Skip to main content

Financialization and Social Impact Investing

  • 283 Accesses

Abstract

This chapter provides a much-needed link between the state, financialization, and financial innovations such as social impact investing. Reviewing empirical literature, Golka shows how current scholarly perspectives either see the state as a constraint or an enabler for the spread of financial innovations. Sketching the development of social impact investing in Britain, Golka shows the limitations of both of these perspectives as the state not only had constraining and enabling influences but also broader ideational ones. However, state influence varies considerably across the numerous practices that are typically subsumed under the impact investing label. The author reveals these differences by analyzing social impact investing through his relational perspective that focuses on the link between financial and nonfinancial actors.

This is a preview of subscription content, access via your institution.

Buying options

Chapter
USD   29.95
Price excludes VAT (USA)
  • DOI: 10.1007/978-3-030-06100-5_2
  • Chapter length: 18 pages
  • Instant PDF download
  • Readable on all devices
  • Own it forever
  • Exclusive offer for individuals only
  • Tax calculation will be finalised during checkout
eBook
USD   89.00
Price excludes VAT (USA)
  • ISBN: 978-3-030-06100-5
  • Instant PDF download
  • Readable on all devices
  • Own it forever
  • Exclusive offer for individuals only
  • Tax calculation will be finalised during checkout
Hardcover Book
USD   119.99
Price excludes VAT (USA)

Notes

  1. 1.

    This resonates with findings from derivatives trading, where it has been shown that a market for derivatives only emerged after the development and spread of Black-Scholes-Merton formula for option pricing (MacKenzie 2008; MacKenzie and Millo 2003).

  2. 2.

    I acknowledge that dynamics in other non-market economic actors—households in particular—are, too, of critical importance for the study of financialization. See, for example, Schwartz (2012) on the interplay between the shift from defined benefit to defined contribution pension systems in the US, individuals’ increased house price speculation, and regulation. That being said, my research question focuses more on the relation between finance, policy and public organizations.

  3. 3.

    This might be particularly true for Michelle Giddens, the CEO of the oldest and largest British SII fund, Bridges Ventures, and daughter of Anthony Giddens.

  4. 4.

    Source: Tom Happold and Kevin Maguire. “Revealed: Brown and Blair’s pact.” The Guardian, June 6th 2003: https://www.theguardian.com/politics/2003/jun/06/labour.uk, accessed July 16th 2017

References

  • Aguilera, R. V., & Jackson, G. (2003). The cross-national diversity of corporate governance: Dimensions and determinants. Academy of Management Review, 28(3), 447–465.

    CrossRef  Google Scholar 

  • Aitken, R. (2007). Performing capital: Toward a cultural economy of popular and global finance. New York: Palgrave Macmillan.

    CrossRef  Google Scholar 

  • Arrighi, G. (1994). The long twentieth century: Money, power, and the origins of our times. London: Verso.

    Google Scholar 

  • Barman, E. (2015). Of principle and principal: Value plurality in the market of impact investing. Valuation Studies, 3(1), 9–44.

    CrossRef  Google Scholar 

  • Barman, E. (2016). Caring capitalism: The meaning and measure of social value. Cambridge: Cambridge University Press.

    CrossRef  Google Scholar 

  • Battilana, J., & Lee, M. (2014). Advancing research on hybrid organizing: Insights from the study of social enterprises. Academy of Management Annals, 8(1), 397–441.

    CrossRef  Google Scholar 

  • Baud, C., & Durand, C. (2012). Financialization, globalization and the making of profits by leading retailers. Socio-Economic Review, 10(2), 241–266.

    CrossRef  Google Scholar 

  • Beech, M., & Lee, S. (Eds.). (2015). The conservative-liberal coalition. Examining the Cameron-Clegg government. Basingstoke: Palgrave Macmillan.

    Google Scholar 

  • Belfrage, C. (2008). Towards ‘universal financialisation’ in Sweden? Contemporary Politics, 14(3), 277–296.

    CrossRef  Google Scholar 

  • Blyth, M. (2013). Austerity: The history of a dangerous idea. Oxford: Oxford University Press.

    Google Scholar 

  • Chiapello, E., & Medjad, K. (2009). An unprecedented privatisation of mandatory standard-setting: The case of European accounting policy. Critical Perspectives on Accounting, 20(4), 448–468.

    CrossRef  Google Scholar 

  • Chiapello, E., & Walter, C. (2016). The three ages of financial quantification: A conventionalist approach to the Financiers’ metrology. Historical Social Research, 41(2), 155–177.

    Google Scholar 

  • Connell, A. (2010). Welfare policy under new labour: The politics of social security reform. London: I.B. Tauris.

    Google Scholar 

  • Coombs, N. (2016). What is an algorithm? Financial regulation in the era of high-frequency trading. Economy and Society, 45(2), 278–302.

    CrossRef  Google Scholar 

  • Crotty, J. (2005). The neoliberal paradox: The impact of destructive product market competition and ‘modern’ financial markets on nonfinancial corporation performance in the neoliberal era. In G. A. Epstein (Ed.), Financialization and the world economy (pp. 77–110). Cheltenham: Edward Elgar.

    Google Scholar 

  • Crotty, J. (2008). If financial market competition is intense, why are financial firm profits so high? Reflections on the current ‘golden age’of finance. Competition & Change, 12(2), 167–183.

    Google Scholar 

  • Crouch, C. (2011). The strange non-death of neo-liberalism. Cambridge: Polity Press.

    Google Scholar 

  • Davies, S. (2008). Contracting out employment services to the third and private sectors: A critique. Critical Social Policy, 28(2), 136–164.

    CrossRef  Google Scholar 

  • Davis, A., & Walsh, C. (2015). The role of the state in the financialisation of the UK economy. Political Studies, 64(3), 666–682.

    CrossRef  Google Scholar 

  • Deakin, N., & Parry, R. (2000). The treasury and social policy: The contest for control of welfare strategy. Basingstoke: Macmillan Press.

    CrossRef  Google Scholar 

  • Deeg, R., & Jackson, G. (2007). Towards a more dynamic theory of capitalist variety. Socio-Economic Review, 5(1), 149–179.

    CrossRef  Google Scholar 

  • Deutschmann, C. (2008). Finanzmarkt-Kapitalismus und Wachstumskrise. In C. Deutschmann (Ed.), Kapitalistische Dynamik: Eine gesellschaftstheoretische Perspektive (pp. 151–174). Wiesbaden: VS Verlag für Sozialwissenschaften.

    Google Scholar 

  • Dobrowolsky, A., & Lister, R. (2008). Social investment: The discourse and the dimensions of change. In M. Powell (Ed.), Modernising the welfare state: The Blair legacy. Bristol: Policy Press.

    Google Scholar 

  • Dore, R. (2008). Financialization of the global economy. Industrial and Corporate Change, 17(6), 1097–1112.

    CrossRef  Google Scholar 

  • Dowling, E., & Harvie, D. (2014). Harnessing the social: State, crisis and (big) society. Sociology, 48(5), 869–886.

    CrossRef  Google Scholar 

  • Du Gay, P., & Pryke, M. (2002). Cultural economy: Cultural analysis and commercial life. Thousand Oaks, CA: Sage.

    Google Scholar 

  • Duménil, G., & Lévy, D. (2004). Capital resurgent: Roots of the neoliberal revolution. Cambridge, MA: Harvard University Press.

    Google Scholar 

  • Dünhaupt, P. (2012). Financialization and the rentier income share–evidence from the USA and Germany. International Review of Applied Economics, 26(4), 465–487.

    CrossRef  Google Scholar 

  • Esping-Andersen, G. (1990). The three worlds of welfare capitalism. Princeton, NJ: Princeton University Press.

    Google Scholar 

  • Feist, M., & Fuchs, D. (2014). Was heißt hier nachhaltig? In M. Heires & A. Nölke (Eds.), Politische Ökonomie der Finanzialisierung (pp. 225–240). Wiesbaden: Springer.

    CrossRef  Google Scholar 

  • Finlayson, A. (2009). Financialisation, financial literacy and asset-based-welfare. British Journal of Politics and International Relations, 11(3), 400–421.

    CrossRef  Google Scholar 

  • Fiss, P. C., & Zajac, E. J. (2004). The diffusion of ideas over contested terrain: The (non) adoption of a shareholder value orientation among German firms. Administrative Science Quarterly, 49(4), 501–534.

    Google Scholar 

  • Flaherty, E. (2015). Top incomes under finance-driven capitalism, 1990–2010: Power resources and regulatory orders. Socio-Economic Review, 13(3), 417–447.

    CrossRef  Google Scholar 

  • Fligstein, N. (1990). The transformation of corporate control. Cambridge, MA: Harvard University Press.

    Google Scholar 

  • Fligstein, N., & Goldstein, A. (2012). A long strange trip: The state and mortgage securitization, 1968-2010. In K. Knorr Cetina & A. Preda (Eds.), The Oxford handbook of the sociology of finance (pp. 339–356). Oxford: Oxford University Press.

    Google Scholar 

  • Fligstein, N., & McAdam, D. (2012). A theory of fields. Oxford: Oxford University Press.

    CrossRef  Google Scholar 

  • Fligstein, N., & Shin, T.-J. (2004). The shareholder value society: A review of the changes in working conditions and inequality in the United States, 1976 to 2000. In K. Neckermann (Ed.), Social inequality (pp. 401–432). New York: Russell Sage Foundation.

    Google Scholar 

  • G-8. (2014). Impact Investing: The invisible heart of markets. Retrieved from http://www.socialimpactinvestment.org

  • Giddens, A. (1998). The third way: The renewal of social democracy. Cambridge: Polity Press.

    Google Scholar 

  • Godechot, O. (2015). Financialization is marketization! A study on the respective impact of various dimensions of financialization on the increase of global inequality. Sociological Science, 3, 495–519.

    CrossRef  Google Scholar 

  • Hall, P. A., & Soskice, D. (2001). Varieties of capitalism: The institutional foundations of comparative advantage. Oxford: Oxford University Press.

    CrossRef  Google Scholar 

  • Harvey, D. (2005). A brief history of neoliberalism. Oxford: Oxford University Press.

    Google Scholar 

  • Hebb, T. (2013). Impact investing and responsible investing: What does it mean? Journal of Sustainable Finance & Investment, 3(2), 71–74.

    CrossRef  Google Scholar 

  • Hiß, S. (2013). The politics of the financialization of sustainability. Competition & Change, 17(3), 234–247.

    CrossRef  Google Scholar 

  • Hiß, S. (2014). Was bleibt von der Nachhaltigkeit nach ihrer Finanzialisierung? In M. Heires & A. Nölke (Eds.), Politische Ökonomie der Finanzialisierung (pp. 211–224). Wiesbaden: Springer.

    CrossRef  Google Scholar 

  • Ho, K. (2009). Liquidated: An ethnography of wall street. Durham, NC: Duke University Press.

    CrossRef  Google Scholar 

  • Höpner, M., & Jackson, G. (2006). Revisiting the Mannesmann takeover: How markets for corporate control emerge. European Management Review, 3(3), 142–155.

    CrossRef  Google Scholar 

  • Jackson, G., & Deeg, R. (2012). The long-term trajectories of institutional change in European capitalism. Journal of European Public Policy, 19(8), 1109–1125.

    CrossRef  Google Scholar 

  • Jessop, B. (2010). Cultural political economy and critical policy studies. Critical Policy Studies, 3(3–4), 336–356.

    CrossRef  Google Scholar 

  • Jessop, B. (2011). Imagined recoveries, recovered imaginaries: A cultural political economy perspective. Retrieved from http://www.lancs.ac.uk/cperc/docs/E-2012 Jessop-CPE-SwanseaRecovery.pdf

  • JP Morgan. (2010). Impact investments: An emerging asset class. Retrieved from https://thegiin.org/knowledge/publication/impact-investments-an-emerging-asset-class

  • Jung, J. (2015). A struggle on two fronts: Labour resistance to changing layoff policies at large US companies. Socio-Economic Review, 15(1), 213–239.

    Google Scholar 

  • Jung, J., & Dobbin, F. (2012). Finance and institutional investors. In K. Knorr Cetina & A. Preda (Eds.), The Oxford handbook of the sociology of finance (pp. 52–74). Oxford: Oxford University Press.

    Google Scholar 

  • Kädtler, J. (2011). Financialisation of capitalist economies: Bargaining on conventional economic rationalities. Historical Social Research, 36(4), 169–191.

    Google Scholar 

  • Kädtler, J. (2015). Macht und Machtverhältnisse im Rahmen und außerhalb des konventionenökonomischen Programms. In L. Knoll (Ed.), Organisationen und Konventionen: Die Soziologie der Konventionen in der Organisationsforschung. Wiesbaden: Springer VS.

    Google Scholar 

  • Kelly, J. (2007). Reforming public services in the UK: Bringing in the third sector. Public Administration, 85(4), 1003–1022.

    CrossRef  Google Scholar 

  • Khurana, R. (2007). From higher aims to hired hands: The social transformation of American business schools and the unfulfilled promise of management as a profession. Princeton, NJ: Princeton University Press.

    Google Scholar 

  • Knorr-Cetina, K. (2009). What is a financial market? In J. Beckert & C. Deutschmann (Eds.), Wirtschaftssoziologie (Kölner Zeitschrift für Soziologie und Sozialpsychologie 49) (pp. 326–342). Wiesbaden: VS-Verlag für Sozialwissenschaften.

    Google Scholar 

  • Konings, M. (2009). The construction of US financial power. Review of International Studies, 35(01), 69–94.

    CrossRef  Google Scholar 

  • Krippner, G. R. (2005). The financialization of the American economy. Socio-Economic Review, 3(2), 173–208.

    CrossRef  Google Scholar 

  • Krippner, G. R. (2011). Capitalizing on crisis. Cambridge, MA: Harvard University Press.

    Google Scholar 

  • Lake, R. W. (2015). The financialization of urban policy in the age of Obama. Journal of Urban Affairs, 37(1), 75–78.

    CrossRef  Google Scholar 

  • Langenohl, A., & Wetzel, D. (2011). Finanzmärkte und ihre Sinnformen: Handlungskoordination und Signalkommunikation. Berliner Journal für Soziologie, 21(4), 539–559.

    CrossRef  Google Scholar 

  • Langley, P. (2006). Securitising suburbia: The transformation of Anglo-American mortgage finance. Competition & Change, 10(3), 283–299.

    CrossRef  Google Scholar 

  • Langley, P. (2008). Financialization and the consumer credit boom. Competition & Change, 12(2), 133–147.

    Google Scholar 

  • Larsen, T. P., Taylor-Gooby, P., & Kananen, J. (2006). New labour’s policy style: A mix of policy approaches. Journal of Social Policy, 35(4), 629–649.

    CrossRef  Google Scholar 

  • Lazonick, W. (2014). Profits without prosperity. Harvard Business Review, 92(9), 46–55.

    Google Scholar 

  • Lazonick, W., & O’Sullivan, M. (2000). Maximizing shareholder value: A new ideology for corporate governance. Economy and Society, 29(1), 13–35.

    CrossRef  Google Scholar 

  • Lee, S. (2006). Gordon Brown and the ‘British way’. The Political Quarterly, 77(3), 369–378.

    CrossRef  Google Scholar 

  • Lee, S. (2008). Best for Britain? The politics and leagcy of Gordon Brown. Oxford: Oneworld Books.

    Google Scholar 

  • Lin, K.-H., & Tomaskovic-Devey, D. (2013). Financialization and US income inequality, 1970–20081. American Journal of Sociology, 118(5), 1284–1329.

    CrossRef  Google Scholar 

  • Lister, R. (1998). From equality to social inclusion: New labour and the welfare state. Critical Social Policy, 18(2), 215–225.

    CrossRef  Google Scholar 

  • MacKenzie, D. (2008). An engine, not a camera: How financial models shape markets. Cambridge, MA: MIT Press.

    Google Scholar 

  • MacKenzie, D., & Millo, Y. (2003). Constructing a market, performing theory: The historical sociology of a financial derivatives exchange1. American Journal of Sociology, 109(1), 107–145.

    CrossRef  Google Scholar 

  • Mader, P. (2015). The political economy of microfinance: Financialising poverty. London: Palgrave Macmillan.

    CrossRef  Google Scholar 

  • Mader, P. (2016). Questioning three fundamental assumptions in financial inclusion (IDS evidence report, 176). Brighton: IDS.

    Google Scholar 

  • Mair, J., & Marti, I. (2009). Entrepreneurship in and around institutional voids: A case study from Bangladesh. Journal of Business Venturing, 24(5), 419–435.

    CrossRef  Google Scholar 

  • Martin, R. (2002). Financialization of daily life. Philadelphia, PA: Temple University Press.

    Google Scholar 

  • Milberg, W. (2008). Shifting sources and uses of profits: Sustaining US financialization with global value chains. Economy and Society, 37(3), 420–451.

    CrossRef  Google Scholar 

  • Mizruchi, M. S. (1996). What do interlocks do? An analysis, critique, and assessment of research on interlocking directorates. Annual Review of Sociology, 22(1), 271–298.

    CrossRef  Google Scholar 

  • Morin, F. (2000). A transformation in the French model of shareholding and management. Economy and Society, 29(1), 36–53.

    CrossRef  Google Scholar 

  • Mortensen, J. L., & Seabrooke, L. (2008). Housing as social right or means to wealth? The politics of property booms in Australia and Denmark. Comparative European Politics, 6(3), 305–324.

    CrossRef  Google Scholar 

  • Mulderrig, J. (2011). The grammar of governance. Critical Discourse Studies, 8(1), 45–68.

    CrossRef  Google Scholar 

  • Nicholls, A. (2010). The institutionalization of social investment: The interplay of investment logics and investor rationalities. Journal of Social Entrepreneurship, 1(1), 70–100.

    CrossRef  Google Scholar 

  • Nölke, A., & Perry, J. (2007). The power of transnational private governance: Financialization and the IASB. Business Power and Global Governance, 9(3), 1–25.

    Google Scholar 

  • Pacewicz, J. (2012). Tax increment financing, economic development professionals and the financialization of urban politics. Socio-Economic Review, 11(3), 413–440.

    CrossRef  Google Scholar 

  • Piketty, T. (2014). Capital in the twenty-first century. Cambridge, MA: Harvard University Press.

    CrossRef  Google Scholar 

  • Powell, M. (2000). New labour and the third way in the British welfare state: A new and distinctive approach? Critical Social Policy, 20(1), 39–60.

    CrossRef  Google Scholar 

  • Powell, M. (Ed.). (2008). Modernising the welfare state: The Blair legacy. Bristol: Policy Press.

    Google Scholar 

  • Quinn, S. L. (2010). Government policy, housing, and the origins of securitization, 1780–1968. (PhD), Berkeley, CA: University of California.

    Google Scholar 

  • Schelkle, W. (2012). A crisis of what? Mortgage credit markets and the social policy of promoting homeownership in the United States and in Europe. Politics and Society, 40(1), 59–80.

    CrossRef  Google Scholar 

  • Schmidt, V. A. (2008). Discursive institutionalism: The explanatory power of ideas and discourse. Annual Review of Political Science, 11, 303–326.

    CrossRef  Google Scholar 

  • Schwartz, H. (2012). Housing, the welfare state, and the global financial crisis: What is the connection? Politics and Society, 40(1), 35–58.

    CrossRef  Google Scholar 

  • Seabrooke, L. (2007). Everyday legitimacy and international financial orders: The social sources of imperialism and hegemony in global finance. New Political Economy, 12(1), 1–18.

    CrossRef  Google Scholar 

  • Seabrooke, L. (2010). Everyday legitimacy and institutional change. In A. Gofas & C. Hay (Eds.), The role of ideas in political analysis: A portrait of contemporary debates (pp. 78–93). New York: Routledge.

    Google Scholar 

  • Smith, A. (2010). The third sector, regeneration and sustainable communities: “Rolling” with the new labour agenda. International Journal of Sociology and Social Policy, 30(1/2), 48–65.

    CrossRef  Google Scholar 

  • Stockhammer, E. (2004). Financialisation and the slowdown of accumulation. Cambridge Journal of Economics, 28(5), 719–741.

    CrossRef  Google Scholar 

  • Streeck, W. (2013). Gekaufte Zeit. Die vertagte Krise des demokratischen Kapitalismus. Frankfurt/Main: Suhrkamp.

    Google Scholar 

  • Streeck, W., & Thelen, K. A. (2005). Beyond continuity: Institutional change in advanced political economies. Oxford: Oxford University Press.

    Google Scholar 

  • Sturm, R. (2009). Politik in Großbritannien. Wiesbaden: Springer VS.

    CrossRef  Google Scholar 

  • Tomaskovic-Devey, D., & Lin, K.-H. (2011). Income dynamics, economic rents, and the financialization of the US economy. American Sociological Review, 76(4), 538–559.

    CrossRef  Google Scholar 

  • Van der Zwan, N. (2014). Making sense of financialization. Socio-Economic Review, 12(1), 99–129.

    CrossRef  Google Scholar 

  • Vitols, S. (2002). Shareholder value, management culture and production regimes in the transformation of the German chemical-pharmaceutical industry. Competition and Change, 6(3), 309–325.

    CrossRef  Google Scholar 

  • Widmer, F. (2011). Institutional investors, corporate elites and the building of a market for corporate control. Socio-Economic Review, 9(4), 671–697.

    CrossRef  Google Scholar 

  • Windolf, P. (2005). Finanzmarkt-Kapitalismus: Analysen zum Wandel von Produktionsregimen. Wiesbaden: VS Verlag für Sozialwissenschaften.

    CrossRef  Google Scholar 

  • Windolf, P. (2008). Eigentümer ohne Risiko. Zeitschrift für Soziologie, 37(6), 516–535.

    CrossRef  Google Scholar 

  • Zorn, D. (2004). Here a chief, there a chief: The rise of the CFO in the American firm. American Sociological Review, 69(3), 345–364.

    CrossRef  Google Scholar 

  • Zorn, D., Dobbin, F., Dierkes, J., & Kwok, M.-S. (2005). Managing investors: How financial markets reshaped the American firm. In K. Knorr Cetina & A. Preda (Eds.), The sociology of financial markets (pp. 269–289). Oxford: Oxford University Press.

    Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Rights and permissions

Reprints and Permissions

Copyright information

© 2019 Springer Nature Switzerland AG

About this chapter

Verify currency and authenticity via CrossMark

Cite this chapter

Golka, P. (2019). Financialization and Social Impact Investing. In: Financialization as Welfare. Springer, Cham. https://doi.org/10.1007/978-3-030-06100-5_2

Download citation

  • DOI: https://doi.org/10.1007/978-3-030-06100-5_2

  • Published:

  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-030-06099-2

  • Online ISBN: 978-3-030-06100-5

  • eBook Packages: Social SciencesSocial Sciences (R0)