Why Unethical Practices Go Unpunished in Competitive Markets
When do business leaders stand up against ethical transgressions in their company and when do they allow others to get away with it? New research by Associate Professor Pieter Desmet, Erasmus of School of Law and by ERIM member, <link people niek-hoogervorst>Assistant Professor Niek Hoogervorst from Rotterdam School of Management, Erasmus University (RSM) suggests that managers who believe their company operates in strongly competitive markets might more readily see unethical decisions simply as ‘acceptable business practices’.
In their experiment the researchers asked volunteer participants for opinions about purposefully over-insuring clients, which is clearly unethical behaviour. Half of the participants were made to believe their imaginary insurance firm was operating in a stable market. The other half was told the firm was operating in a highly competitive market. The results show that the last group was more likely to condone unethical behaviour when it was profitable to the company.
Read the full article and watch a video that overviews their research here.
The paper: Desmet, P.T.M., Hoogervorst, N. & Dijke, M.H. van (2015). Prophets vs. profits: How market competition influences leaders' disciplining behavior of ethical transgressions is published in The Leadership Quarterly, 26, 1034-1050.
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The Erasmus Research Institute of Management (ERIM) is the Research School (Onderzoekschool) in the field of management of the Erasmus University Rotterdam. The founding participants of ERIM are the Rotterdam School of Management (RSM), and the Erasmus School of Economics (ESE). ERIM was founded in 1999 and is officially accredited by the Royal Netherlands Academy of Arts and Sciences (KNAW). The research undertaken by ERIM is focused on the management of the firm in its environment, its intra-and inter firm relations, and its business processes in their interdependent connections.
The objective of ERIM is to carry out first rate research in management, and to offer an advanced doctoral programme in Research in Management. Within ERIM, over three hundred senior researchers and PhD Candidates are active in the different research programmes. From a variety of academic backgrounds and expertise, the ERIM community is united in striving for excellence and working at the forefront of creating new business knowledge.
