Policy Signals in National Crises: How Government Policies Shape Nonprofit and Stakeholder Behavior

ABSTRACT National crisis events, such as the Great Recession or a pandemic, pose significant challenges, emphasizing the critical role of government emergency policies in shaping societal responses. This study investigates how state governments' emergency policy responses during the pandemic influenced the behaviors of nonprofit stakeholders. Drawing on signaling theory, we examine how regulatory (“sticks”) and economic support (“carrots”) policies conveyed distinctive signals that shape stakeholder decisions, with the effects moderated by the prevailing political climate. Utilizing panel data from U.S. human service organizations, this study analyzes the nuanced impacts of these policies on government funding, community support, and nonprofit resource‐seeking efforts. The findings reveal complex and sometimes counterintuitive patterns: regulatory policies may reduce government support while spurring private donations, and economic support policies may encourage government grants but risk crowding out private contributions. Furthermore, the political climate plays a significant role in moderating these effects, shaping how policy signals are interpreted and their overall effectiveness.