Impact Investing: A Theory of Financing Social Enterprises

42 Pages Posted: 12 Feb 2020

See all articles by Benjamin Roth

Benjamin Roth

Harvard University - Business School (HBS)

Date Written: December 26, 2019

Abstract

I present a model of financing social enterprises to delineate the role of impact investors relative to “pure” philanthropists. I characterize the optimal scale and structure of a social enterprise when financed by grants, and when financed by investments. The analysis yields two heuristics to guide impact investors. First, investments allow a financier to discipline inefficient spending. Second, investments may enable a social enterprise to exploit new opportunities for profit, and may increase the enterprise’s scale relative to when grant financed. I quantify these heuristics for the case of Husk Power, a social enterprise that has received impact investment.

Suggested Citation

Roth, Benjamin, Impact Investing: A Theory of Financing Social Enterprises (December 26, 2019). Harvard Business School Entrepreneurial Management Working Paper No. 20-078, Available at SSRN: https://ssrn.com/abstract=3535731 or http://dx.doi.org/10.2139/ssrn.3535731

Benjamin Roth (Contact Author)

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
49
Abstract Views
326
PlumX Metrics