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DOI: https://doi.org/10.34069/AI/2023.64.04.36
How to Cite:
Minochkina, O., Adamovska, V., & Skibitska, L. (2023). The role of the state in supporting social investment projects to ensure
sustainable development. Amazonia Investiga, 12(64), 340-347. https://doi.org/10.34069/AI/2023.64.04.36
The role of the state in supporting social investment projects to ensure
sustainable development
Роль Держави в Підтримці Соціальних Інвестиційних Проєктів для Забезпечення
Сталого Розвитку
Received: February 2, 2023 Accepted: April 5, 2023
Written by:
Olha Minochkina1
https://orcid.org/0000-0002-8513-4360
Viktoriia Adamovska2
https://orcid.org/0000-0001-8911-1388
Liana Skibitska3
https://orcid.org/0000-0003-4600-670X
Abstract
Human, intellectual, and social capital serve as
the foundation for the modern global socio-
economic environment, impacting the
competitiveness of economic systems and
playing a pivotal role in their development.
However, social responsibility has emerged as a
pressing concern, with governments often failing
to provide adequate social security to citizens due
to various reasons. State-level provisions
typically offer minimal social guarantees,
leaving urgent issues unresolved and social
assistance mechanisms ineffective. This article
aims to clarify the theoretical foundations and
practical trends in social investment project
development, emphasizing their significance for
both individual companies and the broader socio-
economic context. The research employs
analytical and bibliographic methods to examine
relevant scientific literature, employing systemic
and structural analyses, comparisons, logical and
linguistic methods, as well as induction,
deduction, information synthesis, abstraction,
and idealization for data processing.
Additionally, an online questionnaire survey was
conducted to identify key issues related to social
investment project development. The study's
results highlight crucial theoretical aspects of
social investment in the economy and explore the
perspectives of scientists and heads of local
1
Doctor of Economic Sciences, Assistant Professor, Department of Economics and Business Technologies, Faculty of Economics
and Business Administration, National Aviation University, Kyiv, Ukraine.
2
PhD in Economics, Associate Professor, Department of Accounting, Taxation, Public Governance and Administration, Faculty of
Economics and Business Management, Kryvyi Rih National University, Kryvyi Rih, Ukraine.
3
Doctor of Economics, Associate Professor, Department of Economics and Business Technologies, Faculty of Economics and
Business Administration, National Aviation University, Kyiv, Ukraine.
Minochkina, O., Adamovska, V., Skibitska, L. / Volume 12 - Issue 64: 340-347 / April, 2023
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government departments on its pivotal
dimensions and importance for economic and
social progress.
Keywords: social investments, human capital,
corporate social responsibility, social guarantees,
social assistance mechanism.
Introduction
The development of society requires attention to
social investment as a targeted investment of
resources in the development of the social
sphere, i.e. the environment where human,
intellectual, and social capital is formed and
built. Social investment is the main tool and an
important feature of social responsibility at all
levels, which is performed to create a beneficial
social effect in the future.
The theoretical part of this study substantiates
different points of view on the concept,
components, and factors of social investment
development from the perspective of its impact
on the general state and pace of economic
development.
The practical part of the study includes an
assessment of the priority of social components
of the country's development. This is a
prerequisite for forming the goal of social
investment. The study covers the most effective
types of social investment. It also examines the
most important areas of social investment
processes within individual business entities. The
study examines the most effective strategic
directions of socially responsible investment in
the framework of international cooperation.
The results of the survey revealed the
respondents' opinions. In their opinion, the main
social components of the country's development
mechanism are an effective support for those in
need. High quality of life is also an important
social component. Furthermore, creating
conditions for the formation of effective
employees and owners is a prerequisite for
development. Indirect and mixed social
investments are recognized as the most effective
in terms of achieving the social investment goal.
The survey participants are convinced that the
effective implementation of these social
components is a prerequisite for the country's
development. The opinion of academics and
business leaders was also identified. They
believe that the most important area of social
investment in terms of its purpose for company
employees is social investment related to
corporate social responsibility. At the same time,
today the most important goal of social
investment is to improve the situation in the area
of presence and financial efficiency of the
implemented social investments. At the same
time, the most effective strategic areas of socially
responsible investment in terms of international
cooperation are the methods of involvement in
social investments. These involve investors
acting as co-owners of companies or acting
within the framework of local investment
development programs.
Literature Review
In the context of the progressive movement of the
vast majority of countries toward sustainable
social development, the identification and
implementation of its main factors are of great
importance (Balon, Kottala & Reddy, 2022).
Economists interpret the concept of social
investments of companies as material,
technological, managerial, or other resources, as
well as financial resources of companies. By the
decision of the management, these resources are
directed to the implementation of social
programs developed with due regard to the
interests of the main internal and external
stakeholders. In doing so, it is expected that a
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certain social and economic effect will be
obtained from a strategic perspective. (Graafland
& Smid, 2019), (Wang, Delgado & Xu, 2023).
Social investment is a way of implementing
corporate social responsibility through targeted
programs that meet the needs of key stakeholder
groups - consumers, employees, and local
communities. Social investment shares many of
the same characteristics as traditional
investment, but with a focus on investing in
projects or initiatives that align with specific
social or environmental criteria. These criteria
shape the selection of investment objects and
reflect the values and goals of the investors
(Fatima & Elbanna, 2023).
Social investments can also be seen as a
voluntary contribution of business to the
development of society. Social investments
mainly include corporate sponsorship and
charity, trusteeship, interaction with the local
community, government agencies, and corporate
partnership programs (Beji et al., 2021),
(Quintana-García et al., 2018).
The processes of achieving social effect through
social investments depend on many factors.
There is a sequential investment of resources:
achieving a social effect, parallel investment and
obtaining the result of investment activity, as
well as interval investment, which gives an effect
after a certain time (Bucaro, Jackson & Lill,
2020), (Jiang et al., 2018).
Social investment is a tool aimed at
implementing specific external and internal
social programs of a company, a practical way of
realizing social responsibility. It can include
investments in municipal infrastructure,
healthcare, education, and culture. Their payback
period is much longer and their net cost is lower,
but their return is not only expressed in money.
The effect can be in the form of increased trust
and a positive image of the company among the
community where the investment is made. In
Western countries, the practice of ethical
investment (socially responsible investment) is
widespread. It requires financial institutions to
invest in companies that meet certain social
responsibility criteria (Gödker & Mertins, 2018),
(Laguir, Laguir & Tchemeni, 2019).
Aims
The research aims to determine the position of
scholars and local government leaders on the
nature and importance of social investment for
the economic system.
Materials and methods
A practical study of current trends in the
development of social investment and its
importance for the economy was conducted by
interviewing 282 scientists and 259 heads of
local governments in Poltava, Vinnytsia, Rivne,
Zhytomyr, and Kyiv oblasts of Ukraine. The
research was conducted using the Simpoll
service.
Results
The opinion of the survey participants on the
search for optimal ways to achieve effective
sustainable economic and social growth was
determined. Thus, the main social components of
the country's development mechanism as a
prerequisite for the formation of the goal of
social investment are (Figure 1).
According to the participants of the survey, the
inherent factors of sustainable social
development of the state are, above all, effective
support for those in need, high quality of life, and
the creation of conditions for the formation of
effective employees and effective owners.
An important result of the survey is to find out
the opinion of scientists and local government
leaders on the types of social investments by the
ways they are implemented and the expected
results for the creation and reproduction of
human capital in line with the needs of modern
economic development (Figure 2).
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Figure 1. Priority of social components of the country's development mechanism as prerequisites for the
formation of goals and directions of social investment, %.
Source: built by the authors.
Figure 2. The most effective types of social investments using their implementation and expected results
for the creation and reproduction of human capital following the needs of modern economic development,
%.
Source: built by the authors.
As shown in Figure 2, respondents identified
indirect and mixed social investments as the most
influential in terms of their effectiveness.
Since the environment of business entities is an
important area of social investment, an important
issue that deserves special attention in the context
of this study is to identify the most important area
of social investment in terms of its purpose for
company employees (Figure 3).
Figure 3 shows that the most effective social
investments are those related to corporate social
responsibility. This means that companies carry
out social activities aimed at both external and
internal goals. For instance, the internal goal is to
create a favorable working environment for
employees, while the external goal is to create a
positive image of the company in the eyes of civil
society and provide social benefits to the
community.
0
10
20
30
40
50
60
70
Social responsibility
Social integration
Overcoming massive
social and civic
apathy and dependent
attitudes in society
Effective support for
the needy
High quality of life of
the population
Creating conditions
for the formation of
productive employees
and successful owners
Stimulation of social
investments
43 45 42
57 61 54
41
47 41 40
59 63 52 44
From the perspective of scholars conducting research in the field of social investment
From the perspective of local government officials
0
5
10
15
20
25
30
35
40
45
50
Indirect, which
provide public goods
and improve the
quality of life of
citizens
Direct, which ensure
the improvement of
human capital quality
Mixed, which provide
public goods and
increase human capital
42 37
47
44 38 45
From the perspective of scholars conducting research in the field of social investment
From the perspective of local government officials
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Figure 3. The most significant social investment directions within individual business entities in terms of
their effectiveness for the company's employees, %.
Source: built by the authors.
The effectiveness of socially responsible
investing is primarily related to the achievement
of its main goal - the realization of the possibility
of combining financial benefits and ethical
values of the investor. The survey revealed the
most important goal of social investment, namely
the types of effects that social investors mostly
expect (Figure 4).
Figure 4. Types of effects (goals of social investment) that social investors mainly expect, %.
Source: built by the authors.
According to the survey results, when planning
and implementing financial investments, social investors mainly expect to improve the situation
in the area of their presence. They also expect the
0
10
20
30
40
50
60
70
Social investments
related to corporate
social responsibility
Investments in human
capital that contribute
to the development of
productive human skills
57 43
63
37
From the perspective of scholars conducting research in the field of social investment
From the perspective of local government officials
0
5
10
15
20
25
30
35
40
45
50
Financial efficiency (risk
protection, increased marketing
efficiency and sales growth,
reduced operating costs, etc.)
Non-financial efficiency
(company image and
reputation, customer and
employee loyalty)
Efficiency of influence on the
situation in the area of presence
41 35
47
44
37
45
From the perspective of scholars conducting research in the field of social investment
From the perspective of local government officials
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financial efficiency of the implemented social
investments.
The survey helped to identify the most effective
strategic directions of socially responsible
investment in terms of international cooperation
between investment subjects and objects. At the
same time, the widespread trend of such
investment processes in the world in recent years
was considered (Figure 5).
Figure 5. The most effective strategic directions of socially responsible investment in the framework of
international cooperation between investment subjects and objects, %.
Source: built by the authors.
As can be seen from Figure 5, three strategies of
socially responsible investment are generally
used in global practice today. Among them, the
most effective are the ways of engaging in social
investments. These involve investors acting as
co-owners of companies or acting within the
framework of local investment development
programs.
Discussion
The subjects of social investment at different
levels are the state (government agencies at all
levels), enterprises of all forms of ownership,
commercial and non-profit organizations, and
individuals. Meanwhile, the motivation and goals
of the social investment may differ significantly
depending on the ultimate goal, the problem to be
solved in the process of social investment, and
the source of investment (Chu, Chen & Gan,
2020), (Ginder, Kwon & Byun, 2021).
For the state, the goals of social investment can
be to improve living standards and national
income, as well as to expand opportunities for
human development. For commercial entities,
the goals of the social investment may include
maintaining and expanding market positions and
making a profit. For foreign investors and
individuals, the goal of a social investment may
be to make a profit. For non-profit organizations,
the goals of social investment can be to meet
specific urgent needs of the community or certain
groups of people and to improve the level and
quality of life of the population by meeting
0
10
20
30
40
50
60
Selection of securities in the investment
portfolio of those companies that meet
established social or environmental
criteria
Investors are co-owners of the companies
in which they have invested their funds,
and their rights and obligations stem
from the status of shareholders
Cooperation in local investment
programs (investments at the community
level through grant programs or business
projects)
38
47
53
35
51 52
From the perspective of scholars conducting research in the field of social investment
From the perspective of local government officials
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material, spiritual and social needs (Farmaki,
2019), (Pham & Tran, 2020).
The current global practice of social investment
has problems that impede the implementation of
socially responsible programs and the overall
level of social responsibility development. These
problems mainly include the lack of
understanding by entrepreneurs of the role
played by corporate social responsibility in the
strategic development of companies and
dissatisfaction of certain parts of society with
corporate social responsibility measures (Khan,
2018), (Platonova et al., 2018).
The actions of all social investment actors - the
state, municipalities, and companies - are aimed
at achieving very specific goals. Therefore, for a
more complete understanding of the category of
"social investment", it is also worthwhile to
analyze in detail the purpose for which social
investment entities make a particular financial
investment. A special analysis shows a large
number of different positions on this topic in
legislation and scientific publications. In
particular, a significant number of scholars
emphasize that the purpose of non-productive
expenditures is to achieve economic and social
results or impact. These effects include
improvement in working and living conditions,
reduction of morbidity, increase in the level of
education, increase in free time and its rational
use, etc. (George, Walker & Monster, 2019),
(Luo, Huang & Lam, 2019).
Socially responsible investment is a process of
investment decision-making that takes into
account the social and environmental impacts of
investments. It is based on the study and selection
of companies as acceptable investment targets
that conduct open and transparent business
practices based on ethical values, respect for
employees, shareholders, and consumers, and
care for the environment. The basis of socially
responsible investment is the so-called triple
bottom line concept. Its essence lies in the fact
that when evaluating an investment project, an
investor takes into account not only future
financial results but also the extent to which the
company's activities are socially,
environmentally, and ethically responsible
(Ettinger et al., 2021), (Pedersen, Gwozdz &
Hvass, 2018).
Conclusions
Thus, the analysis of the scientific literature on
the research topic and the results of the
questionnaire survey showed that the
phenomenon of social investment is deeply
rooted in the history of the world economic
culture. Recently, this phenomenon has been
spreading with renewed vigor in the business
environment, mainly in more developed
countries.
The widespread adoption of socially responsible
business practices by companies will help
develop existing markets and create new ones,
address social and environmental issues, expand
access of companies to international markets,
increase their capitalization, and contribute to the
sustainable development of society as a whole.
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