(Illustration by iStock/DrAfter123)
Since 2007, when the Rockefeller Foundation coined the term “impact investing” to describe “investing with the intention to generate positive, measurable social and environmental impact alongside a financial return,” the field has grown dramatically. More than 1,340 organizations currently manage $502 billion in impact investment assets around the world, according to the Global Impact Investing Network (GIIN). Sir Ronald Cohen, one of the field’s founding fathers, envisioned an “impact revolution” to save the planet and improve the lives of billions of people. Over the course of more than a decade, a diverse group—including policy makers, bankers, development agencies, and philanthropic foundations—has worked together to build the field, giving shape to the norms and ideas that now dominate it. They have prioritized standardized solutions, investing in scalable social businesses, and developing tools to measure and manage the impact of their investments.
In a new paper, organizational management scholars Lisa Hehenberger, Johanna Mair, and Ashley Metz take a critical look at this burgeoning sector by drawing on 12 years of data (2006-2018) from Europe, where the growth of impact investing has surpassed figures elsewhere. The starting point for their research is that impact investing, like other areas of institutional life, has a “field ideology,” or a “coherent system of ideas that shapes thinking and acting.” Hehenberger, a professor of strategy and general management at Barcelona’s ESADE Business School; Mair, a professor of organization, strategy, and leadership at Berlin’s Hertie School of Governance and Stanford Social Innovation Review’s academic editor; and Metz, a professor of organization studies at Tilburg University in the Netherlands, show how certain ideas became dominant at the expense of others. Early discussions in impact investing focused on “diverse and local needs rather than standardized solutions,” and on putting “beneficiaries at the center of decision-making,” the authors write. “Had they been pursued and enacted, these ideas could have altered the trajectory of the field.”
How did certain norms come to prevail over others? Hehenberger, Mair, and Metz investigate the field’s “systemic forms of power.” Unlike the conflicts and changes associated with “power struggles between incumbents and challengers,” which tend to transpire out in the open, the emergence of systemic power and how it becomes embedded in institutional structures is often covert and invisible to outsiders. “There’s no speech or document to pick up to see the structures of the field,” Hehenberger says. “There’s no clear way to see the ideas that were lost, neglected, or never discussed.”
Hehenberger, Mair, and Metz developed an original methodological approach to solve this problem. “What we discovered,” Hehenberger says, “is that gender theory offered a way to assess underlying power dynamics in impact investing. Gender is part of the system we’re in. We can use it to analyze power dynamics that aren’t readily visible from the outside.” As research and policy director at the European Venture Philanthropy Association for more than six years, Hehenberger brought an insider perspective and data from her work in impact investing to the study, including public transcripts (official meeting minutes, presentations, newsletters, policy briefs, and publications) and hidden transcripts such as field notes, observations from meetings, emails, interviews, and internal strategy documents.
Looking to gender analysis, where masculine and feminine serve as ideal types, Hehenberger, Mair, and Metz capture dichotomies in impact investing, even employing a set of codes labeled XX and XY to bring “conflict and contestation to the surface.” Dichotomies such as customized versus standardized approaches, self-sufficiency versus dependency, head versus heart, and scaling versus going native reveal the contingency and lack of consensus that characterized the field’s early days. The authors show that with the passage of time, suppression—the “power-laden mechanism” by which systemic power arises and persists—made some ideas “prominent and dominant” while others were devalued or lost.
“Suppression was achieved by downplaying the contributions of some actors, by prioritizing means over ends, and by returning to ‘simpler’ solutions rather than embracing the complexity of the problem,” says Fabrizio Ferraro, a professor of strategic management at Barcelona’s IESE Business School.
While scholars of institutional theory have shown that once institutions rise to dominance, they determine the field’s behavior, there hasn’t been a rigorous, academic study of impact investing until now. Yet even beyond the field, the implications are far-reaching. “I believe these mechanisms of suppression explain many policy debates,” Ferraro says, “where standardized, quantified, financialized, scalable, ‘entrepreneurial’ solutions are systematically winning over customized, qualitative, non-financial, participatory ones.”
Lisa Hehenberger, Johanna Mair, and Ashley Metz, “The Assembly of a Field Ideology: An Idea-Centric Perspective on Systemic Power in Impact Investing,” Academy of Management Journal, vol. 62, no. 6, 2019, pp. 1672-1704.
Read more stories by Daniela Blei.