Abstract
The inefficiency of the performing arts sector, and by association the need for patronage and subsidisation within such organisations dates back over 2,000 years with the first instance of such arts funding occurring in 1st Century B.C. Despite this long-standing tradition, academic investigations into the numeric and financial aspects of cultural organisations have only come to prominence since the mid-1960’s. In light of the somewhat recent canonization of this field, there are still numerous gaps within the current literature that need to be filled. The primary rationale for such gaps is due to current literature being focused on the perspective of the donor, rather than the recipient, resulting in a vast lack of literature and associated knowledge surrounding the impact of the acceptance of unearned revenues on recipient firm. The lack of academic work from a firm level perspective can greatly be attributed to the notion that such external funding is seen as more a less a necessary evil within the theatrical sector, as without such funding many live arts organisations will face closures due to the perpetual deficit they operate within. Therefore, the provision of unearned non-market funding is seen as a solution to the structural and technological inefficiencies incurred within theatres and nothing more. However, it has recently come to light that these inefficiencies are in fact made worse not better by the provision of such non-market funding, though the specifics of such ramifications have yet to be investigated fully. As such, this thesis aims to investigate the ramifications of unearned revenues on the financial, organisational, and artistic health of theatrical organisation, through the use of a unified theoretical framework which comprises of Resource Dependency Theory, Stakeholder Theory and Stakeholder Salience. This being done through a longitudinal quantitative analysis of the English Non-profit theatrical sector between 2008/09 and 2017/18, with the aim of ascertaining: “How does the receipt of unearned revenues impact the performance of non-profit theatrical organisations in its various definitions?”.This thesis is divided into three distinct studies, each of which aims to fill a prominent gap within the current canon of literature, allowing for an all-encompassing understanding of the impact of such funding within the receipt firm in question. All studies operate under the banner of the overarching research question posed with three subsect analyses, using a composite dataset comprising the financial, organisational and repertory information of 125 non-profit Arts Council England funded organisations, which equates to roughly 50% of the population during the study period.
The first study is focused on the crowding-out and crowding-in phenomenon, in order to ascertain whether the receipt of government subsidy results in the crowding-out or crowding-in of private philanthropy. Findings suggest that £1 increase in governmental funding at time “t” will result in an associated increase in private philanthropy at time “t+1” of £0.87. This suggests that private donors prefer to donate to organisations already in receipt of governmental arts funding, due to the legitimating and securitizing effects of such subsidisation, despite the conflicting interest and aims of private and government funders.
The second study focused on the impact of donor expectations on the artistic health of the recipient organisation. This aims to ascertain whether the source of unearned revenues a given organisation receives impacts their repertory conventionality and by association propensity to innovate. The current literature suggests that governmental funders expect innovation from the recipients of their funding, while private funders tend to demand more conservative and traditional artistic outputs. Therefore, as most theatres receive both governmental and private funding, it is vital to understand how the preference and demands of these multiple resource providers are managed. However, findings suggest that regardless of the source of funding a 1 percentage point increase in the amount of unearned revenues available to a given organisation resulted in an increase to their level of innovation, complying with the traditionally held belief that a reduced reliance on box-office funds acts as a catalyst for innovation regardless of the source of such
funding.
The third study investigates whether non-market unearned revenues result in the occurrence of further organisational inefficiencies. The acceptance of such non-market funding is seen to impact the internal processes and aims of the recipient organisation, such as the implementation of budget maximization principals or a shift in organisational orientation. Potentially resulting in the occurrence of further internal inefficiencies which can be measured by a decrease in earned revenues coupled with an increase in total expenditure, as a result of an increase in the given firm’s quantity of available unearned revenues. Results suggest that the English non-profit theatrical sector is incurring the effects of ‘subsidy-based inefficiency’ by which a 1 percentage point increase in unearned revenues at time “t”, leads to a decrease in their earned revenues by £7,630.21 and an increase in expenditure of £22,763.19 at time “t+1”.
As a whole, this thesis provides insights into numerous fields of academic work, as well as assisting in providing practical solutions for theatrical organisations, funders, and policy makers. Within an academic context, this thesis fills gaps within literature surrounding innovation, the crowding-out phenomenon, and subsidy-based inefficiency through the use of the non-profit theatrical sector as a representative context. Further to this, the findings gained build upon existing literature within the fields of Resource Dependency Theory, Stakeholder Theory and Cultural Management, as the implications of this thesis have suggested the need for a much greater scope of research in order to gain a further understanding of the organisational level impact of resource dependency on external funders. Finally, within a practical context, the insights derived can be utilised by theatrical organisations and other relevant parties in order to gain an understanding of the financial stability of such unearned revenue funding strategies, as well as find means by which to avoid the negative ramifications associated with non-market revenues.
| Date of Award | 1 Jul 2022 |
|---|---|
| Original language | English |
| Awarding Institution |
|
| Supervisor | Thomas Roulet (Supervisor) & Kamini Gupta (Supervisor) |