Are Social Impact Bonds an innovation in finance or do they help finance social innovation?

Olson, Hilary, Painter, Gary, Albertson, Kevin ORCID: https://orcid.org/0000-0001-6678-5590, Fox, Chris ORCID: https://orcid.org/0000-0003-1931-2058 and O’Leary, Chris (2024) Are Social Impact Bonds an innovation in finance or do they help finance social innovation? Journal of Social Policy, 53 (2). pp. 407-431. ISSN 0047-2794

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Abstract

Outcomes Based Commissioning (OBC) – for example, Pay for Success (in the US) or Payment by Results (in the UK) – has been suggested as a way to provide ‘more’ social services for ‘less’ public resources. Such commissioning is often linked with an innovative financing tool called a Social Impact Bond (SIB). Using data from the Social Finance UK Database and focusing on SIBs in the US and UK, we evaluate whether the SIB approach aligns with the theoretical predictions of social innovation. The results provide limited evidence that SIBs facilitate capital injections from the private sector into the production of social goods as well as facilitate parts of the process of social innovation – namely, piloting and scaling. We conclude that there is significant variation, both between the US and UK and within the US, in social innovation ecosystems and the role played by SIBs.