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Corporate Profit, Entrepreneurship Theory and Business Ethics

Economic profit is produced by entrepreneurs, those special individuals able to detect and seize as yet unexploited market opportunities. In general capitalist firms manage to deliver positive profits even in the most competitive environments. They can do so thanks to internal entrepreneurs, a subset of their employees able to drive change and develop innovation in the workplace. This paper argues that the goal of profit maximization is fully consistent with the corporation doing good for society. However, there is little justification for corporations to transfer the whole economic profit to shareholders. Economic agents entitled to receive the economic profit are precisely those who create this profit, namely the internal entrepreneurs.

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Paper provided by ESSEC Research Center, ESSEC Business School in its series ESSEC Working Papers with number WP1308.

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Length: 21 pages
Date of creation: May 2013
Date of revision:
Handle: RePEc:ebg:essewp:dr-13008
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ESSEC Research Center, BP 105, 95021 Cergy, France

Web page: http://www.essec.edu/
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  1. Williamson, Oliver E, 1983. "Organization Form, Residual Claimants, and Corporate Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 351-66, June.
  2. Vranceanu, Radu, 2005. "The Ethical Dimension of Economic Choices," ESSEC Working Papers DR 05001, ESSEC Research Center, ESSEC Business School.
  3. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-25, June.
  4. Herbert Kierulff & Grant Learned, 2009. "Limiting Laissez Faire Profits: The Financial Implications," Journal of Business Ethics, Springer, vol. 90(3), pages 425-436, December.
  5. vranceanu, radu, 2007. "The moral layer of contemporary economics: A virtue-ethics perspective," ESSEC Working Papers DR 07006, ESSEC Research Center, ESSEC Business School.
  6. Benabou, Roland & Tirole, Jean, 2009. "Individual and Corporate Social Responsibility," IZA Discussion Papers 4570, Institute for the Study of Labor (IZA).
  7. Koehn, Daryl, 1995. "A Role for Virtue Ethics in the Analysis of Business Practice," Business Ethics Quarterly, Cambridge University Press, vol. 5(03), pages 533-539, July.
  8. Robert A. Burgelman, 1983. "Corporate Entrepreneurship and Strategic Management: Insights from a Process Study," Management Science, INFORMS, vol. 29(12), pages 1349-1364, December.
  9. Williamson, Oliver E, 1993. "Calculativeness, Trust, and Economic Organization," Journal of Law and Economics, University of Chicago Press, vol. 36(1), pages 453-86, April.
  10. Solomon, Robert C., 2003. "Victims of Circumstances? A Defense of Virtue Ethics in Business," Business Ethics Quarterly, Cambridge University Press, vol. 13(01), pages 43-62, January.
  11. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
  12. Audi, Robert, 2012. "Virtue Ethics as a Resource in Business," Business Ethics Quarterly, Cambridge University Press, vol. 22(02), pages 273-291, April.
  13. Sigmund Wagner-Tsukamoto, 2007. "Moral Agency, Profits and the Firm: Economic Revisions to the Friedman Theorem," Journal of Business Ethics, Springer, vol. 70(2), pages 209-220, January.
  14. Moore, Geoff, 2008. "Re-Imagining the Morality of Management: A Modern Virtue Ethics Approach," Business Ethics Quarterly, Cambridge University Press, vol. 18(04), pages 483-511, October.
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