'Economic, political, legal, and social factors act as moderators of the relationship between culture and entrepreneurial orientation, concluding that only those countries with certain specific cultural tendencies will develop a strong entrepreneurial orientation' (Morris Samit)
The growing importance of entrepreneurship with regards to economic development had generated great interest in exploring its fundamentals. Work done identified the difference in the levels of entrepreneurial activities across countries and the reasoning behind the difference. Most studies reasoned economic, demographic and institutional factors (Wennekers et al. 2005, Van Stel 2006) playing a key role in generating this difference. However, cross country differences in cultural orientations and value systems have been argued to affect entrepreneurship as well.
Barnouw (1979, p. 5) defines culture as configurations of "stereotyped patterns of learned behaviour which are handed down from one generation to the next". As extensive research has shown a link between value, beliefs and behaviour, it is possible that differences in culture, which incorporate and are representative of these values and beliefs may influence behaviours including the decision to become an entrepreneur or be self-employed instead of working for others (Mueller and Thomas, 2000). National level studies undertaken by Lynn (1991), Shane (1993), and Hofstede (1980) follow the above reasoning. The aim of this research is to test if culture, operationalised through the World Values Survey (WVS) data, is a significant factor in predicting levels of entrepreneurial activities across countries as measured by total entrepreneurial activity rate (TEA). The total entrepreneurial activity data has been sourced from Global Entrepreneurship Monitor (GEM). Hence, we examine the extent to which culture can help explain the difference in entrepreneurial activities and contribute to the existing research on this vital topic by examining the relationship between various measures of culture and level of entrepreneurship across countries
The outline of the paper is as follows:
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In Section 2, we briefly discuss the literature and various studies which have been undertaken on the relationship between entrepreneurial culture and economic development, and the role played by culture in explaining the difference in the level of entrepreneurial activity across countries. In Section 3, we propose the model and our hypothesis. In Section 4 we introduce the data and conduct a regression analysis to assess the impact of culture on the entrepreneurship levels across countries. In Section 4, we discuss the results and in Section 5, we discuss the limitations and propose directions for future research.
2 Literature review
The rate of entrepreneurship varies over time and across countries (Wennekers et al.2005). It has been observed that some countries, for ex the United States, score persistently high on measures of entrepreneurial activities, whereas some countries remain in a backward position (Kashifa Suddle, Sjoerd Beugelsdijk, Sander Wennekers, January 2006). The difference in the level of entrepreneurial activities across countries has been explained by economic, demographic and institutional factors (Wennekers et al. 2005, Van Stel, 2006). The relative stability in the difference of entrepreneurial activities across countries indicates that there are some other factors at play which can help explain this persistent difference. Some entrepreneurship theorists (e.g. Schumpeter, 1934, McClelland, 1961) and some empirical studies (Davidsson, 2004, Wennekers et al. 2005) have suggested a role for culture in explaining this difference. There may be some social values which may be more conducive to entrepreneurial start-up activity and a dynamic economic environment than the others.
Much of the empirical analysis with regards to culture has been done on its impact on economic outcomes (Guiso et al. 2006, Licht et al. 2007, and Tabellini 2008 and 2009), and relatively less work has been done in the field relating culture and entrepreneurship. However, culture plays a very important role in innovation as well as resource leverage of entrepreneurs (Tiessen 1997). A society's manifestation with regards to entrepreneurship affects the decision to become an entrepreneur and also reflects society's approval or disapproval of entrepreneurship as a valued undertaking or vocation (Morris Samit).
Culture has been regarded as the system of shared values that distinguish the members of one group from the other (Hofstede, 1980; Mueller & Thomas, 2001). Hence culture acts as the "common frame of reference or logic by which members of a society view organizations, the environment, and their relations to one another" (Geletkanycz, 1997: 617). Implying entrepreneurship in a society requires taking into account the principles and norms that establish or shape the individual as well as the collective perception of entrepreneurial opportunities (Achtenhagen et al 2004)
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David McClelland was the first author who had systematically tried to identify the relationship between entrepreneurial culture and economic development (Kashifa Suddle, Sjoerd Beugelsdijk, Sander Wennekers, January 2006). He proposed the concept of achievement motivation to be critical for economic development (McClelland, 1961). Even though his analysis came under heavy criticism for lack of strong results and adoption of some questionable proxy measures, such as the use of changes in electricity generation to measure economic development (O'Farrell, 1986; Schatz, 1965; Frey, 1984; Gilleard, 1989; Beugelsdijk and Smeets, 2005), he made the first attempt to systematically measure entrepreneurial culture and link it to economic development. Hence his contribution in this regard cannot be ignored as it ultimately opened avenues to explore the relationship between culture and entrepreneurship.
The argument that cultural factors influences individual behaviour is distinctly relevant to the field of entrepreneurship, as individual behaviour has been frequently linked to the roots of firm-level entrepreneurial orientation. Hence a few authors, instead of exploring the relationship between entrepreneurial culture and growth, have tried to directly explore the link between culture, as measured by societal values, and measures of entrepreneurship.
Till date there have been up to three significant cross cultural research attempts to better understand how variations in national culture across countries can be applied to various aspects of an organization (Diana M. Hechavarria & Paul D. Reynolds, 2009). Namely, the ground-breaking work done by Hofstede using information of IBM employees among 50 countries, then we have a survey of values, initiated by Shalom H. Schwartz and finally the World Values Survey which is coordinated by Ronald Inglehart.
Shane (1993) applied Hofstede's measure of culture to analyze differences in innovation rates across countries at a national level. The results of his analysis indicated that culture, defined as 'the collective programming of the mind which distinguishes the members of one group from another' (Hofstede, 1980, p. 25), does have an affect on a country's innovativeness. Morris et al (1994) on the other hand used Hofstede's measure of individualism, one of Hofstede's four dimensions of culture, and tried to link it to corporate entrepreneurship. The cultural aspect of individualism was considered as it is associated with people's willingness to violate norms and their level of achievement motivation (Hofstede 1980), both of which tend to be associated with entrepreneurship. Hofstede's measure of "individualism" is believed to positively contribute to a country's entrepreneurial potential and orientation (Mueller and Thomas et al. 2000, Lee and Peterson et al 2000).
In contrast Singh, DeNoble, and Ehrlich (2004) found no direct relationship between total entrepreneurial activity (as measured by GEM) and Hofstede's measure of individualism. One of the most important shortcomings with regards to Hofstede's dimensions of culture is that they are based on information collected in the 1970s. Though we might agree that culture is fairly consistent over time relative to economic activities, using it to explain the level of entrepreneurial activities across countries after 30 years does have its limitations since culture can evolve over a time frame of 30 years.
Granato et al. (1996) on the other hand used the World Value Survey data to build an achievement motivation indicator and relate it to economic growth. A re-analysis of their main findings with regards to the positive role of an entrepreneurial culture indicates weak measures and omitted variables (Beugelsdijk and Smeets, 2005).
In another work, Wennekers et. al. (2005) operationalized culture through indirect measures such as a dummy variable for the communist heritage. He developed a model in which he explicates levels of entrepreneurship in a sample of 33 countries. Even though Wennekers et. al. (2005) have been one of the first to explore, on such a broad empirical scale the relationship between culture and entrepreneurship, their measure of culture does not seem to be exhaustive and complete. There is further scope for developing a stronger and a more exhaustive measure of entrepreneurial culture which may help explain and improve the existing work exploring the relationship between culture and entrepreneurship.
Hence, based on micro-insights of the value orientation of entrepreneurs, there seems to be a need for appropriate measure of entrepreneurial culture. Socio-psychologists in the past have tried to establish distinguishing personality traits or characteristics of entrepreneurs and work done by scholars like Sexton and Bowman (1985), Chell et al. (1991) and Thomas and Mueller (2000) have established the idea that entrepreneurs have distinct personality characteristics.
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Hence, although there is paucity of research dealing with cultural influences on entrepreneurship, the ones in existence can be partitioned into the following three views (Andreas Freytag & Roy Thurik, 2006). The first view is of the 'aggregate psychological trait' according to which, if a society has a greater proportion of people with 'entrepreneurial values,' then more people will become entrepreneurs (Davidsson 1995; Uhlaner and Thurik 2007). The second view relates degree of 'legitimation' to entrepreneurship within a culture (Etzioni 1987). According to which a high level of legitimation for entrepreneurship in the society has wide scale implications with regards to a higher social status of entrepreneurs, and more tax incentives to encourage business start-ups. The third view puts forward the 'push' explanation of entrepreneurship which is based on the differences in values and beliefs of population as whole and potential entrepreneurs.
In this paper we use well informed indicators of entrepreneurial culture and explore their relationship with the level of entrepreneurial activity in a country. The well informed indicators of entrepreneurial culture help us overcome shortcomings of the earlier research work in this area, as they were based on general cultural indicators and not on those that are specifically related to entrepreneurship.
3 Model and hypotheses
The underlying hypothesis being tested in this paper is that material gains are crucial with regards to entrepreneurship and hence a society which is more post materialistic is more likely to be less entrepreneurial. The premise being tested is closely associated with the psychological aggregate perspective, wherein it has been assumed that in a society with lesser number of materialistic individuals will have fewer entrepreneurs (Lorraine Uhlaner & Roy Thurik, 2007). Hence our primary purpose here is to explore the link that entrepreneurs are motivated by material motives, a cultural aspect of a society. Some previous research related to the above topic found that individual owners spread across a broad set of countries are more likely to have materialistic values (McGrath et al. 1992). In their research, entrepreneurs are more likely to identify an accomplishment as 'making lots of money' relative to their their non-entrepreneur counterparts, however they did not explore these differences at a country level. Robichaud et al. (2001) on the other hand, found a positive association between the sales performance and the extrinsic motivation of an entrepreneur. They observed negative relationships between the dependent variable, sales performance and, intrinsic motivation, autonomy and independence.
Hence we see that some of the research till date, although they have primarily undertaken a micro-level of analysis (i.e. comparing individual entrepreneurs), have supported the argument that business owners, particularly the ones which have been successful, are relatively more materialistic than their peers who are either employed or unemployed. Here we have posited a link that if the society as a whole tends to be more materialistic (as measured by the world value survey's postmaterialism index), then the values of the society are more closely aligned with the goals of individual entrepreneurs.
Although relatively unknown compared to cultural indices developed by Hofstede (1980), Inglehart ((1977; 1990; 1997) proposed materialism/post-materialism hypothesis to attempt explaining changes in values in the modern societies. It describes change in a country from a more materialistic oriented population to the one which prefers non-material goals over the material (Lorraine M. Uhlaner, Roy Thurik, Jan Hutjes, 2002). Explaining the extent to which a society regards non-material life goals such as personal development over and above the aspects associated with material security. Hence basing our analysis on aggregated psychological traits view, we expect that, in societies wherein making money is relatively less valued by the average person, the rate of entrepreneurship ( measured as total entrepreneurial activity) is also likely to be lower. The hypothesis we test in our analysis is as follows:
Hypothesis 1: The more postmaterialist a culture, the lower will be the rate of total entrepreneurial activity.
Additionally, past research work has shown some degree of correlation between postmaterialism and other socio-economic indicators such as GDP, population and life satisfaction. Hence the influence of postmaterialism could be intertwined with the above mentioned factors (Lorraine Uhlaner & Roy Thurik, 2007). Thus, a second hypothesis proposes a "culture" effect with regards to postmaterialism values, controlling for the other socio-economic variables mentioned above.
Hence, our second hypothesis is stated as follows:
Hypothesis 2: Controlling for GDP and population growth, and measure of life satisfaction, there still exists an independent (negative) relationship between postmaterialism and the rate of total entrepreneurial activity.
It is also important to discuss the role of individual motivation in the wake of entrepreneurship (Shane et al. 2003; Locke and Baum 2007). There have been many individual-level studies on motivations which drive entrepreneurship. One of them tries to draw a distinction between 'pull' and 'push' factors leading to entrepreneurship (Jolanda , Marco van Gelderen and Roy Thurik, 2008). Pull motives such as autonomy, challenge and, recognition and status (Kolvereid 1996; Feldman and Bolino 2000; Carter et al. 2003; Wilson et al. 2004) have been identified as motives encouraging entrepreneurship. There also have been studies focusing on depth-psychological motives, examples include studies on the need for achievement and power (McClelland 1961, 1975). These studies show that achievement has small, though significant, positive influence on entrepreneurship. Studies at the individual level have been used to examine factors which lead to differences between the entrepreneurs, however there is a need to explore the impact and role which entrepreneurial motivations have on entrepreneurial decisions. In the context to culture at a national level, some research work has related entrepreneurial motivations to Hofstede's dimensions (Hayton et al. 2002). In our analysis we incorporate Schwatz dimensions of culture covered in the world values survey.
As compared to Hofstede's approach, Schwartz values have been based on psychology research and have been derived theoretically at the forefront of the survey (Andreas Engelen & Florian Heinemann &
Malte Brettel, 2008)
Hence, we have also incorporated in our analysis variables 'Self-direction', 'simulation' and 'Achievement' as measures of entrepreneurial culture. Some of these variables due to their embeddedness in trait research have a solid theoretical base (Kashifa Suddle, Sjoerd Beugelsdijk, Sander Wennekers and Zoetermeer, January 2006). Several studies have researched 'Achieving', as a cultural dimension of entrepreneurship which was initiated by the work done by McClelland (1961).
Also, though there exists some commonalities between Schwartz's and Hofstede's dimensions ( for ex., power with power distance), there are some dimensions which are not covered directly by Hofstede in his research ( ex., self-direction and stimulation). Helping us to further explore the relationship between these additional dimensions and entrepreneurship. Hence along with 'achievement' we have incorporated 'Self-direction' and 'Stimulation' dimensions in our analysis. 'Self-direction' and 'simulation', Schwartz's cultural dimensions reflecting openness to change, was found to be positively correlated to an index which indicated the extent to which an individual agrees with culture level norms about entrepreneurs and the entrepreneurial role (John Perry, Steven Farmer, Gergana Markova, Timothy Pett, Derek Ruth, James Wolff and Xin Yao, 2008).
4. Data and method
4.1 Data and variables
The Global Entrepreneurship Monitor (2006) and the World Values Survey (5th Wave, 2006) are the sources of data for our entrepreneurship and cultural variables of interest. A detailed explanation of these measures is presented below. We have mentioned the sources of the control variables in the Appendix
As a result of the inter-disciplinary nature of entrepreneurship we have a range of perspectives on it, hence giving rise to the need of a coherent framework to help understand the differences in the level of entrepreneurial activity across societies (Low and Macmillan, 1988; Aldrich and Baker, 1997; Lee and Peterson, 2000). The Global Entrepreneurship Monitor project has helped in the development of such a framework. 'The model links cultural, social and political factors to the development of entrepreneurial framework conditions such as the financial, government policy and legal infrastructure across countries, which in turn shape motivation and skills of entrepreneurs as well entrepreneurial opportunities in a given society' (Reynolds et al., 2000: 6)
Hence, I have used the latest publicly available data on entrepreneurship from the Global Entrepreneurship Monitor (GEM) database for the year 2006, in which 37 countries participated. I have used total entrepreneurial activity across countries as defined by the GEM database as the entrepreneurship indicator which in turn is our dependent variable. Total entrepreneurial activity is defined as the share of adults in the total population of 18 to 64 years old who are either actively involved in starting a new business (nascent) or in managing a business less than 42 months old (starters) (Reynolds et al 2001). Past research on entrepreneurship has widely used self-employment as a measure of entrepreneurship, since it has been observed to be a major factor benefiting spillover effects of entrepreneurial energy (Wennekers and Thurik, 1999; Reynolds, Hay, Bygrave, Camp and Autio, 2000). However with a more comprehensive measure of entrepreneurship available through the GEM database, we can retest some of the earlier hypothesis using a more comprehensive measure of entrepreneurship. However we have also computed the impact of various dimensions of culture on self-employment to check for the consistency of our results with previous research.
With regards to culture, the world values survey is an important source for obtaining information on individuals' attitude to a wide variety of socio-cultural and political issues (Inglehart, 1997). We use measures from the most resent fifth wave of World Values Survey (WVS) to attain indicators of culture used in our analysis. WVS measures public values in the developed and developing countries with the objective of providing valuable research data on social change at no cost to any and all interested parties (Darin R. Molnar, 2007). Post-materialism based upon Inglehart's four-item post-materialism index has been included as a measure of culture in our research. We have selected the four-item index for our analysis as there appears to be more complete data across countries for this shorter index (L. Uhlaner, R. Thurik, 2007). Schwartz's cultural dimensions on 'Achieving', 'Simulation' and 'Self-direction', which are also covered in the World Values Survey, have been included in our analysis to analyse the effect of culture on entrepreneurship
4.2 The sample
The primary dataset used for analysis consists of the following 25 countries, across which data was available for all the indicators used in our analysis. The countries are: Australia, Brazil, Canada, Chile, China, Finland, France, Germany, India, Indonesia, Japan, Mexico, Netherlands, Norway, Peru, Russia, Slovenia, South Africa, Spain, Sweden, Thailand, Turkey, United Kingdom, United States and Uruguay
4.3 Control variables:
As some interactions between social, economic, demographic and cultural factors have been observed in previous research, we have included a set of specific control variables to test for the independent role that culture plays with regards to entrepreneurial activity. The control variables which we have incorporated in our analysis include GDP growth, Population growth and a measure of life satisfaction.
Economic factors: In order to better understand the role played by cultural factors on the entrepreneurial activities across countries it is important to control for economic factors. Since economic climate of a country can have a strong influence on its postmaterialist values (Lorraine Uhlaner & Roy Thurik, 2007), similar to the use by Wennekers et al. (2005), we have incorporated GDP growth (2005 - 2006) as an economic predictor of entrepreneurship. Recently, Beugelsdijk and Smeets (2005) also concluded that there does exist a theoretical basis for the interaction between economic growth and entrepreneurial culture.
Population - We have included population growth (2005 - 2006) as one of the controls since it is expected to have a positive influence on entrepreneurship (Armington and Acs, 2002, p. 43). From the point of view of demand side of entrepreneurship, a growing population provides new opportunities through an expanded consumer market resulting from the population growth. It may also be a push factor to participate in new economic activity to make a living (Sander Wennekers, Andre van Stel, Roy Thurik and Paul Reynolds, 2005).
Life Satisfaction - According to Inglehart (2003), there exists positive and a statistically significant relationship between postmaterialism and life satisfaction. He concluded that wealthier nations showed relatively higher levels of life satisfaction compared to the poorer ones. However, past research related to entrepreneurship and life satisfaction has presented contradictory results (Noorderhaven et al. 2004;Verheul et al. 2006). Noorderhaven et al. (2004) proposed life satisfaction to be negatively correlated to self-employement. Whereas Verheul et al. (2006) proposed just the opposite result, indicating a positive association between life satisfaction and total entrepreneurial activity, especially with regards to women. Hence as incorporated by Lorraine Uhlaner & Roy Thurik (2007) in order to separate the effect of well being and hence life satisfaction from post-materialism we have also included life satisfaction as one of the control variables
For a more exhaustive description of the sources used, we refer to Reynolds et al. (2002) for GEM and Halman (2001) for EVS/WVS. The data on the control variables have been sourced from Euromonitor.
4.3 Data analysis
We have used the methodology as adopted by Kashifa Suddle, Sjoerd Beugelsdijk and Sander Wennekers (2007) and Lorraine M. Uhlaner, Roy Thurik, Jan Hutjes, (2002)
Initially, we have run bivariate correlations in order to examine the effects which individual variables have on the dependent variable of total entrepreneurial activity. Then in order to separate the influence of economic, social and demographic factors, we have carried out a set of regression analysis. As a result of the small sample size, we have carried out a preliminary regression in order to identify the primary economic factor explaining variation in total entrepreneurial activity. Then in subsequent regressions we have done a regression analysis with post-materialism and some other cultural factors
In order to test for Hypothesis 1, we have computed bivariate correlations to determine the effects of the individual variables on total entrepreneurial activity which is the primary dependent variable in our analysis. Then we have regressed total entrepreneurial activity on postmaterialism alone, to test for the significance of the model.
Further, in order to test Hypothesis 2 we run a multiple regression analysis to recognize the effects which different cultural variables along with post-materialism might have on entrepreneurship, and also the possible mediating effects.
4.3.1 Initial test of hypothesis 1: bivariate tests and other bivariate relationships
Table 1 represents the correlation matrix, which displays the correlation between variables we have included in our analysis. We observe that the correlation coefficients between some of the independent variables is greater than 0.4, which hints that the problems of multi-collinearity may exist when we carry out our regression analysis. In order to test for multi-collinearity we computed the variance inflation factor (VIF). Therein we do not observe VIF above 10, indicating that in our analysis multi-collinearity is not an issue.
Now, in order to test hypothesis 1, following from (Lorraine Uhlaner and Roy Thurik, 2007), we have used Pearson Product-Moment Correlation coefficient. Although the results with regards to post materialism are insignificant, we observe that postmaterialism is negatively related to total entrepreneurial activity (r = âˆ’0.10, ns). Further analysis of a subcomponent of total entrepreneurial activity, namely new business formation, we find that postmaterialism has a more stronger (and negative) association with new business formation (r = âˆ’0.32, ns) than to total entrepreneurial activity. In Table 1. we have shown our findings to other bivariate tests for dependent, independent and control variables. Total entrepreneurial activity is found to be positively associated with GDP growth (r = 0.41, p < 0.05), and Population growth (r = 0.44, p < 0.05), consistent with research done in the past on the association of demographic and economic indicators with entrepreneurship. As posited earlier total entrepreneurial activity is negatively associated with life satisfaction (r = âˆ’0.18, ns). We have further analysed the relationship between some other measures of culture such Achievement, Self-direction and Stimulation with total entrepreneurial activity, its sub component new business formation and other control variables namely GDP growth, Population growth and life satisfaction. We observe a positive although insignificant correlation between total entrepreneurial activity and other dimensions of culture included in our analysis, namely Achievement, Self-direction and Stimulation.
Correlations are based on the 25 countries used in the multiple regression analysis.
*** Correlation is significant at the 0.01 level (two-tailed)
** Correlation is significant at the 0.05 level (two-tailed)
* Correlation is significant at the 0.10 level (two-tailed)
In Table 2 we have presented the multiple regression analysis to determine the role postmaterialism plays in influencing entrepreneurship.
Postmaterialism on TEA
PostmatrialismandGDP Growth on TEA
Postmaterialism and Population Growth
AllControl Variables on TEA
*** Correlation is significant at the 0.01 level (two-tailed)
** Correlation is significant at the 0.05 level (two-tailed)
* Correlation is significant at the 0.10 level (two-tailed)
When controlling separately, first for GDP growth, postmaterialism does not play a role in providing an explanation of the model (Model 2), even though we observe coefficient of GDP growth being significant at the 10% significance level. We find similar results when we control for population growth (Model 3) and life satisfaction (Model 4). Where although the coefficient of population growth in significant at the 5% level of significance (Model 3), again postmaterialism does not play a role in providing an explanation of the model. After including all the controls ie GDP growth, population growth and life satisfaction, though the coefficients of GDP growth and Population growth are significant at 5% and 10% level of significance respectively, we still do not get significant coefficients with regards to our variable of interest post materialism, resulting in insignificant results.
In Table 3 we have presented the multiple regression analysis to determine the role of individual motivation in the wake of entrepreneurship. Individual motivations herein have been captured through Schwartz's cultural dimensions of achievement, self-direction and simulation.
Schwartz dimensions on TEA Model 1
Post Materialism on TEA
Schwartz dimensions and Postmaterialism on TEA Model 3
Imp of Succ
Including all the controls (ie GDP growth, population growth and life satisfaction) we observe that Schwartz's dimensions of achievement, self-direction and simulation, when incorporated together in model 1 fail to explain the level of entrepreneurship. We obtain similar non-significant results when we combine it with the dimension of post-materialism in Model 3, although GDP growth and population have significant coefficients at 5% and 10% level of significance respectively.
In Table 4 we have presented a multiple regression analysis to determine the role of post-materialism and individual motivation in the wake of self-employment dimension of entrepreneurship. Again Individual motivations herein have been captured through Schwartz's cultural dimensions of achievement, self-direction and simulation.
Postmaterialism on Self-employed
Self-direction on Self employed
Simulation on Self-employed
Achievementon Self employed
Postmat and contraols onTEA
Postmat and contraols onon Self employed
Here we observe that post-materialism is significantly negatively correlated to the self-employement dimension of entrepreneurship at 10% level of significance (Model 1), consistenet with the findings of by Lorraine M. Uhlaner, Roy Thurik, Jan Hutjes (2002). However when included with other controls (ie GDP growth, population growth and life satisfaction) we obtain an insignificant relationship between post-materialism and self-employement.. The results with regards to TEA are consistent with the new data set of 22 countries. We also observe that self-employement is significantly positively correlated to the Schwartz dimensions of stimulation and achievement in models 3 and 4 respectively. However these dimensions are rendered insignificant when run together with postmaterialism in model 6
Our findings do not confirm the significance of post-materialism in determining total entrepreneurial activity across countries, even after controlling for economic and demographic factors, even though it is significant in determining self-employement. Strong correlation between post-materialism and other control factors makes it difficult to obtain significant results
In the current paper I have aimed to deal with some of the relevant issues raised by Hayton et al. (2002) with regards to their review of the existing literature on entrepreneurship and culture. Following their call to analyse cultural measures other than Hofstede's, which have come under regular criticism by many authors (e.g. Schwartz, 1994; McSweeney, 2002), I have tried to establish and analyse the link between some of Schwartz values based dimension of culture and post-materialism as measured by Inglehart's index and total entrepreneurship activity in a cross country setting.
In summary, our findings confirm the significance of economic factors in predicting total entrepreneurial activity with economies with a higher level of economic development having higher level of total entrepreneurial activity. GDP growth and population growth, in particular, helps explain the variation in total entrepreneurial activity and is used in subsequent analyses. Controlling for economic and demographic factors, (i.e. GDP and Population) there residual effect of post-materialism is not significant, suggesting a relevant co-variation among these latter factors (post-materialism with GDP growth and population growth). Our result though contrary to our proposed hypothesis, it is consistent with (Wennekers, Noorderhaven, Thurik and Hofstede,2002) who found that Hofstede's masculinity index, which essentially also measures the degree of materialism in a society, is not significantly correlated with self-employment ( a measure used to indicate entrepreneurship levels).
An earlier study conducted by Lorraine M. Uhlaner, Roy Thurik, Jan Hutjes (2002), found a significant negative relationship between self-employment and the cultural aspect of post-materialism. Our regression results confirm the same (Model 1, Table 4). However when combined with the control variables, we obtain insignificant results. One possible explanation for the difference in the overall results after including the controls might be that the former study (by Lorraine M. Uhlaner, Roy Thurik, Jan Hutjes (2002)), was based on set of Western countries ( with the exception of Japan), which have more affluent cultures. In our study the inclusion of developing countries such as China, India and Indonesia, which are relatively less affluent, might have weakened the above relationship resulting in its insignificance. In some studies it has been observed that post-materialism has a negative effect on self-employement, whereas it was observed to positively influence in the study undertaken by Brons, Lajos (2005).
Contrary to our findings Lorraine Uhlaner and Roy Thurik (2007) found a significant negative relationship between total entrepreneurial activity and post-materialism. The different effects on total entrepreneurial activity of the same cultural aspect is possible due to the reason that post-materialism is 'non-atomic' (Brons, Lajos (2005)). Post-materialism may be composed of a variety of culturally different aspects that may result in contradictory effects. On one hand lower importance attached to material aspects may lower self-employement whereas dimensions of self-expression and self-development may on the other had may promote it.
The empirical work done in our analysis is inconclusive. However, due to the limited size of the sample, and non availability of data on all the indicators across time periods, the relationships may alter if we consider a dataset for different time period. Hence to improve the analysis of evaluating the relationship between entrepreneurship and culture, longitudinal studies should be undertaken. However the erratic availability of data on some key social and cultural variables pose a problem in this regard.
Limitations And Directions For Future Research -
As with any paper there exists potential limitations in this paper as well. The primary limitation of our study, a cross sectional analysis on the relationship between entrepreneurship and culture, is its small sample size (25 countries). The sample size imposes limitations on the robustness of our analysis. Hence, going forward empirical work in this field should be undertaken with more updated data from the from GEM and WVS datasources, with an expanded set of countries.
Going forward one could also explore factors contributing to differences in various dimensions of entrepreneurship; new business formation, nascent etrepreneurship and overall established business rate. Entrepreneurial motives may change over time (Littunen 2000) hence future research should take into account the dynamic aspect of entrepreneurial motivation. Categorization of entrepreneurship into "opportunity" and "necessity" entrepreneurship by the GEM database opens up new fields of research to identify the role played by culture in opportunity and necessity entrepreneurship.
Absence of institutional factors such as variation in taxation policies may also contribute to the regional difference in entrepreneurship. Hence a more complete analysis requires differentiated models to explain and predict nascent entrepreneurship, new business formation and business survival rate, after taking into account a more exhaustive socio (other cultural aspects), economic and human capital indicators (build upon from level of educational attainment). Factors which have categorised as push factors, such as secondary education may lead to an increased desire for job security and hence may limit entrepreneurship.
Even though we could not identify significant relationship between entrepreneurship and post-materialism at the country level, there could exist a significant relation between the two at a more micro level. Since materialistic views at the micro level can play role in determining level of entrepreneurship within countries. Research trying to establish a link between culture and entrepreneurship could also explore the extent to which different cultures and countries are able to encourage conditions supporting creating new firms and ventures over time. Hence future research should focus on refining the measures of national culture that may be directly linked and be a key driver of entrepreneurial activity
Finally, though research and studies till date indicate that culture is likely to have a major say in the organizational setup across culture, the fundamentals in terms of the causes and effects of these differences are still quite unclear. (Andreas Engelen, Florian Heinemann &, Malte Brettel, 2008). Hence future research work should conduct and build a more comprehensive and complex models that go further than just conducting a mere correlation analysis with regards to entrepreneurship and national culture.
Index on Datasources:
GDP growth and Population growth have been computed for the period 2005 - 2006, from the datasource Euromonitor
Life Satisfaction data has been sourced from World Values Survey, from the 5th wave of the survey.
The score for this variable is constructed as the average score of the inhabitants of a
country rating the following three areas on a scale ranging from 1 (completely dissatisfied) to 10 (completely satisfied).