The relationship between culture and Entrepreneurship.
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Abstract
The study investigates the relationship between entrepreneurship and culture. The study indicates that to realize both the social impact and economic impact of entrepreneurship, communities have to implement the strategies of nurturing and cultivating entrepreneurs. Culture consists of various dimensions that influence entrepreneurship. This dimension includes the power distance, collectivism, uncertainty avoidance, human orientation, and assertiveness. Each dimension has a significant influence on the level and the mode of entrepreneurial activity in the community.
Besides, entrepreneurship is a systematic phenomenon that needs individuals who are willing to take challenges and risks and succeed in their ventures. Culture is an informal institutional setting that has a significant influence on entrepreneurship (a formal institutional setting). Culture can have a diverse effect on the entrepreneurial decision during decision-making processes.
Introduction
Although studies that are related to different rates of entrepreneurial activity are largely based on the economic and psychological theories, Castillo, Batista, and Zúñiga (2017) show that there exists a wide recognition that culture and in the entrepreneurial interpretation can provide variable insights related to decision processes in a business. The relationship of entrepreneurship has possible ramifications in different business levels.
Huggins and Thompson (2016) indicate that culture legitimizes personal characteristics which are correlated with entrepreneurial activities that lead to economic development in a county and the society at large. As entrepreneurship is related to formal institutions, culture is related to informal institutions and can conflict with the constraints and the incentives from the formal institutions leading to unintended ramifications. In the business world, there exists conflict and informal establishments related to culture. These establishments play a crucial role in the behavior and decision determination of the entrepreneur.
Secondly, the moral approval approach and the legitimation that relate to the culture make entrepreneurial activities better rewarded and more acceptable. Owing to this reason, Adekiya and Ibrahim (2016) show that more marginal individuals can therefore now be entrepreneurs. The third perspective according to Collins et al., (2017) concerns push-theory. In this view, non-entrepreneurs and entrepreneurs have different beliefs and values. Entrepreneurs will be forced out of the labor force to introduce their business as the gap widens between two groups. Investigations comparing the two groups across cultures have found that there is a difference between the two groups in between the prevailing culture. However, Cacciotti and Hayton (2017) show that culture does not seem to play a major role in the extent to which the two groups differ, and therefore it may play a role in the determination of the number of the potential players within a given population.
In general, Farny et al., (2016) show that three major factors determine the entrepreneurial activity involvement. These factors include the economic environment, institutional motivation, and personal motivation. Culture may play a major role in affecting all the three factors by showing socially accepted conducts and behaviors, therefore, leading to economic objectives and motivation of the entrepreneur as part of the divided subjectivity. Valliere (2019) adds that the accepted and prevailing business norms of culture can influence the attitudes of entrepreneurial activities as well as entrepreneurial involvement even in the new sectors of the economy. For the entrepreneurs starting new business activities, the prevailing cultural beliefs and personal motivations may determine the growth strategies that they pursue.
Literature Review
At the country level, Adekiya and Ibrahim (2016) highlight the benefits of culture which support economic development and entrepreneurship in the country. According to Cacciotti and Hayton (2017), society can contribute to a rise in the innovations and rates by valuing entrepreneurship. Ratten and Ferreira’s (2017) study has shown that by conferring social esteem, and personal behaviors in the community, society can maintain sustainable entrepreneurship.
Culture
Grace and Smith (2016) defines culture as the patterns of values, ideas, and other meaningful symbolic systems such as factors that shape individual behavior. Stephan and Pathak (2016) had their view of culture as the stereotyped patterns of behaviors that are learned and handed down from one generation to another in another community. Beugelsdijk, Kostova, and Roth (2017) define culture as the “collective programming of the mind” which differentiates one category or group from another group.
Beliaeva and Bogatyreva (2018) distinguish two types of cultural manifestation in entrepreneurship: cultural values and cultural practices. Cultural practices include the perceptions of individuals in a given community and the aspirations on how they should exist. These types of cultural manifestation are measured through various cultural dimensions. Beugelsdijk, Kostova, and Roth (2017) indicate that there are four dimensions of culture according to Hofstede which include individualism, uncertainty avoidance, power distance, masculinity, collectivism, and masculinity. Besides, Beliaeva and Bogatyreva (2018) add that other dimensions which include: future orientation, human orientation, and performance orientation.
Uncertainty avoidance is the level to which members seek consistency, order, structure, and formalized processes and rules that cover day to day situations. Practices which relate to the uncertainty avoidance show low support for entrepreneurship. Doğan’s (2016) study shows that uncertainty avoidance is negatively related to the entrepreneurial quality in nations with higher GDP.
Collectivism reflects the level in which people are encouraged by the community institutions to be defined into groups within the society and the organization. In this regard, the communities that value innovations and entrepreneurship introduce efficient systems to promote innovative organizations. Therefore, the institutional ecology affects the rate of activities in the economy, strategic actions, and entrepreneurship in the community. Stephan and Pathak (2016) show that the individuals in the community of reasonable institutions collectivism perceive results as the outcomes as desirable since these organizations strengthen the cultural infrastructure of the society, facilitate creations of new business organizations as well as establishing support systems for training.
Assertiveness reflects the extinct in which people are aggressive, assertive, and confrontational in social relationships. In highly assertive societies, individuals are encouraged to take risks and negotiate aggressively as well as be competitive while in less assertive society’s harmony, supportive relationships are encouraged. Also, from a theoretical point of view, Stephan and Pathak (2016) show that low levels of assertiveness in the community produce fewer entrepreneurship opportunities.
Human orientation includes the level in which people in a community or a society are encouraged and reward others to be fair, friendly, and altruistic. Farny et al., (2016) in his study verifies that a community with individuals with a high degree of human orientation and with low Gross Domestic Product and humane orientation is driven towards high levels of entrepreneurial culture.
Facchini, Jaeck, and Bouhaddioui (2020) show that Hofstede’s cultural dimensions mean that they are imperfect to capture the influence on entrepreneurial choices. Studies that use Hofstede’s dimensions of culture have resulted in different results based on the groups of periods, groups of nations, and the entrepreneurship measures investigated. For instance, Essien (2020) finds that entrepreneurship is influenced by cultural variables. Beliaeva and Bogatyreva (2018) find that innovation on the other hand is positively correlated with individualism and negatively associated with power distance, although the investigation is not persistent across different periodical times. Alongside low uncertainty avoidance the Stephan and Pathak (2016), finds out that individualism is related to entrepreneurship and through its correlation with the likelihood of the entrepreneurs possessing an internal locus of control that encourages entrepreneurship. Al-Kadi (2017) shows that depending on the nation’s wealth, culture may have a positive or a negative effect which may influence the entrepreneurial activities in the country.
Entrepreneurship
Entrepreneurship is an essential process that initiates change through the creation or innovation of new products. Also, new markets, jobs, and customers are created through innovation and renewal of organizations which results in the impact of both cultures, economic and social systems in the business sectors, nations, and regions. Ratten and Ferreira (2017) show that entrepreneurship is described as a rational decision-maker who identifies business activities, takes a risk, and provides the management of his business activity in their organization. Doody, Chen, and Goldstein (2016) define entrepreneurs as individuals who initiate a business activity and start to venture. Entrepreneurs are characterized and several qualities and traits which differ from the business managers. This includes the activities of high need for achievement which includes challenge preferences, acceptance of responsibility in the process of business establishment and innovativeness, need for independence, and innovativeness.
Doğan (2016) shows that the entrepreneurs scored higher in terms of the need for business achievement and that managers in small businesses. Additionally, enterprises have special qualities of ambiguity tolerance and risk-taking propensity. In general, previous studies have an entrepreneurial profile and value system has been consistently related to the need for achievement, risk-taking, independence, internal locus control, and risk-taking propensity. However, this study not include how culture and the environment that produces these entrepreneurs.
Discussion
Many studies investigate the correlation between culture and entrepreneurship. Grace and Smith (2016) find a positive correlation between entrepreneurship and culture. Hustedde and Breazeale (2017) add that, despite the formal education that the entrepreneurs undergo in educational institutions, culture has a special effect on entrepreneurial involvement in entrepreneurial activities.
Lounsbury et al., (2019) states that entrepreneurship is encouraged by higher self-effectiveness. This can be sometimes different as it may not affect the entrepreneur’s performance positively. The results are very similar to the recent investigation that there is a significance between social values and entrepreneurial performance leading to growth and overall success to entrepreneurial activities.
It is now undisputed that culture has a profound influence on entrepreneurship facets in society. The richness of motivation in entrepreneurship suggests clearly that entrepreneurial behavior responds to the set values from the cultural environment. Entrepreneurs – like all agents in the economy – operate in cultural concrete and social institutions settings. Lounsbury et al., (2019) highlights that some of the information and the knowledge that an entrepreneur requires is to develop their organization and business as well as acquire them within their institution and culture. The entrepreneurial process is demanding and demanding with many obstacles. A community that accepts the uncertain results of the entrepreneurial endeavors and social views entrepreneurial failures as not a waste of time, resources, and efforts but as an opportunity to do better is likely to attract entrepreneurs to and lead to the growth of entrepreneurial culture over time.
Challenges
There exist a challenge on the link between culture and entrepreneurship. Firstly, it is not easy to differentiate the cultural entrepreneur and cultural manager in a business setting. Entrepreneurs can have opportunities without considering the resources under regulation and take risks to achieve results that have benefits to the community. The managers on the other hand have standard practices to maintain functional firms. The training of cultural entrepreneurs is different from cultural managers in an organization. Entrepreneurs create a vision for an organization that bridges the gap between the market and the community needs, cultural experiences, cultural traditions, and innovations.
Secondly, it is difficult to combine collaborative working and individualistic values for the entrepreneur. Grace and Smith (2016) shows that entrepreneurs are independent who work according to their values, pace, and beliefs. This trait is regarded to foster entrepreneurial creativity and innovation and in turn, cultural practices are stated to have common values and beliefs.
Finally, researchers have identified various measures in reliability and validity to capture the concept of entrepreneurship across the nations. Popular measures in this sense include the self-employment rate and publicly reported organizational formation rates among other measures. However, there exist challenges in the already established measures which may seem to be severe. Firstly, they do not include the cultural aspects across various regional divides.
Conclusion
This study examines the relationship between entrepreneurship and culture. The investigation concludes that entrepreneurship is a systematic phenomenon that needs individuals who are willing to take challenges and risks and succeed in their ventures. In this regard, many studies have focused on identifying the issues that promote or hinder entrepreneurship. Among one of the influential effects in Institutional Economic Theory, which shows that there are informal and formal factors that influence entrepreneurial activities. This informal aspect includes culture as one of the major aspects in the development of entrepreneurial activities.
Various authors have raised some dimensions of culture that affect entrepreneurial activities. These dimensions include power distance, collectivism, uncertainty avoidance, human orientation, and assertiveness. For instance, Stephan and Pathak (2016) show that power distance influence significantly the entrepreneurial activities in society. The study shows that societies with high power distance will have lower levels of entrepreneurial activities. This is due to the reason that people in higher socioeconomic strata will have the necessary resources to start entrepreneurial activities unlike the individuals in the low economic strata. Consequently, the study shows that the high levels of uncertainty of the avoidance dimension are associated with low levels of entrepreneurial activities.
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