The Role of Business Entertainment in Economic Exchanges: A Governance Perspective and Propositions

While entertainment activities in private business settings (i.e., business entertainment) are widely seen all over the world, issues about their prevalence have remained unresolved in the literature. This study takes an institutional approach to elucidate (1) the governance role of business entertainment in economic exchanges, (2) the mechanism through which business entertainment plays this role, and (3) the conditions under which business entertainment plays a greater role to facilitate economic exchanges. Our starting point is that economic transactions are governed through a combination of market rules, legal restraints, and social norms. We argue that business entertainment plays a governance role by boosting the power of social norms to regulate the behaviors of economic actors. As such, business entertainment should be more prevalent under the conditions where social fabrics are dense but market and legal infrastructures are underdeveloped. This governance approach provides a common ground to accommodate the positive versus negative views on business entertainment advocated by two camps of researchers in management, economics, and sociology. It also offers useful guidelines for policymakers to regulate, and for executives to manage, this prevalent but often misunderstood business practice.