Collective Reputations Affect Donations to Nonprofits

Maintaining their organization's reputation is an important challenge for nonprofit managers. Organizations are often linked via a common reputation within their industry or sector such that publicity about one organization can spill over to affect how stakeholders view its peers. The linkages of common reputations may be particularly pronounced among nonprofits because important dimensions of their quality are difficult to observe directly. In this paper, we show that when the third‐party evaluator Charity Navigator rates nonprofits and displays ratings of their peers, it creates a collective reputation among groups of nonprofits performing similar functions in the same region. Through an analysis of 3,413 charities from 1993 through 2008, we find that donations to nonprofits rated by Charity Navigator rise and fall with the published Charity Navigator ratings of their peers. The effect appears to be due to the charity updating fundraising choices in response to the ratings rather than donor reactions. The presence of collective reputations has important implications for nonprofit management, such as collective self‐regulation programs.