Does Commercialization in Human Service Nonprofits Increase Their Financial Health?

The purpose of this study is to examine whether an increase in commercial activities among nonprofit human service organizations affects the financial health of the organization.

The sample of this study includes 501(c)(3) public charities in the human service sector that filed a Form 990 for each year in the period 2000–2012 (

N

 = 1471). This study utilized the USA nonprofit financial data accessed from the Internal Revenue Services' Statistics of Income database by the National Center for Charitable Statistics. Latent class growth analysis and latent growth curve analyses were conducted using Mplus 8.0.

This study found that a dramatic increase in the commercial activity ratio affected a decrease in financial health. When examining the relationship between financial health and commercial revenue, human service nonprofits that increased their commercial activity ratio over 12 years showed a decreasing trajectory of profitability and margin. The implications for nonprofit research and practice were discussed.