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Rijksuniversiteit Groningen, Faculty of Economics and Business

Entrepreneurship and

Entrepreneurial Cultures

Master Thesis

Name: Kevin Matthew Schenk Student Number: S2620472

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1

Acknowledgements

This paper would have not been possible without the support of these people and others. Their encouragement and guidance from start to finish helped me to get this far:

Prof. Dr. Sjoerd Beugelsdijk who agreed to be my advisor despite many other academic and professional commitments, and who helped abundantly and offered assistance where needed, support and guidance.

My colleague Alejandro de la Cuesta Jimenez for his support and guidance, for without him this paper would not look as it does today.

My family for supporting me in all of my endeavours and their loving words and kindness as well as my girlfriend Mariam Talakhadze for her moral support, love and inspiration during this entire process.

Abstract

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2 Contents Acknowledgements ... 1 Abstract ... 1 Contents ... 2 Table of Figures ... 4 Introduction ... 5 Literature Review ... 7 Entrepreneurship ... 7 Definition ... 7

Schumpeter & Kirzner on entrepreneurship ... 8

Institutional environment ... 9

Self-Employment and Entrepreneurship ... 14

Motivation for entrepreneurship ... 14

Cognitions ... 14

Why is Entrepreneurship important? ... 7

Entrepreneurial Culture ... 10

What is culture ... 10

What is Entrepreneurial Culture ... 10

Hofstede and Entrepreneurship ... 12

Regional entrepreneurial culture ... 12

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3 Results ... 26 Factor Analysis ... 26 Regression Analysis ... 27 Discussion ... 27 Conclusion ... 29 Works Cited ... 31 Appendix ... 1 Data ... 1

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4

Table of Figures

Figure 1: Model visualization. 24

Figure 2: Regression standardized residual histogram vi

Figure 3: P-P plot of the regression standardized residual. vii

Figure 4: Scatterplot of the regression standardized residual against the regression standardized

predicted value. viii

Figure 5: Scree plot. xii

Table 1: Component loadings for 6 items with loadings >= .30 26

Table 2: Descriptive statistics and correlations table with Mean, standard deviation and correlations.

The significance values are indicated by asterisks. ... 27

Table 3: Main results of the coefficient values with the coefficiency significance in brackets and the standardized error before that. Statistically significant variables are indicated as such. ... 28

Table 4: Descriptive Statistics results from the regression analysis with Mean and Standard Deviation. ... 1

Table 5: Correlations with Pearson-Correlation and Sigma value. ... 2

Table 6: Model Summary with R, R², Adjust R², Standard error of the estimate and Durbin-Watson.iv Table 7: ANOVA results of the regression analysis with the sum of squares, Mean square, F and Significance results. ... iv

Table 8: Coefficients results from the regression analysis with Unstandardized and Standardized coefficients Beta, Standard error, t-value and significance... v

Table 9: Excluded variables from the regression analysis with collinearity, tolerance, t-value and significance. ... v

Table 10: Residual Statistics with minimum, maximum, Mean, deviation and N. ... vi

Table 11: Descriptive Statistics of the Factor Analysis ... 9

Table 12: Correlation Matrix of the Factor Analysis ... 9

Table 13: KMO and Bartlett's Test of sampling adequacy ... x

Table 14: Inverse of the correlation matrix ... x

Table 15: Communalities with initial and extraction values. ... x

Table 16: Total Variance explained ... x

Table 17: Goodness of fit ... Fout! Bladwijzer niet gedefinieerd. Table 18: Reproduced correlations ... xi

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5

Introduction

We know that entrepreneurship can appear in many different ways. These are all possibilities and current literature has a hard time defining what it is exactly (Kirby, 2003). It can be especially hard to quantify where there is and where there is no entrepreneurship and how it can be distinguished. It is clear by now that there is indeed an entrepreneurial culture and it exists within national cultures and that it can be regionally clustered or is somewhere within a nation. It has also been established that an entrepreneur is different from non-entrepreneurs. Entrepreneurs have a specific mindset and have different personality traits than non-entrepreneurs: they are risk-takers, they are high in confidence and they are willing to engage in entrepreneurship even if the odds may appear stacked against them. Entrepreneurship is how, with what methods and to which effect an individual creates new goods or services to enrich their environment and how they discover, evaluate and exploit these opportunities that arise from around them (Shane & Venkataraman, 2000).

Entrepreneurship is important for economic development (Kirzner I. M., 1997) and economic growth (Wenneker & Thurik, 1999). Entrepreneurship may come in many different sizes: it can be a farmer in rural India, a small firm in Belgium creating applications for mobile phones, or it can be a subsidiary of a multinational expanding telecommunication networks in Burma. Entrepreneurial culture is a mix of culture and entrepreneurship and to understand how the entrepreneur thinks and acts and why they engage in entrepreneurial actions, as well as effect of their actions.

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7

Literature Review

Entrepreneurship

Why is Entrepreneurship important?

It is mentioned that entrepreneurship is important for generating employment opportunities (Fölster, 2000), fuelling innovation (Castany, López-Bazo, & Moreno, 2005) or stimulating (national) economic growth and productivity (Carree & Thurik, 2003). Entrepreneurship is usually examined in most studies already assuming that this is the case and while it may carry statistical significance, it is also important to realize that it is not always the case that entrepreneurship will fulfill the aforementioned factors. As examined by van Praag & Versloot (2007) they found that whilst many studies found that entrepreneurship can indeed fuel innovation, generate employment and stimulate economic growth and productivity, it is not a given. By and large however their study confirms that entrepreneurs contribute to economic prosperity and have a very specific function in the economy. They create new knowledge which can lead to spill-overs, thus enhancing the regional employment growth rates of all companies within a region (Sternberg & Litzenberger, 2004). The main contribution, according to van Praag, is that entrepreneurs create employment possibilities by taking employment into their own hands and whilst they create innovation, they do not create a lot of new and innovative goods or services, but, as van Praag argues, of higher quality. The measure for examining innovation is fallible due to the fact that most studies simply inspect the factor of patents filed within a certain timeframe (Shane, 1993). Entrepreneurship therefore contributes to innovation, but is mainly seen as an alternative to employment which can have its pros and cons but ultimately the utility of entrepreneurship is in its quick growth enhancement within regions and stimulating the economy of a region and ultimately a nation (van Praag & Versloot, 2007).

Definition

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8 Siegel and Licht’s article defined social institutions as the written and unwritten ‘rules of the game’: laws, norms, beliefs (Siegel & Licht, 2008). The multidisciplinary nature of entrepreneurship makes it hard to pinpoint and Kirby states that “there is no agreed definition of […] what constitutes […] entrepreneurship” (Kirby, 2003). Chell, Haworth and Brealey agree that “there is still no standard, universally accepted definition of entrepreneurship” (Haworth, Brealey, & Chell, 1991).

Entrepreneurial actions are facilitated both by formal institutions (e.g. property rights, enforceable contracts) and by socially shared beliefs and values that reward or inhibit the necessary behaviours (e.g. innovation, creativity, risk taking; (George & Zahra, 2002; Hayton & Cacciotti, 2013)). Within entrepreneurship there are two streams of research: one investigates the impact of national culture on rates of innovation and entrepreneurship at the national or regional level (Beugelsdijk, 2007; Beugelsdijk & Smeets, 2008; Aoyama, 2009) whilst the other focuses on the relationship between culture and the beliefs, motives, values and cognitions of entrepreneurs across regional and national boundaries (Blanchflower, Oswald, & Stutzer, 2001; García-Cabrera & Gárcia-Soto, 2008). They look for evidence for differences across regions or countries in terms of the individual beliefs, motives and values associated with entrepreneurial behaviour (Tiessen, 1997) as well as a focus on, and proof of, the existence of an entrepreneurial mindset, and reflects a test of the ‘deviance’ hypothesis – i.e. that by necessity, entrepreneurs somehow deviate from cultural norms (Pruett, Shinnar, Toney, Llopis, & Fox, 2009) and therefore prove that an entrepreneurial culture can exist and this culture is different from the common cultural mindset prevalent within a country.

Schumpeter & Kirzner on entrepreneurship

Schumpeter (1934) represented a research stream that believed that entrepreneurs are special persons with the ability to act as catalysts to bring about extraordinary events and that radical innovation was necessary for genuine entrepreneurship - such as new technological process or product or organisations. Schumpeter believed that creative destruction was the best way towards entrepreneurship: innovation would destroy traditional markets served by existing firms and may encourage new entry until returns are comparable to the already existing activities. He believed in rapid environmental change which essentially destroys predictability and undermines the entrepreneurs’ calculations.

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9 information becomes an entrepreneur (insidership/outsidership) and that knowledge and possession of that information are the drivers of entrepreneurial action (Johanson & Vahlne, 2009). Institutional policy, according to Kirzner, focuses on funding disadvantaged groups but should rather invest in knowledge and its acquisition. He theorized that centralized economies produce disadvantages because they reduce uncertainty and differences in knowledge and that patent holding and licensing produce disadvantages because it prevents the exploitation of more valuable opportunities. The argument is that the institutional environment is not affecting entrepreneurship but it is altered by the entrepreneur. We tend to see institutions as more rigid and long lasting and while it can be true that the entrepreneur can create innovative devices to alter the status quo of a socio-economical setting, the majority of entrepreneurship in emerging markets is based on incremental entrepreneurship or copying that which already exists and through reverse innovation making it fit best in their environment (Govindarajan & Ramamurti, 2011; Rosen, 1997; Yeager, 1997).

Institutional environment

Entrepreneurs need an institutional environment that fosters and encourages entrepreneurial behaviour. While an entrepreneur needs to have entrepreneurial intention and the capability to recognize business opportunities as well as take advantage of them in a timely fashion (Chell, 2008) the institutional framework surrounding the entrepreneur must also be able to accommodate entrepreneurs. The institutional environment is therefore connected with the entrepreneurship within a country. Most literature pertaining to these factors reference McClelland’s “The Achieving Society” (1967) where McClelland found a strong correlation between achievements (N achievement) imagery in school textbooks and the rate of economic growth, the result being that out of the 23 and 41 countries examined a relationship between economic development, societal differences and entrepreneurship was found. It ended up being accurate within the study’s scope, that economic growth partly results from the (entrepreneurial) ambitions of people. However, it has been criticized and recently Pryor demonstrated that a robust relationship between economic growth and societal values does not exist. (Beugelsdijk & Smeets, 2008; Pryor, 2005). This can be an indication for an underlying factor that has an impact on economic growth that has not yet been found, or that one can simply not deduce the economic growth of any given nation on societal factors.

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10 has an impact on economic growth, considering institutional as well as economic, political and psychological factors. It is evident that the institutional environment is related to a culture. Kirzner’s view of the entrepreneur seems to dominate in the common literature as the more robust theory to entrepreneurial enterprise on an individual level. While it may inhibit or encourage entrepreneurship, it is a vital factor for entrepreneurship.

Entrepreneurial Culture

What is culture

It has become clear that within the literature that culture has a noteworthy impact of all aspects of entrepreneurship in societies (George & Zahra, 2002). Culture refers to the complex of meanings, symbols and assumptions about what is good or bad, legitimate or illegitimate which underlies the prevailing social norms and practices within a society (Bourdieu, 1972; Markus & Kitayama, 1994). Culture is often defined as a set of shared values and beliefs (Hofstede, 1980). A society’s culture can be an indication of how people within the society respond to certain issues. Culture may condition potential for entrepreneurship and generate differences across national and regional boundaries. One of the most common deductions is that a supportive national culture will increase the entrepreneurial potential of a country (Stephan & Uhlaner, 2010). This proposes that in addition to support from political, social, and business leaders, there needs to be a supportive culture to cultivate the mind and character of the potential entrepreneur. Crucial for the understanding of the social dimensions of entrepreneurship is that culture is a society-level phenomenon. Often times the distinction between the individual and societal levels of analysis is not recognized leading to the ‘ecological fallacy’. The ecological fallacy is one fails to acknowledge the distinction between the individual and societal levels of analysis, such that aggregate characteristics of nations are simply transferred to individuals (Hofstede, 1980). It is important to understand how culture works to understand how a potential entrepreneurial culture might function.

What is Entrepreneurial Culture

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11 low power distance are the most conductive factors towards entrepreneurship after an examination of various research scripture on entrepreneurial culture (Hayton & Cacciotti, 2013). This seems to be the framework that most researchers use for examining entrepreneurial intent within a nation as the comparability of the Hofstede values is a great advantage. Shane also examined these dimensions, with the help of Hofstede values, individualism, power distance, uncertainty avoidance & masculinity and their relation to entrepreneurship and found that uncertainty avoidance is closely associated with innovation; that culture matters and is needed to create innovative activity; that a tolerance for risk & change is required; individualism is autonomy, independence and freedom and per capita income is the more important indicator than industrial structure (Shane, 1993). As a result uncertainty avoidance matters for entrepreneurial endeavours.

Research done by Beugelsdijk examined the relationship between culture and economic growth and the results suggest that differences in economic growth in Europe can be explained by differences in entrepreneurial culture, but mostly in an indirect way (Beugelsdijk, 2007). This study had a focus on innovativeness and self-employment and the factor of self-employment is a very big influence in the decision of a person to become an entrepreneur or not. This is a factor I later discuss. It is often the case that research is conducted under the assumption that an entire nation’s culture is significant for the formation of an entrepreneurial culture, but there are also sub-national and more regional factors that might be able to explain entrepreneurial culture better.

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12 people would not deviate. This is why it would be interesting to examine if the entrepreneurial culture is so much more different from the general populace; to see if (sub-) national culture is the underlying influence or if entrepreneurial culture is a phenomenon that exists within cultures.

Hofstede and Entrepreneurship

While many studies have so far used Hofstede’s dimensions to examine the effect of culture of a given nation on entrepreneurship, its applicability has been put in question as researchers have found that there are also cultural movements within a nation. These sub-national cultural movements which may be limited to clustered areas of entrepreneurship (Sternberg & Litzenberger, 2004) seem to have a greater effect on entrepreneurship and entrepreneurial culture than the entirety of a nation’s culture. While, for example, Pinillos & Reyes inspected, with the help of two of Hofstede’s dimensions, individualism and collectivism, if culture relates to entrepreneurship, they found that entrepreneurship rates are negatively related to individualism when the economic development is medium or low but positively when the economic development is high (Pinillos & Reyes, 2011). Another example is Garcia-Soto who found that individualism is linked to locus of control, which in turn only influences entrepreneurial behaviour indirectly through the education level of a given country (Garcia-Soto 2008). An additional example is Fairweather et al. who used Hofstede measures and on the one hand they found that they have a correlation to per capita trademarks proven (Shane, 1993) using the GII (Global Innovation Index) but they found that power distance and GII have a negative relationship; individualism and GII have a strong positive relationship and that uncertainty avoidance has no relationship to the GII (Rinne, Steel, & Fairweather, 2012). It is evident that the Hofstede values may hold importance for comparing studies and looking at national cultural differences. However in the entrepreneurial context it becomes clear that entrepreneurship can have regional alterations that deviate from the national norm and still create entrepreneurial enterprise (García-Cabrera & Gárcia-Soto, 2008; Liñán & Chen, 2009; Sternberg & Litzenberger, 2004). But in order to trace links between culture and entrepreneurial traits, it is necessary to consider multiple dimensions of culture and multiple relevant traits.

Regional entrepreneurial culture

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13 the Republic of Cape Verde found various cultural differences between regions of Cape Verde and as a result, different levels of entrepreneurship within the same country (García-Cabrera & Gárcia-Soto, 2008). Lee-Ross & Mitchell did something similar in the Torres Strait Islands. Their study showed that contrary to the common Hofstede idea of the cultural values necessary in a nation or region to encourage entrepreneurship, the Torres Strait entrepreneurs contradicted those all save for uncertainty avoidance (Lee-Ross & Mitchell, 2007). Aoyama et al. examined that regional legacy and regional culture have an influence on entrepreneurship and that the acceptance of outsiders is one of the most important factors to encouraging entrepreneurship, or being a barrier (Aoyama, 2009). Urban examined South Africa which is which is particularly interesting due to a very culturally diverse society. Urban hypothesized that different cultural values would influence the attitude towards entrepreneurship across ethnic groups. He adapted entrepreneurial intentions to reflect entrepreneurial self-efficacy. The result was that entrepreneurial self-efficacy rather than cultural values influenced the intention to engage in entrepreneurship (Urban, 2006). However South Africa still showed a tendency towards fulfilling the Hofstede social dimension prerequisites for having entrepreneurs, according to this study.

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14 & Licht, 2008). The empirical findings according to Siegel and Licht support the underlying idea that high uncertainty avoidance in large organizations may push people towards entrepreneurship however I believe that there is an entrepreneurial culture beyond the dimensions of Hofstede. While it is true that the constructs for measurement of an entrepreneurial culture are hard to agree upon, there has been work in the past done in the aspect of entrepreneurial culture using individual level constructs (Kreiser, Marino, & Weaver, 2001) and the aforementioned regional entrepreneurial cultural differences lead me to believe that there is indeed a deviation of entrepreneurial culture from the cultural norm. An attempt to establish these values universally has been done by Schwartz (Schwartz, 1992) and others (Ciavarella, Buchholtz, & Riordan, 2004; Mitchell, Smith, Seawright, & Morse, 2000). As such I believe that some entrepreneurial cultures are more conductive to the entrepreneurial culture construct than others (Desau, Gompers, & Lerner, 2003). In order to trace links between culture and entrepreneurial traits, it is necessary to consider multiple dimensions of culture and multiple relevant traits that could potentially influence entrepreneurship and entrepreneurial behaviour. Any cross-national differences in entrepreneurship might be best explained by a broader set of institutions in addition to culture (Busenitz, Gomez, and Spencer 2000). From this set of literature it can be seen that culture is not just a national level phenomenon but can also be a regional or even sub-regional phenomenon that has many facets and comes in many different sizes and forms, some more heterogeneous, others more homogeneous. It is evident from these papers that culture may have a stronger or weaker impact on the entrepreneurial intent of entrepreneurs and has no decisive form or shape. While culture has an influence on the societal effect on entrepreneurs, entrepreneurs can show up in a multitude of environments.

Motivation for entrepreneurship

An important aspect of entrepreneurship is if an entrepreneur has the motivation to do so. There can be a variety of motives as to why someone would start a business such as for monetary improvement, financial independence, improving one owns environment or the environment around them and many others (Scheinberg & MacMillan ‘88) and there have been studies to see if there are cultural reasons to start a business/engage in entrepreneurship or if the motivation to engage in entrepreneurial behaviour is strictly intrinsic (Shane, Kolverheid, Westhead ‘91).

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15 their findings suggested that the Ajzen model successfully predicts entrepreneurial intent however the significance of the model varies by country (Engle, et al., 2010). This seems plausible as not every individual will have similar motives to engage in entrepreneurship. Some might be doing it out of opportunities that arise from around them, others out of necessity due to lack of other options. However it depends on how people perceive their environment and the opportunities around them which I will evaluate in the “cognitions” chapter. Autio et al. also used Ajzen’s theory with their findings suggesting a “good robustness” and that “perceived behavioural control” was a main determinant of entrepreneurial intent (Autio, Keeley, Klofsten, Parker, & Hay, 2001). Further analysis of entrepreneurship using Ajzen’s theory was done by Liñán & Chen and their findings suggested that culture can explain motivational perceptions (Liñán & Chen, 2009). Moriano et al. focused on a more diverse set of nations when using Ajzen’s theory and less “western” nations and came to the result that culture has an effect on attitudes and self-efficacy (Moriano, Gorgievski, Laguna, Stephan, & Zarafshani, 2012). It is better to have a wider view of entrepreneurial intent across a broader range of countries than the classic Western-focused literature to establish if entrepreneurial intent is prevalent in countries where it is not driven by opportunity but by necessity, for example (McMullen, Bagby, & Palich, 2008). Pruett et al. examined if culture, social and psychological factors can predict entrepreneurial decisions. They found the importance of self-efficacy as a predictor of entrepreneurial intent as well as using the variables of personal entrepreneurial exposure, expected family support, entrepreneurial disposition and perceptions of motives/barriers and defined them as entrepreneurial intentions (Pruett, Shinnar, Toney, Llopis, & Fox, 2009). Stewart et al. examined achievement motivation, risk-taking propensity and preference for innovation to the goal orientations of US and Russian entrepreneurs. Their results varied according to the culture and had an influence on the ultimate goal of the entrepreneurs’ venture (Stewart, Carland, Carland, Watson, & Sweo, 2003).

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16 risk for a lower pay. This risk-propensity clearly seems to be different from those of non-entrepreneurs. As a result they are overly optimistic in their assessment of the risks and threats and engage in entrepreneurial behaviour regardless (Palich & Bagby, 1995; Sarasvathz, Simon, & Lave, 1998). Despite this however, entrepreneurs seem to be fine with the situation as Frey & Benz examined the United Kingdom, Germany (Frey & Benz, 2003).

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17 The usage of Ajzen’s theory of planned behaviour has clearly shown that self-efficacy is one of the biggest motivators for engaging in entrepreneurial behaviour, the belief in one’s own skills. The other important traits are fear of failure, lack of support, lack of capital, lack of competency, risk-taking propensity, locus of control and a high energy level. It is evident that an entrepreneur differs from the norm as this person engages in risky behaviour and this risk is accompanied with a plethora of worries they carry with them. Despite this, the entrepreneur still maintains the motivation to engage in entrepreneurial behaviour and aim for self-employment despite the risks and potentially lower income. It does not come as a surprise that entrepreneurs are overly optimistic (Palich & Bagby, 1995) and are willing to see past the risks and dangers to achieve their goal.

Self-Employment and Entrepreneurship

An acknowledged fact by researchers is that entrepreneurs forgo financial benefits in order to engage in entrepreneurship, thus acknowledging that they have potentially risk a lower standard of living to fulfil their desire of becoming entrepreneurs (Moskowitz & Vissing-Jørgensen, 2002; Kerings, Smith, & Smith, 2004). There is an idea that entrepreneurs go out to become entrepreneurs as a means of self-employment. It is usually done if the wages in their home country are insufficient or there are insufficient job opportunities in their local environment. Another view is that entrepreneurs are created by opportunities in their environment and they have found a possibility to capitalize on that opportunity, rather than have inadequate opportunities in the job market. Several studies hold that entrepreneurs find special importance in their financial independence (Blanchflower & Oswald, 1998; Hundley, 2001; Blanchflower, 2000).

Thurik et al. examined the influence of cultural attitudes towards uncertainty on the rate of business ownership across 21 OECD countries, yielding evidence that uncertainty avoidance is positively correlated with the prevalence of business ownership (Wennekers, Thurik, van Stel, & Noorderhaven, 2007). This suggests that rising opportunity costs of self-employment play a less important role in this cultural environment, or are being compensated by increasing entrepreneurial opportunities, as there seems to not be an increase of entrepreneurial behaviour in countries with lower uncertainty avoidance which would lead to the formation of more firms, and more entrepreneurs.

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18

Cognitions

The cognition abilities of entrepreneurs and how they are able to recognize and decipher where and how opportunities arise from specific situations. The impact of national culture to the cognitive processes of entrepreneurs is limited and offers mixed results (Goktan and Gunay 2011; Mitchell et al. 2000). Mitchell et al. examined whether entrepreneurial cognitive scripts vary across cultures and they found that individualism and power distance are relevant for venture creation in these countries (Mitchell, Smith, Seawright, & Morse, 2000; Pinillos & Reyes, 2011). They found an interrelation between culture and entrepreneurial cognition.

Goktan and Gunay as well as Mitchell et al. (Mitchell, Smith, Seawright, & Morse, 2000; Goktan & Gunay, 2011) have examined to see the effect of national culture on the cognitive processes of entrepreneurs and have found that it is limited and offers mixed results. Butler et al. suggest that entrepreneurial action is linked to absorbing and bearing uncertainty, noticing opportunities and those opportunities are essential to the entrepreneurial endeavour (Butler, Doktor, & Lins, 2010). Here Butler emphasizes that opportunities weigh greater than the entrepreneurial mindset itself. This is understandable as an entrepreneur would be more willing to engage in risky behaviour if the entrepreneur not only recognizes the opportunity but evaluates the opportunity to recognize that pursuance of this opportunity will yield greater benefits in the long-run. While it is evident that entrepreneurial cognitive scripts vary across cultures, the factor of entrepreneurial cognition is a difficult one to measure all together. It is easy for an entrepreneur to say that he/she had great cognitive skills when recognizing a potential opportunity, but who is to say that it was not stumbled upon by mere change or heavily influenced by a third party without recognition? The measurement of an entrepreneur’s cognitive ability therefore seems arbitrary as it is subject to the entrepreneur’s opinion of him/herself in most cases a survey and as a result difficult to measure. Ultimately it is clear however that besides being able to recognize opportunities, a trait which people beyond a certain circle of entrepreneurs are capable of doing, the entrepreneur is comprised of a variety of skills and traits that, in union, enable the entrepreneur to discover the opportunity, as well as evaluate and exploit it to the extent of creating a business out of the recognized possibility.

Entrepreneurial Traits

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19 importantly internal drivers. As mentioned before these can include innovativeness, locus of control, risk-taking propensity, capital, support, fear of failure, self-efficacy, competency and energy (Thomas & Mueller 2000) and vary by culture (Pinillos & Reyes, 2011)) but are made of many other aspects that have been examined by various researchers. According to Linan & Chen, Moriano and Engle, there are three motivational antecedents: personal attitude, subjective norm and perceived behavioural control, which explain the formation of entrepreneurial intention in different countries and cultural values, determine the strength of these relationships (Linan and Chen 2009; Moriano et al. 2012; Engle et al. 2010). Countries that have different cultural characteristic will have different entrepreneurial intentions and traits. As noted by Kristiansen & Indarti these can explain the differences in the entrepreneurs decision-making as well as their ulterior motives (Kristiansen & Indarti 2004). In the following I will elaborate on 6 traits that the basic entrepreneur possesses and potential entrepreneurs strive to have, as examined by Cromie (2000).

Independence

Independence is classified as the need for autonomy and a tolerance for ambiguity and self-confidence. An entrepreneur is autonomous when they direct themselves towards their goals and visions. They can deal with unstructured or uncertain situations or information and can distil that which is important to them or not and can organize resources to convert the opportunities “into marketable goods or services”.

Locus of control

The locus of control depicts the “extent to which an individual feels in charge” (Cromie, 2000). An entrepreneur who has a high locus of control believes that he/she is in control of their situation and that outside interferences are not as big of an influence to the actions they will undertake. Those who have locus of control show initiative and are proactive in their entrepreneurial efforts.

Need for achievement

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20 to being entrepreneurs and he classified them as undergraduates, naval officers, university professors and the like (Cromie, 2000).

Risk-taking

As mentioned before in the self-employment segment, risk-taking is a basic entrepreneurial trait. Individuals who engage in risky behaviour have are different to those who don’t engage in this behaviour. While entrepreneurs are risk-takers they prefer to take “calculated risks” and are more prone to be moderate rather than high risk takers (Timmons, 1989; Caird, 1991). While an entrepreneur with a high risk propensity would be willing to sacrifice certain securities, they are willing to do so due to their higher self-efficacy. As a result it could be perhaps correlated with a self-efficacy variable later on in the analysis of the data at hand.

Creativity

Another important entrepreneurial trait is creativity, a way to think of new ideas, see new opportunities or combines existing ideas or resources to create further value. Trial and error and experimentation are essential and entrepreneurial literature suggests that entrepreneurs are more creative than non-entrepreneurs (Nyström, 1993; Baron & Tang, 2011; Kirzner I. , 1999).

Creativity is deemed important but some differentiate between creating something new and adopting it or using it (Holt, 1983). Some consider innovation to be paramount to entrepreneurship (Rinne, Steel, & Fairweather, 2012) and Cromie himself measured and has evidence suggesting that certain people with certain jobs may be more creative than others. Characteristically the entrepreneur is more creative than the non-entrepreneur in the way they approach potential entrepreneurial opportunities. As such it seems inhibiting to limit them to any specific job classification as anyone could potentially have the creativity needed for entrepreneurship.

Self-efficacy

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21

Why is it important?

It is apparent that entrepreneurial culture is a distinct culture with values and norms of its own and to a certain degree independent to the prevailing culture of a given nation. This is due to the fact that the entrepreneur is, as it has been established in literature, a type of person that differs from the norm. Entrepreneurs distinguish themselves through high confidence; a high internal locus of control; their desire to achieve something noteworthy; their ability to take risks; their above average creativity in respect to approaching and identifying opportunities and their independence from others. It is important to a country to have these types of people to create new ventures, identify opportunities and exploit these opportunities and thus contribute to the growth of the economy.

If there are cultures that are not beneficial for entrepreneurship, Shane others say that there are cultures that are beneficial for entrepreneurship (Hayton & Cacciotti, 2013; Shane & Venkataraman, 2000). Therefore if a certain culture per Hofstede values can be defined as beneficial towards entrepreneurship it seems plausible that a specific sub-culture within a nation will have entrepreneurial traits. Therefore it would be an examination of a culture within a culture – looking at the culture of entrepreneurship and not if it exists, because it must exist in a country to a certain degree if there is an entrepreneurial activity rate, but to see as to how far its influence is upon the TEA of a country. If a country has a better shaped entrepreneurial culture then they will have a higher TEA because the entrepreneurs are better prepared there.

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Theory

My research is based on theory by Busenitz and Lau and Dimitratos (Dimitratos & Plakoyiannaki, 2003; Busenitz & Lau, 1996), primarily Dimitratos who defined the aspects of an entrepreneurial culture and their relation to entrepreneurial endeavour. Busenitz & Lau fit the cross-cultural model of venture creation into 3 variables: social context, cultural values and personal variables. All of the aforementioned variables are examined to a certain extent with the variables chosen. Entrepreneurship is formed not only by firms but also individuals. A collection of entrepreneurial individuals can form a firm, but the main drivers for entrepreneurship come from within entrepreneurs themselves. An entrepreneur requires the skillset to identify, evaluate and exploit opportunities and to recognize how he/she can create, potentially novel, goods or services from this opportunity (Shane & Venkataraman, 2000). How an entrepreneur motivates him or herself into engaging into entrepreneurial behaviour can be influenced externally or internally. This can be dependent on the institutional environment as well as the societal environment and the inner drive of a person, their locus of control. If a country has a fostering institutional environment it can improve the entrepreneurial output and economic activity. This can be achieved by supplying monetary funds, creating an adequate social climate and encouraging trust within the society (Nissan, Martín, & Picazo, 2011). Entrepreneurs can also create economic value by through intangible assets as well (socio-cultural).

Entrepreneurial culture itself can exist within a country and is not necessarily constrained any one country’s societal values, but instead is a culture within cultures (Dimitratos & Plakoyiannaki, 2003). Entrepreneurial culture affects entrepreneurship as each person has a specific set of capabilities or perspective that they see themselves as entrepreneurs and see the possibilities for entrepreneurship. This group of people are more prone to be entrepreneurs and as a result this culture that exists is beneficial to entrepreneurship as a whole. If they do not possess the aforementioned and discussed traits then they will probably not become entrepreneurs (Haworth, Brealey, & Chell, 1991; Moriano, Gorgievski, Laguna, Stephan, & Zarafshani, 2012). Moreover, a country has a culture that fosters an entrepreneurial culture then the higher those cultures entrepreneurial activity will be (Nguyen, Bryant, Rose, Tseng, & Kapasuwan, 2009).

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23 Sternberg & Litzenberger, 2004; Lee-Ross & Mitchell, 2007). Therefore the generalization that one or another country is more prone to entrepreneurship is dependent on the entrepreneurial culture within a country. Each country has an entrepreneurial culture, but some countries will have stronger or more distinctive entrepreneurial culture than other nations. Entrepreneurial culture consists of individuals with entrepreneurship enabling traits. The people within these cultures are more independent, have a better internal locus of control, a certain degree of need for achievement, are willing to take risks by giving up the possibility of a good employment for their entrepreneurial enterprise, they are creative and confident. If a person has these traits then they are more prone to become entrepreneurs than others who lack these traits or have these traits but not as pronounced as the entrepreneur.

As a result this leads to the question if a country has a more distinctive entrepreneurial culture prevalent, would then have a higher entrepreneurial activity rate? If there are more people with the aforementioned traits, would this lead to higher entrepreneurship rates? The hypothesis is therefore: Hypothesis: There is a significant positive relation between entrepreneurial cultures and total entrepreneurial activity.

Methodology

Dependent Variables

In this paper I will use a linear regression to establish the effect of entrepreneurial cultures on the total entrepreneurial activity rate. The variables for the total entrepreneurial activity rate will be used as it is measured by the Global Entrepreneurship Monitor defined as follows:

“the prevalence rate of individuals in the working age population who are actively involved in business start-ups, either in the phase in advance of the birth of the firm (nascent entrepreneurs), or the phase spanning 42 months after the birth of the firm (owner-managers of new firms)” (GEM, 2014).

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24 of expanding the sample size, countries were included that had a TEA in any given year between 2003 and 2013.

Figure 1: Model visualization.

Due to lacking data for Turkey and Finland these countries which were initially included, were omitted. As a result the final number of countries included in the analyses is 31 countries of varying origin and cultural variety. The countries are: Algeria, Argentina, Brazil, Chile, China, Colombia, Ecuador, France, Germany, Guatemala, Hungary, Iran, Italy, Japan, Malaysia, Netherlands, Norway, Peru, Romania, Russia, South Africa, Spain, Switzerland, United States, Malaysia, Mexico, Pakistan, Slovenia, Tunisia, Egypt, Taiwan and Uruguay.

Independent variables

The question was if there is a positive relation between entrepreneurial cultures and total entrepreneurial culture. Looking at the traits needed for entrepreneurial cultures I took those values into account through measurable variables from the WVS (WVS, 2014): pertaining to the education of children values and their importance to the questioned people: independence, hard work, imagination, frugality, determination, unselfishness, and responsibility.

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25 weaknesses (García-Cabrera & Gárcia-Soto, 2008; Lee-Ross & Mitchell, 2007; Aoyama, 2009). As such I chose values that have been used in examining entrepreneurial culture in the past.

The child value of independence I found an important measure to gauge if a person in the future would be more inclined to engage in self-employment. It would be related to independence. The child value of imagination would encourage creativity in children and would be related to creativity. If a child is taught to be imaginative, the more they can rely on their own internal creativity processes rather than gathering creative inputs from their social surroundings, hence the child value of imagination. Having a good imagination is important for an entrepreneur as through this imagination the entrepreneur can come up with new ideas or products or simply for recognizing an opportunity. The child value of frugality would indicate if a child is brought up to save money or not. A country with higher frugality would have more wealth saved up to invest in entrepreneurial ventures and one would not rely on others in the social circle to support oneself. This would be the variable to determine the risk-taking propensity of an entrepreneur. Someone who is more frugal is more likely to avoid risky investments, let alone engage in them themselves. The child value of determination would, theoretically, indicate if a child would follow through their aspiration to become an entrepreneur and if they would be more likely to continue entrepreneurial efforts despite the resistance. This child education value would be attributed to the value of self-efficacy. Concerning the need for achievement I have used the child value of work. Someone who works hard, who values work, will look to achieve more as they know that hard work is necessary to achieve what they want to achieve. For the values of responsibility I have used the children’s value of responsibility and likewise the children’s value of unselfishness for unselfishness. Finally the locus of control variable is controlled for the WVS value of Control/Fate wherein a survey participant stated if they felt that they were more in control of their life or if fate had a bigger impact on their day-to-day actions.

Control Variables

The GDP control variable is gross domestic product per capita of a country in United States Dollars and was calculated as the mean between the years 2003 and 2013 and the data was extracted from the World Development Indicators (The World Bank, 2015).

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26 WVS as well. The values are in percentage of people from a country who indicated that they are self-employed in the WVS.

Results

Due to the fact that normality was not a given in the initial data, the data was put through a Log10 calculation to assure for normality. The method of regression analysis was through forced entry. The assumptions of linearity are fulfilled for the regression analysis. There were two significant outliers (Turkey and Finland) in the results of the dependent variable data and as such were omitted to maintain normality. This was done after the data was normalized through a Log10 transformation

to ensure normality of the dataset.

Factor Analysis

Before carrying out the regression analysis I performed a factor analysis for the entrepreneurial traits. The prime goal of the factor analysis is to identify simple items that load beyond 0.40 on one factor for easier interpretation, assuming that the items are factorable. The Kaiser-Meyer-Olkin measure of sampling adequacy tests whether the partial correlations among variables are small. Bartlett's test of sphericity tests whether the correlation matrix is an identity matrix, indicating that the factor model is inappropriate. The factor analysis was conducted after recognizing high correlations amongst the entrepreneurial trait values themselves.

The factor analysis conducted was a maximum likelihood with a Varimax (orthogonal) rotation of the 6 values from 31 nations. The examination of the Kaiser-Myer-Olkin measure of sampling adequacy suggested unfavourable factorability, however this was neglected due to the small sample size (KMO = .596). It is apparent that 3 items loaded into the first of the two factors which I will use as entrepreneurial culture 1 in the regression analysis. These factors load onto creativity most significantly with a negative loading towards need for achievement. The four items loading onto Table 1: Component loadings for 6 items with loadings >= .40

1 2

Creativity .983

Need for Achievement -.419

Self-efficacy .428 .653 Independence .538 Locus of Control -.513 Risk-Taking .467 Factor Matrix Factor

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27 factor 2 are further used as the variable entrepreneurial culture 2 for the regression analysis. This factor loads mostly on self-efficacy with a negative loading for internal locus of control.

Regression Analysis

Concerning the possibility of Multicollinearity the VIF values are all under 10 and the average VIF for this model is 1.358 however the value of self-employment slightly higher than average at 2.058. The tolerance values of the variables are all above 0.1 and 0.2. According to the standardized residuals there are no outliers in the model. The Cook distance values for the model are all below 1 indicating no influence upon the model. An observation of the ZRESID values plotted against the ZPRED values from the regression analysis lead to the assumption of linearity and homogeneity of variance to a certain degree.

The results of the regression analysis and the adjusted R² of 30.3% of the variability in the TEA can be explained by the entrepreneurial culture values I have chosen. This shows that the models accuracy his higher before the introduction of those variables. The result of the ANOVA leads to the conclusion that the model is a sufficient fit with a significance of 0.013 at p < 0.05.

Discussion

Table 2: Descriptive statistics and correlations table with Mean, standard deviation and correlations. The significance values are indicated by asterisks.

The entrepreneurial culture 1 variable was comprised mainly of the creativity loading in the factor analysis with the variables need for achievement and self-efficacy as well. There is a high correlation of the entrepreneurial culture 1 value to the TEA, GDP per capita and self-employment. The entrepreneurial culture 2 value was correlated highly to self-employment but was not statistically

Table 1 Variable Mean Std. Dev. 1 2 3 4 5 1 TEA 0.91 0.21 2 GDP per Capita 0.53 0.15 -.01 3 Self-employment 0.88 0.12 .11 .45*** 4 Education average 0.53 0.19 .47 *** .03 .03 5 Entre. Culture 1 0.00 0.98 .45 *** .39** .46*** .17 6 Entre. Culture 2 0.00 0.83 .01 .26* .52*** -.11 -.01 N = 31

Descriptive Statistics and correlations

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28 significant to the total entrepreneurial activity rate. These results led to the issue of inspecting the collinearity of the variables. An examination of the collinearity leads to the result that there is a higher collinearity between the entrepreneurial culture 2 variable and self-employment, but still well below values that could lead to concern. Evidently it seems that the higher the entrepreneurial culture 1 value, the higher the total entrepreneurial activity. This would lead to the assumption that the hypothesis that “the more entrepreneurial culture in a country, the higher the total entrepreneurial activity rate” would be correct. Looking at table 2 it is evident from the coefficients that entrepreneurial culture 1 has a significant statistical impact on the value of TEA.

From the results of the entrepreneurial culture 1 it appears that creativity and self-efficacy have the biggest impact on total entrepreneurial activity. This appears to overlap with claims by other researchers who have examined creativity and self-efficacy albeit with other factors (Baron & Tang, 2011; Nyström, 1993). The 2nd entrepreneurial culture value, comprised of independence, locus of control, risk-taking and self-efficacy has a lower impact on the TEA rate and is statistically not relevant. From this data it appears that these are not big influences for total entrepreneurial activity.

Table 3: Main results of the coefficient values with the coefficiency significance in brackets and the standardized error before that. Statistically significant variables are indicated as such.

In compliance with the results of previous studies on self-employment, the total entrepreneurial activity rate is positively influenced by self-employment (Hamilton, 2000).

Table 2 Main results

Model 1 2 3

Dependent Variable: TEA

GDP per Capita 0.27 ( 0.67 ) 0.25 ( 0.31 ) 0.25 ( 0.26 ) Education Values 0.35 ( 0.47 ) 0.34 ( 0.80 ) 0.40 ( 0.48 ) Self-employment 0.19 ( 0.01 )*** 0.18 ( 0.03 )** 0.18 ( 0.03 )** Entre. Culture 1 - - 0.04 ( 0.02 )** 0.04 ( 0.01 )*** Entre. Culture 2 - - - - 0.05 ( 0.32 ) R -Squared 0.16 0.30 0.30 N 31 31 31 * p <0.1, ** p <0.05, *** p <0.01 (2-tailed)

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29

Conclusion

In the course of this paper I have inspected the topic of entrepreneurship. It has been hard to clearly define and continues to be a very broad field with various definitions and factors influencing it. It became clear that entrepreneurial cultures are not dependent on the cultures that are prevalent within a given nation. I then inspected whether or not entrepreneurial culture has an effect on entrepreneurship, and ultimately also an effect on the economic prosperity of a nation as a whole. As it turns out the entrepreneurial culture variables, deduced from a factor analysis, have shown that creativity and self-efficacy have an impact on total entrepreneurial activity, within the scope and sample size of this research.

My research is different as I specifically examine the impact of an entrepreneurial culture on entrepreneurship itself whereas other studies have examined the relationship between institutions and entrepreneurship (Nissan, Martín, & Picazo, 2011), institutional influence on entrepreneurship , their intentions (Nga & Shamagunathan, 2010), the importance of entrepreneurial values in itself (Felício, Caldeirinha, & Rodrigues, 2012), learning and building trust (Johanson & Vahlne, 2009; Bergh, Thorgren, & Wincent, 2011) and the value of entrepreneurship (van Praag & Versloot, 2007). I also take a look at countries that are not only in the OECD but also developing countries over a cross section of 10 years (2003-2013) which is more recent.

The applicability of this paper is limited due to the small sample size and variable amount. However it bears interest for future examinations of entrepreneurial cultures themselves. Further it can be used to distinguish a focus on the two aspects, creativity and self-efficacy, when examining entrepreneurial cultures. This can help establish if an entrepreneurial culture is more prominent or not, in consideration with other factors as well.

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