Expanding Economic Opportunity: The Role of Large Firms

Abstract

The past fifty years have witnessed a ""revolution"" in global economic growth. Yet not everyone has participated in this revolution. More than 65% of the world's population, over four billion people, still lives on the equivalent of less than $4 per person per day. Even worse, the world's poor are severely constrained - and often completely lacking - in opportunity to do better for themselves. The business community has both the capabilities and the strategic, business reasons to play a major role in creating these opportunities. The CSR Initiative's Economic Opportunity Program explores this role. ""Economic opportunity enables people to manage their assets in ways that generate incomes and options."" For the poor, livelihood choices - in employment and entrepreneurship - are constrained by a wide range of interdependent obstacles, ranging from geographic isolation to market failures to political exclusion. This suggests that when we think about eradicating poverty, we should think broadly about creating economic opportunity. Economic opportunity is not, in itself, a solution; instead it is a context in which individuals can create their own solutions. It is a combination of factors that enables the poor to manage their assets in ways that generate incomes and options. Creating or expanding economic opportunity could rightly be considered a responsibility of governments toward their citizens. But in today's global market environment, various risks and opportunities provide reason for business to engage. These reasons include the risks - and attendant costs - of dependence on the company, unmet expectations, conflict, and the general perception that a company is ""not doing enough"" to contribute to local economic development. Reasons also include opportunities to reduce cost, increase flexibility and productivity, acquire new customers, and generate innovations that can fuel strategic and competitive advantage in developing and developed countries alike. Another reason for business to engage is to leverage its own comparative advantage in society. As Milton Friedman might say, ""the business of business is business"" - and this is exactly what gives firms the capability and credibility to expand economic opportunity. Business activity creates jobs, cultivates inter-firm linkages, enables technology transfer, builds human capital and physical infrastructure, generates tax revenues for governments, and, of course offers a variety of products and services to consumers and other businesses. Each of these contributions has multiplier effects on development. In developing countries, however, companies' multipliers often fall to reach the scale or leverage of which they might be capable, due to market failures, governance gaps, and other bottlenecks. More deliberate management attention is required to unlock their full potential.