Nonprofit Entry, Exit, and Implications for Sector Growth

ABSTRACT

Patterns of nonprofit sector growth, organizational birth, and organizational dissolution continue to be at the forefront of the nonprofit management literature. We contribute to this line of research by examining entry, exit, and growth simultaneously, employing the longest panel of US nonprofits of which we are aware. We find estimates of entry ranging between four and 5%, while exit ranges between 1% and 2% per year. The combined rates result in positive sector growth every year, despite variations in regulatory and economic conditions. Our results indicate that lack of exit—not excess entry—is an important, and often overlooked, factor for continued growth of the nonprofit sector. Furthermore, we document the importance of including 990‐N filers and addressing missed filings, demonstrating the bias introduced in metrics of sector growth and exit if we do not account for these issues. We conclude by providing guidance on best practices for scholars and practitioners when measuring nonprofit entry, exit, density, and growth metrics, along with suggested reframing of the mindset around sector growth to consider a lack of exit driving growth rather than exclusively focusing on the creation of new nonprofits.