Our research tidbits this week looks at the benefits of sustained CSR decisions and actions and the relationship with stakeholders in the long-term.

Judgements of SMEs’ Legitimacy and its Sources
Organisational legitimacy is an important resource, which provides access to other resources. As such, it impacts the survival chances of organisations. In this study, we examine the individual judgments of the owner-managers of small-and-medium size enterprises (SMEs) of the legitimacy of their own enterprise as well as their perception of the legitimacy evaluations of relevant stakeholders.

This research is based on interviews with owner-managers of SMEs located in the Lorraine region of France. The results show that when legitimacy is perceived as acquired, their judgments are based on instrumental, relational and moral evaluations, whereas when legitimacy is perceived as being deferred, judgement is based on mainly instrumental evaluations and when they report not being in position to judge their own legitimacy, their judgements are based on moral evaluations.

In addition, the legitimacy judgements employed are associated with the different types of legitimacy sought by the SME owner-managers. Moreover, they perceive the validity cues coming from clients and employees as the most important sources of legitimacy. Other stakeholders are accorded secondary importance in granting legitimacy.

Olga Ivanova Ruffo, Kamel Mnisri, Christine Morin-Esteves & Corinne Gendron. 2020. Judgements of SMEs’ Legitimacy and Its Sources..

Journal of Business Ethics, 165(3), 395–410.

Ethos is Destiny: Organisational Values and Compliance in Corporate Governance
This paper investigates the effect of enacted ethical and instrumental values on corporate governance effectiveness. It further considers whether and how compliance with formal corporate governance codes influences the effect of these organisational values on governance effectiveness.

Empirical evidence based on a sample of firms listed in the Athens Stock Exchange shows that strong ethical values are the key element for effective corporate governance, while instrumental values play a significant role only in the presence of compliance. Compliance, although not sufficient by itself, serves as a complementary mechanism strengthening the effects of ethical values and creating the conditions by which instrumental values can act in favour of corporate governance.

The results highlight that governance benefits can emanate from maintaining high ethical standards as well as from synergies between compliance and a focus on organisational values. Overall, the findings provide important implications for managers regarding how to utilise behavioural along with structural governance mechanisms to enhance corporate governance. The findings add to the behavioural perspective of corporate governance bringing aspects of the social fabric into the corporate governance puzzle.

Maria Fotaki, Spyros Lioukas & Irini Voudouris. 2020. Ethos is Destiny: Organizational Values and Compliance in Corporate Governance.

Journal of Business Ethics, 166(1), 19–37.

The Benefits of Auditors’ Sustained Ethical Behaviour: Increased Trust and Reduced Costs
Studies demonstrating the benefits of ethical behaviour at an individual level are scarce. The business ethics literature centers its analysis on unethical behaviours and their consequences, rather than ethical behaviours and their benefits.

There is now considerable debate on the role of auditors in society and the function of accounting firms in the free market capitalist system. Specifically, the eminently ethical nature of the auditor’s work has been highlighted. Therefore, the aim of this paper is to show the impact of auditors’ sustained ethical behaviour: the trust it generates. This trust results in considerable benefits for the firm due to a reduction in the costs of the partner’s supervision of the auditor.

The methodology chosen to validate these claims is a survey of partner of the audit firm in auditing companies. The results of this research confirm the hypotheses raised in the theoretical model.

Rafael Morales-Sánchez, Manuel Orta-Pérez & M. Ángeles Rodríguez-Serrano. 2020. The Benefits of Auditors’ Sustained Ethical Behavior: Increased Trust and Reduced Costs.

Journal of Business Ethics, 166(2), 441–459.

Value creation for sustainability and business models
Business models are developed and managed to create value. While most business model frameworks envision value creation as a uni-directional flow between the focal business and its customers, this article presents a broader view based on a stringent application of stakeholder theory.

It provides a stakeholder value creation framework derived from key characteristics of stakeholder theory. This article highlights mutual stakeholder relationships in which stakeholders are both recipients and (co-) creators of value in joint value creation processes. Key findings include that the concept and analysis of value creation through business models need to be expanded with regard to (i) different types of value created with and for different stakeholders and (ii) the resulting value portfolio, i.e., the different kinds of value exchanged between the company and its stakeholders. This paper details the application of the stakeholder value creation framework and its theoretical propositions for the case of business models for sustainability.

The framework aims to support theoretical and empirical analyses of value creation as well as the management and transformation of business models in line with corporate sustainability ambitions and stakeholder expectations. Overall, this paper proposes a shift in perspective from business models as devices of sheer value creation to business models as devices that organise and facilitate stakeholder relationships and corresponding value exchanges.

Birte Freudenreich, Florian Lüdeke-Freund & Stefan Schaltegger. 2020. A Stakeholder Theory Perspective on Business Models: Value Creation for Sustainability.

Journal of Business Ethics, 166(1), 3–18.