Entrepreneurship and innovation in emerging economies

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Entrepreneurship and Innovation in

Emerging Economies

Ellen Denteneer 10342790 23-06-2017 Final Version

MSc Business Administration - International Management Track University of Amsterdam

First Supervisor: Drs. M. Mashiho Second Supervisor: Drs. V.G. Scalera

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Statement of originality

This document is written by Student Ellen Denteneer who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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List of tables and figures

1. Figure 1. Visual Representation of the Hypotheses ………30 2. Table 1. Descriptive statistic and Pearsons Correlation ………..38 3. Table 3. Multilinear Regression Analyses on Innovation ………...39

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Abstract

Studies about entrepreneurship and innovation have proposed that the concepts financial capital, human capital, entrepreneurship, culture are related to innovation. However, researchers have not yet reached consensus on the nature of these relations and their generalizability is not yet clear. A better understanding of these relations will provide a new insights to the nature of entrepreneurship. This thesis sets out to explore these relations in a setting of emerging economies, because of their rapidly changing environment in terms of capital and innovation it is interesting to see if the proposed relations are also visible in these settings. Additionally, the moderating effect of a supportive entrepreneurial culture on the proposed relations is assessed.

The data of 138 countries were included in this thesis. The results indicated that there was no relationship between financial or human capital with innovation and that a supportive entrepreneurial culture had a negative impact on these relations. Unfortunately, the test regarding the relation between human capital and innovation was not significant and therefore needs further research. This thesis contributes to the debate on the relation between financial capital and innovation and supported the school of thought claiming financial capital is an outcome instead of a driver of innovation. If the test concerning human capital would be significant it would show that the influence of human capital is context depended and is not necessarily a driver of innovation and that a supportive entrepreneurial culture leads to less innovation. Finally, the result back up the criticism of the allocative theory on entrepreneurship and the retreat of the relevance of this theory.

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1. Introduction

A factor that is commonly seen as one of the key drivers of economic growth on firm, industry, regional and national level is innovation (Frank, Cortimiglia, Ribeiro & Oliviera, 2016). Innovation enhances the position of emerging economies on global markets and is a sustainable driver of the economic growth of a country (Govindarajan & Ramamurti, 2011). Entrepreneurs are the ones driving innovation on a national level (Schumpeter, 1934), they take an invention and use the resources available to them to implement the invention in such a way that it will spread and become an innovation. Hence, individual companies and entrepreneurs play a key role in the development of innovation in (emerging) countries.

Entrepreneurship and innovation are linked together because entrepreneurs are the ones who carry out the innovations. New enterprises and innovation can bring enormous benefits for emerging economies, the development of enterprises can amongst other things alleviate the poverty and create more employment (Robson, Haugh & Obeng, 2009). However, the results of entrepreneurs are not always innovative, they can also be of an imitative character which can result in a highly competitive situation, leading to diminishing returns for entrepreneurs (Bradley, McMullen, Artz & Simiyu, 2012). Not every country has the same level of innovation productivity, and emerging and developing economies are working hard to fight to catch up with more developed economies (Wu, Ma & Zhuo, 2017). However, they still face additional challenges in retrospect to more developed economies. For instance, in emerging economies there is a higher risk of imitation due to the lack of developed antitrust regulation and intellectual property together with the high concentration of industries, this can inhibit the motivation to innovate (Hermelo & Vassolo, 2010).

Therefore, hence entrepreneurs play such an important role in the production of innovation and the benefits of innovation (Schumpeter, 1934), it is interesting to know what stimulates

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entrepreneurs to become innovative. Schumpeter (1934) introduced the entrepreneur in his theory about economic growth. Entrepreneurship has been a field of research for quite some time now, even though it has not always been a priority on the research agenda. Over time several theories concerning the nature of entrepreneurs, entrepreneurial opportunities and the process of innovations were conducted. The three most important theories regarding the generating of entrepreneurial opportunities are: the discovery theory, the allocation theory and the creativity theory (Bradley et al., 2012). Each theory has a different perspective on what leads to the discovery of entrepreneurial opportunities and innovation, researchers have not yet reached consensus on what the best theory is to explain innovative entrepreneurship. Previous studies have shown that there are different constructs linked to innovation through entrepreneurship, such as human capital, financial capital, and culture.

Financial capital can be used as an investment in the research and development (R&D) department and therefore seen as an important input for the production of innovations (Tsai & Wang, 2004). However, this relationship is not unquestionable, influential economists such as Bauer & Yamer (1959) argued that financial capital is an outcome of economic development and rather than a driver of economic growth. More recent research conducted by Bradley et al. (2012) supported this notion and found that capital alone is not enough for economic growth, they found that financial capital does not provide a necessary nor a sufficient condition for innovation. Human capital is seen as a driver of economic development because it empowers individuals to seek out new opportunities and create a better livelihood (George, McGahan & Prabhu, 2012). Human capital represents a countries ability to produce and commercialize on innovative technology (Wu et al., 2017). The development of human capital can be displayed by a higher level of education and skill development of a population (Sachs, 2005).

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Another important determinant of entrepreneurship and innovation is the culture of a country (Chrisman, Chua & Steier, 2002). Culture is a broad term and can be defined in a number of different ways. The most common and widely accepted definition was proposed by Hofstede (2001), he defined culture as a collective programming of a group, which distinguishes groups of people from each other. Within these groups, there is a shared perception of reality which guides the behavior of the group (Chrisman et al., 2002). Prior studies have examined how culture plays a role in terms of innovation (Jones & Davis, 2000) the cultural dimensions of Hofstede (1980) were used to explain innovation, Shane (1992) found evidence for the ability of individualistic, non-hierarchical cultures to be more innovative than others and he suggested later (1995) that societies that are more willing to accept uncertainty than others are more innovative. Similarly, the differences between countries in terms of entrepreneurial behavior were examined. For instance, Kemelgor (2002) conducted a research that found significant differences in the entrepreneurial orientation between the Netherlands and the U.S. and Adler (1997) examined the different outcome in ‘doing-oriented’ cultures and ‘being-oriented’ cultures.

Over the last few decades, there has been a global shift in economic power. Traditional underdeveloped economies became more stable and gained economic power, their GDP increased, the living standards of their population has risen and they started to produce competitive firms and innovations. The middle class of emerging economies grew as the economic development progresses, which had a positive effect on the level of human capital and financial capital in a country (Das, 2009). Traditional theories had made a strong connection between the capital of an entrepreneur and their innovation capabilities. Therefore, the increase of human capital and financial capital could have been the driver of entrepreneurship and innovation in the emerging economies. The entrepreneurs and the innovations they started to produce, on their turn could have

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been the key factors driving the rapid economic growth these countries have experienced over the past decades (Wong, Ho & Autio, 2005). Because of this rapidly changing and developing situation in emerging economies, it is interesting to see if the same patterns between (human and financial) capital, entrepreneurship, and innovation appears in these environments. Additionally, even though entrepreneurship seems universal as a driver of economic growth and innovation, the research is primarily driven by U.S. researchers in a U.S. context. Therefore, it is interesting to find out if these theories are generalizable to other countries with different cultural and economic environments (Mueller & Thomas, 2001).

In order to verify and generalize the theories of entrepreneurship and innovation this thesis aims to examine the relationship between human capital, financial capital, and innovation on a national level in emerging economies and examined the moderating effect of culture on this relationship. This lead to the formulation of the following research question:

What is the relationship between human & financial capital and innovation in emerging

economies? And what is the moderating effect of culture on this relation?

By conducting this research, this thesis will contribute to the research field of entrepreneurship. The field of entrepreneurship tries to understand how, by whom and with what effects entrepreneurial opportunities are discovered and exploited (Shane & Venkataraman, 2000). There are a large number of studies connecting capital, entrepreneurship, culture, and location to innovation (Bradley et al., 2012; Crossan & Apaydin, 2010; Sledzik, 2013). Because innovation and entrepreneurship are drivers of economic growth it is important to know more about the necessary conditions for entrepreneurs to become innovative (Liñán, & Fernandez-Serrano, 2014). Understanding how entrepreneurs discover, recognize or exploit entrepreneurial opportunity has

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rich and practical implications for entrepreneurship as a scholarly field and governmental policy (Marvel & Lumpkin, 2007). The context of emerging economies, because of their rapid economic development and changing environment offers a new setting to verify proposed theories. It is interesting to see if proposed relations between (human and financial) capital and innovation also appear in these settings because it will provide additional support for these theories.

The second part of the added value of this thesis is related to the development of the different theories regarding entrepreneurial opportunities. Several different theories exist concerning the evolvement of entrepreneurial opportunities and researchers have not reached consensus on what the conditions are for individuals to generate entrepreneurial opportunities, or what enables them to leverage these opportunities in such a way that they will become an innovation. In the literature review, the three most important theories regarding these processes will be discussed and through conducting research on national bases on entrepreneurship this thesis sets out to contribute to the development of these theories.

During this thesis the following structure will be followed: first, it will elaborate view on the main theoretical concepts of this study through an in-depth review of the relevant literature regarding emerging economies, entrepreneurship, and innovation. Second, the hypotheses are presented and discussed in the theoretical framework. Followed by the methodology section in which the method and the data of this thesis are described, along with the explanation of the different variables. After the methodology section, the results of the statistical analyses are addressed followed by the discussion in which the hypotheses are discussed in the context of the literature together with the limitations of the research and the implications for future studies. Finally, in the conclusion, we provide a quick overview of the entire thesis and answer the research question.

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2. Literature Review

This section of the thesis provides an overview of previous literature related to the research question. The relevant topics will be discussed to get a full understanding of the different concepts and the relations between them. First, the development of economies and especially emerging economies will be discussed. Then the concept of entrepreneurship will be addressed and the different views on entrepreneurship will be discussed as will the relationship between entrepreneurship and innovation. Lastly, the concept of innovation will be thoroughly reviewed. 2.1 Emerging Economies

There is a large body of research concerning the development of economies. A countries economy can be classified into three stages: underdeveloped economies, emerging or developing economies and developed or advanced economies (Singh, Amir, Fanesh & Venayagamoorthy, 2014). Underdeveloped economies are countries that have a low average income per capita and low levels of accumulated capital (Bauer & Yamey, 1959). An emerging country is a country where the economy is in a state of transition, this transition can take place from an underdeveloped economy in a developed economy but can also move towards the opposite direction, meaning from a developed economy in an underdeveloped economy. However, the term is most widely used to describe countries transitioning from underdeveloped economies towards developed (Sechel & Gheorghe, 2014). Economies are characterized as developed or advanced when they have a high level of GDP per capita, developed industries and when their population has a high standard of living (Husain, Mody & Rogoff, 2004). Each stage of economic development presents different political, social and economic issues (Singh et al., 2014).

Further distinctions can be made in the transitioning position of the development of emerging economies. Simon (1997) distinguishes three categories, the most advanced markets, narrow emerging markets and latent emerging markets. Advanced markets are markets that have

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low inflation rates and where there is some stability in the exchange rates. The financial and banking systems are developed, and are open to international financial markets and have sophisticated supporting mechanisms. These countries are not categorized as developed yet because their position is seen as vulnerable and do not produce companies that are able to fulfill the conditions to be listed (Simon, 1997). Narrow emerging markets are not as open to foreign investors as advanced emerging markets. The rate of inflation is still high and the monetary and financial markets do not have the right infrastructure to provide optimal conditions for investments. The latent emerging markets are still at the starting point of economic development, their economic performance is still quite poor and the access to financial markets remains limited. They need capital to support the entry on increasing trajectory and to support the further development of financial infrastructure (Sechel & Gheorghe, 2014).

Many economists believe that the development of the emerging economies brings a new force in the world which will boost the world economy (Sechel & Gheorghe, 2014). The developing and transitional countries have grown faster than more advanced and developed countries over the last decades, this has led to a shift in the distribution of income, this development shows a shift of power from ‘unipolar’ towards ‘multipolar’. Mainly the BRICS countries, Brazil, Russia, India, China and South Africa have gained in power, while traditional strong economies shave weakened (Ignat & Bujancă, 2014). In the late twentieth century there a shift took place concerning the traditional economic positions of countries around the world (Das, 2009). The United States had maintained the position of the largest national economy in terms of GDP and one of the economies with the highest average income from half way of the twentieth century until early 2000 (Wade, 2011). This is about to change, over the past 30 years emerging economies have been improving

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their economic position and China will pass the United States and will become the largest economy by 2020 (Eichengreen, Pardee, & Pardee, 2013).

The global shift in the world economy is visible through a number of economic changes in the world such as the decreasing share of the GDP in the global economy, this was 72% in 2000 and has dropped to 53% in 2011 according to the IMF. The increased output of China, which has risen from 6% in 1980 and 22% in 2008. The strong rise of influence of the monetary currency of China (yuan) in perspective to the rest of the world. The share of developing and transitional countries rose by 10% between 2000 and 2009 and the export from South Asia to the United States grew from 36% to 46% of their exports (Wade, 2011). The economy is expected to grow faster in emerging economies than in advanced economies according to the International Monetary Fund (IMF) (2014), however, the difference is diverging and the growth rates are coming closer together.

One of the possible driving forces behind the global shift of economic power is the globalization trend, due to international trade and international investment third world countries experienced an intake of financial and human capital (Das, 2009). This, amongst other causes, provided them with the capabilities to reform their economy and some of the emerging economies became strong rivals for the established world leading economies such as the U.S and other Western countries. Some economist even think that the BRICS countries, meaning Brazil, Russia, India, China and South Africa, will become the world leading economies by 2050 (Wilson & Purushothaman, 2003).

Economic and financial globalization is considered to be one of the most powerful forces to transfer the global economy. It enabled East Asian to achieve income convergence, this indicates that global income differences are falling not just poverty (Das, 2009). The overall global GDP grew very strongly over the past decades (Maddison, 2003) for less developed economies who

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grew with, this meant a significant improvement in living standards for their population (Kohler, 2002). Which led to the growth of the middle class among the population of emerging economies, and can play a reinforcing role of economic growth in developing economies because it may enables the middle class to become entrepreneurs now that they have more financial capacity to take on entrepreneurial risk (Banerjee & Duflo, 2008).

Over the past few years emerging economies have worked to improve their business climates and managed to catch up with more developed economies, however emerging economies still have an additional set of challenges to face to maintain a sustainable competitive position (Alvarez and Barney, 2004), one of the key factors in obtaining such a position is innovation (Frank et al., 2016). Emerging economies have started producing their own innovations (Govindarajan & Ramamurti, 2011).The initial innovations of firms from emerging economies are generally speaking not radical innovations, firms from emerging economies are more focused on exploiting home country specific advantages at first. Imitating successful, experienced firms from developed economies helps firms from emerging economies to reduce uncertainty and flattens their learning curve, however as a consequence firms do not develop their own identities, to become a successful competitor, firms need to differentiate themselves (Baum & Haveman, 1997). Kim & Nelson (2000) found that when a country reaches a stage where innovation is possible, imitation was no longer enough to ensure a sustainable profitable position for firms, and firms have to develop their own innovations to be able to survive. Over time the ability to produce innovation grew and innovation started to appear from emerging economies to developed economies (Govindarajan & Ramamurti, 2011; Li & Kozhikode, 2008).

A lot of research is done regarding the drivers of economic development. Peter Thomas Bauer is an influential economist who has done a lot of research regarding the conditions and

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drivers of economic growth (Dorn, 2002). Bauer & Yamey (1959) conducted an influential study about the development of poor economies. They found that for the economy of a country develop, a few changes needed to take place. The aggregate size and the regional distribution of population changes, there is a change in culture amongst individuals, their desires and (work) attitudes and the population needs to acquire more skills. Some of these changes lead to the attraction of more capital to a country and some ensure a more effective use of the available capital. The stock and capital infrastructure of a country is another important factor in the economic development and needs to endure some changes. The governments have to have opened their economic boundaries and let foreign investors invest in the country, furthermore the infrastructure of the stock and capital market needs to be further developed and be modernized (Bauer & Yamey, 1959). Later Bauer concluded that economic development was mostly depended on the individuals, culture and institutions of a country and not the large scale investment or policy planning (Dorn, 2002).

Another factor that is seen as a driver of economic growth is financial capital(Miller, 1998). There is a wide notion of the cycle of poverty and underdevelopment, meaning that the lack of capital in a country prevents the possibility to attract and produce more capital and therefore prevents economic development (Perry, 2006).Bauer & Yamey (1959) already stated in 1959 that this negative cycle is not unquestionable. Capital formation plays an important role in the economic development of a country, however, it is not correct to single out capital as the only key factor in the process of development (Easterly & Levine, 2002). This notion was confirmed by more recent studies which found that capital alone is not enough for economic development (Bradley et al., 2012). They even argue that an increase of capital can stimulate imitative entrepreneurship instead of innovative entrepreneurship, which can lead to diminishing profits which is an undesirable outcome.

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In this section of the literature review, entrepreneurs and entrepreneurship will be discussed. There are a lot of theories about entrepreneurship and the research field has a long history. First, the first appearance of the entrepreneur in the literature will be addressed and second the role he played in relation to business and innovation followed by the different kinds of entrepreneurs that exist. After this section, several theories (Neoclassical, Psychological and Austrian) which try to explain what leads people to become entrepreneurs will be reviewed. Followed by discussing the influence of culture, region, and motivations on entrepreneurship and innovation. Finally, the three important views on how entrepreneurs find entrepreneurial opportunities are considered.

The first economist who wrote an influential article on the entrepreneur was Schumpeter in 1934. However, the field of entrepreneurship as a field of research has only gained extensive interest over the last few decades. Due to some structural changes in the society in the 1970s and 1980s which created a state of disequilibrium leading to opportunities for innovation and entrepreneurship. These activities sparked the interest in theories of entrepreneurship and even though the research field of entrepreneurship was not always a priority on the mainstream research agenda, the body of research has developed extensively (Cornelius, Landström & Persson, 2006)

The first type of entrepreneur was seen as an agent who uses an enterprise as a source of profit. The entrepreneur gets a return on his capital and does not work for wages or landlords (Courvisanos & Mackenzie, 2014). Schumpeter (1934) was the first one to formally introduce the entrepreneur and connects him to innovation. Schumpeter saw the entrepreneur as the individual who drove innovation, the one who took an invention and transformed it into an innovation. The entrepreneur employed workers, capital and natural resources in order to actualize the new knowledge into a new product. In this era, the entrepreneur is seen as a manager or organizer in the innovation process (Sledzik, 2013). The higher responsibility of an entrepreneur to drive the

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innovation within a country is rejected by Baumol (2010), even though Baumol beliefs that there is a central role in economics. However, he did not yet succeed in specifying the endogenous role an entrepreneur plays (Courvisanos & Mackenzie, 2014).

Several authors use different typologies to distinguish between different types of entrepreneurs the classification of opportunity-based entrepreneurs and necessity-based entrepreneurs is been used in several studies (Acs & Varga, 2005). Opportunity-based entrepreneurs are entrepreneurs who choose to be entrepreneurs because they spot an opportunity and think they will be able to profit from an opportunity, necessity-based entrepreneurs are entrepreneurs because they lack other options (Acs & Varga, 2005).Baumol (2010) distinguishes between a dynamic entrepreneur and a disruptive entrepreneur. The dynamic entrepreneur who is productive in a welfare enhancing development process, this is the type Schumpeter (1934) described in his works. Baumol also identifies the disruptive entrepreneur, who is unproductive and is only interested in rent-seeking activities (Courvisanos & Mackenzie, 2014). Bradley et al., (2012) address the difference between innovative entrepreneurship and imitative entrepreneurship. Innovative entrepreneurship produces new ventures or products that will enhance the economic development in contrast to imitative entrepreneurship which copies successful strategies and products. This enhances competition which drives the profits down and leads to diminishing returns on the investments made. Thus, even though entrepreneurs play an important role in the economy of a country they can also have a negative influence when they take on the role of necessity based, disruptive or imitative entrepreneurs.

There are two lines of work regarding entrepreneurs in the literature, one regarding entrepreneurs as the ones who establish new ventures and the second one emphasizes the role of entrepreneurs as the ones taking care of renewal in large firms (Hagedoorn, 1996). The latter is commonly described as corporate entrepreneurship or intrapreneurship. Corporate entrepreneurs

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are the ones driving organizations to use opportunistic activities to create value while taking on some risk, they are often engaged in product-market innovation and are used to take on somewhat risky ventures (Wei & Ling, 2015). These firms are the first to come up with proactive innovation and beat their competitors to the punch. Non-entrepreneurial firms are the ones that do not innovate a lot, avoid risk and follow strategic competitors instead of finding their own way (Luo, Zhou & Liu, 2005). Literature shows that corporate entrepreneurship takes on an important role in the creation of innovation. The influence of the corporate entrepreneurship on business is caused by corporate culture and leadership (Hsu, Tan, Jayaram & Laosririhongtong., 2014).

Entrepreneurship varies a lot between different countries, regions or firms, not everybody has the ability to become entrepreneurs, some people lack the skills or motivation to become the entrepreneur (Bradley et al., 2012). However, it is interesting to know what factors determine if an individual becomes an entrepreneur. There are three main schools of thoughts, the Neoclassical Equilibrium theories, Psychological theories and the Austrian theories, which try to explain the differences between people’s ability to recognize the entrepreneurial opportunity. Each of these schools has a different set of assumptions about the nature of the entrepreneurial process (Shane, 2000).

The Neoclassic Equilibrium theory is based on the model of Khilstrom and Laffont’s (1979) and assumes that all opportunities have been recognized and all transactions are perfectly coordinated. Therefore, due to personal preferences, people choose to become entrepreneurs instead of employees, however, everyone is capable of becoming an entrepreneur (Shane, 2000). Psychological theories assume that entrepreneurship is a function of a set of stable characteristics that some people possess and others not. Therefore, some human attributes such as the need for achievement, willingness to bear risk, self-efficacy, internal locus of control and tolerance for ambiguity determine who will become an entrepreneur and not the information about opportunities.

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This process depends on the willingness and abilities of people to exploit an opportunity rather than recognize one (McMullen & Shepherd 2006). According to the Austrian economists, it is the possession of information that determines if someone will take advantage of an opportunity. This is an important difference because due to the fact that entrepreneurs (often) do not remain entrepreneurs for life, it is less likely that stable attributes will affect the decision to become an entrepreneur (Foss & Ishikawa, 2007).

Shane (2000) wrote an influential article on the three theories describing three important differences between the Austrian theory and the Neoclassical and Psychological theories. The first big difference is that according to the Austrian the process of discovering entrepreneurial opportunities is not mechanical.If the entrepreneur cannot identify all entrepreneurial opportunities he cannot maximize all these options. Second, the Austrian explanation of entrepreneurs does not depend on human attributes, according to this view entrepreneurship depends on an external factor. Third, the Austrian economics consider the exploitation of opportunity endogenous to the opportunity discovery. The Austrian view on entrepreneurship has some implications for the two previous frameworks in order to determine who becomes an entrepreneur, how to organize entrepreneurial efforts and the influence of the government on the entrepreneurial process.

Besides the theories concerning the necessary conditions to create an entrepreneur, personal preferences, personal characteristics or information an individual possesses, another important topic regarding the research field of entrepreneurship is how entrepreneurial opportunities are generated by an entrepreneur. The recognition of entrepreneurial opportunity is an important ability for entrepreneurs, the process of recognition is likely to lead to the discovery of more entrepreneurial opportunities than the search for entrepreneurial opportunities (Gaglio & Katz, 2001). A better understanding how entrepreneurial opportunities originate could provide better

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insights to how entrepreneurs generate and exploit entrepreneurial opportunities which is important because a better understanding of entrepreneurs can help stimulate entrepreneurship in the future. There are three important views on the origination of entrepreneurial opportunities: the allocative view, the discovery view and the creativity view which each have their own ideas how entrepreneurs find entrepreneurial opportunities (Bradley et al., 2012). According to the allocation view, entrepreneurship is the process of reallocating existing resources into more efficient means. As a result, people with less capital, human or financial, are thought to be excluded from entrepreneurship, not because they fail to recognize opportunities but because the lack the capital to exploit these opportunities (Sarasvathy, Dew, Velamure & Venkataraman, 2010).The discovery view views opportunities as a part of the environment and entrepreneurs simply have to discover them by watching signal for the environment, an entrepreneur has to keep learning and experimenting to be able to discover them (Zahra, Rawhouser, Bhawe, Neubaum & Hayton, 2008). The creativity view proposes that opportunities are co-created through a process of social negotiation among various stakeholders (Sarasvathy et al., 2010).

The creativity view and discovery view are gaining importance due to critique on the allocative view. The critique entails that the allocative view implicitly assumes that each person has the capacity to be an entrepreneur when there are enough resources available (Bradley et al., 2012). Evidence has shown that even in more developed economies where capital is available the percentage of successful entrepreneurs lays around three to ten percent of the population (Bosma, Acs, Autio, Coduras & Levie, 2009). Additionally, recent studies have found that not all people are equally likely to recognize entrepreneurial opportunities which makes this view less relevant (Shane, 2000). Finally, according to the allocative view of entrepreneurship, entrepreneurship will most likely lead to imitative entrepreneurship. Hence if all opportunities are known to everyone,

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and people only need the right resources everyone will take advantage of the same entrepreneurial opportunities which lead to a market full of similar ventures (Bradley et al., 2012).

Besides the three main theories on the individual conditions for entrepreneurship and the three theories on the generation of entrepreneurial opportunities, there have been a number of studies conducted on other facets of entrepreneurship. Such as the motivations of entrepreneurs to start a venture Porter & Stern (2001) found that external factors have an impact on their motivations and on their ability to be innovative just as internal factors do (Porter & Stern, 2001). The external factors can be formal such as job opportunities, available capital, policies and resource commitments, but they can also be cultural. The motivations of entrepreneurs have a huge influence on their aspirations with their enterprises (Hessels, van Gelderen & Thurik, 2008). The study of Damanpour (1991), related to corporate entrepreneurship found that the innovativeness of an organization was related to the attitudes of the top management. The top management can inspire and motivate their employees to innovate through their verbal support.

Even the geographic region of an entrepreneur has an influence on how an entrepreneur perceives opportunities (Chrisman et al., 2002), this could be related to different cultures in those regions. Culture plays an important role in the economic development of a country (Minkov & Hofstede, 2012) through its influence the characteristics of entrepreneurs (Ma & Todorovic, 2012). Even though entrepreneurs in different regions share some universal traits, they also have traits which are specific for their culture (Yasin, 1996). Entrepreneurship is linked to cultural values and beliefs in a region that has either a stimulating or inhibiting effect on the behavior of entrepreneurs and their innovativeness (Eroglu & Picak, 2011). In addition to culture, the variation in entrepreneurship across different geographical regions could also be influenced by the different resources available in those regions, such as education or finance. Hence, it is argued that cultural

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diversity can explain a part of the differences in the national level of economic, social, institutional or scientific variables together with other variables based on the region's resources (Schwartz & Zamboanga, 2008).

Two important resources related to innovation are financial and human capital. Financial capital can be used as an investment in R&D and lead to the generation of more innovation (Tsai & Wang, 2004). According to Schumpeter (1934), credit, or in other words financial capital, is only a secondary part of the growth mechanism of an entrepreneur. He states that when recovering from a recession, an influx of financial capital is not an effective way to stimulate the recovery of the economy. It can even be argued that the outcome of lowered interest rates will be worse because of a two-fold damping process on the discontinuous innovation required to generate the growth necessary for economic recovery (Courvisanos & Mackenzie, 2014). A lot of research is done concerning the relationship between human capital and innovation. Human capital is defined as the labor skills and knowledge of an individual (OECD, 2001), which can be stimulated through state education policies to provide a learning environment (Courvisanos & Mackenzie, 2014). The literature views human capital as an important aspect in regards to the recognition of entrepreneurial opportunities by entrepreneurs (Marvel & Lumpkin, 2007).

2.2 Innovation

Currently, there is an unprecedented interest in the role of innovation in the economic development process. Different forms of capital play a significant role in relation to innovation (Neubert, Bradley, Ardianti & Simiyu, 2015) Over time, a lot of research was conducted related to the relationship between human capital, financial capital, and innovation (Wu et al., 2017). However, the first and most influential researcher on innovation was the economist Joseph Schumpeter (Sledzik, 2013). Schumpeter identified two primary drivers behind innovation, entrepreneurship and the core capabilities of a firm. According to Schumpeter the innovation of a

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nation lays within its entrepreneurs (Hsu et al., 2014). He divided innovation into five types: launch of a new product or a new species of an already known product, the application of new methods of production or sales of a product, the opening of new market, the acquirement of new sources of supply of raw materials or semi-finished goods and a new industry structure such as the creation or destruction of a monopoly position (Sledzik, 2013).

Innovation is a very broad term and includes different types of innovation such as technological innovation, service innovation and process innovation (Damanpour, 1991). Whether an innovation is seen as such depends on the context of the innovation, a common practice in one organization can still be considered as an innovation when it is initiated in other contexts (Crossan & Apaydin, 2010). Shawney, Wolcot & Arroniz (2006) identified as much as 12 dimensions of (business) innovation, this shows the broadness of the term. A number of different kinds of innovation can be identified and innovation can be used in many disciplines and fields (Baregheh, Rowley & Sambrook, 2009). To have one clear understanding of innovation we maintain the following definition conducted by Crossan and Apaydin (2010) in their meta-review ‘Innovation

is the production or adoption, assimilation, and exploitation of a value-added novelty in economic

and social spheres; renewal and enlargement of products, services, and markets; development of

new methods of production; and establishment of new management systems. It is both a process

and an outcome.’ This definition both entails the production and adoption of innovation and it

focusses on innovation as more than a creative process, while it also focusses on a relative novelty perspective on innovation and leaves room for the dependence on the context of an innovation.

Innovation can be of an incremental nature or of a more radical nature, incremental innovation is a more conventional process, it is the extension of a line of previous improvements while radical innovation is considerably more dramatic and results in dramatic changes (Pavitt,

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1991). Radical change transforms existing markets, creates new ones and makes an enormous contribution to the economic development (Leifer, 2000). Baumol (2006) found that over the last two centuries the majority of radical innovations were produced by individual entrepreneurs, and evidence has shown that even when large firms produced radical innovations, it was an individual scientist or engineer who discovered the critical breakthrough (O’ Conner & Rice, 2001). This emphasizes the role of the entrepreneur as a driver of an innovation and could indicate the importance of human capital.

The amount of human capital a person possesses may enable them to discover, recognize and pursue entrepreneurial opportunity successfully because it enables them to have the right insights which can lead to innovation (Marvel & Lumpkin, 2007). Numerous studies have assumed that the more human capital the best, however the findings relating to higher level of education to the discovery and exploitation of entrepreneurial opportunities are mixed (Marvel & Lumpkin, 2007). Besides human capital, financial capital is also seen as one of the drivers of innovation (Ayygari, Demirgüç-Kunt, Maksimovic, 2011). It may enable individual entrepreneurs to create a buffer and therefore allow them to take on the risk of innovating. More financial resources may result in a higher budget for research & development departments which produce technological innovations (Tsai & Wang, 2007).

Even though innovation is widely seen as a key factor to achieve a sustainable competitive advantage, not all firms are innovative (Kuratko, Cobin & Hornsby, 2014). A research conducted by Accenture revealed that over 50% of the executives reported that they believed they had a poor innovation process and only 18% saw that their own innovative strategy leads to a competitive advantage (Koetzier & Alon, 2013). On a national/regional level countries also vary in their ability to produce innovative firms (Nam, Parboteeah, Cullen & Johnson, 2014). There has been over more

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than two decades of theoretical and empirical research on regional innovation systems to provide a better understanding why innovative capacity varies across space (Polenske, 2007). The Regional innovative systems approach is based on two assumptions. First that regional competitive advantage depends on the innovativeness of a region and second that existing knowledge in combination with regional context produces innovation (Coenen, Asheim, Bugge & Herstad, 2016). Regional innovation systems consist out of an interacting knowledge exploration component together with an exploitation subsystem which is linked to global, national and another regional innovation system to be able to commercialize on new knowledge (Cooke, 2004).

A number of studies have examined regional innovation systems such as Boschma (2005), Moulaert and Sekie (2003) and Cooke (2004). Boschma (2005) studied the influence of proximity to other firms on their innovation outcome through interactive learning and discovered that geographical proximity is neither a necessary nor a sufficient condition for innovation to take place. Proximity can have a negative impact due to the problem of lock-in, meaning that firms lack openness and flexibility. Nonetheless, proximity can have a positive impact as well, by stimulating interactive learning between firms (Boschma, 2005). Cooke (2004) examined the influences of systematic and socio-cultural dynamics such as learning, feedback loops and networking of a specific area. Moulaert and Sekia (2003) captured different variations theories of regional innovativeness in their Territorial Innovation System (TIS). This model was based on different concepts of regional innovation systems which, even though they focussed on different dimensions, included a number of similarities. According to TIS, innovation is a non-linear, systematic activity with a spatial dimension. Innovation is the result of the interactions between firms, clients, suppliers and knowledge providers under the influence of the local formal/informal institutions and culture to explain the variation of regional innovation (Moulaert & Sekia, 2003).

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Multiple researchers have found that aspects of the cultural influence the motivation to innovate on a national level (Lundvall, 2007) and that it influences the innovation outcomes (Jones & Davis, 2000). Existing cultural conditions even determine whether, when, how and in what form a new innovation will evolve (Herbig & Dunphy, 1998). The norms and values of a society can foster or inhibit the implementation of an innovation and therefore are an important factor in determining the success of an innovation (Jones & Davis, 2000). The organizational and business cultures of entrepreneurs are influenced by the national culture (Strychalska-Rudzewicz, 2016). National culture is deeply embedded in the daily life of the population and is defined as the values, beliefs, and assumptions learned in early childhood that distinguish one group from another (Beck & Moore, 1985).

3. Theoretical framework

In this section of the thesis, the different theories and concepts which are discussed in the literature review will be tied together. Followed by the argumentation which leads to the four hypotheses of this thesis. This section will end with a summary and a visual representation of the hypotheses.

3.1 Overview Literature Review

The literature review shows that there are a number of theories about entrepreneurship and innovation (Bradley et al., 2012; Hsu et al., 2014; Shane, 2000). There are a large number of studies connecting capital, entrepreneurship, culture, and location to innovation (Bradley et al., 2012; Crossan & Apaydin, 2010; Sledzik, 2013). Due to the benefits of entrepreneurship and innovation on a national level, it is valuable to know what the important factors are which stimulate innovative entrepreneurship. There have been conducted quite some studies on this topic by previous researchers (Ma & Todorovic, 2012; Schwartz 2008; Shaker & Zahar, 2002). However, researchers

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have not yet reached a consensus on the different theories and the body of research is still developing. Emerging economies have grown rapidly over the past few years and became more innovative than a decade ago (Sechel & Ciobuna, 2014) and provide an interesting setting to verify traditional theories and contribute to their generalizability. Therefore, this thesis contributes to the body of research by conducting research on data from emerging economies in order to recognize the proposed relationship.

Using the literature review as a background first investigate the general relationship between the different kinds of capital and innovation in emerging economies. This will be followed by an examination of the moderating effect of the cultural attributes of these relationships. Later in this thesis, in the discussion, the results of the outcome of the hypotheses will be connected to the body of entrepreneurship research.

3.2 Financial capital and innovation

There are more necessity-based entrepreneurs in low-income regions, who potentially do not have the economic security to bear the risk of being innovative (Hessels, van Gelderen & Thurik, 2008). There remains a strong notion that poor countries are poor because they are poor, they can’t escape the cycle of poverty because of the lack capital (Dorn, 2002). However, trillions of dollars of foreign aid to help developing countries escape poverty have not made them able to escape their cycle and foster economic development (Banerjee & Duflo, 2010). Therefore, it is more likely that capital is a product of economic development rather than it is a driver of economic development (Bradley et al, 2012). An increase in GDP of a country may result in a larger middle class which has the financial slack to explore their entrepreneurial dreams (Das, 2009). However, providing potential entrepreneurs just with financial resources may lead to imitative entrepreneurship instead of innovative entrepreneurship. Imitative entrepreneurship is a situation

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where enterprises developed by entrepreneurs copy successful innovative firms instead of innovating themselves, this increases competition and leads to a reduction in profit. While on the other hand innovative entrepreneurship will lead to new products or services which will stimulate the economy (Bradley et al., 2012). Due to a lack of development formal institutions who can reinforce intellectual property laws, emerging economies are a potential environment for imitation by entrepreneurs (Wu, Zhenzhong & Zhuo, 2017). Studies have shown that in earlier stages of economic development in emerging economies, there is a high level of imitation because it flattens the learning curve and reduces uncertainty.

Even though financial capital may not be the factor driving innovation, it is hard to argue that it has a negative impact on innovation because it provides an entrepreneur with access to resources and allows them to take on some financial risk (Das, 2009). Additionally, financial capital can be used as an investment in the R&D department of a firm which does have a positive effect on the innovativeness of a firm (Tsai & Wang, 2004). Therefore, we propose that even though financial capital is an important aspect regarding, financial capital is not a driver of innovation. Therefore we propose that there is no direct relationship between the financial capital and the innovation outcome on a national level. Thus, this led to the formulation of our first hypothesis:

H1. There is no relationship between financial capital and innovation on a national level

3.3 Human capital and innovation

There is a large body of research considering the relationship between human capital and entrepreneurship outcomes (Martin, McNally & Kay, 2013). Human capital is defined as the productive wealth embodied in labor, skills, and knowledge (OECD, 2001), can be less developed in emerging economies (Kafouros & Wang, 2008). Human capital is important for innovation because it influences the ability of humans to use resources in a new in order to produce an

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economic payoff, an increase in human capital enhances the ability of people to become innovative (De Clercq & Dakhli, 2003). Education is placed at the center of economic development in the view of Human Capital Theory. However, supporters, of this theory acknowledge that just education is not enough for economic growth (Tan, 2014). Constraints in the access to education for entrepreneurs, as is the case for poorer regions, is likely to inhibit their human capital and will have a negative impact on their potential for generating innovations (Hessels, van Gelderen & Thurik, 2008).

The literature review showed that opportunity recognition is one important aspect of innovative entrepreneurship. Human capital is seen as one of the indicators of the discovery of entrepreneurial opportunity by individuals because it enhances the ability to have the right insights to create and exploit entrepreneurial opportunities (Venkataraman 1997). Hence each individual’s life is different, the accumulated human capital also varies from individual to individual. The entrepreneurs general and person-specific human capital enables specifically them to discover entrepreneurial opportunities (Marvel & Lumpkin, 2007). A meta-analysis conducted in 2011 by Unger et al., found that there was a (small) positive correlation between human capital and entrepreneurial performance. Thus we propose that a higher level of human capital in emerging economies correlates with a higher national innovation level. Formulated in the second hypothesis:

H2. There is a positive relationship between human capital and innovation on a national level

3.4 Moderating effect of a supportive entrepreneurial culture

Literature has shown that the amount and type of entrepreneurs are different in different countries as is the level of innovation level, one of the causes of these differences between countries could be the national culture (Ma & Todorovic, 2012). Culture is a multidimensional phenomenon which has a complex impact on the economic development (Hofstede 2003) and entrepreneurship

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(Thurik & Dejardin, 2011). It influences the motivation of individuals why they become entrepreneurs, necessity based or opportunity based, which has an effect on the innovation outcome of the entrepreneurs (Bradley et al., 2012). If the culture in a country is supportive of entrepreneurship this would lead to the social legitimization of the entrepreneur, meaning that an entrepreneurial career is valued and socially recognized by a group of people, due to the positive enforcement entrepreneurship will be stimulated (Etzioni, 1987). Additionally, if a culture is supportive of entrepreneurship this would lead to more individuals showing characteristics which are proposed to be necessary for entrepreneurs (Krueger, 2003) and will lead to an increase in entrepreneurs. A high perceived valuation of entrepreneurship in a society will have a positive effect on the individual's intentions and attitudes to become entrepreneurs (Liñán, & Fernandez-Serrano, 2014).

In the first hypothesis, we proposed that there is no direct relationship between financial capital and innovative entrepreneurship because the provision of financial capital alone is not enough to stimulate individuals to become innovative entrepreneurs. However, under the influence of a supportive entrepreneurial culture people are more willing to become entrepreneurs (Liñán, & Fernandez-Serrano, 2014). Based on this research, it is proposed that under the influence of a supportive culture regarding entrepreneurship there will appear a positive relationship between financial capital and innovative entrepreneurship. This led to the formulation of the third hypothesis:

H3. Under the influence of a supportive entrepreneurial culture, there is a positive relationship

between financial capital and innovation on a national level

In the second hypothesis, we proposed that there is a positive relation between human capital and national innovation. If a culture is supportive of entrepreneurship not alone the intention

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of individuals to become an entrepreneur is higher, it also favors the entrepreneurial characteristic and beliefs of individuals in a society (Krueger, 2003). Thus, it is proposed that a supportive culture of entrepreneurship will reinforce the positive relation between human capital and national innovation. Formulated in the fourth hypothesis:

H4. A supportive entrepreneurial culture will have a reinforcing effect on the positive

relationship between human capital and innovation on a national level

3.5 Summary of Hypothesis

To summarize and visualize the relationship between the constructs and to visualize the hypothesis as described in the theoretical framework we refer to figure 1. This framework is a result of an elaborate literature review in which several theories about entrepreneurship and innovation were discussed. In the theoretical framework we have first connected the theories between capital, entrepreneurship and innovation outcomes and secondly, we looked at the moderating effect of the cultural attributes regarding entrepreneurship on these relations. In this final section of the theoretical framework a visual representation of the hypotheses is presented:

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4. Methodology

In this section, a description of the data collection and the research sample of this thesis will be provided. Followed by an operationalisation of the different variables used during our thesis and finally the specification of the methods and models of the thesis.

4.1 Research Sample and Data Collection

The sample of this study consists of the national economic profiles of emerging economies. To determine whether a country is an emerging economy they have to fulfill two criteria, firstly they have to show a rapid economic development and secondly they have to have had liberalized their markets and adopted a free market system (Hoskisson, Eden, Lau & Wright, 2000). The Morgan Stanley Capital International (MSCI) index, characterizes 23 countries as emerging over the year of 2016 (www.msci.com). We use the database of the Global Entrepreneurship Monitor as databank to retrieve the economic profiles of these emerging countries. The Global Entrepreneurship Monitor is the world’s most forth striving study of entrepreneurship. Through a vast, centrally coordinated, internationally executed data collection effect, GEM is able to provide trustworthy information within comprehensive reports and interesting stories. This database is focussed on entrepreneurial activity and collects data surrounding entrepreneurs(Bosma & Levie, 2010).

The Global Entrepreneurship Monitor has reports and data over 109 countries globally. Our research only focusses on emerging economies. Emerging economies were defined as emerging as they were listed in the MSCI Index (Sadorsky, 2009), this led to the inclusion of the following emerging economies: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Mexico, Malaysia, Peru, Philippines, Poland, Qatar, Russia, South Africa, South

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Korea, Taiwan, Thailand, Turkey and the United Arabs. We collected data from a range of years starting in 2011 until 2016.

4.2 Variables

In the following section, the variables that are used in this thesis and describe how we have operationalized and measured the variables are explained. A total of four different variables are used during this study, one dependent variable: innovation, two independent variables human capital and financial capital and lastly, one moderating variable the cultural attributes towards entrepreneurship.

4.2.1 Dependent Variable

The dependent variable of this thesis is the innovativeness on the national level of an emerging economy. We use the rankings of the Global Innovation Index (GII) from 2011 until 2016 to determine the innovativeness of an emerging economy. The GII is the leading reference on innovation and the report consists of a ranking of an economies’ innovation capabilities and results and is published by the Cornwell University and the World Intellectual Property Organization (www.globalinnovationindex.org). The GII provides a deeper understanding of innovation by including measures that go beyond the traditional measurements of innovation such as the level of research and development. The GII gives all the economies a score between 0.00 and 100.00, and with this measurement, we operationalise the innovativeness of the emerging economies, as is done in previous studies by Crespo & Crespo (2016). We use the data available over the years of 2011 – 2016, due to the change in the scale used by the GII for ranking the countries in 2010 (www.globalinnovation.org).

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There are two independent variables included in this study: the human capital and the financial capital. Both variables are deducted from the economic profiles that were retrieved from the Global Entrepreneurship Monitor.

Human capital

A positive relation between human capital and innovation was proposed, to have a specific measurement of human capital, we needed to operationalize this concept. Therefore we followed the example of Estrin, Mickiewicz & Stephan (2017) who measured human capital through the education an individual had encountered. Their and our data was retracted from the Global Entrepreneurship Monitor, which measured the basic school entrepreneurial education & training and the post-school entrepreneurial education & training of an individual. The level of education an individual has may enable them to recognize entrepreneurial opportunities and act accordingly to it (Levie & Autio, 2008). The two levels of education combined are used as an operationalisation of the human capital a person possesses.

Financial capital

Financial capital is the (financial) resources available to an individual (Danes, Stafford, Haynes & Amarapurkar, 2009). We needed to operationalize this construct as well as the human capital. The economic profiles retrieved from the Global Entrepreneurship Monitor include the measurement of finance for entrepreneurs and the governmental support and policies, this we can use as an operationalization of financial capital (Allen, Langowitz, Minniti, 2007).

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The moderator in this study is the support in a culture of entrepreneurship. In the Global Economic Monitor, there is data concerning the cultural support of entrepreneurship. To operationalize the cultural attributes towards entrepreneurship, as is done in the studies of Tominc & Rebernik (2007) the measurement of the status of successful entrepreneurs in the countries and the general view regards entrepreneurship as a good career choice were used.

4.2.4 Control variable

Finally a set of control variables were included in the models to find the most reliable model. The control variable which were added included the country size, income and the technological development of a country. The country size was operationalized through the size of the population as was done by Jetter & Parmeter (2015) in their study. The GDP of a country is used as a measurement for the income level of a country (Kohli, 2004) and lastly, the technological development is measured by the amount of GDP spent on technological development (Meo, Masri, Usmani, Memon & Zaidi, 2013).

4.3 Method and Model Specification

In this section, we give an overview of the method and the model specification that are used to analyze the hypotheses. According to Field (2013), a multiple linear regression analysis is the proper way to predict the influence of an independent variable on a dependent variable. Four models have been tested to find the best relationship between human and financial capital and innovation. Therefore we have conducted two equations, the first is aimed at the relationship between financial capital and human capital and innovation and the second equation focusses on the moderating effect of a supportive entrepreneurial culture.

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Yit = 𝑎it + 𝑧it𝛽+ 𝑠itt𝛿 + 𝜀it

The Y represents the dependent variable meaning the innovation score of the country, 𝑎 is the constant or intercept of a country. The 𝑧it𝛽 correspond with the control variables that are used

in this study, meaning the technological development, country income and country size. The independent variables are represented by the 𝑠 in the equation, thus either the human capital or financial capital and the 𝛿 represents the amount of steps which the innovation increases or decreases with a change in human capital or financial capital. Finally the 𝜀 indicates the error term within the regression. This equation is used to test the first two hypotheses regarding the relationship.

In order to test the moderating effect of a supportive entrepreneurial culture a different equation is used:

Y = 𝑎it + 𝑧it𝛽 + 𝑠it + 𝑒it𝑠it + 𝜀it

The variables are mostly similar to the ones included in the first model, however, there is one variable added that is quite important. Namely, the variable 𝑒it𝑠it which represents the

moderating effect of the cultural attributes in a country towards entrepreneurship on the independent variables. We use this equation to test the final two hypotheses regarding the moderating effect of a supportive entrepreneurial culture on the relationship between financial and human capital an innovation.

To test the hypotheses we analyzed the data in SPSS using a stepwise method which led to the specification of 4 models. In model 1, 2, and 3 the first two hypotheses (H.1 & H.2) were tested. They included the control variables and the independent variable. In model 4. The moderating

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effect of a supportive entrepreneurial culture was tested by adding the mode effect of this variable on the two independent variables and therefore testing the two final hypotheses (H.3 & H.4).

5. Results & hypothesis

In this section, the results are presented regarding the relation between financial and human capital and the innovativeness of a nation and the moderating effect of a supportive culture on these relationships. First the descriptive statistics and the correlations of the data will be discussed, then the results of the multilinear regression analyses will be presented and finally, the outcome of the hypotheses will be reviewed.

5.1 Descriptive statistics and correlations

In Table 1, the descriptive statistics of the sample and the results of the Pearson Correlation test are presented. In total there were 138 observations of the 23 emerging countries over 6 years starting from 2011 until 2016. The missing values within the data were replaced in SPSS with the mean of the variable so the sample could be included.

The Pearsons Correlation test had the following outcomes. The technological development within a country is positively related to the innovation outcome, r = 0,384 and statistically significant sig = 0,000. There is a significant positive connection between income and innovation as well, r = 0,266. Between the country size and innovation, income is a statistically significant negative relation of -0,111. The relationship between cultural attributes and innovation is negative, r = -0,350 and significant as well. The relationship between human capital and innovation is tested as slightly negative with -0,25, however it is so close to zero that it indicates that there is no relationship between human capital and innovation outcome (Fields, 2013). This result is not significant because the alpha is 0,387 which is bigger than 0,05. For the relationship between

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financial capital and innovation outcome, we measured an r of 0,135, which also indicates a very weak or non-existent relation between the two variables (Fields, 2013), this effect was not significant. The moderating effect of cultural attributes on financial capital and on human capital are both negative with -0.264 for human capital and -0.196 for financial capital and are both statistically significant.

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38 Table 1. Pearson correlations

Mean SD 1 2 3 4 5 6 7 8

1. National innovation level 39,4 8,29 -

2. Technological development 1,12 0,69 0,384* - 3. Income 21996648,64 18672,34 0,266* 0,103 - 4. Country size 2166525889 8928515300 -0,111** -0,05* -0,105** - 5. Cultural attributes 67,01 10,35 -0,35* -0,281* -0,144* 0,109* - 6. Human capital 2,4 0.31 -0,025 -0,17* -0,038 -0,098* 0,058 - 7. Financial capital 2,6 0,35 0,135** 0,057 0,009 0,05* -0,121** 0,445* -

8. Human capital * cultural

attributes 160,62 34,4 -0,264* -0,246* -0,126** 0,1* 0,746* 0,698* 0,181* -

9. Financial capital * cultural

attributes 173,96 32,71 -0,196** -0,135** -0,105** 0,128* 0,739* 0,36* 0,564* 0,538*

Entrepreneurship and innovation in emerging economies