What Is the Business of Business?

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This chapter develops a simple framework for understanding the emergence of new organizational forms, such as socially responsible firms and social entrepreneurs, that embody the private sector’s efforts to resolve problems that typically have been within the purview of government and traditional public charities. We consider organizations that can generate both financial and social returns. Differences in the technologies between the for-profit sector and the social sector give rise to comparative advantages and play a key part in the analysis. This allows us to analyze the conditions under which hybrid organizations emerge in place of traditional charities and profit-maximizers.