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Impact of Managerial Values on Moral Judgment, Ethical Work Climate and Business Consequences: A Case of Sri Lankan Manufacturing Entrepreneurs G D V Rupika Senadheera- Senior Lecturer/ PhD Student University of Sri Jayewardenepura [email protected] In the contemporary business world, entrepreneurs occupy the strategic centre as movers and shakers of intellectual and material wealth. They shape and color their respective societies with the way they utilize the intellectual and material wealth. They channel the intellectual and material wealth through different streams of production in an effort to attain prosperity. Hence, business activities of an entrepreneur are viewed in terms of interactions that take place between a business and the society within which it function. At a theoretical basis, it is surmised that when the entrepreneurs prosper the society within which they function too prosper. Similarly, entrepreneurship in general is viewed in a positive light as a beacon of stability and certainty in a world plagued with uncertainty and instability. They are expected to sustain their respective societies by generating jobs, fueling innovations, fostering development, demarcating a cogent social gradation. Hence fundamentally they are given the difficult task making the world a better place to live. Yet, all these expectations are piled upon the assumption that entrepreneurial prosperity coincides with societal prosperity. Recent large scale corporate debacles such as Enron testify to the fallibility of this assumption. Such cases of corporate fraud indicate a possibility of entrepreneurship being rather ignoble in their operations so as to glean out a parasitical existence. This duality of entrepreneurship reflects a core contention common to all entrepreneurs- the struggle between social wellbeing and organizational wellbeing. Within this struggle, values of entrepreneurs become the most crucial determinant that dictates the ethical commitment of an organization to the social wellbeing. Yet some scholars disagree with the associations made between businesses and ethics. They consider ethics as an exclusively private matter and regards businesses as basically profit oriented ventures. Milton Friedman, a staunch ally of this view, states that business organizations are responsible solely to maximize profits for the benefit of their owners. In 1960s saw the emergence of social responsibility movement which made business ethics an integral part of entrepreneurship and other business ventures. In this contemporary business era the concept of

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Impact of Managerial Values on Moral Judgment, Ethical Work Climate and

Business Consequences: A Case of Sri Lankan Manufacturing Entrepreneurs

G D V Rupika Senadheera- Senior Lecturer/ PhD Student University of Sri Jayewardenepura

[email protected]

In the contemporary business world, entrepreneurs occupy the strategic centre as movers and

shakers of intellectual and material wealth. They shape and color their respective societies with

the way they utilize the intellectual and material wealth. They channel the intellectual and

material wealth through different streams of production in an effort to attain prosperity. Hence,

business activities of an entrepreneur are viewed in terms of interactions that take place between

a business and the society within which it function. At a theoretical basis, it is surmised that

when the entrepreneurs prosper the society within which they function too prosper. Similarly,

entrepreneurship in general is viewed in a positive light as a beacon of stability and certainty in a

world plagued with uncertainty and instability. They are expected to sustain their respective

societies by generating jobs, fueling innovations, fostering development, demarcating a cogent

social gradation. Hence fundamentally they are given the difficult task making the world a better

place to live. Yet, all these expectations are piled upon the assumption that entrepreneurial

prosperity coincides with societal prosperity. Recent large scale corporate debacles such as

Enron testify to the fallibility of this assumption. Such cases of corporate fraud indicate a

possibility of entrepreneurship being rather ignoble in their operations so as to glean out a

parasitical existence. This duality of entrepreneurship reflects a core contention common to all

entrepreneurs- the struggle between social wellbeing and organizational wellbeing. Within this

struggle, values of entrepreneurs become the most crucial determinant that dictates the ethical

commitment of an organization to the social wellbeing.

Yet some scholars disagree with the associations made between businesses and ethics. They

consider ethics as an exclusively private matter and regards businesses as basically profit

oriented ventures. Milton Friedman, a staunch ally of this view, states that business organizations

are responsible solely to maximize profits for the benefit of their owners. In 1960s saw the

emergence of social responsibility movement which made business ethics an integral part of

entrepreneurship and other business ventures. In this contemporary business era the concept of

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profit motive is diminishing and the importance of the term social wellbeing is increasing and it

has become a dominant factor and a key determinant of organizational success throughout the

business world. As far as organizations are concerned, they have limited resources to gain

competitive advantages. Business ethics helps to gain competitive advantage, business

profitability and organizational success as it covers all levels of business activity including the

obligations and responsibilities of businesses to customers, employees, other businesses,

government, general public and the environment. Hence, firms can incorporate business ethics

in all their business tasks in order to improve attitudes towards work, solve problems through a

humane approach and gain competitive edge and business success.

According to a research conducted by Wu (1999), majority of Asian firms consider corruption

as one of the major obstacles of business development- a substantial percentage of these firms

are engaged in bribery in a regular basis. Recognition of and managing ethics in workplace

holds remarkable benefits for leaders, managers and owners of organizations. This will also give

them the ability to deal with complex conflicts in the organization, to improve team work and

gain higher productivity and assure employee growth. Further it will help to manage and

continue values; promote public image and direct workplace towards the “right things” to do

(McNamara, 2008,).

At present, the notion of gaining a competitive edge has become a major preoccupation of

businesses and they have come to realize that a concurrent and equal emphasis on social as well

as financial aspects of a business is required to gain the coveted competitive edge. Therefore,

with this paradigm shift, the society began to re-analyze the critical issues such as how far the

existing business organizations are capable of resolving unsolved problems of the society,

whether they are capable of serving or fulfilling community interests and whether bring

satisfaction to their community at large. Under these circumstances extant operational guidelines

are not adequate to overcome the challenges and conflicts that arise in modern business context.

Furthermore, it is said that economic and legal framework of any country alone is not enough to

address these emerging issues in society. Hence it is clear that all encompassing ethical approach

that goes beyond existing legal and economic framework is needed to address these emerging

issues in the society. Ethics, in both conscious and subconscious levels, determines the

parameters of right and wrong. It decides what is moral and what is immoral within a specific

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socio-cultural context. It does not reach finality at any point of time, past or present, as it

continues to evolve along the temporal and situational lines.

All these considerations seem to suggest that entrepreneurs have the power to facilitate the

national growth or disrupt the development because entrepreneurs are the individuals who utilize

the resources to solve basic economic problems. It is clear that entrepreneurial behavior is a

principal indicator of the development of the country. Simply, entrepreneurial community

behavior is the manifestation of their actions, decisions, perceptions and values. A scrutiny of

philosophical paradigms, empirical findings and research context revealed that business ethics,

ethical work climate and practice and ethical behavior are the dominant attributes that determine

entrepreneurial success. Further literatures have shown that ethics is a relative concept that is

specific to individual, culture, context, country and time. Finally all these findings lead to the

realization that, managing ethical behavior is not only one of the most challenging issues

confronting business organizations today but also a critical social problem.

Considering these arguments it is prudent to facilitate studies in different context not

withstanding theoretical over simplications. Hence, although there are research findings which

reveal the relationships that exist between ethics and different disciplines, conducting a study of

this nature in Sri Lankan context is valuable. This study will either confirm or contradict

previous research findings as it deals with a unique context.

Research Questions

1) Does the notion of managerial values coexist with moral judgment?

2) Does the notion of managerial values coexist with managerial practices and ethical work

climate?

3) Does the notion of moral judgment and managerial practices & ethical work climate

collectively impact business consequences?

4) Does the established entrepreneurial ethical business context coexist with business

consequence?

5) Do demographic variables influence the relationship between managerial values,

managerial practice& ethical work climate and moral judgment?

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Hence, this paper aims to identify the impact of managerial values on moral judgment, ethical

work climate and business consequences in the context of manufacturing entrepreneurs in Sri

Lanka. Considering the status of Sri Lanka as a growing and internationalizing economy,

investigation of this relationship in Sri Lankan context is important. This paper contains four

sections. Section one focuses on the importance of values and ethics, background and purpose of

the study. The related literature is revealed in the second section. Third section illustrates the

research methodology including sampling, data collection and data analysis used in the study.

Results, conclusion and their implications are presented in the fourth section.

Hypotheses

H1 A statistically significant relationship exists between managerial values and positive

business consequences.

H2 A statistically significant relationship exists between managerial values and idealism and

negative relationship between managerial values and relativism.

H3 A statistically significant relationship exists between managerial values and self

centered moral climate.

H4 A statistically significant relationship exists between managerial values and deontological

moral climate.

H5 A statistically significant relationship exists between managerial values and universal

moral climate.

H6 Demographic variables of decision makers have a positive influence over values.

Literature Review

The literature survey reveals that ethics and values have been explored in different disciplines.

Ethics is a theme common to both natural sciences and social sciences. Application of ethics is

universal in a multidisciplinary sense. Organizations are the strategic center of the society

irrespective of their motives. Application of ethics in the field of business and their incorporation

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into entrepreneurship has given rise to many a research by noted scholars. Values and beliefs of

entrepreneurs’ have a direct impact on the business operations and it is said that the survival of

entrepreneurial business firms and their success depend on the degree to which an organization

learns to recognize emerging social issues, re-analyze their role and analyze its impact on the

business performances. Thus, to guarantee the business excellence the entrepreneurial actions

should focus on ethics such as what is right and what is wrong. The attention given to business

ethics by scholars underpins the importance of ethical behavior to maintain an undisrupted civil

society. Longenecker et al. (1988) pointed out “entrepreneurial ethics is embedded within the

main characteristics of entrepreneur; that is independence of action or individualism. Moreover,

their need of achievement leads them to focus on personal gains” and he also stated that ethical

standards of entrepreneurs are different from those of managers in large corporations.

Furthermore, ethics is fundamental, essential and of innermost importance to managing a

business successfully. Nevertheless, according to Hisrich,(1998), Hannafey,(2003) the body of

research on entrepreneurial ethics is relatively limited considering its overall importance to the

global economy. Also, relatively few empirical studies have been devoted to analyze the issues

related to entrepreneurship and those studies are not adequate considering the ethical

consequences of their own decisions and ethical ideologies they possess.

Morris et al., (2002) pointed out that as a new venture expands both entrepreneurial and ethical

context change. David Voge (1992) pointed out that there is evidence that business ethics are not

universally similar, but vary according country with their historical background (cited in Clerk,

R and Aram,J. 1997). In 1981 Webber explained institutionalizing as the primary task of ethics

within an organization and he define ethics as a process that should formally and explicitly be

incorporated to daily business life making it a regular and normal part of business.

Another group of scholars have addressed the issue what influence ethics have on entrepreneurs

(Longenecker,et al.,1988, Moon, et al.; 2000, Nielsen, 1989, Rest, et al., 1985; Roman,et al.,

2005 ), how their ethical behavior affect long term success of ventures (Wu,2002; Yves, 2005),

what are the ethical dilemmas entrepreneurs facing and how entrepreneurs overcome them (

Hannafey, 2003; Vyakarnam, et al.,1997).

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The strongest empirical evidence has shown that the entrepreneurial attributes such as

psychological attributes, socio-demographic attributes are the best determinants of

entrepreneurial behavior and performance (Akktaruddin, 1999, Andres and Michael, 2000). This

is further proved by a number of researchers who explained their significance over business

decisions (Longenecker, et al. 1988). Entrepreneurs encounter unique challenges, operate in

stressful business environments and often struggle to achieve success.

There are not many researches available in Sri Lanka in the area of entrepreneurship and

business ethics is also a relatively new research field in Sri Lankan context. However, these

fields are not new in the international research context. Nevertheless, the socio-cultural context

of Sri Lanka differs from western countries in the world. Entrepreneurship plays a vital role in

the society and it is highly culture bound and shaped by the socio-cultural factors of the country.

The possibility of achieving industrial development through the application of western

ideologies in developing countries has been challenged for many years. (Nanayakkara 1984,

Alawattage 1998, Wickramasinghe and Hopper 2000). Rathnasiri (1999) asserts that the

functionalist, rational and positivist frame work of the western paradigm does not enable an

understanding from a socio-cultural perspective. Gamage et al.,(2003), Wickramasinghe and

Hopper (2000), Alawattege (1998) emphasize that it is difficult to evaluate and understand

cultural factors through the “lenses” of other cultures. Therefore, ethics being unique in every

context including Sri Lanka cannot be evaluated or viewed through western standpoints.

Western style management education and training have not made an appreciable contribution to

organizational success in Sri Lanka. Nanayakkara (1999) asserts that as a result, “the process of

management in our organizations in almost every vital sector of the economy is increasingly

proving its inability to convert input resource in to useful output efficiently”.

In addition, other existing entrepreneurship research studies in the Sri Lankan context have been

focused on; Internationalization of Sri Lankan Entrepreneurship: A case of Sri Lankan immigrant

entrepreneurs in Japan (Karunarathna, H D, 2009); the issues entrepreneurial motivation and

need for achievement; and theory surprise and reality: exploring the world of the Sri Lankan

Entrepreneur ( Gamage, H R et al.,2003); The entrepreneurial process and economic success in a

constrained environment (Kodithuwakku, S.,2002) characteristics of Sri Lankan entrepreneurs

and how valid is the Schumpeterian Model? (Perera, T et al., 1999);collectivistic achievement

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orientation of Sinhala entrepreneurs (Bddhadasa, S., 1992); the need for affiliation as a

moderator in the behavior of entrepreneurs (Perera, T., 1996).

Values are viewed as motivating individuals to act (Roe, R .A 1999). Hisrich (1998) believes that

entrepreneurs tackle problems and take decisions with strict adherence their personal values.

Further, he explained the similarity between ethics of entrepreneurs and managers. Individually

or collectively they take decisions based on value judgments.

Values are ingrained and solidified assumptions on relative merits of things, actions and

individuals. They dictate individual assumptions on what is right and what is wrong. Man is a

social being with a collective sense of existence. Family, friends, culture, religion are some of

the essential ingredients of the social existence. Every social group cherishes a unique value

profile. Meaning in life is gleaned out of values. Schwartz, 1992 explained that there may be a

conflict and compatibilities likely arise when people pursue values simultaneously ex. Pursuit of

achievement values may conflict with pursuit of benevolence values. Schwartz ,1992 identifies

ten human values viz. power ,achievement ,hedonism, stimulation, self direction, univerlism,

benovelence, tradition respect, conformity and security (cited in Schwartz, 1994). Given the

significant role played by values in dictating choices and decisions, identifying the values of

individual business managers may be useful for understanding the basis of managerial decisions

and ethical judgments.

Hofstead defines values as “a broad tendency to prefer certain status of affaires over others”.

Rockeach, 1973 defined values as “an enduring belief that a specific mode of conduct or end

state of existence is personally or socially preferable to an opposite or converse mode of conduct

or end state of existence”. Schwartz, 1994 defines values as desirable trans situational goals

varying in importance , that serve as guiding principles in the life of a person or social entity.

Hence, values represent interest of social entity, judge and justify actions, direct or guide human

actions and social groups.

In the literature, values are put into different classifications: general values, work values and

work activities values. According to Schwartz, values represent, in the form of conscious goals,

responses to three universal requirements with which all individuals and societies must cope:

need of individuals as biological organism, requisites of coordinated social interaction and

requirements for the smooth functioning and survival of all groups. Sagie (1993) noted that

religiosity to be a factor that determines how young people perceive their work obligations.

Thus culture, religion, social group also influence to determine values. Values are also viewed

as objects in the world that people work for ( Saunders, G & Wenzel, L ,2008, Roe, R.A. (1999).

Values always guide actions. In essence, values are cognition representations of personal needs

and the appropriate means for satisfying them. They are central to and in the background of all

human behavior ( Rokeach,1979, Schwartz, 1990).Within business entities three different forms

of values may be identified. These are strategic values, work values and ethical values (Rossouw

& Van Vuuren, 2006 cited in Roe, R.A. (1999). Strategic values aim to achieve corporate level

objectives and they are incorporated with organizational vision and mission. Work values in an

entity are those priorities to which the entity’s employees should adhere e.g. punctuality, Quality

etc. Ethical values help to establish good relations and interactions with various stakeholders.

Values are considered to be relatively stable over time (Roe, R.A. (1999, Saunders, G & Wenzel,

L ,2008,). and they are related with the personality traits like attitudes, evaluations, judgments,

decisions and commitments. However, values differ among individuals.

The term business ethics does not have a universal definition. Since the birth of the social

responsibility movement in the 1960s, business ethics has been put under the wing of

management sciences. Different people have defined ethics to suit their own set of values which

vary according to time, place, culture and religion. Trevino and Nelson (1999) define ethics as

“the principles, norms and standards of governing an individual or a group”. Timmons, (1994)

stated that “high ethical standards were the single most important factor in long term success of

the business organizations (cited in Longenecker, J. G. et al.). David Vogel (1992) pointed out

that business ethics are culture specific concepts and they are not universally similar. (,cited in

Clarkee, R &Aram ,J 1997; Becker and fritzche;1987). Abdullah H and valentine, B. (2009)

defined business ethics as “the study of business activities, decisions and situations where the

right and wrong are addressed”. According to Travino and Nelson (1999), ethics is a “moral

perspective that asks you to judge your conduct in term of what’s right and wrong, what’s

decent, what’s good, what’s honest, what’s honorable. The reason to be ethical is simply that it’s

the right things to do.” The interest in business ethics leads organizations to be concerned with

what is good or bad and what is right or wrong in business practices and operations. In other

words, business ethics refer to the ability of firms to pay attention to moral judgments, practices,

and commitments in making business decisions (Hung, L,C. ,Kung,F.,& Cheng,L.C., 2011).

Thus, ethics is a reflection on individual choices, traits and sensibilities as informed by the

society.

Research on entrepreneurship have specified a set of values as highly prevalent among

entrepreneurs They include achievement, advancement, economic rewards, autonomy, social

relations, prestige, personal development, authority, social recognition, honesty, commitment,

hard work, self confidence etc. Individuals with a strong need for achievements wants to solve

problems themselves, set targets, and strive for these targets through their own efforts. Hence,

individuals with a strong need to achieve likely to succeed as entrepreneurs. Any development

strategy based on n-Ach concept will probably benefit from a significant revision which aligns it

with values and belief that influence behavior in the Sri Lanka social and cultural context (

Gamage,R., Cameron,D. Woods, E. 2003).

According to Longenecker, J.G. et al. entrepreneurial ethical perceptions on different situations

differ from that of others greatly and at times they can be rigorous enforcers of ethics while at

others they are rather tolerant. Individual characteristics are a factor determining ethical behavior

and an individual’s character develops slowly as a result of upbringing and the accumulation of

values that are transmitted by genes, school, family, friends and religion.

The next argument was built around in relation to ethics is whether the ethics is an individual

issue or organizational issues .Various studies have discussed a number of variables that affect

ethical perception and behavior of an individual and mainly, uncertainty, achievement oriented,

autonomy, independence, locus of control are the main attributes that embedded with

entrepreneurship. Lin and Ding (2003) have stated that ethical judgment is situation-specific.

Many studies have identified, age ( Volkema, 2004; Stead, Worrell, Stead, J. G. 1990); and level

of education (Deshpande,1997; Kantor and Weisberg.2002; Doyle,O. Z.,2009) as prominent

factors in determining ethical perception of an individual. Peterson et al. 2001 have professed

that business people become “more ethical” with age and Terpstra, Rozell and Robinson 1993;

have also emphasized that people tend to become more ethical as they mature. Existing literature

explain the relationships between gender and ethics (Deshpande, 1997, Stead, Worrell Stead,

1990; Doyle,O. Z.,2009) and level of education and ethical behavior (Levy and Sharma, 1994:

Doyle,O. Z.,2009). Dawson, 1997; states that females are more ethical than men and Levy and

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Sharma 1994 state that a high level of education has a positive impact over the ethical behavior

of an individual. Another important factor in ethical behavior is the presence of a formal code of

ethics. They are probably the most visible sign of the organization’s ethical philosophy of an

organization. Simultaneously the entrepreneurial context is not static; it evolves s over time. In

consequence, the ethical standards of the entrepreneur typically have a direct impact over the

survival and success of the firm ( Morris, M.H, et al., 2002). A considerable amount of attention

has been paid by researchers to study ethics. David Vogel (1992) pointed out business ethics are

culture specific concepts and they are not universally similar One of the most researched areas

concerning ethics and entrepreneurs focuses on the ethical issues and situations encountered by

entrepreneurs (Cited in Longenecker et al. (1988)

Ethics position theory presumes that moral actions and evaluations are the outward expression of

a person’s integrated conceptual system of personal ethics, or ethical position (Forsyth,

1980.1992, cited in Forsyth & O’Boyle, 2010). According to this theory, individuals resolve their

moral issues and make ethical judgments with the aid of two general dimensions: relativism and

idealism. The relativist paradigm explains that individuals who are highly relativist think of the

possibility of formulating universal principles, and they avoid moral rules. Their personal moral

philosophy is based on skepticism. Highly relativist individuals feel that moral actions depend on

the nature of the situation and the individuals involved so that when judging others, they weigh

the situation more than the ethical principles that was violated. Thus individuals scoring high in

relativism tend to reject the notion of an overriding moral code ( Banett et al., 1994). Being

quite the opposite, individuals who are low in relativism believe that actions are consistent with

moral principles, norms, or laws (Forsyth, 1992; Cited in Forsyth and Boyle, 2010). The idealist

paradigm is based on the relative importance of minimizing harmful, injurious outcomes. It

indicates a concern for others. Highly idealist individuals “assume that desirable consequences

can, with the ‘right’ action, always be obtained” i.e morally “right” behavior leads to good or

positive consequences (Forsyth, 1980.1992, cited in Forsyth & O’Boyle, 2010). A highly

idealistic individual feels that harming others is always avoidable and will not act in a manner

that leads to negative consequences. A low idealistic individual believes that although harm will

sometimes bring negative consequences it is necessary at times to produce good results

(Forsyth & O’Boyle, 2010; Valentine S et al., 2001;Barnett et al. 1994). Forsyth, (1980)

developed the Ethical Position Questionnaire (EPQ) to measure both relativism and idealism.

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The ethical relativism scale consists of twenty items. The first ten items focus on measuring

idealism and next ten items measure relativism.

In general, empirical studies suggest that individuals possess different ethical ideologies because

they face different ethical issues.( (Forsyth & O’Boyle, 2010; Barnett et al. 1994). C P Lin and

C G Ding (2003) have explained that the individual ideologies and judgments about the ethics of

peer reporting may be associated in various ways. First, differences in ethical ideology may

affect an individual‘s way of processing information about problems involving wrong doings of

peers. Second, degree of sensitivity to wrong doings may differ among individuals with different

ideologies.

Individual sensitivity is influenced by the ethical issues. The factor of individual difference that

has received the most research support is “cognitive moral development”. This framework is

developed by Lawrence Kohlberg in the 1960. Cognitive moral development model helps to

explain why different people make different evaluations when facing same ethical issues. It

conceives that an individual’s level of “moral development’ affect their recognition of ethical

issues, judgment, behavioral intensions, and behaviors. This sequence is parallel to Rest’s

sequential model of moral behavior.

The concept of ethical climate is pioneered by Victor and Cullen (1987). It represents a vivid

picture of ethical decision making and actions within an organization based on philosophical and

sociological theories. Since its introduction many researchers have applied this concept and

examined the relationship between ethical climate and a variety of outcomes. Organizational

ethical climates vary both within and across organizations due to differences in individuals,

workgroups, employment histories, and rank of the employees (Victor and Cullen, 1988, cited in

M. Elci and L. Alpkan, 2009; Martin and Cullen, 2006,). Responsibility of building an ethical

climate rests on the hands of top management and it is a shared set of beliefs on what is a correct

behavior and how ethical issues will be handled. Victor and Cullen (1987, 1988; cited in Martin

and Cullen, 2006) define organizational ethical climate as “shared perceptions of what ethically

correct behavior is and how ethical issues should be handled”(cited in M. Elci and L. Alpkan,

2009 and Martin and Cullen, 2006) . Richers and Schneider (1990) defined ethical climate as

shared perceptions on procedures, policies, and practice, both formal and informal (cited in

Martin and Cullen, 2006). An ethical climate is a type of work climate that is best understood as

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a group of perspective climates reflecting the organizational procedures, policies, and practices

with regard to moral consequences ( Martin and Cullen, 2006). Organizational work climates

have been studied since the 1950s (Wimbush and Shepard,1994; cited in Martin and Cullen,

2006).

The Victor and Cullen frame work refers to egoism, benevolence (utilitarianism), and principle

(deontology) dimensions.

Egoism focuses on maximizing one’s own interest. Benevolence focuses on maximizing joint

interests, while principle focuses on adherence to ethical norms or principles. (Martin and

Cullen, 2006; Cited in Shafer, W.e., and Wang,Z. 2010; M. Elci and L. Alpkan, 2009 ). These

are the embedded guidelines by which ethical decisions are framed. Research shows that one

dominant criterion will emerge in an organization and ultimately define the organizations ethical

climate (Martin and Cullen, 2006).

Furthermore, Victor and Cullen (1987) conceptually cross-classified the three bases of moral

judgment with the three loci of analysis on a matrix with nine cells. This concept originates in

sociological theory ( Merton,1968; cited in Martin and Cullen, 2006) Each of nine cells presents

an ethical criterion that is expected to guide decision making in firms (Martin and Cullen, 2006).

They have demonstrated these different climates under three loci of analysis namely; individual

level (mainly focus on self as moral reasoning), local (focus on organization itself)) and

cosmopolitan (focus on community or society at large) (Martin and Cullen, 2006).

Methodology

A cross section of manufacturing business organizations representing its various branches such

as food and beverages, garments and wearing apparels, chemical and pharmaceuticals, leather

products, building materials, fabricated and metal products were used as the sample of the study.

Experience of more than five years in the field was a prerequisite for all members of the sample.

Although they do not own the business, mangers too greatly contribute to the decision making

process of an organization. Hence, values of managers as well as of owners exert a considerable

influence on the ethical outlook of an organization which prompted the researcher to include

both owners and managers in the sample. In selecting sample members, emphasis was given to

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organizations with more than hundred employees and organizations that evolved from micro

level to middle or large scale were also preferred.

A semi structured questionnaire and focus in-depth interviews were employed for the study.

Quantitative methods were used to prove statistically significant relationships between

managerial values, moral judgment, and ethical work climate and business consequences.

Qualitative methods yielded qualitative values which were used to substantiate and triangulate

the quantitative findings. To measure the degree of idealism and relativism, Forsyth’s Ethical

Position Questionnaire (EPQ) (1980) was employed. To measure the ethical climate, victor and

Cullen’s Ethical Climate Questionnaire (ECQ) (1990) was used. A Likerts scale ranging from

strongly disagree (1) to strongly agree (5) was used in the questionnaire.

The main independent variable used in the research is values. Values of mangers as well as

founders were used in the study and these were divided into personal values and entrepreneurial

values. As personal values honesty, care, trust, friendly, open and fair. Need for achievement,

innovation, risk bearing, and self confidence were used as entrepreneurial values. Moral

judgment was identified in terms of relativism and idealism. Ethical work climate was

categorized in term of self centered moral climate (egoism), deontological moral climate and

universal moral climate. To analyze the collected data, parametric technique was used as require

by their nature. To analyze data SPSS 16 was employed. Each relationship will be tested at 95

confidence level. Furthermore, to seek relationships, P value was considered. If the calculated

value (P) is less than 0.05, the relationship between two variables is considered to be significant.

Results, Discussion and Conclusion

Seventy five percent of response rate was recorded in the study. Majority of the sample consisted

of males (83.6%) aged between 30 to 40 years (43.8%). 23.3 percent of respondents were of the

age group between 41 to 50 years. More than half of respondents had at least gained a degree

level qualification. 27.3% of respondents had gone through a professional education program.

Only 16.4% respondents had stopped their formal education after school education. 47.9 percent

were born in rural areas and other 50.7 percent were from urban areas. Only 27.4 percent of

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respondents had been exposed to some sort of formal training in relation to diversity issues,

sensitivity or ethics. Overwhelming majority (72.6%) did not have such an exposure.

The validity requirements for all the variables were met and Cronbach’s Alpha co-efficient were

calculated of all variables. The values were: Deontology .868, Honesty,.764 Trust .472, Friendly

.839, Open .775, Fair .816, Idealism .7, Relativism .7, Power distance .786, Egoism

.761,Utilitarianism .909. Number of calculations including mean comparison, factor analysis and

correlation were used in the study. Managerial values are a construct of person specific values

viz. honesty, trust, open, fair and friendly. Entrepreneurial values include need for achievement,

innovation, self confidence and risk bearing. Using the statistical method idealism (0.671) and

relativism (.74) are grouped as moral judgment. When Need for achievement is considered it has

insignificant relationship (.279) but it shares significant relationship with (.02, P<0.05) moral

judgment. However the detailed analysis indicated a significant relationship with idealism (.011,

P<0.05) but by contrast there was an insignificant relationship (.46) with relativism. These

findings indicate that, among manufacturing entrepreneurs in Sri Lanka, there exist a universal

set of preconceived ideals that act as guidelines. It can be surmised that socio cultural

environment of Sri Lanka favors and nurtures such a set of ideals. When the relationship between

self centered morality (egoism) and need for achievement was considered, there was no

relationship (P> .05) between the two. But the data indicate that there is a significant relationship

between need for achievement and harmonious morality and between need for achievement and

universal morality. The managerial value self confidence is considered to have an insignificant

relationship with moral judgment including relativism and idealism but by contrast a significant

relationship exist between self centered morality, universal morality and deontological morality

climate. The managerial value innovation is implied to have a significant relationship with self

centered morality, universal morality and deontological morality climate, however it shows

insignificant relationship with moral judgment both relativism and idealism. The entrepreneurial

value risk bearing share a significant co-relationship with value judgment. Although risk bearing

share a significant co-relationship with value judgment at a holistic level, it maintains significant

relationship with idealism (.005). when ethical climate is taken into consideration with risk

bearing shows a significant relationship with deontological and universal moral climate. It does

not share a significant relationship with self centered morality.

���

The research findings do not support the hypothesis H1 in that there is no relationship between

managerial values and business consequences (P=0.641>.05) and H 6 that demographic variables

are not influence over values. When H2 is concerned, statistics support the statement as there is a

statistically significant positive relationship between managerial values and idealism (.05) and

there is an insignificant relationship between managerial values and relativism (P=0.851>.05).

The H3 is also supported by the data as there exist a statistically significant relationship between

managerial values and self centered moral climate (P<0.05). The findings do also support H4 in

that between deontological moral climate and managerial values there seems to be a significant

relationship (P<.05). A statistically significant relationship is found between managerial values

and universal moral climate which ascertains the validity of H5.

Conclusion

All these results indicate that within the Sri Lankan manufacturing context, entrepreneurs clearly

distinguish two spheres: personal and business. In other words within one individual there exists

two beings: a social being and a business being. This demarcation is made on the basis of what

values one utilizes on different contexts. At the personal sphere, Sri Lankan entrepreneurs seem

to be bound by strong value and moral basis which drive them to be considerate of others

wellbeing and be abided by social and legal bounds. But at the business sphere, they seem to

come under the grip of yet another, rather different, set of values that motivate them to further

their gains. Following the same thread of argument, they seem to be more willing to innovate and

take risks in the business sphere rather than in the personal sphere. At the business sphere, all

attempts at innovation and risky ventures are governed by a set of rules and regulation and the

consequences of the actions are borne collectively by the entire organization. At personal sphere

nothing but personal assumptions govern such actions and consequences are specifically borne

by decision taker. Hence, the relative reluctance to do things differently by themselves.

���

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