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.     

The new generation of millennial entrepreneurs: A review and call for research

Entering the third decade of the new millennium, the millennial generation is stepping into their most productive stage of life. We have witnessed a number of exemplary millennial entrepreneurs, such as Mark Zuckerberg, founder and CEO of Facebook. The world’s economy is evolving fast and presenting distinct entrepreneurial opportunities to millennials across the globe. It is critical that scholars of international entrepreneurship explore the new breed of millennial entrepreneurs and contrast them across generations and countries. Regrettably, the extant literature comes up short in fully addressing the new generation of entrepreneurs. We call for immediate scholarly attention on millennial entrepreneurs as they are in substantive ways unlike all earlier generations. We urge researchers to explore the unique characteristics of millennial entrepreneurs, their influence on entrepreneurial motivation, orientation, opportunity discovery and exploitation process, and the global ambition of their entrepreneurial ventures.     

Reflective Judgement: Understanding Entrepreneurship as Ethical Practice

Recently, the ethical rather than just the economic resonance of entrepreneurship has attracted attention with researchers highlighting entrepreneurship and ethics as interwoven processes of value creation and management. Recognising that traditional normative perspectives on ethics are limited in application in entrepreneurial contexts, this stream of research has theorised entrepreneurship and ethics as the pragmatic production of useful effects through the alignment of public–private values. In this article, we critique this view and use Kant’s concept of reflective judgement as discussed in his Critique of the Power of Judgement to theorise ethical entrepreneurial practice as the capacity to routinely break free from current conventions through the imaginative creation and use of self-legislating maxims. Through an analysis of the narratives of 12 entrepreneurs, we suggest there are three dimensions to reflective judgement in entrepreneurial contexts: (1) Social Performance; (2) Public Challenge and; (3) Personal Autonomy. Whilst the entrepreneurs were alive to the importance of commercial return, their narratives demonstrated further concern for, and commitment to, standards that they rationally and imaginatively felt as being appropriate. In our discussion, we integrate the findings into existing theoretical categories from entrepreneurship studies to better appreciate ethics within the context of value creation.     

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.     

Embedded entrepreneurship in the creative re-construction of place

This paper focuses on ways in which entrepreneurs engage with place and community. Drawing on the ideas of embeddedness and transferring value across spheres, we develop insight about how the relationship between entrepreneurs and communities influences entrepreneurial practices and outcomes. Employing an ethnographic perspective including participant observation, we explored the situated practices of entrepreneurs in two depleted communities in the Northwest of Ireland. We found that entrepreneurs not only drew on the community in running their business, but were also involved in a wide range of “other” activities that engaged, involved and worked with the community. This entrepreneurship produced a range of projects that addressed social and economic issues (unemployment, employability and emigration) and the depleted sense of place which was adversely affecting these communities. We show how social bonds and an affinity to community enable entrepreneurship to create, renew and reify a positive identity of place by combining understanding with entrepreneurial purpose.     

A field study of entrepreneurial decision-making and moral imagination

How entrepreneurs make decisions under extreme uncertainty and ambiguity is central to explaining entrepreneurial success. However, because of their pioneering nature, these decisions also have significant ethical implications. While there has been an increasing focus on the unique approaches entrepreneurs take to decision-making, less attention has been paid to the inherent ethical dimension of making decisions under high uncertainty. This study applies the concept of moral imagination to the challenges of making entrepreneurial decisions under Knightian uncertainty. It examines the extent to which entrepreneurs use moral imagination to integrate the ethical dimensions of pioneering situations into their decision-making.     

Habitual entrepreneurs: Possible cases of entrepreneurship addiction?

We examine the underlying psychological processes that may motivate habitual entrepreneurs to engage in entrepreneurship repeatedly. By drawing on the psychology literature on behavioral addictions, such as workaholism and Internet use, we develop a framework that defines the symptomatology of what we identify as a “behavioral addiction to entrepreneurship.” Through interviews with two habitual entrepreneurs, we demonstrate how these addiction symptoms manifest in the entrepreneurial context. We also demonstrate how psychological, emotional, and physiological aspects of the entrepreneurial experience reinforce a behavioral addiction to entrepreneurship. Our theorizing offers insights into the psychological origins of repeated engagement in venture creation activities and yields insights into possible “dark side” of entrepreneurship outcomes.     

The community dynamics of entrepreneurship: The birth of the american film industry, 1895–1929

This paper provides insight for practitioners by exploring the collective process of entrepreneurship in the context of the formation of new industries. In contrast to the popular notions of entrepreneurship, with their emphasis on individual traits, we argue that successful entrepreneurship is often not solely the result of solitary individuals acting in isolation. In many respects, entrepreneurs exist as part of larger collectives. First and foremost, there is the population of organizations engaging in activities similar to those of the entrepreneurial firm, which constitute a social system that can affect entrepreneurial success. In addition, there is also a community of populations of organizations characterized by interdependence of outcomes. Individual entrepreneurs may be more successful in the venturing process if they recognize some of the ways in which their success may depend on the actions of entrepreneurs throughout this community. Thus, we urge practitioners and theorists alike to include a community perspective in their approach to entrepreneurship. We also suggest that one way of conceptualizing the community of relevance might be in terms of populations of organizations that constitute the value chain. For example, in the early film industry a simple value chain with three functions—production, distribution, and exhibition—is a convenient heuristic for considering what populations of organizations might be relevant. As we show in our case study of that industry, a community model offers insights into the collective nature of entrepreneurship and the emergence of new industries.Our basic thesis is that the role of entrepreneurship in the creation of new industries can be conceptualized in terms of the dynamics of a community of organizational populations. At least three implications of this view may be important for practitioners. First, the kind of widespread and fundamental economic and social change that has often been linked with entrepreneurship requires a variety of behaviors. While most definitions of entrepreneurship have recognized that entrepreneurship requires the introduction of innovation, they have tended to ignore the importance of behaviors that subsequently support that innovation. To encompass these important behaviors, we believe that a broad definition of entrepreneurial behaviors is justified. To capture this, the framework of entrepreneurial behaviors that we develop includes the variety of behaviors that are important to the success of a collective process of entrepreneurship. We believe that recognition of a variety of different behaviors that are important to the success of the entrepreneurial process can help practicing entrepreneurs to understand more fully the complex dynamics of new industry creation. In terms of our framework, the range of behaviors of potential importance to entrepreneurship includes all of the following: creating a firm that innovates, creating a new business that imitates the practices of others, innovating within an existing business, and imitating by creating change in an existing business. In addition, we recognize that the kinds of innovative change that support entrepreneurship in the context of new industry creation are not narrowly technological; other kinds of product and service changes as well as administrative innovations may also be relevant.Second, entrepreneurship in one part of the community often creates the opportunity for entrepreneurial activity elsewhere in the community. For example, the founding of movie palaces did not begin until feature length films appeared. The challenge for entrepreneurs is to recognize these opportunities and act on them. Third, and related, the long-term success of entrepreneurial behaviors in one population of the community frequently requires that supportive entrepreneurial behaviors occur in other populations in the community. For example, the success of feature length films was hastened by the development of distribution organizations to replace traveling shows and localized markets. Their success was also hastened by the movement away from nickelodeons towards larger, more comfortable exhibition outlets, such as theaters and show palaces. When the interdependence among populations in the community is stated this way, another challenge to entrepreneurs becomes clear: the facilitation and encouragement of supportive behaviors in other populations.We are not the first to propose that the community is important, but we contribute to this idea by showing in a specific context how various types of behaviors interact and ultimately promote entrepreneurship throughout the community. Our contribution for practitioners is twofold. We would urge practitioners to consider the variety of behaviors necessary to create, reinforce, and maintain fundamental and widespread change. Further, we would suggest that practitioners consider how activities in a broad community of organizations can set the stage for entrepreneurship and have a high impact on its ultimate success or failure. Thus, we would suggest that practitioners who seek to innovate should search broadly for opportunities and understand the importance of relations with businesses elsewhere in the community. The success of their entrepreneurial efforts may depend on the occurrence of supportive entrepreneurial changes in those businesses as well. Their ability to do this will be enhanced by a broad understanding of entrepreneurial behaviors and sensitivity to the opportunities that their entrepreneurial behaviors may create for others.     

Investigating social entrepreneurship: A multidimensional model

Social entrepreneurship is an emerging area of investigation within the entrepreneurship and not-for-profit marketing literatures. A review of the literature emerging from a number of domains reveals that it is fragmented and that there is no coherent theoretical framework. In particular, current conceptualizations of social entrepreneurship fail to adequately consider the unique characteristics of social entrepreneurs and the context within which they must operate. Using grounded theory method and drawing on nine in-depth case studies of social entrepreneurial not-for-profit organizations, this paper addresses this research gap and develops a bounded multidimensional model of social entrepreneurship. Implications for social entrepreneurship theory, management practice, and policy directions are discussed.     

Stigma and business failure: implications for entrepreneurs’ career choices

We use data from global entrepreneurship monitor to examine the act of entrepreneurial reentry by entrepreneurs who exit a failed business. We study reentry by mode of entry and by form of organizing. We find that, in countries where the levels of stigma and regulatory conveyance of stigma markings were at their highest, entrepreneurs who exited failed businesses were less likely to reenter into entrepreneurial activity. Our finding suggests that negative social and economic sanctions that are associated with stigma markings speak only to one side of the entrepreneurship phenomenon. On the other side, stigma can function as a stimulus for entrepreneurs to defy the illegitimacy of the failed business and to actively seek out and engage in innovative behaviors that contribute to the overall diversity of entrepreneurial activities in their country.     

Internationalization and value orientation of entrepreneurial ventures—a Latin American perspective

Entrepreneurial ventures from Latin American emerging economies are underexplored on the current international entrepreneurship literature. This paper is aimed to contribute empirical evidence on entrepreneurial ventures from Latin American emerging economies and their internationalization and value orientation. Based on the 2009 Global Entrepreneurship Monitor data, we found that institutional voids on Latin American emerging economies were a double-edge sword: on one hand, inefficient and unregulated markets make ventures from Latin American emerging economies encounter the liability of their country of origin; on the other hand, less active governments and absence of influential NGOs alternatively trigger more social entrepreneurial opportunities, with some of them across the national border. Some entrepreneurs from Latin American emerging economies have been active in exploiting those international social opportunities. International social entrepreneurship can be regarded as an alternative solution to social problems which governments, NGOs, or for-profit ventures fail to tackle on Latin American emerging economies.     

Who become serial and portfolio entrepreneurs?

“Serial entrepreneurs” run multiple businesses in sequence while “portfolio entrepreneurs” run multiple businesses in parallel; they differ from “novice entrepreneurs” who have so far operated only one venture. The present paper is the first to model occupational choices between all three entrepreneurial types: It goes on to discuss its theoretical predictions in the light of independent evidence about serial and portfolio entrepreneurship from the extant literature.     

Why Create Value for Others? An Exploration of Social Entrepreneurial Motives

Social entrepreneurs create value for and with target communities in need. This paper responds to calls for research addressing social entrepreneurs’ drive to benefit others. We draw from psychology to augment the understanding of motives in entrepreneurship before conducting a phenomenon‐driven, instrumental case study of social entrepreneurs’ motives. We find some emotions, such as entrepreneurial passion and frustration, lead to self‐oriented motives, while sympathy and empathy are precursors for other‐oriented motivations, such as altruism and social justice. This work provides a theoretical platform for future studies in entrepreneurial motivation that addresses the importance of nonfinancial motives and associated rewards for fostering engagement in the sector.     

The benefits of having an entrepreneur-mother: Influence of mother's entrepreneurial status on human capital formation among children

Prior research shows that childcare is a unique driver for female entrepreneurship, as entrepreneurship allows women to increase time allocation on child supervision. Yet, whether female entrepreneurship actually promotes childrearing outcomes remains contentious in extant literature. This study focuses on child human capital formation as a key childrearing outcome. Drawing on the occupational inheritance literature, we suggest that, in addition to supervision, entrepreneur-mothers may foster child human capital formation through value transmission—in particular, transmitting self-direction values to children. Using nationally representative data from China, we find that children with entrepreneur-mothers exhibit better human capital formation outcomes—especially when they are younger and female. We further show that both supervision and value transmission are present, with the latter being a more important mechanism. Reconciling conflicting views in the literature, our study has both theoretical and practical implications.Executive summaryPrior female entrepreneurship research suggests that women often choose to be entrepreneurs out of family, particularly childrearing, considerations. Entrepreneurship offers work autonomy and scheduling flexibility, allowing entrepreneur-mothers to better allocate time to childrearing activities. Given that numerous studies document a positive relationship between maternal time allocation and childrearing outcomes, conceivably entrepreneur-mothers should achieve favorable childrearing outcomes. Entrepreneurial research focusing on the business-family interface, however, suggests female entrepreneurs often face unanticipated pressures that limit their ability to care for family members. In addition, some female entrepreneurs may be motivated more by career than by childcare considerations. As such, the relationship between female entrepreneurship and childrearing outcomes remains conceptually and empirically ambiguous. Given the foregoing situation, we examine this relationship both theoretically and empirically, focusing on child human capital formation as a specific and important childrearing outcome.Examining how female entrepreneurship relates to child human capital formation is of both scholarly and practical importance. First, it brings enhanced clarity to our understanding of the family- and child-related consequences of female entrepreneurship, thus affording reconciliation of the ambiguous predictions found in extant theories. Accordingly, we advance research on female entrepreneurship. Exploring the relationship also adds to the family embeddedness perspective in the broader entrepreneurship literature, because child development is a crucial component within the family domain.Second, our research has practical values and policy implications. Prospective female entrepreneurs may, regardless of their pre-entry intentions, be interested in learning how entering entrepreneurship could affect childrearing outcomes. Policymakers worldwide have been actively promoting entrepreneurship in the past few decades, mainly driven by economic and technological considerations. Because such efforts likely increase female participation in entrepreneurial activities, they should be evaluated to account for their family or childrearing consequences in addition to the economic and technological implications. Therefore, we provide evidence which prospective female entrepreneurs and policymakers can use to make informed decisions.To study the effect of female entrepreneurship on child human capital formation, we note that the ambiguous predictions in extant work arise because it predominantly focuses on whether entrepreneur-mothers can allocate more time to childrearing activities, which we call “supervision”. We suggest that this supervision mechanism is not the only way in which the intergenerational impact occurs. Drawing on sociological research in occupational inheritance, we propose that entrepreneur-mothers could foster child human capital formation through transmitting self-direction values, thus promoting children's aspirations and achievements. To test these theoretical hypotheses, we use data from a nationally representative Chinese household survey, which contains separately surveyed parent and child data.Our empirical analyses reveal that children with entrepreneur-mothers outperform those with non-entrepreneur-mothers in both cognitive and noncognitive skills. The effect is stronger for daughters and younger children. Additional analyses verify the presence of both supervision and value transmission mechanisms, with value transmission being more importantly in explaining the entrepreneur-mother effect.Findings in this study deepen our knowledge on whether and how entrepreneur-mothers foster children's human capital formation. They highlight that—in addition to supervision—value transmission is a crucial channel through which entrepreneur-mothers exert an intergenerational impact on children. Our results also indicate that women running larger businesses—likely those with career motives and targets of policies that promote entrepreneurship—see better child human capital formation outcomes despite having potentially limited supervision capacity. Finally, our findings not only shed light on female entrepreneurship in China, a context with growing relevance in the global economy and rate of entrepreneurial activities, but also offer generalizable insights to other economies.     

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.     

A typology of social entrepreneurs: Motives, search processes and ethical challenges

Social entrepreneurship has been the subject of considerable interest in the literature. This stems from its importance in addressing social problems and enriching communities and societies. In this article, we define social entrepreneurship; discuss its contributions to creating social wealth; offer a typology of entrepreneurs' search processes that lead to the discovery of opportunities for creating social ventures; and articulate the major ethical concerns social entrepreneurs might encounter. We conclude by outlining implications for entrepreneurs and advancing an agenda for future research, especially the ethics of social entrepreneurship.     

Entrepreneurial orientation,social capital,and the internationalization of SMES: Evidence from China

This article combines arguments from entrepreneurship literature and social capital theory to examine the antecedents to the internationalization of small and medium‐sized enterprises (SMEs) from China. Our quantitative study of 117 Chinese SMEs demonstrates the overall importance of entrepreneurial orientation and social capital of entrepreneurs in facilitating their internationalization efforts, and also reveals that different dimensions of entrepreneurial orientation and different types of social capital exert different levels of independent influence on Chinese SMEs' internationalization. Complementary data from multiple case studies explains the variation between our quantitative findings and the findings of previous research. By highlighting the value of the entrepreneurial attributes of Chinese SMEs and the social capital embedded in their networks in the pursuit of their internationalization, the article adds to the scant literature on the internationalization behavior of the rapidly emerging Chinese SMEs. © 2012 Wiley Periodicals, Inc.     

The social value of productive entrepreneurship

As a critical contribution to the literature on social entrepreneurship, this paper provides structure and clarity to this concept, situating it within the context of charity and philanthropy as sources of social value creation. Identifying social entrepreneurship as creating both social and economic value, we discuss productive, unproductive, and destructive entrepreneurship in terms of social value creation. To illustrate these issues comparative case studies are presented on Microsoft Corporation and Grameen Bank. Even if their successes have been derived from different motivations, these highly innovative ventures have created significant economic and social value.     

Conceptualizing knowledge-based entrepreneurship networks: perspectives from the literature

Efforts to promote and support knowledge-based entrepreneurship as a vehicle for economic development are increasingly focused on the importance of networks to entrepreneurial success. This article reviews the extant empirical literature and finds a striking consensus among multiple disciplinary perspectives: not only are networks important, network characteristics also mediate resources important to entrepreneurial performance. Unfortunately, current conceptual frameworks do not adequately account for the unique nature of knowledge spillovers and their role in innovation and economic dynamism. The article suggests that scholars embrace the nascent knowledge spillover theory of entrepreneurship to guide future empirical research on entrepreneurship networks and focus intently on their impact on entrepreneurial performance—and therefore economic growth.