Increasing Fairness Perceptions of Government Grant Applicants: An Investigation of Justice Theory in Small Business in Post-Katrina New Orleans

By Kwun, Obyung; Mancuso, Louis C. et al. | Academy of Entrepreneurship Journal, July 2010 | Go to article overview

Increasing Fairness Perceptions of Government Grant Applicants: An Investigation of Justice Theory in Small Business in Post-Katrina New Orleans


Kwun, Obyung, Mancuso, Louis C., Alijani, Ghasem S., Nickels, David W., Academy of Entrepreneurship Journal


BACKGROUND PERSPECTIVES

Hurricane Katrina further exacerbated the serious economic challenges faced by New Orleans even before Katrina. The flooding, wind, rain, and unfortunate looting and arson associated with the storm destroyed or damaged thousands of businesses. Commerce was seriously interrupted in industries such as entertainment, hospitality and tourism, finance, and transportation. Small businesses and entrepreneurial efforts suffered extensive losses stemming from the damages, and the city's sales tax base plummeted. The labor force declined considerably, particularly in the health and education industries (According to FedStats and FEMA in 2006, the population of Orleans Parish decreased by 60%: even today, the population is still down 36%). Unemployment increased, and the city faced significant population losses due to out-migration, particularly of the African-American community. Use of mainly Hispanic workers from outside the state to support the huge construction business, while the African-American residents in New Orleans remained without jobs, raised labor issues (Entertainment, Tourism and Hospitality, U.S. Chamber of Commerce, November 8, 2005).

The severity of Katrina's destruction has made redevelopment of New Orleans, including promoting investments, small businesses and entrepreneurs, job creation and economic growth, a herculean task. The incredible extent of damage due to the disaster should be a matter of great concern to residents, businesses, policy makers, and politicians for the purpose of acquiring and deploying necessary resources to support a smooth and speedy recovery. In particular, it must be kept in mind that the Hurricane Katrina aftermath produced small business environments that were lacking in planning, susceptible to cash flow reductions, lacking inadequate access to capital for recovery, facing difficulties related to federal government aid, and attempting to operate in a devastated infrastructure, slowing early recovery (Runyun, March, 2006). Also, it is important that government agencies assist affected businesses' attempts to survive and motivate new entrepreneurs to start fresh businesses (Zolin & Kropp, January, 2007). Despite the critical nature of governmental assistance, a previous study showed a high level of dissatisfaction with government aid among New Orleans business owners (Mancuso, June, 2006). This dissatisfaction, in turn, may discourage small business owners from applying for government grants, which can speed up the recovery.

LITERATURE REVIEW

Justice theory has been successful in explaining attitudes and behaviors in such diverse domains as resource allocation, conflict resolution, personnel selection, and layoffs. Justice, as a perception of fairness of the decision process and decision outcomes, has been shown to influence attitudes (e.g., satisfaction) and behavior (e.g., turnover) (Greenberg, 1990).

Researchers have developed conceptual models of justice theory that explain the role of fairness in organizations by identifying factors (e.g., Bies, 1987) that account for different dimensions of justice and their effects on attitudes and behaviors ( Andrews, Baker, & Hunt, 2008; Hershcovi, et.al., 2007; McFarlin & Sweeney, 1992). These dimensions include procedural justice, interactional justice, and distributive justice. Procedural justice refers to the fairness of the formal procedures through which outcomes are achieved (Greenberg, 1990). A number of research studies have demonstrated that procedural justice affects attitudes toward the organization and its operations (Korsgaard, Schweiger, & Spienza, 1995). Interactional justice deals with the interpersonal treatment people receive from the decision maker and the adequacy with which formal decision-making procedures are explained (Bies, 1987). Empirical evidence has shown that perceptions of fairness may also be affected by the interpersonal treatment received from the decision-maker, causing affective and behavioral reactions (Donovan, Drasgow, & Munson, 1998). …

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