Does competition ruin business ethics or do business ethics impede competitive advantage? This question is often asked given that the free market economy has morphed into what we now call the neo-liberal economic structure, the salient features of which include privatization of social services, deregulation of key industries, and the liberalization of economies. The spirit that moves the hidden hands of the free market is competition—the unfettered movement of goods, services and ideas with the least possible intervention from state apparatuses.
The values of competition do not only manifest in the context of entire economies. They primarily grow and flourish in the grassroots of business organizations. While it is important to delve into the ethics involved in competition in the context of the free market as a whole, it is worthwhile to raise questions on the relationship (or absence of such) between competition and ethics at the level of the business organization.
In a managerial and organizational behavior perspective, competitive advantage is a measure of an organization’s performance. As long as it is manifested in a constructive manner, competitive strategy can be used to foster improved performance. However, we cannot take away the idea that in dealing with competition, lapses in ethical behavior may occur to ensure efficiency, which in turn, may affect competitive advantage.
Ethics does not always conform to efficiency, Harvard University economics professor Andrei Shleifer once wrote. He cited activities that include child labor, corruption, excessive executive pays, corporate earnings manipulation, and involvement of universities in commercial activities, which are generally censured, but in the short run, allow companies to be efficient. These allow them to lower their costs and permit them to offer competitive prices to their consumers. In these scenarios, we can clearly see that although activities are considered unethical in nature, the outcome results in efficiency, which has a beneficial effect on others. In these cases, competitive advantage leads to unethical practices.
Nevertheless, he argued that competition can actually lead to ethical behavior when viewed from a long-run perspective. He explained that competition actually drives innovation, technological advancement and wealth creation. As competition forces markets to continue improving products and services, which leads to growth and development; in turn, as society changes, so does the market’s capability to demand competitive and ethically-made products and services.
Amid such discussions about the effects of competition on ethical practices and vice versa, it is imperative that this issue be given due consideration by managers, considering the recent scandals and stories brought about by unethical practices. Given this, the idea of going back to educating future managers and executives and instilling in them the value of business ethics should be given importance.
Tia Mare L Ebdane is pursuing her Doctor of Philosophy major in Business degree at De La Salle University, Manila. She works as Instructor at the University of Eastern Philippines, Catarman, Northern Samar. She is also a Past President of the Junior Chamber International Catarman “Cocoking”. She may be contacted at firstname.lastname@example.org.The views expressed above are the author’s and do not necessarily reflect the official position of DLSU, its faculty, and its administrators.