The Nonprofit Starvation Cycle: Empirical Evidence From a German Context

The nonprofit starvation cycle describes a phenomenon in which nonprofit organizations continuously underinvest in their organizational infrastructure in response to external expectations for low overhead expenditure. In this study, we draw on nonprofit financial data from 2006 to 2015 to investigate whether the German nonprofit sector is affected by this phenomenon, specifically in the form of falling overhead ratios over time. We find reported overhead ratios to have significantly decreased among organizations without government funding and that the decrease originates from cuts in fundraising expenses—two results that are in contrast to previous findings from the U.S. nonprofit sector. With this study, we contribute to nonprofit literature by engaging in a discussion around the starvation cycle’s generalizability across contexts