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A Stakeholder Approach to the Ethicality of BRIC-firm Managers’ Use of Favors

  • Daniel McCarthy

    ()

  • Sheila Puffer

    ()

  • Denise Dunlap

    ()

  • Alfred Jaeger

    ()

Registered author(s):

    This article investigates the use of favors by managers of BRIC firms to accomplish business goals, the ethicality of which should be determined by the moral reasoning in these countries rather than from a developed country perspective. We define a favor as an exchange of outcomes between individuals, typically utilizing one’s connections, that is based on a commonly understood cultural tradition, with reciprocity by the receiver typically not being immediate, and its value being less than what would constitute bribery within that cultural context. This exchange normally takes place between and among members of networks, and may involve a network outsider contacted by a network insider on behalf of another insider. We see the giver and receiver of the favor, as well as network insiders and outsiders, as stakeholders. Additionally, society could also be considered to be a stakeholder since the practice of using favors generally inhibits the development of legitimate, strong formal institutions, since the use of favors in emerging economies is rooted in cultural traditions that we view as informal institutions. Furthermore, we assert that the practice of using favors can lead to bribery which harms society as a stakeholder both morally and economically. We posit that BRIC-country managers’ behaviors stem from informal, culturally based practices—jeito in Brazil, blat/sviazi in Russia, jaan-pehchaan in India, and guanxi in China. We utilize institutional theory to explain why favors are relied upon, and ISCT to support the argument that the use of favors in environments like the BRICs is generally considered ethical. Copyright Springer Science+Business Media B.V. 2012

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    File URL: http://hdl.handle.net/10.1007/s10551-012-1377-4
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    Article provided by Springer in its journal Journal of Business Ethics.

    Volume (Year): 109 (2012)
    Issue (Month): 1 (August)
    Pages: 27-38

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    Handle: RePEc:kap:jbuset:v:109:y:2012:i:1:p:27-38
    Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100281

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    1. Bat Batjargal, 2007. "Network triads: transitivity, referral and venture capital decisions in China and Russia," Journal of International Business Studies, Palgrave Macmillan, vol. 38(6), pages 998-1012, November.
    2. Juan Sanchez & Carolina Gomez & Guillermo Wated, 2008. "A Value-based Framework for Understanding Managerial Tolerance of Bribery in Latin America," Journal of Business Ethics, Springer, vol. 83(2), pages 341-352, December.
    3. Michael Jensen, 2001. "Value Maximisation, Stakeholder Theory, and the Corporate Objective Function," European Financial Management, European Financial Management Association, vol. 7(3), pages 297-317.
    4. Justin Tan & Irene Chow, 2009. "Isolating Cultural and National Influence on Value and Ethics: A Test of Competing Hypotheses," Journal of Business Ethics, Springer, vol. 88(1), pages 197-210, April.
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    7. Michailova, Snejina & Worm, Verner, 2003. "Personal Networking in Russia and China:: Blat and Guanxi," European Management Journal, Elsevier, vol. 21(4), pages 509-519, August.
    8. Nguyen, Thang V. & Rose, Jerman, 2009. "Building trust--Evidence from Vietnamese entrepreneurs," Journal of Business Venturing, Elsevier, vol. 24(2), pages 165-182, March.
    9. Bryan W Husted, 1999. "Wealth, Culture, and Corruption," Journal of International Business Studies, Palgrave Macmillan, vol. 30(2), pages 339-359, June.
    10. Luo, Yadong, 2008. "The changing Chinese culture and business behavior: The perspective of intertwinement between guanxi and corruption," International Business Review, Elsevier, vol. 17(2), pages 188-193, April.
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