Cultural Differences In International Entrepreneurship Commerce Essay

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It is likely that the level of entrepreneurial activity within a country varies due to the effects of differing national cultures. National culture also affects how men and women interact with their environments and the roles they assume in society (Hofstede 2001). It also seems that men will have differing outlooks or perspectives on entrepreneurship than women, which suggests that the level of new business start-ups in different countries should vary by gender. Therefore, this exploratory study was designed to analyze the impacts of national culture and gender differences on entrepreneurial activity in a variety of countries.

People differ along a variety of demographic dimensions such as age, gender, level of education, and functional work experiences, and it is likely that individuals from differing backgrounds would view entrepreneurial efforts differently. For example, a political scientist may consider creating wealth for society as a major goal of business ventures, while a business school graduate may believe a primary goal is to maximize shareholder value.

As individuals who are diverse on demographic dimensions have differing personal value systems and the life-goals associated with them, differing dimensions based on national culture are also likely to affect personal value systems and life-goals. In other words, individuals from different countries may rank the importance of self-venturing or starting one's own business quite differently.

1.1Background:

An entrepreneur refers to a person who has the possession to start new enterprise, venture or idea and assumes significant accountability for the inherent risks and the outcome. That person will be an ambitious leader who combines land, and capital to often create and market new goods or services. Entrepreneurship placed an emphasis on innovation such as new products, new product methods, new markets and new forms of organization.

2. Motivation for Research/Research problem:

The motivation of this research is to identify the cultural differences in the international entrepreneurship and its implications. This research has done for the purpose of understanding the cultural dimensions on entrepreneurship in the international business environment.

Research area of this paper deals with the effects of national culture on individuals. There is a great deal of research that supports the effects of national culture on individuals. There is also some research (e.g., Salk & Brannen, 2000) that suggests that trends such as the globalization of business ease of transportation, international educations, and modern communication services, along with increased access to those services, are reducing the consequences of local and national cultures, and that people around the world are becoming more homogeneous particularly within the context of business. However, it seems unlikely that the effects from a "shrinking world" have negated the ingrained effects of national culture on entrepreneurial processes. It seems likely that the level and types of entrepreneurial activity within a country vary for individuals from differing national cultures. Given the effects of national culture on men and women and the roles they assume in society (Hofstede, 1998), it also seems likely that those same entrepreneurial efforts will be valued differently by men versus women, and effect the level of self-venturing activity.

Based on the inconclusive nature of this on-going debate, this paper investigates the importance of national culture and gender differences on entrepreneurial activity. It focuses on whether it is likely that a "shrinking world" has wiped out or significantly reduced the effects of national cultures and gender, or whether national cultural and gender differences in entrepreneurial efforts have resisted globalization. It is worth noting that the intent of this exploratory study is not to investigate differences between "Thom and pop" small business owners and entrepreneurs, but rather to acknowledge the conclusions drawn that the entrepreneur and self-venturing activities are best defined on a continuum (Carland 1992; Jackson, Wafts, and Wright 1993). Thus the current study about the Following is a literature review of national culture and its posited effects on entrepreneurial activity, Hofstede's four original societal dimensions of culture, and related

issues of gender. Based on the review, hypotheses are presented that link national culture, gender and entrepreneurship.

3. Research Objectives:

To understand how highly masculine countries helps the people to start the new business.

To understand people's opportunity in low uncertainty avoidance countries to start new business.

To determine people's involvement in the high power distance countries to start new business.

To investigate if the highly collective countries affects the starting of new business.

4. Research Hypothesis:

H1: People from highly masculine countries will be more likely to start new businesses than will people from highly feminine countries.

H2: People from highly individualistic countries will be more likely to start new businesses than will people from highly collective countries.

H3: People from low uncertainty avoidance countries will be more likely to start new businesses than will people from high uncertainty avoidance countries.

H4: People from low power distance countries will be more likely to start new businesses than will people from high power distance countries.

 

5. Research Questions:

RQ1: how the highly masculine countries will have strong base for their people to start new business?

RQ2: what are all the countries that have low uncertainty avoidance?

RQ3: how the feminine countries will affect their people in starting a new business?

6. Significance of Study:

This paper explains the nature of the people in different countries with different cultures and when it comes to studies international entrepreneurship differs in each countries according to the culture. People from different countries lack in knowing the different culture existing in different countries which makes the business fail and so this paper explains about the international entrepreneurship where a person has to consider culture when he/she doing business globally.

7. Literature Review:

7.1 Entrepreneurship and National Culture:

Culture is the collective programming of the mind that distinguishes the members of one group or category of people from another (Hofstede 2001). At this level, culture is usually synonymous with country and influences the development and reinforcement of people's beliefs and values. There is evidence that business people's attitudes cluster according to definable cultural groupings, or national cultural patterns (Haire, Ohiselli & Porter, 1966; Hofstede 1980, 2001). According to this study, it is identified that four dimensions of national culture and posited that people from different countries have national tendencies for these dimensions. His four dimensions will be briefly reviewed shortly as they relate to entrepreneurship activity across countries (Hofstede 1980).

It is stated that the United States has perfected the art of entrepreneurship, there are few formal studies of the relationship between nationality and entrepreneurial efforts, but inferences can be made from comparative studies of business ethics (Carland and Busbin 1997). For example, it is found that Japanese und U.S. managers differed strongly in their ethics orientations (Nakano 1997) and it is demonstrated about differences in ethical perceptions between expatriate and local managers in Hong Kong (McDonald 1997). The differences between Chinese and U.S. managers in scenario-based ethical decision-making exercises are showed (Whitcomb, Erdener and Li 1998). The comparison between North American and Pacific Rim nations found differences in the ethical principles of investment professionals (Baker and Veit 1998).

Cross-national differences in entrepreneurial efforts may be reflected in comparative studies on entrepreneurship, in spite of some common traits of entrepreneurs across borders (McGrath & McMillan 1992). It is found that there are similar and differing needs for entrepreneurs and managers in Israel versus the U.S. (Baum, Olian, Erez, Schnell, KG. Smith, Sims, Scully and K.A. Smith 1993). It is reported that there is large differences in the levels of self employment across 23 OECD (Organization for Economic Cooperation and Development) countries, and related these differences to subjective reasons why individuals in these countries chose to start their own business (Wildeman, Hofstede, Noorderhaven, Thurik, Verhoeven and Wennekers 1999).

Several comparative studies have shown national differences in individuals' values (Hofstede, 2001, 1998, 1980; Schwartz, 1994: England, 1975) which affect people in their business surroundings. For example, individual values affect perception of fair compensation (Hundley & Kim, 1997) and desirable leadership traits (Hofstede, Doktor, Noorderhaven, Scarlett, & Usunier, 2000), and are likely to also affect attitudes toward entrepreneurship. On the other hand, forces of globalization of business, modem communication services, ease of transportation, and international education could reduce the importance of national cultures (Kamar & Thibodeaux, 1998; Salk & Brannen, 2000). Being exposed to similar business contexts, business people in different countries could increasingly start embracing similar goals. It is important, then to briefly review Hofstede's (2001, 1980) original dimensions of national culture and their likely impact on entrepreneurial activity.

Cultural Dimensions:

7.2 Cultural values with National and International differences:

The literature on national culture and the dimensions, typologies and variables used to study it is extensive. Inkeles and Levinson (1969) offer various common problems that all human beings must face: (1) the relationship with authority; and (2) the concept and definition of oneself as a being (relationship between individual and society, individual concept of masculinity and femininity, and ways of dealing with conflicts including aggression control and expression of feelings). In this context, cultures emerge as a result of the different responses that human groups offer to these basic dilemmas, in addition assuming that the responses of individuals from the same nation coincide, given the existing integrating forces such as national language, communication media, national army, national sports teams and so forth (Hofstede 1964).

Among the different studies that have tried to identify the cultural dimensions in response to Inkeles and Levinson's (1969) challenge, Hofstede's (1984) work is considered the cornerstone (Søndergaard 1994), since it not only analyses national cultures but also the effects of such differences inside organizations. It is particularly useful for understanding behaviors and attitudes at work, such as leadership, motivation, or the behavior and relationships between members (Full agar et al. 2003). This model is amply analyzed in the literature, replicated and cited in numerous research works, and taken as the foundation for developing subsequent, more evolved models, such as the GLOBE project (Blyton 2001). Furthermore, it has been used successfully in different studies of both entrepreneurial behavior (see Mitchell et a!. 9000, Mueller and Thomas 2000, Steensma Marino, weaver and Dickson 2000, Steensma, Marino and weaver 2000, Ardichvili and Gasparishvili 2003) and individuals locus of control (see Mueller and Thomas 2000, Martinez Garcia a at. 2002, Spector a al. 2002), so we opted to follow this model in the current research.

Figure : Five dimensions of culture (Hofstede, and Geert 1980)

7.3 Collectivism versus Individualism:

Hofstede's (1980) dimension of individualism versus collectivism involves whether people prefer to work alone or in groups, distinguishes between "I" and "we" as the primary unit of identity within a culture, and has been equated with low-context versus high-context cultures (see, e.g., Gudykunst & Ting-Toomey, 1988). Highly individualistic cultures tend to have strong work ethics, high levels of individual initiative and autonomy that come from working alone, and promotions tend to be based on achievement. In cultures that are highly collectivist in nature, people tend to belong to groups or collectives and to look after each other in exchange for loyalty. In these cultures, the work ethic tends to be less strong, people display less individual initiative, and promotions are mostly based on seniority.

In highly individualistic countries such as the U.S., people prefer to be held accountable for their own efforts rather than be tied to collective group efforts as in Japan and South Korea. For example, a study of pay equity issues between South Korean and U.S. employees found that judgments of fair pay in South Korea were affected more by differences in seniority, education and family size while those in the U.S. were more sensitive to variations in individual job performance and work effort (Hundley & Kim, 1997). These findings highlight the highly individualistic nature of U.S. respondents compared to respondents in a more collective culture.

 

 In general, it seems logical that highly individualistic countries would have greater levels of entrepreneurial activity than countries with greater levels of collectivism. On the other hand, there may be a strong tendency for family-owned business start-ups in highly collective cultures, such as India. In fact, many of the poorer GDP countries tend to have strong financial bonds within and among the villages in their greater communities. For example, women from these countries are highly collective and often create cooperative vendor areas to attract tourist spending that provides a subsistence living that is not available to them through more traditional corporate employment.

7.4 Masculinity versus Femininity:

This dimension has been likened to a masculine competitive orientation versus a feminine cooperation orientation, or a performance-based orientation versus a collaborative-based orientation. In highly masculine cultures, the dominant values in society are success, money, and things, and great importance is placed on independent decision-making, earnings, recognition, advancement, and challenge. On the other hand, highly feminine societies tend to hold more dominant values of caring for others and the quality of life. Cooperation, a friendly atmosphere, and employment security are highly valued, and group decision-making is encouraged in these societies.

 Del Rosario (2002) and others contend that leaders of this century will need to exhibit both masculine and feminine qualities. Traditionally, necessary skills for leadership included masculine qualities of assertiveness, decisiveness, self-confidence, coolness under fire, risk-taking and boldness. Today, feminine skills such as sensitivity, humor, nurturing, attention to detail and compassion are also considered 'must- have' skills. He further argues that upcoming leaders need to be 'androgynous' with the ability to crossover between both masculine and feminine qualities.

Yet cultural differences have been found to influence which worker skills are considered desirable in different countries. For example, Niikura (1999) found differences in the level of assertiveness shown by Japanese, Malaysian, Filipino, and U.S. white-collar workers. These country differences should carry over into individuals' willingness to start new businesses. We expect that highly masculine societies would have greater levels of entrepreneurial activity versus more feminine cultures.

7.5 Uncertainty Avoidance:

Hofstede (2001) defines uncertainty avoidance as the extent that a society is comfortable with degrees if the unknown. In societies with high uncertainty avoidance, individuals tend to follow the 'tried and true' routines that they know to minimize any unexpected events and circumstances. Low uncertainty cultures tend to be more willing to take risks, have a greater tolerance for ambiguity in structures and procedures, and tend to be relationship oriented. It would be logical to assume, then, that people from high uncertainty avoidance countries would be more likely to work for others for a guaranteed income rather than start new businesses and enter an unknown arena. On the other hand, a lack of jobs in areas of high unemployment may lead to increased entrepreneurial activity given that there are no other alternatives.

7.6 Power Distance:

The dimension of power distance refers to levels of perceived equality among people, and particularly within organizations. Low power distance countries believe in equality among people and that there are no inherent class or wealth differences. In effect, a person can be born into any economic level and work his/her way up within an organization. Informality and first names are common within the work place in low power distance cultures. Conversely, high power distance countries believe that people should respect their superiors and address them by formal titles only. The Indian caste system is one of the strongest examples of a high power distance country. We would expect that individuals in low power distance cultures will be more likely to start small businesses believing that anyone can succeed.

While the above dimensions of national culture are thought to be important because of their effects on new business start-ups, gender differences are also likely to affect entrepreneurial activity.

7.7 The Effects of Gender:

While some studies have found no significant gender differences (e.g., McDonald 1997), other studies strongly support the importance gender plays in business contexts. One study determined that male managers (and Indian managers) were more willing than others to take risks (Fagenson 1993). Looking at demographic factors and workplace values, Glover, Bumpus, Logan and Ciesla (1997) determined that gender influences ethical decision-making, while Prasad, Marlow, and Flattwick (1997) found significant gender differences in subjects' perceptions of a just society. In a meta-analysis of studies from 1985-1994, Borkowski and Ugras (1998) found that female students exhibited stronger ethical attitudes than their male counterparts.

 

 Although women are involved a very high percentage of all entrepreneurial starts-ups in the U.S., this number varies considerably across countries. For example, in Scandinavian countries, only 20 percent of current new firm formations are by women (Ljunggren & Kolvereid, 1996). Analyzing gender differences in Dutch real estate brokers, Verheul, Risseeuw and Bartelse (2002) found significant differences in that female entrepreneurs were more likely to start new business ventures while male brokers were more likely to take over existing businesses.

In a related area, Hofstede, Van Deusen, Mueller and Charles (2002) found that comparative studies of the importance of work goals to mid-level managers show repeatedly that, other things being equal, men tend to stress ego-related goals and women tend to stress social goals. This finding is directly related to the masculinity versus femininity dimension, and was the impetus that initially drove the present study. Further evaluating the 15 specific work goals used by Hofstede et al. (2002) earlier, Mueller and Van Deusen (2002) identified that the following gender related relationships emerged across cultures (i) Younger males were more interested in their personal wealth than were older males and females.(ii) Males were more interested in creating something new than were females. (iii) Females and older males placed a greater emphasis on short-term profitability than did younger males. (iv) Although all groups viewed behaving responsibly toward their employees as important, females and older males placed somewhat more emphasis on this goal.

 

7.8The individual's demographic characteristics and entrepreneurial behavior:

Many academics have considered the demographic characteristics in their attempt to find the profile of individuals with entrepreneurial behavior. This perspective of analysis is sustained on the idea that individuals behaving similarly will probably possess similar and stable personal characteristics (Robinson ci al. 1991), including age, marital status, educational level, the Position occupied among the siblings, and so on. Thus, by finding the average demographic profile of individuals with a recognized entrepreneurial behavior, researchers can estimate entrepreneurial behavior in unknown situations. Under this demographic approach, therefore, researchers analyze and explain how each of these variables motivates the individual's entrepreneurial behavior. Specifically, entrepreneurial behavior is principally associated with individuals who are male (Begley and Tan 2001, Ardichvii and Gasparishvili 2003, Acs et al. 2005), not very old (Ardichvili and Gasparishvili 2003, Acs et at. 2005), and with a higher educational level (Harmadyova 1997, Ardichvili and Gasparishvili 2003, Acs ci at. 2005). These conclusions are similar to those of Mohapatrn CIA. (2007) in their study of rural areas in China, although other studies recognize the growing role of female entrepreneurs in rural areas (McGehee et a. 2007).

In the current research work, the attributes gender and age are incorporated into the model only as control variables, as they are static characteristics of individuals that cannot be determined by them, falling outside their range of control. Yet the educational level, in contrast, is a demographic attribute of a dynamic nature that can be modified as a result of the decision and behavior adopted by the individual. Hence, we reel that it should be regarded as an independent variable at the individual level that is potentially explanatory of entrepreneurial behavior.

The educational level can be considered as a determinant factor in the decision to create a firm, since it increases individuals' chances of perceiving the different business opportunities arising in their environment, given that the greater the knowledge base and consequently resources, the more easily individuals can conduct critical analyses (Basu 1998) and, hence, recognize market opportunities (Mitchell et at. 2000). At the same time, the individual's educational level also facilitates access to the various relevant authorities, procedures and agents that are necessary for starting up and running a firm (Mitchell a at. 2000, Arenius and De Clercq 2005). However, this argument remains valid for firms created in rural areas, as Meccheri and Pelloni (2006) conclude in their empirical work, which finds that education significantly and positively influences the decision to adopt instruments of assistance in general, and financial assistance in particular, to create a new business. In turn, Galvao Baptista and Vidigal da Silva (2004) study rural and urban areas in the Republic of Cape Verde, including both formal and informal entrepreneurship in their sample. They also find a positive association between educational level and requests for financial assistance, since education gives these individuals more knowledge about credit requirements and procedures, and may even reduce 'fear of the bank'.

Second, the complexity associated with the strategic and operational management of the business requires qualified individuals to carry it out efficiently (Basu 1998), and to do so profitably, vital for guaranteeing the company's survival. Consistent with this approach, Wang and Wong (2004) find a positive relation between education in management and entrepreneurship. Third, better-educated entrepreneurs may sometimes result in more profitable firms not because they are superior entrepreneurs but because they tend to come from better- off families, with better social networks and access to capital. Under this perspective, the educational level should be both a relevant quality of the entrepreneur (Lee and Tsang 2001) and a possible predictor of the sociological and economic conditions that affect the entrepreneurial activity that the entrepreneur undertakes. This would explain why numerous authors find a positive association between education and entrepreneurship.

On the other hand, we cannot ignore the results of studies that associate informal entrepreneurship with individuals with low educational levels, limited professional knowledge and poor management skills. These individuals, who are seeking work and find it difficult to get

a formal job (Tokman 1992, Gong and Soest 2002), opt for self employment and have extremely limited access to finance. Mohapatra et al. (2007) believe that educational level is indeed a key factor to distinguish between innovative entrepreneurs who boost the territory's economic development process and inefficient forms of self-employment. In this respect, when individuals behaving entrepreneur rally in a particular territory are characterized by having a higher educational level, any doubts about the harmful effects of informal entrepreneurship in a developing economy quickly disappear.

 

7.9 International culture and entrepreneurship:

The growing globalization of the economy has encouraged researchers to study aspects relating to international business and firms functioning in such a context. In particular, researchers have widely and almost routinely questioned the universality of theories of organizational behavior due to the evidence provided from cross-national research (Huang and van de vliert 2003). In this respect, a good part of research now includes the 'national culture' variable as a key aspect, accepting that all social behavior occurs in the framework of a particular geographical context linked to the values and beliefs of the Population living in that context and which affect individual's Processes of perception, interpretation and behavior (Hofstede 1984, 2001, Early 1997). Following this approach, Barr and Glynn (2004) stress that the cultural measures obtained at the group level have proved able to show their effect in the results analyzed at the individual level. Ignoring this approach can, therefore, result in the incapacity to undertake and manage businesses in the international context successfully (Sackmann and Phillips 2004).

The concept of national culture assumed in the current research work corresponds to the common stream that conceives it as the set of values, beliefs and attitudes shared by the individuals of a human group (societies, ethnic groups, races, for example), which influences individuals behavior and the social relationships that they establish (Hofstede 1984, 2001, Schein 1988). However, some research concludes that nationality and national cultures no longer play an important role because of the increasing economic and social globalization, arguing that we should, therefore, choose new groups of variables to identify the preferences and attitudes of

individuals in the business context (Zander and Romani 2004). Nevertheless, national differences, though questioned, have been empirically corroborated (Carr and Harris 2004: 80)

and the existence of intra-national differences is also increasingly stressed (Au and Cheung 2004). In this context, Zander and Romani (2004) show how belonging to a particular nationality exerts a stronger influence on individuals' leadership preferences than their link to a departmental group within the firm, hierarchical level, age group or gender. With respect to entrepreneurship, socio-cultural values have also traditionally been seen as a key environmental element potentially affecting entrepreneurial activity (Shapero and Sokol 1982, Thomas and Mueller 2000).

We could, however, ask if all aspects relating to management, in general, or entrepreneurship, in particular, vary between cultures. To answer this we need a combined approach of universalism and particularism, according to which some aspects of management are universally applicable while others are strongly determined by the Particular contextual factors that make them difficult to transfer (Pudelko 2001). In this line, Mitchell n at. (2000) consider that entrepreneurs belonging to different national cultures do not think very differently about certain relevant issues (the Plan or programme, or the will to undertake entrepreneurial activity) but, there are differences affecting other important aspects (for example search for opportunities, commitment, skills). In any case, and given that entrepreneurship is a culturally embedded concept, cross-cultural or cross-national generalizations that do not have adequate empirical support are baseless (Lee and Tsang 2001). We approach this current work then with the aim of providing new conclusions to the cross-cultural entrepreneurship literature.

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