Ethical Beliefs and Management Behaviour: A Cross-Cultural Comparison

A cross-cultural empirical study is reported in this article which looks at ethical beliefs and behaviours among French and German managers, and compares this with previous studies of U.S. and Israeli managers using a similar questionnaire. Comparisons are made between what managers say they believe, and what they do, between managers and their peers' attitudes and behaviours, and between perceived top management attitudes and the existence of company policy. In the latter, significant differences are found by national ownership of the company rather than the country in which it is situated. Significant differences are found, for both individual managers by nationality, and for companies by nationality of parents, in the area of organizational loyalty. The attitude towards accepting gifts and favours in exchange for preferential treatment, as a measure of societal values, is also found to show significant differences between national groups. However, no significant differences are found for measures for group loyalty, conflict between organizational and group loyalty and for conflicts between self and group/organization. The findings have implications for cross-border management decision strategies regarding such issues as receiving and giving of gifts, and the management of relations between local employees and international organizations which may be affected by differences in attitude to corporate loyalty.     

Insider trading revisited

A recent article in this Journal argued that insider trading is an unethical practice leading to an inefficiently functioning market. The debate on this topic has primarily pitted ethical defenses of prohibition against economic arguments extolling its allowance. In addition to being incomplete, this approach ignores other unwanted economic effects of prohibition itself and unethical implications of its existence. This article shows that Adam Smith's free market concept, when properly interpreted, provides all the incentive structure necessary for an efficient and ethical marketplace even when insider trading is permitted. Deryl W. Martin has presented his research at several regional and national conferences, and has published in the Journal of Economics and Business, the Journal of Strategic and Financial Decisions, The Moneypaper, and several proceedings and newspapers. He is currently Assistant Professor of Finance at Tennessee Technological University in Cookeville, TN.Jeffrey H. Peterson is a doctoral candidate in finance at the University of Alabama. He also has presented his research at several regional and national meetings, and is currently Instructor of Finance at St. Bonaventure University in Olean, NY.     

Business borrowing and control: A theory of entrepreneurial types

A formal model of the bank borrowing decision by the small firm is provided to explain why some entrepreneurs borrow and others do not, and why some businesses grow and others remain stationary over long periods.Loan capital is productive and increases the firm's revenue but brings the business under the control of the bank. Profits generated by borrowing are a good increasing owner utility whereas control is a bad, reducing it. The consequent tradeoff between borrowing and control implies that the business' optimum will involve borrowing less than the amount that maximises profits. If owner control-aversion is strong enough equilibrium may involve a corner solution with the business being entirely self-funding. The above result holds under conditions of symmetric information and zero credit rationing.Dynamic analysis distinguishes one group of entrepreneurs (Movers) whose preferences towards control evolve through time and their control-aversion diminishes, from another group (Stayers) whose preferences remain stationary. For the Movers borrowing increases over time up to a profit-maximising optimum whereas for the Stayers independence of control is maintained but at the expense of non-growth.     

A Network-based Approach on Opportunity Recognition

This paper argues that individuals differ in terms of their perception of opportunities because of the differences between the networks they are embedded in. We focus on two aspects of individuals embeddedness in networks, that is, (1) individuals belonging to residential areas that are more or less likely to be characterized by network cohesion, and (2) individuals differential access to network contacts based on the level of human capital they hold. Our analyses show that the nature of ones residential area influences the perception of entrepreneurial opportunities. Further, we find a positive effect for education, i.e., people with a higher educational level are more likely to perceive entrepreneurial opportunities compared to those with a lower educational level.     

Professionalism: Foundation for business ethics

Professionalism includes the essential contents of other key notions within the field of business ethics. As a term involving the notion of vocation it may be understood as containing a religious content, since vocation refers to a man's most intimate personal decisions, destiny and providence. Professionalism also connotes respect for law and so includes a reference to commercial law as a guide to right conduct. Professionalsim thus lifts the requirements of law to the level of personal commitment.Like an honest act, professionalism may not be easy to define, but you will know it when you see it. As for professionalism's practitioners, like the practitioners of honesty, their art is learned not by seeking definitions of what they do, but by practicing professionalism. Only if this practice becomes an obsession with the Business Aristocracy can we expect professionalism to seize the soul of lesser businessmen and suffuse the entire business community. Thomas E. Schaefer, Ph. D., is Professor of Business Administration at the University of Texas, Permian Basin. He was formerly Head of the Department of Business Administration, University of Alaska, and Dean of Business Administration, Sacred Heart University, Puerto Rico. He has received a Private Sector Award of Pres. Reagan for Extraordinary Contributions to Small Business. His most important publications are: The Process of Management: What Supervisors Do (O.C. Press, 1982); Leadership Through Followership, Business Horizons (September/October, 1982) and many others.Paper presented at the 16th Conference on Value Inquiry, entitled: Ethics and the Market Place: An Exercise in Bridge-Building or On the Slopes of the Inteface.     

Towards an Integrative Model of Small Firm Internationalisation

Firm internationalisation has long been regarded as an incremental process, wherein firms gravitate towards psychologically close markets and increase commitment to international markets in a gradual, step-wise, manner through a series of evolutionary stages. However, much of the recent literature provides clear evidence of rapid and dedicated internationalisation by born global firms. Typically, these are smaller entrepreneurial firms that internationalise from inception, or start to shortly thereafter. Their main source of competitive advantage is often related to a more sophisticated knowledge base. In addition, the authors have found evidence of firms supporting this born global pattern of behaviour but also evidence of firms that suddenly internationalise after a long period of focusing on the domestic market. These born-again globals appear to be influenced by critical events that provide them with additional human or financial resources, such as changes in ownership/management, being taken over by another company with international networks, or themselves acquiring such a firm. Based upon the extant literature and our own research, we propose an integrative model that recognises the existence of different internationalisation pathways. We then explore differences in behaviour due to the firm's internationalisation trajectory and discuss the strategic and public policy implications.     

Employment,entrepreneurship and 1992: Microeconomic policy and European problems

Policy conclusions This essay has covered several areas which are not usually regarded as closely interrelated. Policy conclusions have been discussed briefly at various points, and will now be developed more fully in this final section. As evidence for the interrelatedness of such disparate fields as corporate finance and employment policy, we start from the observation that many large firms are relatively inefficient, particularly at product innovation and flexible organization and employment policies, in part because top managerial compensation depends mainly on size. This creates an incentive for excessive growth and empire building, rather than payment to shareholders of the free cash flow which cannot be profitably invested internally. More appropriate incentives for top management would increase dividend payments, and hence the flow of funds into the capital market available for financing new start-ups and small firms as venture capital. Even in the U.S. the cost of obtaining external capital often constrains small firms to invest only their internal cash flow (Fazzari et al., 1988).Increased entry of new firms would also be encouraged by labour market flexibility and deregulation, as well as reduction of excessive state subsidies and other support for large existing corporations. Enlargement of the small firm sector, in turn, would enhance competition, increase the overall rate of return on capital, and above all expand employment, following experience in the U.S. An exclusive focus of employment policy on aggregate demand or on wages and the labour market will thus miss important avenues through which welfare, competitivity and employment can all be influenced simultaneously without additional public expenditure (FitzRoy, 1989).The integrated view espoused here is also important in assessing the consequences of removing direct barriers to trade within the EC by 1992. Much official thought assumes that competitiveness and efficiency will automatically be increased by these developments, with consequent employment gains to follow. However, as usual in economics, there are countervailing tendencies which deserve emphasis (Kay, 1989). In particular, liberalization of capital markets without improvement of the incentives provided to top management of large corporations is likely to generate a substantial increase of takeover activity. The experience in the U.S. in recent years summarized above casts doubt on the efficiency-enhancing effects of unrestricted takeovers. Pursuit of speculative capital gains, insider trading, which is scarcely sanctioned in many contexts in Europe, and excessive growth by the manager of free cash flows are likely results. The LBO operations which are most likely to increase efficiency are inhibited in Europe by the risk-aversion of senior managers. Top-heavy conglomerates, ultimately increased market power, and negative effects on employment, and consumer welfare are by no means implausible unless policy makers abandon their cherished but unrealistic faith in economies of scale, and institute a throughoing reversal of current policy towards large firms, preferably coupled with support for venture capital for new start-ups and small firms.Tax policy is a traditional method for achieving specific allocative goals, but one which is currently providing perverse rather than positive incentives for employment growth. The rapid increase of non-wage labour costs in the form of payroll and other related taxes, largely to fund a pay-as-you-go system of social security benefits, represents a tax on employment which accelerates the substitution of labour by capital equipment. The major obstacle to replacing these perverse taxes by less distorting consumption or value-added taxes (VAT) is the distributive consequence of such change. Similar arguments are advanced against abolition of the double taxation of dividends, which encourages wasteful investment by large corporations, and against introduction of urgently needed environmental taxes on energy use and toxic emissions. A simplified negative income tax or support for low income recipients would in fact remove the hardship from the redistributive consequences of tax reform, but the political obstacles seem to be currently insurmountable. At the very least, however, these problems deserve much more intensive discussion and wider recognition than they have hitherto received.A major extension of adult retraining schemes following the example of Sweden seems to be the policy measure with the highest chances of realization, in part because the direct costs in the short run are relatively small, and also involve job creation. Removal of tax penalties for part-time work should also be feasible without substantial distributive effects, and would represent a first step towards general flexibility of working according to individual preferences. Clearly the state sector, still a major employer, could usefully lead the way instead of generally lagging behind the private sector. Overcoming ideological and sectarian opposition by organized labour leaders offers a challenge to public authorities and educational channels.A move to more flexible, decentralized wage bargaining and deregulation of the more archaic institutions of labour markets to facilitate entry by the self-employed and new firms should arguably be the ultimate goal for policy towards noninflationary full employment. While benefits from centralized or corporatist bargaining structures are sometimes claimed, the importance of new firm entry for employment and competition would appear to shift the weight of the evidence in favour of decentralization. However the political obstacles in most European countries are formidable, and promise only glacially slow progress.In view of evidence for failure of the capital market for small business in the U.S. noted above, a case could be made for state support and extension of the much less developed European venture capital market. Existing state grants and other systems, designed to encourage new investment and employment, are usually too cumbersome and bureaucratic. The paperwork involved often represents a major deterrent for small enterprises or new start-ups, and the time lags involved are particularly damaging to high-tech prospects where new ideas can quickly become obsolescent. It is quite conceivable that state funded venture capital suppliers, efficiently organized as independent local units, could develop into profitable going concerns able to repay their loan capital in the long run. To maximize the employment impact it is important to go beyond high tech, and offer funds in any promising service or manufacturing area, according to the available expertise of specialized personnel and institutions. A precondition for success is that staff should be profit sharing professionals rather than salaried civil servants. Similarly, employees should be encouraged to accept shares in future profits rather than initially high wages, to reduce the liquidity constraints on new businesses.It has been argued here that employment and industrial policy are closely interrelated, and should thus be coordinated in the light of recent research in these fields. This requires both academics and policy makers to cross conventional boundaries and take a broader view of the economy than is customary under the specialization that severely restricts much of the relevant debate. Current piecemeal policies, even with the help of the longest postwar boom, have hardly dented the problem of long run unemployment to date, and are unlikely to do so after 1992 without fundamental reorientation.     

What is business in America?

This paper, presented at the Conference on Value Issues in Business at Millsaps College, is divided into three parts. The first sketches the logic of the evolution of U.S. business and suggests reasons for its remarkable success. The second assesses the power of U.S. business in modern society, both from an economic and political perspective. The third attempts to formulate the underlying philosophy of U.S. business using ideals such as the work ethic, entrepreneurism, democracy, and equality. Some of these ideals, the paper suggests, are irreconcilable. Thomas J. Donaldson is Associate Professor of Philosophy at Loyola University of Chicago. His publications in the area of business ethics include numerous articles and two books, Ethical Issues in Business co-edited with Patricia Werhane, and Corporations and Morality.     

Small firm mutual funds: Additional evidence on the small firm effect

Returns generated with small firm mutual fund data are used to examine the extent to which identification of a small firm effect is due to the difficulty in measuring the direct and indirect transaction costs involved in investing in the common shares of small capitalization stocks. Little if any evidence of the excess risk-adjusted returns is obtained for either of the period 1978–1983, when the small firm effect was observed, or the period 1984–1989, when it was not. The small firm effect may therefore be attributed to (1) higher direct transaction costs including bid-ask spread and broker fees and (2) higher indirect transaction costs including portfolio management expenses and market impact costs.The authors thank an anonymous referee for helpful comments on an earlier version of this paper, and Brett Salazar for valuable assistance in data collection. Errors remain our own.     

Limitations of ethical reasoning as an action (praxis) strategy

For both philosophers and managers, reasoning with ourselves and others can be used both as (1) a way of knowing what is ethical and (2) a way of acting to help ourselves, others and organizations behave ethically. However, for many of us, knowing is frequently not the same as acting. Four areas are addressed: (1) thirteen limitations of ethical reasoning as an action strategy; (2) how a better understanding of these limitations can strengthen ethical reasoning as an action strategy; (3) how an understanding of these limitations can serve as a conceptual foundation for exploring other ethical action strategies; and, (4) implications for experiential learning and teaching. Richard P. Nielsen is a Management Professor in the Department of Organizational Studies, School of Management, Boston College, Chestnut Hill, MA 02167. Related articles of his include Toward an Action Philosophy for Managers Based on Arendt and Tillich, Journal of Business Ethics, May 1984, What Can Managers Do about Unethical Management, Journal of Business Ethics, May 1987, and Cooperative Strategy, Strategic Management Journal 9, 1988.     

National Innovation Systems, ‘Real Economies’ and Instituted Processes

The design of institutions, policies and units of analysis are all predicated upon the ways in which we see the world and explain change. Today, as the pace of change quickens due to technological advancement and growing technoeconomic interdependencies in a series of processes generally referred to as globalization, analytic frameworks which emphasize national systems have emerged to provide a unit of analysis through which to explain these changes and growing interactions. These frameworks have the allure of trying to incorporate the ways in which economies, markets and economic agents actually behave – with particular reference to innovation, knowledge, learning and institutions. Our purpose in this paper is to raise some questions about the importance of these frameworks from a policy (managerial) and analytic perspective, to outline some limitations of their utility, and to suggest some useful paths for investigation.     

A Qualitative Exploration into Voters' Ethical Perceptions of Political Advertising: Discourse, Disinformation, and Moral Boundaries

Political campaign advertising continues to be a controversial policy topic in advertising and marketing research. It is also a prime subject for investigating the ethical evaluations of consumers (or voters). The following study draws from postmodern communication theory and employs a qualitative research methodology in order to explore voters' intimate and subjective views about politics, candidates, and political advertising. The findings include emergent themes relating to significant media rituals in voters' lives, the cynical perspective of politics as a game, and the widespread disapproval and suspicion with which voters regard negative political advertising. Additionally, the a priori theme of political information as disinformation was proposed and expanded upon. Findings are discussed in light of a greater understanding of the appropriateness of the traditional versus the postmodern perspective of political communication, informants' construction of moral boundaries which help them determine right from wrong, acceptable vs. unacceptable political behaviours in this particular context.     

A quick justification for business ethics

The article examines the question of whether business ethics courses ought to have an impact. Despite the still common attitude among students and some business professionals that ethical considerations are less pressing in business, I argue that moral obligations are just as important there as elsewhere. The emphasis on profits in business is related to other realms (e.g., hobbies and seeking and education) in which, though private goals are dominant, moral limits remain in force. Business ethics courses can play a crucial role in emphasizing the necessity of ethical analysis in business. Louis G. Lombardi is Assistant Professor of Philosophy at the Lake Forest College and the author of Inherent Worth, Respect, and Rights in Environmental Ethics.     

Saturday Review's annual advertising awards

Saturday Review's long, commendable effort to identify corporations willing to promote the general good through their advertising was damaged in 1977 because of procedural changes in the awards. Prior to 1977 the named judges made the important distinction between public-service (non-image) and public-relations (corporate image) advertising. But in 1977 the judges were not named and the public service/public relations distinction was eliminated, replaced by the single category of public spirited ads. Most of these ads, however, were not public spirited, but were public relations ads. But in 1978 this deception was ended by the empaneling of a new kind of jury, one drawn from the S.I. Newhouse School of Public Communications. James Richard Bennett is Professor of English at the University of Arkansas, Fayetteville. He is the editor of Style, a Journal of Stylistics. He won the Fulbright Teaching Award in Yugoslavia in 1968–69. His most important publication is: Prose Style: A Historical Approach Through Studies, 1971.I wish to thank Professor Leonard White of the Department of Economics at the University of Arkansas for his advice concerning several of the ads discussed herein.     

International Entrepreneurship Research: What Scope for International Business Theories?

International entrepreneurship (IE) research has commonly neglected significant perspectives applied by international business scholars. Explanations for the emergence and growth of international entrepreneurial firms largely focus on the resource-based view and the network perspective. While these approaches are useful, we suggest that IE would benefit significantly from a greater emphasis on its international nature. Therefore, theories of international business should be employed in conjunction with other approaches in order to appropriately emphasize the international character, holistically study the IE notion, and considerably broaden the scope of IE examination. Suggestions for relevant research directions are discussed.     

Demand-side Spillovers and Semi-collusion in the Mobile Communications Market

We analyze roaming policy in the market for mobile telecommunications. Firms undertake quality improving investments in network infrastructure in order to increase geographical coverage, capacity in a given area, or functionality. Prior to investments, roaming policy is determined. We show that under collusion at the investment stage, firms and a benevolent welfare maximizing regulators interests coincide, and no regulatory intervention is needed. When investments are undertaken non-cooperatively, firms and the regulators interests do not coincide. Contrary to what seems to be the regulators concern, firms would decide on a higher roaming quality than the regulator. The effects of allowing a virtual operator to enter are also examined. Furthermore, we discuss some implications for competition policy with regard to network infrastructure investment.     

Factors Impacting the Adoption of the Internet among SMEs

The Internet can extend market reach and operational efficiency of small and medium enterprises (SMEs) and enhance their contributions to the U.S. economy. This paper reports an empirical study conducted to identify the factors that impact SMEs involvement with the Internet. Internal and external variables such as firm size, self-efficacy, prior technology use, etc. are used to predict the level of Internet involvement. This involvement is examined in terms of ownership of a web site (adoption) and use of the Internet for selling purposes (routinization). Logistic regression is used to examine the relationships between internal and external factors and SMEs involvement with the Internet. The results suggest that specific factors contribute to the SMEs involvement with the Internet – prior technology use and the customer service subscale of perceived competitive pressure influence both stages of Internet adoption. Moreover, the relative importance of some of these predictor variables decreases as the level of Internet involvement increases. Past media use does not explain SME behavior – in terms of adoption or routinization. These findings can be used to develop strategies to build SME involvement with the Internet.     

Business ethics and commercial morality: Report of the Royal Commission into Commercial Activities

This section is focused on some areas of concern which were identified in The Report of the Royal Commission into Commercial Activities of Government and Other Matters (1990–1992). In the Report a number of situations were examined in which some individuals acted without recourse to any ethical guidelines. Most of the people mentioned in the Report held responsible positions in either Government or the private sector, and all were very well known in the community. The Report of the Royal Commission made a number of findings of serious impropriety on the part of several individuals, although there was comparatively little evidence of illegal or corrupt conduct. This section shows what happened to a governmental system in an Australian state when a number of Ministers and their advisors placed their personal or party advantage over their constitutional obligation to act in the community's interests.Those who cannot remember the past are condemned to repeat it.George Santayana (1863–1952)Michael Small is a Senior L1ecturer in the Curtin Business School, Western Australia. Earlier positions have included appointments with the Commonwealth Attorney-General's Department and more recently as Senior Lecturer in the Australian Police Staff College.     

The ethics of Nigeria's proposed withdrawal from the organisation of petroleum exporting countries

In the wake of the prevailing world oil glut which has affected the revenue earning powers of OPEC (Organisation of Petroleum Exporting Countries) members, there are serious proposals and arguments in favour of Nigeria's withdrawal from OPEC.The mission of this paper is to question the ethical basis of this proposed strategy after she has benefited from OPEC membership for over a decade. This paper postulates that it would be ethically wrong to do so and suggests a strategy that would boost the petrochemical industry for agriculture, building, pharmaceuticals, automative industry, etc. Dr. Bedford A. Fubara is Senior Lecturer and Head of the Department at the Rivers State University of Science and Technology in Port Harcourt, Nigeria. He was awarded the Columbia University Fellowship 1970–1972 and he received the Unesco Research Award in 1981/1982. His most important publications are: Negative Profitability Performances of Public Enterprises in Developing Countries: A Business Policy Anatomy, 1984, Public Enterprise 4; Government in Business, 1983, Management in Nigeria; Corporate Planning Art in Nigeria: The Experiental Evidence of Corporate Executive, Long Range Planning (forthcoming).This research was financed by the Rivers State University of Science and Technology under Project No. SRPC/014 dated 11th June, 1984.     

Mergers,takeovers, and a property ethic

The recent takeover and merger trend cries out for ethical evaluation. This essay proposes a model for evaluating them in terms of their impact on a firm's immediate stakeholders: investors, owners, management and employees. Since mergers and takeovers are Transfers of Ownership of Firms (TOFs) they entail a property ethic of ownership, control, securing stakeholder interests, and defining which stakeholders should exercise these rights. I use the model to evaluate two fictional cases, a friendly merger and a hostile takeover. The results show that neither TOF serves all interests equitably. Since the control structure of the private firm is legitimized by its interest structure, I reason that both should be reformed. Both rest on a broader economic rationale; but it is controverted. Accordingly, the economic and ethical evaluation of TOFs, I conclude, both entail the democratic reform of the control structure of the firm.A corporation represents far more than its current stock price; it embodies obligations to employees, customers, suppliers and communities.Robert S. Saul, Peers Merchant BankVincent di Norcia is Associate Professor of Philosophy at the University of Sudbury. He is the author of Ethics in Management and Beyond the Red Tory.