Joint CSTIO and GSC Seminar with Prof Gabriel Benito (BI Norwegian Business School)

Impact Investment: a Safeguard against Institutional Hazards in FDI

Abstract: The growing practice of “impact investing” – investing for both pecuniary (financial) and non-pecuniary (social, and environmental) outcomes – has attracted increasing attention in recent years. However, questions remain on the outcomes of impact investments, especially in high-risk countries. The international business and strategy literature establish that country risk from institutional hazards negatively impact foreign investments. Leveraging a novel unique hand-collected dataset of impact investments globally, we theorize and empirically test the role of impact investment as a safeguard against institutional hazards. Impact investment may mitigate the adverse effects of institutional hazards through three mechanisms: (1) by reducing the cost of capital, (2) by catalyzing further investments, and (3) by fostering capacity building to improve institutional environments. These mechanisms help firms manage uncertainties involved in foreign investment and reduce incentives to exit high-risk countries. Analyzing 794 U.S. firms and their subsidiaries in 79 countries over the 2000 to 2015 period, we find empirical support for our assertions.

About the speaker: Gabriel Benito is a Professor of Strategy at BI Norwegian Business School.  He has a doctorate from NHH Norwegian School of Economics and a Siviløkonom/Masters degree from the BI Norwegian Business School. Before joining BI, he had research and teaching positions at Copenhagen Business School, Østfold University College, and at the Norwegian Fund for Market and Distribution Research. He has been a guest professor at Copenhagen Business School (2018), visiting fellow at Henley Business School/University of Reading (2015-2018), visiting professor at Copenhagen Business School (2003-2005), and at University of Valencia (2002-2003), and a visiting scholar at University of Melbourne (1998).