Purpose and Performance: Is There a Trade-off? A Comparison of Social and Non-Social Innovative Startups

ABSTRACT - As social innovative startups 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 startups, our findings do not reveal any significant differences in profitability between social and non-social innovative startups. The study concludes with a discussion of alternative reward mechanisms, based on measurable societal contributions, in place of passive tax subsidies.