Between mission pull and governance burden: Geographic distance and deal realisation in impact investing

Impact investing is widely expected to direct capital to locations where social and environmental challenges are most severe. Yet such opportunities are often found in places geographically distant from major pools of investment capital. We examine how geographic distance affects the realisation of impact investment deals and how host-country conditions alter that relationship. Integrating transaction cost economics with the location logic of the eclectic paradigm, we argue that impact investment decisions reflect the joint consideration of anticipated transaction value and governance costs. Distance raises the costs of screening, contracting, monitoring, and supporting ventures, while severe sustainability challenges can increase a location's mission-specific attractiveness by signaling greater unmet need and potential scope for additionality. By contrast, trade and investment risk increases transaction hazards that make distant deals harder to execute. We test these arguments using PitchBook data on 3126 impact deals closed in 2022–2023. We analyse 3606 realised investor–venture ties against matched unrealised alternatives in a choice-based sampling design. Distance reduces the likelihood of deal realisation. Challenge severity modestly weakens the distance penalty for a subset of sampled dyads, whereas trade and investment risk strengthens it across most observations. These findings contribute to impact investing by explaining why severe unmet need does not automatically translate into realised investment relationships. They extend transaction cost reasoning in entrepreneurial finance by incorporating mission-adjusted transactional value. They refine international business location logic by distinguishing mission-specific locational attractiveness from host-country transaction hazard.