In the decade between the 1992 United Nations Conference on Environment and Development in Rio de Janeiro, Brazil, and the 2002 World Summit on Sustainable Development in Johannesburg, South Africa, the private sector’s influence in developing and emerging countries’ economies expanded considerably. Foreign direct investment grew rapidly and now easily eclipses official development assistance.1 The governance and regulatory domains have shifted in many developing countries; such shifts have redefined the role of states, development agencies and nongovernmental organizations and have established a greater role for business in sustainable development.2 Today, the United Nations, together with many governments and NGOs, explicitly promotes the mobilization of private-sector efficiency and creativity to help address the world’s many pressing social and ecological problems. The 2004 report of the U.N. Commission on the Private Sector and Development,Unleashing Entrepreneurship, made a number of specific recommendations for private sector activity to “make business work for the poor.”3
Although there remains some mistrust of increased private sector involvement in development, as seen in commentary from some antiglobalization activists,4 polling data from citizens worldwide indicate a more positive view. Survey data suggest that the overwhelming majority of people around the world want business to do more than just make a profit and obey the law.5 In addition, the World Bank’sVoices of the Poor survey reveals that low-income people have clear hopes that commercial enterprises will provide livelihoods for them and their families.6
Concurrently, management literature has begun to describe more commercially grounded models for global economic development. Strategic management theorists C.K. Prahalad and Stuart Hart have advocated a “bottom of the pyramid” approach, in which multinational corporations and their partners in developing countries sell goods and services to the world’s poor.7 Prahalad’s and Hart’s analyses have led to the suggestion that multinationals have a special role to play in reducing poverty because they can generally mobilize greater resources, such as distribution and communications infrastructures. In addition, these management theorists argue, multinationals are better positioned to transfer learning between international markets, build partnerships and commercial infrastructure and transfer products and services between developed and developing countries.
1. United Nations Conference on Trade and Development, “World Investment Report 2004: The Shift Towards Services” (New York: UNCTAD, 2004).
2. Defined here as development that “meets the needs of the present without compromising the ability of future generations to meet their own needs,” after G. Bruntland, ed. “Our Common Future: The World Commission on Environment and Development” (Oxford: Oxford University Press, 1987).
3. United Nations Commission on the Private Sector and Development, “Unleashing Entrepreneurship: Making Business Work for the Poor” (New York: U.N. Development Programme, 2004).
4. Here we may cite commentators such as N. Klein, “No Logo: No Space, No Choice, No Jobs” (London: Flamingo/Harper Collins, 2000); and D. Korten, “When Corporations Rule the World” (West Hartford, Connecticut: Kumarian Press/Berrett-Koehler, 1995).
5. Environics International, “Corporate Social Responsibility Monitor: Global Public Opinion on the Changing Role of Companies” (public opinion survey conducted on behalf of the World Economic Forum in 2001).
6. D. Narayan, R. Patel, K. Schafft, A. Rademacher, and S. Koch-Schulte, “Voices of the Poor: Can Anyone Hear Us?” (Oxford: Oxford University Press, 2000); and D. Narayan, R. Chambers, M. Shah, and P. Petesch, “Voices of the Poor: Crying Out for Change” (Oxford: Oxford University Press, 2000).
7. A. Hammond and C.K. Prahalad, “Selling to the Poor,” Foreign Policy 142 (May–June 2004): 30–37; and C.K. Prahalad, “The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits” (Upper Saddle River, New Jersey: Wharton School Publishing, 2004). The “bottom of the pyramid” refers to the four billion people who live on a per capita income of less than $1,500 per annum.
8. C.K. Prahalad and S.L. Hart, “The Fortune at the Bottom of the Pyramid,” Strategy + Business 26 (first quarter 2002).
9. Prahalad, “The Fortune at the Bottom of the Pyramid: Eradicating Poverty,” 63.
10. See J. Moore, “The Death of Competition: Leadership and Strategy in the Age of Business Ecosystems” (New York: HarperBusiness, 1996), 26; D. Tapscott, D. Ticoll and A. Lowy, “Digital Capital: Harnessing the Power of Business Webs” (Boston: Harvard Business School Press, 2000), 4; and D. Wheeler, B. Colbert and R.E. Freeman, “Focusing on Value: Reconciling Corporate Social Responsibility, Sustainability and a Stakeholder Approach in a Network World,” Journal of General Management 28, no. 3 (spring 2003): 1–28.
11. Prahalad, “The Fortune at the Bottom of the Pyramid: Eradicating Poverty,” 68.
12. S.L. Hart, “Capitalism at the Crossroads: The Unlimited Business Opportunities in Solving the World’s Most Difficult Problems” (Upper Saddle River, New Jersey: Wharton School Publishing, 2005).
13. The research described here was funded by the Canadian International Development Agency, the International Finance Corp. (part of the World Bank Group) and the McLean Foundation of Canada.
14. D. Wheeler, “The Successful Navigation of Uncertainty: Sustainability and the Organization,” in “Leading in Turbulent Times: Managing in the New World of Work,” eds. R. Burke and C. Cooper (Oxford: Blackwell Publishing, 2003), 182–207.
15. P.S. Adler and S.W. Kwon, “Social Capital: Prospects for a New Concept,” Academy of Management Review 27, no. 1 (2002): 17–40; J. Nahapiet and S. Ghoshal, “Social Capital, Intellectual Capital, and the Organizational Advantage,” Academy of Management Review 23, no. 2 (1998): 242–266; A. Portes, “Social Capital: Its Origins and Applications in Modern Sociology,” Annual Review of Sociology 24, no. 1 (1998): 1–24; G. Dess and J. Picken, “Beyond Productivity: How Leading Companies Achieve Superior Performance by Leveraging Their Human Capital” (New York: AMACOM, 1999); and P. Hawken, A. Lovins and L.H. Lovins, “Natural Capitalism: Creating the Next Industrial Revolution” (New York: Little, Brown and Co., 1999).
16. B. Wernerfelt, “A Resource-Based View of the Firm,” Strategic Management Journal 5, (April–June 1984): 171–180; J. Barney, “Firm Resources and Sustained Competitive Advantage,” Journal of Management 17, no. 1 (1991): 99–120; J.B. Barney, “Looking Inside for Competitive Advantage,” Academy of Management Executive 9, no. 4 (1995): 49–61; and J.B. Barney and M.H. Hansen, “Trustworthiness as a Source of Competitive Advantage,” Strategic Management Journal 15, no. 2 (1994): 175–190.
17. W. Tsai and S. Ghoshal, “Social Capital and Value Creation: The Role of Intrafirm Networks,” Academy of Management Journal 41, no. 4 (1998): 464–476; and Tapscott, Ticoll and Lowy, “Digital Capital.”
18. D. Wheeler, B. Colbert and R.E. Freeman, “Focusing on Value: Reconciling Corporate Social Responsibility, Sustainability and a Stakeholder Approach in a Network World,” Journal of General Management 28, no. 3 (2003): 1–28.
19. United Nations Commission on the Private Sector and Development, “Unleashing Entrepreneurship.”
20. Such as those identified as leaders in “Beyond Grey Pinstripes: Preparing MBAs for Social and Environmental Stewardship” (surveys of management schools that incorporate social and environmental issues into their curriculums, conducted by the World Resources Institute and the Aspen Institute in 2001, 2003, and 2005); see also D. Wheeler, D. Horvath and P. Victor, “Graduate Learning for Business and Sustainability,” Journal of Business Administration and Policy Analysis, 27–29 (2001): 123–144.