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Competing Responsibly

Published online by Cambridge University Press:  23 January 2015

Bert van de Ven  and
Ronald Jeurissen
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Abstract:

In this paper we examine the effects of different competitive conditions on the determination and evaluation of strategies of corporate social responsibility (CSR). Although the mainstream of current thinking in business ethics recognizes that a firm should invest in social responsibility, the normative theory on how specific competitive conditions affect a firm’s social responsibility remains underdeveloped. Intensity of competition, risks to reputation and the regulatory environment determine the competitive conditions of a firm. Our central thesis is that differential strength of competition produces differential moral legitimacy of firm behavior. When competition is fierce or weak, different acts or strategies become morally acceptable, as well as economically rational. A firm has to develop its own strategy of social responsibility, in light of its competitive position, as well as ethical considerations.

Type
Articles
Information
Business Ethics Quarterly , Volume 15 , Issue 2 , April 2005 , pp. 299 - 317
Copyright
Copyright © Society for Business Ethics 2005

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References

Notes

1. R. E. Freeman, Strategic Management: A Stakeholder Approach (Boston: Pitman, 1984); R. E. Freeman and W. M. Evan, “Corporate Governance: A Stakeholder Approach,” Journal of Behavioral Economics 19 (1990): 337–59; A. Wicks, D. Gilbert, and E. Freeman, “A Feminist Reinterpretation of the Stakeholder Concept,” Business Ethics Quarterly 4(4) (October 1994); Th. Donaldson and L. E. Preston, “The Stakeholder Theory of the Corporation: Concepts, Evidence and Implications,” Academy of Management Review 20(1) (1995): 65–91; N. E. Bowie, Business Ethics: A Kantian Perspective (Malden, Mass.: Blackwell, 1999); R. K. Mitchell, B. R. Agle, and D. J. Wood, “Toward a Theory of Stakeholder Identification and Salience: The Principle of Who and What Really Counts,” Academy of Management Review 22(4) (1997): 853–86.

2. Commission of the European Communities, Communication from the Commission Concerning Corporate Social Responsibility: A Business Contribution to Sustainable Development (Brussels: COM [2002]): 347 final, p. 3 (http://europa.eu.int/comm/employment_social/soc-dial/csr/csr_index.htm).

3. S. Douma, H. Schreuder, Economic Approaches to Organizations (New York: Prentice Hall, 1991): 66.

4. J. Kay, Foundations of Corporate Success (Oxford: Oxford University Press, 1993): 8–9.

5. Compare C. W. Hill and T. M. Jones, “Stakeholder-Agency Theory,” Journal of Management Studies 29 (1992): 145: “[O]bviously, the claims of different groups may conflict.… However, on a more general level, each group can be seen as having a stake in the continued existence of the firm.” This passage is also quoted with approval in a recent article by R. Phillips, R. E. Freeman, and A. C. Wicks, “What Stakeholder Theory is Not,” Business Ethics Quarterly 13(4) (2003): 484.

6. L. Sharp Paine, Does Ethics Pay? Business Ethics Quarterly 10(1) (2000): 319–30.

7. S. P. Sethi and L. M. Sama, “Ethical Behavior as a Strategic Choice by Large Corporations: The Interactive Effect of Marketplace Competition, Industry Structure, and Firm Resources,” Business Ethics Quarterly 8(1) (1998): 85–104.

8. R. Solomon, Ethics and Excellence. Cooperation and Integrity in Business (Oxford: Oxford University Press, 1992), 44.

9. P. Drucker, Management: Tasks, Responsibilities, Practices (New York: Harper & Row, 1974), 60.

10. H. Steinmann and A. Löhr, “Unternehmensethik: Ein republikanisches Programm in der Kritik,” in Markt und Moral: Die Diskussion um die Unternehmensethik, ed. S. Blasche, W. Köhler, and P. Rohs (Bern: Haupt, 1994), 156.

11. Steinmann and Löhr, “Unternehmensethik,” 147.

12. W. Baumol, “(Almost) Perfect Competition (Contestability) and Business Ethics,” in W. Baumol and S. Batey Blackman, Perfect Markets and Easy Virtues: Business Ethics and the Invisible Hand (Cambridge, Mass.: Blackwell, 1991), 1–23; K. Homann and F. Blome-Drees, Wirtschafts- und Unternehmensethik (Göttingen: Vandenhoeck and Ruprecht, 1992), 42; Sethi and Sama, “Ethical Behavior as a Strategic Choice by Large Corporations,” 90.

13. R. De George, Competing with Integrity in International Business (Oxford: Oxford University Press, 1993), 97.

14. Steinmann and Löhr, “Unternehmensethik,” 170.

15. M. Friedman, Capitalism and Freedom (Chicago: University of Chicago Press, 1962), 120.

16. M. E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980); M. E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New York: Free Press, 1985).

17. Porter, Competitive Advantage, 4.

18. Ibid., 7.

19. Porter, Competitive Strategy, 35.

20. A. Carroll, Business and Society (Boston: Little Brown, 1981); L. Sharp Paine, “Managing for Organisational Integrity,” Harvard Business Review (March–April 1994): 106–17.

21. Sethi and Sama, “Ethical Behavior as a Strategic Choice by Large Corporations,” 90.

22. One could object that bankruptcy might also mean that the interests of some stakeholders are protected. Although bankruptcy can be the best solution in the case of insolvency, it also means that the interests of the stakeholders are terminated. One could argue that this is not a moral problem, since after the bankruptcy, the assets will be put to more efficient use. Hence, total utility would benefit from bankruptcy. This argument, however, is built on the assumption that the market is efficient. This means, among other things, that the rules governing the market place affect all the competitors in the same way. However, as we argued above, a lack of law enforcement punishes legal compliance and rewards non-compliance. In these circumstances, it may happen that an efficient and obedient firm goes bankrupt, while an inefficient disobedient firm survives. As a result, the social optimum will not be achieved.

23. M. Velasquez, Business Ethics: Concepts and Cases, 3rd ed. (Englewood Cliffs, N.J.: Prentice Hall, 1992), 40.

24. Fombrun and Rindova define corporate reputation as follows: “A corporate reputation is a collective representation of a firm’s past actions and results that describes the firm’s ability to deliver valued outcomes to multiple stakeholders. It gauges a firm’s relative standing both internally with employees and externally with its stakeholders, in both its competitive and institutional environments.” C. Fombrun and C. van Riel, “The Reputational Landscape,” in Revealing the Corporation. Perspectives on Identity, Image, Reputation, Corporate Branding, and Corporate-Level Marketing, ed. J. Balmer and S. Greyser (London/New York: Routledge, 2003), 230.

25. Kay, Foundations of Corporate Success.

26. Ibid., 66–86.

27. H. Steinmann and T. Olbrich, “Business Ethics in U.S. Corporations: Results from an Interview Series,” in P. Ulrich and J. Wieland, Unternehmensethik in der Praxis. Impulse aus den USA, Deutchland und der Schweiz, (Bern: Haupt, 1998), 72.

28. Steinmann and Olbrich, “Business Ethics in U.S. Corporations,” 75.

29. “We suggest that a theory of stakeholder identification and salience must somehow account for latent stakeholders if it is to be both comprehensive and useful, because such identification can, at a minimum, help organizations avoid problems and perhaps even enhance effectiveness.” Mitchell, Agle, and Wood, “Toward a Theory of Stakeholder Identification and Salience,” 859.

30. Kay, Foundations of Corporate Success, 87.

31. Ibid., 263.

32. N. Klein, No Logo: No Space, No Choice, No Jobs: Taking Aim at the Brand Bullies (London: Flamingo, 2000).

33. M. J. Sirgy and C. Su, “The Ethics of Consumer Sovereignty in an Age of High Tech,” Journal of Business Ethics 28 (2000): 1–14, 2–9.

34. See, for example, the writings of John Entine, who has followed The Body Shop critically for a decade now: J. Entine, “The Body Shop: Truth and Consequences,” Drugs and Cosmetics Industry (January 1995), 57–60; J. Entine, “Body Flop: Anita Roddick Proclaimed that Business Could be Caring as well as Capitalist. Today The Body Shop is Struggling on Both Counts,” R.O.B.: Toronto Globe and Mail’s Report on Business Magazine (May 31, 2002).