Publications
Publications
- 2021
- HBS Working Paper Series
Impact Investing: A Theory of Financing Social Enterprises
By: Benjamin N. Roth
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
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.)