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Impact Investing Strategies Impact Investing Strategies Agrawal, Anirudh Document Version Final published version Publication date: 2020 License Unspecified Citation for published version (APA): Agrawal, A. (2020). Impact Investing Strategies. Copenhagen Business School [Phd]. PhD Series No. 25.2020 Link to publication in CBS Research Portal General rights Copyright and moral rights for the publications made accessible in the public portal are retained by the authors and/or other copyright owners and it is a condition of accessing publications that users recognise and abide by the legal requirements associated with these rights. Take down policy If you believe that this document breaches copyright please contact us ([email protected]) providing details, and we will remove access to the work immediately and investigate your claim. Download date: 03. Oct. 2021 COPENHAGEN BUSINESS SCHOOL IMPACT INVESTING STRATEGIES SOLBJERG PLADS 3 DK-2000 FREDERIKSBERG DANMARK WWW.CBS.DK ISSN 0906-6934 Print ISBN: 978-87-93956-60-5 Online ISBN: 978-87-93956-61-2 Anirudh Agrawal IMPACT INVESTING STRATEGIES CBS PhD School PhD Series 25.2020 PhD Series 25.2020 Impact Investing Strategies By Anirudh Agrawal A Doctoral Dissertation Submitted to the Department of Management, Society, and Communication Copenhagen Business School In partial fulfillment of the requirement for the Doctoral Degree October 2019 1 Anirudh Agrawal Impact Investing Strategies 1st edition 2020 PhD Series 25.2020 © Anirudh Agrawal ISSN 0906-6934 Print ISBN: 978-87-93956-60-5 Online ISBN: 978-87-93956-61-2 The CBS PhD School is an active and international research environment at Copenhagen Business School for PhD students working on theoretical and empirical research projects, including interdisciplinary ones, related to economics and the organisation and management of private businesses, as well as public and voluntary institutions, at business, industry and country level. All rights reserved. No parts of this book may be reproduced or transmitted in any form or by any means,electronic or mechanical, including photocopying, recording, or by any informationstorage or retrieval system, without permission in writing from the publisher. Acknowledgments “If I have seen further than others, it is by standing upon the shoulders of giants.” The Isaac Newton Pursuing a Ph.D. was challenging work for me. It was a journey that brought me out of my comfort zone, and I have learned much and changed in many ways. This journey was my dharma, and the credit to this journey primarily goes to my mentor and coach, Kai Hockerts. I wish to thank the Department of MSC (formerly IKL) and Copenhagen Business School for approving my application and accepting me in their team. My doctoral journey was similar to the story of Arjuna (rich student), Karna (poor student) and Dronacharya (the Guru). Arjuna worked hard with Dronacharya as a mentor by his side, and Karna worked hard with the statue of Dronacharya as his spiritual mentor. Both Arjuna and Karna achieved their desires, albeit through different means. I have had a journey in which I experienced the lives of both Arjuna and Karna in addition to the numerous gurus whose work I read or who worked with me to develop my craft. Throughout the journey I encountered multiple articles and ideas, mentors, reviewers, and fellows—doctoral fellows, family, friends, social entrepreneurs, impact investors, practitioners, consultants, teachers, professors, co-authors, and editors, who all functioned as my Dronacharya (both spiritual and real guru) and contributed to this work. I would like to express special gratitude to the following: Dharma (good) and Adharma (evil) are analogous to yin-yang. Wherever adharma is, dharma is there to balance it. The socioeconomic problems of society are adharma, and the acts of social entrepreneurs are acts of dharma that maintain the balance in society. Social entrepreneurs inspire me; I love their motivation and their journey, and I wish to acknowledge their hard work in attempting to bring social values and enact socioeconomic change in this rapidly changing world. I want to express my sincerest thanks to every social entrepreneur and impact investors who was part of the journey and inspired me. Academic institutions are a unique paradox. They are both temples of ideas and centers of bureaucracy. I wish to express my deepest gratitude to Dorte Salskov-Iversen, the head of IKL/MSC, for accepting me in the department and providing me with generous funding. I would like to thank Annika Dilling, Majbritt Vendelbo, Lise Soestroem, Lisbeth de Thurah, and Susanne Sorrentino for the incredible support they have provided me during my doctoral journey. In addition, I would like to thank my doctoral friends Lara Hale, Kristian Jespersen, Janni Hansen, and Sarah Netter for sharing their ideas and words of wisdom. I would like to thank my co-authors, Dr. Sreevas Sarahsaran, Dr. Prajakta Khare, Dr. Payal Kumar, and Dr. Ashish Tyagi, with whom I published multiple book chapters and popular articles and who have helped me to develop my craft. Furthermore, I wish to thank the wonderful people I met in numerous conferences, paper development workshops, and doctoral events who helped me 2 throughout this journey. In addition, I would like to thank the many anonymous reviewers and editors who helped me to improve my writing craft. I would like to give a special thanks to my colleagues and the faculty at Jindal Global University, Jindal Center for Social Entrepreneurship, Bennett University, EFER, ESU, Frankfurt School of Finance and Management and Flame University, whose ideas and discussion offered me new insights. I want to thank my family, who have been incredibly supportive throughout this journey. I would also like to thank my wife, Abhilasha Gupta; my kids, Anushka Agrawal and Ashwin Agrawal; my mother, Sudha Rani Agrawal; my father, Dr. CB Agrawal; my sister, Dr. Saranga Agarwal; and my brother-in-law, Dr. Deepak Jain. My family has provided enormous support and has backed me during all the ups and downs. I hope to use my learnings (my dharma) from this journey, as Arjuna and Karna did, to serve humanity and counter adharma through teaching, research, and public service. Finally, I would like to thank everyone who has contributed to this journey from the bottom of my heart, and I shall carry this immense gratitude until my last breath. Anirudh Agrawal 3 Abstract Access to finance at a ‘fair price’ is one of the major issues in many economies. Both developed and developing economies struggle to fund promising social entrepreneurs. The traditional financial systems are designed to discourage promising social entrepreneurs without any collateral from obtaining financial services. To address this disequilibrium in the finance ecosystem, impact investing is one of the most promising, innovative types of financing aimed at making the financial system more inclusive. The field of impact investing is growing, and multiple players populate it. They provide substantial capital to projects and social enterprises with a strong social mission and promising financial return capability. However, there remains a lack of a knowledge base to understand the complexities surrounding impact investing, investment logics, and organizational form. The lack of a strong knowledge base of impact investing increases the risks (financial risks, legitimacy risks, and institutional risks) of impact investments. Therefore, this thesis investigates impact investing, historical development, distinction, investment strategies, and their relationship with investee firms. The thesis aims to develop a greater understanding of impact investing. It provides elements that should offer a more significant knowledge base upon which investors can base their impact investing decisions. First, legitimacy of impact investing is linked to how well it selects and invests in social enterprises. Second, most venture capital literature is focused on the performance of investees. The performance of impact investing is tied to social and commercial value creation. Given the difference in objectives of (compared with traditional venture capital firms), our understanding of how impact investors and investee social enterprises interact at the inter-organizational level remains weak and must be explored. Third, most studies on impact investing consider it as merely a practice of investing with social and financial benefits. Given the vast institutional difference between the global north and the global south, how social and commercial expectations vary remains to be explored. This dissertation is composed of three articles, each contributing to impact-investing field by drawing insights from the institutional theory, institutional logic, impact investing, and social entrepreneurship literature. The research design of this dissertation primarily relies on a systematic literature review for understanding the current status of the field, interviews, and multiple case studies for developing an in-depth understanding of the process, strategy, and application of impact investing. Article #1 is a review of 85 impact investing articles that explore the longitudinal growth of the field and compare the development of impact investing scholarship with the Kuhnian scientific paradigm. The analysis in the review suggests that the scholarship in impact investing is currently at the exploratory stage, known as the pre-paradigmatic stage of scientific inquiry. For impact investing scholarship to develop into an established field
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