Analysis reveals no significant profitability differences in social and non-social innovative startups, suggesting financial incentives may not be essential.
As social innovative start-ups focus on both social and economic objectives, they are assumed to face double externalities, preventing them from competing on equal terms with their private-sector counterparts. This argument is used by governments to offer financial incentives to spur socially innovative investments. But is this support really necessary? Using a longitudinal dataset of innovative Italian start-ups, our findings do not reveal any significant differences in profitability between social and non-social innovative start-ups. The study concludes with a discussion of alternative reward mechanisms, based on measurable societal contributions, in place of passive tax subsidies.
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Pascale et al. (2025) studied this question.
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