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Many empirical studies have focused on whether public funding leverages (crowds in) or discourages (crowds out) private giving behavior, finding mixed results. Recent studies suggest the need to examine how nonprofits adjust their fundraising efforts after experiencing cuts or increases in government funding, which can then influence donor behavior.

In this study, the authors conduct an online survey experiment with nonprofit managers to test how nonprofits respond to changes in government funding.

The authors find some evidence that nonprofit organizations would change their fundraising expenses when facing cuts in government funding, yet the authors also find that the change could be either to increase or decrease fundraising spending. Since decisions are made by executive directors, the study also considered how executive personality type as maximizers or satisficers may interact with institutional and environmental constraints in decision-making. When funding goals are met, executives tend to behave as “satisficers” and are unlikely to make significant changes, even when their individual personality is more consistent with being a “maximizer.”

The authors find these results to be the reflection of the current environment in which many nonprofits operate, characterized by pressures to keep operating costs low. The results of the experiment have implications for both funding agencies and nonprofits that strive to enhance the capacity of nonprofit services.

This study is the first attempt to untangle the multilayered relationships between government funding, fundraising, leader preferences and personalities, and donations using an experimental approach with current nonprofit leaders.