Journal of Business Ethics

, Volume 115, Issue 2, pp 271–290 | Cite as

How Ethical Behavior of Firms is Influenced by the Legal and Political Environments: A Bayesian Causal Map Analysis Based on Stages of Development

Article

Abstract

Even though potential impacts of political and legal environments of business on ethical behavior of firms (EBOF) have been conceptually recognized, not much evidence (i.e., empirical work) has been produced to clarify their role. In this paper, using Bayesian causal maps (BCMs) methodology, relationships between legal and political environments of business and EBOF are investigated. The unique design of our study allows us to analyze these relationships based on the stages of development in 92 countries around the world. The EBOF models structured through BCMs are used to explain how EBOF in a given country group are shaped by how managers perceive political, legislative, and protective environments of business in these countries. The results suggest that irregular payments and bribes are the most influential factors affecting managers’ perceptions of business ethics in relatively more advanced economies, whereas intellectual property protection is the most influential factor affecting managers’ perceptions of business ethics in less-advanced economies. The results also suggest that regardless of where the business is conducted in the world, judicial independence is the driving force behind managers’ perceptions of business ethics. In addition, the results of this study provide further support for scholars who argue that business ethics is likely to vary among countries based on their socio-economic factors. In addition to its managerial implications, the study provides directions for policy makers to improve the ethical conduct of businesses in their respective countries.

Keywords

Bayesian causal map Ethical behavior of firms Judicial independence Bribery Intellectual property protection Country development stage 

Abbreviations

WEF

World Economic Forum

BCM

Bayesian causal map

EOS

Executive Opinion Survey

GCI

Global Competitiveness Index

EBOF

Ethical behavior of firms

IPP

Intellectual property protection

IPAB

Irregular payments and bribes

JI

Judicial independence

FDGO

Favoritism in decisions of government officials

TGP

Transparency of government policymaking

SARS

Strength of auditing and reporting standards

ECB

Efficacy of corporate boards

SIP

Strength of investor protection

IPR

Intellectual property rights

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Copyright information

© Springer Science+Business Media B.V. 2012

Authors and Affiliations

  1. 1.Faculty of Business AdministrationBilkent UniversityBilkent, AnkaraTurkey
  2. 2.Dogus University, Engineering FacultyAcibadem, IstanbulTurkey

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