Cultural Influence

5.2.2 Cultural Influence

Davidsson (1995) identifies two overall views regarding the relationship between cultural values and entrepreneurial behavior. The first, the aggregate psychological trait explanation for entrepreneurship, is based on the idea that if a society contains more people with entrepreneurial values, more people will be entrepreneurs. Davidsson notes that this is essentially the perspective taken by McClelland (1961) and other proponents of the

individualistic view of culture. Davidsson also identifies a second view, first set forth by Etzioni (1987) referred to as social legitimation. This latter view assumes that variation in entrepreneurship is based upon differences in values and beliefs between the population as a whole and potential entrepreneurs. It is precisely the clash of values between the groups that drives potential entrepreneurs away from the average organization and into self-employment (Wennekers et al, 2002).

Linking Hofstede's cultural indices to entrepreneurship

Many articles and books discussing the relationship between culture and economy refer to the four cultural indices of Hofstede (1980), power distance (PDI), uncertainty avoidance (UAI), masculinity (MAS), and individualism (IDV). However, the existing hypotheses with respect to the influence of the indices on entrepreneurship, or the hypotheses that can be inferred from indirectly related phenomena, are often contradictory. For example, Shane (1992) investigates the relationship between culture and inventions, and finds that countries with small power distance (PDI-) and high individualism (IDV+) are more inventive than others. Shane (1993) examines the influence of culture on rates of innovation (per capita number of trademarks), and finds that weak uncertainty avoidance (UAI-) has the strongest influence, even stronger than per capita income. PDI- and IDV+ are related to innovation as well, though to a lesser extent. Since innovation is more directly related to entrepreneurship than inventiveness, the latter article shows more evidence for the influence of culture on entrepreneurship than Shane (1992). Although the relationships with culture are indirect, the results of the two references suggest that countries with PDI-, UAI-, and IDV+ are more entrepreneurial and hence may have more entrepreneurs than others. Using Hofstede’s indices, McGrath et al. (1992) compare entrepreneurs and non-entrepreneurs within eight countries, although they do not make cross-country comparisons. Using discriminant analysis, they differentiate

entrepreneurs vs. non-entrepreneurs as follows: Entrepreneurs tend to score high on power distance (PDI+), individualism (IDV+), and masculinity (MAS+) while scoring low on uncertainty avoidance (UAI-). Note that although the results for power distance seem to contradict Shane’s findings (1992, 1993), the analyses were different, one comparing countries, and the other comparing entrepreneurs with non-entrepreneurs across countries and identify certain entrepreneurial values, independent of culture. Baum et al. (1993) hypothesize a reverse role of individualism (at the level of countries). The authors argue that not high but low individualism may stimulate entrepreneurship (self-employment): an individualistic society is more adapted to deal with people who want to do it their own way; both entrepreneurs and non-entrepreneurs might be able to satisfy their motivational needs in a common organizational environment. In a less individualistic society, organizations and institutions do not yield these opportunities and, as a result, people with entrepreneurial needs are more inclined to start for themselves, as they cannot satisfy their needs within the existing structures. In another study using Hofstede’s indices for culture and self-employment, Acs et al. (1994) empirically examine culture and self-employment at the level of nations. They focus primarily on economic explanations and consider culture just marginally. Nevertheless, the authors find that UAI+ and IDV- are related to higher levels of self-employment.

Other research proposes that more than one satisfactory blend of cultural attributes leading to innovation (and thus perhaps to entrepreneurship). Ulijn and Weggeman (2001) propose a fit between certain corporate and national cultures such that depending upon the national culture, different types of corporate cultures that may still obtain equally good results. They identify four types of corporate cultures that may be influenced by national culture including the clan (low in UAI and PDI), the guided missile or well-oiled machine (high UAI and low PID), the family, closed system (low UAI but high PDI), and the Eiffel tower or pyramid of people

innovation. Thus, these interactions may help to explain some of the contradictions in the literature. More recent work also attempts to apply Hofstede’s indices to the prediction of new product development, which might be viewed as a corollary of entrepreneurship (Nakata and Sivakumar, 1996). Based on a literature review, Nakata and Sivakumar outline some possible new directions to explore linking national culture and firm performance.

Altogether, there are several contradicting hypotheses with respect to the influence of Hofstede’s indices of culture on entrepreneurship and/or self-employment. Consistent with the ‘aggregate psychological traits’ perspective, one might surmise that PDI-, UAI-, MAS+, and IDV+ stimulate entrepreneurship (Shane, 1992; Shane, 1993).

This is based on the assumption that countries with this cultural profile have relatively more individuals with entrepreneurial values. However, according to the social legitimating perspective, regarding the level of entrepreneurship, the opposite could also be true. Thus, applying the reasoning of Baum et al. (1993) to all four indices, one could argue that 'entrepreneurial' individuals in countries with PDI+, UAI+, MAS-, and IDV have more difficulties in 'doing things their own way', since organisations and existing structures are less suited for them. Dissatisfied as they are in their situation, they may choose for self-employment to be as independent as possible. The findings of Acs et al. (1994) empirically confirm this reverse role, at least for the indices UAI+ and IDV-. That is, would-be entrepreneurs are ‘pushed’ toward self-employment because they are unhappy working in mainstream companies. (Hofstede et al, 2004)

In order to understand the cultural influence of entrepreneurship, Hofstede’s cultural dimensions will be used to compare the demand side of the venture capital industry in Turkey and Taiwan. Moreover, self employment data will be analyzed to understand the level of tendency to start up business.

CHAPTER 6. COMPARING THE FACTORS THAT