Entrepreneur Ethics Case Study

This case study examines the workplace ethical dilemmas faced by Jonathan Smith, a young entrepreneur who is interested in beginning a business career while serving his community. Jonathan has an aptitude for mathematics and sciences and possesses an associate’s degree in business technology. After an invitation to visit a local World Business manufacturing factory, Jonathan expresses reservations about working with the company because he believes that their practice of hiring sweatshop laborers and bribing foreign officials may be unethical and illegal. Further, he is considering establishing his own business and making use of the secrets he obtained during his business to compete with the firm. In considering the correct course of action, Jonathan must consider the feasibility of starting his own business, the ethics of using the secrets he gained to develop his own business, and the ethics of working for World Business in light of their questionable activities abroad. While working for World Business may limit Jonathan’s ability to directly benefit his community through his work, an assessment of these three factors will reveal that it is ideal for Jonathan to pursue an opportunity with an established firm rather than start his own venture.

The first dilemma facing Jonathan is whether he can fulfill his goals of working with technology and serving his community through entrepreneurship. As the case establishes, Jonathan is considering establishing a business that improves upon the products offered by World Business. Yet because one in five businesses fail within the first two years (Hormozi 278), it is important for Jonathan to evaluate his potential to succeed as an entrepreneur. First, he should consider whether he possesses the personal characteristics that are important to entrepreneurs, such as the desire to achieve high goals, the ability to commit to hard work, the ability to maintain optimism, and the ability to efficiently organize his business activities (278). Further, it is important for Jonathan to determine whether he possesses the technical skills that are needed to develop his product ideas (278). Though Jonathan might be a hard worker, his lack of experience and technical skills will hinder his efforts to develop his business idea.

There are several steps that Jonathan can take to assess the feasibility of his product ideas. First, he must determine whether the idea that he has is truly creative (281). It might be possible that World Business or other companies are in the process of researching similar or better product improvements. Obtaining information on trade shows and expositions is one way that Jonathan can determine whether there are competing ideas that will reduce the novelty of his idea. Next, Jonathan should determine whether there is a market for the demands that he proposes. If he is entering a mature industry, it will be difficult for him to compete with established businesses for customers, even with an improved product (281). Further, Jonathan can utilize on-line databases and trade association literature to obtain further market information for his product (282). Additionally, conducting independent research through surveys or focus groups can help Jonathan determine whether there is sufficient demand for the improvements that he proposes (282). Taking these steps will enable Jonathan to determine whether he can successfully introduce his product to the market and attract investors to fund his business.

The second consideration Jonathan must make is whether he can legally and ethically utilize information from his factory visit to launch his business. Typically, businesses file trade secret misappropriation lawsuits in a scenario where an employee leaves a company and utilizes the information they gained during their employment to develop competitive technology that is sold to the same customers (Chapman and Nile 1). However, because Jonathan is not an employee of World Business and did not sign a non-disclosure contract for his visit, he is under no legal obligation to conceal the company’s secrets. Yet, while World Business may not have legal grounds to prevent Jonathan from using the information, it is often the case that corporations engage in trade secret litigation in order to tie up the resources of competitors and to “crush” startup companies (Chapman and Nile 1). Further, Jonathan should hold himself to ethical standards that are above what is required legally. If his actions are considered to be dishonest, he may face a ruined reputation that hinders his ability to seek assistance or find a job should his entrepreneurial goals fail.

Finally, Jonathan must consider whether working for World Business aligns with his ethical framework. On one hand, Jonathan perceives the company’s actions to be unethical. One way that he can settle his fears is to check the company’s compliance with laws. In order to determine whether World Business is compliant with environmental laws, workers' safety laws, or trade laws, Jonathan can request information from regulatory agencies, including the Environmental Protection Agency, the Occupational Safety and Health Administration, and the Federal Trade Commission. By approaching specific regulatory agencies, Jonathan can determine whether any sanctions have been placed upon the company.

Further, it is important for Jonathan to reconsider the ethical framework that he applies to foreign business practices. Often, the framework that Americans apply to business transactions is inadequate for assessing business practices abroad. For example, ethicist Bernard T. Adeney highlights that deontological ethics, the belief that there is an absolute standard for morality, informs the opposition that most Westerners have to acts of bribery in developing countries (Adeney 227). However, as he notes, moral rules are strongly related to culture, and in many cultures, bribery is not perceived to be an issue of morality (228). Adeney proposes that situational ethics be applied to determine whether acts such as bribery are appropriate within a foreign context (229). For example, bribing officials might be appropriate when it is only viewed within the context of a gift and when it compels authorities to grant favors that are just or legal (230). Further, there are many moral benefits to sweatshops that Jonathan should consider. As New York Times columnists Nicholas Kristoff and Sheryl WuDunn reported, sweatshop factories contributed to widespread growth in southern China, leading to the emergence of the middle class and a private housing market (Kristoff and WuDunn 240). Further, while wages may be initially low, they have risen significantly to reflect the demand for reliable labor in sweatshop regions (240). Thus, the practice of operating sweatshops often leads to gradually improved conditions for laborers.

As an analysis of the three dilemmas presented to Jonathan reveals, his best option is to work with World Business rather than begin his own business venture. Though market research may reveal demand for Jonathan’s product improvements, he faces a significant disadvantage of trying to establish a business in a market that is already mature. It would be difficult for him to gain the technical expertise and capital that is needed to successfully compete against the entrenched industry leaders. Further, his use of information gained during his factory visit could be a liability because it provides World Business the opportunity to file a lawsuit in order to hinder the development of his business. Further, a re-examination of ethics pertaining to international businesses reveals that World Business’s practices abroad are not particularly unique or unethical. Thus, Jonathan will primarily benefit from the experience, contacts, and knowledge that he will gain if he works for an established company before he becomes an entrepreneur.

Works Cited

Adeney, Bernard T. “Ethical Theory, and Bribery.” Readings in Beyond Integrity: A Judeo-Christian Approach to Business Ethics. 2nd ed. Eds. Scott B. Rae and Kenneth L. Wong. Grand Rapids, MI: Zondervan, 2004. 239-41. Print

Chapman, James C., and Alex Y. Nie. "The Entrepreneur's Guide to Forming a High Technology Company: What Every Entrepreneur Should Know about Intellectual Property." Computer and Internet Lawyer 30.2 (2013): 1-15. ProQuest. Web. 21 Oct. 2013.

Hormozi, Amir M. "Becoming an Entrepreneur: How to Start a Small Business." International Journal of Management 21.3 (2004): 278-85. ProQuest. Web. 21 Oct. 2013.

Kristof, Nicholas, and Sheryl WuDunn. “Two Cheers for Sweatshops.” Readings in Beyond Integrity: A Judeo-Christian Approach to Business Ethics. 2nd ed. Eds. Scott B. Rae and Kenneth L. Wong. Grand Rapids, MI: Zondervan, 2004. 225-38. Print