The influence of (national) cultural differences on
entrepreneurship
by
Ramon Pruissen (S2076195)
Master Thesis International Business and Management Faculty of Economics and Business
University of Groningen
Supervisor: Dr. A. Kuiken
Co-assessor: Dr. M.J. Klasing
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ABSTRACT
Several studies consider entrepreneurship as the engine behind economic growth. Therefore, identifying factors that influence entrepreneurship becomes more important. This study uses action theory, personality trait theory and Hofstede’s cultural dimensions to investigate the influence of national cultural differences on entrepreneurial activity, mediated by the personality traits risk taking propensity and self-efficacy. Using data from 2017, the sample consisted of 48 countries from all over the world. Data regarding entrepreneurial activity, risk perception and self-efficacy was sourced from the Global Entrepreneurship Monitor (GEM). The results showed that collectivistic cultures have higher rates of entrepreneurship.
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Table of Contents
1. INTRODUCTION ... 5 2. THEORETICAL BACKGROUND ... 9 2.1. Defining entrepreneurship ... 9 2.2. Action Theory ... 102.3. Personality traits of entrepreneurs ... 11
2.4. Necessity-driven versus opportunity-driven entrepreneurs ... 15
2.5. Entrepreneurial stages ... 16
2.6. Hofstede’s cultural dimensions ... 18
3. HYPOTHESIS DEVELOPMENT ... 21
4. METHODOLOGY ... 24
4.1. Sample ... 24
4.1.1. Risk taking propensity & self-efficacy... 24
4.1.2. Cultural dimensions ... 24 4.1.3. Final sample ... 25 4.2. Variables ... 26 4.2.1. Independent variables ... 26 4.2.2. Dependent variable ... 26 4.2.3. Mediator variables ... 27 4.2.4. Control variables ... 27 4.3. Data analysis ... 30 5. RESULTS ... 33 5.1. Assumptions ... 33 5.1.1. Normality ... 33 5.1.2. Linearity ... 34 5.1.3. Homoscedasticity ... 35 5.1.4. Multicollinearity ... 36 5.2. Descriptive statistics ... 37
5.3. Regression direct path’s ... 38
5.4. Mediation effect of risk perception and self-efficacy ... 40
5.5. Robustness checks ... 40
6. DISCUSSION AND CONCLUSION ... 43
6.1. Main findings ... 43
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1. INTRODUCTION
Entrepreneurship is a relatively new field of academic study. Entrepreneurship has been progressively formalized. In the academic field, the interest in entrepreneurship has increased considerably in the past 20 years (Sternberg, 2009). Publications of new articles in this particular domain have increased tremendously (Aldrich, 2012).
Entrepreneurship appears more and more often on the agendas of a lot of politicians. In essence, the suggestion is made that entrepreneurs contribute towards economic growth because they bring innovations to the market, initiate economic changes and strengthen competition and productivity (Audretsch, Keilbach, & Lehmann, 2006; Van Praag, &
Versloot, 2007). According to Naudé (2010), entrepreneurship contributes to the development of the country in two ways; by driving structural change and economic growth. This leads to more (paid) employment opportunities, specialization and labour mobility. Secondly, it offers people the possibility to escape from (absolute and relative) poverty. Because of the positive character that entrepreneurship entails on an economy, more and more research has been done into different types of policy to stimulate entrepreneurship in an effective way (Parker, 2009). Given the potential benefits that entrepreneurship can bring to a country, it is useful for society if the potential or successful entrepreneur can be distinguished from the non-potential or unsuccessful entrepreneur, because a bankruptcy or a forced firm withdrawal has serious consequences for those involved (Brockhaus, 1980; Thomas, 2004).
If there is a demand for entrepreneurship, individuals will also have to be willing to make the choice to start a business, to meet this demand. In order to understand the choice for
entrepreneurship, research has to be conducted regarding which factors affect that choice. Concerning these factors, a separation can be made between formal and informal institutions (North, 1991). An institution is a formal or informal rule that restricts behaviour and
interaction within a group. Formal institutions consist mainly of laws. Informal institutions consist of traditions, values and cultural norms. Institutions are experienced as given facts imposed on individuals by society, which are, among other things, shaped by the culture of a given society. According to Welter (2007), formal institutions contribute to the production of opportunities and informal institutions contribute to configure the perceptions of the
6 (countries) is more supportiveness towards entrepreneurship then starting a business is more favourable (Etzioni, 1987).
The awareness that entrepreneurship plays an important role within a country increases and is accurately tracked in different countries (Monitor, 2017). On the basis of this information, decisions can be taken which, for example, facilitate the start-up phase of a company and therefore stimulate entrepreneurship in a country. After all, the formal and informal rules differ per country and can therefore influence the business climate (Pejovich, 2012). Entrepreneurial traits play an important role in entrepreneurship. An entrepreneur
distinguishes itself from a combination of personality traits. These are personality traits that people possess, which make them more or less suitable for entrepreneurship.
Culture in part, defines the personality traits of an individual. Mueller and Thomas (2001) point out that culture can strengthen the entrepreneurial spirit of an individual, because certain traits related to entrepreneurial activity are more common in some cultures than in others, therefore, the purpose of this research is to investigate the influence of national cultural differences on the personality traits of entrepreneurs. Many studies have already been
conducted into the personality traits of an entrepreneur at the micro-level (McClelland, 1961; Brockhaus, 1982; Begley, & Boyd, 1987; Chye Koh, 1996; Lumpkin, & Dess, 1996; Frese, & Gielnik, 2014; Nasip, Amirul, Sondoh, & Tanakinjal, 2017).
With the assistance of the cultural dimensions from Hofstede (1984), it is possible to map the differences between cultures and subsequently determine the influence on entrepreneurship. Hofstede has measured the culture of different countries and by indexing them, a cross-cultural comparison between various countries is possible. Secondly, it has some similarities with the personality traits of successful entrepreneurs. Personality traits are together with other things moulded by its culture. This means that culture could subsequently influences the personality traits of people (Davidsson, & Wiklund, 1997), and therefore, influences
entrepreneurial traits in a positive or negative way. These traits can be off assistance as a link between national culture and entrepreneurship, because culture supports certain personality traits and castigate others, it is assumed that different cultures differ in terms of
7 restrictive. Nowadays, we speak of the earth as a global village. This makes it increasingly common for people to leave their countries of origin to work in a host country.
It is becoming increasingly easier for companies to determine where they produce and market their products (Abele, Elzenheimer, Liebeck, & Meyer, 2006). Large companies move their factories to other countries, for example, because production costs in another country may be cheaper. The relocation forced the newcomers to cooperate with the local population. Since the local population often knows a different culture than the newcomer, miscommunications often arise between the two parties. In order to avoid these miscommunications as much as possible, it is important that both parties become acquainted with each other's cultures (Barkema, Shenkar, Vermeulen, & Bell, 1997).
Given the growth in international trade and migration, it can be very useful that people acquire more knowledge about other cultures. By gaining more knowledge about cooperative relationships between cultures, an understanding society can come into being, because culture is not always tied to a particular area. Cultures these days are no longer only restricted by national borders, making it increasingly important to understand the impact of cultural influences (Mattila, 1999). Today's society can be referred to as a multicultural society. Everywhere people from different regions meet, but each has his own interpretation of social reality, because cultural values influence the way people interpret things they see (Nakata, & Sivakumar, 2001).
We live in a revolutionary era in which entrepreneurship, driven by technological
developments, is subject to enormous change. In the past, entrepreneurs had to think carefully about starting a company and weighing all the risks against the benefits. Predictions based on previous experiences are no longer valid. Start-ups of barely a few years old such as Uber and Airbnb turn entire industries upside down on a worldwide scale. This leads to great
uncertainty.
According to Makimurto-Koivumaa and Puhakka (2013), the abovementioned developments have led to less interest among students in entrepreneurship. Career expectations change and students therefore need new skills. This means that research into this subject in the past is not always representative for the future. New research into this subject therefore remains
essential. Besides, a relatively large amount of research has been conducted towards the effect of entrepreneurship in developed countries, compared to developing countries.
8 for entrepreneurship policies more effective per country or type of country. A policy that is used to stimulate entrepreneurship will have different effects in various countries due to the different circumstances that apply per country. In this case, it is also interesting to know if entrepreneurs are different across cultures, because the transfer of entrepreneurship theory and knowledge to different cultures can possibly be acknowledged.
Most of the research on entrepreneurship targets their attention towards the definition,
measurement and influence on the performance of corporations in all sort of firms (Hughes, & Morgan, 2007), however, less research has been conducted regarding the factors (explanatory variables) that stimulate entrepreneurship (Fayolle, Basso, & Bouchard, 2010). There are several explanatory variables that influence entrepreneurship. This research will focus on the explanatory variable culture. The importance of national culture on entrepreneurship has been well determined, however, commonly speaking, research that includes cultural variables have been slightly ignored (Hayton, George, & Zahra 2002). The culture of a country could affect the number of entrepreneurs, because the behaviour of a corporation is to some degree the product of its individual people, it can be assumed that culture also influence entrepreneurial activity (Rauch, Wiklund, Frese, & Lumpkin, 2004). Such an assumption can be answered through cross-cultural research.
The approach of this research is to analyse the individual personality traits that influence entrepreneurial behaviour in a positive way. By doing so, an overall picture of how these personality traits relates to the amount of entrepreneurship can be made. By means of personality traits, this research attempts to establish the relationship between culture and entrepreneurship at the macro-level (country-level). Based on this relationship, cultural norms and values can be specified that make a positive contribution towards entrepreneurship. These norms and values can then be used to stimulate entrepreneurship in a more focused/directional way.
This will bring us to the following central research question:
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2. THEORETICAL BACKGROUND
There are different theories available to answer the research question. This paper focuses on action theory (the action-characteristics model of entrepreneurship), personality trait theory, and the widely known theory of Hofstede’s cultural dimensions. Also, hypotheses will be formulated based on the theory. This section will end with a conceptual model. After
evaluation of and reflection on the existing literature regarding entrepreneurship and cultural differences, our understanding concerning this topic is expected to increase.
2.1. Defining entrepreneurship
In order to answer the central research question, it is important to have a clear understanding what entrepreneurship exactly entails, because for the overview and clarity of this research it is still required to come to a definition of the entrepreneur. Both classic and modern
definitions will be discussed. The term entrepreneurship is a multifaceted economic concept when one looks at the history of the term. Many definitions have emerged over the years, but today there is still debate about the exact definition of entrepreneurship.
One of the reasons why it is difficult to define a definition has to do with the multitude of perspectives. Scientists from varying fields occupy themselves with entrepreneurship and each of them has his / her own view of the entrepreneur's interests.
Cantillon (2015) was the first economist to discuss the entrepreneur in detail. Cantillon saw the entrepreneur as responsible for all exchanges and circulations in the economy. In contrast to contract workers, the entrepreneur earned an uncertain profit that arose from the difference between a certain purchase price and an uncertain sales price, a form of arbitration.
Say (1836), saw a different role for the entrepreneur. Not risk played the biggest role, but the management qualities of the company. This made the entrepreneur input into the production process.
Schumpeter (1947) emphasized the innovative function of the entrepreneur in his work. The main task of the entrepreneur was identifying unique possibilities and commercialise them. The economist Kirzner (2015) argued that entrepreneurs must deal with situations in which the economy is out of balance by shocks that constantly influence the economy.
10 According to Reynolds, Hay and Camp (1999: 3), the definition of entrepreneurship is as follows: “Any attempt at new business or new venture creation, such as self-employment, a
new business organization, or the expansion of an existing business, by an individual, a team of individuals, or an established business”.
According to Cummins and Dallat (2004), entrepreneurship is the process of identification, development and the putting into practice of an idea. This can be an innovative idea, a chance in the market or simply a better way of doing something. The end result of this process is the creation of a new business, which came to fruition through risky conditions and a given amount of uncertainty.
More recent entrepreneurship researchers, such as Davidsson (2016), see entrepreneurship as competitive behaviours that support the market system, also formulated as the establishment of new economic activity that points towards innovation in the marketplace.
One aspect that returns within almost all these definitions is that entrepreneurs engage in action. Entrepreneurs are more active then employees and even managers (Utsch, Rauch, Rothfufs, & Frese, 1999), Proactivity and taking initiative are important characteristics of entrepreneurs. Waiting is a clincher for an entrepreneur. An entrepreneur is actively committed to achieving a certain goal in order to be one step ahead of the competition. Therefore, action theory can be used to analyse the entrepreneurial process. Empirical research has shown that changing a person’s approach from passive towards active ensures entrepreneurial prosperity in less than a year (Glaub, Fischer, Klemm, & Frese, 2009).
2.2. Action Theory
Action theory is a combination of values, knowledge, norms and skills that enable people to interpret situations and to act appropriately. This theory is therefore about actions that we have to perform in order to achieve the desired result in a certain situation (Parsons, 1978). An action theory states that if we do x in a given situation, y will be achieved. In virtually everything we do, an action theory can be found. When we greet someone else, he or she does the same. If we steal, we will be punished. All our behaviour is based on theories that connect our actions to certain consequences. In action theory, elements are also included about the effects that activities can realize. Learning is the development of an action theory. Learning relates to interpreting situations and implementing the appropriate actions with the intended effects. By trying out and experimenting, people have come to understand what does and does not 'work'. We thus develop our own action theories. Of course this also applies to
11 Frese (2009) has developed a model for entrepreneurship that uses action theory as a starting point. This model maps all kinds of characteristics that can be linked to entrepreneurship. These characteristics are embedded in the national culture of a country, which is indicated by the model below. This research will only focus on the personality traits of entrepreneurs, as discussed earlier in the introduction.
(Figure 1, Source: Frese, 2009)
2.3. Personality traits of entrepreneurs
Personality traits say something about the person himself. Personality traits are therefore visible and recognizable to others and are reflected in the attitude of a person. A characteristic difference with skills is that personality traits are not easy to learn or unlearn. Personality traits are in the genes or have been shaped by the influence of environment over the years (Loehlin, 1992, Bouchard, 1994).
The personality traits of people that are active in the company's top management influence the strategic choices and performance of a company (Hambrick & Mason, 1984). In the
entrepreneur’s behaviour, much of his personality, his experiences and his values can be found. From this, Hambrick and Mason (1984) subsequently stated that the relevant background personality traits could be used to predict the strategic choices of leaders /
12 leader on the company is substantial. As soon as the company grows, these influence probably decreases somewhat, however, even then, the leader is of course still very important for the company (Hambrick, 2007).
Much research has been done in the literature on the personality traits of entrepreneurs (McClelland, 1961; Brockhaus, 1982; Begley, & Boyd, 1987; Chye Koh, 1996; Lumpkin, & Dess, 1996; Frese, & Gielnik, 2014; Nasip, Amirul, Sondoh, & Tanakinjal, 2017). It is a combination of personality traits that sets apart the potential entrepreneur from the non-potential entrepreneur.
Above all, there are six properties that constantly come back; risk taking propensity, need for achievement, self-efficacy, locus of control, autonomy and innovativeness. There are many variables that have an influence on entrepreneurship, but these personality traits have the highest correlation with entrepreneurial activity (McClelland, 1961; Rotter, 1966, Begley, & Boyd, 1987; Rauch, & Frese, 2007). Successful entrepreneurs generally score higher on these traits than less successful entrepreneurs.
13 have not started their own business (Hornaday, & Aboud, 1971). What also clearly emerged is that entrepreneurs have a stronger desire to achieve something than people with a paid job (Robinson, Stimpson, Huefner, & Hunt, 1991).
The concept of locus-of-control is about the extent to which people feel that they can influence the situation and / or their future. People with an internal locus of control believe that they are able to control the events in life. People with an external locus of control think that events in life depend on external influences, for example, chance, happiness and fate (Rotter, 1966). Empirical research has shown that internal locus of control is a typical characteristic of an entrepreneur (Durand, & Shea, 1974, Robinson et al., 1991, Cromie, 2000). A study by Brockhaus and Horwitz (2002) has shown that successful entrepreneurs have a higher locus of control than entrepreneurs who have failed. Entrepreneurs with a high internal locus of control appear to be more motivated to find new business opportunities, instead of waiting for a business opportunity to arise; they are proactive (Lee, & Tsang, 2001).
Self-efficacy means that an entrepreneur thinks he is capable of achieving his goals in a certain way (Bandura, 1977; Chen, Green, & Crick, 1998). The entrepreneur has the faith to be able to make good decisions (Krueger, & Dickson, 1994). The belief in their own abilities gives entrepreneurs’ confidence in their control over future business results. Rauch and Frese (2007) found that self-efficacy has the highest correlation with business creation off all the traits they investigated, including all the traits mentioned earlier.
According to Lee and Tsang (2001), self-efficacy determines the degree of internal locus of control. This is also evident from the results of the interviews of Brockhaus (1982).
14 Autonomy is one of the most cited reasons to start up a business (Shane, Kolvereid, &
Westhead, 1991; Kolvereid 1996; Carter, Gartner, Shaver, & Gatewood, 2003. An
entrepreneur wants to be independent (Brandstätter, 1997). In addition, the entrepreneur needs a certain degree of freedom. Striving for this freedom has to do with determining your own fate about the work you execute. It may also have to do with certain underlying reasons such as; not being able to control a boss and / or rules, determining what happens and striving for personal growth and development (Rauch, & Frese, 2007). The foregoing clearly indicates that entrepreneurs are individualists, whereby it also appears that they do not like to receive help from third parties (Kuratko, Hornsby, & Naffziger, 1997).
Another very important characteristic of entrepreneurs is innovativeness.
Innovativeness is the connection between conceiving and executing new and unique business opportunities (Robinson et al., 1991). It is also a character trait (Mitton, 1989). This
characteristic says something about the innovative capacity. The chance that a company survives and the chance that a company will become successful is increasingly dependent on the innovative capacity. Not only product innovation is important to maintain market share, but also process innovation to keep the price low. Innovation is also about existing ideas, carried out in new markets (Rauch, & Frese, 2007). Entrepreneurs with a high innovative capacity are more successful than entrepreneurs with a low innovative capacity. This applies particularly to small companies (Heunks, 1998). There is sufficient evidence that
entrepreneurs are significantly more innovative than not entrepreneurs (Ho & Koh, 1992; Stewart, Watson, Carland, J.C., & Carland, J.W., 1999).
In this research the two personality traits risk taking propensity (fear of failure) and self-efficacy (perceived capabilities) will be used because the data source that is used in this research only uses these two personality traits. Future research should broaden this study by incorporating more personality traits related towards entrepreneurship along with the
influence of other institutional factors like political stability, infrastructure and the educational system.
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2.4. Necessity-driven versus opportunity-driven entrepreneurs
The result of the decision to start a business is often the choice between two alternatives: becoming independent or work as a paid employee (Block, & Wagner, 2010). In the literature, the motives to start a business are divided in to ‘necessity entrepreneurship’ and ‘opportunity entrepreneurship’ (Rosa, Kodithuwakku, & Balunywa, 2008).
Necessity-driven entrepreneurs are mostly individuals who, because of the lack of alternative economical options, generate the necessary income through a personal business. These are businesses that come into existence due to an economy that is far from developed,
predominantly in developing countries (Reynolds, Bygrave, Autio, Cox, & Hay, 2001). This is important, given the fact that this research also focuses on developing countries. These businesses often originate because there is no alternative choice of generating income in a regular fashion, such as paid employment. Usually, these are businesses that have little influence on the economy and barely create any employment.
The big difference with necessity-driven entrepreneurs lies in the voluntary character of a unique available opportunity for entrepreneurship. This opportunity can come from economic factors, but also non-economic factors.
Opportunity-driven entrepreneurs are usually found in a flourishing economy. These
businesses see daylight because the economy offers the choice of starting your own business or taking paid employment. In such an economy there are many ways to start a successful business that can also influence the economy. These businesses are mostly typical for countries with a high income (Reynolds et al., 2001).
In developed countries, entrepreneurship often refers to the innovative entrepreneur who, by means of new products or services, keeps competition sharp and / or increases productivity (Thurik, Carree, Van Stel, & Audretsch, 2008). Unlike in developed countries,
entrepreneurship in developing countries is much more self-employed that mainly compete on the basis of the price and the products that are sold are almost the same everywhere. Also, entrepreneurs in developing countries are more often active in the informal sector. This is a much larger source of economic activity in developing countries. The motives of starting entrepreneurs in developing countries are therefore often different from the motives of new entrepreneurs in developed countries (Desai, 2011).
Bosma and Levie (2010) showed that the share of necessity-driven entrepreneurs in
16 necessity.
The Global Entrepreneurship Monitor (GEM) distinguishes between necessity-driven and opportunity-driven entrepreneurs through 3 different motives: necessity, independency and increase-wealth motives. GEM also separates entrepreneurship into different stages.
2.5. Entrepreneurial stages
Increased interest in entrepreneurship has led to the development of the Global
Entrepreneurship Monitor (GEM) consortium. GEM has been conducting worldwide uniform research into various dimensions of entrepreneurship since 1997. GEM is an organisation that was founded to study the relationship between entrepreneurship and economic growth. GEM monitors and analyses entrepreneurial activity worldwide. GEM is the largest international comparative research on entrepreneurship among the workforce population and is
implemented worldwide in more than seventy countries (Monitor, 2017).
Besides public databases, the GEM publishes a so called GEM report every year. This report deals with various issues about entrepreneurship around the world. Much attention is paid to the factors that make people decide to become entrepreneurs. These factors were investigated at three different levels: micro, meso and macro level (Freytag, & Thurik, 2007). At the macro level, research is concerned with explaining differences in entrepreneurial activity between different countries and over time. Various factors such as demographic characteristics, technological development, government policy with regard to entrepreneurship, economic growth and cultural factors play a role in this (Wennekers, Uhlaner, & Thurik, 2002).
Entrepreneurship is a development that knows several stages, which cannot be simply defined in a single moment. In the literature, several stages of entrepreneurship are listed and there are different methods to define those stages. GEM has conceptualized the concept of
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(Figure 2, Source: Monitor, 2017)
GEM divides entrepreneurship in to 4 different stages:
- The involvement of potential entrepreneurs, individuals who show evidence of
entrepreneurial attitudes. These are the individuals who see opportunities within their field and believe that they have the qualities to start a business. Fear of failure and the societal view of society on entrepreneurship also play a role here;
- Nascent entrepreneur, individuals who started a new company less than three months ago. Many companies appear to have no existence in these first three months, but entrepreneurial activity can take place at this time;
- Owner-manager of a new business, those former nascent entrepreneurs who have been in business for more than three months. However, people only fall into this category if the company does not exist for more than 42 months;
- Established businesses are those that have been in existence for more than 42 months. The (possible) last stage of the entrepreneur is the liquidation of the company, often for various reasons.
18 companies will not continue to exist, they can contribute to economic activity. One must think of increased competition through new ideas, which forces markets to renew. In its initial stages, entrepreneurship is marked by an excessive amount of uncertainty and high levels of complexity in entrepreneurial activities. Entrepreneurs are faced with accounting, marketing, leadership, human resource management and production etcetera (McMullen, & Shepherd, 2006). According to Baron and Shane (2007), entrepreneurship should have at least 3 stages, which consist of: opportunity identification, launch stage and post launch stage. This is comparable to the classification used by GEM.
2.6. Hofstede’s cultural dimensions
According to Weber (2013), at the society level, variation in the scale of entrepreneurship can be explained by cultural factors. Mueller and Thomas (2001) point out that culture can
strengthen the entrepreneurial spirit of an individual, because certain personality traits related to entrepreneurial activity are more common in some cultures than in others.
Culture is a difficult concept to describe. This is due to its ubiquity. It is difficult to distinguish between strictly cultural factors and other influences at a macro level (Soares, Farhangmehr, & Shoham, 2007). As a result, it is very important for good research to properly describe culture. In science, there are several definitions of culture. The definition of Hofstede (1984) has been chosen because Hofstede has attempted to make a model through which cultures can be distinguished from each other. This model consists of different dimensions that are described later.
According to Hofstede (1984), culture can be defined as:
“Culture is the collective programming of the human mind that distinguishes the members of one human group from those of another. Culture in this sense is a system of collectively held values” (p. 25).
19 A cultural value dimension is an aspect from which a culture can be compared with other cultures. After a statistical analysis of the replies, Hofstede could distinguish between four cultural dimensions in which people differ: individualism versus collectivism (IDV), power distance (PDI), masculinity versus femininity (MAS) and uncertainty avoidance (UAI). Later, Hofstede added a fifth and sixth dimension to his model: long term orientation versus short term orientation (LTO) and indulgence versus restraint (IND) (Hofstede, G., Hofstede, G. J., & Minkov, 2005; Hofstede, & Minkov, 2010; Minkov, 2011). This dimensions surfaced through comparable researches.
The dimension individualism versus collectivism describes the relationship that individuals have with each other. Collectivist cultures consist of a strong social framework, where a distinction is made between people belonging to the group and people who do not belong to it. They expect the other individuals in the group to take care of them in exchange for absolute loyalty to the group, hence individual initiative is not highly valued.
Hofstede describes individualism as societies where relationships between individuals are loose and the expectation is, that ever person takes care of himself/herself and his/her family. With individualism, free time, freedom (to choose your own employment) and challenge (in the employment with a resulting certain sense of satisfaction) prove to play an important role. Hofstede describes power distance as the level at which the lesser powerful members of institutions and organisations within a country, expect and accept that the distribution of power is shared unequally. The bigger the power distance, the more inequality exists in a society. This dimension has many similarities with the dimension individualism -
collectivism. In cultures where individualism scores high, there is a good chance that the power distance is small. On the other hand, there is much more power distance in the countries where collectivism is explicitly present.
The dimension masculinity versus femininity describes what kinds of values are dominant in a culture. There are few countries with a high score on masculinity. The differences are
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3. HYPOTHESIS DEVELOPMENT
In view of the abovementioned theory, hypotheses will be formulated. For each of the four cultural dimensions, hypotheses are formed.
Individualistic cultures put emphasis on individual achievement, independency, personal initiative and autonomy, which are personality traits that are common among entrepreneurs. According to Mueller and Thomas (2001), innovativeness, combined with internal locus of control is prevailing in individualistic cultures because these cultures are more supportive and tolerant towards individual action. Countries high in individualism are more inclined to take risks because individualism causes managers to become overconfident and overoptimistic (Breuer, Riesener, & Salzmann, 2014; Illiashenko, & Laidroo, 2020). According to Klassen (2004), self-efficacy beliefs are higher in individualist cultures. This leads to the following hypothesis:
H1: Individualistic cultures will have higher rates of entrepreneurship than collectivistic cultures.
H1a: Risk taking propensity serves as a mediator in explaining higher rates of entrepreneurship in individualistic cultures compared to collectivistic cultures.
H1b: Self-efficacy serves as a mediator in explaining higher rates of entrepreneurship in individualistic cultures compared to collectivistic cultures.
Countries with a high power distance are characterized with respect and dependence. At a young age, children are expected to respect the parents and people of older age. The children are raised with a certain level of protectiveness. Leaders in high power distance cultures believe in giving employees precise guidance with little autonomy to interpret them (Jeannet, & Hennessey, 1998). Thus, in these kinds of cultures, the self-efficacy of people is highly influenced by the role of the authorities.
In countries with a low power distance, individuals are largely treated equally. Both age and status are of no relevance in these countries. The children are raised in such a way, that they are given freedom in all aspects of life. They can express their opinions and are allowed to experiment (Bandura, 1995). Their experiences are somewhat free of teachers’ influence, which could have a positive impact on their self-efficacy. Also, experimenting is an important property of innovation (Thomke, 2003). There are a lot of opportunities to climb up the social ladder and a problem can be seen as a positive thing, opposed to high power distance
22 solving can be linked towards more risk taking (Antoncic et al., 2018). In small and medium-sized enterprises (SME’s), power distance exhibited a negative influence on risk taking (Kreiser, Marino, Dickson, & Weaver, 2010). This leads to the following hypothesis:
H2: High power distance cultures will have lower rates of entrepreneurship than low power distance cultures.
H2a: Risk taking propensity serves as a mediator in explaining lower rates of
entrepreneurship in high power distance cultures compared to low power distance cultures. H2b: Self-efficacy serves as a mediator in explaining lower rates of entrepreneurship in high power distance cultures compared to low power distance cultures.
Cultures with a high degree of masculinity find things like assertiveness, autonomy, earning money, prestige, performing, individual accomplishment and challenging important, which can be linked to the entrepreneurial traits risk taking propensity, self-efficacy and need for achievement. In masculine cultures, the most important factor of self-efficacy is the focus on individual achievement (Yanev, & Tsenkov, 2016). A study done by McClelland (1961), in which 22 countries where investigated in the field of need for achievement, pointed out a multiple correlation of r = + 0.74 (correlation coefficient) for countries that score high on masculinity and low on uncertainty avoidance. In small and medium-sized enterprises (SME’s), masculinity exhibited a positive relationship with risk taking (Yeboah, 2014). This leads to the following hypothesis:
H3: Masculine cultures will have higher rates of entrepreneurship than feminine cultures. H3a: Risk taking propensity serves as a mediator in explaining higher rates of
entrepreneurship in masculine cultures compared to feminine cultures.
H3b: Self-efficacy serves as a mediator in explaining higher rates of entrepreneurship in masculine cultures compared to feminine cultures.
Cultures with low uncertainty avoidance are more achievement orientated and show more eagerness to take risk (Hofstede, 1984). In a cross-national research of innovativeness, Shane (1993) has shown that uncertainty accepting societies will be more innovative than
uncertainty avoiding societies. According to Koiranen, Hyrsky and Tuunanen (1997), entrepreneurs from the United States have a higher liking to innovation than entrepreneurs from Finland. In comparison with the United States, Finland has a comparatively high uncertainty avoidance culture (Hofstede, 1984).
23 are more negligent towards rules and laws. They embrace risk and innovativeness, thereby having more space to develop their self-efficacy. This leads to the following hypothesis:
H4: Uncertainty avoiding cultures have lower rates of entrepreneurship than uncertainty accepting cultures.
H4a: Risk taking propensity serves as a mediator in explaining lower rates of
entrepreneurship in uncertainty avoiding cultures compared to uncertainty accepting cultures.
H4b: Self-efficacy serves as a mediator in explaining lower rates of entrepreneurship in uncertainty avoiding cultures compared to uncertainty accepting cultures.
Below is a conceptual model, by using personality traits of entrepreneurs, the relationship between cultural differences and entrepreneurial activity can be explained.
(Figure 3: Conceptual model)
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4. METHODOLOGY
This section describes the methodology of the research, which can be used to conduct an empirical research. With the results of this empirical research, the hypotheses can be answered.
4.1. Sample
This research will be based on data that is conducted through a quantitative research, using secondary data, collected from various data sources. To test the hypotheses, data is used from GEM, Hofstede and the World Bank. All the data in this study represents the year 2017. This research will take place on the country-level.
4.1.1. Risk taking propensity & self-efficacy
Data required for measuring entrepreneurship is sourced from the Global Entrepreneurship Monitor (GEM). GEM is very suitable for this research because they look at the
entrepreneurial behaviour and the attitude of individuals towards entrepreneurship. The unit of the analysis with the GEM-research is not the business, but the individual who identifies himself/herself within the transition process which classifies entrepreneurship. This aspect makes it easier to link culture to entrepreneurship. By measuring on an individual level, entrepreneurship can be mapped out by country. Companies have their own culture and also operate internationally, making them less suitable for measuring entrepreneurship per country. To ensure that international comparison is possible, data has been obtained in a standardized way.
Data from GEM is actually the only significant cross-country research of entrepreneurial activity, measuring useful individual attitudes towards entrepreneurship in many countries all over the world (Koelinger, Minniti, & Schade, 2007). Due to the extensive, centrally
coordinated and internationally executed nature of the research, it is possible for GEM to collect high quality data and carry out analyses.
Data on risk taking propensity and self-efficacy is fetched from the GEM 2017 Global Report. This report involves in total 52 countries.
4.1.2. Cultural dimensions
25 example, involves differences between organizations in one country. National culture is also much deeper established in the values of the people, because the national culture is taught by everyone from birth.
According to Hambrick and Brandon (1988), it is not easy to establish measures of cultural values which are accurate, reliable, valid and applicable in numerous countries. Although there has been criticism of Hofstede's work, he has tried to improve his work over the years, which is visible in his latest VSM. The model has become more accurate, but has lost some of its simplicity.
Other researchers also conducted replica studies, in which Hofstede's results were continually re-verified (McClelland, 1961; Cutright, 1968; Kogut, & Singh, 1988). This means that Hofstede’s research is nevertheless plausible.
Data on cultural dimensions is fetched from Hofstede’s website. Hofstede has made an overview (dimension data matrix) of all the dimension scores per country (Hofstede, G., & Hofstede, G. J., 2015). Scores concerning cultural dimensions are hardly updated because cultures change very slowly, from generation to generation (McGrath, MacMillan, & Scheinberg, 1992).
Data concerning the cultural dimensions consists of a total of 104 countries. To enhance the external validity of this research, all countries whose data is present will therefore be
included. The scores regarding the cultural dimensions were obtained by using the Values Survey Module (VSM), version 2013. This is the latest version of the VSM. In case of the cultural dimensions, the fifth and sixth dimensions: long term orientation versus short term orientation and indulgence versus restraint has been left out of this research, because there is not as much data available as for the initial four cultural dimensions. If this two dimensions where to be included, the total sample size would be very low, jeopardizing the reliability of the results.
4.1.3. Final sample
Between all the different variables there was a total overlap of 48 countries. Sufficient data was available from the control variables and therefore did not cause any issues regarding the sample size. Thus, the total sample size in this research is N = 48 countries. When taking a look at the statistics regarding the availability of the data, the dataset contains the following countries:
- Low-income economies:
26 - Upper-middle economies: Argentina, Brazil, Bulgaria, China, Colombia, Ecuador,
Guatemala, Iran, Lebanon, Malaysia, Mexico, Peru, South Africa and Thailand;
- High-income economies: Australia, Canada, Chile, Croatia, Estonia, France, Germany, Greece, Ireland, Israel, Italy, Japan, South Korea, Latvia, Luxembourg, Netherlands, Panama, Poland, Puerto Rico, Qatar, Saudi Arabia, Slovakia, Slovenia, Spain, Sweden, Switzerland, United Arab Emirates, United Kingdom, United States and Uruguay.
4.2. Variables
4.2.1. Independent variables
As discussed earlier, it is possible to measure national culture with the help of the cultural dimensions from Hofstede (1984). Hofstede has developed a questionnaire to find out which unspoken values underlie the actions of people. Hofstede's Values Survey Module (VSM) consists of closed questions with multiple choice answers. He has presented these questions to managers of different nationalities. By means of 30 simple questions about work, life and others, the respondents can be compared to the cultural dimensions. He applied factor analysis to the answers he collected. From the answers, Hofstede derived his model of cultural
dimensions.
The independent variables (cultural dimensions) are; individualism versus collectivism (IDV), power distance (PDI), masculinity versus femininity (MAS) and uncertainty avoidance (UAI). Hofstede used these four dimensions to determine the national culture of a country. By
awarding every country a score between 1 and 100 for every dimension, countries were ranked. These are relative scores, only meant to be able to compare countries. For example, when comparing individualism versus collectivism, a higher score means a greater degree of individualism.
4.2.2. Dependent variable
27 is an important GEM indicator for inflowing entrepreneurship. The distinction between
nascent and new entrepreneurship is determined on the basis of payment of salaries, wages or payments in kind by the new company. Comparable studies also used the TEA indicator, because it has proven to be a reliable proxy (Ho, & Wong, 2007; Stephan, & Uhlaner, 2010). 4.2.3. Mediator variables
In the theoretical background it is indicated that entrepreneurs can be typed by means of certain personality traits. With the help of these personality traits, entrepreneurial activity will be mapped out for each country included in this study.
The APS assesses individual attitudes towards entrepreneurship (individual self-perceptions, individual intentions and social impression). All respondents are asked to personally assess whether good opportunities will occur in the region where they live (opportunity detection), to the extent that they possess the necessary knowledge and skills to set up a business (perceived capabilities), or fear of failure would impede them from starting a business.
This research attempts to expose the relationship between culture and entrepreneurship through the personality traits risk taking propensity (fear of failure) and self-efficacy
(perceived capabilities). These variables are assigned a score that is measured on the basis of percentages. These percentages are based on the amount of respondents agreeing with the following statements:
1) Risk perception: Respondents were asked the following question: Would fear of failure prevent you from starting a business? (0 = No, 1 = Yes).
2) Self-efficacy: Respondents were asked the following question: Do you have the knowledge, skill and experience required to start a new business? (0 = No, 1 = Yes).
For more detailed information about the evaluation of the questionnaires used, reliability and validity tests of the APS, the article by Reynolds et al. (2005) can be consulted.
4.2.4. Control variables
There are several control variables which can possibly affect the dependent variable, these variables have been implemented to control for entrepreneurial rates.
Economic development influences entrepreneurial activity. Economic development seems to be positively and negatively related towards entrepreneurship (Wennekers et al., 2005; Minniti, Bygrave, & Autio, 2006; Uhlaner, & Thurik, 2010).
28 relationship between entrepreneurship and economic development (measured in GDP per capita), there is a U-shape. When the indicators for entrepreneurship and economic growth are compared, it appears that entrepreneurship has the highest level in countries with the lowest economic development (factor-driven economies), decreases as industrialization increases (efficiency-driven economies) and rises slightly in the most developed countries (innovation-driven economies). The theoretical minimum level is reached in countries that make the transition from an efficiency-driven economy to an innovation-driven economy. In other words, countries that see an increase of necessity entrepreneurs move to either opportunity entrepreneurship or paid employment will see an increase in economic development.
Usually, the gross domestic product (GDP) per capita is used as a measurement for economic development. The higher the GDP per capita, the more prosperous the people in that country are considered. In order to be able to compare GDP per capita, the GDP will be converted into a specific currency, usually the dollar. Per capita income in dollars can give a highly distorted picture of the actual purchasing power ratios of different countries. After all, the GDP per capita is low in developing countries, but the prices of products are also much lower than in Western countries (developed countries). So the wealth of ‘rich countries’ are relatively greatly increased, as is the poverty of ‘poor countries’.
By using the so called purchasing power parity (PPP), the purchasing power of households in different countries can be compared. Adjustments are made for price differences, which mean that the effects of price differences are eliminated. The World Bank has the option to measure economic development in PPP. This is a reliable way to compare purchasing power between countries. The amount is expressed in international dollars, a notional currency that has the same purchasing power in every country as the US dollar in the United States.
The PPP relates the purchasing power of the national currency of a country to the national price level. The PPP links your wage to the value of the goods that you can purchase with it in your own country (local prices), and not to the purchasing power of your national currency in another country. People in the poor countries consume a lot of goods and services produced locally, with the low labour costs of those countries, so that the costs of living there is generally much lower than in rich countries.
29 market. If someone does not have a job, he or she will still need to generate income, so they are, as it were, driven towards (necessity) entrepreneurship.
The opportunity costs are also relatively low, since they also have low career prospects. Audretsch, Carree and Thurik (2001) speak of the ‘refugee effect’, meaning that individuals resort to entrepreneurship in order to earn money. Research conducted by González-Sánchez (2015) has verified this ‘refugee effect’. It can be concluded that unemployment has a significant influence on entrepreneurship and should thus be controlled for.
Information about unemployment rates is fetched from the World Bank, this control variable encompasses the total percentage of the labour force that has no employment relationship but is available for and seeking employment.
Government policy is considered crucial for a well-functioning business climate (Raposo, & Do Paço, 2011; Groşanu, Boţa-Avram, Răchişan, Vesselinov, & Tiron-Tudor, 2015). There is a strong worldwide need to encourage entrepreneurial education from the government and to encourage people who want to become entrepreneurs to become self-employed. This means that in addition to the qualities of the entrepreneur, the presence of formal institutions can also be an important precondition for successful entrepreneurship.
The entrepreneur benefits from the quality of the (formal) institutions such as legislation, the judiciary and education etcetera. A multitude of entry regulations impede the creation of new companies (Klapper, Laeven, & Rajan, 2006).
When there is a lot of bureaucracy in a country, this has a discouraging effect on starting a business because it can take a lot of time and money, such as making all sorts of applications and sending documents. Countries with high levels of entrepreneurship generally have lower levels of entry procedures (Baumol, 1996).
30 Government effectiveness is translated as the extent to which the government is an obstacle for companies, a minimum of regulation, a smoothly operating administration and a consistent economic course are important characteristics of a well-performing government (Boyle, 2007). This indicator measures the perception of the quality of public services, the degree of independence of political pressure, the quality of policy formulation and implementation and the credibility of the government to commit to that policy (Kaufmann, Kraay, & Mastruzzi, 2011). Government effectiveness is expressed among other things in a percentile rank among all countries, ranging from 0 (lowest) to 100 (highest).
Government effectiveness is an indicator composed of 15 different sub-indicators. The weights of these sub-indicators depend on the accuracy of those individual indicators. Sub-indicators with a low variance, and therefore more accurately, have a larger share in the total indicator (Kaufmann et al., 2011). The government effectiveness indicator mainly consists of data collected through questionnaires (based on searches of citizens), business surveys and expert opinion polls. It must be borne in mind that this indicator initially measures the perception of performance and not the actual performance of the various governments (Van de Walle, Sterck, Van Dooren, & Bouckaert, 2004).
Government effectiveness is based exclusively on subjective indicators. Despite the fact that the producer of this ranking draws from 18 different data sources for her measurement, none of the 49 variables used is objective in nature.
4.3. Data analysis
In order to test the hypotheses, the appropriate statistical technique that will be used in this study to map the relationship between the dependent and independent variables is mediation analysis with multiple mediators, which can be performed with a statistic program. The mediation is conducted by means of the bootstrapping method.
A mediation analysis is used to see if a relationship between an independent and a dependent variable can also be transferred via a third variable. A mediation analysis can be seen as a combination of several regressions.
According to Baron and Kenny (1986), four conditions must be met to prove that there is mediation:
31 - The independent variable must influence the mediator (path a, indirect effect);
- The mediator must influence the dependent variable (path b, indirect effect);
- The influence of the independent variable on the dependent variable must decrease or disappear when path a and b are being controlled for. If the influence of the independent variable is completely eliminated then it’s called complete mediation, if it only decreases, it’s called partial mediation.
(Figure 4: Mediation model)
There are two common ways to perform a mediation analysis, the causal steps approach (CS method) or the product of coefficients approach (PC method).
The first is the best known and is based on Baron and Kenny (1986). This method requires a number of steps in which a causal relationship is tested.
Regarding the PC method, the causal steps are integrated in a program (macro) in order to perform the analysis in one go. The emphasis is on estimating the indirect effect as the product of two regression coefficients (Preacher & Hayes, 2004).
Field (2013) points out that the PC method is preferable because with this method the combined effect of the path between the independent variable versus mediator and between the mediator versus dependent variable is tested. In addition, unlike the CS method, the PC method does not require a significant relationship between the independent and the dependent variable in order to be able to test the mediation (Hayes, 2012).
32 Bootstrapping is a method where new samples are drawn from the existing sample. The original sample therefore acts as a pseudo population in the bootstrap procedure (Efron, & Tibshirani, 1994). The software will simulate data based on your own sample. A confidence interval is established based on the newly generated samples. By using bootstrapping, the PC method has a higher statistical power than the CS method, which means that it is more likely to find an effect that actually exists. From a statistical point of view, the bootstrap method has the advantage (compared to, for example, the Sobel test) that it is not necessary to take into account the assumption that data must be normally distributed (Shrout, & Bolger, 2002; Preacher, Rucker, & Hayes, 2007).
33
5. RESULTS
5.1. AssumptionsBefore a discussion of the results can be started, it must first be guaranteed that the data meets the conditions of a regression analysis. Each statistical technique is based on a number of assumptions. To be able to draw justified conclusions from the results of a data analysis, it is necessary that these assumptions are met. These are the following assumptions: normality, linearity, homoscedasticity. The fourth assumption is that there should not be
multicollinearity. 5.1.1. Normality
Normality can be tested using a Q-Q plot. Figures 5 and 6 covers the Q-Q plots. On all figures you can see that the dots (individual data points) follow roughly the 45 degree angle straight line. So no major deviations can be seen, which means that the assumption of normality has been met.
34
(Figure 6: Normality mediators and dependent variable)
5.1.2. Linearity
35
(Figure 7: Linearity)
5.1.3. Homoscedasticity
Homoscedasticity can also be tested by using a scatterplot. Homoscedasticity is said to be in place when there is equal statistical variances of the residuals (Field, 2013). The variance of the residuals are roughly unbiased and homoscedastic (figure 8), the variance in the residuals of the independent variables (individualism, masculinity and uncertainty avoidance) is approximately the same for each score of the dependent variable, thus satisfying the assumption of homoscedasticity.
36
(Figure 8: Homoscedasticity)
5.1.4. Multicollinearity
There should not be high levels of multicollinearity within the regression analysis. Because correlation was found between the independent variables, it was also examined whether there was multicollinearity. The correlation matrix (table 1) shows us that there is a strong
correlation between individualism and power distance (B= -.731**), and a moderate correlation between individualism and uncertainty avoidance (B= -.350*).
Multicollinearity can be diagnosed using ‘tolerance’ and the ‘variance inflation factor’ (VIF). The VIF’s of the independent variables are below 3 and the tolerances are above .400 (table 2). The tolerances are higher than .100 and the VIF’s are lower than 5 or 10. This means that multicollinearity will not cause any problems when performing all the necessary regression analyses (James, Witten, Hastie, & Tibshirani, 2014).
37 5. Risk perception 0,126 -0,107 0,010 -0,073 1 6. Self-efficacy -,399** ,367* -0,166 0,121 -0,275 1 7. TEA -,410** 0,250 -0,153 -0,091 -0,241 ,672** 1 8. PPP $US -,385** -0,237 0,095 -0,078 0,238 -0,276 -,418** 1 9. Unemployment 0,167 -0,130 0,021 0,087 -0,015 -0,128 -0,237 -0,268 1 10. Govern Effectiv ,662** -,564** -0,037 -0,185 0,262 -,479** -,474** ,640** -0,174 1 11. Self-employment -,562** ,300* -0,028 -0,028 0,019 ,360* ,532** -,701** -0,016 -,696** 1
**. Correlation is significant at the 0.01 level (2-tailed) *. Correlation is significant at the 0.05 level (2-tailed)
Table 2 Model Collinearity Statistics Tolerance VIF Individualism ,391 2,588 Power distance ,411 2,436 Masculinity ,869 1,151 Uncertainty avoidance ,874 1,144 Risk perception ,921 1,086 Self-efficacy ,749 1,335
a. Dependent Variable: TEA
5.2. Descriptive statistics
The dataset consists of 48 countries in total, of which four countries can be classified as lower-middle-income economies, 14 can be classified as upper-middle economies and 30 can be classified as high-income economies. Representing a ratio of respectively 8.3, 29.2 and 62.5 percent. The means, standard deviations, minimums and maximums are presented in table 1. From all cultural dimensions, individualism has the lowest mean (43.65) and uncertainty avoidance has the highest mean (67.81). What is also notable is that uncertainty avoidance has a relatively high minimum (29) compared to the other dimensions. From this it can be concluded that people generally, wherever they come from, don’t like uncertainty. The country with the highest purchasing power parity (PPP), a notional currency that has the same purchasing power in every country, expressed in dollars, is Qatar with a PPP of
128.374,30 dollars. Vietnam has the lowest PPP with 6.775,80 dollars. The mean of
38 relatively high. This is not very surprising given the high share (62.5%) of high income
economies in the data set.
The data shows that there is a substantial amount of variation between TEA rates and self-employment rates. Ecuador has the highest TEA rate (29.60) while Bulgaria has the lowest TEA rate (3.70). Vietnam has the highest self-employment rate (57.20) while Qatar has the lowest self-employment rate (0.4). There is also a big difference between the means of these two variables.
The correlation between TEA and self-employment can be found in table 1 (B=.532, p=.000). The explained variance between TEA and self-employment is 28.3% (R² = 0.283), which is considerably weak. The TEA mean is 12,733 while self-employment has a mean of 24,469, which is almost twice as much. These differences raise the question if self-employment would be a good proxy for TEA.
5.3. Regression direct path’s
The analysis starts with a correlation matrix of the direct path’s, which are the influence of the four cultural dimensions; individualism, power distance, masculinity and uncertainty
avoidance on entrepreneurship (total early-stage entrepreneurial activity; TEA). In order to do this, multiple regression analyses where conducted.
- The assumption for model 1 was that individualistic cultures will have higher rates of
Table 3
Descriptive Statistics
N Minimum Maximum Mean Std. Deviation
39 entrepreneurship than collectivistic cultures. Results show a negative (B= -.410) and
statistically significant (p=.004 / p<0.05) relationship, thus hypothesis 1 is rejected (table 4). - The assumption for model 2 was that high power distance cultures will have lower rates of entrepreneurship than low power distance cultures. Results show a positive (B= .250) and statistically insignificant (p=.087 / p>0.05) relationship, thus hypothesis 2 is rejected. - The assumption for model 3 was that masculine cultures will have higher rates of
entrepreneurship than feminine cultures. Results show a negative (B= -.153) and statistically insignificant (p=.298 / p>0.05) relationship, thus hypothesis 3 is rejected.
- The assumption for model 4 was that uncertainty avoiding cultures have lower rates of entrepreneurship than uncertainty accepting cultures. Results show a negative (B= -.091) and statistically insignificant (p=.537 / p>0.05) relationship, thus hypothesis 4 is rejected. The control variables (covariates) PPP $US and government effectiveness turn out to have a significant effect on TEA.
40 6 (Constant) 14,929 1,624 9,192 ,000 Unemployment rate -,311 ,188 -,237 -1,656 ,105 7 (Constant) 23,793 3,146 7,564 ,000 Government effectiveness -,157 ,043 -,474 -3,652 ,001
a. Dependent Variable: TEA
5.4. Mediation effect of risk perception and self-efficacy
The mediation analyses will be performed using the PC method instead of the CS method because it has several advantages, which have been explained earlier. In this research, 95% confidence intervals were computed using 5000 bootstrap replicates. Table 5 presents the indirect effects of cultural dimensions on TEA through mediators risk perception and self-efficacy. When zero does not appear between the lower and upper limit it means that the indirect effect is significant. The tests show that all the results are insignificant, which mean that H1a, H1b, H2a, H2b, H3a, H3b, H4a and H4b are not supported.
Table 5 Bootstrap results
Cultural dimensions Risk perception Self-efficacy
Indirect effect Lower Upper Indirect effect Lower Upper
Individualism .0030 -.0212 .0246 -.0061 -,0686 .0543
Power distance -.0016 -.0258 .0225 .0130 -.0440 .0739
Masculinity -.001 -.0139 .0162 -.0333 -.0980 .0256
Uncertainty avoidance .0011 -.0133 .0201 .0079 -.0457 .0660
The mediation was tested using PPP $US, unemployment rate and government effectiveness as control variables.
5.5. Robustness checks
Robustness checks have been carried out to test the validity of the findings. This makes it possible to check whether the results remain the same if parts of the model are changed. It has been tested whether the outcomes change if the dependent variable TEA is replaced by self-employment rate. The same model will therefore be constructed, but with the dependent variable self-employment rate instead of TEA.
41 you work for someone else?
Results can be found in table 6 and 7. The results in table 6 show that the independent variable power distance turn out to have a statistically significant effect on self-employment (p=.038 / p<0.05), with TEA this was not the case (p=.087 / p>0.05).
No deviating outcomes emerged from the results in table 7. The bootstrap results from table 7 show that all the results are insignificant.
Table 6 Direct path’s Model Unstandardized Coefficients Standardized Coefficients t Sig. B Std. Error Beta 1 (Constant) 40,311 3,927 10,264 ,000 Individualism -,363 ,079 -,562 -4,604 ,000 2 (Constant) 10,616 6,854 1,549 ,128 Power distance ,224 ,105 ,300 2,132 ,038 3 (Constant) 25,678 6,659 3,856 ,000 Masculinity -,024 ,124 -,028 -,193 ,848 4 (Constant) 25,902 7,932 3,266 ,002 Uncertainty avoidance -,021 ,112 -,028 -,189 ,851 5 (Constant) 40,311 2,883 13,981 ,000 PPP $US ,000 ,000 -,701 -6,666 ,000 6 (Constant) 24,812 3,963 6,261 ,000 Unemployment rate -,049 ,458 -,016 -,106 ,916 7 (Constant) 62,953 6,083 10,349 ,000 Government effectiveness -,546 ,083 -,696 -6,571 ,000
42
Table 7 Bootstrap results
Cultural dimensions Risk perception Self-efficacy
Indirect effect Lower Upper Indirect effect Lower Upper
Individualism -.0199 -.0979 .0890 .0003 -,0359 .0398
Power distance .0118 -.0884 .0905 .0002 -.0317 .0378
Masculinity .0007 -.0536 .0604 .0007 -.0587 .0527
Uncertainty avoidance -.0067 -.0777 .0439 .0001 -.0414 .0233
43
6. DISCUSSION AND CONCLUSION
The aim of this research was to see whether cultural differences have an impact on
entrepreneurship, whereby an attempt was made to explain the relationship between culture and entrepreneurship with the help of personality traits risk taking propensity and
self-efficacy. The literature review revealed that the TEA is a good indicator for entrepreneurship because it reflects the dynamic entrepreneurship activity within a country. Based on the action theory and personality trait theory, two personality traits have been identified that lead to high levels of entrepreneurship. Subsequently, the theory of cultural differences was investigated and it emerged that cultural differences are characterized by 4 different dimensions based on cultural dimensions from Hofstede. Hypotheses could be formulated based on all this
information. In this chapter, the main findings, limitations and suggestions for future research will be discussed.
6.1. Main findings
A total of 12 hypotheses were drawn up. 11 hypotheses were found to have no significant effect. This may have been caused by the relatively low sample size (N = 48).
The assumption was that individualistic cultures will have higher rates of entrepreneurship than collectivistic cultures. Results showed a negative and statistically significant relationship. A possible cause for this could be that there were a high percentage of necessity-driven
entrepreneurs in collectivistic cultures.
Regarding the central research question: what is the influence of (national) cultural
differences on personality traits that are prevailing within entrepreneurs? It can be said that the influence is insignificant.
There are several aspects that could have contributed to the results being insignificant. The field of entrepreneurship has changed drastically in the last 10 years. Theories that were formed in the past might not be relevant anymore today. Nowadays, the entrepreneur must constantly rediscover himself to keep up with all the current developments in the world. As a result, the personality traits of a successful entrepreneur are also subject to change
(Makimurto-Koivumaa, & Puhakka, 2013).
