Procedural justice theory and entrepreneurship

The theory of procedural justice was introduced by John Thibaut and Laurens Walker (1975) and has then been applied to the organizational strategy context (e.g., Kim and Mauborgne, 1991), and most recently to help explain entrepreneurial success from a financing-availability perspective.
Thibaut and Walker propose that procedural justice focuses on the processes of justice rather than the outcomes of such processes (i.e., distributive justice), because the processes are more important in the evaluations of participants. Processes take place over time, whereas outcomes are more like events. For example, a client may be more willing to accept concessions suggested by a lawyer that assures him or her that the negotiation process is normal and offers are within the bounds of acceptable behavior for an opponent’s council.
According to Sapienza and Korsgaard, we do not yet know much about how entrepreneurs manage their relationships with investors. Entrepreneurs want to build trust to attain continuous support for their ventures and a boost to their reputations, but how do they do it? They look to information sharing between the entrepreneurs and their investors. While entrepreneurs benefit from sharing information with investors, they also may benefit from withholding information. Providing information builds trust while withholding information increases relative power. They find that procedural justice optimizes information flows in order to gain inventor trust, support, growth financing, and imparted reputation.
Procedural justice may help explain how entrepreneurs successfully manage their investor relationships. More generally, entrepreneurs may aim for procedural justice in the application of their decision-making power in all stakeholder relationships.
Sources:
Procedural justice: A psychological perspective
JW Thibaut, L Walker – 1975 – Hillsdale, NJ: Erlbaum

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