Business Research

Ethics - From U.S. to Ukraine

Twenty years ago, when he spent a year in Japan as an exchange professor at Seinan Gakuin University, Joseph McKinney began his long-term study of trade between the United States and other countries. He focused on Japan, because trade between that country and this one garnered plentiful attention.

Next, he looked at a free trade agreement hammered out between the United States and Canada, and soon he and others surmised that a trade agreement with Mexico looked promising. Both the economic reforms occurring inside Mexico and its proximity to the United States led to that hunch. McKinney collaborated with others to organize a conference at Baylor University on North American free trade. The Canadian government cosponsored the event.

"People told us it was a ridiculous idea, that it would never happen, but we had our conference, published a conference volume out of it, and pretty soon there was an agreement with Mexico and a North American Free Trade Agreement," McKinney said. NAFTA, the most far-reaching trade agreement of its time, became reality in 1994, and for 10 years McKinney focused a large portion of his attention on subjects related to it. You could say "The rest is history," but wait a bit.

McKinney, The Ben H. Williams Professor of International Economics, continues to ply international waters and add names to the list of countries he's studying. He's working with Carlos Moore on a study of international bribery, and the two will present a paper in Hong Kong on the issue. They are looking at how codes of ethics influence behavior inside U.S. companies.

He has recently studied business ethics in Ukraine as well as the settlement of disputes between the United States and the European Union countries. "I've enjoyed the international collaborations we've had that have resulted from international professors that come to the business school," McKinney said. He also gives praise to Baylor, which has supported him with both time and financial resources to do the research. "I had two sabbaticals to do Fulbrights, one in England and one in Canada."

Through all of his studies, a thread permeating international business agreements and the environment they "live" in has been ethics, or the ground rules governing how business operates. As far as trade goes, one could swap the location, location, location mantra for another ground rules, ground rules, ground rules. A standard set of rules for businesses to follow is essential to a smoothly functioning international economy, McKinney said.

"That applies both to ethical practice and also to living up to terms of trade agreements," he said. "As far as the one issue of bribery in Hong Kong, all sorts of economic studies show that economies plagued by corruption have problems with economic development and growth."

The major topics of his recent research involve trade disputes that arise between the United States and Canada, and between the United States and the European Union. "These are our largest trading partners. Whenever we have trade agreements™ disagreements will arise about whether each party is abiding by the terms," he said. "So there has to be some dispute settlement mechanism in place where either party can hold the other party to account."

Sticking to trade agreements is important to free trade, he noted. When trade agreements are violated, the result is usually restricted trade. "That works against the goal of freeing up trade, allowing people to specialize in what they do best, and just reap the benefits of international specialization," McKinney said. "I've looked at several of those disputes the softwood lumber dispute between the United States and Canada and another dispute over the trade in wheat. As far as the European Union is concerned, I've looked at our dispute with them over trade in biotechnology genetically modifying foods."

A visiting professor from Ukraine asked for McKinney's help on a study of business climate ethics in her country, which is changing from a communist to a free market system. They've run into a brick wall of sorts with corruption problems, McKinney said. "We compared the attitudes of business ethics professionals with those in the United States, and we found that in Ukraine things are in a pretty sad state concerning ethical practices and attitudes."

For the study, McKinney joined with Olena Vynoslavska at the National Technical University of Ukraine; Moore, The Edwin W. Streetman Professor of Marketing at Baylor; and the late Justin G. Longenecker, emeritus professor of management at Baylor. They presented 16 hypothetical situations involving ethical dilemmas to Ukrainian respondents. Researchers delivered 100 questionnaires in April and May of 2000 and got back 70 completed surveys. The researchers then compared the data to responses from 1,261 usable questionnaires (of 10,000 mailed) in the United States.

In 13 of the 16 vignettes, the Ukrainian business professionals showed more lenient ethical attitudes, according to a paper that appeared in the Journal of Business Ethics in 2005. Researchers attribute the differences to economic transition in Ukraine.

In the paper that Moore and McKinney are working on concerning international bribery, preliminary data show that codes of ethics do make a difference, McKinney said, "that has a positive effect on whether or not people are inclined to engage in international bribery." Also, they've noticed a relationship with regard to the extent of international operations a company has. "Those (American firms) that are more involved internationally seem to be more sensitive to that issue."

Except for the Ukraine study, his 20-year database of ethics surveys has involved primarily U.S. companies. The research uses all types of businesses. "They are identified by the industries they are in and several other things, but we take care to leave the responses anonymous so they are very frank in their responses," McKinney said.

He gives the United States credit for leading the movement with the Foreign Corrupt Practices Act of 1977, making bribery a criminal offense. Since then, major industrial countries that belong to the Organization for Economic Cooperation and Development negotiated an ethical code dealing with international bribery. It's called the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Even more recently, the United Nations adopted the UN Convention against Corruption.

"It's recognized that there is a need for this sort of improvement and it's being worked on at several different levels," McKinney said. The need is particularly acute for lesser developed economies, he noted. "It's very important™ for some positive and good ethical practices to be followed in the interest of all the countries in the world, and particularly those that are lesser developed and need so much to benefit from the global economic system."

Dr. Joseph McKinney
Joe McKinney
Baylor University