Regional differences in impact investment: a theory of impact investing ecosystems

Impact investing, a type of values-based investing that combines financial investment with philanthropic goals, is receiving heightened scholarly and practitioner attention. The geography of impact investing, however, is largely unexamined, and it is not clear why some regional impact-investing communities are more vibrant than other communities. Regional differences in entrepreneurial activities are increasingly explained by differences in the vitality of entrepreneurial ecosystems, the set of interconnected forces that promote and sustain regional entrepreneurship. The purpose of this paper is to leverage insights from entrepreneurial ecosystems studies to understand the dynamics of communities that encourage and support impact investing.

To explain inter-regional differences in the prevalence and intensity of impact investing, this conceptual paper draws from research on entrepreneurial ecosystems and impact investment to theorize about the ecosystem attributes and components that drive vibrant impact investing communities.

It is theorized that vibrant impact investing ecosystems have three system-level attributes – diversity, cohesion and coordination – that are influenced by the core components of the ecosystems, including the characteristics of investors, the presence of social impact support organizations and cultural values that promote blending logics.

The theoretical model contributes to research on impact investing and hybrid organizing, produces concrete implications for ecosystem builders and sets an agenda for future research.