ABSTRACT THE ABILITY TO BUILD: ABSORPTIVE CAPACITY IN THE NONPROFIT SECTOR Eileen A. Setti, Ph.D. Department of Political Science Northern Illinois University, 2016 Alicia Schatteman, Director This dissertation explores how nonprofit organizations gather and leverage new information in order to build the capacity of their agencies. A theoretical framework from literature across several disciplines spanning organization learning, knowledge management, and nonprofit capacity building is built. The majority of capacity building literature focuses on programmatic, organizational, or adaptive capacities. It is here that this dissertation adds new insight by arguing that a fourth capacity, absorptive capacity, is critical to developing a nonprofit organization. Absorptive capacity is a construct developed by Cohen and Levinthal (1989; 1990) and Zahra and George (2002) to explain how an organization acquires, assimilates, transforms, and exploits new information. This project utilized a comparative case study to test the research question, to what extent do nonprofit organizations exhibit absorptive capacity? Four broad theoretical propositions explored how the size of the organization, its leadership, strategic outlook, and membership in national bodies or participation in accrediting processes influence absorptive capacity. The data analysis indicates absorptive capacity is evident in the nonprofit setting and is influenced by both internal and external factors such as size, leadership, strategic outlook, members, and accreditation standards. This research contributes to emerging nonprofit knowledge management literature and extends existing nonprofit capacity building scholarship, and provides insight for nonprofit practitioners contemplating capacity building initiatives and navigating everyday pressures of nonprofit management. It provides a foundation for future research to further develop exactly how information absorption influences capacity building in the nonprofit setting. NORTHERN ILLINOIS UNIVERSITY DEKALB, ILLINOIS AUGUST 2016 THE ABILITY TO BUILD: ABSORPTIVE CAPACITY IN THE NONPROFIT SECTOR BY EILEEN A. SETTI © 2016 Eileen A. Setti A DISSERTATION SUBMITTED TO THE GRADUATE SCHOOL IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE DOCTOR OF PHILOSOPHY DEPARTMENT OF POLITICAL SCIENCE Doctoral Director: Alicia Schatteman ACKNOWLEDGMENTS One hundred twenty-five miles marks the distance between my driveway in Peoria, Illinois and the parking deck at Northern Illinois University in DeKalb, Illinois. I know every twist and turn, every gas station, and every speed-trap in those one hundred twenty-five miles. While commuting to NIU in order to complete my degree has been a momentous journey, it pales in comparison to the journey with all of the people who supported me in the last five and a half years. First and foremost, I want to thank my husband Chris and our daughters Kate and Liz. Words cannot express my gratitude. Every time I quit (which was often), you were there to inch me forward. Your love, enthusiasm, and patience were the energy I needed every day. Chris became a single dad so I could pursue my dream. You kept this family together. Kate was ten and Lizzy was seven when I took my first class at NIU, and now you are fourteen and twelve. You are remarkable girls, and I love you dearly. My parents, Erlin and Linda, taught me an unrelenting work ethic and the power of tenacity which prepared me to be a student while juggling the duties of wife, mother, teacher, and volunteer. I fully expect Dad to spontaneously combust with joy and pride when I receive my diploma. I’d like to thank my siblings and business partners Lisa and Nathan for keeping a successful consulting firm afloat while their little sister pursued her dream. The basic concept for this dissertation is rooted in our endless discussions focused on helping our clients. Of course, Melissa and Tom (the Ruby family out-laws) graciously helped us whenever called upon. I am most grateful to my Setti in-laws, Peg, Dave, and Abby, for their unconditional love now and always. Even though you iii all live in California, you are always tucked in my heart. I would be remiss to not acknowledge my nieces and nephews: Ethan, Andrew, Delaney, Anna, Nash, and Joey. You already know who is my favorite. My family is absolutely amazing, and without their strength and love, none of this would have been possible. I am lucky enough to consider so many friends as family as well. Brooke, Pat, Karen, and Scott were the threads that kept me grounded to a somewhat normal life. Whether it was late-night conversation or taxiing the Setti girls to countless activities, you kept our family afloat. And, of course, to the Uplands, the best neighborhood on the planet. The Settis could not be more privileged to have such a remarkable village raising our children. I thank the UHMC and the Alabama Golfers for providing Chris with much-needed rest and relaxation— and of course immature hijinks. I would like to thank the Public Administration Department at Northern Illinois University who wholeheartedly supported my practitioner ways and interdisciplinary tendencies. Dr. Kurt Thurmaier not only got me into this mess but advocated for me every step of the way. You gave me hope and confidence when I needed it most. I aspire to be half the woman-mom-scholar-friend that Dr. Alicia Schatteman demonstrates every day. I am proud to be your first doctoral student and thank you for your calming words on the most stressful of days. I am so very grateful that Dr. Kerry Ferris and Dr. Bart Sharp took a chance on a complete stranger from Political Science. Kerry brought me under her wing and coaxed my sociological imagination throughout this research. She has become a friend and mentor. Bart extended the hand of collaboration across campus from the School of Business and iv exemplified the power of interdisciplinary research. He connected nonprofit capacity building with absorptive capacity in the first place. There are so many others at NIU who quietly played important roles in my journey: Jeanine Thurmaier, Gerald Gabris, Ellen Cabrera, June Kubasiak, Denise Burchard, Kim Wilson, April Davis, Kate Paton, and all of the graduate students who welcomed a middle-aged mother into their community. I am grateful that my cohort considered me a “fun aunt” rather than a “boring mom.” I appreciate my copyeditor Carol Abrahamson who literally pulled me through the last few steps of this process. I thank all of the faculty and staff at Illinois Central College, Eureka College, and Bradley University who befriended me as adjunct faculty. I especially thank the librarians at these institutions who tirelessly located resources for me. Susan Kellerstrass at ICC is an interlibrary-loan angel! There are many, many more to thank. I appreciate all of the prayers and patience shown by my church family at St. Paul Lutheran and my office neighbors at Woodridge Professional Building where I spent the better part of a year in Suite 313. I would also like to thank the eight organizations who participated in this study. You graciously gave of your time and opened your organizations to me. Your missions make Peoria a better place every day. I would like to thank Mark Roberts from the Community Foundation of Central Illinois, Brad McMillan from Bradley University, and Jeff Griffin from the Greater Peoria Business Alliance for supporting this research and prompting a dialogue in the area regarding nonprofit capacity building. Finally, I would like to thank the faculty, staff, and students at Methodist College where v the next chapter of my career will unfold. I appreciate how you have opened your arms and welcomed me into your fold, and I look forward to a bright future serving our community at Methodist. The sky is the limit, and I cannot wait to get there! One hundred twenty-five miles…but an infinite amount of love, compassion, guidance, and help to get there. Thank you. DEDICATION For Team Setti To Chris—whose broad shoulders carry me To Kate—whose tenacity pushes me forward To Liz—whose wit keeps my heart happy To Satch—who sweetly kept me company for the beginning of this journey And to Bo—whose antics will entertain me well beyond this finish line We did it! TABLE OF CONTENTS Page LIST OF TABLES…………………………………………………………………..….…… x LIST OF FIGURES………………………………………...………………………..….…… xi LIST OF APPENDICES………………...…………………………………………..….…… xii Chapter 1. INTRODUCTION…………………..…………………………….……..……………….. 1 2. LITERATURE REVIEW AND THEOTETICAL FRAMEWORK……………………… 5 Beginning Perspectives: Organization Learning……….............................................. 6 Beginning Perspectives: Knowledge Management……..…….………………….….. 7 Knowledge Management in Nonprofit and Public Sector Scholarship...……..……... 16 Nonprofit Scholarship………..…………………………………………....……….... 20 Nonprofit Capacity Building Scholarship………….…………………….….………. 32 The Limitation of the Letts, Ryan, and Grossman’s and Sussman’s Capacity Building Model…………………………………………………................................................ 37 Contribution to Literature………..……..…….…………….…………………….….. 41 Theoretical Framework: Absorptive Capacity as the Ability to Build Capacity...…... 44 Research Question………………………………………………………....……….... 56 Theoretical Propositions…….………….………………………….…..…….………. 58 3. RESEARCH METHODOLOGY…………………………………………..……..……… 62 viii Chapter Page Case Study Method……………………...…………………………………….……... 62 Research Area: Peoria-Pekin MSA………...………………………...…………….... 65 Sampling Strategy: The Peoria-Pekin