How Does Ethics Impact Business Entrepreneurship Failure

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Wednesday, May 7th, 2008 Subscribe To Our Feed

How do business get done? Historically, business was done on a handshake. Two people would discuss terms, negotiate differences, and reach a deal. When that agreement was sealed by a handshake, both parties could walk away with certainty that the terms would be honored by both parties.

Today, your business attorney would never allow you to seal a business agreement with nothing more than a handshake.

What has become of personal ethics? Has it truly disappeared? Are agreements still struck with the power and authority of a handshake?

On the surface, it would appear that these notions are now a quaint historical footnote on how business used to be done in the “gold old days”!

Watson disagrees. Watson says that today, in a rapidly changing world, that ethics is even more critical than it has ever been before.

Professor Watson studies Integrity and its’ impact on business, serial entrepreneurs, and new product development. In his research, he has identified ethics as a key characteristic of a Serial Entrepreneur. Successful entrepreneurs consistently demonstrate behaviors of Integrity at a significantly higher rate than other business owners, executives, and managers.

Watson attributes this to the importance of ethics in ones behavior. When an entrepreneur demonstrates characteristics of ethics, the entrepreneur inspires confidence and credibility that the activities of business will get done. This trust that is earned is recognized by potential business stakeholders such as venture capitalists, investors, business partners, vendors, potential customers, and potential employees.

Watson suggests that ethics is part of the risk equation that parties to a deal utilize to evaluate whether the deal will be completed successfully and fairly to all parties. It is this trust component that provides a significant competitive edge to the entrepreneur as they negotiate the rapidly changing landscape of launching a new business enterprise.

Just like the handshake. When you perceive your business partner to demonstrate characteristics of ethics, your confidence that all parties will execute on the deal increases. Or to restate that, your risk that your partner will not execute is lowered. Business Entrepreneurship is driven by the the trust that you can execute.

While many may dismiss the role of Trust, Watson attributes ethics as a key factor in determining the long term success rate of entrepreneurship. Just like the handshake of days past, the personal ethics of an entrepreneur are a critical variable in determining whether a second, third, or fourth new business venture is completed.

Ethics is a critical factor in determining whether an entrepreneur can replicate past successes in future subsequent new business ventures.

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