Publications
Publications
- 2019
- HBS Working Paper Series
Impact Investing: A Theory of Financing Social Entrepreneurship
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. 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.
Keywords
Citation
Roth, Benjamin N. "Impact Investing: A Theory of Financing Social Entrepreneurship." Harvard Business School Working Paper, No. 20-078, February 2020.