Ethical Judgments in Business Ethics Research: Definition,and Research Agenda

Decades of empirical and theoretical research has produced an extensive literature on the ethical judgments construct. Given its importance to understanding people’s ethical choices, future research should explore the psychological processes that produce ethical judgments. In this paper, the authors discuss two steps needed to advance this effort. First, they note that the business ethics literature lacks a single, generally accepted definition of ethical judgments. After reviewing several extant definitions, the authors offer a definition of the construct and discuss its advantages. Second, future ethical judgment research would benefit from greater integration between theories of ethical decision making and theories of social cognition. Drawing upon the Hunt–Vitell (Journal of Macromarketing 6(Spring), 5–15, 1986; In: N. C. Smith and J. A. Quelch (eds.), Ethics in Marketing. Irwin, Homewood, IL, pp. 775–784, 1992) model and the heuristic-systematic model (Chaiken, Journal of Personality and Social Psychology 39(November), 752–766, 1980), the authors present a brief research agenda intended to stimulate research on the psychological processes behind ethical judgments.     

Firm entry and turnover: the nexus with profitability and growth

The paper presents a new sectoral taxonomy, which classifies industries according to the opportunity and cost of experimentation. Econometric tests show for a sample of 24 countries that in the 1990s ‘entrepreneurial’ industries with a mutable and growing firm population experienced the highest growth in terms of value added and employment, but also the lowest growth of labour productivity. ‘Entrepreneurial’ industries generally earned a better profit-ratio than ‘routinised’ industries with an inertial population. The results are consistent with entrepreneurial theories of market competition, which suggest that entry follows profit opportunities but does not deplete them.      

Andersen and the Market for Lemons in Audit Reports

Previous accounting ethics research berates auditors for ethical lapses that contribute to the failure of Andersen (e.g., Duska, R.: 2005, Journal of Business Ethics 57, 17–29; Staubus, G.: 2005, Journal of Business Ethics 57, 5–15; however, some of the blame must also fall on regulatory and professional bodies that exist to mitigate auditors’ ethical lapses. In this paper, we consider the ethical and economic context that existed and facilitated Andersen’s failure. Our analysis is grounded in Akerlof’s (1970, Quarterly Journal of Economics August, 488–500) Theory of the Market for Lemons and we characterize the market for audit reports as a market for lemons. Consistent with Akerlof’s model, we consider the appropriateness of the countervailing mechanisms that existed at the time of Andersen’s demise that appeared to have effectively failed in counteracting Andersen’s ethical shortcomings. Finally, we assess the appropriateness of the remedies proposed by the Sarbanes–Oxley Act of 2002 (SOA) to ensure that similar ethical lapses will not occur in the future. Our analysis indicates that the SOA regulatory reforms should counteract some of the necessary conditions of the Lemons Model, and thereby mitigate the likelihood of audit failures. However, we contend that the effectiveness of the SOA critically depends upon the focus and attention of the␣Public Companies Accounting Oversight Board (PCAOB) towards assessing the ethical climates of public accounting firms. Assessments by the PCAOB of public accounting firm’s ethical climate are needed to sufficiently ensure that public accounting firms effectively promote and maintain audit quality in situations where unconscious bias or economic incentives may erode the public accounting firm’s independence.     

Partnership Formation for Change: Indicators for Transformative Potential in Cross Sector Social Partnerships

Despite their ethical intentions, ethically minded consumers rarely purchase ethical products (Auger and Devinney: 2007, Journal of Business Ethics 76, 361–383). This intentions–behaviour gap is important to researchers and industry, yet poorly understood (Belk et al.: 2005, Consumption, Markets and Culture 8(3), 275–289). In order to push the understanding of ethical consumption forward, we draw on what is known about the intention–behaviour gap from the social psychology and consumer behaviour literatures and apply these insights to ethical consumerism. We bring together three separate insights – implementation intentions (Gollwitzer: 1999, American Psychologist 54(7), 493–503), actual behavioural control (ABC) (Ajzen and Madden: 1986, Journal of Experimental Social Psychology 22, 453–474; Sheeran et al.: 2003, Journal of Social Psychology, 42, 393–410) and situational context (SC) (Belk: 1975, Journal of Consumer Research 2, 157–164) – to construct an integrated, holistic conceptual model of the intention–behaviour gap of ethically minded consumers. This holistic conceptual model addresses significant limitations within the ethical consumerism literature, and moves the understanding of ethical consumer behaviour forward. Further, the operationalisation of this model offers insight and strategic direction for marketing managers attempting to bridge the intention–behaviour gap of the ethically minded consumer.     

Evolution of entrepreneurship and organizational configurations at Zildjian, 1623�C2010

This work uses a case-based research approach and Siggelkow’s (Acad Manag J 47:125–159, 2002) four-phase organizational configuration model to analyze Zildjian’s evolutionary growth and entrepreneurial initiatives in the global music industry. Zildjian is a unique and well-respected cymbal manufacturer that originated out of Turkey in 1623 and continues to be a major force in the music instruments sector. Turkey was a growing market during the periods of 1700 and 1800 that helped Zildjian to become an increasingly successful company. This also led to creating 13 generations of a successful family business. The work discusses Zildjian’s 387-year family genealogy and its growth within the domains of entrepreneurship, organizational configurations, and strategic inertia. The work finds that behind Zildjian’s marvelous expansion and well-known cymbals, there is a tightly knit family firm that continues to operate like an entrepreneurial venture, dealing with thousands of artists, musicians, educators, orchestras, and bands worldwide. As of 2011, the company may not be a large multinational corporation but its business model is a classic addition to the international entrepreneurship literature. Staunchly traditional in its family business, Zildjian thrives as a privately held company and protects its closely guarded metallurgical formula. The significance of this work lies in its unique methodology within the evolution of Zildjian’s entrepreneurial growth and organizational configurations.     

The Effect of Business Regulations on Nascent and Young Business Entrepreneurship

We examine the relationship, across 39 countries, between regulation and entrepreneurship using a new two-equation model. We find the minimum capital requirement required to start a business lowers entrepreneurship rates across countries, as do labour market regulations. However the administrative considerations of starting a business – such as the time, the cost, or the number of procedures required – are unrelated to the formation rate of either nascent or young businesses. Given the explicit link made by Djankov et al. [Djankov et al. 2002, ‹The Regulation of Entry’, Quarterly Journal of Economics 117(1), 1–37] between the speed and ease with which businesses may be established in a country and its economic performance – and the enthusiasm with which this link has been grasped by European Union policy makers – our findings imply this link needs reconsidering. Prepared for: Small Business Economics (2007), Special issue GEM conference 2005     

Impact of Post-restatement Actions Taken by a Firm on Non-professional Investors’ Credibility Perceptions

The frequency of earnings restatements has been increasing over the last decade. Restating previous earnings erodes perceived trustworthiness and competence of management, giving firms strong incentives to take actions to enhance perceived credibility of future financial reports [Farber, D. B.: 2005, The Accounting Review 80(2), 539–561.]. Using an experimental case, we examine the ability of post-restatement actions taken by a firm to positively influence non-professional investors’ perceptions of management’s financial reporting credibility. Our examination considers credibility judgments following two types of restatements – those resulting from fraud in which the character, ethics, and values of an organization may be called into question [cf. Copeland, Jr., J. E.: 2005, Accounting Horizons 19(1), 35–43.], and those resulting from non-fraud (i.e., aggressive accounting). Based on the information in the experimental case, non-professional investors take the role of potential equity investors and make a judgment about management’s financial reporting credibility after reviewing a set of post-restatement actions taken by a firm. The possible actions include changes in four corporate governance mechanisms (i.e., internal audit function, external audit firm, board of directors, CFO) and a buyback of company stock. Our results provide an important contribution to the literature by demonstrating that among non-professional investors, perceptions of management’s financial reporting credibility are affected both by the post-restatement action taken and the nature of the restatement. These results offer insight into the formation of a key credibility judgment made by non-professional investors following a trust-destroying event, an earnings restatement. Data Availability: The data are available upon request.     

Scientific Paradigms,Entrepreneurial Opportunities and Cycles in Economic Growth

In this paper I present a model of economic growth that combines insights from endogenous growth theory, the field of entrepreneurship research and the philosophy and economics of science. The model is built on three relatively standard assumptions and a Kuhnian approach to scientific knowledge accumulation. I assume that innovation generates economic growth, that opportunity driven entrepreneurship is an important source of innovation, that entrepreneurial opportunities increasingly arise out of scientific knowledge creation and that science follows Kuhnian paradigm shifting dynamics. The model then generates opportunity driven cycles in entrepreneurial activity that in turn cause waves of innovation and cycles in economic growth. This result is highly relevant and fills a gap in all three literatures as ‚traditional’ endogenous growth models typically generate constant growth rates in the steady state, entrepreneurship research keeps the origin of entrepreneurial opportunity exogenous and the literatures on the philosophy and economics of science ignore the important downstream economic implications of the non-profit driven institutional framework that governs scientific knowledge accumulation. This paper contributes by identifying scientific institutions and entrepreneurial activity as prerequisites for economic growth and it offers a tentative explanation for the rise and fall in the levels of scientific, entrepreneurial and economic activity over the Kondratieff-cycle.      

The Ethical Climate of Danish Firms: A Discussion and Enhancement of the Ethical-Climate Model

The initial purpose of this study is to provide an empirical validation of Victor and Cullen’s ethical-climate model (1987, Frederick (ed.), Research in Corporate Social Performance and Policy, Vol. 9, pp. 51–71; 1988, Administrative Science Quarterly 33, 101–125; 1990, Frederick and Preston (eds.), Business Ethics: Research Issues and Empirical Studies (JAI Press Inc., Greenwich, Connecticut), pp. 77–97). Testing the model on a sample of Danish firms, this study demonstrates that the empirical model as suggested by Victor and Cullen is much stronger than suggested by previous research. Based on a confirmatory factor model, the results of this study suggest a revised ethical structure. Especially a sixth dimension – own interest – is separated from the original instrumental dimension. Further, this study suggests that the ethical-climate model can be enhanced with the dimension of autonomy deriving from Koys and DeCotiis’ (1991, Human Relations 44(3), 265–285.) dimensional psychological climate instrument.     

企业战略管理:"静态模式"与"动态模式"

Based on an analysis of the dynamic trend of the environment in which Chinese enterprises operate and the theory of dynamic competition, this paper seeks to propose a new strategic management pattern—the “dynamic paradigm”, which has mainly resulted from an integration of the theoretic contributions of the two strategic management streams. It ultimately aims at enhancing the effectiveness and efficiency of strategic management in an environment full of uncertainties. The dynamic paradigm designed to explore today’s real business world is characterized by: 1) viewing strategic management as a process of both proactive plans and in-the-process reaction, both point and process decision-making and both rational and non-rational decision-making; 2) stressing the roles played by speed and innovation in the dynamic competition; 3) highlighting the inherent ties and the interaction among the three phases of strategic management; 4) emphasizing the critical impacts on the effectiveness and efficiency of strategic management by corporate governance, organizational structure, managerial mechanism, mode of control, composition of top-management team and corporate culture. __________ Translated and revised from Nankai guanli pinglun 南开管理评论 (Nankai Business Review), 2007, 10(5): 31–35     

Social Contracting in a Pluralist Process of Moral Sense Making: A Dialogic Twist on the ISCT

This paper applies Wempe’s (2005, Business Ethics Quarterly 15(1), 113–135) boundary conditions that define the external and internal logics for contractarian business ethics theory, as a system of argumentation for evaluating current or prospective institutional arrangements for arriving at the “good life,” based on the principles and practices of social justice. It does so by showing that a more dynamic, process-oriented, and pluralist ‘dialogic twist’ to Donaldson and Dunfee’s (2003, ‘Social Contracts: sic et non’, in P. Heugens, H. van Oosterhout and J. Vromen (eds.), The Social Institutions of Capitalism: Evolution and Design of Social Contracts (Cheltenham, UK, Edward Elgar Publishing, Ltd.) pp. 109–126; 1999, Ties that Bind: A Social Contracts Approach to Business Ethics (Boston, MA, Harvard Business School Press); 1995, Economics and Philosophy 11(1), 85–112; 1994, Academy of Management Review 19(2), 252–284.) integrated social contracting theory (ISCT) of economic ethics will further develop this promising and influential approach to moral reasoning, ethical decision-making, and stakeholder governance. This evolutionary, interactive learning-based model of ethical norm generation via dialogic stakeholder engagement is particularly appropriate within economic communities that are experiencing value conflict and pressures for institutional change.Jerry M. Calton is Professor of Management at the University of Hawaii at Hilo. His research interests encompass multi-stakeholder learning dialogue, trust-based network governance, and the social contracting approach to ethical decision-making. His publications have appeared in the Journal of Business Ethics, Business & Society, Business Ethics Quarterly, the Journal of Corporate Citizenship, and elsewhere.     

The Impact of Moral Reasoning and Retaliation on Whistle-Blowing: New Zealand Evidence

This study examined experimentally the effect of retaliation strength and accounting students’ level of moral reasoning, on their propensity to blow the whistle (PBW) when faced with a serious wrongdoing. Fifty-one senior accounting students enrolled in an auditing course offered by a large New Zealand university participated in the study. Participants responded to three hypothetical whistle-blowing scenarios and completed an instrument that measured moral reasoning (Welton et al., 1994, Accounting Education. International Journal (Toronto, Ont.) 3(1), 35–50) on one of two conditions – i.e., strong or weak retaliation for whistle-blowing. Consistent with the results of Arnold and Ponemon (1991, Auditing: A Journal of Practice and Theory 10, 1–15) this study found that the strength of retaliation and participants’ moral reasoning level positively affected their PBW. Unlike results reported in Arnold and Ponemon (1991, Auditing; A Journal of Practice and Theory 10, 1–15) a significant interaction effect of moral reasoning level and retaliation on participants’ PBW was not found. However, results showed that a participant’s gender has a significant effect on the relationship between his or her moral reasoning level and PBW. These results support the need to improve ethical awareness through accounting education and to increase protection for whistle-blowing (Miceli 2004, Journal of Management Inquiry 13, 364–366). Furthermore, many participants found it difficult to take a stand when serious wrongdoing is discovered. Therefore, policymakers must exercise caution when placing heavy reliance on whistle-blowing, especially when whistle-blower protection processes are complex and not easily accessible, and processes to facilitate whistle-blowing may vary substantially between public and private sector organizations (Scholtens, 2003, Review of the operation of the Protected Disclosures Act 2000: Report to the Minister of State Services).     

Impact of founder experience on exit intentions

Entrepreneurial exit—the process by which the founders of privately held firms leave the firm they helped to create (DeTienne, J Bus Venturing, 2010)—is an important component of the entrepreneurial process, yet researchers know very little about it. We examine entrepreneurs’ intentions to exit by a range of possible exit paths [acquisition, initial public offering (IPO), family succession, employee buyout, independent sale, liquidation], building on Gimeno et al.’s (Adm Sci Q 42:750–783, 1997) notion of thresholds as they apply to a simple survival/exit dichotomy, and expanding this to include different intended paths of exit. Our results indicate that entrepreneurs intend to pursue different exit paths based on previous entrepreneurial experience, industry experience, age, and education level. Our findings provide preliminary evidence that differences between intended exit and failure are underspecified in the literature, since exit consists of many unique paths. Also, in support of threshold theory, we find that the intended exit path is driven by factors other than firm performance.     

Ethical Issues Related to the Mass Marketing of Securities

This paper examines ethical issues involved in the mass marketing of securities to individuals. The marketing of products deemed “socially questionable” or “sinful” (like tobacco and alcohol) has long been recognized as posing special ethical challenges (Kotler, P. and S. Levy: 1971, Harvard Business Review 49, 74–80; Davidson, D. K: 1996, Selling Sin: The Marketing of Socially Unacceptable Products (Quorum Press, Westport). We contend that marketers should consider securities (i.e. common stock, options) in a similar vein, as a potentially dangerous product. Given the inherent volatility of equity prices, responsible marketers need to exercise caution and restraint in promoting securities. We evaluate whether the NYSE’s current guidelines adequately encourage ethical marketing practices and deter unethical ones. Using recent examples of controversial brokerage advertisements, we expose weaknesses in the Exchange’s vague injunction that members not “mislead” reasonable people by making “exaggerated claims” in their communications. From a moral perspective, we find it troublesome that intentionality need not be present for a promotion to be considered misleading. Also problematic is the continued invocation of the reasonable person standard to judge the propriety of advertisements. We close with some thoughts on improving the quality of securities marketing. We suggest that the NYSE, in the interests of fostering higher ethical behavior among member marketers, may need to revive a marketing code of conduct prevalent on Wall Street in an earlier era.     

Attitudes About Corporate Social Responsibility: Business Student Predictors

Four predictors were posited to affect business student attitudes about the social responsibilities of business, also known as corporate social responsibility (CSR). Applying Forsyth’s (1980, Journal of Personality and Social Psychology 39, 175–184, 1992, Journal of Business Ethics 11, 461–470) personal moral philosophy model, we found that ethical idealism had a positive relationship with CSR attitudes, and ethical relativism a negative relationship. We also found materialism to be negatively related to CSR attitudes. Spirituality among business students did not significantly predict CSR attitudes. Understanding the relationship between CSR attitudes and the significant predictors has important implications for researchers and teachers in particular.     

The Impact of Technological Turbulence on Entrepreneurial Behavior, Social Norms and Ethics: Three Internet-based Cases

We investigate the entrepreneurial opportunities and ethical dilemmas presented by technological turbulence. More specifically we investigate the line between Baumol’s [J. Polit. Econ. 98 (1990) 893] productive (e.g. innovation), unproductive (e.g. rent seeking) and destructive (e.g. criminal) entrepreneurship through three examples of Internet innovation – spam (destructive), music file sharing (unproductive), and Internet pharmacies (potentially productive). The emergence of accessible Internet technologies, under present norms, has created the potential for all three entrepreneurial activities. Because of the propensity for self-serving biases and for bending the rules, the need for creativity in overcoming obstacles and overall liabilities of newness, entrepreneurs are likely to challenge established industrial morals and laws. Unlike new entrants, incumbents must abide by the currently accepted norms, and thus suffer from “liabilities of oldness”. The challenge for new entrants is to change sociopolitical legitimacy, whereas incumbents need to defend the established norms. We discuss competitive and other issues that result from technological turbulence and innovation.     

Living in Agreement with a Contract: The Management of Moral and Viable Firm–Stakeholder Relationships

In a contractual firm–stakeholder relationship the participants are expected to act according to the agreement and for mutual benefit. By acting against the agreement at the expense of the other participant, however, may result in higher individual profits within a short period of time. Building on the unlocked iterated prisoner’s dilemma (PD) setting, Scanlon’s [Scanlon, T.␣M.: 1998, What We Owe to Each Other (Belknap Press of Harvard University Press, Cambridge, Mass)] version of contractualism, and the social dilemma literature, this article considers what types of behaviors should be followed by both parties in an established firm–stakeholder relationship in order to reach an outcome that is defensible both in terms of morality and viability. It is argued that a normative foundation, which advises firms and stakeholders to ground their behavior on principles that could not reasonably be rejected by others, forms a basis for moral and viable behavior that can be expressed in the form of a strategic rule that excludes defection and utilizes the option to exit in response to the other participant’s defection. Then, a set of testable propositions is developed that describe how a firm and its stakeholders can further promote moral and viable relationships.Kalle Pajunen received his Ph.D. in strategic management. His current research interests include research methodologies, turnaround processes, stakeholder theory, strategic leadership, and business ethics. His recent articles appear (or are forthcoming) for instance in Advances in Strategic Management, Human Relations, Journal of Management Studies, and Leadership.     

Nascent Entrepreneurship and the Level of Economic Development

Based upon two strands of literature, this paper hypothesizes a U-shaped relationship between a country’s rate of entrepreneurial dynamics and its level of economic development. This would imply a different scope for entrepreneurship policy across subsequent stages of development. Regressing global entrepreneurship (GEM) 2002 data for nascent entrepreneurship in 36 countries on the level of economic development as measured either by per capita income or by an index for innovative capacity, we find support for a U-shaped relationship. The results suggest that a ‘natural rate’ of nascent entrepreneurship is to some extent governed by ‘laws’ related to the level of economic development. For the most advanced nations, improving incentive structures for business start-ups and promoting the commercial exploitation of scientific findings offer the most promising approach for public policy. Developing nations, however, may be better off pursuing the exploitation of scale economies, fostering foreign direct investment and promoting management education. An erratum to this article is available at .