Ethics & Politics: Impact on New Firm Formation

Abstract

New firm formation indicates the dynamism of an economy. The supporting context, in which new firm formation takes place, has individual, cultural and political connotations. The entrepreneur searches for opportunity, contributes the investment, takes the risk and builds the organization. In all the processes involving organization building, the entrepreneur exhibits highest level of ethical standard. Ethics becomes of paramount importance, since it forms the base, the common and shared value system around which the organization and larger community interacts. Lack of ethics jeopardizes the sustainability of the organization. If the promoter is suspected or found to be unethical, then the organization looses the goodwill and base upon which it stands. However, politics being a system of governance has significant impact on new firm formation. It creates the milieu in which organization takes birth, gets directed and thrives. Politics being central to the governance, has access to information, resources, and mechanism. At the same time politics ensures the balance of larger public interest, societal goals in comparison to the business interest of the entrepreneur, shareholders and employees of any organization. It tries to resolve the dichotomy involved. Thus, the context of Ethics and Politics has tremendous impact on new firm formation and entrepreneurship. Politics is also impacted by the existing firms and new firm formation. Politics has to ensure the economic growth and development, leading to financial betterment of the public. At macro level; income, price, interest, supply, demand etc are used to judge the efficacy and efficiency of political process. Similarly at micro level politics has impact in influencing the individual betterment. Politics and Firm economics form a bidirectional symbiotic relationship. If the relationship is not symbiotic, then the system goes to a higher level of entropy and creates chaos. Ethics is individualized in nature, relates to broader view of wellbeing of the individuals, society and nature. Ethics is supra to regulatory framework. In this sense we can understand that laws and regulations are minimal ethics. This paper takes the extant literature, example and practices from different fields and analyses in the context of Odisha