Ethics and Entrepreneurship

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Bessant and Tidd's (2007) types of entrepreneurs
Lifestyle, Growth, and Innovative entrepreneurs
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Variables the influence success
Economic factor, Political factor, Social factor, Competencies, Personality
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Personality of a successful entrepreneur quote
"High need for achievement and a moderate need for power" - McClelland, 1961
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Drivers for innovation
Financial pressure, Social changes, Demand for accountability, Rising consumer expectation
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Strategic innovation
Defensive, Offensive, Imitative
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Define Business ethics
"A study of business situations, activities and decisions where issues of right and wrong are addressed" - Crane and Matten, 2004
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McIntosh, 1998, reason for ethical business
"Some companies have acknowledged ... enhanced corporate reputation to be gained through recognising that capitliams will be most successful when it cares for its customers, its producers, the environment and the communities in which it operates"
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What does ethical business involve?
Conducting business honestly, Treating people fairly, Being accountable, Looking after the environment (Summarised by Crane and Matten, 2004)
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Theories of ethics
Transcendental ethics, Utilitarianism, Ethical relativism, Tactical ethics
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Why does ethics vary?
Values of individuals, Corporate culture, Social norms of society, Laws
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Example of tactical ethics
Coca-cola's SR report avoids several incidents taken to court in South America
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Define Corporate Social Responsibility
"...a situation where the firm goes beyond compliance and engages in actions that appear to further some social good beyond the interests of the firm and that which is required by law" - McWilliams, 2006
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Shareholder view (Who, What)
Friedmand (1970) - responsibility of business is towards its shareholders, to legally maximise profit
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Arguments against shareholder view
Focus on short-term gains rather than long-term growth. Needle: More shareholders want to invest in ethical firms with clear SR
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Stakeholder view (Who, What)
Freeman - managers should balance stakeholders' interests. Firms have a wider social responsibility
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Japanese example of stakeholder responsibility
Japanese firms stayed loyal to suppliers during recession and cut costs elsewhere
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Pyramid of corporate social responsibility (Who, What)
Carroll (1991) - Economic and legal responsibilities are fundamental, ethical and philanthropic responsibilities can only be addressed as long as the firm is managing finacially
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Arguments for Corporate Social Responsiblity
Moral argument, Business argument, Strategic argument
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Moral Argument
Organisations are part of society and has the same responsibility as other citizens. Business activities cause problems (such as oil spillage of Exxon Valdes) and solving such problems would benefit society
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Business Argument
Ethical business is profitable. Gains favour with consumers. Free media coverage which may be more effective than expensive advertising. Studies show that workers in good conditions produce more goods with higher quality
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Strategic Argument
Porter and Kramer, 2006: A source of competitive advantage. Ex: Nestlé
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Arguments against Corporate Social Responsiblity
Alternative debate, Misuse of resources, Business creates conflict, Weak evidence
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Alternative Debate
Levitt, 1958: Governments responsibility. Friedman, 1970: Wealth creation is real social benefit by business
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Misuse of resources
Friedman, 1970: CSR misuses resources which should maximise shareholder value.
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Dodge and Ford Motor in Michigan Supreme Court 1919
"Corporates exist for the sole benefit of its shareholders and concerns for other groups are not relevant."
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Weak evidence
Brammer and Millington, 2008: A study of financial performance of 500 UK firms over 10 years with donations as a measure of CSR was inconclusive
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Kirk O. Hanson on temptations
"Startup culture poses a host of temptations - and resistance is hard"
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Kirk O. Hanson on attracting initial customers and investors
"The temptation to attract initial customers and investors by presenting them with a rose-coloured view of your company is tremendous."
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Why is ethics difficult for startups?
The lack the infrastructure to address ethical challenges. Entrepreneurs have little time to monitor own behaviour. Success is measured in millions and billions of dollars
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Why is honesty the best policy?
Honesty is important for long-term relationship and many businesses rely on repeat business
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Dwight R. Lee on business honesty
"Business interested in long-term survival is more honest than other groups in society - customers detect and avoid deception."
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BPV on business honesty
"However great or small a company's advantages, it is our observation that their durability is usually directly related to how good a partner the company is to those with whom it does business."
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How is Game Theory relevant?
Game theory predicts that repeated interaction will lead to honesty. Deception improves profit once but harms long-term profit
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Cases which supports honesty (CEO)
CEO, had 1w to get funding, found employees had falsified financial reports given to investors. The employees were fired and he was honest with the investors. The firm nearly went bankrupt, but some investors admired his honesty and invested
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Cases which supports honesty (Theranos)
Elizabeth Holmes, blood-testing start up valued at $10 billion after ten years. Lost consumer confidence when revealed that only 15 of 200 tests were by her technology and that the required proficiency test had been skipped
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Reasons for dishonesty (Kimberly Weisul)
"Fake-it-til-you-make-it is pretty much the entrepreneurs' mantra." It takes confidence to take on established firms, but thin line between hubris and fraud
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Reasons for dishonesty (Zappos)
Founder used to run and buy ordered shoes at the store to ship to customers. Ten years later the company's revenue was $1 billion
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Card 2

Front

Variables the influence success

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Economic factor, Political factor, Social factor, Competencies, Personality

Card 3

Front

Personality of a successful entrepreneur quote

Back

Preview of the front of card 3

Card 4

Front

Drivers for innovation

Back

Preview of the front of card 4

Card 5

Front

Strategic innovation

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Preview of the front of card 5
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