Toward a Theory of Membership Association Finance

This article explores patterns in membership associations’ portfolios. It compares and contrasts portfolio theory, which predicts variety in revenue portfolios, with a newer benefits theory, which postulates that revenue options are constrained by the balance between the member benefits and societal...

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Bibliographic Details
Published in:Nonprofit and voluntary sector quarterly 2017-08, Vol.46 (4), p.772-793
Main Author: Bowman, H. Woods
Format: Article
Language:English
Subjects:
Associations
Clubs
Finance
Income
Labor unions
Membership
Ownership
Portfolio management
Portfolios
Real estate
Tariffs
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Summary:This article explores patterns in membership associations’ portfolios. It compares and contrasts portfolio theory, which predicts variety in revenue portfolios, with a newer benefits theory, which postulates that revenue options are constrained by the balance between the member benefits and societal benefits they produce. The research makes use of a new database that more accurately measures dues and program service revenue of associations than other databases. The weight of the evidence supports benefits theory more strongly than revenue portfolio theory. This research incidentally finds that revenue concentration increases with size and decreases with real estate ownership. The article introduces the concepts of one-off entry and exit costs on members (tariffs), which tend to reduce members’ sensitivity to the level of dues. Indeed, dues are often dominant among the associations having presumptively high tariffs, such as trade unions and certain recreational clubs.
ISSN:0899-7640
1552-7395
0899-7640
DOI:10.1177/0899764016685860