Skip to main content
SpringerLink
Log in

Moral Degradation, Business Ethics, and Corporate Social Responsibility in a Transitional Economy

  • Published:
Journal of Business Ethics Aims and scope Submit manuscript

Abstract

This article theoretically proposes and empirically verifies an understudied issue in the business ethics (BE) and corporate social responsibility (CSR) literature—how moral degradation (MD) in a society influences the relationship between BE or CSR and firm performance (i.e., corporate legitimacy and competitive advantage). Building on strategic choice theory, we propose that both BE and CSR become more important in enhancing business success when the perceived MD is heightened. Our analysis of 300 firms operating in China statistically confirms our hypotheses: first, under high MD, firms’ engagement in CSR results in higher corporate legitimacy and competitive advantage, and second, their adherence to ethical business codes leads to higher corporate legitimacy. We conclude the article by outlining the implications for both theory and practice.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4

Similar content being viewed by others

References

  • Abbott, W. F., & Monsen, R. J. (1979). On the measurement of corporate social responsibility: Self-reported disclosures as a method of measuring corporate social involvement. Academy of Management Journal, 22(3), 501–515.

    Article  Google Scholar 

  • Aiken, L. S., & West, S. G. (1991). Multiple regression: Testing and interpreting interactions. London: Sage.

    Google Scholar 

  • Ansoff, H. I. (1987). The emerging paradigm of strategic behavior. Strategic Management Journal, 8(6), 501–515.

    Article  Google Scholar 

  • Apressyan, R. G. (1997). Business ethics in Russia. Journal of Business Ethics, 16(14), 1561–1570.

    Article  Google Scholar 

  • Arlow, P., & Gannon, M. J. (1982). Social responsiveness, corporate structure, and economic performance. Academy of Management Review, 7(2), 235–241.

    Google Scholar 

  • Arthur, H. (1984). Making business ethics useful. Strategic Management Journal, 5(4), 319–333.

    Article  Google Scholar 

  • Bailey, W., & Spicer, A. (2007). When does national identity matter? Convergence and divergence in international business ethics. Academy of Management Journal, 50(6), 1462–1480.

    Article  Google Scholar 

  • Baron, D. (2001). Private politics, corporate social responsibility and integrated strategy. Journal of Economics and Management Strategy, 10(1), 7–45.

    Article  Google Scholar 

  • Basu, K., & Palazzo, G. (2008). Corporate social responsibility: A process model of sensemaking. Academy of Management Review, 33(1), 122–136.

    Article  Google Scholar 

  • Baucus, M. (1994). Pressure, opportunity, and predisposition: A multivariate model of corporate illegality. Journal of Management, 20(4), 699–721.

    Article  Google Scholar 

  • Baucus, M., & Near, J. (1991). Can illegal corporate behavior be predicted? An even history analysis. Academy of Management Journal, 34, 9–36.

    Article  Google Scholar 

  • Brammer, S. J., & Pavelin, S. (2006). Corporate reputation and social performance: The importance of fit. Journal of Management Studies, 43(3), 435–455.

    Article  Google Scholar 

  • Branzei, O., Ursacki-Bryant, T. J., Vertinsky, I., & Zhang, W. (2004). The formations of green strategies in Chinese firms: Matching corporate environmental responses and individual principles. Strategic Management Journal, 25, 1075–1095.

    Article  Google Scholar 

  • Brickson, S. L. (2007). Organizational identity orientation: The genesis of the role of the firm and distinct forms of social value. Academy of Management Review, 32(3), 864–888.

    Article  Google Scholar 

  • Brislin, R. W. (1970). Back-translation for cross-cultural research. Journal of Cross-Cultural Psychology, 1(3), 185–216.

    Article  Google Scholar 

  • Chan, R. Y. K., Cheng, L. T. W., & Szeto, R. W. F. (2002). The dynamics of Guanxi and ethics for Chinese executives. Journal of Business Ethics, 41(4), 327–336.

    Article  Google Scholar 

  • Chang, S., Witteloostuijn, A., & Eden, L. (2010). From the editors: Common method variance in international business research. Journal of International Business Studies, 41(2), 178–184.

    Article  Google Scholar 

  • Child, J. (1972). Organizational structure, environment and performance: The role of strategic choice. Sociology, 6(1), 1–20.

    Article  Google Scholar 

  • China Foreign Enterprise Directory. (2009). Beijing: Association of Chinese Foreign-Funded Enterprises.

  • Christmann, P., & Taylor, G. (2006). Firm self-regulation through international certifiable standards: Determinants of symbolic versus substantive implementation. Journal of International Business Studies, 37, 863–878.

    Article  Google Scholar 

  • Cohen, S. (1973). Folk devils and moral panics. St. Albans: Paladin.

    Google Scholar 

  • Davis, K. (1973). The case for and against business assumption of social responsibilities. Academy of Management Journal, 16(2), 312–322.

    Article  Google Scholar 

  • DiMaggio, P. J., & Powell, W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), 147–160.

    Article  Google Scholar 

  • Durkheim, E. (1966). The rules of sociological method. New York: Free Press.

    Google Scholar 

  • Ehrgott, M., Reimann, F., Kaufmann, L., & Carter, C. R. (2011). Social sustainability in selecting emerging economy suppliers. Journal of Business Ethics, 98(1), 99–119.

    Article  Google Scholar 

  • Fairclough, G. (2008). Tainting of milk is open secret in China. The Wall Street Journal, November 3. http://www.Online.Wsj.Com/Article/SB122567367498791713.Html. Retrieved 10 Sep 2011.

  • Fang, T., Gunterberg, C., & Larsson, E. (2010). Sourcing in an increasingly expensive China: Four Swedish cases. Journal of Business Ethics, 97, 119–138.

    Article  Google Scholar 

  • Fombrun, C. J., & Shanley, M. (1990). What’s in a name? Reputation building and corporate strategy. Academy of Management Journal, 33(2), 233–258.

    Article  Google Scholar 

  • Freeman, E. R. (1999). Divergent stakeholder theory. Academy of Management Review, 24(2), 233–236.

    Google Scholar 

  • Fulop, G., Hisrich, R., & Szegedi, K. (2000). Business ethics and social responsibility in transitional economies. Journal of Management Development, 19(1), 5–31.

    Article  Google Scholar 

  • Galang, R. M. N. (2011). Victim or victimizer: Firm responses to government corruption. Journal of Management Studies, 49(2), 429–462.

    Article  Google Scholar 

  • Giddens, A. (1995). Politics, sociology and social theory. Stanford, CA: Stanford University Press.

    Google Scholar 

  • Glinkina, S. P., Grigoriev, A., & Yakobidze, V. (2001). Crime and corruption. In L. R. Klein & M. Pomer (Eds.), The New Russia, transition gone awry (pp. 233–250). Stanford, CA: Stanford University Press.

    Google Scholar 

  • Hamel, G., & Prahalad, C. K. (1989). Strategic intent. Harvard Business Review, 67(3), 63–76.

    Google Scholar 

  • Harvey, B. (1999). ‘Graceful Merchants’: A contemporary view of Chinese business ethics. Journal of Business Ethics, 20(1), 85–92.

    Article  Google Scholar 

  • Hemingway, C. A. (2005). Personal values as a catalyst for corporate social entrepreneurship. Journal of Business Ethics, 60(3), 233–249.

    Article  Google Scholar 

  • Heugens, P. M., Kaptein, M., & Van Oosterhout, J. (2008). Contracts to communities: A processual model of organizational virtue. Journal of Management Studies, 45(1), 100–121.

    Google Scholar 

  • Hillman, A. J., & Keim, G. D. (2001). Shareholder value, stakeholder management and social issues: What’s the bottom line? Strategic Management Journal, 22(2), 125–139.

    Article  Google Scholar 

  • Hofer, C., & Schendel, D. (1978). Strategy formulation: Analytical concepts. St. Paul, MN: West Publishing Co.

    Google Scholar 

  • Hu, L., & Bentler, P. M. (1999). Cutoff criteria for fit indexes in covariance structure analysis: Conventional criteria versus new alternatives. Structural Equation Modeling, 6(1), 1–55.

    Article  Google Scholar 

  • Husters, T. (2003). China’s new order: Society, politics and economy in transition. Cambridge, MA: Harvard University Press.

    Google Scholar 

  • Jamali, D., & Mirshak, R. (2007). Corporate social responsibility (CSR): Theory and practice in a developing country context. Journal of Business Ethics, 72(3), 243–262.

    Article  Google Scholar 

  • Jamali, D., & Neville, B. (2011). Convergence verse divergence in CSR in developing countries: An embedded multi-layered institutional lens. Journal of Business Ethics, 102(4), 599–621.

    Article  Google Scholar 

  • Jenkins, H. (2006). Small business champions for corporate social responsibility. Journal of Business Ethics, 67(3), 241–256.

    Article  Google Scholar 

  • Jensen, G. (2002). Institutional anomie and societal variations in crime: A critical appraisal. International Journal of Sociology and Social Policy, 22(7/8), 45–74.

    Article  Google Scholar 

  • Jones, T. (1995). Instrumental stakeholder theory: A synthesis of ethics and economics. Academy of Management Review, 20(2), 404–437.

    Google Scholar 

  • Jones, T. M., Felps, W., & Bigley, G. A. (2007). Ethical theory and stakeholder-related decisions: The role of stakeholder culture. Academy of Management Review, 32(1), 137–155.

    Article  Google Scholar 

  • Kline, R. B. (2004). Principles and practice of structural equation modeling. New York: Guilford.

    Google Scholar 

  • Kostova, T., Roth, K., & Dacin, M. T. (2008). Institutional theory in the study of multinational corporations: A critique and new directions. Academy of Management Review, 33(4), 994–1006.

    Article  Google Scholar 

  • Ledeneva, A. (1998). Russia’s economy of favours: Blat, networking and informal exchange. Cambridge, MA: Cambridge University Press.

    Google Scholar 

  • Lee, T. W., & Mitchell, T. R. (1994). An alternative approach: The unfolding model of employee turnover. Academy of Management Review, 19(1), 51–89.

    Google Scholar 

  • Luo, Y. (2004). An organizational perspective of corruption. Management and Organization Review, 1(1), 119–154.

    Article  Google Scholar 

  • Luo, Y. (2008). A strategic analysis of product recalls: The role of moral degradation and organizational control. Management and Organization Review, 4(2), 183–196.

    Article  Google Scholar 

  • Luo, Y. (2011). Strategic responses to perceived corruption in an emerging market: Lessons from MNEs investing in China. Business and Society, 50(2), 350–387.

    Article  Google Scholar 

  • Mackey, A., Mackey, T. B., & Barney, J. B. (2007). Corporate social responsibility and firm performance: Investor relations and corporate strategies. Academy of Management Review, 32(3), 817–835.

    Article  Google Scholar 

  • Margolis, J. D., & Walsh, J. P. (2003). Misery loves firms: Rethinking social initiatives by business. Administrative Science Quarterly, 48(2), 268–305.

    Article  Google Scholar 

  • Martin, K. D., Cullen, J. B., Johnson J. L., & Parboteeah, K. P. (2007). Deciding to bribe: A cross-level analysis of firm and home country influences on bribery activity. Academy of Management Journal 50(6), 1401–1422.

    Google Scholar 

  • Mckendall, M., & Wagner, J. (1997). Motive, opportunity, choice and corporate illegality. Organization Science, 8(6), 624–647.

    Article  Google Scholar 

  • Mcwilliams, A., & Siegel, D. S. (2000). Corporate social responsibility and financial performance: Correlation or misspecification? Strategic Management Journal, 21(5), 603–609.

    Article  Google Scholar 

  • Mcwilliams, A., & Siegel, D. S. (2001). Corporate social responsibility: A theory of the firm perspective. Academy of Management Review, 26(1), 117–127.

    Google Scholar 

  • Mcwilliams, A., Siegel, D. S., & Wright, P. M. (2006). Corporate social responsibility: Strategic implications. Journal of Management Studies, 43(1), 1–18.

    Article  Google Scholar 

  • Mcwilliams, A., Van Fleet, D. D., & Cory, K. (2002). ‘Raising Rivals’ costs through political strategy: An extension of the resource-based theory. Journal of Management Studies, 39(5), 707–724.

    Article  Google Scholar 

  • Merton, R. K. (1968). Social theory and social structure. New York: Free Press.

    Google Scholar 

  • Messner, S. F., & Rosenfeld, R. (2001). Crime and the American dream. Belmont, CA: Wadsworth.

    Google Scholar 

  • Montanari, J. R. (1978). Managerial discretion: An expanded model of organization choice. Academy of Management Review, 3(2), 231–241.

    Google Scholar 

  • Muller, A., & Kolk, A. (2010). Extrinsic and intrinsic drivers of corporate social performance: Evidence from foreign and domestic firms in Mexico. Journal of Management Studies, 47(1), 1–26.

    Article  Google Scholar 

  • Murray, K. B., & Montanari, J. B. (1986). Strategic management of the socially responsible firm: Integrating management and marketing theory. Academy of Management Review, 11(4), 815–827.

    Google Scholar 

  • North, D. C. (1990). Institutions, institutional change and economic performance. Cambridge, MA: Harvard University Press.

    Book  Google Scholar 

  • Oliver, C. (1991). Strategic responses to institutional processes. Academy of Management Review, 16(1), 145–179.

    Google Scholar 

  • Oliver, C. (1996). The institutional embeddedness of economic activity. Advances in Strategic Management, 13(1), 163–186.

    Google Scholar 

  • Ozen, S., & Kuskii, F. (2009). Corporate environmental citizenship variation in developing countries: An institutional framework. Journal of Business Ethics, 89(2), 297–393.

    Article  Google Scholar 

  • Palazzo, G., & Scherer, A. G. (2006). Corporate legitimacy as deliberation: A communicative framework. Journal of Business Ethics, 66(1), 71–88.

    Article  Google Scholar 

  • Peng, M. W., & Heath, P. S. (1996). The growth of the firm in planned economies in transition: Institutions, organizations and strategic choice. Academy of Management Review, 21(2), 492–528.

    Google Scholar 

  • Pfeffer, J., & Salancik, G. R. (1978). The external control of organizations: A resource dependence perspective. New York: Harper and Row.

    Google Scholar 

  • Pirsch, J., Gupta, S., & Grau, S. L. (2007). A framework for understanding corporate social responsibility programs as a continuum: An exploratory study. Journal of Business Ethics, 70(2), 125–140.

    Article  Google Scholar 

  • Podsakoff, P. M., S. B. Mackenzie Y. Lee and N. P. Podsakoff: 2003, Common method biases in behavioral research: A critical review of the literature and recommended remedies. Journal of Applied Psychology 88(5), 879–903.

    Google Scholar 

  • Porter, M. E. (1980). Competitive strategy: Techniques for analyzing industries and competitors. New York: Free Press.

    Google Scholar 

  • Porter, M. E. (1985). Competitive advantage: Creating and sustaining superior performance. New York: Free Press.

    Google Scholar 

  • Porter, M. E., & Kramer, M. R. (2006). Strategy and society: The link between competitive advantage and corporate social responsibility. Harvard Business Review, 84(12), 78–92.

    Google Scholar 

  • Powell, W. W. (1985). The institutionalization of rational organizations. Contemporary Sociology, 14(5), 564–566.

    Article  Google Scholar 

  • Puffer, S. M. (1994). Understanding the bear: A portrait of russian business leaders. Academy of Management Executive, 8(1), 41–54.

    Google Scholar 

  • Redfern, K., & Crawford, J. (2004). An empirical investigation of the ethics position questionnaire in the People’s Republic of China. Journal of Business Ethics, 50(3), 199–210.

    Article  Google Scholar 

  • Reidenbach, R. E., & Robin, D. P. (1990). Toward the development of a multidimensional scale for improving the evaluation of business ethics. Journal of Business Ethics, 9(8), 639–653.

    Article  Google Scholar 

  • Saul, G. K. (1981). Business ethics: Where are we going? Academy of Business, 6(2), 269–276.

    Google Scholar 

  • Scherer, A. G., & Palazzo, G. (2011). The new political role of business in a globalized world: A review of a new perspective on CSR and its implications for the firm, governance, and democracy. Journal of Management Studies, 48(4), 899–931.

    Article  Google Scholar 

  • Scott, W. R. (1995). Institutions and organizations. Thousand Oaks, CA: Sage.

    Google Scholar 

  • Sethi, S. P. (1979). A conceptual framework for environmental analysis of social issues and evaluation of business response patterns. Academy of Management Review, 4(1), 63–74.

    Google Scholar 

  • Siltaoja, M. E. (2006). Value priorities as combining core factors between CSR and reputation—a qualitative study. Journal of Business Ethics, 68(1), 91–111.

    Article  Google Scholar 

  • Strong, K. C., Ringer, R. C., & Taylor, S. A. (2001). The ruled of stakeholder satisfaction (timeliness, honesty, empathy). Journal of Business Ethics, 32(3), 219–230.

    Article  Google Scholar 

  • Suchman, M. C. (1995). Managing legitimacy: strategic and institutional approaches. Academy of Management Review, 20(3), 571–610.

    Google Scholar 

  • Sullivan, B. N., Haunschild, P., & Page, K. (2007). Organizations non-gratae? The impact of unethical corporate acts on interorganizational networks. Organization Science, 18(1), 55–70.

    Article  Google Scholar 

  • Tam, O. K. (2002). Ethical issues in the evolution of corporate governance in China. Journal of Business Ethics, 37(3), 303–320.

    Article  Google Scholar 

  • Transparency International. (2009). Global corruption report: Corruption and the private sector. Cambridge, MA: Cambridge University Press.

    Google Scholar 

  • Vynoslavska, O., Mckinney, J. A., Moore, C. W., & Longenecker, J. G. (2005). Transition ethics: A comparison of Ukrainian and United States business professionals. Journal of Business Ethics, 61(3), 283–299.

    Article  Google Scholar 

  • Weaver, G., Treviño, L., & Cochran, P. (1999). Corporate ethics programs as control systems: Influences of executive commitment and environmental factors. Academy of Management Journal, 42(1), 41–57.

    Article  Google Scholar 

  • Whetten, D. A., & Mackey, A. (2002). A social actor conception of organizational identity and its implications for the study of organizational reputation. Business and Society, 41(4), 393–414.

    Article  Google Scholar 

  • White, H. (1980). A heteroskedasticity-consistent covariance matrix estimator and a direct test for heteroskedasticity. Econometrica, 48(4), 817–838.

    Article  Google Scholar 

  • Whittington, R. (1988). Environmental structure and theories of strategic choice. Journal of Management Studies, 25(6), 521–536.

    Article  Google Scholar 

  • Wood, D. J. (1991). Corporate social performance revisited. Academy of Management Review, 16(4), 691–718.

    Google Scholar 

  • Wright, P. C., Szeto, W. F., & Lee, S. K. (2003). Ethical perceptions in China: The reality of business ethics in an international context. Management Decision, 41(1), 180–189.

    Article  Google Scholar 

  • Zhang, R., & Rezaa, Z. (2009). Do credible firms perform better in emerging markets. Journal of Business Ethics, 90(2), 221–237.

    Article  Google Scholar 

Download references

Acknowledgments

The authors would like to sincerely thank the National Natural Science Foundation of China (71272004) and the Third Phase of “985 Project” on Advancing Social Science Research, Fudan University (2011SHKXZD006) for sponsoring this project.

Author information

Authors and Affiliations

  1. School of Management, Fudan University, 670 Guoshun Road, Shanghai, 200433, China

    Qinqin Zheng

  2. Sun Yat-Sen Business School, Sun Yat-Sen University, Guangzhou, China

    Yadong Luo

  3. School of Business Administration, University of Miami, Coral Gables, FL, 33124-9145, USA

    Yadong Luo

  4. Department of Management, School of Business Administration, University of Miami, 412F Jenkins Building, Coral Gables, FL, 33124-9145, USA

    Stephanie Lu Wang

Authors
  1. Qinqin Zheng
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Yadong Luo
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Stephanie Lu Wang
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Yadong Luo.

Appendix: Major Survey Questions

Appendix: Major Survey Questions

Rights and permissions

Reprints and permissions

About this article

Cite this article

Zheng, Q., Luo, Y. & Wang, S.L. Moral Degradation, Business Ethics, and Corporate Social Responsibility in a Transitional Economy. J Bus Ethics 120, 405–421 (2014). https://doi.org/10.1007/s10551-013-1668-4

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-013-1668-4

Keywords

Search

Navigation