In this paper the exclusive focus on large firms in the field of business ethics is challenged. Some of the idiosyncrasies of small firms are explained, and links are made between these and potential ethical issues. A review of the existing literature on ethics in small firms demonstrates the lack of appropriate research, so that to date we can draw no firm conclusions in relation to ethics in the small firm. Recommendations are made as to the way forward for small (...) firm business ethics research. Questions for investigation are suggested using micro, meso and macro perspectives. Much exploratory work needs to be done to lay the groundwork for this important area of social and commercial research in the future. (shrink)

This paper explores the nature of the relationship between corporate social responsibility (CSR) and competitiveness. We start with the commonly held view that firm competitiveness is defined by the market. That is, the question of what are the critical competitiveness factors is answered by looking at how companies and financial analysts describe and evaluate a firm. To analyze this, we review the current state of the art on the relationship between CSR and competitiveness. Second, CSR criteria used by financial analysts (...) is identified and compared with company valuation methods. Third, the results of a multi-stakeholder dialogue on CSR and competitiveness of the European financial sector are presented. As a conclusion, we argue that CSR and competitiveness relate through a learning and innovation cycle, where corporate values, policies and practices are permanently defined and re-defined. Thus, we propose that learning takes place as CSR is embedded in business processes, and that once it has been integrated, in turn, it generates innovative practices, and finally, competitiveness. At the end of the paper, we propose that CSR in practice consists of managing inherent paradoxes generated by the tension between CSR and business policies. (shrink)

While Corporate Social Responsibility (CSR) has traditionally been the domain of the corporate sector, recognition of the growing significance of the Small and Medium Sized Enterprise (SME) sector has led to an emphasis on their social and environmental impact, illustrated by an increasing number of initiatives aimed at engaging SMEs in the CSR agenda. CSR has been well researched in large companies, but SMEs have received less attention in this area. This paper presents the findings from a U.K. wide study (...) of socially responsible SMEs. The 24 companies studied were chosen as “exemplars” of␣CSR in SMEs. The aim of this study therefore is to progress understanding of both the limitations on and opportunities for CSR in SMEs through the exploration of exemplary characteristics in the study companies. Key areas of investigation were CSR terminology, the influence of managerial values, the nature of SME CSR activities, motivation for and benefits from engaging in CSR, and the challenges faced. The results of this study demonstrate some of the exemplary goals and principles needed to achieve social responsibility in SMEs, and begin to provide knowledge that could be used to engender learning in other SMEs. In particular, there is evidence that stakeholder theory may provide a framework in which SMEs and CSR can be understood. SMEs prefer to learn through networking and from their peers, so this is a possible avenue for greater SME engagement in CSR. This would require strong leadership or “championing” from individuals such as highly motivated owner–managers and from exemplary companies as a whole. (shrink)

The authors use empirical research into the environmental practices of 31 manufacturing small and medium-sized enterprises (SMEs) to show that ‚business performance’ and ‚regulation’ considerations drive behaviour. They suggest that this is inevitable, given the market-based decision-making frames that permeate and dominate the industry in which manufacturing SMEs operate. Since the environment is a pillar of corporate social responsibility (CSR), the findings have important implications for CSR policy, which promotes voluntary actions predicated on a business case. It is argued that (...) this approach will not alter the behaviour of manufacturing SMEs significantly because CSR practice will be regarded as an optional and costly ‚extra’ affecting core business activity. Consequently, the use and development of existing regulatory structures, providing minimum standards for many activities covered by CSR, remains the most effective means through which the behaviour of manufacturing SMEs will be changed in the short to medium-term. Another feature of the paper is the distinction made between ‚business performance’ and the ‚business case’ argument. Business performance emphasises cost reductions and efficiency whereas the business case accentuates the benefits to shareholders of good practices as their firms become more attractive to stakeholders and society. Manufacturing SMEs␣try to improve business performance because of the pressures placed on them by market-dominated decision-making frames. These frames do not encourage manufacturing SMEs to undertake voluntary actions for the benefit of wider stakeholders and society. (shrink)

This article provides empirical results indicating that acting in a socially respon- sible and lawful manner is a necessary, though not sufficient, condition for increasing shareholder wealth. It meta-analyzes 27 event studies that have mea- sured the stock market's reaction to incidences of socially irresponsible and illicit behavior. It finds that for firms engaging in socially irresponsible and illicit behavior, the effect on shareholder wealth is negative (wealth decreases), statisti- cally significant (p <.001), and so substantial in size (D = (...) -.932) that the distribution of abnormal returns is shifted nearly a full standard deviation to the left (i.e., negatively) from their expected standard normal distribution. This result gives rationally self-interested firms a self-interested reason to act in a socially responsible and law-abiding manner. It also provides support for a moral position called enlightened self-interest, which prescribes that firms should act in a socially responsible manner to promote the shareholders' interests. (shrink)

The 'Evolution of Cooperation' addresses a simple yet age-old question; If living things evolve through competition, how can cooperation ever emerge? Despite the abundant evidence of cooperation all around us, there existed no purely naturalistic answer to this question until 1979, when Robert Axelrod famously ran a computer tournament featuring a standard game-theory exercise called The Prisoner's Dilemma. To everyone's surprise, the program that won the tournament, named Tit for Tat, was not only the simplest but the most "cooperative" entrant. (...) This unexpected victory proved that cooperation - one might even say altruism - is mathematically possible and therefore needs no hidden hand or divine agent to create and sustain it. A great roadblock to the understanding of all sorts of behavior was at last removed. The updated edition includes an extensive new chapter on cooperation in cancer cells and among terrorist organizations. (shrink)

Allthough small business accounts for over 90% of businesses in U.K. and indeed elsewhere, they remain the largely uncharted area of ethics. There has not been any research based on the perspective of small business owners, to define what echical delemmas they face and how, if at all, they resolve them. This paper explores ethics from the perspective of small business owner, using focus groups and reports on four clearly identifiable themes of ethical delemmas; entrepreneurial activity itself, conflicts of personal (...) values with business needs, social responsibility and the impact of owners' personality on business ethics. The mechanisms for resolving ethical dilemmas is not at all clear, as there appears to be a web of filters which are used in an inter-connected way. However a common starting point for resolving an ethical delemma which involves others is based on identifying who it is (e.g., a friend or institution) and the quality of the relationship with that person. The research yielded a rich source of material on business ethics and it is clear that future researchers must focus on this sector if business ethics is to make significant advances. (shrink)

This article introduces the important issue of communicating with small firms about ethical issues. Evidence from two research projects from the U.K. and Spain are used to indicate some of the important issues and how small firms may differ from large firms in this area. The importance of informal mechanisms such as the influence of friends, family and employees are highlighted, and the likely ineffectiveness of formal tools such as Codes and Social and Ethical Standards suggested. Further resarch in the (...) area of small firms and ethics is essential. (shrink)

Corporate reputation is an intangible asset that is related to marketing and financial performance. The social, economic, and global environment of the 1990'shas resulted in environmental performance becoming an increasingly important component of a company'sreputation. This paper explores the relationship between reputation, environmental performance, and financial performance, and looks at the contingencies that impact environmental policy making.

This study investigates the hypothesis that the advantage corporate social performance (CSP) yields in attracting human resources depends on the degree of job choice possessed by the job seeking population. Results indicate that organizational CSP is positively related to employer attractiveness for job seekers with high levels of job choice but not related for populations with low levels suggesting advantages to firms with high levels of CSP in the ability to attract the most qualified employees.

Building on earlier work on the relationship between corporate social performance (CSP) and a firm’s financial performance, this integrative empirical study supports the theoretical argument that the higher a firm’s CSP the lower its financial risk. Specifically, the relationship between CSP and risk appears to be one of reciprocal causality, because prior CSP is negatively related to subsequent financial risk, and prior financial risk is negatively related to subsequent CSP. Additionally, CSP is more strongly correlated with measures of market risk (...) than measures of accounting risk. Of all CSP measures, reputation for social responsibility appears to be the most important one in terms of its risk implications. (shrink)

This study complements previous empirical research on the business case for corporate social responsibility (CSR) by employing hitherto unused data on corporate social performance (CSP) and proposing statistical analyses to account for bi-directional causality between social and financial performance. By allowing for differences in the importance of single components of CSP between industries, the data in this study overcome certain limitations of the databases used in earlier studies. The econometrics employed offer a rigorous way of addressing the problem of endogeneity (...) due to simultaneous causality. Although the study’s results provide no evidence that there is a generic or universal business case for CSR, they indicate that there is a strong link between single stakeholder-related issues of CSR and financial performance. However, the analysis does not establish causality within these relationships. (shrink)

In this paper, the approaches of a sample of small firms to environmental issues in the UK and the Netherlands are compared.The study makes a contribution by addressing the lack of research on small firms and the environment, as well as offering insights intothe influence that cultural. institutional, and political frameworks can have on small firm owner-managers' attitudes to external issues. The environment is considered here as an ethical issue, drawing on work on the environmental responsibility of business by both (...) Bowie (1990) and Hoffman (1991). It is argued that the approaches to the environment identified in this study by Dutch and UK small firm owner-managers do not fit in with the positions of either Bowie or Hoffman. The concept of stakeholder cooperation is proposed as a more realistic alternative. (shrink)

Assumed benefits from improved reputation are often used as motives to drive corporate social responsibility (CSR) initiatives. Are improved cost efficiencies among these reputation benefits? Cost efficiencies and cost management have become more relevant as revenue streams dry up in these tough economic times. Can a good reputation aid these efforts to develop cost efficiencies specifically when managing labor costs? Prior research hypothesizes that good reputation can create labor productivity and efficiency benefits. The purpose of this study is to empirically (...) investigate reputation's relationship with labor efficiency, labor productivity, and labor cost. Using a sample of highly reputable firms from Fortune's America's Most Admired Companies list and a corresponding matched sample of firms, we find that reputation is associated with improved labor efficiency and labor productivity. However, we do not find a significant association between reputation and reduced labor costs. Our study contributes to current research hypothesizing and finding efficiency benefits associated with good reputation. Documenting these potential reputation benefits has important implications for CSR activities and initiatives. It supports recent work that incorporates reputation into a more developed model of the relationship between CSR and performance (Vilanova et al.: 2009, Journal of Business Ethics 87, 57-69). This work is useful to businesses and supports strategies focused on "doing well by doing good" and maintaining healthy reputations. (shrink)

"Social capital" can be considered to be the product of co-operationbetween various institutions, networks and business partners. It haspotential as a useful tool for business ethics. In this article weidentify categories pertinent to the measurement of social capital insmall and medium sized enterprises (SMEs). By drawing on three differentsectors, one business-to-business service, one business-to-customerservice, and one manufacturing, we have enabled the consideration ofsectoral differences. We find sector to play an important part inrelation to business practices and social capital. Our inclusion (...) of SMEsfrom Germany and the United Kingdom has called attention to cultural,institutional and economic aspects of two regions of Europe and how theycan influence SME social capital. Social capital is found to beinfluenced by context and, in particular, institutional arrangements. Inanalysing the data we note particular areas of interest from the pointof view of SMEs and social capital as being: formal engagement,networking within sectors, networking across sectors, volunteerism andgiving to charity, and finally a focus on why people engage. We concludethat there is a considerable amount of further research needed on socialcapital, SME''s and business ethics. (shrink)

Firms engage in corporate social responsibility (CSR) because they consider that some kind of competitive advantage accrues to them. We contend that resource-based perspectives (RBP) are useful to understand why firms engage in CSR activities and disclosure. From a resource-based perspective CSR is seen as providing internal or external benefits, or both. Investments in socially responsible activities may have internal benefits by helping a firm to develop new resources and capabilities which are related namely to know-how and corporate culture. In (...) effect, investing in social responsibility activities and disclosure has important consequences on the creation or depletion of fundamental intangible resources, namely those associated with employees. The external benefits of CSR are related to its effect on corporate reputation. Corporate reputation can be understood as a fundamental intangible resource which can be created or depleted as a consequence of the decisions to engage or not in social responsibility activities and disclosure. Firms with good social responsibility reputation may improve relations with external actors. They may also attract better employees or increase current employees’ motivation, morale, commitment and loyalty to the firm. This article contributes to the understanding of why CSR may be seen as having strategic value for firms and how RBP can be used in such endeavour. (shrink)

Several researchers have suggested that a talented, quality workforce will become a more important source of competitive advantage for firms in the future. Drawing on social identity theory and signaling theory, the authors hypothesize that firms can use their corporate social performance (CSP) activities to attract job applicants. Specifically, signaling theory suggests that a firm’s CSP sends signals to prospective job applicants about what it would be like to work for a firm. Social identity theory suggests that job applicants have (...) higher self-images whenworking for socially responsive firms over their less responsive counterparts. The authors conducted an experiment in which they manipulated CSP and found that prospective job applicants are more likely to pursue jobs from socially responsible firms than from firms with poor social performance reputations. The implications of these findings for academicians and practitioners alike are discussed. (shrink)

A horseshoe is regarded as a lucky, perhaps even romantic, symbol of our industrial heritage. Why is it, then, that much of English literature, from Mandeville's ‘Grumbling Hive’ on, portrays business in a murky light? The paper begins with an analysis of this phenomenon and concludes that it is the institutionalisation and legitimisation of avarice and its consequential effects that gives rise to such a portrayal. A horseshoe has also been used as a convenient means of conceptualising an answer to (...) the questions this conclusion raises: ‘Who should control the corporation and for what ends?’ (Mintzberg 1985) and discussing recent developments in corporate social responsibility. Drawing on research evidence the paper demonstrates how corporations are simultaneously under pressure from society and responding to its concerns. The paper concludes that these current developments can at best ameliorate the situation, and that what is necessary is to rediscover the notion of corporate virtue, instead of putting virtue at the service of vice. (shrink)

In this editorial to a collection of papers on ethics in small firms, the case is made for greater use of high quality empirical research on business ethics. Sociological perspectives have much to offer to the field of business ethics that continues to be dominated by normative, moral philosophy. The second contribution of the paper is to argue for a reorientation away from the large multi-national firm as a benchmark subject of business ethics research. One important point of view to (...) be included is that of the small firm, which remains the dominant organisational form throughout all the OECD countries. (shrink)

In this paper we report on empirical research which investigates social capital of Small and Medium Sized Enterprises (SMEs). Bringing an international perspective to the work, we make a comparison between 30 firms located in West London and Munich in the sectors of food manufacturing/production, marketing services and garages. Here we present 6 case studies, which we use to illustrate the early findings from this pilot project. We identify differences in approach to associational membership in Germany and the U.K., with (...) a greater propensity to "belong" to an official group in Germany. We distinguish clear sectoral similarities across the countries, and indications that certain personality types will seek out engagement and find time beyond busy work life schedules, often merging work/home/leisure life and friends. Some of our cases illustrate that formal institutions, networks and mutual relationships can develop social capital for the SME, although we should take care not to assume a universal win-win situation for those who are engaged and contribute to the common good. Some of the obstacles to cooperation and civic engagement are outlined. (shrink)

This chapter contains sections titled: Introduction The outside story Open questions Which Europe? What business ethics? Conclusion.

The concept of corporate social responsibility (CSR) emerged in the official discourse of the EU in 2000. This article explains how, while CSR may have been initially an idea about the scope of the responsibility of companies towards their environment, it has now become a process in which the representatives of the business community have come to occupy the main role, and whose purpose is to promote learning among business organizations, rather than to identify the components of a regulatory framework (...) for CSR. The central question now, therefore, is whether the so-called business case for CSR is strong enough, so that we may hope that the forces of market will suffice to encourage companies to behave responsibly, over and above their obligation to comply with their legal obligations. The article shows, however, that this case rests on certain presuppositions about markets and the business environment, which cannot be simply assumed, but should be affirmatively created by a regulatory framework for CSR. Following the introduction, it proceeds in four stages. First, it examines the development of CSR in the EU. Second, it offers a critical examination of the so-called business case for CSR, taking into account the growing diversity within the enlarged EU. It then discusses, as an alternative, what a regulatory framework for CSR could resemble, highlighting a number of initiatives which have been taken in this regard by the EU. The article finally concludes that, since the failure of the European Multi-Stakeholder Forum on CSR in 2004, the debate has made a turn in the wrong direction, both because of the mistaken view that the establishment of a regulatory framework for CSR would threaten the competitiveness of European companies, and because of the naive (and contradictory) view that reliance on market mechanisms will suffice to ensure that corporations will seek to minimize the negative social and environmental impacts of their activities, even in circumstances where they are not legally obliged to do so. (shrink)