Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • 2021
  • Working Paper
  • HBS Working Paper Series

Impact Investing: A Theory of Financing Social Enterprises

By: Benjamin N. Roth
  • Format:Print
  • | Language:English
  • | Pages:41
ShareBar

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. Impact investing creates value by inducing firms to shift towards profitability and away from their social mission. I draw implications for the choice of debt versus equity. I show that impact investing is more valuable when firms face less competition in their product markets. I operationalize these insights for the case of Husk Power, a social enterprise that received impact investment.

Keywords

Impact Investing; Social Entrepreneurship; Finance; Investment; Mathematical Methods

Citation

Roth, Benjamin N. "Impact Investing: A Theory of Financing Social Enterprises." Harvard Business School Working Paper, No. 20-078, February 2020. (Revised June 2021.)
  • SSRN
  • Read Now

About The Author

Benjamin N. Roth

Entrepreneurial Management
→More Publications

More from the Author

    • March 2022
    • American Economic Review

    Targeting High Ability Entrepreneurs Using Community Information: Mechanism Design in the Field

    By: Reshmaan Hussam, Natalia Rigol and Benjamin N. Roth
    • March 2022
    • Review of Financial Studies

    Contractual Restrictions and Debt Traps

    By: Ernest Liu and Benjamin N. Roth
    • January 2022
    • Faculty Research

    A Close Shave at Squire

    By: Jeffrey J. Bussgang, Benjamin N. Roth and Michael Norris
More from the Author
  • Targeting High Ability Entrepreneurs Using Community Information: Mechanism Design in the Field By: Reshmaan Hussam, Natalia Rigol and Benjamin N. Roth
  • Contractual Restrictions and Debt Traps By: Ernest Liu and Benjamin N. Roth
  • A Close Shave at Squire By: Jeffrey J. Bussgang, Benjamin N. Roth and Michael Norris
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Digital Accessibility
Copyright © President & Fellows of Harvard College