Designing Markets Together: Nascent Financial Engineering for Social Innovation.

Social innovations create social value, but are severely underfunded. Globally, new public-private initiatives seek to build special financial infrastructures for social innovation. We study these initiatives under the lens of nascent markets and as a new type of financial engineering, which refers to purposeful, public-private efforts of creating new market infrastructures that support social value. We develop a typology of how these efforts pursue modest adjustments or more radical alternatives to capitalism. We also specify the inherent partnership and governance challenges, and how this affects the functioning of markets. First, financing social innovation introduces impact in addition to return and risk as a key criterion for governing markets. Second, there are positive and negative consequences of state intervention in promoting alternative models of capitalism. Third, shaping the social relations and institutional structure of markets in parallel can help unplug Ayn Rand's famous Atlas, who holds capitalism in a deadlock. [ABSTRACT FROM AUTHOR]