Governance and Value Creation in Grant-Giving Foundations

PURPOSE 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. The main objective of the paper is to determine whether effective governance plays a major role in driving foundations’ innovation and value creation processes. METHODOLOGY Building on the idea that foundations should act as financial partners, managerial experts, and innovator facilitators who deal with the projects proposed by non-profit organizations, this paper uses a survey and the annual reports of Italian grant-giving foundations to isolate their records in term of governance, innovation attitude, and performance. FINDINGS The results of this paper contribute to improving understanding of the drivers that help foundations to improve the sophistication level of the grant-giving process. In particular, the analysis of governance provides relevant insights about the path foundations follow to incorporate selected tailored methods and practices from the “for profit” competitive arena to improve foundations’ output and non-profit grantees’ outcomes. SOCIAL IMPLICATION Many academics, political leaders, and practitioners expect foundations to play the unique dual role of merchant bank and venture capitalist to foster the positive impact of non-profit organizations on societies and people. The findings of this paper facilitate this process. ORIGINALITY/VALUE The main contribution of this study lies in proposing and testing a theoretical framework that foundations can implement to disseminate liquidity and managerial expertise efficiently among selected grantees and to improve grantees’ social outcome.