Business Innovation, Ethics, and Prosperity: The Primacy of Microeconomics

Abstract

This paper examines the role of "business innovation" and "business ethics"- two seemingly unrelated principles - in underpinning the disparities in economicprosperity across 107 countries over the period from 2003 to 2006. Unlike Porter,Ketels, and Delgado's (2007) statistical approach, which relies on partial correlations,this paper uses a multiple regression analysis within a general macro/microeconomicframework to examine business innovation strategies and ethics, while controlling forhuman capital, geography, and socio-cultural demographics. Additionally, this paperborrows from Wu (2005) to assess the interaction between business innovation strategiesand business ethics. Econometric results indicate that business innovation andbusiness ethics are both positively correlated with and needed to sustain economicprosperity. Additional results show that microeconomic variables have the primacyover macroeconomic ones. Relevant policy implications are discussed.