The activities of Ben & Jerry’s, Tata Group, and similar enterprises around the world would not have been possible without the
ability to provide the original paying customers with a desired service. The ability to create social value derives from the existence of
a residual in the creation of private value.
2
Of course, entrepreneurs can do much more to create social
value than direct profi t in the service of society. They can also create social value by engaging in activities that have an impact that
extends beyond what they are immediately doing, what economists
call generating positive externalities. The Amazon Conservation
Team, for example, helps indigenous people maintain their cultural
heritage by documenting their knowledge, and it helps protect their
environmental heritage by mapping their territories.
The most signifi cant positive externality created by entrepreneurs,
perhaps, is the benefi cial impact that they have on governance. In fact,
it is precisely the failure of governments that creates opportunities
for social entrepreneurs, just as the failure of existing corporations
creates opportunities for other types of entrepreneurs. Furthermore,
the large corporations that Barro, Aneel Karnani, and others of like
mind tend to celebrate for their job-creating capacity are often active—if, at times, unwilling—participants in societal processes that
reinforce the centralization of power and poor governance.
3
The phenomenon is most clearly evident in countries (most poor)
plagued by corruption and public sector mismanagement, but it is
also a fundamental feature of democratic, economically advanced
countries. Joseph Schumpeter articulated this fundamental paradox
of capitalist economic advancement: Growth driven by entrepreneurial opportunity contains the seeds of its own undoing. Where the
bumper sticker version of Schumpeter emphasizes the notion that
entrepreneurs can challenge powerful incumbents and thus achieve
“creative destruction,” the more nuanced corollary is considerably less
bullish.
4
When combined with the status quo-preserving tendencies
of political institutions, yesterday’s entrepreneurs’ success in building large companies can actually undermine prospects for today’s
entrepreneurs. As a result, sustained development is achievable only
through active eff orts to preserve the possibility of entrepreneurship
in its myriad forms—economic, social, and political.