Corporations are usually more willing to donate products and services than hard cash to nonprofit organizations. Nonprofits, however, are generally less keen to receive their donations in kind, because they fear getting the wrong products at the wrong times (Exhibit 1). Yet our research suggests that carefully managed in-kind donations can do a lot to help nonprofits—especially international relief organizations—narrow the gap between their aims and their resources. The trick is to create long-term partnerships between nonprofits and donor companies and to make the benefits for both sides explicit. This approach gives nonprofits more control over what they receive and when they receive it—in effect, allowing them to look a gift horse in the mouth.

An in-kind gift’s market value can be more than double the value of a cash donation from the same donor, since the gift’s cost to the donor is only the product’s marginal cost, which might be only half of its market price. Moreover, many corporations have spare capacity that they could put to use for nonprofits at a negligible extra cost to themselves; for example, transportation or shipping companies may have spare container space; IT consultancies, temporarily underutilized communications engineers.

Why should a corporation...