Title: Complexity, novelty, and ethical judgement by entrepreneurs

Authors: Harvey S. James Jr.; Desmond Ng; Peter G. Klein

Addresses: Department of Agricultural and Applied Economics, University of Missouri, Columbia, MO 65211, USA ' Department of Agricultural Economics, Texas A&M University, College Station, TX 77843, USA ' Department of Entrepreneurship, Baylor University, Waco, TX 76798, USA

Abstract: How do individual characteristics and the business environment affect the ethical judgement of entrepreneurs? We build on literatures in stakeholder and cognitive theory to examine the effects of situational complexity and novelty on an entrepreneur's ethical judgement. Our conceptual framework shows how confirmation biases and inward biases affect the ethical judgement of entrepreneurs. We test our theory using cross country data from the World Values Survey. We find that the ethical judgement of self-employed individuals is lower than that of non-entrepreneurs and that differences are moderated by the complexity and novelty of their decision setting. We also find that the ethical judgement of entrepreneurs with low levels of entrepreneurial initiative is the lowest, especially in moderately complex and novel decision settings. We argue that these findings have important implications for stakeholder approaches to entrepreneurial ethics.

Keywords: entrepreneurship; ethical decision making; entrepreneurial ethics; uncertainty; cognitive bias; stakeholder theory; situational complexity; novelty; ethical judgement.

DOI: 10.1504/IJEV.2016.077624

International Journal of Entrepreneurial Venturing, 2016 Vol.8 No.2, pp.170 - 195

Received: 06 Jun 2014
Accepted: 22 Nov 2014
Published online: 07 Jul 2016 *

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