Reports of scandalous behavior in companies have dominated the popular press during the past several years, and scandals involving public officials have threatened economic stability in various regions of the world. Corruption has become a particularly salient issue as multinational firms have come under intense scrutiny in all areas of operations (Robertson et al. 2008). In a study commissioned by the American Management Association, experts attributed the rise in unethical and potentially illegal behavior to pressure to meet unrealistic business objectives and deadlines (Business and Legal Reports 2006). Callahan (2004) credited this behavior to an economic climate in which values have been both shaped and, ultimately, corrupted.

Researchers have long argued that culture has a significant influence on individual ethical values, and culture has been found to be of particular importance in the international context (England 1975; Prasad and Rao 1982; Lu et al. 1999; Robertson et al. 2002). The impact of culture, particularly East vs. West, has been studied somewhat extensively in the literature. Essentially, Eastern culture is influenced by the teachings of Confucius and the dominant religions of Buddhism and Taoism, while Western culture has been permeated by the Judeo-Christian notion of individuality (Ralston et al. 1997). Additionally, power elements of culture (distance, imbalance, and collectivism) have been found to be more dominant in the East than in the West, with the East vs. West culture accounting for more differences in work-related values than that of profession, gender, or age (Hofstede 1980).

More recently, corruption has emerged as a form of cultural influence in international business. Findings from corruption surveys suggest that corruption is a serious societal problem in many countries (Anti-Corruption Gateway for Europe and Eurasia 2006). It has been suggested that corrupt actions perpetuate continued corruption and, furthermore, that perpetrators do not view themselves as corrupt or unethical (Anand et al. 2004). Individual countries and multinational companies may face a “corruption eruption” as corruption spreads (Beets 2005). Thus, a default theory with respect to corruption is that attitudes toward ethics will be weaker where corruption is greater.

Alternatively, however, students of business in corrupt countries may be more cognizant of ethical issues when responding to questions of ethics and may recognize a need for higher standards because of a heightened sensitivity due to the corruption surrounding them. Beets (2005, p. 74) states that “a well-educated citizen may understand the deleterious effects of corruption on society and, accordingly, may be less tempted by corruption” (cf. Everett et al. 2006). We are left to speculate whether the nature of the country culture from which business students develop can be overcome by proper education in ethical behavior. Thus, is there an identifiable difference in (un)ethical behaviors between students studying in the Eastern and Western cultures, and between those students studying in notably corrupt and less corrupt countries?

1 Dimensions of ethical sensitivity

Past research on (un)ethical behavior suggests three major factors that drive ethical decision making: situational ethics (necessity), laws as the foundation of ethics (belief), and relevance or outcome of acts (tolerance). Since the goal of the current research is to explore cross-country differences in ethical sensitivity, we explore these three dimensions of ethical sensitivity.

1.1 The necessity for unethical acts

The need or necessity to compromise one’s ethics is likely a function of the pressure to meet certain objectives. Researchers such as Trevino (1986), Jones (1991), and Beets (2005) focus upon the rationale behind the actions (e.g., uncertainty, closeness to the business environment, and empathy). Callahan (2004), however, attributes the necessity to commit unethical actions to the economic climate in which people and companies operate. Thus, unethical actions are driven by capitalist market forces, with money as a major cause in the demise of moral behavior (Pike 1980). Yet, unethical actions such as corruption are prevalent in socialist/totalitarian countries as well as capitalist countries (Hodess and Wolkers 2004). Thus, a question arises as to whether the perceived necessity for an unethical act is the same worldwide or if differences in perceived necessity exist across the globe.

1.2 The belief that anything that is legal is ethical

An ongoing debate exists about the relationship between law and ethics. The post-Enron era has seen a considerable emphasis upon external regulation. Most notably, the Sarbanes–Oxley Act (SOX) is an attempt by the United States Congress to impose stiff penalties for corporate misconduct in an effort to restore confidence in large corporations. Developed in America, SOX applies to all foreign companies operating in the USA and to subsidiaries of US companies operating worldwide. The implication is that SOX, the International Accounting Standards, and the drafting of international standards on social responsibility can regulate an organization’s moral compass. The question then becomes whether legislated ethics implies that legal is ethical (Beggs and Dean 2007; Di Lorenzo 2007) and whether companies may be responding to the threat of prosecution instead of respecting the principle behind the formulation of such laws (Kelly 2005a). Regardless of the rationale behind the response, there is not one set of laws to govern worldwide business behavior. Thus, if students equate laws with ethics, then there could be a variety of ethical behaviors largely dependent upon the laws (or enforcement of such) in a particular country. Ultimately, students would not need a moral compass but, rather, would rely upon laws to guide their business decision making.

1.3 The tolerance of unethical acts

Researchers have suggested that the vast majority of unethical acts are not conducted for personal gain, but rather that questionable practices are committed to meet organizational performance goals (Brewer et al. 2006; Kelly 2005a). Others imply that managers are writing off instances of wrongdoing as aberrations and simply mistakes for which little relevance should be assigned (Gandossy and Kanter 2002). Gellerman (2003, p. 18) states that an executive is “caught between avoiding the sanctions of the authorities and the displeasure of the stock market” and that they are “constantly pushed toward the fuzzy, indistinct line that separates barely acceptable practices from those that are intolerable.” An interesting overview of the line between corporate and personal gain is reported by Pavlo and Weinberg (2007). In this story told by someone inside the MCI Worldcom scandal, wrongdoing was overlooked until the person took the wrongdoing to a level of personal gain. This begs the question as to whether there is a higher tolerance toward unethical acts when the end result is corporate gain and not personal gain.

The objective of the current research is to segment business students worldwide based on ethical attitudes toward each of these variables. In addition, the research explores disparity in (un)ethical behaviors based on a possible East vs. West phenomenon as well as the degree of corruption within the environment that the student is studying.

2 Method

2.1 Sample and data collection

A two-stage sampling design was employed in the initial data collection process. In the first stage, a sample of 4-year colleges and universities from various points around the globe was identified. In this stage, 64 professors in business schools at 4-year institutions were identified as contact points and were asked to administer a questionnaire to undergraduate business students in an in-class setting at the beginning of the next academic term. Only four professors were unable or unwilling to assist in the data collection process. The second stage consisted of obtaining a cluster sample of business students in each of the stage-one locations. In total, 6,226 business students in 36 countries were represented in the sample. The usable sample of business students was deemed sufficiently representative of undergraduate business students globally, albeit represented strongly by students and institutions in the USA.

2.2 Questionnaire

The entire questionnaire consisted of 27 Likert-type items (1 = strongly agree, 6 = strongly disagree) derived from a multitude of sources, six demographic questions, and three screening questions (academic classification, major field of study, and citizenship). The questionnaire and individual items were modeled after previous studies targeting business students (Peterson et al. 1991). The survey was pre-tested on a sample of 25 undergraduate business students in the USA, along with a qualitative evaluation of statement clarity and an assessment of administrative ease. Additionally, the longitudinal stability (test–retest reliability) of the items was evaluated within three samples of students from France, Spain, and the USA. The median (2-week and 1-month) test–retest correlation measuring longitudinal stability was acceptable at r > 0.50.

The questionnaire was developed in English and subsequently translated into Chinese, French, German, Spanish, and Vietnamese, usually by professors in the countries where the data were collected. In countries in which potential respondents spoke English or one or more of the languages into which the questionnaire was translated (e.g., Filipinos speak Spanish and Tunisians speak French), the questionnaire was not translated. The lack of need to translate was confirmed by the proctoring professor and has been established in previous cross-national ethics research (Husted et al. 1996).

Four Likert-scaled statements were used to capture respondents’ ethical sensitivity in the research reported here:

  • In order to succeed in business, it is often necessary to compromise one’s ethics.

  • Business behavior that is legal is ethical.

  • If a manager in a company is discovered to have engaged in unethical behavior that results primarily in personal gain (rather than corporate gain), he or she should be terminated or fired.

  • If a manager in a company is discovered to have engaged in unethical behavior that results primarily in corporate gain (rather than personal gain), he or she should be terminated or fired.

The first statement corresponds with the necessity for unethical acts. The second statement corresponds with the belief that legal equals ethical. The final two statements relate to the tolerance for unethical acts with respect to personal and corporate gain.

2.3 Cultural variables

The distinction between the East and the West derives from European cultural history. Ethical differences related to Eastern vs. Western culture have been identified in the literature; thus, countries represented in this research project were examined using the traditional definition of Eastern and Western cultures (Broek and Webb 1973). That is, countries comprising the Western culture in the data set were: Argentina, Australia, Austria, Belgium, Bolivia, Brazil, Canada, Chile, Colombia, Denmark, France, Germany, Greece, Honduras, Iceland, Ireland, Malta, Mexico, The Netherlands, New Zealand, Norway, Spain, UK, and USA. The Eastern culture countries represented in the data were Hong Kong, Hungary, Korea, Morocco, Philippines, People’s Republic of China, Senegal, Singapore, Thailand, Tunisia, Turkey, and Viet Nam. While Khera (2001) suggests differences in developed vs. underdeveloped nations, the vast majority of prior research has focused on findings of significant differences as related to ethical behavior between East and West.

Transparency International Global Corruption Barometer is a public opinion survey that assesses perceptions of current and future corruption among more than 50,000 people in 64 countries (Hodess and Wolkers 2004). Transparency International’s Corruption Perceptions Index is a proxy for both economic development and the quality of the governance of a country (Mellios and Paget-Blanc 2006), and the data has been found to have acceptable validity in a number of studies (Davis and Ruhe 2003; Husted 2002; Longhurst 2006; Robertson and Watson 2004). Since corruption is grounded in a country’s social, cultural, political, and economic development and is thus related to human development (Akçay 2006), country corruption perceptions data from Transparency International’s 2004 reports were utilized in the research (reports from 2004 were used to coincide with data collected in the second half of 2003).

The Corruption Perceptions Index (CPI) 2004 rates countries on a scale of 1 to 10 (with 1 being very corrupt and 10 being not corrupt). Transparency International denotes that a score of 1 or 2 on the CPI indicates rampant corruption and scores of 9 or 10 indicate low levels of perceived corruption. The 3–8 scores represent various degrees of corruption with scores of 3, 4, and 5 tending to fall more clearly on the corrupt end of the scale and scores of 6, 7, and 8 moving into lower perceptions of corruption. While Transparency International also ranks countries according to the CPI, the country score is thought to be a much more indicative of the perceived level of corruption in a country. For purposes of this research, “less corrupt” countries are designated as those that score 6 or higher on the CPI and “more corrupt” as those that score 5 or below. This allowed for the corrupt to extremely corrupt to be grouped together and the somewhat corrupt and not so group to comprise the second grouping. Table 1 provides the corruption scale and basic demographic information for the countries included in the current research project.

Table 1 Country detail and overall sample demographics
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3 Results

3.1 East vs. West and corruption

A multivariate analysis of variance (MANOVA) test was used to examine whether (1) Eastern vs. Western and (2) corruption (more vs. less corrupt) cultural influences have a significant effect on the four ethics variables. The correlations of the four ethical sensitivity variables with each other and the two cultural variables were examined (Table 2). All four ethical dependent variables were correlated significantly with Eastern vs. Western culture; however, the two independent variables were also correlated significantly with each other (r = 0.615, p < 0.001). Because the raw data showed a significant relationship between the East–West and corruption variables, a random sampling paring process was undertaken to ensure orthogonality for the MANOVA tests (Berger and Maurer 2002).Footnote 1 Table 3 presents the cell sizes defined by the East–West and corruption before and after the paring. The MANOVA results show that there are significant differences in the ethical sensitivity variables due to both types of cultural influences (East vs. West: Wilks’ Lambda = 0.958, F (4, 1568) = 17.18, p < .001, and η 2 = 0.042; corruption: Wilks’ Lambda = 0.972, F (4, 1568) = 21.51, p < .001, and η 2 = 0.028) and that there is a significant interaction effect of East vs. West and corruption (Wilks’ Lambda = 0.982, F (4,1568) = 7.36, p < 0.001, η 2 = 0.018).

Table 2 Correlations
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Table 3 Cell sizes for the full data set vs. pared data for MANOVA
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As discussed previously, researchers report a difference in ethical values between the Eastern and Western cultures (England 1975; Prasad and Rao 1982; Lu et al. 1999; Robertson et al. 2002). As the results in Table 4 indicate, students studying in the East, compared with those studying in the West, have stronger agreement with the necessity for unethical behavior and with the belief that legal equals ethical, while having a greater tolerance for unethical acts for personal gain and for corporate gain. With respect to the corruption impact, students educated in more corrupt countries, compared to those educated in less corrupt countries, have stronger agreement with the necessity for unethical acts and the belief that legal equals ethical, with no differences in tolerance for personal gain or tolerance for corporate gain. Interestingly, the results suggest that there is very little tolerance for unethical acts that result in personal or corporate gain regardless of whether the students are educated in more or less corrupt countries. Univariate tests also reveal a significant interaction for the necessity for unethical acts and tolerance for corporate gain but not for the belief that legal equals ethical or tolerance for personal gain. It would appear that students educated in less corrupt countries in the West are the least likely to believe there is need for unethical acts (M West—less corrupt = 3.93; M West—more corrupt = 3.43), whereas students educated in more corrupt countries in the East appear to have the greatest tolerance for unethical acts for corporate gain (M East—less corrupt = 3.32; M East—more corrupt = 3.21).

Table 4 Summary of means for the four ethical sensitivity questions by level of corruption and East–West for the pared sample
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While there are differences in each of the four variables as a function of the two cultural variables, there is heterogeneity in the attitudes of students from different countries not yet accounted for. Students’ views vary across each of the four variables. For example, some students report a necessity for unethical behavior but have little tolerance for those who get caught committing such unethical acts. As such, cluster analysis was used to explore how the factors underlying the four-item analysis of ethics differ across countries.

3.2 Differences among students across countries

To better understand differences among students from around the world, hierarchical cluster analysis with Ward’s method as the clustering algorithm was used to segment the students from across the world based on their response to the four key items in the survey. Since the results for the resampled data were consistent with the results of the entire response set, the latter was used for creating clusters. In order to determine the best number of clusters to examine, the percentage change in the agglomeration coefficient as clusters joined together was examined. Smaller changes represent the joining of somewhat similar clusters, while larger changes represent the joining of heterogeneous clusters (Hair et al. 2005). The largest percentage change occurred when moving from a four-cluster to a three-cluster solution. MANOVA was then used to test whether the four clusters were indeed distinct across the key variables. Multivariate results confirmed that there were significant differences in the means of the key variables due to the clusters (Wilks lambda = 0.127, F (12,16454) = 1,620.39, p < 0.001, η 2 = 0.497). Univariate tests were also significant for necessity (F (3, 6222) = 3,455.15, p < 0.001, η 2 = 0.625), belief (F (3,6222) = 754.47, p < 0.001, η 2 = 0.267), tolerance for personal gain (F (3, 6222) = 1,007.06, p < 0.001, η 2 = 0.327), and tolerance for corporate gain (F (3, 6222) = 1,931.64, p < 0.001, η 2 = 0.486). A summary of the means for each cluster can be seen in Table 5.

Table 5 Cluster descriptions with means and sample size
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To assess differences among the four clusters, a Bonferroni post hoc test was performed. The results indicated that the means on each of the four items were significantly different for all four clusters at p < 0.05. As a final check, the five-cluster solution was also tested to see if any further insight could be gathered (Hair et al. 2005). Post hoc tests showed less distinction among the five-clusters for three of the key variables, and no further insight was gained by the additional cluster. Thus, the four-cluster solution was appropriate with the clusters identified as less principled, ambivalent, subjective, and more principled.

The less principled cluster has the lowest ethical sensitivity on necessity and belief but second lowest on the tolerance measures. Thus, this group is comprised of students who are sensitive to ethical issues but particularly less ethical when it comes to the necessity and belief variables. This group appears consistent with Kelly’s (2005b, p. 1) description of “companies that push, push, push against the limits of the legal, thinking that if they don’t step over the line they’re fine.” Students in this group are most likely to believe that one needs to compromise their ethics, that ethical sensitivity is determined by legality, and that managers should not be fired if they are caught doing something for corporate gain but should be fired if caught for personal gain. This less principled cluster is similar to what Gellerman (2003, p. 20) describes as those whose “morals are not especially rigid and who might not be above doing the wrong thing if they encountered sufficiently permissive conditions.” In reference to employee groups, this group is quite large and includes many capable employees (Gellerman 2003). The size of the group is evident in the student data also, in that this was the second largest cluster in terms of number of students.

The ambivalent are of two minds. This group has the second highest ethical sensitivity to necessity and the lowest ethical sensitivity when it comes to tolerance. While they lean toward the ethical side in that one should not compromise one’s ethics and ethics is not determined by legality, they are the most lenient when it comes to the tolerance of unethical acts. That is, this group is least likely to fire employees for ethics violations whether it be for corporate or personal gain. Thus, while possessing more rigidity in their own morals, the Ambivalent group is extremely tolerant toward those whose ethical values are less than their own.

The Subjective cluster has relatively low ethical sensitivity with respect to necessity and high ethical sensitivity to belief and tolerance. Students in the subjective segment acknowledge that it might be necessary to compromise one’s ethics to be successful. However, they do not think that compromise is the right action to take and are unyielding when it comes to the unethical behavior of others, believing that employees should be fired when it comes to unethical acts regardless of corporate or personal outcome. The students in this cluster are less likely of all groups to equate ethics with the law. Apparently, subjective students accept that unethical actions will take place and that the decision is not as easy as following the letter of the law. But, someone who crosses the subjective ethical boundary should be fired. It is this belief of the inevitability of compromising personal ethics that distinguishes the subjective group from the more ethical group of students.

The more principled segment is the ultimate in ethical sensitivity. Students in the more principled cluster have the highest ethical sensitivity to necessity and tolerance but less so with respect to the belief variable. More principled students do not think it is necessary to compromise one’s ethics to succeed in business and feel strongly that managers should be fired for unethical behavior. Interestingly, however, this group is more likely that the ambivalent and subjective students to equate legal and ethical. Yet, the difference between the more principled and less principled groups on this belief is still quite large with the less principled definitely using the law as the moral barometer.

3.3 Cluster profiles

Table 6a provides an overview of the students included in each cluster, and Table 6b provides a profile within each region of the world surveyed. As noted previously, the usable sample of students was represented strongly by students in the USA with the non-USA sample size representation approximately equal to the USA sample size representation. Although no particular relationship was hypothesized between the demographic and regional membership with each of the four clusters, tests of independence reveal significant relationships (see Table 6a and b). It is interesting to note that the less principled cluster tends to have fewer marketing students relative to the overall sample proportion while the more principled cluster tends to have far more marketing students. Similarly, the less principled cluster tends to have a greater proportion of students from more corrupt countries and eastern countries than any of the other clusters. Interestingly, the less principled cluster has the highest proportion of males relative to females than any of the other clusters and the overall sample.

Table 6 Cluster profiles
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The results by region were aggregated due to the similarity in results. However, the three countries representing North America were examined separately because of the diversity of the results. Approximately 40% of the students studying in the USA can be classified as more principled while just over a quarter of the USA respondents are classified as ambivalent. There tends to be more of an extreme for students studying in Mexico where 43.1% are classified as less principled and 31.9% are classified as more principled, whereas the largest proportion of students studying in Canada are classified as ambivalent (33.1%) or subjective (26.8%). Students in Central/South America are more similar to students in Mexico in that the larger segments are on the end points of less (30.4%) and more principled (28.7%). Yet, unlike the students in Mexico, there is stronger representation in the ambivalent (22.2%) and subjective (18.7%) groups. Outside of the Americas, however, the student groups tend to gravitate toward the less principled (31.4% to 40.1%) and ambivalent (26% to 29.7%) perspectives. Such geographic differences could be a reflection of a combination of culture, laws, and media coverage of both professional and personal misconduct.

4 Discussion

The findings in this study of unethical behavior support the notion that environmental influences will likely impact the ethical attitudes of future business leaders. It appears that corruption breeds corruption, as we find current business students in corrupt countries are more likely than their counterparts in less corrupt countries to have attitudes that reflect lower ethical standards. For example, they are more likely to equate legal and ethical standards, suggesting no higher-order standards for behavior than the law. Additionally, these same students are more likely to perceive a necessity for unethical actions, while acknowledging that it will take rules to constrain such unethical acts. It is evident that business students in more corrupt countries expect to use the law as an ethical gauge. Given the level of corruption that has occurred within the governments that are making the laws in these countries, this finding should be cause for continuing concern. If suggestions by Beets (2005) and Everett et al. (2006) are accurate and education is a critical variable in anti-corruption programs, ethics training is imperative for inhibiting the continual breeding of corruption among future business leaders.

The difference between the East and West is consistent with that found in previous ethics research. The composition of the less principled and ambivalent groups, in particular, offers insight into ethical expectations as related to both traditional Eastern vs. Western and corruption cultural influences. Essentially, whatever works for the greatest number of people is acceptable and appropriate behavior but may not be ethical behavior. Given the degree of global expansion in today’s business world, findings from this study of worldwide business students indicate that companies will need to take into account such likely ethical incongruence when developing policies and practices.