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Abstract
This article examines whether ethical business practice enhances financial performance with respect to interorganizational
favour exchange. We argue that the link between the ethicality and economic utility of interorganizational favour exchange
is governed by: (1) organizational–individual interest alignment/conflict and (2) the fairness or justifiability of favour
exchanges from the perspective of third parties. We classify interorganizational (IO) favour exchange into four types (Business–Personal,
Personal–Business, Personal–Personal and Business–Business favour exchange). Our analysis shows that the first three types
of favour exchange are unethical as they involve conflicts between organizational and individual interests in one or both
participating organizations that negatively affect organizational value creation. The last type of favour exchange involves
organizational–individual interest alignment in both participating organizations and positively affects the capacity of those
involved in the exchange to create value. Favour exchanges of this fourth variety are ethically justifiable unless they unfairly
damage the legitimate interests of third parties. In the latter case, these favour exchanges create the risk of negative third
party reactions, which in turn affect the sustainability of the benefits of the favour exchanges to the focal group (the dyad).
Our research results advance understanding of the ethical and economic implications of IO favour exchange, counter the prejudice
against this behaviour in organizations, provide ethical guidance for management and business practice, and have implications
for the relationship between doing well and doing good.
- Content Type Journal Article
- Pages 1-16
- DOI 10.1007/s10551-011-0947-1
- Authors
- Adam Nguyen, 101B Colbeth, 515 Loudon Rd, Loudonville, NY 12211, USA
- Wesley Cragg, York University, 379 York Lanes, 4700 Keele St., Toronto, M3J 1P3 Canada
- Journal Journal of Business Ethics
- Online ISSN 1573-0697
- Print ISSN 0167-4544