Seizing the Ethical High Ground: Ethical Reputation Building in Corrupt Environments

Abstract

We study how ethical behavior by firms leads to ethical reputation building. Based on our in-depth studies of two firms in India and Zimbabwe that resisted corruption and survived for extended time periods, we propose that in addition to behaving ethically, firms need to elicit favorable responses from a critical mass of stakeholders from both strong and weak tie networks in order for their ethical reputations to diffuse quickly and widely. We find that the strength of stakeholder responses to ethical behavior is moderated by firm level and contextual factors: high status affiliations, industry characteristics, the nature of corruption resisted, the presence of a plural press, the potential for collective action, and the presence of an independent judiciary. These antecedents also influence the pattern of stakeholder resource commitments that firms are able to enjoy as a result of having built ethical reputations.