The Spirit of Entrepreneurship and the Qualities of Moral Decision Making: Toward A Unifying Framework

At the heart of entrepreneurship are imagination, creativity, novelty, and sensitivity. It takes these qualities to develop a new product or service and bring it to market, to envision the possible impacts a new product may make and come up with novel and creative solutions to problems that may arise. These qualities go to make up what could be called the spirit of entrepreneurship, a spirit that involves the ability to handle the experimental nature of entrepreunerial activity. These same qualities are crucial for moral decision making, and an ethical approach which emphasizes imagination, creativity, and has an experimental thrust is much better adapted to the entrepreneurial activity and much more relevant to the unique situations that entrepreneurs face. In this sense, the process approach to ethics developed in this article is a unifying framework that brings together the activity of entrepreneurship and moral decision making.     

Entrepreneurship and Ethics: A Literature Review

During the past twenty years, there has been an explosion of new interest in entrepreneurs and their activities. Yet only recently has serious research attention been devoted to the ethical problems encountered by entrepreneurs and their organizations. Entrepreneurs face uniquely complex moral problems related to basic fairness, personnel and customer relationships, distribution dilemmas, and other challenges. This essay surveys contemporary research in entrepreneurial ethics, examines the kinds of ethical dilemmas entrepreneurs confront, identifies major research topics and methodological approaches, and discusses possible directions for future research.     

Ethics Through an Entrepreneurial Lens: Theory and Observation

Recent work in the fields of ethics and entrepreneurship has raised the possibility that entrepreneurs may differ from other individuals in the moral issues they face, in their moral judgements and behaviors concerning those issues, and even in their level of cognitive moral development. While this work has been exploratory and its conclusions tentative, the findings raise two interesting questions: do entrepreneurs actually differ from non-entrepreneurs in their ethical orientations and, if so, why? We propose a model of ethical decision making for small business entrepreneurs. We suggest some ways in which the ethical framework of entrepreneurs may differ systematically from that of other business people and propose some areas for future research.     

Reputational Implications for Partners After a Major Audit Failure: Evidence from China

This paper questions the taken-for-granted moral portrayal depicted in the extant literature and popular media of the devoted social entrepreneurial hero with a priori good ethical and moral credentials. We confront this somewhat ‘idealistic’ and biased portrayal with insights from unique large-scale data from the Global Entrepreneurship Monitor 2009 survey on social entrepreneurship covering Belgium and The Netherlands. Binary and multinomial logistic regressions indicate that the intention and dominance of perceived social value creation over economic value creation is indeed what makes social entrepreneurs unique. In contrast to the extant literature, however, our empirical investigation points at a reluctant attitude of social entrepreneurs toward entrepreneurship in terms of confidence in their skills to start and manage a business, their perception of entrepreneurship as a desirable career choice and their involvement in their activities. While the extant literature points at a strong entrepreneurial orientation as a source of ethical issues (e.g., mission drift, profit orientation), the main contribution of this study lies in the reverse observation: ethical issues are also likely to emanate from a frail entrepreneurial profile. We formulate empirically grounded propositions that may serve as a basis for theory-building and testing purposes.     

The Joint Effects of Justice Climate,Group Moral Identity,and Corporate Social Responsibility on the Prosocial and Deviant Behaviors of Groups

While research has focused on why certain entrepreneurs elect to create innovative solutions to social problems, very little is known about why some social entrepreneurs choose to scale their solutions while others do not. Research on scaling has generally focused on organizational characteristics often overlooking factors at the individual level that may affect scaling decisions. Drawing on the multidimensional construct of moral intensity, we propose a theoretical model of ethical decision making to explain why a social entrepreneur’s perception of moral intensity of the social problem, coupled with their personal desire for control, can significantly influence scaling decisions. Specifically, we propose that higher levels of perceived moral intensity will positively influence the likelihood of scaling through open as opposed to closed modes in order to achieve greater speed and scope of social impact. However, we also propose this effect will be negatively moderated by a social entrepreneur’s higher levels of desire for control. Our model has implications for research and practice at the interface of ethics and social entrepreneurship.     

A New Perspective on Ethics,Ecology, and Economics

This paper introduces the important concept of a biophysical perspective on economics into the business ethics literature. The biophysical perspective recognizes that ecological processes determine what can be done in an economy and how best to do it. A biophysical perspective places the economic system into a larger context of the ecologic system. This changes the perception of ethical issues by identifying a larger scope of management decisions. The paper examines the changing ethical landscape in such issues as biotechnology, planned obsolescence, productivity, and international trade. The paper also examines the shift in mindset associated with the shift in economic framework. It draws on the literature on cognitive structures and moral imagination to show this new perspective can actually raise the bar for ethical decision-making and behavior. The pattern is that the ethical behavior associated with a biophysical economic framework has a greater scope of responsibility with the benefit that the required ethical behavior leads to better long-term decision making.     

Product life-cycle considerations and the nature of strategic activities in entrepreneurial firms

This article reports on the nature of strategic activities and concerns reported by the CEOs of 77 entrepreneurial manufacturing firms once initial success in their marketplace had been achieved. Once the entrepreneurial firm achieves initial market success, the rate and number of strategic decisions faced by the entrepreneurs rapidly expand. A product becomes a product line. Product lines are added. Facilities and equipment are expanded. Personnel are added. A more formal and interpersonally complex organization becomes necessary. Markets and distribution channels expand, adding uncertainty to key market-related decisions. New financial risks arise, often as the result of undercapitalized cash flows. All of these factors combine to dramatically increase the pressure on the entrepreneur's strategic decision making.A major factor underlying the complicity inherent in this scenario is the product/market life cycle: the entrepreneurs must now organize and make decisions regarding several product lines that span several life-cycle stages with different strategic concerns, rather than regarding the narrow product range and limited life-cycle position that provided their initial success. The research reported in this article examined the relative importance of ten strategic activities and concerns reported by the 77 CEOs across products at different life-cycle stages.Initial interviews with selected CEOs and a review of the strategic-management literature identified ten key factors shaping the firm's evolving decision-making practices. These ten factors were divided into three groups:

• 1.1. Operational concerns that necessitate strategic attention: 1) changes in product design; 2) changes in process design; 3) risk of producing a product; and 4) emphasis on creativity.
• 2.2. Dimensions influencing a firm's strategic-management activities: 5) demand on the strategic manager's time: 6) speed of decision making; 7) problems of internal politics; and 8) environmental uncertainty.
• 3.3. Fundamental assumptions underlying a firm's decision-making practices: 9) annual-profit potential; and 10) value of strategic planning.

There are two main sets of results: First, four process-related factors (value of strategic planning, demand on CEO's time, speed of decision making and annual-profit potential) were consistently the most important factors affecting performance within eact stage. Regardless of the life cycle of a particular product line, the manner or process by which decisions were made (strategic planning, CEO's time, and speed of decision making) and one key assumption or objective-annual-profit potential-were seen as factors more important in affecting performance than were operating concerns that necessitated strategic attention. Second, strategic issues associated with product lines at the development and growth stages of their life cycle are reported to be significantly more important to CEOs in entrepreneurial manufacturing firms than are strategic issues associated with mature or declining products lines.These results suggest that CEOs in entrepreneurial manufacturing firms should re-examine their strategies and practices to be sure that sufficient “strategic attention” is being given to decisions regarding mature product lines. In addition, these CEO's need to ensure, in the face of constant demands for their time and decisions, that operating concerns requiring strategic attention get appropriate consideration.     

Risk,uncertainty, and heuristics

Nearly a century ago, Frank Knight famously distinguished between risk and uncertainty with respect to the nature of decisions made in a business enterprise. He associated generating economic profit with making entrepreneurial decisions in the face of fundamental uncertainties. This uncertainty is complex because it cannot be reliably hedged unless it is reducible to risk. In making sense of uncertainty, the mathematics of probability that is used for risk calculations may lose relevance. Fast-and-frugal heuristics, on the other hand, provide robust strategies that can perform well under uncertainty. The present paper describes the structure and nature of such heuristics and provides conditions under which each class of heuristics performs successfully. Dealing with uncertainty requires knowledge but not necessarily an exhaustive use of information. In many business situations, effective heuristic decision-making deliberately ignores information and hence uses fewer resources. In an uncertain world, less often proves to be more.     

Successful U.S. Entrepreneurs: Identifying Ethical Decision-making and Social Responsibility Behaviors

This two-part study analyzed some of the ethical choices made by founding entrepreneurs during the creation and development of their ventures in order to identify the areas in which founding entrepreneurs must make decisions related to ethics or social responsibility during venture creation and development. Content analysis was used to identify decisions with ethical components and/or implications from in-depth interviews with 10 successful business founders. The research for part one of the study was guided by the following research question: In what areas must entrepreneurs make decisions with ethical and/or social responsibility implications during new venture creation and development? The authors identified four distinct categories of decisions where ethical or social responsibility components exist: (1) individual entrepreneurial values-related decisions, (2) organizational culture/employee well-being decisions, (3) customer satisfaction and quality decisions, and (4) external accountability decisions. In the second part of the study, the decisions identified in part one were analyzed using a framework derived from prior research in ethics. This framework was developed from the work of Kant (1964) who theorized about human morals and Rawls (1971) who developed theories about justice. Part two of the study was guided by the following research questions: Do entrepreneurs have values and ethics similar to those held by society in general? If they don’t, how do their values and ethics differ? The comparison revealed that the ethics and/or values that the entrepreneurs either explicitly or implicitly acknowledged were in fact similar to those of society in general.     

When Ethics Matters – Interpreting the Ethical Discourse of Small Nature-Based Entrepreneurs

This article examines the unique ethical concerns faced by small nature-based entrepreneurs in their everyday business operations. By using qualitative, empirical data, six kinds of business situations were identified to bring about moral consideration for all the entrepreneurs in this study. The business situations identified were the selection of raw material suppliers, reconciling the quality of production and the lack of resources, the pricing process, the content of marketing information, the close relationships to employees and the collaboration with other entrepreneurs. The ethical argumentation used in these business situations was examined in relation to three ethical theories: utilitarian ethics, deontology and virtue-ethics. This article shows that typical for the decision-making of the small nature-based entrepreneurs in an ethical sense is the variety of ethical arguments used and the important role of customers and employees influencing the ethical views of the entrepreneurs.     

The Successful Product Pioneer: Maintaining Commitment while Adapting to Change

Introducing pioneering products is an important entrepreneurial activity and the lifeblood of small businesses, yet previous literature on pioneering and performance in small firms has been inconclusive. Based on data gathered from entrepreneurs in 51 small computer firms, the study found that commitment (entrepreneurial confidence) and adaptability (corporate entrepreneurship and environmental dynamism) were especially beneficial to pioneers. The other three variables (product championing, marketing emphasis, and technological newness) contributed to performance across all new product introductions but did not have modifying effects on pioneering introductions in particular.     

Ethics in Entrepreneurial Finance: Exploring Problems in Venture Partner Entry and Exit

This research advances our understanding of the manifestation of tensions and ethical issues in entrepreneurial finance. In doing so, we offer an overview of ethics in entrepreneurship and finance, delineating the curious paucity of research at their intersection. Using twelve vignettes, we put forward the asymmetries between entrepreneurs and investors and discuss a set of ethical problems that arise among key actors centring on the dynamics of venture partner entry and exit, applying the multiple-lens ethical perspective to analyse these issues. This analysis culminates in the introduction of a general classification scheme for ethical problems across venture partners. Our analysis highlights the moral dimension inherent in the entry and exit of venture partners and the importance of considering moral judgement, as well as intention in future analysis of any decision-making. Our study also points to the moral responsibility in finance, especially to the mutual moral responsibilities of investors and entrepreneurs. By integrating ethics into finance, this research also demonstrates that in the case of venture partner exit, an ethical approach and decent governance go beyond compliance to the law. We conclude with implications for practitioners, specifically with some proposals for a solution to the problem of blocked and forced exit. Together, we make several contributions to the literature by integrating ethics, finance and entrepreneurship, and we call for future research to stimulate a growing body of research within this presently overlooked area.     

Ethical Decision-Making in Corporate Entrepreneurial Organizations

No research thus far has attempted to examine ethical decision- making in corporate entrepreneurial organizations. Results of such study would provide management executives with insights on what action, if any, is essential for achieving business ethics and corporate entrepreneurship simultaneously. This paper argues, theoretically, that the work characteristics, organizational characteristics, and some individual characteristics in a corporate entrepreneurial organization are conducive to ethical decisions. These characteristics help mitigate the adverse impact of the turbulent environments on ethical decision- making behavior. Based on these arguments, a tentative model of ethical decison-making in corporate entrepreneurial organization is constructed.     

Educating for self‐interest or ‐transcendence? An empirical approach to investigating the role of moral competencies in opportunity recognition for sustainable development

Entrepreneurship education with a focus on sustainable development primarily teaches students to develop a profit‐driven mentality. As sustainable development is a value‐oriented and normative concept, the role of individual ethical norms and values in entrepreneurial processes has been receiving increased attention. Therefore, this study addresses the role of moral competence in the process of idea generation for sustainable development. A mixed method design was developed in which would‐be entrepreneurs were subjected to a questionnaire (n = 398) and to real‐life decision‐making processes in a case assignment (n = 96). The results provide stepping stones for implementing (moral) competencies in entrepreneurship education as a possible avenue to move away from a sole focus on a profit‐driven mentality.     

Ethical Decision Making in Multinational Organizations: A Culture-Based Model

The purpose of this paper is to analyze the relationship between national culture and ethical decision making. Established theories of ethics and moral development are reviewed and a culture-based model of ethical decision making in organizations is derived. Although the body of knowledge in both cross-cultural management and ethics is well documented, researchers have failed to integrate the influence of cultural values into the ethical decision-making paradigm. A conceptual understanding of how managers from different nations make decisions about highly ethical issues will provide business ethics researchers with a sound theoretical foundation upon which future empirical inquiry can be based.     

A Multidimensional Approach to Finnish Managers' Moral Decision-Making

This paper analyses managers' moral decision-making, and studies the role of ethical theories in it by following the research tradition using the multidimensional ethics scale. The research question is: what kinds of ethical dimensions do Finnish business managers reveal when they are making moral decisions, and how have these dimensions changed in the 1990s? This question is answered by examining what kinds of factors emerge when the multidimensional ethics scale is used to analyse Finnish managers' attitudes toward moral dilemmas. The results show that Finnish managers' decision-making reflects a variety of ethical theories. Teleological thinking is strongly emphasised by Finnish managers, and relativist thinking is used as well, but often combined with either deontology or justice thinking. In addition, a strong moralistic dimension emerged in Finnish managers' decision-making. The analysis was carried out in two different surveys in years 1994 and 1999, and the results show that the ways of decision-making were more complex at the end of the 1990s than almost six years earlier.     

Risky choices in new venture decisions—experimental evidence from Germany and the United States

This article presents a model of entrepreneurial risk-taking behavior in different cultural settings. Young entrepreneurs and entrepreneurship students in Germany and the United States were tested by means of an experimental design to evaluate the underlying model and to identify cultural differences in the decision to start a company. The central research question states: How does the cultural context influence the decision-making and risk-taking behavior of entrepreneurs? The overall result of the international sample indicates that the significant differences between entrepreneurs and nonentrepreneurs in risk-taking behavior are culturally driven. Thus, this study extends earlier US studies that distinguish between risk propensity and risk perception in respect of entrepreneurs’ risk behavior within an international, intercultural sample. Furthermore, the survey researches the influence of the personal traits overconfidence and worry. From a managerial perspective, “would-be entrepreneurs” can use the conducted experiment as an individual diagnostic instrument, making it possible to identify individual anomalies in risk and decision-making behavior and, consequently, contribute to a better understanding of suitable entrepreneurial behavior as well as to reveal discrepancies between self-assessment and actual behavior.     

Self-regulation and moral awareness among entrepreneurs

Moral awareness underpins moral reasoning and ethical decision making. This mixed methods study investigates a critical feature of these phenomena among entrepreneurs, namely the influence of social cognitive self-regulation on moral awareness. Results suggest that entrepreneurs with stronger self-regulatory characteristics are more morally aware and relate such awareness to maintaining personal integrity and building inter-personal trust. In contrast, entrepreneurs with weaker self-regulatory characteristics appear less morally aware overall, and focus primarily on moral issues relating to failure and loss. I conclude the paper by discussing the implications for future research and practice.