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

Author

Listed:
  • Boulongne, Romain

    (IESE Business School)

  • Durand, Rodolphe

    (HEC Paris)

  • Flammer, Caroline

    (Columbia University)

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.

Suggested Citation

  • Boulongne, Romain & Durand, Rodolphe & Flammer, Caroline, 2020. "Impact Investing and the Fostering of Entrepreneurship in Disadvantaged Urban Areas: Evidence from Microdata in French Banlieues," HEC Research Papers Series 1405, HEC Paris.
    • Handle: RePEc:ebg:heccah:1405
    DOI: 10.2139/ssrn.3705510
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    More about this item

    Keywords

    Impact Investing; Social Impact; Disadvantaged Urban Areas; Sustainable Cities; Sustainable Development Goals (SDGs); Business Ventures;
    All these keywords.

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H80 - Public Economics - - Miscellaneous Issues - - - General
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General
    • J70 - Labor and Demographic Economics - - Labor Discrimination - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General
    • R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General

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