Structural embeddedness and the liability of newness among nonprofit organizations

Ecological studies have consistently reported that younger organizations are more likely to close or disband than older organizations. This article uses neo-institutional theory and social capital theory to explore this finding. We derive hypotheses from these perspectives and test them on a panel of nonprofit organizations in Minneapolis-St Paul (USA) using event history analysis. We find that larger organizations and organizations more dependent upon private donations are less likely to close, and government funding reduces the age effect on mortality; that is, older and younger publicly funded organizations are equally likely to survive or fail. However, among older organizations, not having government funding increases chances of survival. In contrast, volunteer staffing accentuates the age effect. Older organizations that were more dependent on volunteers had a lower likelihood of closure than younger organizations dependent on volunteers, while age had no effect on closure for organizations not dependent on volunteers. We conclude by examining our findings in light of the extant thinking on the liability of newness and the role of institutional and network embeddedness on the chances of organizational survival.