The Resource-Based Paradox of Impact-Oriented Strategies: A Study in the Context of Microcredit

Abstract

Focusing on impact-oriented strategies, we study a resource-based paradox rooted in a trade-off between effectiveness and inclusiveness. Using a unique dataset of 6,000 microcredit loan applications received by an impact-oriented microfinance firm, we study the role of three resource types: financial, relational and human capital. Our results confirm our proposed resource-based paradox: while certain resource configurations improve entrepreneurs’ ability to generate rents from microloans (higher effectiveness), these gains are only reaped by the restricted set of entrepreneurs with access to those specific configurations (lower inclusiveness). We contribute to the research-based literature by demonstrating how resources influence the ability of impact-oriented strategies to generate gains for target populations, and by expanding the applicability of resource-based theories to the context of businesses designed to promote positive societal impact.