Governance and value creation in grant-giving foundations

ORIGINALITY Grant giving foundation leaders are increasingly concerned with understanding the primary role their institutions are pressured to play in financing the growing non-profit sectors of developed economies. Furthermore, many academics, political leaders and practitioners are expecting foundations to play the unique role of merchant banks and venture capitalists to foster the positive impact of non-profit organizations on societies, people and issues they affect. The main contribution of this study lies in proposing and testing a theoretical framework that foundations might implement in order to efficiently disseminate liquidity and managerial expertise among selected grantees as well as to improve grantees’ social outcome. OBJECTIVE The main objective of the paper is to debate if effective governance plays a major role in driving the foundations’ innovation and value creation processes. The argument being that only improved leadership and refined project screening will lead to greater effectiveness and, in turn, to more social impact. METHOD Building on the idea that foundations should act as financial partners, managerial experts and innovator facilitators dealing with the projects proposed by non-profit organizations, this paper isolates - through a survey and in the annual reports of Italian grant giving foundations - their records in term of governance, innovation attitude and performance. Next, relationships are researched to better investigate the effect that reliable governing leadership and accurate screening might have on foundations’ effectiveness (as measured by economic and social value provision). MANAGERIAL IMPLICATIONS Results of this paper will contribute to a better understanding of the managerial drivers that help foundations in evolving toward a more sophisticated grant giving process. In particular, the analysis of governance will provide relevant insights about the path foundations are following in order to incorporate from the “for profit” competitive arena selected and tailored methods and practices to improve foundations’ output and non-profit grantees’ outcome.