Entrepreneurship and Culture

Citation

by Rachel L. Mathers, R. (2013), "Entrepreneurship and Culture", Journal of Entrepreneurship and Public Policy, Vol. 2 No. 1, pp. 96-98. https://doi.org/10.1108/20452101311318701

The role of entrepreneurship in economic growth has been widely acknowledged by economists and policymakers alike (see, e.g. Schumpeter, 1911; Carree and Thurik, 2003; van Praag and Versloot, 2007). However, in spite of this recognition and policy aimed toward encouraging entrepreneurship, the prevalence of entrepreneurship has yet to converge across countries and remains relatively static. Because of the continuing stability of different levels of entrepreneurial activity across countries, expressed by editors Freytag and Thurik in the introduction to this volume as “the percentage of owners/managers of incorporated and unincorporated businesses relative to the labor force,” Freytag and Thurik suggest that economic factors cannot be the primary driver of these differences (2010, p. 1). How is it possible that entrepreneurship varies across societies despite the widespread recognition of its importance for growth? This edited volume provides one potential answer to this puzzle, offering culture as the explanatory variable for the lack of convergence. The chapters contained in this volume come from a variety of disciplines and explain the role of culture in entrepreneurship, thus helping to untangle the observed differences in entrepreneurship across countries.

This volume is divided into four sections, covering individual decision making, regional aspects, cross‐country differences, and the influence of culture on entrepreneurship. In the first section, four chapters analyze the decisions of the individual in a cultural context. The first chapter examines individual value preferences and finds that entrepreneurs have a high openness to change and self‐enhancement. As the author points out, it is unclear if these individual characteristics are alterable with public policy. The second chapter in this section asks, “what makes entrepreneurs different?” Comparing values of the self‐employed and non‐self‐employed across western European countries, the author finds that the same two traits – openness to change and self‐enhancement – are higher among the self‐employed. The third chapter in this section examines the role of culture in the extent of regulation on new business formation, finding that low uncertainty avoidance is consistent with low levels of regulation toward new business start‐ups. Finally, the fourth chapter in this section suggests that prior technological knowledge is important for innovative success of entrepreneurs post start‐up.

Section 2 examines regional aspects of entrepreneurship, beginning with a comparative study of four East‐German regions, indicating that public research institutions and universities are critical for regional innovation. Following is an analysis of 54 European regions, likewise examining regional innovation. This chapter finds that entrepreneurial culture affects economic growth indirectly through regional innovativeness.

Section 3 then examines cross‐country differences in entrepreneurship, searching for causal explanations of the stable levels of entrepreneurship across countries. Using data from the European Union and the USA, the first chapter finds that culture affects preferences for entrepreneurship but not observed levels of entrepreneurship. The second chapter in this section develops individual measures of cultural orientation for business owners, aiming to provide a more precise micro‐level means of analyzing differing entrepreneurial culture across countries. The third chapter in this section uses the Fraser Institute's Index of Economic Freedom to demonstrate that economic freedom increases the level of entrepreneurship across countries for both necessity start‐ups and opportunity start‐ups. Again, this chapter utilizes micro‐level data, providing strong evidence at the individual level that the larger the size of government, the lower the level of entrepreneurship. Interestingly, this chapter appears misplaced in this volume, focussing more on institutions and policies than on culture. The fourth chapter in this section uses the World Values Survey to build a composite measure of entrepreneurial culture. When regressed on a sample of 28 countries, this measure yields positive and statistically significant results on the level of entrepreneurship across countries. Finally, the fifth chapter in this section examines the role of social protection, such as benefits and unemployment insurance, on the drive to engage in entrepreneurial activity, noting that social protection can work in favor of entrepreneurship by reducing the risk of failure or against entrepreneurship by reducing the income risk of those who are not self‐employed relative to those who are.

Finally, section 4 looks at the influence of culture on entrepreneurship. The first chapter in this section examines the role of uncertainty avoidance in entrepreneurial activity. One of the findings suggests that countries with low uncertainty avoidance display a weaker negative relationship between GDP per capita and the level of business ownership than countries with high uncertainty avoidance. The second chapter uses Inglehart's post‐materialism index as a predictor of the level of entrepreneurial activity across 27 countries, finding that postmaterialism is a significant predictor of entrepreneurial activity.

With 12 chapters exploring a variety of issues related to culture and its impact on entrepreneurship, this volume goes a long way in explaining why culture is one variable of significance in explaining differing levels of entrepreneurial activity across countries. This work offers a compendium of insights, including the characteristics of entrepreneurs, cross‐country empirical studies of culture and entrepreneurship, development of several new measures of entrepreneurial culture and individual values of business owners, and much more.

One question striking the reader of this volume is – “Am I convinced that culture is the explanatory variable?” While the volume is quite convincing as to the importance of culture, an alternative area that should be explored further in future research is the importance of public choice and political economy in explaining the differing levels of entrepreneurship across countries and cultures. These areas of research offer another potential answer to differences in entrepreneurship. For example, differing vested interest groups and political institutions across countries may explain why reform is so challenging and why, in spite of acknowledging that entrepreneurship is important for economic growth, policies aimed to spur entrepreneurship have either been unimplemented or unsuccessful in some countries. The chapter on economic freedom and entrepreneurship is a good starting point to tackle this issue, but more research is needed, especially in the way of analyzing specific policies and stalwarts to change. Consider Tullock's (1975) transitional gains trap, whereby termination of a government program that grants privileges to a particular industry or group is difficult precisely because it would result in substantial losses for entrenched interest groups. Tullock's insight implies that even if a society's culture is conducive to productive entrepreneurship, the presence of the transitional gains trap can make reforms toward “good” policies difficult. In future work, employing public choice analysis can only improve our answering the question posed in this volume.