Influence of cultural tightness-looseness on causal and effectual decision-making.

MASTER THES IS

INFLUENCE OF CULTURA L T IGHTNESS- LOOSENESS ON CAUSAL AND EFFECTUAL DEC IS ION- MAK ING

A rd A .M . Muns te r

FACULTY OF MANAGEMENT AND GOVERNANCE N IKOS INNOVAT ION & ENTREPRENEURSH IP

EXAM INAT ION COMM ITTE

M .R . S t iens t ra MSc .

D r . M .L . Eh renhard

Author

Name : Ard A .M . Munster Student no .: s1244957

Study : Bus iness Adm in istrat ion

Track: Innovat ion and Entrepreneursh ip Ema i l : ardmunster@gma i l .com

Phone : +31 (0 )6 14921912

F irst superv isor

Name : M .R . St ienstra MSc . Phone : +31 (0 )53 489 3534 Ema i l : m .r .st ienstra@utwente .n l

Second superv isor

Name : Dr . M .L . Ehrenhard Phone: +31 (0 ) 53 489 4531 Emai l : m . l .ehrenhard@utwente .n l

MASTER THES IS

INFLUENCE OF CULTURA L

T IGHTNESS- LOOSENESS ON

CAUSAL AND EFFECTUAL

DEC IS ION- MAK ING

Pre face

Th is document is my f ina l step be fore rece iv ing my Master o f Sc ience degree in Bus iness Adm in istrat ion at the Un ivers ity o f Twente in The Nether lands . Dur ing my un ivers ity career, I part ic ipated in the trac k Innovat ion & Entrepreneursh ip , wh ich exam ined top ics that a lways tr iggered my attent ion. In a lecture on internat iona l entrepreneursh ip , the entrepreneur ia l dec is ion- mak ing strategy ‘e f fectuat ion ’ passed by. For me th i s was comp lete ly new , because prior educat ion taught me to deve lop rat iona l bus iness p lans be fore creat ing a new venture. However , the theory o f e f fectuat ion rea l ised me that a bus iness market and an end product cou ld get created through the ventur ing process itse l f in a future that is inherent ly unpred ictab le . Comb in ing th is top ic w ith my great hobby , trave l l ing the wor ld, became the foundat ion for my research . My interest arose to how entrepreneur ia l dec is ion- mak ing is per formed beh ind the boundar ies o f a s ing le country.

A good mot ivat ion is the start , but reta in th is mot ivat ion and get through the t ime ly process o f wr it ing a master thes is is qu ite cha l leng ing . The reward on the f in ish l ine is a good - look ing Master o f Sc ience degree that kept me go ing dur ing the persona l strugg les I had to dea l w ith. T he pass ing away o f my be loved father was a drast ic l i fe- changer that took t ime and e f fort to coop w ith . There fore , I pay my s incere grat itude to my fam i ly , in part icu lar to my mother , who kept fa ith in me and prov ided uncond it iona l support . W ithout the ir encouragement and trust I was not ab le to succeed. In add iton , I wou ld l ike to thank my fr iends be ing there for me and not ask ing too many quest ions about my study progress . Wr it ing a thes is is somet imes a lon e ly endeavour and is not poss ib le w ithout others .

I wou ld l ike to express spec ia l grat itude to my f irst superv isor Mart in St ienstra for h is gu idance and support. He has been a great he lp throughout my course and kept h is pat ience . My second superv isor M iche l Ehrenhard rev iewed and exam ined my work, wh ich I a lso wou ld l ike to k ind ly thank h im for . Study ing at The Un ivers ity o f Twente gave me sat is fact ion and taught me to de f ine and de fend my cho ices throughout the process o f deve lop ing con f idence as an academ ic. Present ing th is thes is fee ls l ike a persona l ach ievement.

Ard Munster

Dronten, the Nether lands | February , 2016

Abstract

E f fectuat ion is a non- pred ict ive dec is ion- mak ing strategy for new venture creat ing e f fect ive in a future that is inherent ly un pred ictab le . Th is th ink ing log ic is researched by Sarasvathy (2001 ) and emphas izes that the end product is unpred ictab le at the beg inn ing o f the process and the market and opportun ity gets created though the process. Th is is contrary to the rat iona l pred ic t ion- or iented bus iness- p lann ing strategy that Sarasvathy (2001 ) descr ibe as causat ion . A new sca le is deve loped to measure e f fectuat ion and causat ion in a quant itat ive way . Th is sca le is used to measure to what extent the soc iety in f luences entrepreneurs in us ing a causa l or e f fectua l dec is ion- mak ing approach. The cu ltura l t ightness - looseness construct (Ge l fand et a l , 2011 ) ga ined research attent ion in recent years and prov ides a new perspect ive on cu lture . Th is new perspect ive was des ired because prev ious stud ies found unconv inc ing resu lts w ith us ing the va lue perspect ive o f Ho fstede.

The hypotheses state the proposed re lat ionsh ips between cu ltura l t ightness- looseness and the pr inc ip les o f e f fectuat ion and causat ion. It is found that entrepreneurs , who are in f luenced by a loose soc iety , app ly a more causa l log ic than an e f fectua l log ic in the dec is ion- mak ing process . Entrepreneurs , who are in f luence by a t ight soc iety , a lso app ly more causa l reason ing than e f fectua l reason ing . These f ind ings ind icate that t ight and lo ose entrepreneurs use both types o f reason ing , but ma in ly app ly the causa l log ic . The resu lts show that some pr inc ip les o f e f fectuat ion and causat ion are shared constructs o f each other and that e f fectuat ion is a format ive construct , wh ich is s im i lar to f i nd ings o f Chand ler et a l . (2011 ) . Future research shou ld expand on how e f fectuat ion and causat ion cou ld be measure as separate constructs and how the broad construct can be app l ied to mu lt ip le f ie lds o f research . A lso , further research can be recommended to invest igate i f Ge l fand ’s sca le on cu ltura l strength is va l id and re l iab le enough to app ly it in an entrepreneur ia l context .

L ist O f Tab les And F igures

F IGURE 1 , C AUSAL AND EFFECTUAL MARKETING PROCESS (S ARASVATHY , 2001 B ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

F IGURE 2 , D YNAMIC MODEL OF EFFECTUATION (S ARASVATHY , 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

F ^IGURE 3 , T ^{HE ONION DIAGRAM} (H ^OFSTEDE , 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

F IGURE 4 , A SYSTEMS MODEL OF TIGHTNESS - LOOSENESS (G ELFAND ET AL . , 2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

F IGURE 5 , T HE CONCEPTUAL MODEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

F IGURE 6 , M ASCULINITY COMPARISON (G EERT - HOFSTEDE . COM , 2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

T ABLE 1 , P RINCIPLES OF EFFECTUATION (S ARASVATHY , 2001 ; 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

T ^ABLE 2 , P ^{UBLISHED INDEX SCORES ON CULTURAL TIGHTNESS} (G ^{ELFAND ET AL} . , 2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

T ABLE 3 , R OTATED COMPONENT MATRIX (V ARIMAX ROTATION ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

T ABLE 4 , P ARAMETRIC TEST RESULTS ON D UTCH ENTREPRENEURS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

T ABLE 5 , P ARAMETRIC TEST RESULTS ON G ERMAN ENTREPRENEURS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

T ABLE 6 , S UMMARY OF RESULTS OF HYPOTHESES TESTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Tab le o f contents

ABSTRACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II

1 . INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1 .1 G ^ENERAL BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1 .2 R ESEARCH GAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

1 .3 R ESEARCH QUESTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

1 .4 R ELEVANCE OF STUDY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

1 .5 R ESEARCH OUTLINE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

2 . THEORETICAL FRAMEWORK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

2 .1 E FFECTUATION & CAUSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

2 .2 C ULTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

3 . HYPOTHESES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

3 .1 M EANS - DRIVEN VS . GOAL - DRIVEN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

3 .2 A FFORDABLE LOSS VS . EXPECTED RETURNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

3 .3 S TRATEGIC ALLIANCES VS . COMPETITIVE ANALYSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

3 .4 E XPLOITING CONTINGENCIES VS . AVOIDING CONTINGENCIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

3 .5 C ONTROL UNPREDICTABLE FUTURE VS . PREDICT UNCERTAIN FUTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

3 .6 E FFECTUATION VS . CAUSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

3 .7 C ONCEPTUAL MODEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

4 . METHODOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

4 .1 S ^CALE DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

4 .2 D ATA COLLECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

4 .3 C ONTROL VARIABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

4 .5 D ^{ATA ANALYSES} . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

5 . RESULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

5 .1 D ATA VALIDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

5 .2 S ^CALE VALIDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

5 .3 C ONTROL VARIABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

5 .4 A NALYSES OF HYPOTHESES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

6 . DISCUSSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

6 .1 V ALIDITY AND RELIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

6 .2 H YPOTHESES OUTCOMES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

6 .3 I MPLICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

7 . CONCLUSION , LIMITATIONS AND FUTURE RESEARCH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

7 .1 C ONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

7 .2 L IMITATIONS AND FUTURE RESEARCH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

BIBLIOGRAPHY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

APPENDIX I : TEST OF NORMALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

APPENDIX II : EXPLORATORY FACTOR ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

APPENDIX III : INTERNAL CONSISTENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

APPENDIX IV : CONTROL VARIABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

APPENDIX V : CORRELATION MATRIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

APPENDIX VI : ANALYSES ON HYPOTHESES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

APPENDIX VII : ITEMS ON QUESTIONNAIRE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

1 . Introduct ion

1 .1 Genera l background

Entrepreneursh ip is a fast - grow ing f ie ld o f research and is inv o lved w ith tak ing r isks (Drucker , 1970 ) and the creat ion o f new organ isat ions (Gartner , 1988 ) . Venkataraman (1997 ) exp la ins that entrepreneursh ip is concerned w ith understand ing “how opportun it ies to br ing into ex istence ‘ future ’ goods and serv ices are d iscovered , created , and exp lo ited , by whom , and w ith what consequences” (p . 120 ) . However , “new venture creat ion” is common ly known as the de f in it ion for entrepreneursh ip (Gartner , 1985 , p . 697 ) . Because research attent ion has been d irected to mu lt ip le areas o f the r ich doma in, each de f in it ion probab ly do not state the ent ire phenomenon o f entrepreneursh ip (Shane & Venkataraman , 2000 ) . Nonethe less , it serves entrepreneursh ip scho lars in mu lt ip le aca dem ic f ie lds.

Perhaps , the best known de f in it ion o f the entrepreneur is by the econom ist Schumpeter , who de f ines entrepreneurs as ind iv idua ls that “re form or revo lut ion ise the pattern o f product ion by exp lo iting an invent ion [… ] or untr ied techn ica l poss ibi l ity for produc ing a new commod ity or produc in g an o ld one in a new way [… ] th is requ ires apt itudes that are present in on ly a sma l l fract ion o f the popu lat ion [… ] ” (Schumpeter , 1934 , p . 132 ) . He sees the ro le o f the entrepreneur as the cata lyst o f change .

Persona l va lues, seq uence o f act iv it ies , dec is ions and act ions are a l l re lated to the process o f new venture creat ion (Gartner , 1985 ) , wh ich is known as the

‘entrepreneur ia l process ’ . Bygrave & Ho fer (1991 ) de f ine the entrepreneur ia l process as “ invo lv ing a l l the funct ions , act iv it ies , and act ions assoc iated w ith perce iv ing opportun it ies and creat ing organ isat ions to pursue them” (p . 14) . Most research on entrepreneur ia l processes is based on rat iona l dec is ion- mak ing mode ls emp loyed by neoc lass ica l econom ics . Most entrepreneursh ip researcher assumed that ind iv idua ls engage in rat iona l goa l- dr iven behav iours when pursu ing entrepreneur ia l opportun it ies (Perry , Chand ler , & Markova , 2012 ) . MBA students in many bus iness schoo ls are taught goa l- dr iven entrepreneur ia l dec is ion mode ls .

In research , a debate emerged on the va lue o f bus iness p lann ing for estab l ished

sma l l and espec ial ly new f irms when fac ing h igh degrees o f uncerta inty (Br inckmann ,

Gr ichn ik , & Kapsa , 2010 ). W i ltbank , Dew , Read , & Sarasvathy (2006 ) exp la in that

there are two schoo ls o f thoughts on the topic o f what f irms shou ld do next in

uncerta in s ituat ions : the p lann ing approaches and the adapt ive approaches .

Accord ing to W i ltbank et a l . (2006 ) , the ro le o f pred ict ion is a centra l issue in the

dec is ion- mak ing process . The p lann ing approach is systemat ic and pred ict ion-

or iented and uses a forma l approach that resu lts in venture per formance . Th is

approach focuses on ‘ try ing harder to pred ict better’ for future cha l lenges (Sarasvathy , 2001 ) . Sarasvathy (2001 ) descr ibed th ese rat iona l bus iness- p lann ing strateg ies as ‘causat ion ’ . Contrary , researchers be long ing to the learn ing schoo l argue the va lue o f pred ict ion- or iented strategy and advocate that the focus shou ld be on strateg ic f lex ib i l ity , learn ing and contro l l ing resources (W i ltbank , Dew , Read , &

Sarasvathy , 2006 ; Br inckmann , Gr ichn ik , & Kapsa , 2010 ). These adapt ive or emergent strateg ies focus on ‘ mov ing faster to adapt better’ (Sarasvathy , 2001 ) . In recent years , research is d irected towards and adapt ive strategy to descr ibe the under ly ing nature o f the entrepreneur ia l process , i .e . the theory o f e f fectuat ion (Sarasvathy , 2001 ) , entrepreneur ia l br ico lage (Baker & Ne lson , 200 5 ) and the creat ion perspect ive (A lvarez & Barney , 2007 ) .

Moroz & H ind le (2012 ) rev iewed 32 process mode ls o f entrepreneursh ip, to determ ine wh ich mode ls are both gener ic (a l l processes that are entrepreneur ia l do th is ) and d ist inct (on ly entrepreneur ia l processes do th is ) about the process o f entrepreneursh ip . In the ir peer - rev iew four mode ls are found that prov ide i ns ight on both character ist ics, works by Gartn er (1985 ) , Bruyat & Ju l ien (2000 ) , Sarasvathy (2001 ) and Shane (2003 ) . These mode ls show entrepreneur ia l process in mu lt ip le perspect ives , but none o f them is s imu ltaneous ly both gener ic and d ist inct . Sarasvathy ’s mode l o f e f fectuat ion is the on ly mode l that presented a d irect pract ica l focus and has a rap id ly grow ing vo lume o f scho larsh ip devoted to it (Moroz & H ind le , 2012 ). Research to date shows that e f fectuat ion theory is app l ied in the rea lm o f management (Aug ier & Sarasvathy , 2004 ) , econom ics (Dew , Sarasvathy , &

Venkataraman , 2004 ), f inance (W i ltbank , Read , Dew , & Sarasvathy , 2009 ) , market ing (Read , Dew , Sarasvathy , Song , & W i ltbank , 2009 ) , and R&D management (Brette l , Mauer , Enge len , & Kupper , 2012 ).

Sarasvathy (2001 ) researched a th ink ing log ic that serves entrepreneurs in start ing a bus iness and prov ides a way to contro l a future that is inherent ly unpred ictab le . Ef fectuat ion beg ins w ith a g iven set o f means and a l lows goa ls to emerge cont ingent ly over t ime from the var ied imag inat ion and d iverse asp irat ions o f the founders and the peop le they interact w ith (Sarasvathy , 2001b ) . Th is non- pred ict ive strategy emphas ize that the end product is unpred ictab le at the beg inn ing o f the process and the market and opportun ity gets created though the process itse l f by determine the a f fordab le loss , form ing strateg ic a l l iances and pre- comm itments w ith stakeho lders , exp lo it ing cont ingenc ies and contro l l ing an unpred ictab le future . In contrast , causat ion is cons istent w ith p lanned strategy approaches and inc ludes act iv it ies such as opportun ity recogn it ion and bus iness p lan deve lopment ( Sarasvathy , 2001 ) .

Forma l and in forma l inst itut ions in f luence the dec is ion- mak ing process and the per formance o f a company. Forma l inst itut ions are po l it ica l , econom ic and contractua l ru les that regu late the behav iour o f an ind iv idua l (North , 1990 ) . The i n forma l inst itut ion is a system o f shared va lues and co l lect ive understand ing between indiv idua ls and is not coded in standards and ru les . Nat iona l cu lture is seen as an import re f lect ion o f an in forma l inst itut ion (North , 1990 ) . Ho lmes , M i l ler , H itt ,

& Sa lmador (2013 ) ind icated the importance o f in forma l in st itut ions and exp la in that cu ltura l d imens ions shape the country ’s forma l inst itut ions . In 1956 , Weber a lready stated the importance o f in forma l inst itut ions and po inted that entrepreneursh ip m ight be l inked to cu ltura l va lues and suggested that va lues and be l ie fs are factors that encourage entrepreneursh ip . Shane (1993 ; 1994 ) researched the assoc iat ion and e f fect between nat iona l cu lture and nat iona l rates o f innovat ion and found pos it ive corre lat ions with the cu ltura l va lues ‘ ind iv idua l ism ’ and ‘ power d istance’ . Research on the re lat ionsh ip between cu lture and entrepreneursh ip d id not rap id ly- deve lop a fter Shane .

A few years later , Mue l ler & Thomas (2000 ) exp lored if entrepreneur ia l tra its ( locus o f contro l and innovat iveness ) var ied across cu ltures and found that uncerta inty avo id ing and ind iv idua l ist ic cu ltures are support ing entrepreneursh ip . Research s low ly expanded on d i f ferent entrepreneur ia l concepts re lated to cu lture . Hayton, George & Zahra (2002 ) rev iewed and synthes ized the f ind ings o f 21 emp ir ica l stud ies that exam ine the assoc iat ion o f cu lture w ith entrepreneursh ip on nat iona l leve l . Mu lt ip le stud ies have conc luded that entrepreneurs in d i f ferent countr ies usua l ly share some un iversa l tra its and they may a lso have other tra its that are spec i f ic to the ir own cu lture . Most behav ioura l stud ies , wh ich Hayton et a l . (2002 ) rev iewed , are skewed towards cu ltura l va lues and entrepreneur ia l behav iour that stems from research o f Ho fstede.

Recent research descr ibed the cu ltura l va lues extens ive ly (Ho fstede G . , 1980 ; Schwartz , 1994; Sm ith , 1996 ; House , Hanges , Jav idan , Dor fman , & V ip in , 2004 ; Taras , K irkman , & Stee l , 2010 ) and shows that the cu ltura l va lues are one o f the more in f luent ia l context var iab les regard ing the in f luence on entrepreneursh ip (Mor r ison , 2000 ). Most research is under the umbre l la o f internationa l bus iness, wh ich does not focus on the entrepreneur ia l process itse l f .

1 .2 Research gap

I t is unc lear to what extend cu lture in f luences the entrepreneur ia l process.

Schumpeter (1965 ) suggests that act iv ity in entrepreneursh ip depends upon the

ava i lab i l ity o f prospect ive entrepreneurs ( i .e . ind iv idua ls possess ing persona l ity tra its

comb ined w ith persona l c ircumstances ) . Th is ind icates that the entrepreneur , w ith

the ir own cu ltura l set o f be l ie fs and persona l tra its , has a key- ro le in the entrepreneur ia l process and cou ld behave d i f ferent ly in other countr ies or soc iet ies .

In the f ie ld o f Internat iona l Entrepreneursh i p , no l iterature is found that goes int o deta i l on cu ltura l imp l icat ions on entrepreneur ia l processes . In Internat iona l Bus iness l iterature Jones & Cov ie l lo (2005 ) v iew internat iona l isat ion as a “t ime- based process o f entrepreneur ia l behav iour” (p . 284 ) , where interna l and externa l env ironmenta l changes lead to the entry mode cho ice and country se lect ion . Even when Jones & Cov ie l lo (2005 ) h igh l ight country d ivers ity (geograph ic , econom ic and cu ltura l d istance ) , no deta i led in format ion is found on the ( in )d irect re lat ionsh ip o f cu lture on entrepreneur ia l processes .

A lso , Sarasvathy (2001 ) does not ment ion the imp l icat ions o f cu lture on new venture creat ion in an e f fectua l way . Perry et a l . (2012 ) rev iewed the deve lopments on the e f fectuat ion theory s ince the introduct ion o f th is top ic . He states that emp ir ica l research on th is top ic is attempted by on ly a few researchers and is there fore lack ing . He prov ides future research suggest ions and argues that the re lat ionsh ip between estab l ished constructs and e f fectuat ion shou ld be exp lored . The ro le o f cu ltura l va lues re lated to e f fectua l dec is ion- mak ing is not ment ioned , wh ich cou ld be va luab le to the dec is ion- mak ing process .

The research pro ject ‘Entrepreneur ia l Processes in a Cu ltura l Context ’ (EP ICC) , at the Un ivers ity o f Twente , invest igated the s ign i f icance o f the cu ltura l context in the entrepreneur ia l dec is ion- mak ing processes . Prev ious stud ies o f th is pro ject show m ixed resu lts o f entrepreneur ia l dec is ion- mak ing in re lat ionsh ip to the cu ltura l d imens ions . For examp le , Kr i jgsman (2012 ) and Te lman (2012 ) found ev idence that uncerta inty avo idance s ign i f icant ly corre lates w ith e f fectuat ion . Mones (2012 ) exp la ined that it was hard to f ind so l id ev idence o f cu ltura l in f luence on e f fectuat ion . Steent jes (2012 ) found that causa l - or iented cu ltures are focused on interna l contro l .

Due to the l im ited amount o f pub l ished research on th is sub ject and the

unconv inc ing resu lts o f the EP ICC pro ject , it i s unc lear what in f luence cu lture has on

the dec is ion- mak ing process in entrepreneur ia l processes . A lso , it is quest ionab le i f

the EP ICC pro ject used su f f ic ient pred ictors to measure cu ltura l in f luences on

entrepreneur ia l dec is ion- mak ing . Th is tr iggers the search to f ind a cu ltura l

measurement that measures the cu ltura l in f luence on the pr inc ip les o f e f fectuation .

Ge l fand ’s theory on soc ieta l t ightness- looseness ga ined research attent ion in recent

years and focused on the strength o f soc ia l norms and the degree o f sanct ion ing

w ith in soc iet ies (Ge l fand , Raver , N ish i i , Les l ie , Lun , & Chong L im , 2011 ) . Taras et a l .

(2010 ) are the f irst researchers that introd uced th is theory re lated to Ho fstede ’s

cu ltura l va lues and found that cu ltura l va lues have s ign i f icant ly stronger e f fects in

cu ltura l ly t ighter , rather than looser , countr ies . There fore , cu ltura l t ightness- looseness is an interest ing construct to l ink to e f fectua l dec is ion - mak ing .

1 .3 Research quest ion

As the research gap ind icates, i nterest ar ises to what extent the pr inc ip les o f e f fectuat ion i s in f luenced beyond the boundar ies o f a s ing le country. In order to measure the cu ltura l in f luences on the dec is ion- mak ing process in entrepreneur ia l processes, the fo l low ing research quest ion is formu lated :

“To what extent does cu ltura l t ightness- loose ness in f luence s the way in wh ich entrepreneurs use a causa l or e f fectua l log ic in the dec is ion- mak ing process?”

1 .4 Re levance o f study

Th is research w i l l make a contr ibut ion to ex ist ing l iterature on e f fectuat ion and cu ltura l t ightness- looseness . Perry et a l . (2012 ) argue that current research on e f fectuat ion can be c lass i f ied as nascent and encourage a deve lopment to an intermed iate state . Re lat ing estab l ished construct as cu ltura l t ightness- looseness to e f fectuat ion hope fu l ly contr ibutes to deve lop the research stream . It w i l l sh ine a new l ight on re lat ing cu lture w ith e f fectuat ion and causat ion . Hope fu l ly understand ing the in f luence o f cu ltura l strenght on e f fectuat ion w i l l expand the know ledge on how soc ia ls norms and behav iour in a soc iety in f luence entrepreneur ia l dec is ion- mak ing . A lso , Sarasvathy (2001 ) gathered and ana lysed th ink- a loud verba l protoco ls for her research , wh ich is a t ime - consum ing process . Th is research app l ies a new quant itat ive measure that hope fu l ly improve s the method o f data co l lect ion and process ing in future research . (Chand ler , DeT ienne , McKe lv ie , & Mum ford , 2011 ; Perry , Chand ler , & Markova , 2012 ).

1 .5 Research out l ine

Th is thes is is organ ised around severa l chapters to answer the stated research

quest ion . Current ly you have read the introduct ion , wh ich exp la ins the re levant

concepts and the research gap , quest ion and re levance. The second chapter prov ides

the theoret ica l framework. In chapter three the hypotheses are formu lated in how

e f fectuat ion is comm itted w ith cu ltura l t ightness- looseness . The fourth part presents

the methodo logy , wh ich exp la ins the method o f data co l lect ion , operat iona l isat ion

o f var iab les and method o f ana lyses . Subsequent ly , the resu lts and interpretat ions o f

ana lyses are presented in chapter f ive and d iscussed in chapter s ix. Chapter seven

answers the research quest ion accompan ied w ith l im itat ions and recommendat ions

for future research .

2 . Theoret ica l framework

2 .1 E f fectuat ion & causat ion 2 .1 .1 Prob lem space

Most research on entrepreneur ia l processes is based on rat iona l dec is ion- mak ing mode ls . These mode ls are based on entrepreneurs that use a rat iona l goa l- dr iven behav iour , wh ich focuses on pred ict ing an uncerta in future . Sarasvathy ’s research focused on entreprene ursh ip as a process and stud ied entrepreneur ia l act iv ity w ith the ir l im itat ions . Dur ing her stud ies she found that entrepreneurs face three types o f uncerta inty (Sarasvathy , 2008 ) . She descr ibes the f irst type as ‘ Kn ight ian uncerta inty’ , wh ich means that it is imposs ib le to ca lcu late poss ib i l it ies for future consequences . She named the second type ‘goa l amb igu ity ’ , wh ich imp l ies that there is a lack o f assumed or structured pre ferences . The th ird type o f uncerta inty is named ‘env ironmenta l isotropy ’ , wh ich i l lustrates that it is d i f f icu lt for entrepreneurs to determ ine on wh ich e lements o f an env ironment the attent ion shou ld be focused on (Sarasvathy , 2008 ) . Sarasvathy wondered how th is wou ld inf luence the entrepreneur ia l dec is ion- mak ing process and recogn ised a pattern about how entrepreneurs create new f irms in new markets . Th is pattern contrad icts the p lann ing approach (W i ltbank et a l . , 2006 ) , wh ich is taught to students in MBA programs across the wor ld and by Sarasvathy termed as ‘causat ion ’ (Sarasvathy , 2001 ).

2 .1 .2 Contrast ing e f fectuat ion and causat ion

Sarasvathy (2001 ) deve loped the e f fectuat ion theory , wh ich va lues an adapt ive approach to reason ing and inverses the term ‘causat ion ’ (W i ltbank et a l . , 2006 ) . E f fectua l reason ing beg ins w ith a “g iven set o f means and a l lows goa ls to emerge cont ingent ly over t ime from the var ied imag inat ion and d iverse asp irat ions o f the founders and the peop le they interact w i th” (Sarasvathy , 2001b , p . 2 ) . Causa l reason ing beg ins w ith a “pre- determ ined goa l and g iven set o f means , and seeks to ident i fy the opt ima l , fastest , cheapest , most e f f ic ient a lternat ive to ach ieve the g iven goa l” (Sarasva thy , 2001b , p . 2 ). The d ist ingu ish ing character ist ic between the two modes is the set o f cho ices . Choos ing between means to create a part icu lar e f fect , versus choos ing between many poss ib le e f fects us ing a part icu lar set o f means . To i l lustrate the d i f f erence between the two modes , a s imp le pract ica l examp le w i l l c lar i fy : imag ine a carpenter who is asked to bu i ld a desk , versus one who is g iven a too lbox and some wood , and asked to bu i ld whatever he or she chooses to (Sarasva thy , 2001 ). F igure 1 graph ica l ly contrasts the causa l and e f fectua l dec is ion- mak ing process .

F igure 1, Causa l and e f fectua l market ing process (Sarasvathy , 2001b )

Sarasvathy (2001) de f ines causat ion as “processes that take a part icu lar e f fect as g iven and focus on se lect ing between means to create that e f fect” (p . 245 ) . Th is de f in it ion exp la ins that the end product is determ ined by the in it ia l opportun ity and the adapt ive changes over t ime to f it the pre- se lected market and/or v is ion . Th is makes causat ion e f fect dependent and exce l lent at exp lo it ing know ledge . Sarasvathy (2001 ) de f ines e f fectuat ion as “processes that take a set o f means as g iven and focus on se lect ing between poss ib le e f fects that can be created w ith that set o f means” (p . 245 ) . The end product in e f fectuat ion is unpred ictab le at the beg inn ing o f the process and both market and opportun ity get created through the process itse l f . The end product is cont ingent on who comes on board and the act ions and goa ls they enab le and constra in . Th is makes e f fectuat ion actor dependent and exce l lent at exp lo it ing cont ingenc ies .

It is necessary to not ice that e f fectuat ion processes are not ‘better ’ or ‘more

e f f ic ient ’ than causat ion processes in creat ing f irms , markets and econom ies . Th is

has imp l icat ions for measur ing e f fectuat ion and causat ion accord ing to Perry et a l .

(2012 ) . The two constructs looks l ike oppos ites end o f a cont inuum , but

entrepreneur can use both causa l and e f fectua l reason ing depend ing on what the

c ircumstances ca l l for . However , e f fectua l reason ing is pre ferred over causa l reason ing in the ear ly stages o f a new venture and in later stages causa l reason ing is more requ ired . Th is makes the e f fectua l log ic part icu lar ly usefu l and e f fect ive dur ing the introduct ion o f new products in new markets , where Sarasvathy (2001b ) and W i ltbank et a l . (2006 ) re ferred to as the ‘ su ic ide quadrant’ . Anso f f (1957 ) de f ined a product- market matr ix to he lps among others entrepreneurs to determ ine strateg ies for future growth . Anso f f recogn ised th is area as ‘d ivers i f icat ion ’ , where trad it iona l marketing techn iques are ine f fect ive accord ing to Sarasvathy (2001b ) . The e f fectua l cyc le ( f igure 2 ) represents the use fu l and e f fect ive th ink ing process in doma ins such as creat ing products , markets , and ventures (Sarasvathy , 2008 ) .

F igure 2, Dynam ic mode l o f e f fect uat ion (Sarasvathy , 2008)

Sarasvathy (2001 ) p lura l ised the concept o f e f fectuat ion and deve lop key- e lements that embody the core o f the theory . These key- e lements are known as pr inc ip les .

2 .1 .3 Pr inc ip les

Sarasvathy (2001 ) use four pr inc ip les to compares the two constructs , in the form o f

d ichotom ies : a f fordab le loss vs . expected returns , strateg ic a l l iances vs . compet it ive

ana lyses , exp lo it ing cont ingenc ies vs . avo id ing cont ingenc ies and contro l vs .

pred ict ion . However l iterature on the e f fectuat ion top ic has expanded over the last

decade and has been app l ied in f ie lds such as management (Aug ier & Sarasvathy ,

2004 ), econom ics (Dew et a l . , 2004 ) , f inance (W i ltbank et a l . , 2009) , market ing (Read

et a l . , 2009) , and R&D management (Brette l et a l . , 2012 ) . The four or ig ina l pr inc ip les

are updated to a l ist o f f ive pr inc ip le s (tab le 1) that make up the e f fectua l log ic

(Sarasvathy , 2008 ) . The pr inc ip le ‘means- dr iven vs . goa l- dr iven ’ is added to the or ig ina l four pr inc ip les . The pr inc ip les w i l l be short ly introduced and chapter 3 prov ides more deta i l .

Tab le 1, Pr inc ip les o f e f fectuat ion (Sarasvathy , 2001 ; 2008 )

The f irst pr inc ip le emphas izes to create someth ing new w ith ex ist ing means rather than d iscover ing new ways to ach ieve g iven goa ls . Causat ion is focus on goa l- dr iven act ion and e f fectuat ion is focus on means- dr iven act ion . The second pr inc ip le prescr ibes how much someone is w i l l ing to lose rather than max im iz ing the potent ia l return . Know ing the a f fordab le loss create more opt ions in the future over those that max im ize returns in the present and focuses on the downs ide r isks . The th ird pr inc ip le focuses on form ing strateg ic a l l iances and pre- comm itments w ith stakeho lders who are w i l l ing to actua l comm itment to the pro ject , w ithout worry ing about opportun ity costs , or carry ing out e laborate compet it ive ana lyses l ike the causa l reason ing . Who comes on board determ ines the goa ls o f the enterpr ise . The fourth pr inc ip le focuses on exp lo it ing cont ingenc ies that arose unexpected ly over t ime . Acknow ledg ing and appropr iat ing cont ingency by leverag ing surpr ises rather than try ing to avo id them , overcome them , or adapt to them . Causat ion mode ls m ight be pre ferab le when pre- ex ist ing know ledge forms the source o f the compet it ive advantage (Sarasvathy , 2001 ) . The f i fth pr inc ip le focuses on contro l l ing an unpred ictab le future rather than pred ict ing an uncerta in future . E f fectuat ion re l ies on work ing w ith human agency as the pr ime dr iver o f opportun ity rather than l im it ing entrepreneur ia l e f forts to exp lo it ing exogenous factors such as techno log ica l tra jector ies and soc ioeconom ic trends .

2 .1 .4 Under ly ing log ic and future research

Sarasvathy (2001 ) states that under ly ing a l l the pr inc ip les o f e f fectuat ion is a coherent log ic that conta ins d i f ferent assumpt ions about the future than causat ion . Causa l reason ing is based on the log ic “to the extent that we can pred ict the future , we can contro l it” ( Sarasvathy , 2001 , p . 252 ) . E f fectua l reason ing is based on the log ic “to the extent that we can contro l the future , we do not need to pred ict it”

( Sarasvathy , 2001 , p . 252 ) .

Causat ion E f fectuat ion

Goa l- dr iven Means- dr iven

Expected returns A f fordab le loss

Compet it ive ana lyses Strateg ic a l l iances

Avo id ing cont ingenc ies Exp lo it ing cont ingenc ies

Pred ict uncerta in future Contro l unpred ictab le future

Research on the e f fectuat ion top ic expanded and e f fectuat ion is connected to constructs as for examp le new venture per formance (Read & Sarasvathy , 2005 ) and trust (Goe l & Karr i , 2006 ; Karr i & Goe l , 2008 ). However , Perry et a l . (2012 ) argues that the study can be c lassi f ied as nascent and encourage a deve lopment t o an intermed iate state . He suggests imp l icat ions for future research and ment ions that researchers shou ld re late the theory o f e f fectuat ion to estab l ished constructs . Sarasvathy (2001 ) does not ment ion the ro le o f cu lture in her adapt ive dec is ion- mak ing strategy and ne ither does Perry et a l . (2012 ) . There fore , the ro le o f cu ltura l va lues re lated to the e f fectua l dec is ion- mak ing process w i l l he lp the deve lopment process and cou ld prov ide va luab le in format ion .

2 .2 Cu lture 2 .2.1 De f in it ions

The not ion o f ‘cu lture ’ has mu lt ip le and var ious ly inc lus ive de f in it ions . Kroeber and K luckhohn (1952 ) cr it ica l ly rev iewed concepts and de f in it ions o f cu lture , and comp i led a l ist o f 164 d i f ferent de f in it ions . The rev iew o f Kroeber & K luckhohn (1952 ) led to the fo l low ing de f in it ion : “cu lture cons ists o f patterns , exp l ic it and imp l ic it , o f and for behav iour acqu ired an d transm itted by symbo ls , const itut ing the d ist inct ive ach ievements o f human groups , inc lud ing the ir embod iment in arte facts;

the essent ia l core o f cu lture cons ists o f trad it iona l ( i .e . h istor ica l ly der ived and se lected ) ideas and espec ia l ly the ir attached va lues ; cu lture systems may , on the one hand , be cons idered as products o f act ion , on the other , as cond itiona l e lements o f future act ion” (p . 181 ; as c ited by Ad ler , 1997 , p . 14 ). Ho fstede (1980 ) fo l lowed up th is de f init ion o f Kroeber & K luckhohn and de f ines cu lture as “the co llect ive programm ing o f the m ind , wh ich d ist ingu ishes the members o f one group from another” (p . 25 ) . The set o f shared va lues and be l ie fs , va lues and expected behav iours are descr ibed extens ive ly , among others (Ho fstede , 1980 ; Schwartz , 1994 ; Sm ith, 1996 ; House et a l . , 2004 ; Taras et a l . , 2010) and are use fu l to d i f ferent iate between cu ltures.

The term ‘cu lture ’ is d i f f icu lt to descr ibe , because it ex ists at d i f ferent leve ls , rang ing from organ isa t iona l , nat iona l , c lan and ind iv idua l (M itche l l , Sm ith , Seawr ight , &

Morse , 2000 ). Nat ions are norma l ly the best representat iv es o f cu lture, because the nat iona l ity o f a person can eas i ly be estab l ished , whereas membersh ip o f a sub- cu lture is more di f f icu lt to estab l ish .

2 .2.2 Cu ltura l va lues

Ho fstede (2001 ) d iscusses the mu lt i leve l nature o f cu lture and represents th is in an

on ion d iagram ( f igure 3 ) . He argues that cu lture looks l ike an on ion and can be

pee led , layer- by- layer , in order to revea l the content (Dah l , 2004 ) . As the f igure ind icates , four terms descr ibe the concept o f cu lture : va lues , symbo ls , heroes and r itua ls descr ibe the concept o f cu lture . The va lues are the most h idden layer o f cu lture and are acquired ear ly i n a person ’s l ive . Eas ier to observe are r itua ls , heroes and symbo ls . R itua ls are cons idered as soc ia l essent ia l , such as ways o f greet ing and pay ing respect to others (Dah l , 2004 ) . Heroes are adm ired persons who serve as an examp le for behav iour . Symbo ls are the most super f ic ia l layer . Peop le who share a spec i f ic cu lture recogn ize these symbo ls l ike words , co lour or arte facts that carry a spec ia l mean ing (Dah l , 2004 ) .

F igure 3, The on ion d iagram (Ho fst ede , 2001)

The cu ltura l va lues have been the focus o f most cross- cu ltura l research. Ho fstede (1994 ) argues that cu ltura l va lues represent the deepest leve l o f a cu lture . They are

“broad fee l ings , o ften unconsc ious and not open to d iscuss ion , about what is good and what is bad , c lean or d irty , beaut i fu l or ug ly , rat iona l or irrat iona l , norma l or abnorma l , natura l or paradox ica l , decent or indecent” (Ho fstede , 1994 , p . 14 ) .

2 .2 .3 Ho fstede ’s framework

Ho fstede (1990 ; 1994) prov ides a framework conta in ing four d imens ions that he be l ieves can be used to d i f ferent iate between nat iona l cu ltures , inc lud ing power d istance (the degree o f inequa l ity among the peop le that the popu lat ion o f a country cons ider norma l ) , Ind iv idua l ism- co l lect iv ism (the degree to wh ich peop le in a country pre fer to act as ind iv idua ls rather than members o f groups) , m ascu l in ity- f em in in ity (the degree to wh ich such ‘mascu l ine ’ va lues , such as assert iveness , compet it ion , and success are emphas ised , as opposed to such ‘ fem in ine ’ va lues as qua l ity o f l i fe , warm persona l re lat ionsh ips , serv ice , etc .) and u ncerta inty avo idance (the degree to wh ich peop le in a country pre fer structured over unstructured s ituat ions ) . Later Ho fstede added the d imens ion long- term or ientat ion ( imp l ies a stress on v irtuous l iv ing in th is wor ld , w ith thr i ft and pers istence as key v irtues ) as the f i fth cu ltura l d imens ion . These d imens ions prov ide a use fu l too l , wh ich has the potent ia l to categor ise certa in important aspects o f cu lture .

Ho fstede ’s framework is used extens ive ly in management and internat iona l bus iness l ite rature and is a dom inant mode l for research on nat iona l cu lture . Ho fstede ’s d imens ions led to an exp los ion o f cross- cu ltura l research in bus iness , psycho logy , and other d isc ip l ines that favour quant itat ive research methods . H is or ig ina l cu ltura l ind ices have been used in thousands o f stud ies and prov ided a foundat ion for cross - cu ltura l corporate tra in ing and internat iona l management courses in bus iness and execut ive educat ion curr icu la (Taras , Stee l , & K irkman , 2012 ) .

Desp ite the enormous popu lar ity , Ho fstede ’s cu ltura l ind ices are not w ithout l im itat ions . Scho lars argue the re l iance and genera l izab i l ity on Ho fstede 's ind ices (Shane , 1993 ; Thomas & Mue l ler , 2000 ; Mue l ler & Thomas , 2000 ; M itche l l , Sm ith , Seawr ight , & Morse , 2000 ; McSweeney , 2002 ). Ho fstede 's d imens ions were or ig ina l ly deve loped in the context o f forma l organ isat ions and the study was based on a samp le o f emp loyees in a s ing le Amer ican organ isat ion , IBM . W ith research deve lopments on cu lture, it is uncerta in i f Ho fstede ’s 40 - year- o ld data is st i l l re l iab ly in today ’s app l icat ion . Taras et a l . (2010 ) ana lysed th e re lat ionsh ip between severa l organ isat iona l ly re levant outcomes w ith the cu ltura l va lue d imens ions . They compared emp ir ica l research that used the Ho fstede ’s ind ices and found that the cu ltura l va lues framework is st i l l re levant . Two years later they publ ished an art ic le that o f fered an updated set o f nat iona l cu ltura l scores a long the d imens ions o f Ho fstede ’s cu ltura l framework . These ind ices are based on a larger and more representat ive samp le and cu ltura l change is addressed by o f fer ing separate sets of ind ices for three decades . The updated dataset is more accurate than that o f fered by Ho fstede or other cross- cu ltura l compar ison stud ies (Taras et a l . , 2012 ) .

More recent stud ies have o f fered new sets o f cu ltura l ind ices, but large ly rema in sub ject to lim itat ions , name ly the l im ited ab i l ity to represent the ir respect ive popu lat ions and conta inment o f a spec i f ic t ime per iod . Even the larger stud ies ( Schwartz , 1994 ; Sm ith et a l . , 1996 ; House et a l. , 2004 ) are represented by a few dozen ind iv idua ls and the data represented a s ing le po int in t ime or a per iod too short to e f fect ive ly prec lude long itud ina l ana lys is (Taras et a l . , 2012 ).

The prev ious EPP IC stud ies used ma in ly the va lue perspect ive o f Ho fstede, but a lso

other stud ies , to determ ine the impact o f cu lture on the entrepreneur ia l dec is ion-

mak ing process and found unconv inc ing resu lts. I t is quest ionab le i f Ho fstede ’s

d imens ions are su f f ic ient pred ictors to measure cu ltura l in f luences on

entrepreneur ia l dec is ion- mak ing. Perry et a l . (2012 ) encourages deve lopment in

e f fectuat ion research and there fore other estab l ished constructs o f cu lture shou ld

be re lated to it . Ge l fand ’s theory on soc ieta l t ightness- looseness ga ined rese arch

attent ion in recent years and focused on the strength o f soc ia l norms and the degree

o f sanct ion ing w ith in soc iet ies . Taras et a l . (2010 ) are the f irst researchers that

introd uced th is theory re lated to cu ltura l va lues and found that cu ltura l va lues have s ign i f icant ly stronger e f fects in cu ltura l ly t ighter , rather than looser , countr ies . Ge l fand, N ish i i & Raver (2006 ) argues that the concept is un ique and comp lementary to other cu ltura l d imens ions .

2 .2.3 T ightness - Looseness

Ear ly research in anthropo logy , soc io logy and psycho logy (Pe lto , 1968 ; Tr iand is , 1989 ) showed the construct o f t ightness- looseness important in d i f ferent iat ing cu ltures and it can exp la in and pred ict cu ltura l d i f ferences in many k inds o f soc ia l behav iour . Pe lto (1968 ) was the f irst on the deve lopment o f a theory on t ightness- looseness and argued that trad it iona l soc iet ies var ied in the ir express ion o f and adherence to soc ia l norms . Pe lto descr ibed t ight soc iet ies as “those that were r igorous ly forma l and d isc ip l ined , had c lear ly de f ined norms , and imposed severe sanct ions on ind iv idua ls who dev iated from norms . By contrast , loose soc iet ies had a lack o f forma l ity and d isc ip l ine , i l l - de f ined norms , and a h igh to lerance for dev iant behav iour” (Ge l fand , 2 012 , p . 420 ).

Pe lto ident i f ied determ inant s o f t ightness- looseness inc lud ing d i f ference in k insh ip systems , popu lat ion dens ity and the dependence on food crops (econom ic system ) . In 1977 , Tr iand is re introduced the t ight- loose construct and argued that i t is an important d imens ion . Because the construct is d i f ferent from other d imens ion o f cu ltura l var iat ion (Tr iand is , 1989 ) there is the need to deve lop measures o f t ightness and looseness for cross- cu ltura l research (G e l fand et a l , 2006 ) .

Ge l fand et a l . (2011 ) created a measure to prov ide ins ight into how t ightness- looseness operates in modern soc iet ies . W ith data from 33 nat ions , the study i l lustrates the d i f ferences between cu ltures that are t ight (have many strong norms and a low to lerance o f dev iant behav iour ) versus loose (have weak soc ia l norms and a h igh to lerance o f dev iant behav iour ) . Resu lts showed that t ightness- looseness is part o f a comp lex , loose ly integrated mu lt i leve l system that compr ises a broad array o f eco log ica l and h istor ica l soc ieta l threats (e .g . popu lat ion dens ity , resource scarc ity , vu lnerab i l ity to natura l d isasters , and preva lence o f d isease ) , broad versus narrow soc ia l isat ion in soc ieta l inst itut ions (e .g . , autocracy , med ia regu lat ions ) , the strength o f everyday recurr ing s ituat ions , and m icro- leve l psycho log ica l a f fordances (e .g . , prevent ion se l f - gu ides , h igh regu latory strength , need for structure ) that nat ions have (or have not ) encountered (Ge l fand et a l ., 2011 ) .

F igure 4, A systems mode l o f t ightness - looseness (Ge l fand et a l . , 2011 )

The ‘systems mode l of t ightness- looseness ’ ( f igure 4 ) i l lustrates the genera l mode l o f how d i f ferences in t ightness emerges and ind icates that t ightness is re lated to h igh popu lat ion dens ity , low percentage o f arab le land and food supp ly , h igh degrees o f env ironmenta l threats , h igh po l ice per cap ita and strength o f cr im ina l just ice systems , h igh degrees o f autocracy , and low openness o f the med ia . There fore , t ight soc iet ies va lue order , forma l ity , d isc ip l ine and con form ity and in contrast , loose soc iet ies va lue innovat ion , openness to change , to lerance and var iety (Ge l fand et a l . , 2006 ).

Research show that t ightness- looseness is re lated to but d ist inct from other cu ltura l d imens ions . Tr iand is and Ge l fand (1998 ) shared research h istory together and per formed research ma in ly on ind iv idua l ism- co l lect iv ism . Carpenter (2000 ) found that the corre lat ion between cu ltura l t ightness and i nd iv idua l ism- co l lect iv ism was on ly moderate ly corre lated . Later , Tr iand is (2004 ) invest igated the re lat ionsh ip o f Ho fstede 's uncerta inty avo idance to t ightness . He found that in cu ltures h igh in uncerta inty avo idance , peop le want to have structure , to know prec ise ly how they are supposed to behave and what is go ing to happen next . Ge l fand et a l . (2011 ) argues that the d imens ion o f uncerta inty avo idance is not s ign i f icant ly re lated w ith t ightness- looseness . Ho fstede ’s d imens ion o f power distance is a lso re lated to but d ist inct from t ightness- looseness . T ight soc iet ies may be more h ierarch ica l , wh ich he lps to re in force order and coord inat ion , but th is is not a lways the case . Resu lts a lso show that power d istance is d ist inct and moderate ly and pos it ive ly corre lated w ith t ightness- looseness (Ge l fand et a l ., 2011 ) .

The next chapter e laborates on how loose a nd t ight soc iet ies and poss ib ly re lates to

e f fectua l and causa l dec is ion- mak ing . Hypotheses are formu lated in order to exp lore

the research quest ion formu lated at the introduct ion (chapter 1 ) .

3. Hypotheses

Th is chapter e laborates on the relat ionsh ip o f e f fectua l and causa l dec is ion- mak ing w ith cu ltura l t ightness- looseness . Sarasvathy ( 2001 ; 2008) for mu lated f ive pr inc ip les that make up the ef fectua l log i c , wh ich are d iscussed separate ly and are l inked to character ist ics o f cu ltura l t ightness- looseness . Each pr inc ip le is formu lated in a group o f two hypotheses . The last group o f hypotheses is a comb inat ion o f the f ive pr inc ip les in order to measure the who le construct o f e f fectuat ion and causat ion . 3 .1 Means- dr iven vs . goa l- dr iven

The start ing po int o f the e f fectua l dec is ion- mak ing process is based on the set o f means. Each stakeho lder asks h imse l f quest ions o f who I am ( ident ity ) , what I know (know ledge ) and whom I know (network ) and interact ion w ith stakeho lders resu lt in se lect ing poss ib le e f fects and dec is ions that can be imag ined w ith the ex ist ing means . The stakeho lders shou ld be open to change in order to create va luab le new comb inat ions . Ge l fand et a l . (2006 ) argues that ind iv idua l s in a loose soc iety are more open to change and show more innovat ive behav iour , wh ich can be bene f ic ia l for creat ing new ends w ith ex ist ing means . Ge l fand et a l . (2006 ) a lso exp lains that there is more var iab i l ity in behav iour in loose soc iet ies , wh ich imp l ies that less s im i lar ity w i l l be found and more poss ib le e f fects can be imag ined .

Sarasvathy (2001 ) argues that the causat ion mode l starts w ith goa ls as a g iven and that the bas ic dec is ion for that mode l is the dec is ion on what means shou ld be accumu lated to ach ieve these goa ls . Less openness to change and creat iv ity is needed , wh ich are character ist ics o f ind iv idua ls in a t ight soc iety . T ight ind iv idua ls seek pred ictab i l ity and order and avo id amb iguous and nove l s ituat ions (Ge l fand et a l . , 2006 ) . A lso , soc ieta l- t ight ind iv idua ls show less var iab i l ity in the ir behav iour , wh ich probab ly resu lts in s im i lar goa ls and act ions .

The fo l low ing hypotheses are stated :

H1a : A loose soc iety in f luences entrepreneurs in emphas iz ing on means- based act ions rather than goa l- based act ion .

H1b: A t ight soc iety in f luences entrepreneurs in emphas iz ing on goa l- based act ions rather than means- based act ions .

3 .2 Af fordab le loss vs . expected returns

The d i f ference between a f fordab le loss and expected returns is based on

pred ispos it ion towards r isk and resources (Kraa i jenbr ink , 2008 ) . E f fectua l reason ing

entrepreneurs focus on pro jects where the loss in a worst- case scenar io is a f fordab le