The Ethical Dimensions of Creative Market Action

The Ethical Dimensions of Creative Market Action: A Framework for Identifying Issues
and Implications of Entrepreneurial Ethics

Author(s): Laura Dunham
Source: Business & Professional Ethics Journal, Vol. 26, No. 1/4 (2007), pp. 3-39
Published by: Philosophy Documentation Center
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BUSINESS & PROFESSIONAL ETHICS JOURNAL, VOL. 26, NOS. 1-4
The Ethical Dimensions of Creative

Market Action: A Framework for
Identifying Issues and Implications
of Entrepreneurial Ethics
Laura Dunham
Abstract: This paper proposes the importance of the ethics of entrepre

neurship as a field of study. The paper argues that entrepreneurship is an
ethical activity of pressing importance, as it significantly influences the
sort of lives we will lead in the future. Furthermore, the distinctive nature
of entrepreneurial action leads to a distinctive set of ethical problems and
ethical obligations. To contribute to our understanding of entrepreneur
ial ethics and to help spur greater inquiry in the area, the paper offers a
framework that begins to capture and organize the range of ethical issues
and topics that arise in conjunction with what we term the "creative mar
ket action" of pioneering entrepreneurs. Framing entrepreneurship as a
process of creative market action allows us to identify the unique ethical
characteristics of entrepreneurship and to take the first steps in identifying
the distinctive research questions that demand our scholarly attention.
Key Words: entrepreneurship, ethical decision-making, business ethics, cre

ativity and innovation, small business, moral judgement, moral development
Introduction
This paper proposes the importance of the ethics of entrepreneurship as a

field of study. The paper argues that, while the field of entrepreneurship
? Business & Professional Ethics Journal, 2007. Correspondance may be

sent to Laura Dunham, University of St Thomas, 2115 Summit Ave., St.
Paul, MN 55105; or via email: lcdunham@stthomas.
4 Business and Professional Ethics Journal
has emerged as an important and distinctive domain of study, the area

of entrepreneurial ethics remains largely neglected by entrepreneurship
scholars and business ethicists alike. In much the same way that the for
mer has recently established entrepreneurship as more than just a "con
text" in which to apply existing management frameworks and theories,
it is argued here that entrepreneurial ethics comprises a distinctive set of
research questions and problems that demand the specialized attention of
scholars. This distinction is rooted in the creative nature of entrepreneur
ial action, as entrepreneurs seek to bring into existence new products and
services for which there has not previously been a market (Venkatara
man, 1997). It is in the pioneering and innovative efforts required to create
new opportunities, to build the organizations necessary for pursuing those
opportunities, and to form the new coalitions of stakeholders needed to
sustain these ventures that entrepreneurial action departs from manage
rial action. In doing so, entrepreneurial action generates new and unique
ethical problems and issues?problems and issues that are of tremendous
significance at the individual, organizational and societal levels.
To contribute to our understanding of entrepreneurial ethics and to
help spur greater inquiry in the area, this paper offers a framework that
begins to capture and organize the range of ethical issues and topics that
arise in conjunction with what I term the "creative market action" of pio
neering entrepreneurs. This framework builds upon the work of Venkat
araman (1997), Shane and Venkataraman (2000) and others (Sarasvathy
et al., 2003; Ireland et al., 2003; Ma and Tan, 2006) in its focus on the
creative and innovative actions of entrepreneurs. I have also drawn from
the general creativity literature in order to shed more light on the nature
and ethical implications of creative action. The framework highlights the
role of "valuable novelty" as the distinguishing characteristic of entre
preneurial creative market action. The paper then goes on to examine the
distinctive antecedents and consequences of creative market action. The
former include "true" environmental uncertainty, the creative orientation
of the entrepreneur(s), and the formation of stakeholder communities. The
latter includes a range of new economic artifacts. In each case, the paper
explores how these features of creative market action distinguish it from
managerial action and lead to the development of ethical dilemmas and
issues specific to the entrepreneurial context.
Framing entrepreneurship as a process of creative market ac
tion allows us to take the first steps in identifying the distinctive re
search questions that demand our scholarly attention. It provides a
unifying framework for the nascent field of entrepreneurial ethics, in
The Ethical Dimensions of Creative Market Action 5
tegrating key streams of the entrepreneurship and creativity literatures

while remaining parsimonious enough to focus on the fundamental factors
affecting the ethical performance of creative market actors. Furthermore,
the framework allows us to examine the creative action of entrepreneurs in
numerous settings, including business start-ups as well as within established
firms. Finally, and most importantly, it establishes the inextricable link be
tween entrepreneurship and ethics. As argued in greater detail elsewhere in
the paper, entrepreneurial action is inescapably "ethical" to its core. Born of
uncertainty, driven by novelty, wedded to change and subject to high rates
of failure, entrepreneurial action raises ethical issues and generates new eth
ical dilemmas at each stage in its progress. It is hoped that the framework
will spark renewed attention to this important topic, while serving as a use
ful starting point for future theory building and empirical investigation.
The paper proceeds as follows. It begins by establishing the raison
d'etre for the paper, that is, the critical importance of entrepreneurial ethics
in terms of its implications and impacts at the individual, organizational
and societal levels. It then goes on to examine the extant literature on the
subject, finding that, while momentum has gathered behind the topic, the
area remains largely overlooked by both business ethicists and entrepre
neurship scholars. The section that follows offers a new framework, built
on a view of entrepreneurship as "creative market action." The framework
allows us to clarify the issues in the field, focus our research efforts, and
identify new research questions. I close by examining the implications for
practice and education.
The Significance of Entrepreneurial Ethics
Why should the ethics of entrepreneurship be of particular interest and

importance at this point in time? Certainly, the topics of entrepreneurship
and ethics have each been highly visible in recent years, with numerous
articles breaking out of the confines of academic journals and onto the edi
torial and commentary pages of leading newspapers and influential maga
zines. However, there are much more fundamental reasons to take the eth
ics of entrepreneurship seriously than these, perhaps fleeting, mentions.
First, entrepreneurship has emerged as a distinctive area of inquiry, with
unique challenges and questions that can be productively studied in their
own right (Venkataraman, 1997; Shane and Venkataraman, 2001). Sec
ond, and most importantly, in this paper I argue that entrepreneurship is an
inescapably ethical activity?whether one views it from the societal, the
organizational or the individual level, entrepreneurial action has powerful
ethical dimensions and implications. At the broadest level, entrepreneur

ship significantly influences the sort of lives we will live in the future. To
the extent that our lives are strongly shaped by market activity, changes in
the way we will live are driven by entrepreneurship. To be sure, there are
many important influences on our future lives beyond those that are eco
nomic. However, the creation and exploitation of new products and new
services for which there has not previously been a market (Venkataraman,
1997) will continue to be one of the leading factors in defining the sort of
lives we will live, the people we will be and the sort of society we will
forge (Sarasvathy, 2002). We only have to look back at our lives before the
possibilities unlocked by the automobile, the personal computer, and birth
control, to mention only three examples, to recognize the ethical impact
of entrepreneurial ventures.
In addition to these more pervasive societal effects, entrepreneurship
exerts a powerful ethical impact through the organizations that it brings into
existence. Entrepreneurship leads to the creation of enduring enterprises
that ultimately reflect the values that entrepreneurs bring to their formation
(Schein, 1983; Garud et al, 2002; Maguire et al., 2004). We need only think
of such examples as Wal-Mart, Microsoft, and Starbucks in order to recog
nize the profound influence of the entrepreneur's values, not only upon
their own organizations but also upon the many organizations and people
their firms touch. Such firms exercise both economic as well as symbolic
power when they become the role models for the next generation, of orga
nizations. Aiming, for example, to "do a Sam Walton to the childcare busi
ness" implies a set of values and beliefs very different from those expressed
when aiming to "do a Steve Jobs" to the kitchen appliance market.
Finally, the ethical influences of entrepreneurship have more im
mediate and individual impacts. The very process of creating these new
products, services and markets is a journey with its own enormous ethical
impact on the stakeholders immediately affected by the entrepreneur's
actions. Such groups of individuals, called to arms by the entrepreneur to
support the emerging venture, place much at stake and put themselves in a
position of great vulnerability to the entrepreneur (Venkataraman, 1997).
Relationships formed and developed under such circumstances are neces
sarily imbued with strong ethical dimensions in terms of the roles and re
sponsibilities. Furthermore, given the tremendous complexities involved
in operating in new, untested areas, entrepreneurship requires entrepre
neurs to make important and, as outlined here, often morally charged de
cisions under conditions of extreme uncertainty, ambiguity and ignorance.
As a result, the entrepreneurial process places extraordinary ethical de

mands on entrepreneurs, whether they realize it?and act on it?or not.
In sum, whether viewed through the lens of macro, meso or micro
analysis, entrepreneurship has ethical concerns richly woven throughout.
It is important here to take a brief aside and note what the paper is not
saying. To say that entrepreneurship is an inherently ethical activity is not
to say that entrepreneurship is an inherently "good" process or that entre
preneurs are all inherently good moral agents. Nor does the paper suggest
that entrepreneurship is unique in having inherent ethical aspects. Obvi
ously most complex human activities have ethical dimensions of varying
degrees. What the paper is proposing is that the ethical implications of
entrepreneurial action are particularly significant, as well as rich, complex
and unique.
Existing Literature
Among the first to explicitly address the connection between entrepreneur

ship and ethics, Dees and Starr (1992) laid the groundwork for much sub
sequent work in the area by establishing the topic as a legitimate source of
academic interest and investigation, and beginning the task of framing a
research agenda. In seeking to establish entrepreneurial ethics as a distinct
domain within the topics of entrepreneurship and business ethics, Dees and
Starr cited the high stakes involved in entrepreneurial action at the indi
vidual, venture and societal levels, as well as the perceived need among
entrepreneurs for greater ethical guidance.1 Furthermore, they argued that
the problems facing entrepreneurs were substantially different from those
facing other business people and could therefore drive a distinct research
agenda. In support of the latter statement, the authors mapped out some cat
egories of ethical dilemmas that can be seen as unique to the entrepreneur
ial context, including "promoter" dilemmas, "relationship" dilemmas and
"innovator" dilemmas. An important feature of the paper was their call for a
cross-disciplinary approach to research in the field, highlighting the needed
contribution from both social scientists and philosophers alike in exploring
the rich, complex nature of entrepreneurial ethics and in incorporating the
normative, descriptive, theory building, and prescriptive dimensions nec
essary "to generate a theory of entrepreneurial ethics-in-practice, and to
produce some concrete recommendations for improving practice" (103).
Since that article's publication, momentum has gathered behind
the topic. Table 1 summarizes key work in the area. However, the area
remains largely overlooked by both business ethicists and entrepreneur
ship scholars. For instance, a search in the leading electronic database

of management journals uncovers only thirty-four articles, since 1998,
that include various versions of "entrepreneurship" (e.g., entrepreneurial,
entrepreneurs) and "ethics" (e.g., ethical, moral) in the title or abstract.
Furthermore, within this small body of research there is little evidence of
progress or coherence around critical issues. A lack of unifying theoretical
perspective underlying the research has hobbled the development of any
meaningful, cohesive theory. Using a variety of approaches, and drawing
from a variety of definitions and assumptions regarding entrepreneurship
and ethics, the empirical work has yielded contradictory findings.
A case in point is the set of work aimed at exploring how entrepre
neurs perceive and reason about ethical problems they face. This repre
sents the greatest bulk of work being carried out in the area of entrepre
neurial ethics. Many of these studies have compared the moral reasoning
processes of entrepreneurs to those of other managers. Results have been
mixed. For instance, Longenecker et al (1988) suggest that entrepreneurs
do indeed differ from other managers in their perspectives on particular
ethical issues, demonstrating a worrisome "tendency toward moral com
promise" (72) when their own financial interests are at stake, although the
authors also note that entrepreneurs appear to hold higher ethical stan
dards on issues of others' health and safety. Summarizing their study, the
authors assert "that although they hold many values in common with oth
ers in business, entrepreneurs tend to rationalize some behavior that oth
ers view more critically" (64). Other researchers, however, have found
different results. A study by Teal and Carroll (1999), for instance, suggests
"that entrepreneurs may exhibit moral reasoning skills at a slightly higher
level than middle-level managers or the general adult population" (229).
A study by Hisrich (1998), on the other hand, "revealed that while, with
a few exceptions, entrepreneurs and managers were in agreement on ethi
cal issues, entrepreneurs consistently placed a greater emphasis on ethical
behavior" (1). Similarly, Bucar 's study (2001) found few differences be
tween entrepreneurs and other managers, but his study noted two excep
tions. Entrepreneurs reported having to sacrifice their personal values less
and entrepreneurs demonstrated higher ethical standards when it came to
the "internal dealings of the company such as not taking longer than nec
essary for a job and not using company resources for personal use" (80).
Much of the problem here appears to lie in a lack of consistent defini
tions and the lack of a coherent underlying theory. In shaping their research
and subsequent findings, the authors appeal to a broad range of underly
ing theories. Further, these studies represent a wide range of approaches
to defining the sample population of entrepreneurs and to defining the

nature of moral reasoning. For instance, Longenecker and colleagues
(1988) draw upon the theory of ethical egoism, focusing on the indepen
dence of action said to characterize entrepreneurs and linking this charac
teristic to a tendency among entrepreneurs to "view their moral world in
terms of its impact on their personal welfare" (65). The authors defined
entrepreneurs as any individual who identified him or herself as self
employed and measured ethical perception based on the respondents'
ratings of a series of brief vignettes "having ethical overtones" (66). Teal
and Carroll (1999), on the other hand, appeal to theories of individual
moral development (e.g., Kohlberg, 1969; Rest, 1979) and measure en
trepreneurial ethics by applying Rest's Defining Issues Test of moral rea
soning skills. Entrepreneurs, in this study, were defined as "individuals
who established a business from which they intended to profit" (empha
sis theirs, 234). In a completely different vein, Bucar (2001) draws upon
theories of property, emphasizing the role of ownership in shaping ethical
action. Entrepreneurs were defined as founders and majority owners of a
business. Ethical orientation was measured by asking respondents to rate
a series of business activities and brief scenarios.
Such a proliferation of approaches and assumptions no doubt reflects
the very early stage of development in this area of research. Nonetheless,
it also points to the need for a unifying theoretical perspective in order to
generate more coherent theory and useful research.
It is interesting to note that, in each of these studies, entrepreneurs
are presented with a fairly standard set of ethical dilemmas drawn from
the general ethics and business ethics literature. There is no attempt to
identify ethical dilemmas that might be unique to the entrepreneurial pro
cess and context. Furthermore, in most of the studies, subjects were spe
cifically prompted to assess the ethicality of certain scenarios, raising the
possibility of social desirability biases. Finally, despite a strong emphasis
by Dees and Starr on the need for researchers to gain better insight into the
nature of entrepreneurial ethical dilemmas, only a handful of studies have
sought to explore this topic (Vitell et al., 2000; Vyakarnam et al., 1997).
There remains a paucity of information on the actual ethical dilemmas that
are faced by entrepreneurs in the field, and thus an inability to focus on
what are seen as the most critical or demanding issues.
In addition to these micro-level analyses of entrepreneurial decision
making, other important research efforts include Joyner et al's (2002)
exploration of the process through which "smaller organizations estab
lish and maintain their ethical standards as they grow" (113) and Morris
et al.'s (2002) examination of the nature of the ethical climate in entre

preneurial firms. Joyner and co-authors found that the entrepreneurial
leader's ethical values strongly determined the ethical climate of the firm.
These values were instilled into the firm through written policies as well
as "by the patterns of ethical behavior established and modeled by the
founder" (113). Morris and his co-authors carried out a cross-sectional
survey of small firms at various stages of development to understand
the nature of the ethical climate in those firms. Their findings suggested
"four distinct clusters of firms based on their formal and informal ethical
structures" (331).
Finally, a small but growing number of authors have begun address
ing macro-level issues of entrepreneurial ethics, focusing on the role of
entrepreneurship within society, in terms of both its impact on economic
welfare and its effect on social life. These authors have tended to fall into
one of two camps. The first tend to offer libertarian/ natural ethics defenses
of entrepreneurial process, asserting that entrepreneurial action is morally
virtuous and that the fruits of this deliberate and costly labor should right
fully accrue only to the individual responsible. Activities that interfere
with such initiative, such as government regulation or enforced income re
distribution, should therefore be discouraged (for example, Kirzner, 1974;
Machan, 1999). The second set of scholars argue that entrepreneurship, as
currently practiced, tends to shirk, or underestimate, its social and envi
ronmental responsibilities in the name of personal profit. Thus, according
to this view, entrepreneurship needs to be harnessed within the control
of government policy in order to ensure that it produces social, as well
as personal good (for example, Brenkert 2002; Cornwall and Naughton,
2002; Deny 2002). While such a brief recap grossly over-simplifies the
arguments put forward, it is hoped that it captures the rich and controver
sial vein of topics to be mined within this area.
In sum, while the field has begun drawing the attention of an in
creasing number of scholars, the number of topics addressed remains
limited. Furthermore, a lack of unifying theoretical perspective underly
ing the research has hobbled the development of any coherent, cohesive
theory. By extension, the field has yet to reach a stage where meaningful
prescriptions for actual practice can be derived. We remain quite a signifi
cant distance away from generating "a theory of entrepreneurial ethics
in-practice" or producing "some concrete recommendations for improv
ing practice" (Dees and Starr, 1992, 103).
In the next section, a framework is offered to provide a robust, and
distinctive, theoretical basis for research efforts in this field. Based on this
framework, the paper begins outlining critical issues in the area of entre
preneurial ethics and suggesting some fruitful new areas of inquiry.
Creative Market Action
The Potential of Creative Market Action as a Framework

Venkataraman has described entrepreneurship as "fundamentally con
cerned with understanding how, in the absence of current markets for fu
ture goods and services, these goods and services manage to come into
existence" (1997, 120). From this perspective, there are three distinctive
characteristics of entrepreneurship. It is a process, not a person, nor a
stage in an institution's development. It is a creative and dynamic human
enterprise that deals with the creation of new artifacts through human ac
tion. Finally, it is uniquely related to activities that take place in relation
to markets. Thus, while it might share many characteristics with creativity
in the arts, in creative problem-solving within families, churches, govern
ments and other institutions, entrepreneurial action takes place within the
context of trade, barter and exchange of goods and services. Furthermore,
while it might share certain activities with the general process of man
agement, it distinctively deals with the creation of new or novel goods
and services rather than with efficient production or incremental improve
ment. Thus, in seeking to define and locate the field of entrepreneurial
ethics, we begin by framing entrepreneurship and, hence, entrepreneurial
ethics, as centrally focused on "creative market action."
A number of reasons support this approach as most conducive to
my task. First, it carves out a phenomenon that is distinctly different from
established fields within the study of management and economics. Spe
cifically, the approach allows me to explore the genesis of the building
blocks of economic activity, such as products, services, and markets, the
prior existence of which are simply assumed by mainstream economics
and by many of the questions pursued in management theory. As such,
this approach allows me to examine the creative action of entrepreneurs
in numerous settings, including business start-ups as well as within es
tablished firms. Second, this approach specifies a purpose on which re
search should focus and on which it should not. Thus, this approach deli
cately achieves a useful balance between a definition so broad as to be
like "Tha?es water, the primary stuff of everything" (Brenkert, 2002, 4)
and a definition so tight as to preclude rich analysis. Third, the creative
market action perspective facilitates research of the ethics of the entre
preneurial phenomenon at all three levels of analysis?the micro, meso
and macro (Brenkert, 2002). Fourth, this approach emphasizes what has
been a neglected element of the ethics of entrepreneurship?the role and
responsibility associated with creativity within our economic systems. Fi
nally, this approach allows me to develop a more complex interpretation
of ethics?instead of leading me toward the traditional empirical focus
on the ethics of constraint and weakness of will, an emphasis on creativ
ity allows including a more positive conception of ethics as that which
drives aspirations, virtues, imagination and progress towards richer and
fuller lives.
Refining the Concept of "Creative Market Action "

Having broadly defined and defended an approach to entrepreneurship
as creative market action, I turn to the task of developing a more detailed
elaboration of the concept in order to better identify and organize the ethi
cal issues and topics that it comprises. Bagozzi and Fornell (1982) have
suggested that the conceptual meaning of a construct is obtained by (1)
defining the construct, (2) identifying the antecedents, determinants, or
causes of the construct, and (3) specifying the consequences, implications,
or results of the construct (1982, 25). This paper uses this structure to
more systematically identify those features of creative market action that
distinguish it from managerial action and therefore drive the development
of unique ethical dilemmas and issues. Distinctive to this approach is that
it has drawn heavily from both the entrepreneurship as well as the gen
eral creativity literatures. Accordingly, this section begins by defining the
construct and then goes on to examine the unique antecedents and conse
quences of creative market action. In each case, I consider how these key
characteristics of creative market action differentiate it from managerial
action and I attempt to identify the distinctive ethical themes and issues
that such an approach might suggest. It should be noted that the intention
is to view entrepreneurship exclusively from the perspective of creative
market action and thus I will intentionally refer to entrepreneurs and cre
ative market actors interchangeably.
Defining Characteristics?Novelty and Value

In this section, I explore the idea of entrepreneurship as the produc
tion of new economic artifacts (Simon, 1996). Hence, in accord with
numerous other entrepreneurship scholars (e.g., Lumpkin and Dess, 1996;
Sharma and Chrisman, 1999; Ward, 2003), I see novelty and newness as
central properties of creative market action. However, drawing upon the
creativity literature, I will argue that the element of novelty is a necessary,
but not sufficient, component of a robust definition of creative market ac

tion. I will propose that novelty must be supplemented and enriched by a
more complex and nuanced conception of "value" or "appropriateness"?
a conception that goes beyond our current emphasis on economic value?
in order for entrepreneurial acts to be considered truly creative over time.
Novelty. As has been observed by a number of scholars over the
years, entrepreneurial action is primarily characterized by the introduc
tion of novelty, including new products and services, new strategies for
producing or delivering existing products and services, new markets, new
firms (e.g., Schumpeter, 1942; Venkataraman, 1997; Shane and Venka
taraman, 2000; Sarasvathy, 2001). In this way, entrepreneurial creative
market action is distinct from other managerial action, which seeks to op
timize competitive positioning within existing market arrangements. Put
another way, opportunities pursued via creative market action are distin
guished from other profit-making opportunities in that "the former require
the discovery of new means-ends relationships while the latter involve
optimization within existing means-ends frameworks" (Shane and Venka
taraman, 2000, 220, citing Kirzner, 1997).
The creation of these new means-ends relationships has been char
acterized as the act of reconfiguring existing resources into "new com
binations" (Schumpeter, 1942) that yield higher value than existing ar
rangements. Such new combinations are made possible when enterprising
individuals form different, or new, sets of beliefs about the value of re
sources, based on their exposure to fresh sources of information about
those resources (Kirzner, 1997; Shane and Venkataraman, 2000) or their
novel and original interpretation of information as mediated through their
personal values and aspirations (Sarasvathy et al., 2003). Of course, not
all new combinations are successful?when the creative market actor's
beliefs, or conjectures, about the new opportunity are wrong, the venture
fails. However, the essence of creative market action is the set of "de
cisions and actions based often only on human imagination and human
aspiration, that may or may not in time lead to new products, firms and
markets" (Sarasvathy et al., 2003, 28).
This emphasis on novelty is consistent with other definitions of cre
ative action. For instance, an exploration of the general creativity literature
reveals that, while theorists differ somewhat in the details of their defini
tions, most see creativity as involving the development of new or novel
ideas or products (e.g., Stein, 1953; Amabile, 1996; Sternberg, 2001). It
is this dimension of novelty that distinguishes creative work from other
products. "Products fashioned by intelligent people are high in quality
but not necessarily novel. Creativity thus seems in some way to go be

yond intelligence" (Sternberg, 2001, 360). Furthermore, the notion of new
combinations is also frequently raised in the creativity literature and is
strongly associated with a broad range of creative accomplishments (e.g.,
Rothenberg, 1979; Ward, 2004). "Rothenberg (1979), in particular, has ar
gued that simultaneously entertaining or integrating two opposing ideas, a
process termed Janusian thinking, underlies creative acts as diverse as the
paintings of da Vinci, the symphonies of Mozart, and the scientific reason
ing of Einstein" (Ward, 2004, 176). Thus, for both entrepreneurship and
general creativity researchers, creativity involves pursuit of the novel and
original, often in the form of new combinations of existing entities.
However, the creativity literature extends the definition of creative
action in an important way. Within that literature, researchers agree that
a product is only creative when it achieves both novelty as well as value
in terms of its appropriateness, usefulness, relevance, or fit to the task at
hand. Such criteria, I argue, goes well beyond the criteria for value?that
is, purely economic value?used within the entrepreneurship literature
and this has ramifications for our understanding of the ethical issues em
bedded within the entrepreneurial process.
Appropriateness or value. In their definitions of creativity, creativity
researchers consistently link novelty with value. Synthesizing the work of
numerous researchers in the area of creativity, Amabile (1996) has defined
creativity as residing in those products or ideas that represent "both a nov
el and appropriate, useful, correct or valuable response to the task at hand"
(35). Others echo this definition. For example, Oldham and Cummings
(1996), characterize creativity as those products, ideas, or procedures that
are not only novel? "either a significant recombination of existing ma
terials or an introduction of completely new materials" (607) ? but are
also "relevant" or "useful." Sternberg defines creativity as the ability to
produce new and original ideas that are both appropriate to their tasks and
"high in quality" (2001, 360). These additional criteria are meant to dis
tinguish truly "creative" acts from the merely "bizarre," that is, those acts
or products that can be construed as novel but without useful contribution,
or even novel acts that make a harmful contribution.
What is interesting here is that the determination of value or appro
priateness must be made on a case-by-case basis, based on criteria specific
to the context or domain in which the creative idea is put forth. There is no
universal metric of value that can be applied. So, for example, a painting
that exhibits great novelty in its form or approach would not be consid
ered highly creative just because it also commanded a high price. Rather,
it would be considered highly creative only if, in addition to its novel

ty, it met criteria for value or appropriateness that could be considered
internal to the practice of painting. Such criteria might include, "visual
interest or visual power, coherence or unity, intelligibility, emotional im
pact, 'says' or 'conveys' something" (Sobel and Rothenberg, 1980, as
cited in Amabile, 1996).
Hence, the creativity literature offers us a definition of value or ap
propriateness that recognizes the plurality of values embedded within any
novel offering and that challenges us, at both the individual and societal
levels, to reflect more deeply and deliberate more fully on the actual and
ethical contribution of new human artifacts. This distinction between the
merely novel, on the one hand, and the novel and valuable, on the other,
enriches our understanding of the plurality of values embedded within
new economic artifacts brought into existence by entrepreneurial action
and highlights the need for richer constructs and approaches for evaluat
ing the products of entrepreneurship. Therefore, in combining the insights
of both the entrepreneurship and creativity literatures, I propose that en
trepreneurship as creative market action be viewed as the act of creating
novel markets, products or services which are both appropriate to the con
text and of value to those affected.
Ethical challenges. With its emphasis on novelty and a multidimen
sional construct of value, the definition of entrepreneurship as creative
market action immediately raises two important questions about ethics:
First, the role of novelty in changing and shaping the world we live in and,
second, the evaluative challenge of ensuring that entrepreneurial strate
gies are not just novel, but also of value and appropriate. I look at each of
these in turn.
Sarasvathy has suggested that entrepreneurship is "economics with
imagination" and that "the task of entrepreneurship is to move us from
the world we have to live in to the world we want to live in" (Sarasvathy,
2002, 96). Through its introduction of novel economic artifacts, entrepre
neurship is a journey through which entrepreneurs both shape and fulfill
our aspirations (105-106), and in doing so, both form, fulfill and challenge
our deepest values. She cites the example of Josiah Wedgwood, whose
revolutionary approach to manufacturing and selling affordable pottery in
the eighteenth century helped create the notion of social mobility and, in
doing so, played an important role in creating the modern middle class.
As stated earlier and as described above, entrepreneurship is made
possible when enterprising individuals form different beliefs about the
value of resources (e.g., Kirzner, 1997). Thus, entrepreneurship is fun
damentally involved with a confrontation between prevailing beliefs and

values. As that confrontation ultimately results in the shaping of new val
ues and beliefs across the broader society, then it is clear that the entrepre
neurial process is one imbued with ethics to its very core. Furthermore,
from this perspective ethics and values play an active, not merely restrain
ing, role in the entrepreneurial process as they drive entrepreneurial dis
covery. Such a view stands in stark contrast to the prevailing assumptions
among many business scholars and practitioners. The latter tend to see
business as a separate optimization process with ethics acting as mere
side-constraints (e.g., Friedman, 1972). Similarly, traditional approaches
to scholarship in entrepreneurship view the creation of entrepreneurial op
portunity as primarily the result of errors, luck or mere alertness (Venkat
araman, 1997; Kirzner, 1997) rather than a story of values and aspirations.
From these traditional perspectives, ethics play no role in the entrepre
neurial process save ruling out certain activities, opportunities or prod
ucts. In contrast, the creative approach outlined here describes a process
in which the values and beliefs of the entrepreneur provide the very fuel
of the entrepreneurial process.
Of course, as stated earlier, saying that entrepreneurship is an in
herently ethical process is not the same thing as saying it is inherently
ethically good (or bad for that matter). It is simply to recognize that when
a process challenges or amends accepted values and beliefs, it is inevi
table that moral tensions occur. In some cases these value tensions may be
somewhat trivial, for example, the entrepreneurial proposition that music
is more valuable when delivered digitally song-by-song (trivial, except
of course if you are a music artist financially reliant on the status quo).
In other cases, these value tensions might be quite profound, as in the
proposition that genetically modified foods are a better way to supply the
food chain.
There are important implications to this view of the role of ethics.
Most significantly, it changes the relationship of ethics to entrepreneur
ship from external constraint to internal architect. As such, it allows us to
expand our focus on ethics from a narrow emphasis on compliance and
weakness of will?what could be termed "an ethics of misdemeanor"?to
a larger emphasis on the role of ethics in inspiring creativity, experimen
tation and imagination. This suggests interesting questions regarding the
role of the entrepreneur's ethics and values in shaping her entrepreneurial
process, from the earliest decisions she makes regarding the attractiveness
of potential ventures to later decisions as she develops and pursues her
opportunities in the market. For instance, while the entrepreneurship lit
erature emphasizes the role of risk and return in the entrepreneur's evalu
ative process, this account suggests that creative entrepreneurs will look
to a broader range of personal and ethical values when making their own
determination as to the attractiveness of their ventures. Some important
questions, then, are: To what criteria, beyond projected profitability/risk
of loss, do entrepreneurs appeal when making their own assessment of
the attractiveness of their ventures? To what sources of information and
advice do they turn when developing these multiple criteria and weigh
ing their plans against them? How do they assess and make trade-offs
among the multiple values embedded in their offerings? For instance, can
a commitment to certain ethical values help explain why entrepreneurs
persist despite low returns? To what degree are they aware of potential
conflict between the values embedded in their new offerings and those
held by their prospective stakeholders? How does this affect the way they
go about mobilizing support for their ventures?
In addition, this view of the role of ethics has implications for our
research methodologies. As Dees and Starr (1992) have pointed out, re
search on entrepreneurial ethics will require ethicists and social scientists
to operate in tandem, with ethicists contributing the normative analysis
that helps frame and define entrepreneurial ethical dilemmas, that pro
vides a basis for categorizing the responses of entrepreneurs to such di
lemmas, and that determines "the ideals against which practice might be
evaluated" (103).
The second key question raised by an approach to entrepreneurship I
have termed the evaluative challenge. Although central to the concept and
to the empirical investigation of creativity in general, the evaluation of the
appropriateness or value of novel ideas is difficult from at least three per
spectives: when is the evaluation made, how is it made, and by whom?
In entrepreneurial, as in all creative situations, novelty can usually
be recognized immediately but the ultimate assessment of value often
only emerges over time. A novel idea or product can be readily recog
nized since it is noticeably different from others we have experienced.
However, because of this very fact, we are often hampered in our ability to
determine its usefulness. If an entrepreneurial idea is entirely new to our
experience, we have few if any frames of reference with which to evalu
ate it. In fact, many new creative ideas are often rejected as worthless
when first introduced. Charles Darwin's theory of evolution was roundly
criticized and his character attacked during his lifetime (Sternberg, 2001).
Similarly, the Impressionists were initially rejected as they sought to in
troduce a new approach to painting and most Impressionist painters never
achieved any measure of recognition or acknowledgment for their work

during their lives (Laurent, 2003). Often, it is only in posterity that value
becomes attached to many creative works (Osborne, 2003). Indeed, as
Kuhn (1970) has pointed out, it is often only after the dominant beliefs
and values have been overturned that a novel idea can be accepted. Thus,
the assessment of value can be very difficult at the time of the introduc
tion of the new idea. This raises the thorny and difficult question of how
entrepreneurs go about acquiring the sociopolitical legitimacy (e.g., Al
drich and Fiol, 1994) necessary to attract stakeholders and survive in the
market. How do they communicate the new, and perhaps controversial
value, to key constituents? How do they overcome the objections of those
comfortable with the status quo?
Another challenge involved in the evaluation problem is the ques
tion of who, in the absence of perfect information and foresight, deter
mines the value of an entrepreneurial idea. Traditionally in economics,
value is determined by the market, as represented by the sum of indi
vidual trading decisions, through fluctuating prices. Those new products
and services that secure a customer base prepared to pay more than the
costs of supply can be deemed as valuable. This approach has a number
of advantages?it is a decentralized process where millions of individu
als can participate in personal buying decisions that help establish what
is most valuable, it is flexible to change as prices vary to reflect changes
in demand and it gives no specific authority to any individuals over oth
ers. However, there are a number of ethical dangers in relying solely on
market-based measures of value in entrepreneurial situations. These
dangers go beyond the normal criticisms of imperfect markets and ex
ternalities. In creative entrepreneurial situations, potential customers
neither share the entrepreneur's beliefs nor are they operating within the
appropriate information corridor (Shane and Venkataraman, 2000, 222).
The problem can be compounded by those who shape and distribute the
information available about a product, as this offers opportunities for dis
tortion. For instance, the increasing sophistication of marketing efforts
to target specific consumer segments has led on numerous occasions to
charges of exploitation of vulnerable consumers, whereby these groups
are induced to purchase products that ultimately provide them with little
value, or even confer harms (Karpatkin, 1999; Laczniak, 1999). Hence,
in entrepreneurial situations the market is at its least useful when used as
the sole means of evaluating a product or service.
Even if markets were capable of evaluating the appropriateness of an
entrepreneurial opportunity, to rely solely on market-based evaluations is
to ignore the role of the individual moral agency of the entrepreneur and
their stakeholders. At the most basic level, such reliance upon the market
assumes that if a product can be made, it should be made; that if a product
can be purchased, it should be purchased; and that if a product provides
value for an individual consumer, it must then contribute towards a greater
value for society as a whole. Such an approach ignores the plurality of
values embedded in any new economic artifact and overlooks the entre
preneur's responsibility to ask, "Is this a useful or appropriate contribu
tion? Is it a venture or product with which I want to be associated? Is this
a good venture?"
These issues suggest some new perspectives on the entrepreneurial
process. If, as suggested here, entrepreneurship is an inherently ethical
process involving the challenging of existing values and beliefs, and one
that requires entrepreneurs to overcome the evaluative challenge if their
offerings are to receive acceptance in the market, we would expect en
trepreneurs who are successful in persuading others of the value of the
visions to use the language of ethics and values, rather than just risk and
payoffs. We would expect successful entrepreneurs to rely more heavily
upon the of use value-laden stories (e.g., Lounsbury and Glynn, 2001),
metaphors (Hill and Levenhagen, 1995) and appeals to beliefs when re
cruiting initial stakeholders than upon a heavy emphasis on negotiation of
contractual relationships. Further, if successful entrepreneurial action is
ultimately about both novelty and value, we would expect entrepreneurs
who focus on novelty alone to have less long-term success. (Thus entre
preneurial ventures built on "pet rocks" and the like will have noticeably
shorter lives than those built on deeper sources of value.)
Antecedents to Creative Market Action
Having identified the defining characteristics of creative market action and

some associated ethical issues, we turn to discussion of its antecedents.
A review of the entrepreneurship and creativity literatures suggests there
are three key antecedents to creative market action: "true" environmental
uncertainty, the creative orientation of the individual entrepreneur or en
trepreneurial team, and the formation of new communities of stakeholders
willing to provide the resources necessary for launching the new venture.
"True" environmental uncertainty. Economic or environmental un
certainty is an important precondition for the types of novel opportuni
ties pursued by entrepreneurs via creative market action (Knight, 1921 ;
Schumpeter, 1942; Kirzner, 1997; Venkataraman, 1997). It is only under
conditions of uncertainty that imaginative and enterprising individuals are
able to perceive or create novel opportunities that have gone unnoticed

or unimagined by others, and in pursuing these opportunities, to capture
entrepreneurial profits that would not be available under more certain and
stable conditions (Knight, 1921; Venkataraman, 1997). While uncertain
ty is endemic to markets, due to the uneven dispersion of information
throughout the economy (Hayek, 1945), creative market action typically
takes place under conditions of "true," Knightian (1921) uncertainty. This
challenging context contrasts with more static decision situations typi
cally associated with managerial action, where there is uncertainty over
which outcome may come to fruition but where the all the possibilities
are well understood. Under such conditions, risks are known and can be
insured. Under conditions of Knightian uncertainty, not only are future
outcomes uncertain, but even the possibilities are unknown at the decision
point. Recent empirical work by Sarasvathy supports this view of the un
certain contexts in which entrepreneurs operate. In her study of expert en
trepreneurs, she found that these entrepreneurs "not only did not assume
the existence of the market, but also explicitly expressed their belief that
the existence of the market cannot be demonstrated or known in advance"
(Sarasvathy et al., 2003, 145).
Such deep levels of uncertainty mean that creative market agents
must act under conditions of ignorance. From this perspective, entrepre
neurs cannot predict with any reliability whether markets can be created
for the products and services they introduce. If their conjectures regarding
their opportunities are correct, they will earn an entrepreneurial profit.
If not, they and those whose support they have mobilized incur a loss
(Casson, 1982; Shane and Venkataraman, 2000). Beyond these more im
mediately felt effects, entrepreneurs as creative market actors are also not
in a position to predict what the potential effects of their innovation will
be. Dew et al. (2004) cite the case of Thomas Edison, who anticipated that
his phonograph would transform office work by being adopted primarily
for use as a record-keeping device for business, when instead its primary
effect was to revolutionize the entertainment industry by providing the
technology that enabled the creation of the record industry.
Acting under conditions of such uncertainty and ignorance poses
some significant decision-making challenges for the creative market actor,
and these challenges have strong ethical overtones. For instance, in their
roles as creative agents, entrepreneurs often find themselves making deci
sions in "ethically pioneering" situations, evaluating the launch of prod
ucts and services that have potentially significant ethical implications.
Consider the ethical issues that have arisen in the wake of widespread
adoption of information technologies (such as privacy issues, intellectual

property issues, etc.) as well as those under debate within the biotechnolo
gy field (stem cells, cloning, etc.). While some of these can be anticipated
prior to the introduction of the technology, many cannot.
Furthermore, in such circumstances, true uncertainty and ignorance
create an environment where the traditional approaches to ethical decision
making emphasized in the business ethics literature become increasingly
inadequate for several reasons. First, such approaches typically begin at
the point when ethical issues have been identified and a commitment has
been made to address them. In pioneering situations, it may be hard to
discern ethical issues or understand the future ethical implications of cur
rent entrepreneurial action. Second, once the ethical issues have been rec
ognized, traditional approaches require that the decision-maker be able
to identify the appropriate principles to apply to a given situation and
to evaluate the potential consequences of their decisions. The confusion
and uncertainties that envelop pioneering situations cloud the decision
maker's understanding of which principles to apply and what consequenc
es to expect from their actions. Thus, creative market actors in pioneer
ing situations face particularly daunting challenges in attempting to apply
sound decision-making processes to their actions.
Another way to view this, and with somewhat different implications,
is that entrepreneurs are often forced to make decisions without the benefit
of ethical precedents. This is particularly problematic in those product
and technology areas that are experiencing what scholars have termed
an "ethical time lag" (Marshall, 1999). In those circumstances, advanc
es in scientific knowledge and technological capability have developed
ahead of the societal consensus as to the meaning of those advances and
the appropriate uses of the technology. This creates a vacuum in which
entrepreneurs must operate, making decisions about complex moral is
sues without the moral guidance available to managers operating in more
mature product and technology areas, where the ethical debate has been
largely settled and the key responsibility is applying established principles
and precedents to particular circumstances. For the creative market actor
operating at the edge of knowledge and experience, the focus moves from
applying precedents to actually establishing them. These individuals thus
find themselves engaged?knowingly or unknowingly? in a process of
"constructive ethics," that is, creating new values, norms and standards.
The uniquely uncertain context of the entrepreneur raises a number
of questions for better understanding the ethical decision-making process
es of creative market actors and for providing better guidance to them.
Some of these are empirical in nature: For instance, to what degree do

entrepreneurs recognize the potential ethical implications of the actions
they are planning to undertake? Do they typically, for instance, consider
themselves responsible for potential, unexpected uses or other repercus
sions of their innovations? How do they go about considering these is
sues, i.e., what decision-making processes or heuristics do entrepreneurial
decision-makers use in pioneering situations? Other questions are norma
tive in nature. With what responsibilities should we charge the entrepre
neur, in terms of considering and acting upon potential, but uncertain,
consequences of their action? In other words, what are appropriate ethics
for experimental situations where one of the few certainties is that there
will be unintended consequences? If we believe that the best route to mak
ing progress in entrepreneurial ethics is through understanding the kinds
of rich, deliberative processes that can address such complexities, then we
must have a goal of describing the difference between a good and a bad
deliberative process. What does it include, what does it not? What allows
it to flourish, what does not? How can it be learned?
Creative orientation of entrepreneur (s). A second key antecedent of
creative market action is the creative orientation of the entrepreneur or
entrepreneurial team. It has been frequently noted, for instance, that en
trepreneurs carrying out creative market action demonstrate a distinctive
mindset that is marked by an orientation towards creativity and innovation
(Ireland et al., 2003; Ma and Tan, 2006; Shane and Venkataraman, 2000;
Ward, 2004). This entrepreneurial mindset entails "challenging the status
quo and finding new ways of doing things" (Ma and Tan, 2006). It enables
the entrepreneur to form a new set of beliefs regarding the value of exist
ing market arrangements (Shane and Venkataraman, 2000; Sarasvathy et
al., 2002) that in turn leads to new combinations of existing resources
(Schumpeter, 1942) that in turn become the basis for new opportunities
in the market. In sum, this creative energy has often been celebrated as a
distinctive difference of the entrepreneur that leads to the introduction of
new and better ways of doing things.
However, this same capacity is a double-edged sword, as is perhaps
best acknowledged in Schumpeter 's famous designation of the entrepre
neur as the source of "creative destruction" (1942). In pursuing creative
action, entrepreneurs challenge prevailing beliefs and values, disrupting
the status quo. In introducing new ideas, processes, and products, creators
become engaged in "questioning and often opposing societal agendas,
as well as proposing new ones" (Sternberg, 2001, 360). They question
and undermine existing paradigms (Kuhn, 1970). They "defy the crowd"
(Sternberg and Lubart, 1995). In following their iconoclastic agendas,

they are prone to underestimating the risks (Busenitz and Barney, 1997)
and engaging in self-justification and self-serving biases (Baron, 1998).
Given the many obstacles they face, they are prone to bending or breaking
the rules (Bhide and Stevenson, 1990).
This conflicting characterization of the creative orientation and ener
gy of entrepreneurial actors raises disturbing questions. For while it might
seem our goal should be to develop normative theories of entrepreneur
ial creativity that reinforce the positive aspects of entrepreneurship and
discourage the more troubling aspects, a more realistic appraisal might
suggest we cannot have the one without the other (Bhide and Steven
son, 1990). Without a tendency to overconfidence and self-justification,
how could entrepreneurs pursue their novel and highly uncertain projects?
Without a willingness to bend and break some rules, how could they per
suade others to support their iconoclastic visions?
Such complexities certainly underline the need for greater scholarly
attention to the development of a viable and thoughtful ethics of creativ
ity (Grudin, 1990). The morally charged and complex nature of entrepre
neurial action also suggests better attention to the study, development and
training of entrepreneurial decision-making models centered on a sense of
"entrepreneurial wisdom" (Dunham, McVea, and Freeman, 2008). Such
models could draw from both centuries-old philosophical tracts (e.g.,
Aristotle, 1998) as well as the emerging science on wisdom (see for in
stance, Baltes and Smith, 1990; Csikszentmihalyi and Rathunde, 1990;
Sternberg, 1998) to help entrepreneurs develop the capabilities for form
ing judgments and choosing ethically satisfying and strategically effective
action within the context of creative market action.
Formation of new communities of stakeholders. The third antecedent
to creative market action is the formation of new stakeholder networks
willing to support the fledgling venture of the creative market actor. Many
entrepreneurship researchers have noted that a wide variety of resources
are needed in order for the visions of creative market actors to achieve
realization in the market (Katz and Gartner, 1988; Stevenson, Robertson
and Grousbeck, 1989; Venkataraman, 1997). These resources include both
the physical and financial assets needed to launch their products into the
market, as well as the knowledge resources required to carry out and fine
tune their visions. Entrepreneurs rarely control all the resources necessary
for launching their businesses (Stevenson and Gumpert, 1985; Venkat
araman, 1997), so pulling them together becomes a critical first task for
the creative market actor. The entrepreneur achieves this through direct
appeal to a variety of individuals who have access to the resources the

entrepreneur lacks. It is through mobilizing the support of this community
of stakeholders that entrepreneurs are able to secure the wherewithal to
pursue their dreams in the market.
Managing such relationships in their early, formative stages?when
risks are high and expectations unclear, when goals are continually shift
ing and reforming, when governance mechanisms have yet to be put in
place, when information asymmetries create opportunities for manipula
tion?poses different ethical challenges from those faced by managers
balancing the demands of more mature stakeholder networks. A case in
point is the role of persuasion. When ideas are the only asset, persuasion
becomes the main currency. As is true for all creative actors, entrepre
neurs must devote considerable time and attention to convincing others
of the merits of their ideas and the power of their visions. Given that
most entrepreneurial ventures begin as nothing more than an unproven
insight in the mind of the entrepreneur, this poses significant challenges.
When the only evidence that entrepreneurs can supply potential stake
holders are the beliefs, convictions and passions they personally bring to
their ventures, the possibility arises for both deception and self-delusion.
Entrepreneurs find themselves needing to balance honesty with their
need to sell critical stakeholders on their merits of their ventures, despite
those stakeholders' aversion to risk or inertia in the face of change. Dees
and Starr (1992) have suggested that this situation gives rise to a set of
"promoters'" dilemmas that are distinctive to the entrepreneurial con
text. Given both the promise and peril of such uncertain circumstances,
understanding where enthusiasm, "impression management" and persua
sion step over the line into deception and manipulation can be a dif
ficult call. Furthermore, the issue is more complex than a focus on the
entrepreneur's integrity would suggest. When framed as "effectuation"
(Sarasvathy, 2001), in which the entrepreneurial act is viewed as one
that is less goal-oriented than means-driven, entrepreneurial action can
be seen as largely propelled by the entrepreneur's ability to galvanize
the many potential stakeholders around them into action supporting the
venture. As Sarasvathy has put it, the entrepreneur's actions are not so
much directed by a clear purpose as by the various "means" at her dis
posal and by the various possible effects that can be created by those
means. Persuasion, under such an account of entrepreneurship, must be
viewed more complexly than as simple manipulation. Persuasion, under
such an account, is the indispensable catalyst of creative, entrepreneurial
collaboration and action.
Another set of problems identified by Dees and Starr (1992) are

what they termed "relationship" problems. Entrepreneurs are unique in
their heavy dependence upon family and friends to provide the resources
needed for their businesses in the early stages of development. This sets
up the opportunity for conflicts of interest to arise, as entrepreneurs seek
to balance both personal and business obligations.
For researchers in entrepreneurial ethics, a number of interesting
questions are raised. For instance, what is the nature of the moral ob
ligation between the entrepreneur and the community of stakeholders
that make the venture possible? Does it change based on the source of
relationships, i.e., do stakeholders drawn from family and friends have
different moral status from stakeholders attracted through more arms
length, market based transactions? Does that responsibility change as the
venture evolves? How does the emerging firm manage its stakeholder
relationships? In what ways does that change as the firm hits different
development stages?
Consequences of Creative Market Action

In addition to the unique set of antecedents driving it, creative market ac
tion also leads to a distinctive set of consequences. The consequences of
creative market action consist of the formation of three main categories
of new economic artifacts?new capital or entrepreneurial profits; new
products and services which challenge both possibility and the status quo;
and often (though not necessarily) new and vulnerable organizations.
New capital Successful entrepreneurial action generates economic
growth (e.g., Schumpeter, 1942) and new capital. Indeed, Ireland and his
colleagues go so far as to suggest that growth and new wealth creation are
"entrepreneurship's defining objectives" (2003, 963).
While economic growth is widely viewed as a positive development
within a society, bringing with it prosperity and improved quality of life
(e.g., Schumpeter, 1942), entrepreneurial wealth creation is also thought
to bring with it greater disparities in income and well being (Brenkert,
2002). The latter issue has raised important questions about entrepreneur
ial profits and the nature of the rights of ownership. It has been argued
(Kirzner, 1973; Machan, 1999) that if new opportunities are created by
the entrepreneur, then the resulting entrepreneurial profits are simply the
natural fruits of the mental creativity of those individuals (Foss, 1997).
Thus, since we have natural rights to our own creative thoughts, entre
preneurs should have natural ownership rights to the results of their cre
ation. As such, these authors propose, entrepreneurial ownership rights
are fundamentally different in nature to the ownership rights of those who

purchase equity in a business?entrepreneurs hold creator rights which
are derived from their freedom of expression. Given these assumptions, a
number of these authors have claimed various degrees of absolute own
ership for entrepreneurs in their ventures and have proposed the illegiti
macy of taxation or regulation of entrepreneurial profits (Machan, 1999;
Kirzner, 1973). In contrast, Brenkert (2002) has argued that these libertar
ian conclusions are flawed in that they assume that entrepreneurs create
new wealth absolutely on their own in the absence of the surrounding
context. From this perspective, once the social supporting institutions are
taken into account, he argues that "society should (have a voice) regarding
their creations" (18). The ongoing debate suggests a number of important
and unresolved issues with regard to entrepreneurial creativity, entrepre
neurial profits and ownership. Specifically, is there a difference of kind
between entrepreneurial property rights, even if they are not absolute, and
the property rights of traditional shareholders? More simply, is there a
difference between the moral status of Bill Gates' wealth and that of, say
Warren Buffet (assuming he operates as a silent investor with minimal
entrepreneurial input)? The answers to these unresolved questions have
important implications on public policies, or lack there of, to promote or
regulate entrepreneurship in society.
New products and services. Creative market action leads to the in
troduction of products and services that "move us from the world we have
to live in to the world we want to live in" (Sarasvathy, 2002, 96). In do
ing so, entrepreneurial action leads to products and services that funda
mentally change the way we live. The coming of the automobile made
possible the kinds of mobility that changed the way we worked (away
from home) and lived (in suburban clusters). The revolution in household
appliances enabled more women to enter the work force (Greenwood et
al., 1995). Personal computing has transformed the way we work and live,
from increasing the number of home workers to increasing the portion of
at-home time devoted to work-related activities. In the most recent de
cades, advances in information technology have confronted the individual
with issues of personal privacy (who knows what about me and how are
they using it?) and property rights (is it okay to download music?), to name
two prominent examples. What are the responsibilities of a creator for their
creation under these circumstances? To what degree should we hold entre
preneurs responsible that their innovations produce positive consequences
for customers? To what degree should entrepreneurs be expected to de
sign their products to minimize misuse? To what degree should we expect
entrepreneurs, operating at the edge of knowledge and possibility, to reflect

beyond the constraints of the current law or of current ethical norms?
The ethics of vulnerable organizations. A final category of econom
ic artifacts introduced by creative market action are new organizational
structures which must be formed to pursue the new opportunity. It has
been widely observed that the culture and norms of new entrepreneur
ial organizations are distinctly different from those of mature businesses.
As Spence (1999) puts it, entrepreneurial firms "tend to be independent
and owner-managed, stretched by multitasking, limited cash flows and
'fire fighting', built on personal relationships, mistrustful of bureaucracy
and controlled by informal mechanisms. The idiosyncrasies of small firms
suggest that they differ in nature as well as in size from their larger coun
terparts (Holliday 1995:2)" (164).
Among the most critical differences, young firms face many haz
ards, often lacking the necessary relationships with customers, suppli
ers, and prospective employees, as well as deep knowledge of their en
vironments and effective internal routines for managing their operations
(Stinchcombe, 1965). They lack access to resources (Bhide, 1992), ex
perience difficulty in raising capital (Kalleberg and Leicht, 1991), and
suffer a lack of familiarity with external sources of capital (van Auken,
2005). Such "liabilities of newness" (Stinchcombe, 1965) drive high lev
els of failure among young organizations, and these failures generate a
variety of harms to stakeholders of the venture. Furthermore, this vul
nerability can drive entrepreneurs to act expediently. As Morris and his
colleagues put it, "Pragmatic operational demands, limited management
controls and lack of public visibility in early stages may reduce pressure
to act ethically" (Morris et al., 2002). Under such severe strains, entrepre
neurs can be drawn toward "lifeboat" ethics? a form of decision-making
norms which are applied when it is felt that "injustice is preferable to total
ruin" (Hardin, 1974). Longenecker et al (1988), for instance, found that
entrepreneurs, when perceiving financial threats, were more likely than
other managers to act to maximize their financial position even if it came
at the expense of other stakeholders.
On the other hand, as mentioned earlier, different studies have found
higher than normal moral reasoning skills among entrepreneurs (Teal and
Carroll, 1999) and higher than normal personal emphasis on ethical be
havior (Hisrich, 1998). In the words of Morris and his colleagues (2002),
"the entrepreneur's pride and personal identification with the venture may
encourage a higher ethical standard." The unresolved tensions between
these conflicting findings raise a number of interesting questions for both
empirical and normative investigation. How, for instance, do the tenden

cies of "lifeboat ethics" perspectives and "superior ethical emphasis and
reasoning" interact in decision-making in new entrepreneurial ventures?
What is the nature of the dilemmas that arise within the entrepreneurial
organization that can lead to a life-boat ethics approach? Can life boat
ethics be justified in survival situations? If so, what are the limits to
lifeboats ethics?
A case in point is the widespread use of bootstrapping strategies by
nascent entrepreneurial ventures. Up to 75% of nascent entrepreneurial
firms adopt some form of bootstrapping as part of their operations (Mc
Cune, 1999). In simplest terms, bootstrapping is the strategy of "doing
more with less" and minimizing the use of cash during the initial stages of
the business. Within the traditional entrepreneurship literature, bootstrap
ping is often studied as an ethically neutral, or even ethically positive,
strategy for entrepreneurial ventures to overcome some of their "unfair"
disadvantages. For instance, it has been observed that "bootstrap financ
ing techniques involving the delay of payments (to others) are preferred
when risk levels appear highest, while owners in business environments
with the most opportunity are more likely to try to minimize accounts re
ceivable" (emphasis added, Carter and Van Auken, 2005). However, from
a creative market action perspective, bootstrapping necessarily involves a
number of important ethical questions and research opportunities. For ex
ample, how do entrepreneurs differentiate between ethical and unethical
cash-flow management? Do personal ethics constrain the level of boot
strapping or do other factors play a larger role, i.e., reputational effects?
To what extent do bootstrapping entrepreneurs use outright deception as
part of their strategies? How do they draw the line between what they see
as acceptable and unacceptable practice?
In sum, the emergence of entrepreneurial organizations with dis
tinctive characteristics and unique ethical problems suggests a number
of important questions of both normative and empirical natures. How, for
instance, do we define the good entrepreneurial organization? What val
ues, norms, practices, and other mechanisms allow us to build good entre
preneurial organizations "from the ground up?" Through what stages and
processes does a young firm's ethical climate and value structure emerge?
In what ways does the entrepreneur affect that evolution? How does the
external environment affect that evolution? How do the intense stresses of
venture launch and early survival affect the ethical climate? Through what
mechanisms do entrepreneurial firms influence and monitor the ethical
behaviors of employees?
Area of Focus Representative

Key Findings/Arguments
Papers
Individual differences Longnecker et al., Entrepreneurs have different ethical perspective
in decision- 1998 than managers (Longnecker et al.)
making jea| ancj Carroll, Entrepreneurs have higher moral reasoning
1999 skills (Teal and Carroll)
Hirsch, 1998 Entrepreneurs sacrifice personal values less
Bucar 2001 tnan managers (Hirsch)
Ethical Dees and Starr, Promoter's, relationship and innovator's
dilemmas of 1992 dilemmas are unique to entrepreneurial
context (Dees and Starr)
entrepreneurship Vyakarnam et al.,
1997 Empirical validation of unique dilemmas, including
conflicts of interest, and prioritization of
stakeholders (Vyakarnam et al.)
Environmental Chau and Siu, 2000 The entrepreneurial environment is detrimental
influences on
Radev, 1993 t0 ethical decision-making
decision
Fuxman 1997 Competitive pressure can significantly alter
making ethical perspectives (Chau and Siu)
The social norms of the surrounding business
culture affect entrepreneurial ethics (Radev)
Ethical Joyner et al., 2002 Entrepreneur's values strongly affect ethical

climates of Morris et al. 2002 climate of organization (Joyner et al.)
entrepreneurial Ethical climates of entrepreneurial firms can be
organizations identified as falling into one of four distinct
clusters of firms based on their formal and
informal ethical structures (Morris et al.)
Societal Foss, 1997 As creator of opportunity, entrepreneur has
impacts Machan, 1999 moral claims to value generated, which
suggest limiting government interference
Brenkert, 2002
(Foss; Machan)
Venkataraman,
2002 Environmental impacts of entrepreneurship
suggests important role for government
Derry, 2002 (Brenkert; Derry)
Figure 1?Summary of Key Research on Entrepreneurial Ethics
Implications
This paper offers a framework that begins the process of identifying and
organizing the range of ethical issues and topics that arise in conjunction
with "creative market action" of pioneering entrepreneurs. I have sug
gested that the essential nature of creative market action, focused as it is
on "valuable novelty," is shaped by a set of antecedents and marked by
a set of consequences that differentiate it from managerial action. This
in turn leads to the rise of distinctive ethical issues and implications that
require the specialized focus of scholars.
3 0 Business and Professional Ethics Journal
This paper contributes to the literature on entrepreneurship by ad

vancing our understanding of the ethical content of entrepreneurial action.
By highlighting the importance and distinctive nature of the ethics of en
trepreneurship, and beginning the process of mapping out this academic
area, it is hoped that the paper can spur more attention to and investiga
tion of this extremely important topic. The paper identifies a number of
new and overlooked research questions regarding the decision-making ap
proaches of entrepreneurs, the nature of the relationships they form, and
their impact on society.
The distinctive set of questions raised by entrepreneurial ethics, as
outlined above, also raises some distinctive challenges with regard to the
appropriate methodological approaches. Given the early stage of devel
opment of inquiry into entrepreneurial ethics, we should expect initial
studies to be largely exploratory. As such we should pay renewed atten
tion to qualitative approaches to data gathering (e.g., Gartner and Birley,
2002). Surveys and other quantitative measures are simply unsuitable for
identifying and understanding the complex, subtle dynamics at work in
creative market action, whether the focus is on the imaginative, reflec
tive decision-making processes of the entrepreneur, or on the distinctive
dilemmas facing them, or on the relationships between the entrepreneur
and her stakeholders. Furthermore, methodologically survey-based ethi
cal studies are highly susceptible to social desirability bias, where par
ticipants respond to abstract vignettes in the way they feel others would
like them to, rather than in the way they would actually act. While ethics
research is obviously a tricky business, more progress will be made if
we as a field embrace a broader range of research techniques. In particu
lar, a greater emphasis on field work, including observation of entrepre
neurial processes, face-to-face interviews, and focused case studies, will
yield the rich insights necessary for understanding the multiple, contex
tual variables that will drive ethical decision-making in these dynamic,
complex environments.
Finally, if we are to develop a rich "theory of entrepreneurial ethics
in-practice, and to produce some concrete recommendations for improv
ing practice" (Dees and Starr, 1992, 103), we must move beyond descrip
tive and explanatory work and provide frank and thoughtful normative
guidance for practitioners. In his recent call for more and better business
ethics research, Donaldson (2003) has argued that researchers must em
brace a "hybrid" approach that integrates both normative and descriptive
dimensions of the business environment if we are to develop meaningful
progress in the area. In keeping with Donaldson's call for an integrative
approach, we must pursue those questions which help us better define

"the good entrepreneur" (Cornwall and Naughton, 2003) and good entre
preneurial practice, in addition to the important empirical research on the
role of ethics in the entrepreneurial process. Without a strong sense of the
good entrepreneur and good practice, built on a robust dialogue between
business ethicists and entrepreneurship scholars, we build a hollow enter
prise?a study of entrepreneurial ethics without any core implications for
actual practice.
The argument put forward here also has implications for practic
ing and would-be entrepreneurs, as well as for how we teach them in the
classroom. Most importantly, the argument here challenges the conven
tional notion, captured in Freeman's (1994) formulation of the Separation
Thesis, that business and ethics comprise two distinct domains, whose
applicability to the other is negligible. According to this view, business
decisions follow economic criteria and ethics, if addressed at all, serves
as no more than a side constraint, marking the parameters of acceptable
decision outcomes. The approach presented here suggests that ethics plays
a central role in driving and supporting the creative and collaborative pro
cesses of entrepreneurship. If entrepreneurship is rooted in a confronta
tion between prevailing beliefs and values and those of the entrepreneur
(e.g., Venkataraman, 1997), and if that confrontation ultimately results
in the shaping of new values and beliefs across the broader society (e.g.,
Sarasvathy, 2002), then the entrepreneurial process is one fully imbued
with ethics. From its inception?under conditions of uncertainty and
through the value-laden actions of entrepreneurs and their stakeholders?
to its consequences of change at multiple levels, entrepreneurial action is
fraught with ethical issues.
Such a stance implies important obligations for entrepreneurs as
well as the need to better prepare entrepreneurs to meet these obligations.
Rest (1984) has suggested that a decision-maker must first recognize that
a moral issue exists before being able to form moral judgments and act
on them. One purpose of this paper is to explicitly make the link between
entrepreneurial action and ethics, and by doing so, to help spur greater
recognition of the complex and often subtle ethical issues embedded in
the entrepreneurial process. This approach suggests that entrepreneurs,
and their instructors, should seek to cultivate a greater sensitivity to
the ethical issues embedded in entrepreneurship as creative market ac
tion and to develop the moral reasoning skills needed to confront and
resolve them. Earlier studies have indicated that entrepreneurs recognize
the importance of ethical decision-making in driving business success
(e.g., Timmons and Stevenson, 1983) and meeting personal standards of

conduct (Sarasvathy, Simon and Lave, 1998). Yet given the pioneering
nature of their work, and the lack of structure, systems, and supervision
that accompanies that start-up process, they tend to lack clear sources of
guidance for their decisions.
For teaching, the paper highlights the need to emphasize the unique
responsibility that falls on creative entrepreneurs and to better prepare
them to manage these responsibilities. At a time when we are increas
ingly exhorting our students to become more entrepreneurial, we as edu
cators need to supply students with better tools for deliberating in the
kinds of complex, uncertain and creative environments that envelop en
trepreneurial action. We must help them move beyond a focus on merely
maximizing an external value toward an ability to determine what is of
value. Such an ambitious goal requires that we challenge our pedagogi
cal approaches and reconsider how ethics, as a process of reflective de
liberation, can best be taught in the classroom. We need to explore how
we can move beyond the contribution of traditional ethics case discus
sions, to incorporate a greater opportunity for experiential learning, and
for the incorporation of emotion, imagination and creativity. We need to
develop ways to teach entrepreneurial decision-making as an evolving
ethical art, rather than as a science constrained by ethics. It has been ob
served that "the practical lesson of integrating normative concerns with
empirical ones boils down to not allowing the goals of either descriptive
or financial performance to dominate our research agenda" (Donaldson,
2003, 365). We would argue that the same logic must then apply to our
curricula and the methods through which we teach entrepreneurship in
the classroom.
In sum, the field of entrepreneurship represents an important,
unique, and neglected opportunity to expand our understanding about
the role of ethics in business. The approach offered here suggests that the
best route to enriching our understanding of entrepreneurial ethics is to
adopt a perspective based on creative market action. Only from this per
spective can we embrace the central ethical responsibility of those who
create markets for the new products and services that will help define our
future lives.
Notes
The author wishes to acknowledge contributions to this paper by her

colleague, John McVea.
1. Dees and Starr cite several studies in which entrepreneurs empha
size the importance of ethical decision-making in driving entrepreneurial suc
cess?e.g., Timmons and Stevenson, 1983, and Hills and Narayana, 1989.
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The Ethical Dimensions of Creative Market Action

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The Ethical Dimensions of Creative Market Action: A Framework for Identifying Issues

and Implications of Entrepreneurial Ethics

Philosophy Documentation Center is collaborating with JSTOR to digitize, preserve and

The Ethical Dimensions of Creative

Abstract: This paper proposes the importance of the ethics of entrepre

Key Words: entrepreneurship, ethical decision-making, business ethics, cre

This paper proposes the importance of the ethics of entrepreneurship as a

? Business & Professional Ethics Journal, 2007. Correspondance may be

has emerged as an important and distinctive domain of study, the area

tegrating key streams of the entrepreneurship and creativity literatures

The Significance of Entrepreneurial Ethics

Why should the ethics of entrepreneurship be of particular interest and

ethical dimensions and implications. At the broadest level, entrepreneur

As a result, the entrepreneurial process places extraordinary ethical de

Among the first to explicitly address the connection between entrepreneur

ship scholars. For instance, a search in the leading electronic database

to defining the sample population of entrepreneurs and to defining the

et al.'s (2002) examination of the nature of the ethical climate in entre

Creative Market Action

The Potential of Creative Market Action as a Framework

Refining the Concept of "Creative Market Action "

Defining Characteristics?Novelty and Value

but not sufficient, component of a robust definition of creative market ac

but not necessarily novel. Creativity thus seems in some way to go be

it would be considered highly creative only if, in addition to its novel

damentally involved with a confrontation between prevailing beliefs and

achieved any measure of recognition or acknowledgment for their work

Antecedents to Creative Market Action

Having identified the defining characteristics of creative market action and

able to perceive or create novel opportunities that have gone unnoticed

adoption of information technologies (such as privacy issues, intellectual

Some of these are empirical in nature: For instance, to what degree do

(Sternberg and Lubart, 1995). In following their iconoclastic agendas,

appeal to a variety of individuals who have access to the resources the

Another set of problems identified by Dees and Starr (1992) are

Consequences of Creative Market Action

are fundamentally different in nature to the ownership rights of those who

entrepreneurs, operating at the edge of knowledge and possibility, to reflect

empirical and normative investigation. How, for instance, do the tenden

Area of Focus Representative

Ethical Joyner et al., 2002 Entrepreneur's values strongly affect ethical

Figure 1?Summary of Key Research on Entrepreneurial Ethics

This paper contributes to the literature on entrepreneurship by ad

approach, we must pursue those questions which help us better define

(e.g., Timmons and Stevenson, 1983) and meeting personal standards of

The author wishes to acknowledge contributions to this paper by her

Carter, R. ., and . Van Auken. 2005. "Bootstrap Financing and the

-. 2001. "Is there an Elephant in Entrepreneurship? Blind Assump

Kalleberg, A. L., and . . Leicht. 1991. "Gender and Organizational Per

Maguire, Steve, Cynthia Hardy, and Thomas B. Lawrence. 2004. "Insti

Schumpeter, J. A. 1942. Capitalism, Socialism and Democracy. New

Venkataraman, S. 1997. "The Distinctive Domain of Entrepreneurship

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