Chapter 12 Chapter Summary

This chapter introduces under-analyzed actors in international development: private enterprise. After reading the chapter, students should be able to differentiate between small and large firms, and the different roles they play in development. Entrepreneurs, especially those in the informal sector, face important challenges related to a lack of property rights and government support, which can hamper economic development. Multinationals also should be regarded as differentiated actors that apply a wide range of strategies with diverse effects on development.

The chapter also underlines the need to consider the role of the state as a mediator. How well the state regulates and bargains with firms has a significant effect on whether they have a good or bad effect on development. Some states are better at getting more from multinationals than others. However, the student should note that international investment agreements sometimes reduce the policy space available to governments. In recent years, multinationals have begun to act directly as development agents, through corporate social responsibility programs that engage communities and by forming partnerships with government agencies and civil society organizations to address development problems. In brief, the effects of private enterprise on development depend on the size of the company, the strategy it employs, mediation by the state, and the way the company engages other actors such as civil society. Companies, by themselves, are not entirely responsible for the successes or the failures of development.