factors that are associated with increases in foundings, failures, organizational growth, and total revenues are generally associated with decreases in financial security, and vice versa. This implies a critical distinction between a sector’s general level of fiscal security and its overall level of organizational and financial “activity.” Paper accepted for presentation at the Annual Meeting of the Western Academy of Management, Missoula, MT, March 21-24, 2007