Entrepreneurial Ethical Decision Making: Context and Determinants

Introduction

The entrepreneur’s characteristics and decisions have a significant influence on both daily operations and long-term strategic manoeuvres of a company in micro and small sized enterprises. As the company size gets smaller in terms of employee numbers, the influence of the entrepreneur become more significant. This chapter explores the relevant concepts and existing theories on ethical decision making within SMEs context and entrepreneurs as individuals to understand how and in what ways they can influence their organizations. Management and ownership cannot be detached from each other and the entrepreneur’s preferences on self-interest impacts on the company for better or worse (Spence & Rutherfoord, 2003; Smith & Oakley, 1994). When at least 95% of all private enterprises in most of the countries are SMEs and they are the primary source of employment, it is crucial to understand the decision mechanism of entrepreneurs who run these companies (European Comission, 2013).

At this point, a clarification on the distinction between entrepreneur and small and medium sized enterprise owner has to be made. Although small business owners are seen as managers who do not strive for growth and expansion and are perceived as seeking a stable approach in running their businesses and entrepreneurs are seen as individuals with a primary goal of growth, profitability and innovation (Kuratko, 2013) this distinction as such can be considered as misleading since not all SME owners are after stability and not all entrepreneurs carry similar characteristics. Existing literature frequently treats entrepreneurs as a homogenous group with identical powers and properties and they are treated as “equally capable” when it comes to starting up and operating a business and these lead to omission of those entrepreneurs that do not necessarily fit the stereotypical image of an entrepreneur (Kaŝperovà &Kitching, 2014). Considering the fact that, SMEs are profit-seeking companies, there is an element of growth and profitability orientation in SME owners as well. Furthermore, both entrepreneurs and SME owners are the principal decision makers, thus differentiating them from larger organizations and creating a commonality between them (Batchelor et al., 2011). Therefore, instead of making a distinction between the two and focusing on either category in the literature, this chapter assumes that there is varying degrees of entrepreneurial capacity in SME owners and uses the term entrepreneur to represent both entrepreneurs and SME owners.

Within this chapter, concepts of greed and power (Fassin, 2005; Gallo, 1998); cognitive moral development (Kohlberg, 1968; Gilligan, 1982); ethical ideologies (Forsyth, 1980; Rest, 1986) and entrepreneurs’ psychological characteristics (Shane, 2003; Trevino, 1986) are explored from the literature in order to build a bridge between individual moral psychology and entrepreneurial decision making. Nevertheless, although individual ethical values correlate with the decision-making process enough research has been done to show that external factors play a very crucial role in that process as well (Allmon, Page & Roberts, 2000). Therefore, the chapter also critically discusses organisational factors and entrepreneurial environment (Hegarty & Sims, 1978; Wu, 2002; Longenecker, McKinney & Moore, 2006; Stead, Worrell & Stead, 1990) and how these can influence an individual decision making process of an entrepreneur.