Entrepreneurship and Culture

The study of the role of entrepreneurship in the modern economy is rooted in economics but has a distinctly eclectic flavor. See Thurik et al. (2002), Wennekers et al. (2002), Audretsch and Thurik (2004) but above all Parker (2004), for many references. It attempts to introduce the variable ‘entrepreneurship’ – whatever it may be – in subfields of economics like labor economics, economics of growth and economic development, industrial organization, enterprise policy, applied micro, and business economics, among others. It has the vivid and pervasive interest of policy makers because entrepreneurship is assumed to enhance economic growth (Carree and Thurik 2003; Acs et al. 2004; Audretsch and Keilbach 2004; van Praag and Versloot 2007). One is inclined to think that such interest – coupled with enormous efforts of entrepreneurship policy making which are more and more similar across countries – would lead to a convergence in entrepreneurship levels across countries. This is not the case because, despite this interest, there remain persistent differences of the level of entrepreneurship across countries (Audretsch et al. 2007).

Inspired by Schumpeter’s seminal depiction of the entrepreneur, this chapter recasts this heroic portrait in a more rigorous theoretical framework, leveraging a model of individual value preferences by Schwartz. The entrepreneurial spirit, it is argued, consists of particular value preferences: most importantly high openness-to-change and also high self-enhancement. These hypotheses are consistent with extant empirical evidence. The upshot of this theory – especially when the stability of cultural value orientations is taken into account – is that individual propensities to engage in new venture creation may not be very susceptible to policy measures. Looking specifically at legal measures, this chapter considers measures that could be narrowly targeted to promoting entrepreneurship by making entrepreneurs even more highly motivated than what they appear to be. Recent research indicates, however, that theoretical and empirical issues, which must be resolved before such measures could be employed with confidence, are intractable at this point.

What makes entrepreneurs different? Using a cross-country dataset, this paper explores essential parts of the value system of entrepreneurs in Western European countries by comparing value items of the self-employed to that of the non-self-employed. The self-employed rate values higher that aim toward openness to change and self-enhancement. In turn, values related to conservation are considered less important.

This paper examines the relationship between cultural values, political institutions and government regulation of new firm entry. A series of hypotheses are developed and tested using data coupled from a variety of sources in comparative political economy and cross-cultural psychology for 53 countries. If society’s general attitudes toward uncertainty and power inequality are embedded in its laws and institutions, then such values should mediate the intensity with which economic incentives affect regulatory procedures and outcomes. Empirical results suggest that entry regulation levels are correlated with the way people in different countries deal with uncertainty and accept inequality of power. Moreover, these intrinsic cultural values act as mediators for the correlations between regulatory intensity and economic, political and institutional variables.

This paper is concerned with the relationship between innovative success of entrepreneurs and their prior knowledge at the stage of firm formation. We distinguish between different kinds of experience an entrepreneur can possess and find evidence that the innovative success subsequent to firm formation is enhanced by entrepreneur’s prior technological knowledge but not by prior market and organizational knowledge. Moreover, we find that prior technological knowledge gathered through embeddedness within a research community has an additionally positive influence on post start-up innovative success. This is a first hint towards the importance of collective innovation activities.

Universities and public research organizations are said to be integrative and essential elements of a functioning innovation system. We analyze four East German regional networks of innovators and investigate the characteristic role of public research within these systems by applying methods of social network analysis. Our results show that universities and non-university institutions of public research are key actors in all regional networks of innovators. Higher centrality of public research compared to private actors may be due to the fact that universities are explicitly designed to give away their knowledge and increasingly need to raise external funds.

In this paper, we empirically study the relationship between entrepreneurial culture and economic growth. Based on a micro based comparison of entrepreneurs and non-entrepreneurs, we develop a measure reflecting entrepreneurial attitude at the regional level. We subsequently relate this newly developed variable, ‘entrepreneurial culture,’ to innovativeness and economic growth in 54 European regions. Extensive robustness analysis suggests that differences in economic growth in Europe can be explained by differences in entrepreneurial culture, albeit mostly in an indirect way.

The relative stability of differences in entrepreneurial activity across countries suggests that other than economic factors are at play. The present paper offers some new thoughts about the determinants of entrepreneurial attitudes and activities by testing the relationship between institutional variables and cross-country differences in the preferences for self-employment as well as in actual self-employment. Data of the 25 member states of the European Union as well as the US are used. The results show that country specific (cultural) variables seem to explain the preference for entrepreneurship, but cannot explain actual entrepreneurship.

We argue that many approaches to cross-cultural measurement in entrepreneurship research have been flawed and that there is a need for scales measuring cultural orientations at the individual level. We developed scenario-based scales measuring seven cultural orientations of business owners, namely uncertainty avoidance, power distance, in-group collectivism, assertiveness, future orientation, humane orientation, and performance orientation. The cultural orientations are manifested in the practices business owners apply in their businesses. We validated the scales on 461 Chinese and German business owners. The assessment of the scales’ invariance across China and Germany suggests that they hold cross-cultural validity and thus allow for meaningful cross-cultural comparisons. Moreover, the scales show good test-retest reliabilities. The assessment of the relationships between the seven cultural orientations and their validation constructs suggests that the scales hold construct validity and thus allow for accurate descriptions and predictions of behaviors.

Societies do not grow and prosper without entrepreneurs. Entrepreneurs are here defined as those individuals who exercise their ability and willingness to perceive new economic opportunities and to introduce their specific ways of seizing these opportunities into the market in the face of uncertainty (Knight 1921; Wennekers and Thurik 1999 pp. 46–47). They may do so by starting up firms or by instituting changes within established firms. As Baumol (1990) argues, entrepreneurial creativity need not necessarily be socially beneficial;1 still, new products, processes,ways of organizing, etc., all essential aspects of the growth process, are outcomes of entrepreneurship (Schumpeter 1911; Rosenberg 1992; Wennekers and Thurik 1999). Not surprisingly, the history of all rich societies is ripe with entrepreneurs:Julius Caesar’s friend Balbus went to Rome from a far–away province (Spain) and worked his way up through the ranks to become one of the richest people in the Empire, and on his way built both theatres and public baths; Thomas Edison’s inventions both made him one of the most famous people of his age and brought electric light and many other modern appliances to ordinary people; and in more recent years, Bill Gates founded one of the world’s largest personal fortunes by bringing the computer age into people’s homes. Common to these three individuals and countless other less known is entrepreneurial ability and will. Indeed, while culture may vary, it is arguable that the particular characteristics of entrepreneurship are anthropological constants (von Mises 1949; Kirzner 1997; Russell and Rath 2002).

This paper investigates the relationship between entrepreneurial culture and the rate of nascent entrepreneurship. Embedded in trait research, we develop a new composite measure of entrepreneurial culture using data from the World Values Survey. To corroborate the results obtained when regressing this newly developed measure on 2002 levels of nascent entrepreneurship in a sample of 28 countries, we also employ existing indicators of entrepreneurial culture, i.e. McClelland’s N achievement index (The achieving society, Princeton, NJ: D. van Nostrand Company, 1961), Granato et al. Achievement motivation index (American Journal of Political Science, 40(3):604–631, 1996), Lynn’s Competitiveness index (The secret of the miracle economy; different National attitudes to competitiveness and money. Social Affairs Unit, Exeter, 1991), and GLOBE’s (2004) performance orientation measure. In contrast with the existing measures we find a significant positive effect of our new measure of entrepreneurial culture, leading us to (1) discuss the strengths and weaknesses of these existing measures, and (2) interpret the wider implications of our findings for the research into the role of entrepreneurial culture in explaining international differences in entrepreneurship rates.

Among academics and policy-makers, there is increasing recognition of the importance of a successful entrepreneurial sector to the promotion of wealth creation and economic prosperity.¹ However, there remains considerable debate over the question of what kind of economic environment provides the best conditions for entrepreneurial activity. In the literature on entrepreneurship, a long line of work dating back to the seminal contribution of Knight (1921) emphasises the role of entrepreneurs as risk takers, who seek out new opportunities and develop new products and processes in an environment of uncertainty. Under this view, the agents in an economy who are drawn into entrepreneurship are those with the least aversion to risk (see Kihlstrom and Laffont 1979, for example). However, formal theoretical models generate ambiguous predictions concerning the effects of an increase in risk on the rate of entrepreneurship in an economy. A priori, therefore it is unclear whether mechanisms designed to reduce the degree of risk faced by individuals in an economy will tend to promote or discourage the level of entrepreneurship.

Persistent differences in the level of business ownership across countries have attracted the attention of scientific as well as political debate. Cultural as well as economic influences are assumed to play a role. This paper deals with the influence of cultural attitudes towards uncertainty on the rate of business ownership across 21 OECD countries. First, the concepts of uncertainty and risk are elaborated, as well as their relevance for entrepreneurship. An occupational choice model is introduced to underpin our reasoning at the macro-level. Second, regression analysis using pooled macro data for 1976, 1990 and 2004 and controlling for several economic variables, yields evidence that uncertainty avoidance is positively correlated with the prevalence of business ownership. According to our model, a restrictive climate of large organizations in high uncertainty avoidance countries pushes individuals striving for autonomy towards self-employment. Regressions for these 3 years separately show that in 2004, this positive correlation is no longer found, indicating that a compensating pull of entrepreneurship in countries with low uncertainty avoidance may have gained momentum in recent years. Third, an interaction term between uncertainty avoidance and GDP per capita in the pooled panel regressions shows that the historical negative relationship between GDP per capita and the level of business ownership is substantially weaker for countries with lower uncertainty avoidance. This suggests that rising opportunity costs of self-employment play a less important role in this cultural environment, or are being compensated by increasing entrepreneurial opportunities.

The relative stability of differences in entrepreneurial activity across countries suggests that other than economic factors are at play. The objective of this paper is to explore how postmaterialism may explain these differences. A distinction is made between nascent entrepreneurship, new business formation and a combination of the two, referred to as total entrepreneurial activity, as defined within the Global Entrepreneurship Monitor (GEM). The model is also tested for the rate of established businesses. The measure for postmaterialism is based upon Inglehart’s four-item postmaterialism index. A set of economic, demographic and social factors is included to investigate the independent role postmaterialism plays in predicting entrepreneurial activity levels. In particular, per capita income is used to control for economic effects. Education rates at both secondary and tertiary levels are used as demographic variables. Finally, life satisfaction is included to control for social effects. Data from 27 countries (GEM, World Values Survey and other sources) are used to test the hypotheses. Findings confirm the significance of postmaterialism in predicting total entrepreneurial activity and more particularly, new business formation rates.