4.1. National Culture and Entrepreneurship
This section displays the discussions and arguments regarding the national cultural dimensions on one hand and entrepreneurship and entrepreneurial orientations on the other. In the first sub-section, we discuss the concepts and definition of national culture, the dimensions of national culture and its effects on entrepreneurship, cultural profile or bundling, and its impact on entrepreneurship.
4.1.1. Concepts and Definition of National Culture
Since the 1980s, culture has become the central point of discussion in management and other social science literature. The horizon of the influence of culture is not only limited to individuals’ lifestyles but also extends to the community, organizations, regions, and nations. Studies show the inherited association of culture with entrepreneurial intentions of individuals (Chukwuma-Nwuba, 2018; Farrukh et al., 2019; Lortie et al., 2019), formal institutions such as policies and regulations (Dheer, 2017; Young et al., 2018), psychological and demographic variables (Kutan et al., 2021; Laskovaia et al., 2017; Smale, 2016), business decisions such as investment choices (Gantenbein et al., 2019; Haq et al., 2018) and operation management (Boscari et al., 2018; Knein et al., 2020; Lee Park and Paiva, 2018; Schneider and Engelen, 2015), the entrepreneurial performance that includes sales growth, growth in profits, and market share (Watson et al., 2019; Saeed et al., 2014). It is also associated with the economic development of nations (Kedmenec and Strašek, 2017; Kreiser et al., 2010; Peprah and Adekoya, 2020; Rauch et al., 2013; Smale, 2016).
A nation's culture determines potential entrepreneurs' entrepreneurial attitudes and the economic transition from a resource-based economy to a knowledge-based economy (Facchini et al., 2021; Donaldson, 2021; Chukwuma-Nwuba, 2018). It determines the willingness and commitment of potential entrepreneurs for self-employment and corporate entrepreneurs to innovate or engage in entrepreneurial activities (Facchini et al., 2021). A culture that favors entrepreneurship is a fertile ground for entrepreneurial intentions to flourish and promotes the creation of new ventures (Chukwuma-Nwuba, 2018). It can also be considered an entrepreneurial culture. Opper and Andersson (2019) define entrepreneurial culture as shared beliefs, norms, and expected behavior transmitted and internalized over multiple generations. Entrepreneurial culture differs from the non-entrepreneurial culture in which the former enhances behaviors that capsulate with entrepreneurship, e.g., risk-taking, innovating, and creating. It prioritizes engagement in a socially desired entrepreneurial activity and regenerates and shapes the communities to promote the salient features of entrepreneurial practices (Donaldson, 2021).
Moreover, Hancıoğlu et al. (2014) argue that the entrepreneurship-oriented culture tends to show an appreciative and positive social attitude toward entrepreneurial activities. It demonstrates a greater tolerance for failure and enables entrepreneurs to create jobs. Because of fear of social stigmatization associated with business failure and favorable social recognition of public sector jobs, potential entrepreneurs, for example, in countries like UEA, demonstrate a low interest in starting their own business (Facchini et al., 2021). Even though culture is an intensively researched topic, there is no single universally accepted definition. The terminological divergence related to culture includes organizational, societal, and national cultures. As the current study focuses on the national culture perspective, some of its definitions are displayed in Table 4.1. below.
Table 4.1
Definitions of National Culture
Authors
|
Definitions
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Hofstede, (1980)
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Culture is a set of beliefs and values shared by a group of people that in turn, regulates what the people regard as socially acceptable behaviors
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Hofstede, 1981, p. 24. cited in Saeed et al. (2014)
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Culture is the “collective programming of the human mind that distinguishes the members of one group from those of another”
|
Opper and Andersson (2019)
|
culture is a set of shared beliefs, norms, and expected behavior internalized and transmitted over multiple generations.
|
Smale, (2016)
|
National culture is an interconnected web of mental models that national groups and individuals share.
|
Bik, 2010, 72, cited in Tian et al., (2021)
|
Culture can be defined as a particular set of values, behaviors, beliefs, and attitudes that are shared, interpreted, and transmitted over time within a collective and distinguishes it from other collectives.
|
Kutan et al., (2021)
|
Culture is the collective norms and values that differentiate the members of one group from the other
|
Greif 1994, 915) cited in Castellani, (2019).
|
Culture is defined as “ideas and thoughts common to several individuals that govern interactions between these people, and between them, their gods, and other groups, and differ from knowledge in that they are not empirically discovered or analytically proven and become known through the socialization process.”
|
(House and Javidan, 2004, 15; cited in
Urbach et al., (2021)
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“A set of shared motives, values, identities, beliefs and interpretations or meanings of significant events that result from common experiences of members of collectivities”
|
Source: Own review, 2022 |
As shown in the above table, the key terms in the definitions of culture include “beliefs, values and norms,” “common,” “mental models or ideas and thoughts,” “transmitted or interpreted,” and “shared by a group of people or collectives,” “distinguishes or differentiate,” and “regulate or govern.” Inculcating these words, one can define national culture as a unique set of values, beliefs, norms, ideas, and thoughts that is shared by a group of people that distinguish them from other groups and regulate their interactions within themselves, with others, with their creator, and with nature. National culture has also been further classified into different dimensions, and the following section presents Hofstede's national culture dimensions and their effect on entrepreneurship.
4.2. The Dimensions of National Culture and Effects on Entrepreneurship
The Hofstede national culture dimensions are the most debated in various social science studies such as applied psychology (Laskovaia et al., 2017; Smale, 2016) and business and management literature (Saeed et al., 2014; Lee Park and Paiva, 2018; Nakata, & Sivakumar, 1996). To develop Hofstede’s national culture index, a comprehensive survey was conducted on 117,000 surveys from over 88,000 IBM employees across 70 nations. It was translated into 20 languages and collected between 1967 and 1969 and between 1971 and 1973. In 1980, Hofstede introduced a set of four partially bi-polar, national cultural dimensions: individualism/collectivism, masculinity/femininity, power distance, and uncertainty avoidance. This database was later expanded with ten additional countries and three regions (i.e., Arab countries and East and West Africa). In the 1980s, based on the research of psychologist Michael Harris Bond, a fifth dimension was added (Hofstede & Bond, 1988), named long-term orientation. In the 2000s, Michael Minkov utilized the data from the World Values Survey (Minkov, 2007), which allowed the addition of a sixth dimension (Hofstede, & Minkov, 2010), named indulgence (Kedmenec and Strašek, 2017; Saeed et al., 2014; Kreiser et al., 2010). Therefore, we now have six of Hofstede’s national culture, mostly bi-polar, dimensions: Individualism versus Collectivism, Masculism versus Feminism, Power distance, uncertainty avoidance, long-term versus short-term orientation, and indulgence versus restraint culture.
Uncertainty avoidance refers to the ease with which people deal with situations they perceive as ambiguous, unpredictable, unforeseeable, and unknown (Hofstede, 2001; Saeed et al., 2014). Individualism is a loosely knit social framework in which individuals are supposed to take care of themselves and their immediate families only (Hofstede, 1983). On the contrary, in the continuum of individualism, there is collectivism which is characterized by a tight social framework in which people identify themselves in groups and out-groups; they expect their in-group to look after them and exchange all thoughts, resources, and feelings of the people in-group (Hofstede, 1983 Saeed et al., 2014). Power distance refers to the extent of equity in power distribution among societal members and societal norm that shows how much individuals accept the unequal distribution of power in society (Zaandam et al., 2021; Hofstede, 2001).
Traditionally, masculinity refers to the male dominant society with a clear-cut role difference between males and females (Çelikkol et al., 2019). It, moreover, shows the tendency of the members of a society or a nation towards materialism, achievement, success, assertiveness, and wealth accumulation. A higher masculine culture exhibit assertive, ostentatious, and competitive behaviors that could lead to higher achievements (Kutan et al., 2021). In contrast, indulgence refers to the freedom given to individuals to entertain, relax, enjoy life, and experience new things. Each of the dimensions of national culture influences the entrepreneurial activities and entrepreneurial ecosystems of a nation directly as well as indirectly.
However, the studies on national culture and entrepreneurship mainly focus on either developed countries’ contexts alone or mix both developed and developing countries (Farrukh et al., 2019). Hence, comparative studies are limited to showing the effect of different national cultural dimensions on entrepreneurship and making evidence-based analysis by differentiating developed countries from developing countries. A five-year longitudinal study covering 82 countries measures the impact of national culture on entrepreneurship rate, based on the Global Entrepreneurship and Development Institute (GEDI) data. It shows that individualism, long-term orientation, and indulgence culture support entrepreneurship rates, whereas masculinity renders entrepreneurship. The other dimensions do not significantly affect the increasing or decreasing entrepreneurship rates of these countries (Çelikkol et al., 2019).
Besides, the findings from six regions of a developing country, the Republic of Cape Verde, depict that individualism plays the most prominent role in enhancing new venture creation. In contrast, masculinity does not significantly affect new business creation rates in the country (Almodóvar-González et al., 2020). This is also seen in multiple countries contexts where individualism remains an accelerator of entrepreneurial venture creations (Çelikkol et al.,2019; Gantenbein et al., 2019; Kutan et al., 2021). Controlling for economic conditions, the legal environment (the rule of law), and other cultural dimensions (power distance, uncertainty avoidance, masculinity, long-term orientation indulgence), the study on 88 countries from 1998 to 2014 reveals that individualism is positively and significantly related to venture-capital investments and explains 30% of cross-country variation. This establishes that individualism, which is intrinsically associated with values of individual freedom, personal responsibility, and reward, is a driving factor of entrepreneurial spirit and, thus, venture-capital investments (Gantenbein et al., 2019).
Notwithstanding, Farrukh, et al. (2019) argue that individualism and collectivism influence entrepreneurial intentions. Their study in Pakistan reveals that individualism moderates the attitudes towards entrepreneurship through perceived behavioral control, whereas collectivism moderates the attitude through the subjective norms commonly accepted by the community. Both individualism and collectivism have their different and unique effect on entrepreneurship. However, Farrukh, et al. (2019) argue that individualism plays a vital role in the motivational antecedents of entrepreneurship, and individualistic values such as independent thinking, independence, and achievement could be obtained through action-based learning (Farrukh et al., 2019). It indicates that the advantage of individualism outweighs collectivism, specifically in entrepreneurial motivation and the size of venture creations because of its strong linkage with individual freedom and autonomy. Its positive association with various entrepreneurial aspects of entrepreneurship, such as entrepreneurial attitudes, abilities, and aspirations (Çelikkol et al., 2019), entrepreneurial behavior (Almodóvar-González et al., 2020), entrepreneurial intentions (Farrukh et al., 2019), and venture capital investment on start-ups (Gantenbein et al.,2019) and risk-taking (Kutan et al.,2021) is well established.
Nonetheless, the fortunes of entrepreneurship in collectivistic culture need not be overlooked. In a collectivistic culture, individuals allude that if their ‘significant others’ approve of their decision to become entrepreneurs, they would be more motivated to self-employment and feel capable of engaging in entrepreneurial activities (Chukwuma-Nwuba, 2018). The collectivistic culture can also determine the type of entrepreneurship, which is mainly practiced in the form of cooperatives. It serves as the source of income for entrepreneurs. Especially, family and friends become the primary sources of funds for new venture creation, and, in this regard, collectivism positively influences entrepreneurship (Chukwuma-Nwuba, 2018).
In an indulgence culture, people prefer to have enjoyable, more leisure life and less self-control, resulting in more debt structure. Hence, there is higher risk-taking in a society that exercises an indulgence culture (Kutan et al., 2021). It does elevate not only risk-taking but also creativity and technology outputs (Prim et al., (2017), entrepreneurial innovativeness (Tehseen et al., 2021), and entrepreneurial attitudes, abilities, and aspirations (Çelikkol et al., 2019). Its positive association with entrepreneurship is not only limited to profit-making businesses but also to creating social entrepreneurial ventures (Kedmenec and Strašek, 2017). This highlight that the more individuals are exposed to free-thinking, relaxation, entertainment, and new adventures and experiments, the more they learn from mistakes and failures and become creative, risk-takers, and innovative.
Despite the common belief, masculinity is negatively related to venture capital (Gantenbein et al., 2019). The studies on a sizeable country-based sample size, 82 countries (Çelikkol et al., 2019) that deal with entrepreneurial attitudes, abilities, and aspirations, and 88 countries (Gantenbein et al., 2019) that deal with decisions on venture capital investment disclosed the negative rendering effect of masculinity on entrepreneurship. Their findings support the previous study by Prim et al. (2017) that showed the negative impact of masculinism on creativity and technology outputs considering the data from 72 countries. However, this does not mean masculinism culture has no use in entrepreneurship. For instance, it is positively associated with entrepreneurial risk-taking (Kutan et al., 2021). Besides, it could also positively contribute if we consider only the initial stage of entrepreneurial decision when bold decisions are required, the masculine culture may positively precipitate entrepreneurial activities.
Regarding uncertainty avoidance, a dearth of literature reveals its opposite correlation with entrepreneurship. Gantenbein et al. (2019) argue that it is negatively related to entrepreneurship, especially with venture capital creation. It also negates the risk-taking propensity of decision-makers (Kutan et al., 2021; Bate, 2022) and reduces creativity and technology outputs (Prim et al., 2017) and the adoption and implementation of new technologies (Veiga et al., 2001). This shows that the more the level of uncertainty avoidance, the more a society becomes risk-averse and less open to experiencing new experiments or products that result in low venture creation and innovation. Nonetheless, uncertainty avoidance will not have a significant effect if we merely consider the entrepreneurial rates or the creation of new business ventures (Çelikkol et al., 2019; Hancıoğlu et al., 2014) because there are so many non-entrepreneurial businesses that only play in their comfort zone. Also, we cannot conclude that the high uncertainty avoidance in developing countries negatively influences their total entrepreneurial activities (TEA) or that a low uncertainty avoidance culture in developed countries positively influences the TEA (Hancıoğlu et al., 2014).
Since entrepreneurs are dreamers, it seems to be believed that they are long-term oriented. Several studies reveal that long-term orientation staunches entrepreneurial activities in various economic settings (e.g., Çelikkol et al., 2019; Gantenbein et al., 2019; Lortie et al., 2019). Regarding the level of power distribution, Çelikkol et al. (2019) find no significant effect of power distance on entrepreneurial attitude, abilities, and aspiration. However, several pieces of literature argue that it negatively affects various aspects of entrepreneurship, such as entrepreneurial risk-taking (Kutan et al., 2021), adoption and implementation of new technologies (Veiga et al., 2001), and creativity and technology outputs (Prim et al., 2017). Veiga et al. (2001) show that countries with a higher power distance are slow to accept new things or IT products. Japanese people (higher power distance) do not move as fast as the USA citizens (low power distance) in IT adoption rates. For example, in 1993, Japan had 9.9 personal computers per 100 workers compared to 41.7 in the USA. In line with this, Prim et al. (2017) find the idea that power distance is negatively related to creativity and innovative technological outputs, which means that those countries with more decentralized organizations tend to be more creative. This result also pinpoints the interpretation that the influence of national culture dimensions could vary based on the specific predicted variables as well as the level of complementarity of other cultural & economic variables. The Table 4.2. below, summarizes the effects of national culture dimensions on entrepreneurship in general.
Table 4.2
The Effect of National Cultural Dimensions on Entrepreneurial Activities
Culture
|
References
|
Subjects
|
Measures
|
Efffects
|
Masculinity
|
Çelikkol et al., (2019)
|
82 countries
|
Entrepreneurial attitudes, abilities, and aspirations
|
-ve influence
|
Almodóvar-González et al., (2020)
|
Cape Verde, six regions.
|
Entrepreneurial behavior
|
-ve influence
|
Kutan et al., (2021)
|
Systematic review
|
Entrepreneurial risk-taking
|
+ve influence
|
Prim et al., (2017)
|
72 countries
|
Creativity and technology outputs
|
-ve influence
|
Gantenbein et al., (2019)
|
88 countries
|
Venture capital investment
|
-ve influence
|
Individualism
|
Çelikkol et al., (2019)
|
82 countries
|
Entrepreneurial attitudes, abilities, and aspirations
|
+ve influence
|
Almodóvar-González et al., (2020)
|
Cape Verde, six regions.
|
Entrepreneurial behavior
|
+ve influence
|
Gantenbein et al., (2019)
|
88 countries
|
Venture capital investment in start-ups
|
+ve influence
|
Farrukh et al., (2019)
|
One country, Pakistan
|
Entrepreneurial intentions
|
+ve influence
|
Prim et al., (2017)
|
72 countries
|
Creativity and technology outputs
|
+ve influence
|
Uncertainty avoidance
|
Çelikkol et al., (2019)
|
82 countries
|
Entrepreneurial attitudes, abilities, and aspirations
|
no significant effect
|
Hancıoğlu et al., (2014)
|
57 countries
|
Total entrepreneurial activity (TEA)
|
no significant effect
|
Gantenbein et al., (2019)
|
88 countries
|
Venture capital investment on start-ups
|
-ve influence
|
Veiga et al., (2001)
|
Literature Review
|
Adoption and implementation new technologies
|
-ve influence
|
Kutan et al., (2021)
|
Systematic Review
|
Entrepreneurial risk-taking
|
-ve influence
|
Prim et al., (2017)
|
72 countries
|
Creativity and technology outputs
|
-ve influence
|
Long-term orientation
|
Çelikkol et al., 2019)
|
82 countries
|
Entrepreneurial attitudes, abilities, and aspirations
|
+ve influence
|
Lortie et al., (2019)
|
29 nations, 262 regions
|
Self-employment rates
|
+ve influence
|
Gantenbein et al., (2019)
|
88 countries
|
Venture capital investment in start-ups
|
+ve influence
|
Prim et al., (2017)
|
72 countries
|
Creativity and technology outputs
|
+ve influence
|
Power distance
|
Çelikkol et al., (2019)
|
82 countries
|
Entrepreneurial attitudes, abilities, and aspirations
|
no significant effect
|
Kutan et al., (2021)
|
Systematic Review
|
Entrepreneurial risk-taking
|
-ve effect
|
Veiga et al., (2001)
|
Literature Review
|
Adoption and implementation of new technologies
|
-ve influence
|
Prim et al., (2017)
|
72 countries
|
Creativity and technology outputs
|
-ve influence
|
Indulgence
|
Kutan et al., (2021)
|
Systematic Review
|
Entrepreneurial risk-taking
|
+ve influence
|
Prim et al., (2017)
|
72 countries
|
Creativity and technology outputs
|
+ve influence
|
Kedmenec and Strašek (2017)
|
40 countries
|
Social entrepreneurial ventures
|
+ve influence
|
Tehseen et al., (2021)
|
One country, Malaysia, 450SMEs
|
Entrepreneurial Innovativeness
|
+ve influence
|
Çelikkol et al., (2019)
|
82 countries
|
Entrepreneurial attitudes, abilities, and aspirations
|
+ve influence
|
Source: Author’s Creation, 2022 |
In a nutshell, as we see in Table 3.2. above, individualism, long-term orientation, and indulgence are the national culture dimensions that positively affect entrepreneurial creativity, attitudes, abilities, aspirations, self-employment rates, and adoption and implementation of new technologies. On the other hand, masculinity, high power distance, and uncertainty avoidance negatively influence entrepreneurship in these aspects. The following section presents the essence of the cultural bundling or profile.
4.2.1. Cultural bundling or profiling and its effects on Entrepreneurship
A unidimensional approach to explaining the effect of a national culture dimension without considering the impact of other cultural dimensions seems flawed (Tekic and Tekic, 2021; Tian et al., 2021; Yong et al., 2020). Tekic and Tekic (2021) applied the neo-configuration approach to explaining how the national culture dimensions interact. They advocated treating these dimensions in combination, not independently or in isolations. A cultural profile comprising the configuration of different cultural dimensions better defines the culture-entrepreneurship relationship. Tekic and Tekic (2021) argue that a high national innovation performance (NIP) is associated with a culture profile that is based on individualism complemented by either low power distance (Solution 1); a combination of femininity and high uncertainty avoidance (Solution 2); or the combination of high uncertainty avoidance and long-term orientation (Solution 3).
Seemingly, the same high national innovation performance could be achieved from the culture profile based on collectivism, and complemented by high power distance, masculinity, low uncertainty avoidance, and long-term orientation (Solution 4), or by high power distance and short-term orientation (Solution 5) (Tekic and Tekic, 2021). Besides, collective reliance and social responsibility could be positively related to the social entrepreneurial behavior shaped by the values of collectivism like–“me because of you” (Vershinina et al., 2018). Yong et al. (2020) criticize that research traditionally focuses on the moderating role of a single cultural dimension in fostering individuals’ creativity across nations and may not offer a clear understanding of the role of national culture. Focusing on one or two values rather than on cultural bundles could lead to partial and misleading conclusions (Tekic and Tekic, 2021). The influence of different cultural factors on innovation does not exist in isolation; their interaction may have a complex impact on the output of innovation that is different from a single cultural factor. For instance, that uncertainty avoidance alone had a negative influence on all aspects of innovation but a positive impact when combined with either one of the other two cultural dimensions – individualism and masculinity (Tian et al., 2021). Hence, the moderating effect of culture is better understood by focusing on the configuration of diverse cultural values or cultural bundles, a set of cultural profiles that characterizes a given country and shows the strength of the norms enforcing these values.
4.3. The Effects of Moderating Variables on Culture and Entrepreneurship Relationship
In this sub-section, a review is done on the extraneous variables that moderate the effect of culture on entrepreneurship. Some of these factors are the distribution of entrepreneurial talents, the complementarity or configurations of cultural values, institutional environment, psycho-social factors and demographic variables, and implementation strategies and adoption of new technologies.
Culture and the distribution of entrepreneurial talents across a nation
There is a high tendency that the attitude and intentions of entrepreneurship transcend from one generation to another. The longitudinal research by Opper and Andersson (2019) in China reveals that the provinces that had been practicing entrepreneurial activities during the Ming (1368–1644) and Qing (1644–1912) dynasties tend to be more entrepreneurial in modern days as well, but the form of entrepreneurship showed changes over time. The research further emboldens (1) the underlying regional cultural differences that persist for the long-term; (2) the entrepreneurial activities adapt to the changing environment and institutional setups (Opper & Andersson, 2019). This also implies the presence of variation in entrepreneurial culture among regions within a given nation. The national cultural dimensions of Hofstede are not evenly distributed across regions in each nation. Hence, nations may need to consider the intra -cultural variations in the policy formulations (Almodóvar-González et al., 2020; Lortie et al., 2019).
Psycho-social Factors and Demographic Variables
Entrepreneurship quantity, as well as quality, is determined by a blend of personal and social factors. Some of these are institutions that influence the experience, values, attitudes, and behaviors as well as resources in a given economy (Chowdhury and Audretsch, 2021; Vershinina et al., 2018); personal characteristics and cultural context (Laskovaia et al., 2017); a psychological (cognitive and behavioral); social process (Smale, 2016) and social practices (Vershinina et al., 2018); and religion and gender (Kutan et al., 2021) and age (Chowdhury & Audretsch, 2021). Older individuals who experienced prolonged interactions with the institutional environment are more risk-averse, less innovative, and less proactive than the younger generation. Concerning resources, older individuals, because of possession of financial and human resources, are more likely to recognize and exploit opportunities than more youthful individuals (Chowdhury & Audretsch, 2021).
IT Implementation and Acceptance
The perceptual and attitudinal faculties of individuals in accepting new technological innovations (Veiga et al., 2001), new product development (Nakata & Sivakumar, 1996), and new operation strategies (Lee Park & Paiva, 2018) are all influenced by culture. The likelihood of technology acceptance remains under the influence of an individual’s culturally induced belief system. Veiga et al. (2001) also argue that managers should design the IT implementation considering the cultural differences among countries. For instance, the pace of individual learning is low where there is high uncertainty avoidance and social elites possess a greater power in high-power distance.
Institutional Environment and Culture
The formal institutions are not free from the positive or negative externalities of the prevailing culture in a nation. The informal institutions (cultural values) emanate, shape, and embolden the formal institutions (Dheer, 2017; Young et al., 2018; Chowdhury and Audretsch, 2021; Zaandam et al., 2021). Without taking into the cultural framework of a society, formal institutions are ineffective in fostering the level of entrepreneurial activity across nations. Dheer (2017) observed that the cultural context shapes the effect of regulations and policies. Individualism positively moderates political freedom and negatively mediates the effect of corruption on the rate of entrepreneurial activity (Dheer, 2017). However, formal and informal institutions do not substitute for each other, and the way, and the extent, they affect entrepreneurial activities could also vary accordingly. Apart from informal institutions, the innovation type and form can be determined by an arrangement of formal institutions, and this also underscores the latter’s moderation effect on the relationship between culture and entrepreneurship. These institutions, thus, dictate the ability of entrepreneurial firms to own and protect their property; assess their tax burden; freely manage their own labor requirements; acquire necessary funding, and start, operate, and close a business that will influence the development of more innovative opportunities.
Culture, Entrepreneurship, and Economic Growth Relationship
Risk-taking, as an EO dimension, is the byproduct of the interactions of individual attitude, corporate strategy, institutional setup, economic development, and national culture (Mihet, 2013). Both risk-taking and proactiveness vary based on the country’s GDP per capita (Kreiser et al., 2010). In general, the total early-stage entrepreneurial activity (TEA) rate is influenced by both uncertainty avoidance culture and level of economic development, measured by GDP per capita (Hancıoğlu et al., 2014). Thus, literature portrays an inherited innate trilateral relationship among national culture, economic development level, and entrepreneurship.
Even though both culture and economic development level determine entrepreneurship, they do not seem to have a linear relationship. The influence of culture is first reflected in business venture decisions, rules & regulations that govern and then extends to the economy in general. Moreover, individual and corporate decision-making at the micro level, the diversification and concentration at the industry level, and the institutional and economic development at the macro level are influenced by culture (Mihet, 2013). This signals a deep-rooted interaction among culture, formal institutions, entrepreneurial activities, and economic growth in general (Rauch et al., 2013). The influence of culture on economic growth mainly goes with or through formal institutions. The culture of a society molds and shapes the institutions, which in turn regulates the entrepreneurial activities that possibly result in economic growth. For instance, individualism positively moderates the effect of institutions on political freedom and education, and negatively moderates corruption's effect on entrepreneurial activities across nations (Dheer, 2017).
Corroborating this, Mihet (2013) argue that, given the difference in culture, the same institutional rules could produce different economic outcomes in societies with various income level and source of income. For an individualistic cultural framework, political freedom and individualism have an amplified synergistic effect on entrepreneurial activities as the former makes individuals feel safer and the environment predictable for business. But in a collectivistic society, the political freedom given to individuals may not significantly increase entrepreneurship rates since the decisions are more likely collective (Dheer, 2017). The effect of corruption on entrepreneurship activities differs across nations and is shaped by their cultural context. In a collectivistic context, corruption, paying bribes, could be considered to speed up new business creation. It helps to connect to the bureaucrats and circumvent the lengthy regulation that hinders the start of new business. In individualistic cultures, the perceived personal opportunity cost of starting a new business increases. Individuals in this culture are less interconnected or interdependent, even though it is not easy to pay bribes (Dheer, 2017). The quality of institutions and economic freedom is the sole heart for entrepreneurship to flourish (Facchini et al., 2021). As institutions are essential for EO, clear rules and regulations can help reduce entrepreneurs’ fear of risk and uncertainty and allows exploitation of opportunities. Establishing a culture of transparency and enforcement of laws equally and consistently in every (or almost every) instance can help establish trust in authorities who formulate policies (Chowdhury and Audretsch, 2021).This pinpoints the significance and moderation effect of formal institution in three-way interaction of culture, entrepreneurship, and economic growth.
Furthermore, the relationship between informal institutions (culture) and entrepreneurship gets more complex because of the interactions of individual-level factors, economic growth, and formal rules driven by society's informal rules. Countries with smaller gross domestic products (GDP) are associated with higher risk-taking levels, moderate technological sophistication and political risk, and higher levels of economic trouble. Proactive firm behaviors are higher in countries with average levels of technical complexity and higher levels of financial and political risk (Kreiser et al., 2010). In addition to economic policies and growth levels, the basis of countries’ laws enhances firms' proactiveness and risk-taking. Those countries whose legal systems are based on French civil law tend to display lower risk-taking and proactive behaviors. One can see from this a three-way interaction in which culture influences formal institutions, which in turn influences EO dimensions, and then the latter influences business performance and economic development and
Figure 4.2 shows that the study indicates that culture directly affects entrepreneurship and entrepreneurial orientation, such as innovativeness, risk-taking, and proactiveness. It also indirectly affects entrepreneurship through formal institutions, including policies and regulations on property rights, education, economic freedom, investment, and business freedom. Moreover, culture directly influences business performance measured by job satisfaction, market share, sales growth, and profitability. Its effect on economic development is indirect through firms’ business performance, which is impacted by culture, formal institutions, and entrepreneurial orientation, and then the vicious circle continues. In general, as economies change, the influence of national culture on entrepreneurship changes, but not enough evidence to conclude that a particular cultural dimension determines economic growth.