Marketizing the Arts: The Effect of Marketized Revenues on Constituency Size and Composition

Abstract

The nonprofit arts and culture sector in the United States is uniquely situated in tension between its not-for-profit status and its growing role as a catalyst for regional economic growth. Since the mid-20th century, for metropolitan areas in particular, these organizations have become an integral part of local economies and visible symbols of regions as robust cultural centers. Their growth is increasingly viewed as a significant contribution to regional economic development. But concomitant with their newly defined roles as regional "economic engines," nonprofit arts and culture organizations also are increasingly pressed to adopt a "market orientation" with respect to both their audiences and funders. This dissertation is an investigation into how these changes have shaped the organizational structures and processes of the sector. The guiding inquiry of this research is how an increased "market orientation" in the sector is affecting organizational operations (especially expenditures), and ultimately, their constituencies. More specifically, this analysis explores the effects of marketization, defined here as dependence on earned income, agenda-oriented local corporate sponsorship, and outcomes-based foundation support, on organizational expenditures and constituency levels and composition. The present research assesses the relative utility of three organizational growth theories- resource dependency theory, institutional theory, and urban growth agenda theory-on the one hand, and the "crowding-out" hypothesis on the other hand, in accounting for the effects of increasing marketization on the size and composition of organizational constituencies. The first three frameworks suggest a connection between marketized revenues and the prioritization of organizational visibility and legitimacy, organizational professionalization, and production quality, with the end goal of constituency growth. On the other hand, the crowding-out hypothesis, though it retains a focus on revenue sources, suggests that revenue from certain sources may lead to the stagnation or even reduction of deeper organizational affiliations such as membership. Specifically, the perspective suggests that a heightened market orientation conflicts with a not-for-profit or philanthropic orientation, thereby "crowding-out" potential members. The tension between these theoretical perspectives reflects the lack of solid empirical evidence regarding the effects of economic inputs (particularly those tied to marketization) on organizational outcomes (particularly constituency composition). The current research hypothesizes that marketized revenues will ultimately lead to audience growth and expansion while simultaneously leading to stagnation or decline in membership. This study focuses on museums and performing arts institutions located within the Pennsylvania portion of the Greater Philadelphia Area. The analysis utilizes survey data on revenues, expenditures, and other organizational characteristics collected on a continuing basis through the Cultural Data Project of the Pew Charitable Trusts, and audience data collected co-operatively by the arts and culture organizations. To test the competing theories listed above, this research uses structural equation modeling to estimate the effects of marketized revenues on organizational expenditures, and ultimately, on constituency composition. The current findings can be divided into three sections. The first central finding of the analysis is that marketized revenues tend to have a positive effect on attendance levels which provides support for resource dependency theory, institutional theory, and urban growth agenda theory in that the need for resources affects organizational expenditures and prioritization in such a way as to ultimately increase organizations' attendance size. The second central finding of the analysis is that the processes that lead to attendance growth in organizations do so, not through increased demographic diversity, but primarily through increases in attendance from communities and neighborhoods outside the region and communities and neighborhoods where there are already high levels of arts and culture participation. This finding is consistent with the critical metropolitan growth perspective that marketization in organizations leads to the establishment of growth over diversity as the absolute bottom line. According to this perspective, if the pursuit of attendance diversity, attendance expansion to local underserved communities, or new single site-attendees does not contribute to the bottom line of attendance growth, then marketized revenues and those who control their flow will not encourage these priorities. The third central finding of the analysis deals with the crowding-out perspective. This analysis shows some degree of support for the crowding-out hypothesis. The results show that membership is decreasing as a result of marketization, and this effect is explained, in part, by differences in organizational prioritization and orientation reflected in organizational expenditure allocation. The implications of this research are extensive for individual organizations, their urban areas, and the future of the sector. As the sector evolves, arts and culture organizations inevitably face the task of balancing their goals and missions with the demands that accompany revenue acquisition. Furthermore, as urban areas continue to emphasize their role as cultural centers which also foster economic development, they will need to consider the balance between the economic and public service functions of arts and culture organizations. Finally, the trend of greater marketization may encourage organizational growth even while it increasingly alienates the sector's not-for-profit identity and, with it, its most ardent supporters.