Journal of Business Ethics

, Volume 117, Issue 1, pp 111–121 | Cite as

Negative Publicity Effect of the Business Founder’s Unethical Behavior on Corporate Image: Evidence from China



The unethical behavior of a business founder often leads to negative publicity which substantially affects positive corporate image. The amount of negative publicity relating to business founders’ unethical behavior is on the rise in the age of online social media in China. Based on the stimulus–response theory and balance theory, this paper developed a theoretical model to examine how negative publicity about a business founder’s unethical behavior affects corporate image. The proposed model was tested by the partial least squares technique. Results show that perceived severity, publicity intensity and recovery performance are predictors of corporate image: perceived severity has a negative impact on positive corporate image; publicity intensity and recovery performance have positive impacts on positive corporate image; and founder image mediates the relationships between the three predictors and corporate image. Moreover, initial consumer impression of business founders has a positive impact on positive corporate image.


Business founder Corporate image Entrepreneurs Entrepreneurship and ethics Negative publicity Unethical behavior 



This work was supported by National Natural Science Foundation of China (71072032) and Ministry of Education, Humanities and Social Sciences project (12YJC810035).


  1. Amos, C., Holmes, G., & Strutton, D. (2008). Exploring the relationship between celebrity endorser effects and advertising effectiveness: A quantitative synthesis of effect size. International Journal of Advertising, 27(2), 209–234.Google Scholar
  2. Bailey, A. A. (2007). Public information and consumer skepticism effects on celebrity endorsements: Studies among young consumers. Journal of Marketing Communications, 13(2), 85–107.CrossRefGoogle Scholar
  3. Baron, R. M., & Kenny, D. A. (1986). The moderator–mediator variable distinction in social psychological research: Conceptual, strategic and statistical considerations. Journal of Personality and Social Psychology, 51(6), 1173–1182.CrossRefGoogle Scholar
  4. Bond, J., & Kirshenbaum, R. (1998). Under the radar: Talking to today’s cynical consumer. New York: Wiley.Google Scholar
  5. Brenkert, G. G. (2009). Innovation, rule breaking and the ethics of entrepreneurship. Journal of Business Venturing, 24(5), 448–464.CrossRefGoogle Scholar
  6. Buchholz, R. A., & Rosenthal, S. B. (2005). The spirit of entrepreneurship and the qualities of moral decision making: Toward a unifying framework. Journal of Business Ethics, 60(1), 307–315.CrossRefGoogle Scholar
  7. Butler, L. T., & Berry, D. C. (2002). The influence of affective statements on performance on implicit and explicit memory tasks. Applied Cognitive Psychology, 16(7), 829–843.CrossRefGoogle Scholar
  8. Chang, Y. P., & Zhu, D. H. (2011). Understanding social networking sites adoption in china: A comparison of pre-adoption and post-adoption. Computers in Human Behavior, 27(5), 1840–1848.CrossRefGoogle Scholar
  9. Chau, L. L., & Siu, W. (2000). Ethical decision making in corporate entrepreneurial organizations. Journal of Business Ethics, 23(4), 365–375.CrossRefGoogle Scholar
  10. Chen, Y. B., Fay, S., & Wang, Q. (2011). The role of marketing in social media: How online consumer reviews evolve. Journal of Interactive Marketing, 25(2), 85–94.CrossRefGoogle Scholar
  11. Chin, W. W., & Gopal, A. (1995). Adoption intention in GSS: Relative importance of beliefs. Data Base for Advances in Information Systems, 26(2–3), 42–64.CrossRefGoogle Scholar
  12. China Whisper. (2010). Song Shanmu is sentenced to jail for 4 years. 26 Dec 2010.
  13. Colliander, J., & Dahlen, M. (2011). Following the fashionable friend: The power of social media. Journal of Advertising Research, 51(1), 313–320.CrossRefGoogle Scholar
  14. Dean, D. H. (2004). Consumer reaction to negative publicity. Journal of Business Communication, 41(2), 192–211.CrossRefGoogle Scholar
  15. Dew, N., & Sarasvathy, S. D. (2007). Innovations, stakeholders and entrepreneurship. Journal of Business Ethics, 74(3), 267–283.CrossRefGoogle Scholar
  16. Dye, P. (1997). Emergency services. Marketing Week, 20(April), 73–74.Google Scholar
  17. Einwiller, S. A., Fedorikhin, A., Johnson, A. R., & Kamins, M. A. (2006). Enough is enough! When identification no longer prevents negative corporate associations. Journal of the Academy of Marketing Science, 34(2), 185–194.CrossRefGoogle Scholar
  18. Fassin, Y., Rossem, A. V., & Buelens, M. (2011). Small-business owner–managers’ perceptions of business ethics and CRS-related concepts. Journal of Business Ethics, 98(3), 425–453.CrossRefGoogle Scholar
  19. Fiske, S. T. (1980). Attention and weight in person perception: The impact of negative and extreme behavior. Journal of Personality and Social Psychology, 38(6), 889–906.CrossRefGoogle Scholar
  20. Fombrun, C. J. (1996). Reputation: Realizing value from the corporate image. Boston: Harvard Business School Press.Google Scholar
  21. Fornell, C., & Larcker, D. F. (1981). Structural equation models with unobservable variables and measurement errors. Journal of Marketing Research, 18(1), 39–50.CrossRefGoogle Scholar
  22. Gefen, D., Straub, D. W., & Boudreau, M. (2000). Structural equation modeling techniques and regression: Guidelines for research practice. Communications of the Association for Information Systems, 4, 1–77.Google Scholar
  23. Haigh, M. M., & Dardis, F. (2012). The impact of apology on organization–public relationships and perceptions of corporate social responsibility. Public Relations Journal, 6(1), 1–16.Google Scholar
  24. Hall, J., & Rosson, P. (2006). The impact of technological turbulence on entrepreneurial behavior, social norms and ethics: Three internet-based cases. Journal of Business Ethics, 64(3), 231–248.CrossRefGoogle Scholar
  25. Hannafey, F. T. (2003). Entrepreneurship and ethics: A literature review. Journal of Business Ethics, 46(2), 99–110.CrossRefGoogle Scholar
  26. Harris, J. D., Sapienza, H., & Bowie, N. E. (2009). Ethics and entrepreneurship. Journal of Business Venturing, 24(5), 407–418.CrossRefGoogle Scholar
  27. Heider, F. (1946). Attitudes and cognitive organization. Journal of Psychology, 21, 107–112.CrossRefGoogle Scholar
  28. Higgins, E. T., Echterhoff, G., Crespillo, R., & Kopietz, R. (2007). Effects of communication on social knowledge: Sharing reality with individual versus group audiences. Japanese Psychological Research, 49(2), 89–99.CrossRefGoogle Scholar
  29. Hornsby, J. S., Kuratko, D. F., Naffziger, D. W., LaFollette, W. R., & Hodgetts, R. M. (1994). The ethical perceptions of small business owners: A factor analytic study. Journal of Small Business Management, 32(4), 9–16.Google Scholar
  30. Humphreys, N., Robin, D. P., Reidenbach, R. E., & Moak, D. L. (1993). The ethical decision making process of small business owner/managers and their customers. Journal of Small Business Management, 31(3), 9–22.Google Scholar
  31. Hunter, E. J. (2010). Celebrity entrepreneurship and celebrity endorsement: Similarities, differences and the effect of deeper engagement, Doctoral dissertation, Queensland University of Technology, Brisbane.Google Scholar
  32. Ingram, R., Skinner, S. J., & Taylor, V. A. (2005). Consumers’ evaluation of unethical marketing behaviors: The role of customer commitment. Journal of Business Ethics, 62(3), 237–252.CrossRefGoogle Scholar
  33. Jackson, G. B., Jackson, R. W., & Newmiller, C. E. (1992). Consumer demographics and reaction to product tampering. Psychology and Marketing, 9(1), 45–57.CrossRefGoogle Scholar
  34. Janney, J. J., & Gove, S. (2011). Reputation and corporate social responsibility aberrations, trends, and hypocrisy: Reactions to firm choices in the stock option backdating scandal. Journal of Management Studies, 48(7), 1562–1585.CrossRefGoogle Scholar
  35. Jones, T., Dacin, P. A., & Taylor, S. (2011). Relational damage and relationship repair: A new look at transgressions in service relationships. Journal of Service Research, 14(3), 318–339.CrossRefGoogle Scholar
  36. Kotler, P., & Mindak, W. (1978). Marketing and public relations. Journal of Marketing, 42(4), 13–20.CrossRefGoogle Scholar
  37. Kuratko, D. F., & Goldsby, M. G. (2004). Corporate entrepreneurs or rogue middle managers? A framework for ethical corporate entrepreneurship. Journal of Business Ethics, 55(1), 13–30.CrossRefGoogle Scholar
  38. Lake, D. A., Reece, B. B., & Rifon, N. J. (2010). Sports team athletes as product endorsers: The moderating role of fan team commitment on the effects of negative publicity. In W. N. Lee (Ed.), Proceedings of the 2010 Conference of the Academy of Advertising (pp. 30–32). Austin, TX: The University of Texas at Austin.Google Scholar
  39. Langmeyer, L., & Shank, M. D. (1993). Celebrity endorsers and public service agencies: A balancing act. In E. Thorson (Ed.), Proceedings of the 1993 Conference of the Academy of Advertising (pp. 197–207). Columbia, MO: American Academy of Advertising.Google Scholar
  40. Lii, Y. S., & Lee, M. (2011). Doing right leads to doing well: when the type of CSR and reputation interact to affect consumer evaluations of the firm. Journal of Business Ethics, 105(1), 69–81.CrossRefGoogle Scholar
  41. Lin, C. P., Chen, S. C., Chiu, C. K., & Lee, W. Y. (2011). Understanding purchase intention during product-harm crises: Moderating effects of perceived corporate ability and corporate social responsibility. Journal of Business Ethics, 102(3), 455–471.CrossRefGoogle Scholar
  42. Malhotra, N. K., Kim, S. S., & Patil, A. (2006). Common method variance in is research: A comparison of alternative approaches and a reanalysis of past research. Management Science, 52(12), 1865–1883.CrossRefGoogle Scholar
  43. Maxham, J. G., I. I. I., & Netemeyer, R. G. (2002). A longitudinal study of complaining customers’ evaluations of multiple service failures and recovery efforts. Journal of Marketing, 66(4), 57–71.CrossRefGoogle Scholar
  44. McCollough, M. A. (2009). The recovery paradox: The effect of recovery performance and service failure severity on post-recovery customer satisfaction academy of marketing. Studies Journal, 13(1), 89–104.Google Scholar
  45. McGinnis, A., Pellegrin, J., Shum, Y., Teo, J., & Wu, J. (2009). The Sichuan earthquake and the changing landscape of CSR in China. April 20 2009. Knowledge@Wharton.
  46. Money, R. B., Shimp, T. A., & Sakano, T. (2006). Celebrity endorsements in Japan and the United States: Is negative information all that harmful? Journal of Advertising Research, 26(1), 113–123.CrossRefGoogle Scholar
  47. Munroe, P. T. (2007). Cognitive balance theory (Heider). In G. Ritzer (Ed.), Blackwell Encyclopedia of Sociology. Oxford: Blackwell.Google Scholar
  48. Nunnally, J. C. (1978). Psychometric theory. New York: McGraw-Hill.Google Scholar
  49. Parker, H. M., & Fink, J. S. (2010). Negative sponsor behavior, team response and how this impacts fan attitudes. International Journal of Sports Marketing & Sponsorship, 11(3), 200–211.Google Scholar
  50. Payne, D., & Joyner, B. E. (2006). Successful US entrepreneurs: Identifying ethical decision-making and social responsibility behaviors. Journal of Business Ethics, 65(3), 203–217.CrossRefGoogle Scholar
  51. Peterson, R. T., & Jun, M. (2009). Perceptions on social responsibility: The entrepreneurial vision. Business & Society, 48(3), 385–405.CrossRefGoogle Scholar
  52. Pina, J. M., Martinez, E., de Chernatony, L., & Drury, S. (2006). The effect of service brand extensions on corporate image—An empirical model. European Journal of Marketing, 40(1–2), 174–197.CrossRefGoogle Scholar
  53. Podsakoff, P. M., & Organ, D. W. (1986). Self-reports in organizational research: Problems and prospects. Journal of Management, 12(4), 531–544.CrossRefGoogle Scholar
  54. Reidenbach, R. E., & Robin, D. P. (1993). Toward the development of a multidimensional scale for improving evaluations of business ethics. Journal of Business Ethics, 9(8), 639–653.CrossRefGoogle Scholar
  55. Romeo, J. B. (1991). The effect of negative information on the evaluations of brand extensions and the family brand. Advances in Consumer Research, 18, 399–406.Google Scholar
  56. Romeo, J. B., Weinberger, M. G., & Antes, D. (1994). An investigation of the communication cues that affect consumers’ responses to negative product safety news. Birmingham: Research Centre for Consumer Behaviour, the University of Birmingham.Google Scholar
  57. Schein, E. H. (1983). The role of the founder in creating organizational culture. Organizational Dynamics, 12(1), 13–28.CrossRefGoogle Scholar
  58. Schminke, M., Ambrose, M. L., & Neubaum, D. O. (2005). The effect of leader moral development on ethical climate and employee attitudes. Organizational Behavior and Human Decision Processes, 97(2), 135–151.CrossRefGoogle Scholar
  59. Solymossy, E., & Masters, J. K. (2002). Ethics through an entrepreneurial lens: Theory and observation. Journal of Business Ethics, 38(3), 227–241.CrossRefGoogle Scholar
  60. Städtler, R. (2011). Celebrity scandals and their impact on brand image: A study among young consumers. München: Grin Verlag.Google Scholar
  61. Sun Moon. (2010). Statement regarding the rumors surrounding Mr. Song Shanmu. 13 May 2010
  62. Teal, E. J., & Carroll, A. B. (1999). Moral reasoning skills: Are entrepreneurs different? Journal of Business Ethics, 19(3), 229–241.CrossRefGoogle Scholar
  63. Wagner, T., Lutz, R. J., & Weitz, B. A. (2009). Corporate hypocrisy: Overcoming the threat of inconsistent corporate social responsibility perceptions. Journal of Marketing, 73(6), 77–91.CrossRefGoogle Scholar
  64. Weinberger, M. G. (1986). Products as target of negative information: Some recent findings. European Journal of Marketing, 20(3/4), 110–128.CrossRefGoogle Scholar
  65. Weinberger, M. G., & Lepkowska-White, E. (2000). The influence of negative information on purchase behavior. Journal of Marketing Management, 16(5), 465–481.CrossRefGoogle Scholar
  66. Xinhua. (2010). Chinese tycoon Huang Guangyu sentenced to 14 years in prison. 18 May 2010
  67. Zhang, L., & Taylor, R. D. (2009). Exploring the reciprocal effect of negative information of brand extensions on parent brand. Marketing Management Journal, 19(1), 1–15.Google Scholar
  68. Zhao, B., Tu, R. T., & Fu, G. Q. (2005). How service recoveries affect customers’ switching intention. Journal of Marketing Science, 1(2), 1–11.Google Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2012

Authors and Affiliations

  1. 1.School of ManagementHuazhong University of Science & TechnologyWuhanChina
  2. 2.School of ManagementHuazhong University of Science & TechnologyWuhanChina

Personalised recommendations