Frontiers of Entrepreneurship Research
1996 Edition
SUMMARIES

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DETERMINANTS OF ENTREPRENEURIAL BEHAVIOR WITHIN FOUNDATIONS: AN EXAMINATION OF FACTORS AFFECTING START-UP, EFFECTIVE MANAGEMENT AND CONTINUITY


Nancy Upton
Donald Sexton
Carlos Moore

Baylor University
PO Box 98011
Waco, TX 76798

Telephone
817-755-2265

Fax
817-755-2265

Principal Topics

Foundations were surveyed in two steps to examine the determinants of philanthropic endeavors, the barriers of creating a foundation, and to identify best practices in operations. Foundations were categorized as family and non-family operated and a comparative analysis reveals aspects of board and staff usage, financial efficiency and succession planning.

Method

Foundations were surveyed in two steps. Based on a survey of the literature, an exploratory survey was mailed to a random sample of 100 foundations. This survey contained a number of open-ended questions concerning determinants of foundation formation, entrepreneurial practices, and grantmaking effectiveness. based on the responses(n=38) a second survey was developed and sent to a random sample of 297 foundations. Foundations are categorized based on structure and donor family involvement. Effectiveness is measured by overhead costs as percentage of annual grants, administrative costs as percentage of assets, current ROA and annual payout rate.

Major Findings

The personal philosophy of the major donor most influenced the creation of the foundation. The primary barriers to the creation of foundations are the legal requirements, government regulations, perceptions that the process is difficult, and the administrative burden. When asked if they believed foundations must be entrepreneurial in their management, the majority said no. However, when presented with a list of entrepreneurial activities, a number of foundations noted that they had participated in joint ventures, use of volunteers, contribution solicitation, and the development of a product or service for sale. In a comparative analysis of foundations based on family involvement no significant differences were found. Effectiveness may be related to size and staff.

Implications

Independent and family foundations are considered the "cornerstone of philanthropy". It has been estimated that between 20,000 and 100,000 entrepreneurs possess sufficient surplus funds to set up their own foundation. As the US government stops or decreases funding of social and educational endeavors, foundations have the potential to step into that role. To enhance the probability of this occurring, we should make the process of creating a foundation easier to understand and the administration less difficult. Foundations can be entrepreneurial and the dissemination of "best practices" would enhance their performance. Since the majority of new foundations will be small, it would be in their best interest to learn how to join forces and become more effective.

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