Board-management relations in small firms: The paradox of simultaneous independence and interdependence

The author introduces constructs based on neo-classical and socio-economic assumptions, and argues that board-management relations should be characterized by both independence and interdependence. Interdependence is especially important in small firms. The article presents a model of directorates from research about directorates based on agency theory assumptions. This model is supplemented with constructs from the theory of contractual relations. Whilst traditional literature tends to focus upon independence from an agency theory perspective, this article argues that it is necessary to use more than one dimension of attributes regarding the board-management relations in order to understand the board's contribution to company performance, and that trust and solidarity is especially important in small firms. Board-management relations described by simultaneous independence and interdependence are proposed to give the highest contribution to company performance. The theoretical propositions are exemplified and supported by results of a field survey of directorates in small firms.     

Umpire and batsman: Is it cricket to be both?

The paper is a response to Richard De George's essay, Theological Ethics and Business Ethics. It defends the possibility of theologically oriented approaches to business ethics by pointing out certain deficiencies in business ethics narrowly based on the premisses of analytic moral philosophy. In particular it argues, in a manner consistent with Alasdair MacIntyre's After Virtue (1981), that such a program of business ethics is insufficiently critical of its own roots in the social fiction of bureaucratic rationality. After showing how this ideology governs De George's negative judgments on theological approaches to business ethics, the author outlines a program of critical reflection that would draw from the intellectual traditions of both theology and philosophy in order to facilitate a dialogue in business ethics that no longer is captive in the Iron Cage of bureaucratic rationality. Dennis P. McCann is an Associate Professor of Religious Studies at De Paul University. He has served on the faculties of Reed College and Lewis and Clark College. He is the author of Christian Realism and Liberation Theology (1981) and a co-author of Polity and Praxis: A Program for American Practical Theology (1985).     

Evidence of creative destruction in the U.S. economy

Schumpeter discusses the importance of innovation and new firm entry in a capitalistic economy as a means to creatively destruct oligopolies and generate new economic wealth. He warns of R&D becoming the arena of professional engineers in large corporations; Schumpeter feared the obsolescence of entrepreneurship would result in an increasing concentration of wealth among large corporations and toward socialism.Using a longitudinal data base of U.S. corporations over the period 1961–1980, this paper statistically tests several aspects of Schumpeter's analysis. Overall our results give some support to Schumpeter's creative destruction hypothesis, though there exists some sensitivity to the measure of size used. We find most of the firms exiting the ranks of the largest 500 firms (as measured by assets) are those with ranks in the 401–500 range; there is also evidence of churning as the same firms enter and exit the top 500 over time. Additionally, we find that merger has gained prominence as the reason why firms exit the top 500. Among our conclusions is that further work is needed on the role of mergers in the growth-and decline-of entrepreneurial firms.     

Procedural learning,consumer decision making,and marketing communication

We examine the applicability of Anderson's (1982) procedural learning framework to consumer decision making within the context of how marketing communications influence people's procedural knowledge about selecting decision criteria for a buying decision. In particular, we explore the importance of explicit, conditional if-then statements (e.g., if you are choosing amongst ..., then you should ...) in which the recommended decision-making operation is compatible with prior procedural knowledge. We test this framework in an exploratory study on advertising effects on women's decision criteria for fitness centers.     

A note on government policy and the new ‘intrapreneurship’ in Bulgaria

Conclusion I have attempted in this paper to highlight the recent emergence and rapid growth of a particular type of intrapreneurship in the Bulgarian economy. This intrapreneurship involves the creation of new smaller establishments within existing large-scale industrial firms. These semi-autonomous auxiliary plants are exempt from part of the bureaucracy which constrains the larger addition, they have provided a higher rate of technological advance, a better supply of consumer goods, a greater utilization of labor resources, and a higher return to human capital.Only through the continued development of a small-firm sector can the Bulgarian economy meet the challenge currently posed by its western counterparts. Whether the next step from intrapreneurship to entrepreneurship is taken may hold the key for industrial development in Bulgaria.     

On Creating and Claiming Value in Negotiations

This paper presents a negotiation model that includes value creation. It shows that creative negotiation efforts tend to intensify toward the deadline, and that the deadline is determined endogenously by the tension between two motives, creating more value and claiming from existing value. When the parties can present misleading offers in order to claim rather than create value, the outcome in early negotiation rounds may display an impasse where any proposal is rejected without inspection, while negotiation activities such as value creation through sincere offers and inspection of clauses intensify toward the deadline.     

From Adam Smith to the American Catholic bishops: Debating visions of economic life

Considerable controversy was stirred by the contrast between the specific approaches to public policy contained in the first draft of the Catholic bishops' letter on the U.S. economy and the policies favored by the Reagan administration. However, a much more basic contrast actually existed between the bishops' underlying vision of economic life and contemporary capitalism. The pastoral challenges a separation between moral criteria and economic activity that is deeply embedded in modernity itself. Indeed, the splitting off of economic life from its moral-religious matrix is seen by the bishops' critics as a positive, defining feature of democratic capitalism. The critics see the separate economic and moral-religious spheres related by due balance; the bishops, while acknowledging an autonomy to economic life, emphasize that its fundamental choices remain moral. The bishops (and, for different reasons, their critics) have preferred to minimize the contrast between the letter's vision and the contemporary economy. They avoid any clearcut judgment on the economic system by stressing pragmatism and reforms; but implicitly they are granting a strictly conditioned acceptance of reformist capitalism, the condition being the system's openness to questioning and change. Peter Steinfels is Editor of Commonweal Magazine and he is the author of The Neoconservatives (Simon and Schuster, 1979).     

Unobservable industry characteristics and the innovation-concentration-advertising-maze: Evidence from an econometric study using panel data for manufacturing industries in the FRG, 1979–1986

In discussing the nexus between innovations and market structure it is often argued that industry characteristics (called opportunities) might play an important role as determinants of innovation, and that simultaneity rather than one-way causality prevails. We consider a three-equation model for innovation, advertising, and concentration. Based on pooled cross-section time-series data for 26 German manufacturing industries we estimate single equation models with and without fixed industry and/or time effects (to control for unobservable industry or time effects, respectively) and simultaneous equation systems including fixed effects, and controlling for extreme cases (outliers) or not. Furthermore, we use two different measures for innovations, i.e., the percentage of shipments due to new products, and the percentage of firms which classified themselves as innovators. Our results can be summarized as follows: (1) The firm size has no significant effect on innovation. One can, therefore, not conclude from this data set that large firms are more innovative than small ones; (2) unobservable industry effects do matter; (3) the treatment of outliers does matter; (4) simultaneity does matter (5) the way innovations are measured does matter; (6) different stories could be told based on the results of the systems of interdependent equations estimated.Earlier versions of this paper were presented at the annual meeting of the committee of industrial economists of the Verein fuer Socialpolitik at Hohenheim University in March, 1990, and at the 1990 conferences of the European Economic Association and the European Association for Research in Industrial Economics in Lisboa. We would like to thank participants of these meetings and three anonymous referees for helpful comments. A more complete version of the paper with a set of tables for the results of all computations is available from the authors on request.     

Teaching Business Ethics: Theory and Practice

Business ethics teaching can be improved when ethicists integrate the ethical theories they apply to business with the organizational design of the course. By utilizing three techniques – implementing a Total Quality Management-style survey and review, nominating and electing class virtues, and telling personal stories of moral action – classes can be organized to operate by the social contract, rights, stakeholder, and virtue theories that dominate business ethics literature. Classes then become laboratories for the practical articulation and application of the theories as well as providing real examples of the theories in action. This methodology produces benefits for the particular class and for the development and refinement of the theories themselves.This paper describes each of the three pedagogical techniques; and then explicitly relates them to these leading business ethics theories to demonstrate how the integration can lead to a community seeking and discovering moral truth in the classroom.     

Humanitarian versus organizational morality — A survey of attitudes concerning business ethics among managing directors

This paper presents the results of an empirical study of attitudes towards ethical questions in business life among managing directors. They study covers more than 240 Swedish firms of all sizes, from different lines of business, and it is based on a solid theoretical framework. It should be seen as a part of the author's effort to develop a model explaining ethical organizational behaviour. Among the most important conclusions of the study is the concept of corporate moral view. It seems possible to distinguish between the humanitarian morality versus the organizational morality, depending on who's interests the decision maker prefers to take in a moral dilemma.Ulrica Nylén is a Doctoral Candidate in Organizational Theory with a special interest in ethical values and their impact on organizational behavior. She is a member of staff at the Umeå Business School, Sweden, were she is the teaching the subject of Management.     

The economics of open source software for a competitive firm

Large quantities of software, ranging from operating systems to web servers to games, are now available as open source software or free software. In many cases, this software is backed by large profit seeking corporations such as IBM. Traditional economic analysis is used to identify the costs and benefits to firms of using open source rather than proprietary solutions, particularly in the case of the firm releasing code to the world when not obliged to do so. Examples of large companies backing open source are examined in light of the profit motive. Additionally, open source is also analyzed as a quasi-public good.     

Technological paradigms,innovative behavior and the formation of dissipative enterprises

Although many studies have assigned a key role to technological paradigms in the development and diffusion of new technologies, which are often pioneered and led by small businesses, the nature of this term has remained somewhat unclear. This paper uses concepts from modern theories of chaos, information theory and dissipative structures, to describe the process through which new technological paradigms form and how the evolve. This analysis shows that the development of a new and innovative product or production methods drive existing as well as new firms to search for innovations. The interaction of all firms that are affected by this explorative behavior generates escalating waves of change and thereby creates chaos, which is the source of the materials from which new technological structures emerge. These new structures are arrangements of production tasks and activities that link an extended, interindustry group of firms into an interdependent system. This structure constitutes a technological paradigm when it serves as a matrix, or template, through which all firms in the system engage in innovative activity.     

Administrative procedures for the control of marketing practices - theoretical rationale and perspectives

The paper purports to analyze some features of administrative control of marketing practices with the help of concepts drawn from modern legal-theoretical debate. As a background a general overview of the traditional justifications for the creation of an administrative control system is presented. These justifications underline the insufficiency of other agencies of control, such as individual consumers, competitors, consumer organizations, public prosecutors, and self-regulatory bodies.The development of administrative control measures has obvious connections with modern legal-theoretical concepts like reflexive law and proceduralization. The theory of reflexive law highlights the fact that effective control presupposes a sufficient consideration of the autonomy of social systems. This leads to emphasizing a flexible negotiation approach of control authorities in order to increase efficiency by creating some degree of internal acceptance of the measures.Legal pluralism again sees the State disintegrating in a constellation of more or less autonomous governments with their own goals and interests. In such a disintegrated State an active consumer authority can, under certain preconditions, create new legal institutions in the consumer law field and thereby contribute to the development not only of consumer law but of general private law as well.

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Theoretische Begründung und Perspektiven für administrative Verfahren der Kontrolle von Marketingpraktiken

Zusammenfassung Der Autor analysiert einige Kennzeichen von administrativer Kontrolle von Marketingpraktiken und zieht dazu Konzepte der neueren rechstheoretischen Diskussion heran. Er prÄsentiert zunÄchst als Hintergrund einen überblick über die traditionellen Rechtfertigungen für ein administratives Kontroll-system. Diese Rechtfertigungen betonen die UnzulÄnglichkeit anderer Kontrollinstanzen, wie z. B. einzelne Konsumenten, Wettbewerber, Verbraucherorganisationen, öffentliche Anklage oder Instanzen der Selbstkontrolle.Die Entwicklung von Ma\nahmen der administrativen Kontrolle hat offenkundig Bezüge zu modernen rechtstheoretischen Konzepten wie reflexives Recht und Prozeduralisierung. Die Theorie des reflexiven Rechts betont als Voraussetzung für effektive Kontrolle, da\ die Autonomie sozialer Systeme ausreichend respektiert wird. Dies führt zur Notwendigkeit flexibler Verhandlungen zwischen Kontrollinstanzen, damit über ein hinreichendes Ma\ an interner Akzeptanz der Mittel, deren Effizienz gesteigert werden kann.Rechtlicher Pluralismus wiederum sieht den Staat zerfallen in eine Konstellation mehr oder weniger autonomer Teilregierungen mit jeweils eigenen Zielen und Interessen. In einem so aufgespaltenen Staat kann eine aktive Verbraucherbehörde unter bestimmten Bedingungen neue rechtliche Institutionen im Bereich des Verbraucherrechts schaffen und dadurch zur Entwicklung nicht nur des Verbraucherrechts, sondern des gesamten Privatrechtes beitragen.

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The paper was presented at the Third International Conference on Consumer Law in Canela, Brazil, March 1992.     

Martyrs on commission: A reformation essay

Fiction. Although this story contains a measure of historical accuracy, any resemblance between the central character and a real person, or between the events of the story and real events, is entirely coincidental. The main purpose of this piece is to expand upon the notion of overload as one reason business people should not be burdened with moral responsibility. The overload argument is presented in a chapter of Business Ethics in Canada, edited by Deborah Poff and Wilfrid Waluchow (Prentice-Hall of Canada, 1987). In this chapter, Moral Responsibility in Business or Fourteen Ways to Pass the Buck, Alex C. Michalos both presents and replies to the overload argument. This short story is presented as an alternative to his reply.Lyle Estill is a salesperson for EMJ Data Systems Ltd. His short stories have appeared in a variety of journals and magazines, and have been produced on radio.     

The Morality of Bluffing: A Reply to Allhoff

In a recent paper that appeared in this journal Fritz Allhoff addresses the morality of bluffing in negotiations¹. He focuses on cases in which people misstate their reservation price in negotiations, e.g., suppose that I am selling a house and tell a prospective buyer that $300,000 is absolutely the lowest price that I will accept, when I know that I would be willing to accept as little as $270,000 for the house rather than continue to try to sell it. Allhoff criticizes my (qualified) defense of bluffing in my paper Second Thoughts on Bluffing,² and offers what he takes to be a more plausible defense of bluffing. Allhoffs criticisms rest on several serious misinterpretations of my views. He ascribes to me several arguments that I dont make. He also attributes to me an unqualified defense of bluffing that I explicitly reject. I briefly document this in Section 1. In Sections 2 and 3 I explain and criticize Allhoffs positive views about bluffing and the morality of bluffing.Thomas Carson is professor of philosophy at Loyola University Chicago. He is the author of Value and the Good Life and The Status of Morality. He is the co-editor of Moral Relativism and Morality and the Good Life. He is the author of numerous papers on ethical theory and business ethics and is a member of the editorial board of Business Ethics Quarterly and Journal of Business Ethics. He is currently working on a book entitled Lying and Deception: Theory and Practice.     

The Impact of Innovativeness and Development Time on New Product Performance for Small Firms

Timing is becoming a new source of competitive advantage. The business press extols the benefits of faster product development. This paper examines whether competitive advantage can be gained by reducing development time across all types of new products or whether this advantage is restricted to certain types of new products. It proposes that product innovativeness moderates the relationship between development time and initial market performance. A survey of 110 small manufacturing firms in computer related industries supports the hypothesis. The survey findings indicate that a firm must guard against over- or under-development of the new product since product innovativeness was found to influence the impact of development time on market performance. The implications for managers are: beware of bringing a new product that is too much, too early or too little, too late.     

Justice: The root of american business ideology and ethics

Although there are many conceptions of Justice, these different perceptions can provide many interesting insights into a business person's ethical standards as well as that person's decision-making processes. Using the Bishops' Pastoral Letter on the U.S. Economy as the basis for asking questions about justice, twenty-four business executives were interviewed about their conception of justice. An analysis of these interviews reveals that this group of businesspeople operated under very different conceptions of Justice at the Macroenvironmental and Microenvironmental levels. This result has some interesting implications not only for those scholars concerned with business ethics but for everyone who has a stake in business education.Men are called good, chiefly on account of their Justice. Cicero, 56 B.C. Ideology is applied philosophy. Lodge, 1986 Richard McGowan, S. J. is an Assistant Professor of Operations and Strategic Management at Boston College. His research focus involves examining both the rationale behind business and public policy decisions as well as determining the effectiveness of these policy measures. Some of his recent publications include Deciphering the Japanese Import Quota, Policy Studies Journal (1988) and Public Policy Measures and Cigarette Sales: An ARIMA Intervention Analysis Study JAI Social Issues Management Volume (1989).     

An Exercise in Moral Philosophy: Seeking to Understand “nobody”

The late Hannah Arendt proposed that many, perhaps most monstrous deeds are not committed by moral monsters but by individuals who do not think. However, understanding the significance of activity of thinking as such requires a moral philosophy that transcends rational actor assumptions and instrumental reason centering, instead, on the conditions of self-knowledge. The ubiquitous and often lethal phenomenon of information distortions provides a vehicle for expanding our understandings of individual moral response-abilities in our modern times.     

Consumer protection in Switzerland by means of “soft law” — Practices and perspectives

Consumer protection by self-regulation has come into focus as a proposed alternative to consumer legislation. This paper tries to show the principal forms in which soft law rules have been established in Switzerland, and to outline some of the main problems to which they have been exposed in practice.To a great extent self-regulation has centered, up to now, in the hands of the trade itself, although consumer organisations participate in some commissions for extra-judicial settlement. The principal deficiencies of self-regulation concern its enforcement and its scope of applicability when the trade is organised only to a limited extent. It has also been prowed that the drawing up of soft law rules has hindered legislation and, in some instances, also court practice.The authors come to the conclusion that some of the conditions without which soft law cannot achieve an effective impact on the trade are missing in Switzerland. However, positive contributions of soft law to consumer protection can sometimes be discerned where legislation has not succeeded.

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Zusammenfassung Die Schwierigkeiten, denen die Verbrauchergesetzgebung auch in der Schweiz begegnet, haben dazu geführt, dass die von der Wirtschaft als Alternative vorgeschlagene Selbstkontrolle stärker in den Mittelpunkt des Interesses gerückt ist als bisher. Der Artikel versucht — soweit ersichtlich, erstmals —, die verschiedenen Erscheinungsformen von soft law in der Schweiz aufzuzeigen und die wesentlichen Schwierigkeiten herauszuarbeiten, denen es in der Praxis begegnet.Die Selbstkontrolle der Wirtschaft bei Verbrauchergeschäften liegt zum grossen Teil ausschliesslich in den Händen der Wirtschaftsverbände. Die Verbraucherorganisationen beteiligen sich an ihr, auch aus finanziellen und personellen Gründen, nur zurückhaltend, wobei der Schwerpunkt dieser Beteiligung in der aussergerichtlichen Streitbeilegung und nicht in der Erarbeitung von materiellrechtlichen Regeln zu finden ist. Der Staat ist bis heute nur in einem Einzelfall interveniert, um eine effektive Selbstkontrolle zu gewährleisten.Die Hauptschwächen von soft law betreffen seine Durchsetzung und die Weite seines Anwendungsbereichs, zumal die verschiedenen Branchen in der Schweiz nur teilweise in repräsentativen Wirtschaftsverbänden organisiert sind. Bedenklich ist insbesondere der negative Einfluss, den soft law-Regelungen auf die Fortentwicklung der Verbrauchergesetzgebung und teilweise auch der Rechtsprechung ausgeübt haben.Einige unabdingbare Voraussetzungen für einen effektiven Verbraucherschutz durch Selbstkontrolle sind in der Schweiz nicht gegeben. Gleichwohl trägt das soft law vornehmlich in den Bereichen zum Verbraucherschutz etwas bei, in denen eine Gesetzgebung bisher nicht möglich war.

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Bernd Stauder is Professor of Law at the Faculty of Law, University of Geneva, Place de l'Université, CH-1211 Geneva 4, Switzerland. Joachim Feldges is a Research Assistant. Peter Mülbert is a former Research Assistant at this Faculty.Michael Bühler, Geneva/Düsseldorf, furnished an important contribution when the paper was first prepared.This article is a shortened version of the German original text, published under the title Praxis und Perspektiven von Konsumentenschutz durch soft law in der Schweiz in Zeitschrift für Schweizerisches Recht 1984 I. The authors are grateful to John Perry for translating the original German text into English.     

A positive approach to organized consumer action: The “buycott” as an alternative to the boycott

A survey of the consumer research literature revealed few instances of consumer buycotts, i.e., efforts by consumer activists to induce shoppers to buy the products or services of selected companies in order to reward these firms for behavior consistent with the goals of the activists. The few cases did however prompt some thoughts on the development of a conceptual framework for understanding the place of buycotts on a consumer activist agenda. The framework is briefly described and examples presented of prospective uses to be made of buycotts by consumer groups. Also presented is a set of basic research questions concerning buycotts which should be of interest to scholars as well as practitioners.

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Kollektive Konsumentenaktion als positive Rückmeldung: der Buycott als Alternative zum Boycott

Zusammenfassung Eine Durchsicht der Literatur zur Verbraucherforschung zeigt einige wenige Beispiele eines Verbraucher-Buycotts, also der Bemühung von Verbraucheraktivisten, Konsumenten zum Kauf von Produkten solcher Unternehmungen zu bewegen, deren Verhalten den Zielvorstellungen der Aktivisten entspricht und die deswegen belohnt werden sollen. Diese wenigen Fälle geben Anlaß für einige grundsätzliche Überlegungen zur Entwicklung eines konzeptionellen Rahmens für das Verständnis des Buycotts und seiner Bedeutung als möglicher Aktionsparameter der Aktivisten. Der Beitrag skizziert einen solchen Bezugsrahmen und lefert Beispiele für künftige Einsatzmöglichkeiten des Buycotts als Instrument von Verbraucherverbänden. Schließlich werden einige Forschungsfragen formuliert, deren Antwort sowohl für Wissenschaftler wie auch für Praktiker von Interesse sein dürfte.

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Monroe Friedman is a Professor of Psychology at Eastern Michigan University, Ypsilanti, MI 48197, USA.