3.8 Literature Review: Ethical dilemma
Disruptive startups have a good position with a potential impact on productivity growth and innovation which is encouraged by policy makers who want to help them.
But the point is that it is disruptive and thus potentially has some negative consequences for some people and sometimes a big impact on the existing industry ecosystem — cost dumping because of the cheaper solution, destroying jobs, risks a public backlash.
Legal scholars have examined disruptive innovation in various disciplines, such as “civil” aspects and policy . But no one has yet applied disruption theory to the field in which it should be most useful — administrative law (Cortez 2014, p. 178).
Administrative law scholarship contains a discourse on how agencies should regulate new markets. These questions, incidentally, can be particularly contentious among categorically novel technologies and business practices.
There are three options: make law, make threats, or do nothing. Making law via traditional rule making or adjudication can be premature or simply may generate flawed rules. And making law may create more uncertainty by triggering judicial challenges that can take years to resolve.
Doing nothing or waiting, can also be undesirable because the industry may develop outside the public eye, and without considering the public interest. Moreover, as the industry matures, the more settled its norms and business practices will become, which can be hard to reverse later.
Taking examples of Uber and Airbnb, their disruption value has a significant legal challenge entering a regulated market, because their activity deals with the existing markets like taxi and rental housing and with individuals who are not registered as tax-payers for providing their services.
On the other hand, the research shows that at its early stage a startup doesn’t normally encounter the usual regulation and ethical problems until it enters a significant level of growth.
“We are in good position, because there is no regulation at the moment. There is no standard. We would use what is already there and our common sense. You just need to use your common sense. Look at what is your product. Instead of looking at the law look at intention, why it was created, what was a purpose. and try to live within it, not just black and white. You can interpret the law in many ways, but the intention will always be the same.” (Hua, 2015).
However, since legislation and regulation aren’t be able to keep up with startup time and speed, it’s not enough just for government to have an agenda here. Once given the opportunity, a startup community can develop its own ethical code within which it wishes to work.
