C r e a t i n g
S o c i a l Va l u e
The extent to which each of these three
basic categories of private value—fi nancial,
reputational, and ethical—is pertinent for
a given entrepreneur or venture will vary
greatly. But, regardless of the composition
of the residual value, it is clear that without
at least one of these values there is no such
thing as entrepreneurship.
Yet entrepreneurs also perform other functions that generate
value. Any venture—including a restaurant or hardware store—
through its presence in a competitive market is generating some increase in the private value captured by others. By off ering new jobs,
they keep existing companies from underpaying their employees; by
off ering new goods and services they keep existing producers from
overcharging otherwise potentially vulnerable consumers. The existence of entrepreneurial activity in markets and the eventual reinvestment of residuals do nothing less than create the possibility
for economic growth and social progress.
The residual value claimed by entrepreneurs also provides a resource that can be used to address societal challenges in instances
where markets might be poorly developed or non-existent. Residual
value creates opportunities for reinvestment and cross-subsidization
of activities that may potentially benefi t people not involved in the
original transactions.
For Ben & Jerry’s, for example, the ability to charge a price above
the minimum cost of service provides the resources it needs to
support an array of other activities—some potentially “profi table”
in an accounting sense, some not—consistent with the founders’
respective visions of benefi cial societal impact. In the case of Ben
& Jerry’s, the subsidized activity is the work of its foundation, as
well as its employee relations practices and community outreach.
India’s Tata Group is another example of a business started by a
social entrepreneur that has grown into a $65 billion a year multinational corporation. (See “From Social Entrepreneur to Corporate Titan” above