I argue that social investors should invest in activities that cannot be reliably sustained through ordinary market transactions. These activities include collective consumption goods, goods with nonverifiable quality, merit goods, and private goods that target groups cannot but ought to be able to, afford. Then I consider government’s role in social investment. Most of the paper is devoted tochoice of investment targets across institutional forms – for-profit, nonprofit, and hybrid organizations. Nonprofits and for-profits have distinct advantages and disadvantages, and either might be the best home for specific kinds of social investment. In contrast, I am skeptical of the claimed benefits of hybrid
organizations and structures. I argue that LLCs (Limited Liability Companies), L3Cs (Low-profit Limited Liability Companies), CICs (Community Investment Corporations), B corporations, Benefit corporations, and Social Impact Bonds lose the efficiency advantage of traditional for-profits and do not enhance access to capital over the nonprofit form. In addition, hybrids suffer from contract failure and some of the hybrid forms will have difficulty sustaining their social mission. Social investors should avoid existing forms of hybrid organization.
Tuesday, September 4, 2012
12:00 – 1:15 p.m.
ES (Education/Social Work Building) 2101, IUPUI
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