Investments Rather Than Costs: The Financial Benefits of Information Technology Adoption in Nonprofit Organizations

ABSTRACT The lack of funding is a significant barrier to information technology (IT) adoption in nonprofit organizations. The question of whether IT investments are justified, particularly given the sector's resource constraints and the pressure to prioritize direct services, remains unresolved. This study investigates the financial returns of IT expenditures in nonprofits. By analyzing tax data from over 8400 nonprofits between 2010 and 2017 using a two‐way fixed effects model, the findings reveal that IT investments enhance financial capacity. Specifically, IT expenses, particularly in program and management areas, positively influence program service income. Higher IT spending also raises the share of mission‐related expenses and lowers management cost ratios. However, IT expenditures may temporarily inflate fundraising costs and reduce fundraising efficiency. This study reframes the conversation around nonprofit expenses, positioning them not as financial burdens but as critical investments driving financial growth. The findings offer practical insights for nonprofit leaders and highlight future directions for research on technology use in nonprofit organizations.