Financing Social Enterprise in the Very Long Run

Abstract

All social enterprises share a common struggle to finance collective goods. Collective goods are notoriously difficult for private firms to produce, because of the incentive for their constituents to defect, or free-ride, on the contributions of others. Because of their historical success, this paper looks toward long-lived religions institutions for strategies to mitigate the collective action problem. We empirically examine the Southern Baptist Convention, which records its efforts to finance international missionary activities since 1935. We test a club good model of adherence. Consistent with the club model, we find that contributions to international missions increase with both religious and secular competition for adherents. We do not find that the specific mechanism for collection within the Southern Baptist matters. We conclude that the club model of organization, where high membership costs are deliberately applied, offers valuable – and counterintuitive – lessons for social enterprises more broadly.