Community variations in the size and scope of the nonprofit sector: Theory and preliminary findings

Nonprofits reflect and shape community conditions. Understanding the nature of this relationship is important if we are to fully comprehend the role nonprofits play in contemporary society and if policy makers are to make effective use of the sector to implement local responses to community needs. Using data on Internal Revenue Service-registered nonprofits for Indiana counties, the authors examine how theories of demand, supply, and social structure predict the overall density of nonprofits in local communities. The authors find substantial county-level variations in the densities of nonprofits overall and of charitable, advocacy, and mutual-benefit nonprofits. Using multiple regression techniques, they are able to explain 20% to 46% of overall variation (depending on legal category involved) in nonprofit densities. Their findings support the supply and social structure, but not demand, explanations and reveal somewhat divergent patterns for the various types of nonprofits. The authors note several important caveats to the findings.