When prosperous businesspeople utilize their influence for good, society as a whole benefits
There is a wealth of literature on the topic of business creation and expansion. Exits, the point at which successful entrepreneurs sell their firm and usually make enough money to retire, have received comparatively less attention from academics. That’s because having that kind of luck is quite uncommon. To be an entrepreneur is like to engaging in deadly warfare, with few survivors.
Success stories from the business world fascinate us as academics. Being an entrepreneur is not only a once-in-a-lifetime opportunity, but also has far-reaching consequences since success brings financial security and opportunities for advancement in society. Any such achievement has the potential to propel societal transformation in a developing economy.
This relates to a broader question: in what ways do entrepreneurs improve our world? There are usually two options. First, business owners improve the economy by making new positions available. The other is that they are capable of thinking outside the box and developing novel approaches to old problems. This is why business owners are called the “creative destroyers” by economist Joseph Schumpeter (1883-1950).
Of course, maybe there’s a third option. Successful business owners are, at their core, excellent organization builders. Suppose they decided to put their talents to good use in areas outside of economics. They may be able to enhance human civilization as a whole.
Realizing the need of social progress
In a recent research, we looked at what characteristics would make commercially successful entrepreneurs more likely to get involved in active giving after they’ve left their for-profit firm. When we talk about “active philanthropy,” we don’t just mean handing out cash donations. Such irregular monetary contributions are simple to make if one has cash on hand. Instead, we investigated whether commercially successful founders consistently stimulated, supported, and shaped social impact initiatives after they had exited their businesses.
From 2003-2013, we looked at data from 673 Indian business owners who had successfully sold their company. Following this quantitative research, we conducted in-depth interviews to round out our findings. We began with the premise that business owners’ unique life experiences could shape their tendency toward charitable giving.
Specifically, we were curious in the characteristics of the entrepreneurs’ lives that would increase their awareness of the need of social change and their desire to take action in response. People in every culture are “slotted” into unofficial social orders based on superficial characteristics, rather than on demonstrated competence. For instance, in today’s America, one’s color (or one’s wealth, one’s level of education, etc.) is a significant, though unspoken, personal feature, with white people at the top of the informal pecking order and black people at the bottom. Similar to the Western context, in our Indian context, caste, gender, and educational attainment (whether at a top Indian institution or abroad) all play important roles.
Within our sample, we discovered significant statistical trends indicating that entrepreneurs who originated from a lower caste background and those who had returned to India (also known as returnees) after studying in a first-world nation were more likely to utilize their newfound income to inspire social change. Due to the small percentage of females in our sample (6%), we were unable to identify any statistically significant gender effects.
Obtaining a different point of view
Our result that prosperous businesspeople who come from socially disadvantaged groups (lower caste in our context) are more likely to contribute to their communities is in line with what has been found in previous research: Those who have a privileged place in society frequently fail to see the need for change because, in their eyes, everything is wonderful the way it is. This is because they have a distorted perception of the world. They have a reasonable and balanced perspective of the world. In addition, they have a propensity to assume that the present social structure of society is founded on merit, but the shortcomings of the system are more readily apparent to those who are allocated a lower social rank.
Returnees, or entrepreneurs who had studied in the West or more developed regions of Asia such as Singapore or Japan before returning to India, were also more driven to promote constructive social change. This was already highlighted above. Acquiring, although briefly, the lower status of “foreign students” or “third-world immigrants” undoubtedly enhanced their likelihood of suffering prejudice, which resulted in the development of empathy for those who are less fortunate than themselves.
An additional mechanism that became easily evident as a result of our interviews is the influence of the interviewees’ exposure to the impacts of a different social contract in the nation in which they were living. The likelihood of seeing prosocial behavior throughout early adulthood is increased by residence in a developed economy during that time period. A disparity that is sufficiently large (in favor of the host nation) might serve as a motivating element for individuals to participate in societal change once they have returned home. According to the words of one businessperson who had recently relocated back to the United States, “The realization that volunteering was a very common part of life in America made a tremendous influence on me.”
Which other groups would find this topic interesting?
Our results may ring true for more than just commercially successful entrepreneurs, though. People in high-paying professions like banking, consulting, medicine, architecture, and law might fall into this category. It’s natural for anyone who has amassed considerable wealth to ponder their next steps once they’ve reached a certain level of professional accomplishment.
What do you do when you finally sell the company you’ve been toiling over for years? In spite of widespread elation, some individuals may also experience sadness or even guilt. We worked really hard, but we were also lucky,” said one business owner. At the time of their financial departure, our sample’s typical entrepreneur was 45 years old. The question is, “How do you retire at 45?” So, now what?
The lesson here is that thriving business owners have a knack for constructing effective structures. They have a knack for seeing potential and then pursuing it in a way that will last. Society would profit from their capacity to look at difficult problems with new and confident eyes if even a small percentage of them could be convinced to shift their focus away from economic realms.
In point of fact, as a spin-off from this research project, one of the authors is also involved in the Post-Exit Entrepreneurs Retreat (PEER). This retreat is an INSEAD-supported initiative that aims to assist successful entrepreneurs in navigating the post-exit stages from a personal, professional, and financial perspective and prepare themselves for their next adventure. The inaugural PEER retreat is going to take place in Bali, Indonesia, from the 21st to the 25th of September 2022. Applications are now being accepted with early-bird discounts being offered.