Social impact contracts: what determines an attraction of private investors?

• Grant number: 18/14786-0
• Support Opportunities: Scholarships abroad - Research
• Start date: January 02, 2019
• End date: February 01, 2019
• Field of knowledge: Applied Social Sciences - Administration - Business Administration
• Principal Investigator: Sérgio Giovanetti Lazzarini
• Grantee: Sérgio Giovanetti Lazzarini
• Host Investigator: Todd Robison Zenger
• Host Institution: Instituto de Ensino e Pesquisa (Insper). São Paulo , SP, Brazil
• Institution abroad: University of Utah (U), United States

Abstract

Management scholars have tried to understand whether it is possible to combine profitability and socio-environmental impact in activities that are funded by private investors trying to blend these performance dimensions - such as the so-called "impact investors." A tool used by these investors involves the creation of outcome-based contracts (such as the "social impact bonds"), a funding mechanism where investors can receive extra compensation if the activity generates measurable socio-environmental impact. Yet, a concern related to these contractual mechanisms is that they are still adopted at a relatively small scale. What factors can explain differences in the amount invested by private investors in those outcome-based contracts? With a quantitative approach, this research proposal plans to use a novel database under development (so far, with 236 CIS in the whole world), with information on the amount invested and a host of variables that can influence the attraction of private capital - such as the type of investors, contractual design features, mechanisms to measure impact, and local factors related to the country where the contract was established. The research project will benefit from the presence of the principal investigator at the David Eccles School of Business, University of Utah, which has several relevant scholars in the strategy field (such as Todd Zenger and Jay Barney), as well as a center specialized in social impact (Sorenson Impact Center). The quantitative analyses will be complemented with interviews with investment funds, social entrepreneurs, nonprofit organizations, and other relevant actors in the locality. The project aims at deepening our understanding of factors influencing the willingness of investors to support projects in the social interest.