NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, December 6, 2010

By Lindsay Clinton

Many social entrepreneurs and social investors tend to avoid inviting the government to their table because it often means a slow, fat-fingered solution, rather than a targeted, nimble infusion of resources.

However, government policy can also serve as a growth catalyst and a broad-based enabler, and, as such, cannot be overlooked as an important partner in the development of social enterprise as a sector.

What does a marriage between social enterprise and government look like?

David Wood, director of the Initiative for Responsible Investment at Harvard University, has been researching the roles that government can play to positively impact social enterprise or, more precisely, social investing. He explains that government can positively affect the development of social enterprises.

Government’s actions can increase the supply of “impactful” capital, or investment by those interested in social and financial returns (e.g., government as co-investor). Government can also increase the demand for impactful capital (i.e., government as capacity builder) or channel capital in strategic directions (e.g., federally regulated organic labeling). All three can be useful mechanisms for accelerating the growth of social enterprise.