The Rhetoric and Realities of Social Impact Bonds

Abstract

As the rhetoric of collaborative governance continues to gain popularity in the discourse of public affairs, both scholars and practitioners advocate cross-sector partnerships as a strategy to replace the vertical hierarchy of government with the horizontal approach of governance through a network of actors. This research explores the potential of social impact bonds (SIBs) as an instrument of collaborative governance. An SIB is an approach for broadening social programs, in a multi-faceted partnership among private investors, governments, and nonprofits. In this cross-sector partnership, private investors take on the financial risk of expanding evidence-based social programs provided by nonprofit organizations. In return, the government agency repays investors if the interventions meet measurable goals that demonstrate social impact (McKinsey & Company 2012, 15). Actors involved in the development of SIBs have published the majority of the scholarship to support them. Therefore, much of the literature informing the creation of future bonds is biased, and governments appear hesitant to try them before seeing any results. This study investigates possible disconnections between the arguments for and the practice of SIBs through textual analysis and elite interviewing. I identify three major disparities between the rhetoric and realities of SIBs: measurement of social impact, complexity of partnerships, and transfer of risk.