Volume 3, 2002
Ethics and Entrepreneurship
Stakeholder Value Equilibration and the Entrepreneurial Process
This lecture explores the possibility of a useful dialogue between the fields of entrepreneurship and business ethics for mutual benefit. Although these two fields have much to offer each other, they have developed largely independently of each other. The lecture argues that entrepreneurship has a role to play in stakeholder theory and, relatedly, that stakeholder theory enriches our understanding of the entrepreneurial process. The lecture introduces the idea that a firm is an equilibrating mechanism, and then asks two questions, namely, “What are the properties of a fair and efficient equilibrating mechanism?” and “What alternative mechanisms would render the firm an effective reconciler of competing claims?” The lecture interprets the stakeholder literature to offer three alternative mechanisms to ensure a fair and efficient equilibrating system. The first mechanism is embodied in a person (the moral manager), the second is embodied in a process (the bargaining process), and the third is embodied in an external (to the firm) institution (the visible hand of law and government). To these three, the lecture adds a fourth mechanism from an entrepreneurship perspective, and explores the implications of this perspective to the stakeholder literature.