The identity of social impact venture capitalists: exploring social linguistic positioning and linguistic distinctiveness through text mining

Published in Small Business Economics

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Impact investing is gaining momentum as an investment practice that optimizes financial and social outcomes. This type of investor supports social enterprises to generate positive, measurable social and environmental impact alongside a financial return. However, the market is still in its emerging stage, and there is ambiguity regarding the definition of players and practices. Moreover, like social enterprises, impact investors are hybrid organizations with a dual nature (as they incorporate financial versus social-oriented goals), making their identities hard to define and understand.

The management literature suggests that, under ambiguity in identity, organizations should engage in extensive communication efforts to improve perceptions of their critical attributes among external audiences. In particular, language is a powerful communication tool that can help organizations give a sense of their identity and make sense of others’ communicated identity.

This paper adopts an investor identity perspective and uses a linguistic approach to explore how social impact venture capitalists (SIVCs) communicate their identities and actions to external stakeholders.

Using innovative methods and tools of text mining and social network analysis, we analyzed the website communication of 195 social impact venture capitalists (SIVCs) worldwide.

We investigate what language reveals about their identity by introducing two dimensions that measure: (i) the strength of their social positioning and (ii) the distinctiveness of their language.

Several academics and practitioners stress that impact investors must be characterized by “intentionality” in their actions, as generating social value cannot be an “incidental side-effect of a commercial deal”.

The first dimension assesses investors’ linguistic intensity in presenting their social orientation and is, thus, extremely relevant to capturing these investors’ social intentionality. Moreover, one-way organizations can be recognized within a competitive market is by distinguishing themselves from their peers.

Accordingly, the second dimension captures the level to which an organization is perceived as different from, rather than interchangeable with, other members of the same market. Accordingly, distinctive language can help foster these inter-relationships by emphasizing key and unique attributes of the organization’s value. These two factors are, thus, particularly relevant as they can reduce uncertainty and equivocality in the audience’s information processing.

Our results reveal four types of investors:

  • Smart Heroes (with high linguistic distinctiveness and a solid social positioning) - “Smart” because the SIVC can communicate in a distinctive way (compared to others) and “Hero” because it has a strong social orientation and thus is more likely perceived as a champion in addressing social challenges.
  • Naïve Dreamers (with a solid social positioning but a language similar to the mass) - By explicitly endorsing the social cause without being able to communicate its identity distinctively, this SIVC appears to have organizational “dreams” regarding social issues but remains “naïve” about how to translate its focus into a distinct social identity.
  • Illusionists (showing distinctive language but poor social identity) - Just as “illusionists” seek to enchant the audience with a range of tricks that mask reality, this type of SIVC tries to attract the external audience by adopting distinctiveness in its communication without ever showing a genuine social conscience.
  • Blabbers (with low scores on both dimensions) represent SIVCs that neither center on the social theme nor distinguish themselves from the masses in their communication.

In addition, we use network topic modeling to identify the main discourse themes on their websites and discuss the differences among the four groups.

Communicating impact investing is most relevant for Smart Heroes and Naïve Dreamers.

Illusionists dedicate more attention to the characteristics of their target ventures, management teams, and the environmental impact of their investments, while sustainable solutions are the main focus of Blabbers.

Finally, as an additional analysis, we assessed whether and to what extent the use of different linguistic styles is majorly effective at attracting the attention of external audiences by exploiting data on website traffic. We find that the websites of Smart Heroes have more web traffic than the other three groups.

Our study presents a new approach for analyzing the (online) communication of SIVCs and demonstrates that social enterprises must wisely choose the language with which they communicate their identity. We maintain that managers should be aware of the power of language and carefully elucidate the social impact they seek to achieve.

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Authors at the Department of Management

LAURA TOSCHI – Associate professor

Academic disciplines: Entrepreneurship, Innovation

Teaching areas: Business Economics, Innovation Management

Research fields:  technology transfer, technology commercialization, patents, venture capital, and innovation

Laura is an Associate Professor in Entrepreneurship and Innovation Management at the Department of Management and serves as Deputy Director of the Executive Master’s in Technology and Innovation Management at the Bologna Business School. She received an ESRC Fellowship at SPRU and has been visiting professor at Boston University, the University of Queensland, and the Queensland University of Technology.