Impact investing in the era of collaborative governance : an empirical study on four cases in Hong Kong

Abstract

Impact investing, a new form of investment intended to create positive social and environmental impacts beyond financial returns, has prevailed around the globe. As a hybrid concept, impact investing embodies social responsibility and financial sustainability, and its development has been a collaborative effort engaging players from the public, private and third sectors. Such an unprecedented convergence of tri-sector stakeholders has also brought about new challenges. Despite the proliferation of research reports of impact investing in the practitioners’ field, little systematic study has been devoted to understanding the intractability of effective collaboration and its policy perspective in this cross-sector arena.

Hong Kong has also been enthusiastic about impact investing, however, not all of the momentum has translated into concrete actions. Local players are still trapped in their own silos with limited investing activities, and “cross-sector collaboration”remains a black box. An empirical inquiry into the collaborative issues in Hong Kong’s local context is long overdue. Given the launch of the Social Innovation and Entrepreneurship Fund by the Hong Kong SAR, the policy implications of impact investing and the role of government can be explored using concrete examples.

To address the challenge confronting collaboration, this study seeks answers to three research questions. First, what factors influence impact investors to collaborate with other stakeholders? Second, how are the collaborative dynamics shaped to induce impact-investing activities? Third, what effect does government intervention have on this collaboration?

The research design is framed by the collaborative governance model, rested on the theoretical foundation of collective action. As an exploratory study, the literature review draws upon a board set of extant frameworks and propositions to generate observable implications such as resource dependency theory and power dynamics to understand the motives, means and barriers in collaboration. It is a multi-phased qualitative case study on four impact investors in Hong Kong through analysis of documents, interviews and observations. Process-tracing and multiple narratives are employed to further develop two embedded cases of collaborative projects. The cross-case comparison reveals how starting conditions and collaboration process affect different types of impact investors/venture philanthropists, with both commonalities and variations in the generic rationale of stakeholder engagement and specific consideration on typical investment. The paradoxes of embeddedness vs publicness, and institutionalization vs joint discretion are discussed. Recommendations are made on the respective roles backbone organization and government could play to best use impact investing in the era of collaborative governance for a better society.