Donors talk: the signaling and imprinting effects of giving to social enterprises

Abstract

How should donors fund microfinance organizations and maximize social impact? Should they spread their contributions across multiple organizations or concentrate them? We address this thorny issue by separately examining how the act of giving a donation and the amount of giving affect the social performance of MFOs worldwide. Drawing on signaling theory, we hypothesize that the act of giving has a more significant impact on social performance than the actual amount donated. Moreover, we show an imprinting effect on social performance that persists even when donations dry up. That is, the improved social performance observed during subsidized periods is not reversed in subsequent unsubsidized periods. The global social impact of donor contributions diversified across many organizations may be greater than that of concentrated funding in a few