Three essays on social impact venture capital

Thesis

This thesis explores how social impact-oriented venture capital (IVC) firms integrate the pursuit of social impact with financial objectives and how this dual focus shapes their investment decisions and outcomes. Each of the three papers contributes to this broader exploration. The first paper uses signalling theory to compare how traditional VCs, governmental VCs, and IVCs interpret signals of financial and social potential from new ventures. The findings show that while traditional VCs prioritise financial signals and governmental VCs focus on social signals, IVCs uniquely treat both financial and social signals as complementary. It provides an example of how dual motivations shape investment decision-making. The second paper investigates the concept of additionality. It demonstrates that IVCs possess expertise to identify and fund social ventures overlooked by traditional VCs. In this way, IVCs play a catalytic role. Not only do they fund otherwise neglected ventures, but their involvement also encourages follow-on investment from traditional VCs. The third paper explores the regional impacts of VC activity and exposes a dark side of traditional VC - it is associated with rising income inequality in targeted regions. In contrast, IVCs avoid these negative distributive effects. However, they produce lower gains in local economic growth than traditional VCs, revealing a trade-off in pursuing both financial and social objectives. Taken together, these three studies provide an empirical and theoretical basis for understanding how IVCs operate, the extent to which they realise their dual objectives, and the broader societal implications of their investment strategies.

Authors: Isik, YE

• DOI: 10.5287/ora-noxgrz6r5
• Type of award: DPhil
• Level of award: Doctoral
• Awarding institution: University of Oxford
• Language: English
• Keywords: signalling theory; social entrepreneurship; additionality; venture capital; impact investing
• Subjects: Strategy; Entrepreneurship; Finance