Ethics and Social Responsibility for Global Entrepreneurs

Introduction: Ethics and Entrepreneurship in a Global Context

Intuitively, the thought of ethics and entrepreneurship being aligned seems paradoxical — even opposed to each other. When one considers the intensity of effort and focus it takes to bring a business to life and keep its vital functions running, there is ample opportunity for ethical boundary debate and stretching. Studies of entrepreneurship indicate this boundary-based mindset toward ethics rather than hard-and-fast compliance (Wempe, 2005). To the extent an entrepreneur is a nonconformist is the extent to which they will fundamentally reshape industries and society (Barbee, 2005).

This is certainly the case with Steve Jobs, who reshaped the music and personal MP3 markets, and Marc Benioff, CEO and founder of Salesforce.com. This latter company, just ten years old at the time of writing, already had over $1 billion in global sales and launched its initial European operations out of a hotel in London before moving to Ireland to open sales offices for global companies located there for the tax advantages. These are just two of many examples spanning North America, the United Kingdom, and Europe — with the Salesforce.com example used for purposes of this analysis.

This analysis concentrates on the ethical and social responsibility issues that an international or global entrepreneur faces when choosing to expand their business globally. Beginning with cultural implications of ethics and social responsibility and progressing through essential qualities of leadership to an assessment of collaborative models, this paper is intended as a roadmap for entrepreneurs looking to expand globally. The cases discussed are drawn primarily from North America, the UK, and Ireland.

What is fascinating about this analysis is the emergence of a new entrepreneurial mindset centered on doing well by doing good. The reciprocity of social responsibility, while difficult to quantify, has significant implications for a new business's brand and reputation in the market (Yeung, Selen, Zhang, & Huo, 2009). This goes beyond lip service, however, as the most ethically operated new businesses often provide metrics in the form of balanced scorecards documenting their ethical and socially responsible behaviors over time (Hannafey, 2003). Studies indicate there is no single defining moment or epiphany when an entrepreneur looking to expand globally chooses an ethically higher road of conduct or embraces social responsibility (Fuller & Tian, 2006). Rather, it is ingrained through their environment, with the most significant influence being a utilitarian-based management philosophy modeled by mentors and coaches. These influences demonstrate the value of nonconformity in creating exceptional value for new companies and their many stakeholders (Brenkert, 2009).

Cultural Factor Considerations When Starting a New Business

The single largest influence on any entrepreneur looking to expand into other geographies — whether into comparable or vastly different nations from their own — is cultural fit: the norms, values, and expectations of the target culture. Entrepreneurs launching a new business venture in the UK, for example, might find expansion into the U.S. challenging, yet not nearly as challenging as expanding into China or other Asian nations with vastly different cultures. One of the most significant lessons learned by entrepreneurs who succeed at global expansion is the hard lesson that trust is extremely difficult to earn when the focus is purely on gaining greater sales or wealth. Paradoxically, research shows that trust is the new currency of successful global expansion (Yeung, Selen, Zhang, & Huo, 2009).

With this in mind, entrepreneurs who succeed in their global expansion efforts take a more culture-centric and therefore more collaborative approach to entering new nations. This often includes defining how their unique product or service strategies can also contribute to the growth of the regions they choose to expand into.

An example of this enrichment mindset is how Marc Benioff uses the offer of volunteer time as a benefit to new employees. Salesforce.com is one of the only rapid-growth software companies that publicly promotes employee involvement in volunteer activities, and in fact promises paid volunteer time for employees' favorite charities as part of its offer of employment (Economist.com, 2006). This is highly unusual in the enterprise software market in which Salesforce.com competes, where the majority of competitors focus only on logistics and government regulations — and far less on culture. It is little wonder, then, that the majority of global expansions fail to meet expectations (Johnston, 1996).

Increasingly, national governments are beginning to emulate the Indian approach to Corporate Social Responsibility (CSR), requiring companies intending to expand into their nation to have a plan for enriching the region of interest even before compliance with government regulations is granted. This approach assures a higher level of CSR through local participation (Sharma, Agarwal, & Ketola, 2009) and national investment (Goldstein, 2008). For entrepreneurs looking to expand into developing nations, CSR is no longer optional; it has become mandatory in many countries. The case of Tata expanding into India to build their Nano car — and the thousands of jobs they had to guarantee to the Indian government — is another case in point (Goldstein, 2008).

The Hofstede Cultural Dimensions Model

For those entrepreneurs looking to expand from the U.S. to the UK and Europe, the strict demands seen in developing nations do not apply to the same degree. Yet the paradox remains of how to earn trust in non-native cultures through consistency and a focus on the greater good. Salesforce.com addressed this by funding the use of computers and Internet access throughout rural regions of Ireland, covering entire elementary and middle schools. This was not a requirement for the then-under-$100-million-a-year company, but Marc Benioff believed it was best to demonstrate his commitment to enriching the new country his company was entering (Economist.com, 2006).

Marc Benioff and other founders like him have a firm grasp of the variations across cultures and how they impact the relative success or failure of global business expansion. A framework that moves these variations from the intuitive to the quantifiable is the Hofstede Cultural Dimensions Model, created by Dr. Geert Hofstede during his time at IBM (Hofstede, 1993). The model centers on five dimensions: the Power Distance Index (PDI), Individualism (IDV), Masculinity (MAS), Uncertainty Avoidance (UAI), and Long-Term Orientation (LTO). Taken together, these dimensions provide a thorough analysis of how one culture compares to another.

This type of analysis provides entrepreneurs with a framework for planning and executing expansion into new nations. The Hofstede Cultural Dimensions Model can also be used for better understanding variations in ethics between nations (Hofstede, 1993). This ethical framework can be invaluable in navigating the process of establishing a new division or subsidiary in another region of the world, as it provides five cultural dimensions that serve as placeholders for ethical expectations and social responsibility alike. As a result of using this framework to assess one culture relative to another, entrepreneurs can quickly determine the congruency of their own ethical and socially responsible perspectives with the cultural profile of their target nations and craft realistic expansion plans accordingly. It is in that congruency — between an entrepreneur's ethics and social responsibility and the cultural profile of the nations targeted for expansion — that success is ultimately found.

Conclusion

For any entrepreneur looking to expand across North America from the UK and Europe, or vice versa, the lessons learned from Marc Benioff need to be kept in mind, as do the frameworks and concepts presented here. It is not enough to claim to be ethical; social networks operating 24/7 will report back the true ethics of an entrepreneur. Ethics require authenticity and transparency if entrepreneurs are to succeed in new market development.