GAUGING THE DIVERSITY OF ETHICAL DECISION MAKING PROCESSES IN SMALL AND MEDIUM SCALE ENTERPRISES: A CROSS CASE ANALYSIS

CHAPTER ONE

INTRODUCTION

1.1. BACKGROUND OF THE STUDY

Small & Medium Enterprise (SMEs)’s entrepreneurs are playing crucial role in the economy of the nation. There is no exception in emerging economy like Nigeria, Thailand, Indonesia and et cetera. In Nigeria, although SME’s entrepreneur contributed to the growth of Nigeria but unfortunately there is a high unethical problem among SME entrepreneurs’ lately. Unethical problem (37%) constitutes the highest percentage among Nigerian SME Disciplinary Offence (SPRM, 2013). Due to the integrity awareness amongst Nigerian, SME’s firms are increasingly asked about their corporate social responsibility and environmental credentials during tendering processes with large corporations. SME owners managers also need to recognize the importance of trust and ethics in business when on the ‘receiving end’ of unethical business practice (Hanafi & Sallam, 2013). When suppliers deliberately do not adhere to agreed terms and conditions, business ethics has thus become a major issue for SME entrepreneur when come to the intention of making ethical decision making in their business (Hanafi & Sallam, 2013). The previous studies indicate that although entrepreneur in Nigerian SMEs are interested to observe good business practices, sometimes the realities forced them to make compromises. The entrepreneurs often feel constrained and have to make unethical adjustments. In addition the lack of effective guiding mechanism in facing complex ethical problems has become another important point (Tan et al., 2011). Ethics is fundamental to decision-making at all levels of work and management; and ethical decisions are a part of everyday life (Ferrell & Fraedrich, 2012).The ability to recognise and deal with complex business ethics issues has become a significant priority in the 21st century companies. In recent years, a number of well publicised scandals resulted in public outrage about deception and fraud in business and subsequent demand for improved business ethics and greater corporate responsibility. Highly visible business ethics issues influence the public’s attitudes towards business and can destroy trust (Ferrell & Fraedrich, 2012). Cases of unethical conduct such as these are particularly salient in the media, because these actions are often intentional, unethical, and even illegal. Due to the threat that unethical business practices can pose to both the business community, industry, and the everyday lives of millions of people (Verschoor, 2011), business leaders, and academics alike, have begun work to improve the ethical conduct of members of organisations, both in terms of research examining the mechanisms surrounding ethical behaviour, and exploring and designing training interventions aimed at improving ethical behaviour. The potential entrepreneurs easily overlook in business ethics because they often have other priorities, such as business ideas, marketing, and financial matters, to consider (Davis, Frederick, & Blomstrom, 2014). Broni (2010) suggests that business ethics is an application of ethical principles and moral or ethical problems that arise in a business situation. Shell, NIKE, GAP, Nestle, and BP are a few of the large international corporations that have come under ethical scrutiny within the past decade (Falkenberg, 2009). Globally, the news media reveals the misconduct in governmental, educational, religious, and business institutions. It is apparent that the unethical behaviour in organisations is a pressing social and economic issue demanding attention (Trevino & Youngblood, 2014) from all the stakeholders.

1.2 STATEMENT OF PROBLEM

Emphasis on good business decision (in general) and good ethical decision (in particular), can influence customer’s attitude towards SMEs and develop trust and loyalty. A variety of models of ethical decision making have been proposed, some describing ethical decision-making process (Jones, 2015; Malhotra & Miller, 2015). While others highlight that the key model on decision making shares four main elements: recognising and interpreting a moral issue; making judgments or choices about the morally correct course of action; formulating an intention to carry out the moral action; and engaging in the moral behaviour (Jones, 2015).These models examine different facets of ethical decision-making in part because different factors influence how people define ethical and moral situations, make judgments about ethical course of action, formulate intentions to carry out those actions, and engage in the ethical behaviour. Gaudine and Thorne (2012) model proposes that positive emotions will increase the likelihood that individuals will (a) recognise ethical dilemmas, (b) have ethical intentions in line with their level of moral development, and (c) carry out those intentions if emotional arousal is also present. Thus, emotional arousal provides cognitive energy or stimulation for recognising a need for and engaging in decision-making (Watson & Tellegen, 2015). There is a little evidence need to enhance ethical behaviour (in general) and ethical decision-making (in particular) by examining the intention to make ethical decision among SME entrepreneurs in Nigeria. Therefore this study seeks to gauge the diversity of ethical decision making processes in small and medium scale enterprises.

1.3 AIMS OF THE STUDY             

The major purpose of this study is to examine gauging the diversity of ethical decision making processes in small and medium scale enterprises. Other general objectives of the study are:

1. To examine the determinants of individual ethical decision making

2. To examine the factors influencing individual entrepreneur’s ethical decision making process and characteristics

3. To examine the influence of ethical decision making on the performance of SMEs

4. To examine the ethical practices that are vital for business survival given the ethical problems prevalent in SMEs in Nigeria.

5. To examine the relationship between individual moral psychology and entrepreneurial decision making

6. To examine the measures that can be used to drive compliance to entrepreneurial decision making in Nigeria

1.4 RESEARCH QUESTIONS

1. What are the determinants of individual ethical decision making?

2. What are the factors influencing individual entrepreneur’s ethical decision making process and characteristics?

3. How is the influence of ethical decision making on the performance of SMEs?

4. What are the ethical practices that are vital for business survival given the ethical problems prevalent in SMEs in Nigeria?

5. What is the relationship between individual moral psychology and entrepreneurial decision making?

6. What are the measures that can be used to drive compliance to entrepreneurial decision making in Nigeria?

1.5 RESEARCH HYPOTHESES

Hypothesis 1

H0: There are no factors influencing individual entrepreneur’s ethical decision making process and characteristics

H1: There are factors influencing individual entrepreneur’s ethical decision making process and characteristics

Hypothesis 2

H0: There is no significant relationship between individual moral psychology and entrepreneurial decision making

H1: There is a significant relationship between individual moral psychology and entrepreneurial decision making

1.6 SIGNIFICANCE OF THE STUDY

This study is significant in more ways than one therefore; the study will provide effective and objective information in ethics and its application in the workforce. Aside its immense potency to contribute to the body of knowledge, the study also, will serve as a reference to managers, entrepreneurs, specialized groups, society, government etc. Moreso, the study can serve as one existing literature or as an additional literature on application of ethics in decision making as a leader or an employee. It will also be instrumental to prospective researchers and students who may want to plunge into this similar area of study.

1.7    SCOPE OF THE STUDY 

The study is based on gauging the diversity of ethical decision making processes in small and medium scale enterprises, a cross case analysis.

1.8 LIMITATION OF STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.8 DEFINITION OF TERMS

Ethical decision making: The principles and standards as they apply to a situation (Luth, May, & Schwoerer, 2014).

Leadership: The demonstration of professional conduct through which an individual can inspire people to follow them and be better as a person (Lawler, 2012).

Organization Ethics: Organization ethics is the logical standards of right and wrong (Pullen & Rhodes, 2013).

Small Business: An individually owned and operated, for profit organization where size or receipts matter, and, which operates in the US and pays US taxes (U.S. Small Business Administration, 2015).