Impact investing: review and research agenda

TLDR: In the last few years, the investment in impact investing has grown many folds, however, the research has not kept pace with the growing pace of impact investing as discussed by the authors, which is an emerging alternative asset class.

Abstract: Impact investing is an emerging alternative asset class. In the last few years, the investment in impact investing has grown many folds, however the research has not kept pace with the growing prac...

Figures

Table 2. List of articles that shared the term ‘impact investing’ with similar terms like SRI, MF, SIB, Philanthropy, SF.Table Layout

Table 3. Factors on which impact investing differs from similar sounding terms.Table Layout

Table 5. Summary of the peer-reviewed articles on impact investing.Table Layout

Table 4. List of impact investing definitions used by different researchers.Table Layout

Table 1. Overview of the data selected and reviewed.Table Layout

Table 6. Future research agenda.Table Layout

Full text

Impact Investing
Review and Research Agenda
Agrawal, Anirudh; Hockerts, Kai
Document Version
Accepted author manuscript
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Journal of Small Business and Entrepreneurship
DOI:
10.1080/08276331.2018.1551457
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2021
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Agrawal, A., & Hockerts, K. (2021). Impact Investing: Review and Research Agenda. Journal of Small Business
and Entrepreneurship, 33(2), 153-181. https://doi.org/10.1080/08276331.2018.1551457
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Impact Investing: Review and Research Agenda
Anirudh Agrawal and Kai Hockerts
Journal article (Accepted manuscript*)
Please cite this article as:
Agrawal, A., & Hockerts, K. (2019). Impact Investing: Review and Research Agenda. Journal of Small
Business and Entrepreneurship. https://doi.org/10.1080/08276331.2018.1551457
This is an Accepted Manuscript of an article published by Taylor & Francis in
Journal of Small Business
and Entrepreneurship
on 31 Jan 2019, available online:
DOI: http://www.tandfonline.com/10.1080/08276331.2018.1551457
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Uploaded to CBS Research Portal: August 2020

Impact invesng: review and research agenda
[AQ37]Anirudh Agrawal
1
2
*
Kai Hockerts
1
1
Department of Management Society and Communicaon, Copenhagen Business School, Copenhagen, Denmark; [AQ2]
2
Benne University, Greater Noida, India[AQ3]
* CONTACT Anirudh Agrawal Anirudh.agrawal@outlook.com Department of Management Society and Communicaon, Copenha‐
gen Business School, Copenhagen 2000, Denmark.[AQ4][AQ5]
ABSTRACT
Impact invesng is an emerging alternave asset class. In the last few years, the investment in impact invesng has grown many
folds, however the research has not kept pace with the growing praconer interest. The lack of knowledge about the eld cou-
pled with the lack of knowledge producon of eld might be dangerous in the long run. This is a systemac review of impact
invesng. This systemac review involves study of 85 published arcles and reports. This literature was collected using the har-
zing’s publish or perish academic search engine and cross-checked against databases such as JSTOR and Web of Science. This
review has four major contribuons. First, the study reveals a unique longitudinal perspecve on how the eld is evolving and
moving from pre-paradigm stage to the stage of proper scienc inquiry. It reveals that the eld is evolving, as the reviewed
literatures nd that a higher number of empirical works were published recently. Second, the eld impact invesng is unique on
six characteriscs namely (1) capital invested, (2) degree of engagement with the investee, (3) process of selecon, (4) social and
commercial outcomes, (5) reporng outcomes, and (6) government role. Third, it reveals that the scholarship in the eld has
been mostly exploratory. Only recently the eld is engaging in conrmatory studies. The research methods have used exisng
databases or exisng single or mulple case studies. Finally, the eld has to delve deeper into concepts like selecon process,
stakeholder management, opportunity recognion, and performance reporng to move the eld forward and generate applied
knowledge.
[AQ13]
KEYWORDS impact invesng; research agenda; social nance; social entrepreneurship
1. Introducon
In 2007, the Rockefeller Foundation convened a meeting at the Bellagio Center in Italy on philanthropy and develop‐
mental finance, where the term impact investing was used formally for the first time (Bugg-Levine and Emerson
2011). Although impact investing firms such as Acumen Fund, Aavishkaar fund, and Villgro Innovations have been
operational since much earlier, the term impact investing gained widespread recognition only recently. After the 2008
financial crisis, public confidence in the financial industry was severely impacted (Geobey, Westley, and Weber
2013). To regain their public image, one of the strategies that the investors adopted involved investing in socially
relevant projects (Benedikter and Giordano 2011). Since then, the scholarship on impact investing has been growing,
there are increasing number of specialized conferences and publications (Hangl 2014; Harji and Hebb 2010); imply‐
ing increased focus on the field supported by underdeveloped empirical and critical studies.
The market for impact investments is proliferating where different banks, foundations, government agencies, and
high net worth individuals are pooling capital (Weber 2016). The channelization of capital in impact investing firms
has been increasing each year. In 2013, the US- small business administration fund increased its impact fund alloca‐
tion from 80 million to 150 million USD, and the USAID increased its impact investing fund to 60 million USD
(Tekula and Shah 2016). Currently, investments of 60 billion USD are under the impact investments category, while
assets under the socially responsible investments category are more than two trillion USD (Roundy, Holzhauer, and
Dai 2017). The impact investing sector is projected to grow to 500 billion USD by the year 2023 (Battilana et al.
2012). The growth in capital investment, in the impact-investing field, is promising. The major reason that drives the
market and institutional interest for impact investing is that investors can pursue social and financial goals simultane‐
ously (Rizzello et al. 2016). However, currently, the practice of impact investing is not matched by relevant empirical,
critical, and theoretical knowledge. The growth in the number of studies on impact investing has been surprisingly
very low. This lack of knowledge about the field and lack of knowledge production on the field pose an increasing
risk of failure for both the investors and the investees. This review aims to understand the terminological and defini‐
research-arcle
1
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tional boundaries of impact investing, current scope of scholarship and future research possibilities. The review anal‐
yses the field from longitudinal perspective discussing the evolution of knowledge over a period of time. Using these
learnings as a base, the review proposes a research agenda.
According to Kuhn (2012), for a scientific field to establish itself, it needs to move beyond conceptual conversa‐
tion and move towards applied science. In order to move the field forward, according to Kuhn (2012), scholars need
to understand the extant scholarship, its context, inconsistencies, and terminological and definitional boundaries. This
article attempts to clarify further the idea of impact investing by reviewing the current magnitude of research and
proposing a future research agenda using a longitudinal lens.
The recent definitional reviews of impact investing mainly map the definitions as a function of social and commer‐
cial performance. The recent works on impact investing mainly explore the promise, conceptualization, definitional,
and terminological clarifications, and categorization using conception analysis (Höchstädter and Scheck, 2014; Dag‐
gers and Nicholls, 2016). Yet, there are many definitional and terminological ambiguities. Few reviews have tried to
clarify the typologies of impact investing that are prevalent (Achleitner et al. 2011; Moore, Westley, and Brodhead
2012). Yet, several articles confuse impact investing with SRI, venture philanthropy, and venture capital. This review
clarifies the definitional ambiguities and studies the development of definition over a period of time, giving a unique
perspective. Secondly, there haven’t been studies that explore the current status and extent of scholarship, research
questions explored, and research methods used. This level of review is essential to understand the current status of
scholarship, the problems with the field, and aid in developing the future research agenda. This systemic review en‐
gages in understanding different research questions explored and methods used. The systemic review takes a longitu‐
dinal perspective and thus gives a unique insight into the present state of scholarship.
The structure of this article is as follows: Section 2 discusses the research methodology adopted for collecting the
literature on impact investing, and subsequently discusses the review strategy. The findings section discusses the ter‐
minological dilemma, definitional dilemma, extant research on impact investing by deliberating on research questions
and methods, and the level of analysis and performance. The critical lens employed while discussing the findings is
Kuhn’s (2012) scientific paradigm. The next section focuses on future research avenues where it discusses the re‐
search possibilities at the institutional, firm, and outcomes levels. Finally, the article ends with a discussion on con‐
clusion and limitation section.
2. Research methodology
2.1. Data collecon and descripon
Impact investing is a new and evolving field, driven by practitioners, it was essential to use a more inclusive
search strategy. To identify the body of literature, the study conducted searches using Harzing’s publish or perish
software-6, covering the time period from January 2005 to December 2017. Harzing’s publish or perish software-6
includes reports and working papers that are not present in the standard databases, thereby providing an overall view
of the field. The study chose this software because it covers articles, reports, and working papers published in most
databases that will not be searchable on the web of science (commonly used for literature review). The study used the
search term impact investing Or impact investor. The search terms were a part of the title, abstract, and keywords.
The initial search yielded 990 articles, reports, edited volumes, working papers, and magazines articles with at
least one citation. The list was saved on Microsoft Excel for further analysis. Empty rows without any citations were
deleted. The subsequent numbers of articles were 984 articles.
Subsequently, from the list, the study chose journal articles written only in English (list included articles written in
Spanish, German, and French). Publications without any apparent relationship to the concept of impact investing
were excluded. Upon further analysis of the list, the study narrowed down to articles which had ten or more citations,
as shown in the harzings’ publish and perish search software.
A friendly reviewer suggested including Porter and Kramer published in 1999, and two articles published in 2018.
The study also included six book chapters on impact investing published in an edited volume in 2016 as it included
some of the most cited scholars of the field. Furthermore, the study included 15 reports and 6 working papers. These
reports and working papers were highly cited (as revealed in google scholar). This list revealed 57 journal articles, 1
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book, and 6 chapters from two edited volumes, 18 reports, and 3 working papers. In total, this review contains 85
works. The academic articles were further cross-checked against the EBSCO, ScienceDirect, and JSTOR databases.
Table 1 gives an overview of the data description.
Table 1. Overview of the data selected and reviewed.Table Layout
Journal Articles 57
Reports 18
Edited Volume Chapters 6
Working papers 3
FT 50 Journal Articles 2
Articles and Reports from Developing Country 4
Articles with used existing theoretical lens Ten articles and two reports
Three quantitative; 10 case studies
The articles and reports found in the research had many commonalities to those analyzed in the review of impact
investing by Daggers and Nicholls (2016), Hangl (2014), Höchstädter and Scheck (2014), and Rizzello at el. (2016).
This review on impact investing, however, is more recent and comprehensive, and focuses on the current state of
research and possible research agenda while giving clarifications on terminological and definitional ambiguities.
2.2. Data analysis: a framework for organizing the literature
Hoogendoorn, Pennings, and Thurik (2010) and Short, Moss, and Lumpkin (2009) theme coded the extant publi‐
cations in social entrepreneurship on definitions, research questions explored, research methods, and level of analysis.
This study uses a similar approach, albeit, for analysing and theme coding of the extant research on impact investing
to understand the development of the field. Using the already published research on categorizing and defining social
entrepreneurship, the articles and reports on impact investing were broadly theme coded into academic articles and
reports, and conceptual papers.
The empirical papers were further coded as quantitative and qualitative papers, types of investments, social sector
of investments, the locations of the impact investors, the location of the investees, definitions, social impact meas‐
ures, and the market potential of various impact investing products and the different stakeholders. The thematic anal‐
ysis looked for definitions and typologies of impact investing, research method employed, theoretical framing em‐
ployed, the impact-investing model developed, research questions, findings, problems, and research agenda. After
identifying the relevant published literature, the study moved to thematically categorizing them.
3. Findings from themac analysis of data
The review found that the research on impact investing is evenly divided among conceptual works, reports en‐
dorsed by practitioners, and scholarly publications. The review has only two articles in the FT50 journal list having
impact investing as a major research question. Since the field is new and emerging, it still lacks substantial publica‐
tion among the FT50 ranked journals. However, the increasing number of publications, conferences, seminars, and
study groups indicate the higher probability of having publications in the top-ranking journal in the near future.
This section first presents terminological and definitional clarifications. Thereafter, it has a discussion on the cur‐
rent extent of research with a particular focus on research questions explored, methods used, level of analysis, and
outcomes.
3.1. Terminological disncon
The thematic analysis of the published articles identified different terms that shared many similarities and charac‐
teristics with impact investing. The review articles by Achleitner et al. (2011) and Höchstädter and Scheck (2014)
were anchored in clarifying the different terminologies and definitions of Impact Investing. The review by Rizzello
et al. (2016) presents the similarities among socially responsible investing, social impact bonds, microfinance, and
venture philanthropy, while Bouslah, Kryzanowski, and M’Zali (2013) presents the differences between these termi‐
nologies and impact investing. One of the major terminological confusions that became apparent was the use of the
Journal of Small Business & Entrepreneurship
, 0 (2017), © 2018 Journal of the Canadian Council for Small Business and Entrepreneurship/
Conseil de la PME et de l’entrepreneuriat
10.1080/08276331.2018.1551457