The Best of Both Worlds? Impact investors and the Financial versus Social Performance Debate

Over the last decades, management scholars have tried to examine whether profitability can be achieved with actions that also improve social and environmental performance. More recently, this debate has gained new traction with the emergence of the so-called “impact investors,” who, in varied ways, pursue social impact besides pure profitability and oftentimes employ metrics of impact. Given the still evolving stage of the impact investing industry, and the opportunity to refine existing theories on how firms deal with financial and social goals, we follow a grounded theory approach using data from qualitative interviews and discussions groups with investment funds, social entrepreneurs, research centers and other actors in the industry. We then generate a novel theoretical framework on how the emergence of impact investors changes the way stakeholders approach financial and social goals, as well as the mechanisms used to reconcile these two performance dimensions.