Impact Investing and the Fostering of Entrepreneurship in Disadvantaged Urban Areas: Evidence from Microdata in French Banlieues

Romain Boulongne, Rodolphe Durand and Caroline Flammer
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Romain Boulongne: IESE Business School
Rodolphe Durand: HEC Paris
Caroline Flammer: Columbia University

No 1405, HEC Research Papers Series from HEC Paris

Abstract: We examine whether impact investing is more effective in fostering business venture success and social impact when investments are directed toward ventures located in disadvantaged urban areas (that is, areas with high crime, unemployment, and poverty) compared to similar investments directed toward ventures located outside these areas. We explore this question in the context of loans made to business ventures in French “banlieues” vs. “non-banlieues.” We find that loans issued to banlieue ventures yield greater improvements in financial performance, as well as greater social impact in terms of the creation of local employment opportunities, quality jobs, and jobs for minorities. These results suggest that impact investors are able to contract with ventures of greater unrealized potential in banlieues, as banlieue ventures tend to be left out of the traditional loan market. This is confirmed in a controlled lab experiment in which participants—business professionals who are asked to act as loan officers—are randomly assigned to identical business ventures that only differ in their geographic location. We find that participants are indeed less likely to grant loans to banlieue ventures compared to non-banlieue ventures, despite the ventures being identical.

Keywords: Impact Investing; Social Impact; Disadvantaged Urban Areas; Sustainable Cities; Sustainable Development Goals (SDGs); Business Ventures (search for similar items in EconPapers)
JEL-codes: D60 E20 G10 G30 H50 H70 H80 I30 J10 J70 L20 L30 M10 O10 R10 R20 R50 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2020-11-24
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1405

DOI: 10.2139/ssrn.3705510

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