New Venture Legitimacy Lies and Ethics: An Application of Social Contract Theory – Dr. Brian Steverson, Dr. Matthew Rutherford, and Dr. Paul Buller

Entrepreneurs of new ventures face unique concerns with regard to ethics, yet remarkably little research addresses these concerns. As such, the purpose of this work is to apply social contract theory to the new venture context. The foundation of this work is that, because of a liability of newness, new venture entrepreneurs face unique ethical considerations in their quest for legitimacy; and these considerations can be captured by the notion of “legitimacy lies”. Our assertion is that commonly applied ethical paradigms, such as Kantianism or utilitarianism, do a less than ideal job of addressing the nuanced ethical nature of new venture legitimacy lies. We argue that social contract theory, specifically that version developed by Donaldson and Dunfee for application to the area of business ethics, is a paradigm that can more fully consider the ethical contours of the subject and more importantly, offer guidance to entrepreneurs attempting to navigate this precarious stage of existence.

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