Social Impact Finance: The role of motivations. Theory and experimental evidence

Social impact finance has emerged in recent years in response to the crisis of traditional welfare systems and the gradual decrease in public funding to the Third Sector, by offering new financial instruments to convey private capital to social entrepreneurship in order to create positive social impact combined with economic returns (Agrawal and Hockerts, 2019; Daggers and Nicholls, 2016; Hochstadter and Scheck, 2015). The debate on the effective application of these instruments has so far focused on social impact as a measurement for return on invested capital, neglecting the role of motivations driving involved agents (investors and social entrepreneurs). In this work, we investigate the impact of different financial instruments on governance structures and on the motivations of social enterprise stakeholders, both from a theoretical point of view and through pilot experiments that mimic the main features of social impact finance. Our experimental design aims to recreate in the laboratory the relationship between social enterprise, beneficiaries and financiers, including the following characteristics: extremely diversified/personalized goods/services (complexity); quality of the good/service; risk (linked to the effectiveness of the intervention provided) and components related to: information asymmetries, evaluation (impact), parameters of the financial instrument. Starting from this setting, we intend to evaluate the effect on motivations of alternative evaluation methods (input, output, outcome) linked to the financial instrument.