How National Culture Affects Entrepreneurs Behaviour Business Essay

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In today's globalised society there appears to be many interesting academic thoughts, theories and perceptions surrounding the concepts of the ways in which culture influences and effects entrepreneurship. The writer will seek to explore some of the relationships between entrepreneurial activity and the cultural and socio economic climates across the globe; further to this exploration the writer will illustrate how these relationships may affect the shape and growth of business ventures together with their links to national culture and entrepreneurial activity. For the purpose of this assignment the writer will utilise a PEST (political, economic, social, technological) analysis to present the main aspects of culture and its links to the way in which entrepreneurs behave.

Basu (1999) insinuates that "The influence of culture on entrepreneurship was first emphasised by Max Weber at the beginning of this century [1990's]. As Weber famously argued, Protestantism encouraged a culture that emphasised individualism, achievement motivation, legitimation of entrepreneurial vocations, rationality, asceticism, and self-reliance" (p.5). As a result this ethic can now be observed as one of the most significant aspects of modern capitalism. Similarly Henderson (2004) decrees that "Business enterprises are at the heart of capitalism, but they do not determine its scope or character" (p.163). Likewise Khosla (2008) reiterates Weber's analysis and proposes that; "We need to get rid of the 'incumbency capitalism' that entrenches participants in a market while stifling innovation by raising the barriers to entry for innovative ideas." On the other hand Lee and Peterson (2000) argue that "Although all perspectives have merit, none are comprehensive enough to fully explain the marked differences in entrepreneurial activity occurring in various societies around the globe" (p.402). In essence it could be viewed that there is a fervent responsibility for a collective understanding of entrepreneurship, and its high level of required innovation and risk taking on a social level. This is, however, proving a difficult task for the many academics. Whilst implicative by its very diverse and sometimes ambiguous nature, identifying contextual relationships between culture and the many roles and routes of the entrepreneur have, as Zahra (all business 2002) advocates "have existed for decades." For this reason it could be assumed that the role of the entrepreneur is inherently contingent on and shaped by the values and normative practices of the external environment in which they are born. As a result of these claims it would be naïve to assume that merely drawing upon capitalist principles would fully grasp the motives behind entrepreneurship and the open systems in which ventures operate.

Barringer and Ireland (2006) constitute 'entrepreneurship' as being "the process by which individuals pursue opportunities without regard to resources they currently control" (p.5). This implies the notion that an entrepreneur has far reaching goals that outweigh the capacity of the assets available to them. In order to undertake a venture would be to make somewhat irrational and unfounded decisions focused primarily on the idea itself, and therefore potentially overlook the key resources necessary to holistically accommodate the venture. Similarly an entrepreneur could be associated with an individual that has created a business venture that often requires unique ideas, bespoke thinking and an elevated level of panache. For example Bridge et al. (2003) state that some of the fundamental attributes of entrepreneurship may include, "autonomy, creativity, imagination, initiative and perseverance" (p.37).

Coulter (2001) defines organisational culture as being "it's beliefs, values and behavioral norms shared and practiced by organizational members" (p.113). In this instance cultural values could be portrayed as representing the level of which a culture foresees entrepreneurial attributes, such as those previously described by Bridge et al. (2003). It is sometimes observed that variances in cultures creates a distinctive and idiosyncratic means that often encompass' an appraisal of values, standards, morals and ethics that a culture may practice within. Besides these values such norms that control and legitimise behaviour may also vary from culture to culture. Wagner (2008) states that, "National culture is only the base layer and more or less an overall framework for other cultural layers" (see appendix 1) (p.2). In cohesion with Wagner's thoughts and ideas many other academic thesis' and common everyday beliefs now feel that cultures can appreciate and reward entrepreneurial behaviour endeavour to encourage proclivity to cultivate and enhance bespoke innovation and dynamic design. On the other hand it could be assumed that cultures that strive to become orthodox and implement total conformity, as well as, enforced jurisdiction may run the risk of not being able to expose entrepreneurial activity, and where there is activity, potentially creates standardisation and imitation that conflicts with the notion of the true entrepreneurial spirit. George and Zahra (entrepreneur 2002) illustrate that "Culture is used to refer to the enduring set of values of a nation, a region, or an organization." Many academic theorists have recognised how both the internal organisational structures and the external political, economic, social and technological factors (PEST) are interlinked, according to Contingency Theory. In Consequence the claim that the role of the entrepreneur is not universally identifiable for all nations is justified. Therefore it could be assumed that the routes, methods and techniques available to entrepreneurs are facilitated by PEST forces that differentiate between cultures.

Over the past few years the development and advancements of entrepreneurship has encouraged the progress of factors that shape economic growth and maturity. Consequently this has led to an increase in job opportunities, as well as, promoting national affluence, prosperity and competitiveness. This expansion and enrichment of socioeconomic growth has provided scope for an increase in the number of consumer goods and services available as well as driving forward improved standards of living. These thoughts and ideas are supported by Samit (2005) who identifies that; "Important to a nation or society is an increase in jobs which serve to build that nation's economy. Since entrepreneurial ventures have indeed created jobs and aided that nation's economic improvement, there has been a marked increased in countries' desire to foster entrepreneurship" (p.263).

Shiller (2005) appears to further his research predominantly across the country of Sweden. Shiller's research explores the effects of social and cultural variables across Swedish municipalities. As a result Shiller proclaims that "religion and politics accounted for about half of the variation across municipalities. Municipalities tended to have more entrepreneurs if they had a high proportion of pensioners who were members of the Church of Sweden (the official state church until 2000) and a high proportion of right-wing voters." This illustrates how the societal culture of ethics and values has the ability to promote entrepreneurship in the best way it sees fit, through its democratic power. For example, on the other hand, a country geared towards left wing socialism would prefer to vote for entrepreneurship that benefits the public sector particularly for those with lower socioeconomic status. In this way it is not only the capitalist owners or the politicians who can dictate the types of entrepreneurial ventures that operate. In addition to Shiller's findings Shiller also observes that the majority of cities that are more populated with entrepreneurs tend to adapt a more dynamic and entrepreneurial driven culture. Moreover this type of culture appears to attract members of the local community as they begin to learn about new business ventures; as a result these people seem to become fascinated and attracted by the changing in culture and appear to want to become more involved, which in turn leads to an overall increase in innovation, job search and individual determination for achievement and success. Shiller (project-syndicate 2005) credibly supports the idea that "Virtually every country is a pastiche of local cultures that differ in how they motivate people and shape their personal identity." Therefore it could be suggested that the disparity in cultures may indicate as to what constitutes a commendable and creditable person, which as a result may help to give an accurate indication as to the varying levels of entrepreneurship amongst different cultures.

Samit (2005) also advises that entrepreneurial achievement involves the need to promote and nurture specific cultures in order to maximise economic growth and prosperity. Recently across Europe between 2003 and 2004 a green paper on entrepreneurship plan was launched, this plan was implemented and aimed to provide "funds, grants, special loan terms, and tax breaks, etc. as incentives for individuals to start and grow companies" (p.266). A consequence of this plan was to encourage individual investment from outside sources, such as venture capitalists and private investors. Many of these international agendas appear to be primarily financially based, which brings forward the importance of finance, as has been recognised as a key factor in the failure rates of ventures. This idea is further supported by Lee and Peterson (2000) who state that, "There is good money and bad money, and what entrepreneurs want from investors and governments is much more than money. They need the added value of advice, contacts, networks, etc., and a national culture that supports and encourages entrepreneurial activity" (p.411). This is perhaps why great measures have been taken to promote entrepreneurial growth; there has been little in the way of knowledge based culture that assists innovation, but rather appear to encourage imitation. Lee and Peterson advise that "Despite the considerable progress many countries have achieved in developing their economies, entrepreneurial activity remains relatively limited in many of these nations" (p.403). This idea suggests that many people throughout the world that facilitate and work in countries that utilise a higher level of entrepreneurship are more likely to become exposed to a much greater standard of living, prosperity, affluence and wealth. Consequently these increases in living standards should provide a strong basis for future economic growth and stability, which in turn may provide an increase in entrepreneurial activity. In critique of Lee and Paterson's suggestion it could be argued that less economically developed countries and societies have little aspiration or desire to increase levels of entrepreneurship due to the lack of psychological and financial rewards. For this reason the question could be asked as to why people in less developed countries and societies aspire to becoming innovative, creative and entrepreneurial if they cannot endeavor to seek reward.

Lee and Peterson (2000) progress their academic exploration and use Russia in 1998 as a primary example of a national culture that is yet to be fully developed and entrepreneurially successful. In spite of Russia's demised communist system and re emergence as a market oriented and capitalist country it seems that Russia has still not been able to implement a productive cultural transfer that can effectively support entrepreneurial activity in order to be lucrative and worthwhile. It is possible that the two primary reasons why entrepreneurial activity in Russia is not decidedly developed is due to; firstly, the barriers to entry for small and medium enterprises (SMEs), for example the procedure of registering an organisation, political instability, inflation, and taxation. Secondly the lack of reformation and structure of large monopolistic organisations whose behavioral activity and actions confine the development and maturity of SMEs much in line with the sentiments of the communist regime and its monopoly of key resources beforehand. This displays how cultures headed by government can become so embedded in a particular approach to business that the principles of capitalism are strongly resisted despite political efforts to introduce economic shift. However, ten years on since the studies conducted by Lee and Peterson it seems that things in Russia are starting to transform and revolutionise. Boutillier (2008) suggests that through the eyes of the World Bank, the business economy in Russia has not improved significantly. In addition to this "In 2008, the rank of Russia in classification of business environment is 106th for 178 economies in the world. Specifically for starting a business, Russia ranks 50th [in comparison the rank of China at 135th]" (p.145). In summary it maybe advised that Russia should aim to review its socioeconomic system and develop new laws and regulations in order to effectively monitor taxation, credit and property lettings, which in turn should allow for improved measures for providing finance and investment. In addition to Lee and Peterson's point of view it could be said that economic restructuring of Russia is only part of the provision required in order to achieve effective modernisation. In consequence it is advised by Berger (1991) that "it is culture that serves as the conductor, and the entrepreneur as the catalyst" (p.122).

Furthermore throughout Russia and in today's modern economy it seems that many Russian entrepreneurs and members of the government are determined to develop and promote hasty economic resurgence on a large scale. The Russian government is always aiming to instigate effective ploys to achieve a successful and valuable market transition within the margins of reasonable social and organisational agreement. In brief it can be identified by Zhuplev et al. (1998) that "in their survey of 40 Russian entrepreneurs characterize them as highly opportunistic, associating their success with requiting products and services of good quality, a capable workforce, financial stability, and a respected image" (p.511). Additionally recent statistics produced by International entrepreneurship 2010 highlight that, "by end of 2001 in Russia "the share of employment in small entrepreneurship sector was 21-25% of the total employment in Russia. 17 million people were employed in the small entrepreneurship sector as of end of 2001." Contrast to the uk, small sentence or two?

The rapidly emergent global economy has meant governments aim to promote and encourage entrepreneurship in order to maintain international competitiveness; however many businesses are somewhat unsuccessful. Klein (business week 1999) indicates that in 1999 statistics released by "The NFIB (National Federation of Independent Business' Education) estimates that over the lifetime of a business, 39% are profitable, 30% break even, and 30% lose money, with 1% falling in the "unable to determine" category." Make a point? In critique of government's aims it is viewed as necessary for the government to take the lead in driving forward an economic shift. Thus entrepreneurship can be viewed as the result of political pressure geared in favour of particular industries. For example the UK economy is highly service-orientated, and much of the manufacturing sector has been outsourced. In contrast the Japanese economy is primarily innovative and utilises world class technology in most of its entrepreneurial ventures.

Empiral evidence?

Contrast UK?


In order of pest


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