Impact Investing: Determinants of External Financing of Social Enterprises in Brazil

Abstract

Social impact investing and social entrepreneurship have great potential for solving global problems. However, practitioners and researchers know little about the entrepreneurial process and the investors’ criteria. Therefore, we identify the determinants of access to external finance for social enterprises in an emerging economy using a quantitative approach in a large sample (N = 601). We found that impact sector, business model, entrepreneurial support, development stage, and the adoption of technologies impact access to finance by social enterprises. We also show that green technologies have greater funding access than other enterprises and that social impact investors are more aware of environmental issues and less concerned with financial returns. To raise more funding, we suggest that social entrepreneurs include environmental issues in their business, quickly validate their idea, add an intermediary company between the enterprise and the consumer, seek the support of incubators or accelerators, and adopt emerging technologies in the product or service offered.

The influence of society’s perception, social networking and social impact measurement on access to finance of social enterprises: Perspective of eThekwini Municipality, KwaZulu-Natal, South Africa.

“…This finding demonstrated by hypothesis one (H1), which shows social impact measurement does not influence access to finance. Nevertheless, social impact measurement is an important aspect of SE activities and improves their credibility in society; however, it does not necessarily influence their access to finance (Fernandes et al, 2023). Many investors consider social impact a subjective concept and the lack of consensus on adequate metrics of measurement affects the reliance on its results as a motivation to invest in SEs (Hermes & Hudon, 2018).…”

“…Many studies mention the influence external contingencies, such as society's perception, social networking and social impact measurement, can have in strengthening relationships and enhancing access to finance for SEs (Coşkun & Öztürk, 2023). Moreover, access to finance remains a key element of an external resource (Fernandes et al, 2023). Social networking is considered a critical external contingency, and small businesses, including SEs can leverage it to enhance their access to finance for their activities (Asad et al, 2016).…”

“…Social networking is considered a critical external contingency, and small businesses, including SEs can leverage it to enhance their access to finance for their activities (Asad et al, 2016). In addition, social impact measurement is believed to have a positive influence on social impact investors and can enhance access to finance for SE activities (Fernandes et al, 2023).…”