This week’s pick of articles looks at ethical business practices across countries and cultures.

Entrepreneurship in the controversial economy
This work extends theory about entrepreneurship across formal and informal institutional boundaries. While research has identified formal, informal, and renegade economies, the authors introduce the concept of the controversial economy, defined as the set of legal but illegitimate (to some large groups) activities through which actors exploit opportunities.

The authors explain the existence of the controversial economy, its prevalence, and provide examples. The authors explore how and why entrepreneurs may exploit opportunities in the controversial economy based on individual and opportunity-related attributes. Finally, the authors identify several theoretical perspectives and research questions as an initial research agenda for the controversial economy.

Benedetto Lorenzo Cannatelli, Brett Richard Smith and Alisa Sydow. 2019. Entrepreneurship in the Controversial Economy: Toward a Research Agenda.
Journal of Business Ethics, 155(3), 837–851.

 

Base-of-the-pyramid research & a sustainable supply chain 
Research on the base-of-the-pyramid (BoP) approach and the associated business case for deprived participants in informal markets now appears frequently in a range of business ethics and management-related journals. The present analysis of how supply chain management (SCM) and sustainable supply chain management (SSCM) concepts are habitually used in base-of-the-pyramid research serves to strengthen the theoretical foundation of BoP research by addressing the related business case.

Based on a content analysis of BoP papers published in English-speaking peer-reviewed journals between 2000 and 2014 from the Web of Science database, this literature review comprehends existing research in the context of established SCM and SSCM frameworks, using both frequency and contingency analyses.

The frequency analysis indicates that supply chain management and sustainable supply chain management [(S)SCM] constructs regularly discussed in the BoP literature include supplier integration, strategic purchasing, decommoditization, long-term relationship and enhanced communication among supply chain actors. The identified contingencies reflect linkages between BoP research and (S)SCM constructs. The highest number of links was found between the SCM constructs of strategic purchasing and long-term relationship and the SSCM constructs of supplier integration and communication and coordination with suppliers.

These can be regarded as the most crucial (S)SCM constructs in the BoP business environment. This analysis facilitates the development of future research propositions at this intersection, including the use of tools from (S)SCM theories to evaluate BoP propositions and projects. Granted the limited range of BoP-related papers analyzed, the findings provide a coherent understanding of (S)SCM practices crucial to the functioning of BoP markets and why they matter, so contributing to the related ethical rationale.

These findings will be of use to researchers and practitioners alike for the formulation of business development strategies and their subsequent implementation in informal market economies.

Raja Usman Khalid and Stefan Seuring. 2019. Analyzing Base-of-the-Pyramid Research from a (Sustainable) Supply Chain Perspective. 
Journal of Business Ethics, 155(3), 663–686.

 

Resisting corruption in Grameen Bank
Across the world, corruption is endemic, a cause of growing inequality, and an impediment to economic growth. Many countries have attempted to curb corruption at the national level, with little success. Researchers have argued that, instead of initiate controlling corruption at national level, resisting corruption should be actively instigated within organisations.

Specifically, Luo (Manag Organ Rev 1(1):119–154, 2005) suggests that corruption becomes entrenched in organisations through the task and institutional environments, and can therefore only be fought through changes in institutional architecture. Modification of Luo’s model, by putting in place anti-corruption systems at the start, shows how anti-corruption behaviours become established and can be resisted.

In this paper, the authors explore the successful management of organisational corruption by the Grameen Bank, a leading microfinance institute that operates in Bangladesh. For many years, this bank has stood out against the generally accepted culture of corruption in Bangladesh. Using the case study method, this research explores the impact of the anti-corruption structures and processes implemented by Grameen Bank, as a unique illustration within Bangladesh of the value of this modified version of the Luo’s model. The bank has actively introduced policies and processes that have made it difficult for corruption to become established.

Mohammad I. Azim & Ron Kluvers. 2019. Resisting Corruption in Grameen Bank. 
Journal of Business Ethics, 156(3), 591–604.

 

Board diversity and CSR disclosure in Malaysia 
This study empirically examines the relationship between wide-ranging board diversity and the quality of corporate social responsibility (CSR) disclosure variables in Malaysia. The authors extend prior literature covering broader dimensions of board diversity (e.g., gender, education level, education background, age, tenure, nationality and ethnicity) and their impact on CSR after controlling for board and audit committee characteristics.

Using 200 listed firms in Bursa Malaysia during 2009–2013 and applying both OLS and 2SLS instrumental variables (IV) approaches, the authors document significant positive effect of board education level and board tenure diversity on the quality of CSR disclosure. Further analysis using robust regression also shows positive association between gender diversity and CSR disclosure.

The findings also demonstrate that the quality of CSR disclosure is significantly negatively associated with board age and nationality diversity. These results remain consistent with using alternative measures for board diversity, and characteristics for board of director and audit committees as well as split samples between large and small firms. Additional tests exhibit complementary relationship of education level and nationality with gender, while substitutive relationship of age and tenure with gender in influencing CSR.

These findings provide useful insights into the policy makers in setting regulations in respect of board diversity in Malaysia and other emerging economies in the Asian region. The evidence is also useful for listed companies in setting the criteria to identify directors who can support their strategic decisions.

Nooraisah Katmon, Zam Zuriyati Mohamad, Norlia Mat Norwani & Omar Al Farooque. 2019. Comprehensive Board Diversity and Quality of Corporate Social Responsibility Disclosure: Evidence from an Emerging Market. 
Journal of Business Ethics, 157(2), 447–481. 

 

The nexus between human capital, corporate governance and performance in Islamic banks
This paper offers novel insight into the Islamic banking business model by considering the effect of investments in human capital and corporate governance features on the market performance of Islamic banks.

Based on a sample of 47 banks (30 full-fledged Islamic banks and 17 Islamic Shariah-windows) operating in different regions during the 2005–2010 period, and controlling for firm-specific characteristics, this paper finds investments in human capital to have a significant positive impact on the market value in the pre- and post-financial crisis period. Based on a market measure, this paper finds board size and CEO power to have a significant positive impact, while the size of Shariah Supervisory Board (SSB) has the opposite effect on market performance.

The results further reveal that the Islamic banking sector is not a homogeneous group, with full-fledged Islamic banks having lax corporate governance mechanisms and large size, while their counterparts, Islamic Shariah-windows, having strong corporate governance mechanisms tend to invest more in human capital to yield positive market value. Overall, the analysis suggests that the financial crisis may have further spurred the impact of investments in human capital on the market performance.

Tasawar Nawaz. 2019. Exploring the Nexus Between Human Capital, Corporate Governance and Performance: Evidence from Islamic Banks.
Journal of Business Ethics, 157(2), 567–587.

 

Compliance through company culture and values: An international study of corruption prevention
The aim of this web-based survey of 15 German companies with an international profile was to identify which higher-level values serve as a basis for a company culture that promotes integrity and can thereby also be used to promote crime prevention.

Results on about 2000 managers in German parent companies and almost 600 managers in Central and North European branch offices show that a major preventive role can be assigned to a company culture that promotes integrity. This requires a ‘tone from the top’, ‘ethical leadership’ from the direct superior, and a general set of values that can be encouraged through training courses. Moreover, employees have to perceive these values as promoting their careers.

The survey reveals that the companies in this study have basically succeeded in establishing their system of values in their Central and North European as well as their Asian branch offices. Moreover, it shows that the main values preventing crime on the management level are trustworthiness and consistency. Open communication is an important value on all levels of a company, and this is supplemented by transparency, compliance with the rules, and a rejection of behaving in one’s own interest.

It is concluded that in spite of regional differences, major international companies can possibly make an important contribution to bringing about cultural change in regions with an affinity for corruption by implementing a culture that promotes integrity in both their company and their daily business.

Kai D. Bussmann & Anja Niemeczek. 2019. Compliance Through Company Culture and Values: An International Study Based on the Example of Corruption Prevention. 
Journal of Business Ethics, 157(3), 797–811.