DO MENTAL MODELS MAKE A DIFFERENCE?

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MASTER THESIS

DO MENTAL

MODELS MAKE

A DIFFERENCE?

The influence of individualism and uncertainty avoidance on entrepreneurship

August 2008

Author: Johan Aalbers S1576380 Supervisor: Dr. H. Stek

Co-assessor: Dr. B. Neuijen

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Abstract

This master thesis studies the relationship between two significant assumed aspects of national culture, individualism and uncertainty avoidance on the level of entrepreneurship within a country. Previous empirical studies found significant relationships between certain elements of national culture and certain elements of entrepreneurship, however the influence of national culture on export was yet to be examined. For this purpose I used Hofstede’s (1980) dimension scores on individualism and uncertainty avoidance to test their influence on the export share of GDP reprensenting the level of

entrepreneurship within a country. In addition to this I argue, based on a sample of 47 countries, that individualism has a significant positive effect on the export share of GDP using multiple regression, where uncertainty

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Table of content

1. Introduction...4

2. Problem definition...6

-National culture...7

- Entrepreneurship the importance of individualism and uncertainty avoidance...9

- Conceptual model building...10

3. Theory review...13

- The concept of export...13

- Individualism and entrepreneurship...14

- Uncertainty avoidance and entrepreneurship...18

4. Method...20

- Sample...20

- Export share of GDP...23

- Individualism and uncertainty avoidance...24

- The model...25

5. Results...25

6. Discussion and limitations...31

- Do mental models make a difference?...31

- Limitations...34

7. Future recommendations and conclusion...34

- Future recommendations...34

- Conclusion...35

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1. INTRODUCTION

This research paper is written in the context of the international business and management study I am about to complete. One might suggest that the existence of an international business and management study is a product of the changing business environment of the last couple of decades, a changing business environment wherein entrepreneurship is faced with the possibility of internationalisation. In the past history countries tended to do everything for themselves, whereby internationalisation was associated with high risks and high levels of uncertainty. Today the companies within these countries have the ability to search for ways to realize global competitive advantages by means of export, foreign joint ventures, foreign takeovers, international mergers and greenfield investments. These international activities offer companies for instance a way to reduce the time of product development, penetrate emerging markets and gain acces to new technologies and economies of scale. Research has proven that as companies internationalize, there is a tendency

towards choosing foreign counterparts that share substantial cultural and institutional similarities with their partner (Parkhe, 1998). Due to the

transparency of knowledge and the familiarity of the host country environment a high level of comfort can be established which will reduce the learning costs and thereby time. In addition to this scholars agree that companies entering foreign markets have to make adjustments to the foreign market, where there are differences in language, lifestyles, cultural standards, consumer preferences and purchasing power (Albaum and Tse 2001; Lu and Beamish 2001; Peñaloza and Gilly 1999; Pornpitakpan 1999; Sousa and Bradley 2005). In sum,

understanding the culture of the foreign market can provide a company an competitive advantage. Especially if managers use the understanding to align internal and transnational practices with the cultural external environment (Newman and Nollen, 1996).

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McDouggal et al. 1994). Hofstede (1980) and with him other authors, state that certain elements of national culture influence entrepreneurship. Several

authors found support for this hypothesis, by means of testing the influence of a selection of the intitial four dimensions encapturing national culture

(individualism, power distance, uncertainy avoidance and masculinity), designed by Hofstede (1980), on variables which are considered to be part of entrepreneurship. In their comprehensive literature review of 21 emperical studies Hayton, George and Zahra (2002) found out that the literature testing the relationship between national culture and entrepreneurship favors a combination of cultural dimensions regarding the facilitation of

entrepreneurship. In general, the research under examination hypothesized that a combination of a high individualism-score, a low uncertainty avoidance score, a low power distance-score and a high masculinity-score held within a country facilitates entrepreneurship. Hayton, George and Zahra (2002) found out that, within their review of four articles discussing the relationship between national culture and entrepreneurship at the country level, national rates of innovation are postitively correlated with individualism and power-distance (Shane, 1992), national rates of innovation are positively correlated with

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promoting such behaviour create the development of radical innovation, whereas their counterparts are more anxious regarding risk-taking and entrepeneurial behaviour.

2. PROBLEM DEFINITION

Although export has for a long time been considered as the first stage in the internationalisation process of a firm and is reckoned to be part of

entrepreneurship, emperical evidence concerning the influence of national culture on export is missing within the literature. This phenomonem could be explained by means of a general lack of interest within the field, however several authors emphasize the importance of research examining the influence of national culture on entrepreneurship. Within this international cooperation context, entrepreneurship has been considered as the utmost important source of economic growth and technological innovation (Hayton, George and Zahra, 2002). So, understanding the effect of national culture on the comprehensive concept of entrepreneurship (R&D, degree of internationalisation, mode of alliance and export) is of considerable theoretical and practival relevance in the international cooperation context. Furthermore Hayton, George and Zahra (2002) state that this understanding is crucial for the internationalization of entrepreneurship theory, which will foster the development and

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with difficulties. Due to transparency reasons data within this context can be hard to retrieve. I consider the fulfilment of the above described literature gap concerning the influence of national culture on the level of entrepreneurship within a country as the primary objective of this research paper. Important to note here is that I do not pretend to encapture the relationship between all of the elements of national culture and entrepreneurship, however certain significant assumed elements of national culture will be tested in relationship with entrepreneurship. Before we go in into the main-body of this research, I will first demarcate the research area under investigation. For the examiniation of the influence of national culture on the level of entrepreneurship within a country one needs to consider which independent variables part of national culture are of relevance within the context of entrepreneurship. In the next section I will underline the choices made within this regard, after I deliniated the national culture concept use within this research. Both will result in the conceptual model of this reseach paper, after which the research question under examiniation will follow.

National culture

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influences end-goal behaviour. Tse et al. (1988) add that national cultures differ in their perception towards the regulation of behaviour, values, attitudes and the tolerance towards foreigners. In addition to this Macmillan and Mcgrath (1992) emphasize the importance of national culture by stating that national culture is deeply embedded within the everyday life of an individual and is almost impervious to change. The underlying values of national culture are regarded to be important tools for the direction of human behavior within a society due to the fact that these values guide choices by means of influencing motivational variables. In sum, one might argue that all of these descriptions of national culture are encaptured within the definition of Hofstede (1980).

In general the concept of national culture is often associated with the IBM-study of Hofstede (1980). By means of a large sample of more than fifty countries, Hofstede found significant differences between countries, which he innitially encaptured within four different dimensions. This operationalisation of

national culture by Hofstede (1980) still is reckoned to have a proven value, in that it presents a concise taxonomy of significant cultural dimensions

explaining behaviourial preferences of human nature in business organizations (Hayton, George and Zahra, 2002). Within an era of corporate

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Entrepreneurship, the importance of individualism and uncertainty avoidance The choice of testing these two particular dimensions of the conceptualization of national culture by Hofstede (1980) on the level of entrepreneurship within a country, is based on the assumption that individualism and uncertainty

avoidance provide a more significant contribution to entrepreneurship than masculinity and power distance do. Hence, I assume that individualism fosters entrepreneurship due to the fact that I associate individualism with

innovativeness, freedom of choice and an outward looking view, where I associate collectivism with the hesitation towards foreign involvement. In addition to this I associate uncertainty avoidance with the willingness to take risks, which is reckoned to be a neccasity in the context of entrepreneurship. Power distance in contrast refers to the experienced hierarchy within a country, whereby there is no clear direct relationship with entrepreneurship. The same logic can be applied for masculinity, which is mainly a within country matter. This line of thinking is approved by a recent article of de Jong et al. (2005) who conducted a cross-country analysis examining the influence of the four

dimensions of national culture on the openness of a country, and found out that individualism and uncertainty avoidance are the most consistent factors in explaining openness. In sum, they argue that open economies are characterized by competition, less fear of uncertainty (uncertainty avoidance) in case of

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Conceptual model building

Based upon the reviewed literature so far, we can conclude that there is a clear relationship between national culture, entrepreneurship and

internationalisation. A relationship which comprehensively has been reviewed by Hayton, George and Zahra (2000) who reckon that entrepreneurship is a source of economic growth and technological innovation and thereby a component of internationalisation. The conceptual model (figure 2.) of this research is based on the framework (figure 1.) introduced by Hayton, George and Zahra (2002) at the end of their reviewing article adressing the emperical literature concerning the relationship between national culture and

entrepreneurship.

Figure 1. A model of Culture’s association with entrepreneurhsip

Their acummulated model draws the relationship between four different main-variables, wherein national culture innitially was subdivided into four different forms of behavioural research due to the fact that these cultural values are the shared denominater of needs and motives, beliefs and behaviours and

cognition. Although some studies found significant relationships between national culture and entrepreneurial outcomes, Hayton, George and Zahra (2002) argue that culture moderates the relationship between institutional and economic factors and entrepreneurial outcomes, by quoting Leff (1979) who

Cultural values

Institutional context Economic context

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states that the institutional and economic context of a country are the key drivers behind entrepreneurship, wherein the economic context entails economic growth and industrial infrastructure and the institutional context entails the capacity for innovation in determining the degree of entrepreneurial behaviour. According to the framework institutions have a direct influence on entrepreneurship within a country. Hence, within the context of this research it is important to note here that Denzau and North (1994) argue that these

institutions are the tangible consequences of national culture and the reflection of evolved mental moddeling within a country. Willamson (2000) agrees by stating that economic activity, governance and institutions are embedded within national culture. Given that their model is a summary of the existing literature concerning the topic of this research, that the gross of the articles reviewed used the operationalization of Hofstede (1980) and that it still is

considered to be relatively recent, bearing in mind that Hofstede introduced the cultural dimensions in more than twenty years ago, I will make use of this model in being the initial concept of this research paper. Since that I will concentrate on the direct relationship between individualism and uncertainty avoidance on the level of entrepreneurship within a country I designed a

derivative of this model which details the relationships under examination. The economic and institutional context are beyond the scope of this research paper, where the focus is on two of the four dimensions introduced by Hofstede (1980), based on the assumption that there will be a significant relationship between individualism, uncertainty avoidance and entrepreneurship within a country. Figure 2. individualism, uncertainty avoidance and entrepreneurship

Mental model

Uncertainty avoidance Individualism

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Due to the fact that I assume that certain cultural values (uncertainty avoidance and individualism) significantly influence entrepreneurship within a country, I expect to discover a relationship between individualism and the level of

entrepreneurship within a country and uncertainty avoidance and the level of entrepreneurship within a country,which leads to the main research question of this research:

Does individualism positively or negatively influence entrepreneurship within a country and what about uncertainty avoidance?

The remainder of this research paper is structured in fivefold. First I will introduce the concept of export behaviour to highlight the important factors of influence within the context of this research. Second I will review the literature discussing the relationship between individualism and entrepreneurship. In addition to that I will review the literature discussing the relationship between uncertainty avoidance and entrepreneurship. By means of this method, I will examine the relationship between both individualism and uncertainty

avoidance and the economic performance of a country, since export is

considered to be an entrepreneurial act and is considered to be an important indicator of openness and thereby the economic performance of a country. For both reviewed relationships a hypothesis will be formulated. Third I will discuss the method used to test the formulated hypothesis, whereby I will operationalize the variables within the conceptual model, present the country-clusters under examination, explain the measurement method and the

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3. THEORY REVIEW

As stated before Hofstede (1980) considers the degree of individualism and uncertainty avoidance to be part of the mental model of the individual. The purpose of this theory review is to examine the relationship described within the literature between a part of the shared mental models of the individuals and the interaction with the environment encaptured within the level of entrepreneurship within a country. Denzau and North (2001) add that on the micro-level mental models are vital in the way that individuals shape their environment and interact with it. Hence, one has to understand that the shared mental model within a country does not mean that all of the individuals have the same mental model. However, the scores on the dimensions of Hofstede (1980) depict a shared mental model per country. Before I will go into the literature adressing the relationship between both individualism and

uncertainty avoidance with entrepreneurship, I will first introduce the concept of export behaviour to highlight the important factors of influence.

The concept of export

In line with the entrepreneurship defenition (Leff, 1974) earlier used within this research paper Morris, Davis and Allen (1994) argue that the construct of

entrepreneurship consists of innovativeness, the development of new products (services or processes), risk-taking, and the urge to pursue opportunities which might have a chance of failure. Export can be considered part of this. Several authors state that the role of export is an evident part of the growing body of literature concerning international entrepreneurship (Zahra, 1993; McDouggal et al. 1994). Within the paper of Ibeh and Young (2001) export is reckoned to be a process of individuals, within organizations or on their own, engaging

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with this it emphazises autonomy, innovativeness, proactiveness, risk-taking and competitive aggressiveness (Lumpkin and Dess, 1996; Morris and Paul, 1987).

Choosing a foreign market capable for foreign investment requires the

delimitation of the number of foreign markets suited. Within the total market space decision-makers have to consider which markets are totally irrelevant to the firm and which markets will be considered the reduced number of suited markets. Reid (1981) states that these suited markets are determined by firm-experiences and decision-maker firm-experiences (culture). Within this context the foreign market orientation of a company represents an evaluative dimension (Reid, 1981). It incurres the differences between cultural, political, economic and market-strategic dimensions between the home market and the foreign markets perceived by a company. An informed decision maker is better capable in discriminating between certain markets and will perceive less ambiquity and complexity in stimuli concerning these markets. Reid (1981) conceptualizes export behaviour as the adoption of the innovation process of companies by means of a five-stage model (figure 2), whereby at each stage firm specific variables and decision-maker characteristics play an important role. Within the context of this research, stage 2 (export intention) offers some valuable insights in the intention-driven variables concerning export behaviour by national culture. Within this stage motivation, attitudes, beliefs, and expectations about the contribution of export play an important role regarding decision-making. Furthermore foreign market entry expectations, foreign market orientation, export orientation, and underlying attitudes towards foreign involvement are considered to be intention-driven variables which differ between cultures. Figure 2. Export behaviour as the adoption of the innovation process

1. 2. 3. 4. 5. Export

awareness

Export

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The export intention-driven variables within the model of Read (1981) will be of use within this paper to examine to what extend individualism and uncertainty avoidance are related to these intention-driven variables. In the next section of this research paper the literature adressing the relationship between

individualism and entrepreneurship will be examined. How do the authors within the literature adress the relationship between individualism and entrepreneurship?

Individualism and entrepreneurship

In his IBM-study Hofstede (1980) considered the first cultural dimension to be individualism in opposite to collectivism. In sum it reflects whether individuals belong to an in-group in which people look after each other for loyalty in

exchange, or whether they tend to only look after themselves. In addition to this he refers to individuals in collectivistic cultures having a we-consciousness, where individuals in individualistic cultures tend to have an I-consciousness.

The relationship between individualism and an outward-looking view, representing the urge to export, is highligted by Moriss and Allen (1994) who state that self-orientation, self-sufficience, control, the pursuit of individual goals (which may not be consistent with group goals) the willingness to confront in-group members and a culture wherein people derive pride from their own accomplishments are all part of individualism. They continue by stating that collectivism in contrast refers to the favor of group goals beyond personal interest. The emphasize within these countries is on group harmony and in-group cooperation. In addition to that they add that there exists hostility towards out-group members. Collectivism in contrast favors in-group

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common within individualistic countries. He continues by stating that small companies are more innovative than large companies and that people in individualistic countries prefer small firms. De Jong et al (2005) add that individuals in individualistic cultures engage more easily in relationships (business) with unknown people than individuals in collectivistic cultures do. Due to the fact that they can act on personal economic incentives they are less hold back by the general interest of the group. Hence, collectivistic cultures tend to have an ‘us versus them’ attitude, where individualistic cultures prefer the ‘us and them’ attitude. The former is detrimental to the openness of a economy, where the latter enhances the openness of a economy.

Thomas and Mueller (2000) continue by stating that the entrepreneur is an initiator capable of self-motivation, relying mainly on self than on others to implement his or her plans. Often cited personal attributes associated with values and behavior within this context are, independence, selfreliance, initiative, confidence, resourcefulness and the need for control.In addition to this Mueller and Thomas (2000) point out that some cultures are more

conducive towards entrepreneurship than others, which is supported by their findings. For instance, innovativeness was found to be more significantly present within individualistic, low uncertainty avoidance countries than in collectivistic high uncertainty avoidance countries. A significant contribution, in addition to this, is made by the psychologist Rotter (1966) who developed the construct of locus of control. The outcome of an event perceived by an

individual, according to Rotter (1966), is either within or beyond the boundaries of understanding and personal control. An internal is convinced to have

influence over the outcome of an event by means of personal attributes (ability, effort or skills), where an external reckones that outside control forces

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business situations have to discount risk, and perceive themselves therefore in control of their business. As individualistic cultures support individual action more and are therefore more in control of their business one might expect that an internal locus of control is more prevalent in individualistic cultures than in collectivistic cultures.

Furthermore Tiessen (1997) points out that there are two entrepreneurial functions, variety generation and resource leverage. The first refers to the

creation of new concepts and is considered to be associated with individualism, while the second favors efficient implementation and is reckoned to be part of collectivism. Furthermore the author agrees that individualism fosters

innovation an the founding of new ventures, where collectivism favors corporate entreneurship (compromise) and resource leverage. In addition to this Huisman (1985) conducted a 12-country study and found out that founder-entrepreneurs are likely to be driven by their individualistic orientation, the urge to develop oneself and lead instead of follow. Furthermore Scheinberg and MacMillan (1986) identified the need for approval, wealth, personal

development and independence to be the key motives of founder-entrepreneurs.

At last we have to attend to Huff and Kelly (2003) who underline the

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eventually may lead to lower transaction costs, and thereby limits oppertunities that are in need of initial trust (Yamagashi, 1998).

In sum one might say that individualism favors the motivation, beliefs and expectations of export over collectivism due to the strong drive for innovation, the outward-looking view, the internal locus of control orientation, the

importance of the creation of new concepts and the amount of value

individualism adds to trust in initial relationships. Since there is a clear positive relationship between these cultural values and the foreign market entry

expectations, the export orientation and the attitudes toward foreign involvement including foreigners, I hypothesize that:

Hypotheses 1: Individualism will have a positive effect on entrepreneurship.

Uncertainty avoidance and entrepreneurship

How do the authors within the literature adress the relationship between uncertainty avoidance and entrepreneurship?

The third cultural dimension of Hofstede (1980), uncertainty avoidance, refers to the way in which individuals feel threatened by uncertain situations and seek to avoid them or to protect themselves from them. Within countries that score high on uncertainty avoidance, individuals experience uncertainty as a constant threat. Only well considered risks tend to be taken in a climate where differences are reckoned to be dangerous. Individuals within low uncertainty avoidance countries are more in favor of uncertainty and willing to take unknown risks, feeling what different is interesting.

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which means that different mental modelled countries posses a different radius of trust. Bhardway, Dietz and Beamish (2007) use this radius of trust in stating that the level of uncertainty avoidance held within a country marks this radius of trust, which affects the attitude towards foreigners. In addition to this they associate uncertainty avoidance with ethnocentrism, a high anxiety of, and low tolerance for the foreign unknown. This argumentation is in line with Hofstede (2001) who states that in high uncertainty avoidance countries foreigners are reckoned to be more threatening due to a lack of transparency regarding their motives and behaviour, which leads to less spontaneity in the formation of business relationships. In addition Fukuyama (1999) states that high

ethnocentrism in high uncertainty avoidance countries can provide stronger bonds and higher in-country levels of cohesion, which decreases the degree of trust hold towards out-group members. Elaborating on this Inglehart (1997) argues that in the case of high uncertainty avoidance, individuals tend to have less interest in living abroad and are more resistant to immigrants, which is negatively related to openness. Furthermore regarding openness, de Jong et al (2005) argue that open economies experience more exposure from external forces. Given this fact is seems likely that high uncertainty avoidance cultures are cautious in opening up their economies, due to their attachment to security. In sum, high uncertainty avoidance countries have lower levels of trust

considering foreigners, which reduces the investments made within foreign-countries.

Furthermore discussing uncertainty avoidance Thomas and Mueller (2000) state that the acception of non-traditional behavior is more prevalent in low

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Finland counterparts, which is considered to be a higher uncertainty avoidance culture. Carland et al. (1984) add that the assignment of the innovator role to the entrepreneur fosters the implementation of competitive strategies, under which opening new markets, the introduction of new products, new methods of production or even the reorganization of an entire industry.

In sum one might say that low uncertainty avoidance favors the motivation, beliefs and expectations of export over high uncertainty avoidance due to the perception of what is different is interesting and not dangerous, the tolerance of foreigners, the outward looking view, the acceptation of non-traditional

behavior and a higher preference for innovation. Hence, one can draw a clear relationship between uncertainty avoidance and the negative influence on the foreign market entry expectations, the export orientation and the attitudes toward foreign involvement including foreigners, therefore I hypothesize that: Hypotheses 2: Uncertainty avoidance will have a negative

effect on entrepreneurship. 4. METHOD

In the next section of this research paper I will adress the method by which I will test the influence of individualism and uncertainty avoidance on the level of entrepreneurship held within a country. Important steps adressed within this process are the choice of the sample, the operationalisation of the variables under examination, the measurement method and the choice of the emperical model (variate).

Sample

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study contains the data of 53 countries, of which I will use the dimension scores of 47 of these countries. Hongkong dimension scores are excluded, while they are now part of China. In addition to this region scores are excluded (Arab countries, East Africa and West Africa), where regions scores offer insuperable difficulties where the export share of GDP within this research is measured on the country-level. For an overview of the sample under examination I grouped the remaining 47 countries by means of their individualism and uncertainty avoidance scores in five clusters (figure 3), where the first cluster contains the countries which score high on individualism and low on uncertainty avoidance, the second cluster contains the countries which score high on both dimensions, the third cluster contains the countries which score low on individualism and high on uncertainty avoidance, the fourth cluster contains countries which score low on both dimensions, and the fifth cluster which contains the

remaining countries under examination within this research. Approximatily in line with Hofstede (1994, p114) we defined high as a 60 or higher dimension score, and low as a 40 or lower dimension score.

Figure 3. Country clusters under examination

1. high IDV + low UAI 2. high IDV + high UAI

In sum, according to the definition used of high and low, one can conclude that a high score on individualism for a country does not implicitly mean that it is followed by a low score on uncertainty avoidance. Hence, only 4 (cluster 1) of the 47 countries under examination exhibit this combination, where another 4 (cluster 2) countries combine a high individualism score with a high

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high individualism clusters the combination of scores, according to the definition of high an low, is only found within European countries. 3. low IDV + high UAI 4. low IDV + low UAI

5. Remaining

The largest group (cluster 3) within the sample scores low on individualism and high on uncertainty avoidance, where 3 countries (cluster 4) score low on both dimensions. The remaining 17 countries fall beyond the scope of any of the above mentioned clusters. For measuring the influence of individualism

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and uncertainty avoidance, encaptured within these scores, on the level of entrepreneurship within a country an operationalisation of the level of entrepreneurship at the country level is required. In the next section of this paper I will adress the operationalisation of the variables under examination. Export share of GDP

Entrepreneurship at the country level is considered to be the dependent variable within this research, because I assume that individualism and uncertainty avoidance explain a significant proportion of the level of

entrepreneurship held within a country. By means of the export share of GDP

(Gross domestic product) I will operationalise the level of entrepreneurship within the countries under examination. The export share of GDP is according to the entrepreneurship literature considered to be the result of the

entrepreneurial conduct of a country (Zahra, 1993; McDouggal et al. 1994). To test the in the previous section formulated hypotheses I will make use of the operationalisation of export on the country level, which means that I will test the influence of individualism and uncertainty avoidance on the export share of GDP within the countries examined by Hofstede (1980). The export share of GDP is a measure which for instance has been used by Popov (1999) who proved that a better economic performance realized by means of domestic industrial restructuring depends on the export-expansion of a country and their share in GDP. In addition to this Merikas (2001) argues that these outward oriented countries experience faster export growth, which results in an rapidly growing export share of GDP. Hence, the export share of GDP within this context resembles the degree of openness of a country. Openness which is reckoned to be an important factor in the overall economic performance of a country, due to the fact that free export and import of knowledge and

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more comprehensive use of the construct export share of GDP was utilized by David and Pappel (1997) who examined, by means of sequential trend break tests, the export share of GDP of 47 countries between 1948 and 1993 to find out whether the export share of GDP of individual countries evolved gradually or changed more abrubtly.

GDP data and export data per country for the year 2007 was obtained from the worldfactbook 2007, in which the American government profiled the required information concerning the economic performance indicators of the countries under examination within this research. Since I make use of the

operationalisation of the level of entrepreneurship of a country by means of the export share of GDP, I divided the GDP data by the export data which resulted in the export share of GDP data per country denominated in percents. In the next section I will discuss the independent variables under examination. Individualism and uncertainty avoidance

Individualism and uncertainty avoidance are within this research considered to be the independent variables, because of their assumed effect on the level of entrepreneurship of a country. By means of the country dimension scores introduced by Hofstede (1980), individualism and uncertainty avoidance are operationalized within this research by country. By means of a questionnaire Hofstede (1980) surveyed a set of fourteen work goals on which

IBM-employees scored on a scale of 1 (of utmost importance to me) to 5 (of very little or no importance). Factor analysis was used to sort the survey questions into groups, where the resulting answer patterns reflected two underlying

dimensions, of which one was called individualism. Mean scores of the standard sample of IBM employees were used to compose the individualism index scores per country. Uncertainty avoidance differences among countries were discovered by Hofstede (1980) as a byproduct of the power distance factor. By means of the mean scores on three questions Hofstede (1980)

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the statement and the percentage of employees expressing their long-term career intentions, which eventually resulted in the uncertainty avoidance index. In sum, the dimension scores of individualism and uncertainty avoidance will both be tested on the export share of GDP of the countries under examination. In the next section I will present the measurement method and the emperical model (variate).

The model

Both hypotheses are tested on the country sample of export share of GDP by using a regression model, in which one dependent metric variable (export share of GDP of a country) is examined within a single relationship with the two dependent variables under examination within this research (individualism and uncertainty avoidance). By means of multiple regression I will examine the regression coefficients under examination, expecting that individualism will have a significant positive effect on the export share of GDP of a country, where in contrast uncertainty avoidance will have a significant negative effect on the export share of GDP of a country. Using this method results in the subsequent regression variate:

Export share of GDP country (Y) = intercept (B0) + Individualism score (B1V1) + Uncertainty avoidance score (B1V2), where

Y = Export share of GDP B0 = intercept

B1 = regression coefficient individualism

B2 = regression coefficient uncertainty avoidance

5. RESULTS

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individualism (45,21), meaning that in general uncertainty avoidance scores are higher then individualism scores.

Table 1. Descriptive statistics

Mean Std. Deviation N

Export share of GDP 26,8694 20,15639 47

Score Uncertainty

avoidance 67,45 23,360 47

Score Individualism 45,21 26,146 47

In addition to this table 2 provides the correlation among the variables under examination within this research. Table 2 shows that individualism is

significantly positively correlated (+,461; sign. .001) with the export share of GDP. Table 2 also shows that uncertainty avoidance is significantly negatively correlated (-,291; sign. .023) with the export share of GDP. However, table 2 also shows that there exists significant multincollinearity (-,457; sign. .001) between individualism and uncertainty avoidance. The consequences of this

multicollinearity will be adressed.

Table 2. Correlations Export share of GDP Score Uncertainty avoidance Score Individuali sm Pearson

Correlation Export share of GDP 1,000 -,291 ,461

Score Uncertainty

avoidance -,291 1,000 -,457

Score

Individualism ,461 -,457 1,000

Sig. (1-tailed) Export share of

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The R square score of ,221 in table 3 below directs the correlation coefficient squared, also referred to as the coefficient of determination. This value indicates the percentage of variation of the export share of GDP explained by the

independent variables under examination. Hence, one might conclude that individualism and uncertainty avoidance only explain a small proportion of the variance of export share of GDP.

Table 3. Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 ,470(a) ,221 ,185 18,19448

a Predictors: (Constant), Score Individualism, Score Uncertainty avoidance

The regression equation follows from subsequent table 4, wherein uncertainty avoidance has an unstandardized coefficient of -,088 and a standardized coefficient of -.102, and individualism has a unstandardized coefficient of ,319 and a standardized coefficient of ,414. Important to note here is that however the coefficients of uncertainty avoidance point out a negative relationship, this result is not proven to be significant. In contrast, the coefficients of

individualism are proven to be significant.

Table 4. Coefficients Model Unstandardized Coefficients Standardized Coefficients t Sig. B Std. Error Beta 1 (Constant) 18,389 12,310 1,494 ,142 Score Uncertainty avoidance -,088 ,129 -,102 -,684 ,498 Score Individualism ,319 ,115 ,414 2,768 ,008

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examine the effect of the independent variables in a simple regression with the dependent variable, meaning that individualism and uncertainty avoidance both were separately tested to examine their influence on the export share of GDP. Table 5 provides the model summary results of testing the influence of individualism on the export share of GDP within a simple regression. Most important conclusion here is that the R square decreased by only 0.009

compared to the former equation, meaning that individualism accounts for the major part of the variance found within the dependent variable export share of GDP.

a Predictors: (Constant), Score Individualism

The corresponding regression equation follows from subsequent table 6, wherein individualism has a unstandardized coefficient of ,355 and a standardized coefficient of ,461 (sign; 0,001). Note here that the coefficients increased with approximately 0,040.

Table 6 Coefficients(a)

Model Unstandardized Coefficients Standardized Coefficients T Sig. B ErrorStd. Beta

2 (Constant) 10,808 5,313 2,034 ,048

Score

Individualism ,355 ,102 ,461 3,483 ,001

a Dependent Variable: Export share of GDP

The results of testing uncertainty avoidance on the export share of GDP in a simple regression equation are shown in the subsequent two tables. Table 7 provides the model summary, in which uncertainty avoidance explains a non-substantial part of the variance (.085) of export share of GDP.

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The corresponding regression equation follows from table 8, which provides a understandardized coeffficient of -.251 and a standardized coefficient of -.291 (sign; ,047) for the relationship between uncertainty avoidance and export share of GDP.

Table 8. Coefficients(a)

a Dependent Variable: Export share of GDP

Within the simple regression equation both hypotheses are supported, noting that individualism explains a more significant amount of the variance of export share of GDP then uncertainty avoidance does. Looking at the multiple

regression equation (model 1, table 1-4) one can conclude that individualism is still significantly influencing the export share of GDP, where uncertainty

avoidance fails to explain a significant amount of the export share of GDP. In an attempt to explain more variance of the dependent variable I included both on beforehand not significant assumed dimensions of national culture (Power distance and Masculinity) within this research in the equation. An additional argument backing the inclusion of these two dimensions within the regression variate is to see whether these dimensions, in opposite to what I assume, explain a more significant part of the variance of the export share of GDP then the dimensions under examination within this research. In addition to these two dimensions I also included population density to the equation. The latter is added to find out whether it explains a significant amount of the variance of Model R SquareR Adjusted R Square Std. Error of the Estimate

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export share of GDP. Table 9 shows that adding power distance, masculinity and population density to the regression variate only explains an additional variance of 0,104.

a Predictors: (Constant), Masculinity, Uncertainty avoidance, Power Distance, Individualism

If we look at the correlation matrix (table 10), we still can conclude that

individualism and export share of GDP experience the highest correlation (,461; sign; .461). In contrast to what I assumed power distance (-,362; sign. ,006) experiences a higher negative correlation with export share of GDP then uncertainty avoidance (-,291; sign. ,023) does.

Table 10. Correlations Model R R Square Adjusted R Square Std. Error of the Estimate 4 ,570(a) ,325 ,243 17,53698 Export share

of GDP IndividuaLism Uncertainty avoidance km2Pop DistancePower Masculinity Pearson

correlation Export share of GDP 1,000 ,461 -,291 ,177 -,362 -,204 Individualism ,461 1,000 -,457 -,069 -,668 ,058 Uncertainty avoidance -,291 -,457 1,000 ,015 ,323 ,005 Pop. km2 ,177 -,069 ,015 1,000 ,022 ,082 Power Distance -,362 -,668 ,323 ,022 1,000 ,088 Masculinity -,204 ,058 ,005 ,082 ,088 1,000 Sig.

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Noticeable here is that power distance and individualism have the highest negative correlation (-,668; sign. ,000). Nevertheless, this finding is beyond the scope of this paper. Furthermore no significant correlations were found

between population density and the other variables within the equation. In addition to this table 11 shows that only individualism explains a significant amount of the export share of GDP at the significance level of ,05 when all of the dimensions, including population density, are added to the regression equation.

Table 11. coefficients (a)

(a) Dependent Variable: Export share of GDP

In sum I can conclude that adding power distance, masculinity and population density to the equation does not lead to a more significant explanation of GDP. Although power distance experienced a higher correlation with export share of GDP, the coefficient was not proven to be significant within the regression variate, where all of the dimensions were included.