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The Impact of Ethical Practices on the Performance of Small and Medium Enterprises in South Africa

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  • Obey Dzomonda
  • Olawale Fatoki

Abstract

SMEs have become beacons of hope towards improving economic growth and development of many countries globally. However, the literature documents a high discontinuance rate among small businesses. The purpose of this study is to investigate the impact of ethical practices on the performance of SMEs in South Africa. The study was based on a quantitative research design. The survey method was used as a data collection method. Using this method, self-administered questionnaires were used as the primary data collection tool. These questionnaires were hand delivered to the participants by the researcher. The random sampling method was used to obtain the participants. The population consisted of SME owner/managers in Polokwane municipality. 74 SME owner/managers participated in the survey. Data analysis included descriptive statistics, factor analysis, T tests and regression analysis. The Cronbach’s alpha was used as a measure of reliability. The findings showed that SMEs display unethical behavior and a weak performance. It was discovered that SMEs does not have policies in place to guide their ethical behavior. The T test results showed significant differences between gender and education levels with ethical practices of SMEs. The regression results showed that there is a positive relationship between ethical practices and performance of SMEs. Recommendations were made for SMEs to treat ethical issues seriously lest they risk incurring costs associated with lawsuits and negative brand reputation.

Suggested Citation

  • Obey Dzomonda & Olawale Fatoki, 2017. "The Impact of Ethical Practices on the Performance of Small and Medium Enterprises in South Africa," Journal of Economics and Behavioral Studies, AMH International, vol. 9(5), pages 209-218.
    • Handle: RePEc:rnd:arjebs:v:9:y:2017:i:5:p:209-218
    DOI: 10.22610/jebs.v9i5(J).1924
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    References listed on IDEAS

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    1. Hans-Jörg Schlierer & Andrea Werner & Silvana Signori & Elisabeth Garriga & Heidi Weltzien Hoivik & Annick Rossem & Yves Fassin, 2012. "How Do European SME Owner–Managers Make Sense of ‘Stakeholder Management’?: Insights from a Cross-National Study," Journal of Business Ethics, Springer, vol. 109(1), pages 39-51, August.
    2. R. Edward Freeman & Andrew C. Wicks & Bidhan Parmar, 2004. "Stakeholder Theory and “The Corporate Objective Revisited”," Organization Science, INFORMS, vol. 15(3), pages 364-369, June.
    3. Elms, Heather & Berman, Shawn & Wicks, Andrew C., 2002. "Ethics and Incentives: An Evaluation and Development of Stakeholder Theory in the Health Care Industry," Business Ethics Quarterly, Cambridge University Press, vol. 12(4), pages 413-432, October.
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    1. Abalala, Turki Shjaan & Islam, Mazharul & Alam, Md. Mahmudul, 2021. "Impact of ethical practices on small and medium enterprises’ performance in Saudi Arabia: An Partial Least Squares-Structural Equation Modeling analysis," OSF Preprints xg3bf, Center for Open Science.

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