Prophets vs. profits: How market competition influences leaders' disciplining behavior towards ethical transgressions

Desmet, PTM; Hoogervorst, N; Van Dijke, M (2015)
Pergamon Press
We investigate how market competition influences the way organizational leaders discipline moral transgressions of employees. In a cross-sectional study among organizational leaders at various hierarchical levels (Study 1), we find that strong market competition is related to an instrumental decision frame (business practices being perceived as focused on serving the organization’s interest). This decision frame explains why strong market competition is related to leaders’ perceptions of the evaluation of wrongdoing in terms of instrumental rather than moral concerns. In two subsequent experiments (Study 2 and 3), we find that high (relative to low) market competition makes leaders’ disciplining of moral transgressions contingent upon the instrumentality of the transgression to the organization. We find that the same transgression is punished less severely when it resulted in profit for the organization than when it resulted in loss. This research is among the first to identify conditions that determine the disciplinary responses of organization leaders to employees’ moral transgressions, and it feeds the debate on whether market competition - a fundamental characteristic of capitalist economies - promotes the display of moral or immoral behavior within organizations

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