Relationship between culture and entrepreneurship

Relationship between culture and entrepreneurship

The decision to become self-employed or to start one's own business is influenced by a number of factors. Professional background, the level of education, current employment, personality traits and the social and regional environment have an impact on the start-up decision. Individual factors alone cannot explain why certain individuals become self-employed and others prefer paid employment. Albert Shapero already pointed to this phenomenon some 20 years ago when he characterised the business foundation process as "overdetermined" (see Shapero 1984, p. 23). Culture can influence economic activity in diverse ways: Culture is known to influence attitudes towards work and consumption. Culture has an influence on the organisation of economic activity and the shaping and effectiveness of institutions, and culture also has an impact on social networks and confidence building within social groups (see Fukuyama 2001, p. 3132ff). Of primary interest in the present study is what kind of influence culture may have on business start-up activities. Such a relationship may be given in different ways. Mostly, analyses on the relationship between culture and start-up activities or entrepreneurship are conducted by considering attitudes towards entrepreneurship or business foundation. One proceeds from the fact that cultural features influence attitudes towards start-ups and that these attitudes, in turn, have an impact on start-up activities. Such a relationship between culture, attitudes and start-up activities may exist on the individual, as well on regional and group levels (see Davidsson/Wiklund 1997, p. 182). There is a direct relationship on the individual level when, on account of cultural features, many persons exhibit a positive attitude towards business foundation and, due to such an attitude, decide to become self-employed or to start a business. In such a case, there is a direct relationship between culture and start-up activities because it is precisely persons with a positive mindset who become self-employed. This argumentation concurs with those of Schumpeter (1934), McClelland (1961) and Kirzner (1985), who likewise describe a direct linkage between attitudes and business foundation activity. Further, there may exist a relationship between culture and foundation activity on the societal level. Etzioni (1987) argues that the values and norms predominant in the social environment of an individual may have an influence on his or her propensity to start a business. In line with this argumentation, a culture averse to business foundation may suppress start-up activities. This would, for example, be the case when entrepreneurs and entrepreneurship have a bad image within a society or a region and the individual therefore does not consider this option of livelihood although he or she does not harbour any reservations towards entrepreneurs. In such a case there is a relationship between culture and business foundation activity not on the individual level but also on the level of groups, region or society. Seen theoretically, the relationship among relevant magnitudes of influence, business foundation attitudes and start-up activities may be explained by the theory of planned behaviour. This theory, derived from social psychology, is one of the most frequently used approaches to explain and predict human behaviour (see Ajzen/Fishbein 1980; Ajzen 1991). Institutional economics, as well, can establish a relationship between culture and entrepreneurial activity. Institutional economics deals with institutions and their impacts on human behaviour. The term "institutions" is to be understood here in a comprehensive sense meaning both formal laws and organisations and informal rules of behaviour, for example standards, habits and customs. North (1992, p. 3) describes institutions as restrictions of human interaction conceived by people, in short: as rules of game of a society. Commonly, institutional economics is devoted to formal institutions such as law, governmental regulations or enterprises (see Richter 1994, p. 2f). As a matter of fact, informal or, as North puts it, "formless" restrictions do play a great role in modern communities. "Our daily dealings with others – be it in the family, in social relations, outside of these or in working life – are subject to an order that is mainly determined by behavioural codices, habits and customs and conventions." (North 1992, p. 43,). Formless restrictions emerge from pieces of information that have been passed on in society and are part of culture. Cultural traits and hence formless restrictions are extremely long-lived and change but 5 slowly. Even when form-tied restrictions change abruptly, the culturally specific formless restrictions tend to change only slowly (see North 1992, p. 43ff). Human behaviour and thus foundation behaviour is essentially shaped by institutions. Institutions constitute the scope of action for entrepreneurs. The respective shaping of the institutional framework influences the behaviour of choice in favour of or against business foundation and, consequently, the availability of business founders. The formal institutions of a society ensure the existence of entrepreneurial opportunities. The informal institutions, i.e. attitudes, habits and customs, determine the extent to which these opportunities are actually recognised and grasped (see Welter 2002, p. 2f). The formal and informal institutions are mutually dependent here. If members of a society have a strongly felt need for security, in the long term this will lead to the emergence of formal institutions that meet such a security need. The approaches presented here are designed to establish a relationship between culture, attitudes and economic activity. Cultural values and norms influence attitudes and patterns of behaviour and in this way have an impact on economic activities. When empirically verifying these approaches, it proves problematic that culture cannot be measured directly. Culture acts as a kind of background variable that manifests itself in attitudes and patterns of behaviour. Apart from cultural background, a number of other individual-related influences determine attitudes and patterns of behaviour, too. Furthermore, people belong to different social groups. That is why regional cultural features overlap with group-specific cultural features (see Hofstede 1994, p. 10ff; Shapero 1984, p. 26). Persons with the same regional cultural background may also display different attitudes and patterns of behaviour. Only in sum is it to be expected that cultural differences lead to varying frequencies of certain attitudes in different regions or cultural groups. Therefore, it is quite difficult to distinguish between individual related features and cultural features. Attitudes and patterns of behaviour can be categorised as cultural features only when these are not individual features of single persons. Thus it is an empirical question whether certain features can be regarded as individual features or as cultural features of a major group of individuals. 

Organisation for Economic Co-operation and Development. (2016, October, 13). Entrepreneurial Culture and attitudes. Retrieved from http://www.oecd.org/site/cfecpr/42202841.pdf