Innovation, Ethics, and Entrepreneurship Morgan P. Miles Linda S. Munilla Jeffrey G. Covin ABSTRACT. This paper is a response to Ray’s (2004) recent proposal that the intellectual property rights (IPR) attached to potentially life saving/life sustaining innova- tions should become public goods in cases where markets are either unable or unwilling to pay for the creation of the intellectual property. Using a free market approach to innovation based on Western moral philosophy, we suggest that treating intellectually protected life saving/life sustaining innovations as public goods will likely reduce social welfare over the long term. KEY WORDS: entrepreneurship, ethics, innovation, intellectual property rights, policy Introduction ‘‘Few trends would so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as they possible can. This is a fundamentally subversive doc- trine’’ (Friedman, l962, p. 133). ‘‘For the Scripture says, ‘Do not muzzle the ox while it is treading out the grain,’ and ‘The worker deserves his wages’ ’’ 1 Timothy 5:18. Ray (2004), in a recent critique of Miles et al. (2002), proposes that the intellectual property rights (IPR) gen- erated from any life saving/life sustaining entrepreneurial initiatives should be transferred to the public domain whenever potential users of these innovations are unable or unwilling to enter into mutually beneficial exchange relationships with the creators of the IPR. This reply offers a perspective on why Ray’s (2004) imperative does not maximize social welfare and, in fact, will tend to diminish social welfare over the long-term as a result of lower economic incentives for innovation. The premise of Miles et al.(2002) was, and as expanded and clarified in this paper, that the entrepreneurial process of entrepreneurial opportu- nity creation/discovery, evaluation, and exploitation is most effective in generating need satisfying inno- vations (in the context of capitalist economies, where innovations are funded through the mecha- nism of public equity markets) when the entities that accept the economic and social risks of discovery, evaluation, and exploitation of entrepreneurial opportunities are also allowed to economically benefit from these risky investments (see Becker, 2001; Kirzner, 1997; Schumpeter, 1934; Shane and Venkataraman, 2000; Venkataraman, 1997). While our free-market position that the entity that creates/ discovers, evaluates, and exploits an entrepreneurial opportunity should profit from it is well grounded in both Western and Christian moral philosophy, we fully acknowledge that not all scholars will agree with our position and we encourage debate. In fact, we greatly appreciate the opportunity for further discourse that Ray (2004) provides through his comments. In this reply we will not address Ray’s (2004, p. 1) discussion of ‘‘persuasive techniques’’, his bizarre and highly personal, unfounded attacks on the authors, nor Ray’s incorrect assumption that our Morgan P. Miles is Professor of Marketing, Georgia Southern University. His research interests include the interface between marketing and corporate entrepreneurship. Linda S. Munilla is Professor of Marketing, Georgia Southern University. Her research interests include marketing and en- vironmental ethics. Jeffery G. Covin is a Professor of Strategic Management and the Samuel and Pauline Glaubinger Professor of Entrepreneur- ship at Kelly School of Business, Indiana University. His research interests include corporate entrepreneurship, strategic processes, and managing in technology intensive competitive environments. Journal of Business Ethics 54: 97–101, 2004. Ó 2004 Kluwer Academic Publishers. Printed in the Netherlands.