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Social Finance in Europe: The Transition from Grants to Follow-Up Financing for Social Enterprises

In: Contemporary Developments in Entrepreneurial Finance

Author

Listed:
  • Mirko Hirschmann

    (Trier University)

  • Alexandra Moritz

    (Trier University)

Abstract

A large number of social enterprises (SEs) use grants as early-stage financing to establish their ventures. However, we know little about the requirements for SEs to receive grants and their follow-up financing opportunities. Based on an interview study with 13 European SEs, we show that SEs need to go through a resource-intensive application process to be able to receive a grant. To finally receive a grant, we find that nonfinancial aspects (e.g., involved people’s passion) and financial sustainability are the most important factors for convincing possible grant providers to finance an SE’s venture. Furthermore, based on signaling theory, we demonstrate that obtaining a grant increases the likelihood of finding follow-up investors. We suggest that further quantitative research should test our conceptual model, which is built on four propositions we formulate.

Suggested Citation

  • Mirko Hirschmann & Alexandra Moritz, 2020. "Social Finance in Europe: The Transition from Grants to Follow-Up Financing for Social Enterprises," FGF Studies in Small Business and Entrepreneurship, in: Alexandra Moritz & Joern H. Block & Stephan Golla & Arndt Werner (ed.), Contemporary Developments in Entrepreneurial Finance, pages 251-275, Springer.
    • Handle: RePEc:spr:fgfchp:978-3-030-17612-9_10
    DOI: 10.1007/978-3-030-17612-9_10
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