Innovation Capsule: Entrepreneurial Ethics

Written by Monica Garza

As an entrepreneur, being ethical is a highly significant quality to have as it serves a multitude of benefits and fosters strong character. There are many ways to tackle ethical dilemmas when faced with challenges and learning how to put ethics into practice helps develop successful entrepreneurs and world leaders.

The Benefits of Ethics

Being ethical when utilizing intellectual property is substantial in fostering respect and strong interpersonal relationships. Strong ethics is established when people don’t steal intellectual property by giving appropriate attribution to resource creators and not borrowing ideas and identities from others to avoid appropriation. There are three main benefits that come from ethics within appropriation and attribution:

1. Creators’ works will thrive.

If people’s works don’t become a victim of appropriation and attribution, they’ll have room to thrive to their fullest potential. They won’t be hindered in success and recognition within the public when it doesn’t become unfairly exploited. This helps creators have a well-balanced and secure career.

2. You’ll avoid legal consequences.

By being ethical, people can avoid getting in trouble with the law as a consequence of appropriation and attribution. As a result, this will promote the continuation of their career well-being.

3. Consumers will have a more fulfilling usage of the resource.

When the resources aren’t unethically exploited and stolen, the consumers that ethically utilize them are able to use them as intended. A balanced utilization of resources creates a foundation of justice. In turn, all of the consumers are able to equally use them, which makes their overall experience more fulfilling. This contentment from using the resources helps creators and creations thrive and prosper even further.

Common Ethical Dilemmas Faced by Entrepreneurs

Though ethics is largely glorified in our society, complex situations very often challenge the exhibition of people’s ethical behaviors. Entrepreneurs, specifically, face a unique variety of obstacles within their ventures. As a result, their integrity can be determined when they face ethical dilemmas. There are seven common ethical dilemmas that entrepreneurs can face:

1. The Overconfidence Bias

The overconfidence bias causes people to think exceedingly highly of their abilities and ethics. It’s important for people to avoid the overconfidence bias because being too individualistic and considered in their ethics can lead them to make irrational, poor decisions. Acknowledging one’s weaknesses and limitations, seeking advice and collaboration from others, and considering important factors before making these decisions is key to avoiding overconfidence bias.

2. Role Morality

Role morality causes people to make moral decisions based on their desire to protect the dignity and respect attached to their job role. At times, this can cause them to make unethical decisions for the sake of protecting their image in their job position. It’s better for their standard of what “good work” means in their job role to be ethics over performance.

3. Conformity Bias

Conformity bias causes people to avoid using their own personal judgment in ethical matters to instead match the behaviors and decisions of others. “Cheating is contagious” underlines the impact that conformity bias can have on ethics in entrepreneurship. Utilizing personal judgment is crucial in establishing ethical decisions.

4. The Tangible vs Abstract

People often tend to place more care and significance on factors that are tangible over abstract factors. Their focus on factors that are more directly associated with them, such as time, place, and people, can impact the quality of their choices. Considering all factors present in an ethical situation will assist them in making better, more informed decisions.

5. Loss Aversion

Loss aversion creates a larger impact on people when they experience a “loss” than when they experience a “gain.” This makes people more likely to take risks in their efforts of getting gains, which leads to ethical missteps. The negative impacts of loss aversion can be avoided by basing one’s decisions on logical analysis over feelings and compulsion.

6. Framing (frame of reference)

Framing, also referred to as point of view, refers to the way people look at a certain situation. People’s varying framings determine their understanding of facts and the way they determine what is ethical. To make the best decision, it is significant to have a wide lens that acknowledges all of the factors that play into an ethical situation.

7. Incrementalism

Incrementalism causes people to gradually lower their personal ethical behavioral standards. Maintaining constant and stable ethical practices by disregarding external unethical pressures is crucial when embarking on entrepreneurship journeys.

By considering these seven ethical dilemmas, you’ll be informed about making better ethical decisions that, ultimately, will make you a more ethical entrepreneur.

Ethics in Action

Ethics, being such a broad idea, is defined in a variety of ways by different people. Having knowledge of them will help entrepreneurs be more open-minded and conscious of the reason behind people’s ethical decisions. Some ethical approaches, based on people’s different values and priorities, are:

1. Utilitarianism: an ethical approach in which decisions are based on the best outcomes for the most amount of people.

2. Role-based ethical approach: deontologicalism, or an approach to ethical decisions that are determined by individual reasoning of what one believes is right and wrong, disregarding contextual features.

3. Virtue ethics ethical approach: an approach to ethical decisions that are based on the reasoning of a decision where one seeks to be a virtuous person.

Though we can’t control people’s ethical approaches to align with the large-scale world decisions we believe to be “ethical,” we can influence those decisions by voting for elected representatives with a good moral compass. As an entrepreneur, it’s significant to become your own ethical leader.

This article is based on key insights from the Herb Kelleher Entrepreneurship Center’s Ignite Startup Workshops Spring 2022 Series on Entrepreneurial Ethics. To see the full recording of these workshops, click here.

For news and information on future events like this, please visit the HKEC site here.