Frontiers of Entrepreneurship Research
1996 Edition
SUMMARIES

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ENTREPRENEURIAL ETHICS: THE IMPACT OF ACCOUNTABILITY AND INDEPENDENCE


Emeric Solymossy
Robert D. Hisrich

Enterprise Hall 513
Weatherhead School of Management
Case Western Reserve University
Cleveland, OH 44106-7235

Telephone
216-368-5354

Fax
216-368-4785

Principal Topics

While widely-discussed from an anecdotal perspective, little research has been done on the ethics of entrepreneurs. Generally, entrepreneurs demonstrate greater independence and different perspectives, employing personal values in their decision process more than their counterparts in large, bureaucratic organizations. In order to focus on the individual nature of business ethics in entrepreneurs, entrepreneurial founders of companies were surveyed on a wide range of topics.

Method

The survey instrument utilized in this study was constructed based on a literature review, maintaining a five a priori objectives. An initial pool of 56 questions and 44 business scenarios gleaned from previous research was reviewed by two judges, who determined each exhibited face validity within the entrepreneurial domain. Questions and scenarios that were not applicable across differing industries and cultures were deleted, as were scenarios judged to be either ambiguous or overly complex. The resulting instrument contained 4 sections: 34 questions having a binary response, 12 scenarios having a multidimensional scale, seven scenarios using a seven- point likert scale, as well as comprehensive demographic information. The first stage of the research effort was the gathering of domestic entrepreneur’s perspectives on business areas relating to marketing, advertising and selling situations, as well as work practices. Topics ranged from specific practices of gift-giving to general issues like truthfulness in customer relations and the influence of competition. Data was gathered through a mail survey of 300 entrepreneurial firms within northeast Ohio. 90 completed surveys were returned, yielding a 30% response rate.

Major Findings

A cross-section of professional backgrounds and industries were represented in the sample. About 90% of the respondents were male, with a high percentage having completed graduate education. The educational attainment level of the respondents differs markedly from the level of graduate school education found in manager, suggesting that managers in traditional organizations tend to achieve higher levels of graduate training. The respondents in the present study were in high income brackets, with a significant number earning over $100,000 annually. While the percentage of respondents feeling that a prescribed code of ethics would assist them in decision-making was similar to that found in previous studies, respondents in this study had a substantially lower percentage of neutral/no responses; a substantially higher percentage believed that a prescribed code of ethics would be of no benefit. 83.3% of the respondents disagreed with the statement that executives of large corporations were typically more honest than the executives of small business enterprises. The entrepreneurs considered themselves more ethical than the average person, and believed mankind to be generally good. This idealistic perspective on mankind diminished when specific issues were presented ( such as trusting a salesperson or depending upon fairness being reciprocal) in different scenarios. The ethics were, however, malleable based upon particular circumstances. A significant majority of entrepreneurs believed that it was not ethical to divulge confidential information to parties external to the firm(93.3%). Yet, when presented with three different scenarios, there were notable differences in response perspectives. There was also a difference in how entrepreneurs viewed what constitutes stealing from a company. While 91.1% stated it was not ethical to remove company supplies for personal use, only 80% felt the same about using company services for personal benefit, and an even lower 76.7% felt it was unethical to use company time for non-company benefits or personal business.

Implications

The results of this research indicates that entrepreneurs have strong positions regarding falsification and maintaining confidentiality, two major areas where entrepreneurs differ from managers. However, within the business environment, the ethics of entrepreneurs were malleable, with emphasis placed on the overall welfare of the enterprise. While expressing high individual standards and providing indications of individual accountability, there does not appear to be any indication of responsibility for overseeing or regulating the activities and ethical behavior of other business people. The entrepreneurs did feel a strong sense of responsibility toward customers and the innocent public.

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