Impact Investing Strategy: Managing Conflicts between Impact Investor and Investee Social Enterprise

How can engagement enhance social outcomes in venture capital?

The study Impact Investing Strategy: Managing Conflicts between Impact Investor and Investee Social Enterprise by Anirudh Agrawal and Kai Hockerts explores the influence of alignment between impact investors and social enterprises on social outcomes.

The authors focus on six case studies in India to provide concrete insights into the dynamics of impact investing and the strategies that can enhance alignment and success:

• A strong social mission helps align the goals of impact investors and social companies, facilitating better collaboration and outcomes.
• Social impact measurement, reporting, and frequent engagement on social and financial goals are critical for maintaining alignment post-investment.
• Social sector specialisation in impact investing is as important as industry specialisation in traditional venture capital to drive up expertise and increase chances of success.
• Effective relationship management between the impact investor and the investee social company is a key driver for creating social and commercial value.
• Social companies are at risk of mission drift, where the focus on financial returns may overshadow the social mission, thus undermining social impact.

The authors aim to understand how investor-investee relationships can be managed to achieve both social and financial goals and how impact investing differs from traditional venture capital on this topic.

The study may face criticism for its reliance on a limited number of case studies, all located in the same country, which may not fully capture the diversity of the impact investing field.