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Ethics in Business-to-Business Relations: a Literature Review

26 gennaio 2019 -
Ethics in Business-to-Business Relations: a Literature Review

Contributo selezionato da Filodiritto tra quelli pubblicati nei Proceedings “2nd International e-conference - Enterprises in the Global Economy 2017”

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Contribution selected by Filodiritto among those published in the Proceedings “2nd International e-conference - Enterprises in the Global Economy 2017”

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BURDUJA Sebastian I. [1]

[1] Research Center in International Business and Economics (CCREI), The Bucharest University of Economic Studies

(ROMANIA)

Email: sebastian.burduja@gmail.com

 

Abstract

This research focuses on exploring the phenomenon of corruption, broadly understood as the abuse of a position for personal gain, and its role and impact in the private sector. Unlike much of the literature on corruption, this work focuses entirely on private actors, i.e., on business-to-business (B2B) corruption. The current article reviews the literature on business ethics and private-sector corruption, pointing out recent progress in exploring the topic, as well as remaining gaps. Ultimately, this work calls for expanding and accelerating research on B2B corruption to enable a common standard across the business world for understanding, addressing, and controlling this deeply harmful phenomenon.

 

Introduction

Today’s world is increasingly complex and interconnected, and relations between business, government, and society are rapidly evolving. Though not always easy to quantify, the direct and indirect impact of business activities on other stakeholders is indisputable. Economic actors, once viewed only from the narrow perspective of profit-making entities, are now widely recognized as active participants to the development of communities at all levels: local, national, regional, and global. Many of these companies, particularly large ones, have responded to this new reality by creating internal regulations, signing integrity pacts, and investing resources in projects or funds that benefit different communities. The mantra “doing well by doing good” is more present than ever in the global business arena.

The purpose of this research is to explore the link between the field of business ethics and anticorruption policies, with a special focus on business-to-business (B2B) corruption. To this end, this article performs a review of the key literature on these topics and concludes by indicating possible avenues for further research.

In particular, scholars and policymakers alike have focused most of their efforts on documenting and combating corruption acts “on the demand side,” i.e., targeting public officials asking for bribes or other illicit gains [1], [2], [3]. Some work has also focused on “the supply side,” i.e., the private actors offering the aforementioned benefits [4].

The issue of business-to-business corruption, also known in the literature as “private corruption” or “corporate corruption,” has received even less attention. To avoid any confusion, this research prefers and henceforth uses the term “private-to-private corruption” or, for simplicity’s sake, “business-to-business corruption” (B2B corruption), which is to refer to a transaction between two private actors [5]. B2B corruption is a grave phenomenon with serious consequences, including: distorting market mechanisms, hurting equity holders’ interests, damaging corporate reputation, increasing inefficiencies in capital investments, reducing tax revenue, reducing transparency, etc.

For all these reasons and taking into consideration the very little attention received by private corruption in particular, in both policy and academic circles, this article seeks to contribute to filling the void by reviewing existing instruments (e.g., international conventions) and literature on the topic, while also proposing avenues for further research.

The next section defines the key concepts and places corruption in the more general framework of business ethics. Further, the article zooms into B2B corruption, summarizing the main articles that explore the topic, including key results and remaining gaps. The final section concludes and proposes several avenues for future research.

 

Business Ethics and Corruption: Definitions

The concept of business ethics is related to the broader field of corporate social responsibility (CSR). The first conceptualization of CSR came from Howard Bowen [6], who defined the social responsibilities of private actors as “[an obligation] to pursue policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society.” This line of thinking was novel in 1953: suddenly, businessmen were called to take into consideration factors beyond the pure bottom line and respecting the applicable legal framework. The strongest and often cited rebuke of this view came from Milton Friedman [7] in 1970. Friedman argued that the only obligation of business actors is to generate value for shareholders, without taking into consideration other factors.

He also claimed that there should be a clear separation between the roles of a government and of a business.

In practice, however, Bowen’s vision is better aligned to the current economic and political environment: there is no way to separate public and private actors in society. Through their work, governments shape businesses, and vice-versa. Indeed, their actions will inevitably influence each other and other stakeholders too. If there can be agreement around this basic tenet, then it follows that corporate social responsibly is indeed applicable and desirable. This is in line with the work of Mark Granovetter [8] and the idea of embeddedness: economic activity is inherently embedded in societies, and societies in turn shape economic choices.

More relevant is the concept of business ethics, defined as the requirement that “the organization or individual behaves in accordance with the carefully thought-out rules of moral philosophy” [9]. Simply put, business ethics defines what a private-sector entity and its employees should and should not do, based on agreed-upon ethical or moral principles, rules, standards, and organizational norms. The field is extremely vast, and touches upon multiple functional areas: from human resources to finance, sales and marketing, procurement, production, intellectual property, etc. [10]. Several of these areas remain critical to the current research.

In this context, it is useful to also propose a definition of corruption, one of the most hotly debated topics in the literature. As noted by Leslie Holmes [11], cultural and legal differences across societies make it “impossible to produce a universally acceptable definition of corruption.” In a 2004 article on corruption in organizations, Anand, Ashforth, and Joshi [12] defined  private  corruption  as  “the  misuse  of  an  organizational  position  or  authority  for personal or organizational (or subunit) gain, where misuse in turn refers to departures from accepted societal norms.” This broad definition encompasses a variety of corrupt practices, from bribery to fraud, money laundering, abuse of power, kickbacks, favors, gifts, nepotism, and others, and is appropriate for the scope of the current research.



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