The Influence of National Culture on Entrepreneurial Orientation

Table of Contents

List of Tables

Introduction

Entrepreneurial Orientation & Culture

Entrepreneurship in Germany & Japan

Conclusion

Bibliography

List of Tables

Table 1: Hofstede’s cultural dimensions

Table 2: Starting a business

Table 3: Comparison of cultural dimensions

Introduction

George and Zahra (2002:5) define entrepreneurship as “the act and process by which societies, regions, organizations, or individuals identify and pursue business opportunities to create wealth.” Likewise, entrepreneurship is considered as a major driver of innovation and productivity, and is beneficial in any phase of economic development (Acs, 1992; Reynolds, 1997). Therefore, an entrepreneurial orientation (EO) is critical for the survival and growth of companies as well as the financial prosperity of a nation (Morris, 1998).

Whereas Bosma and Levie (2010), and Isenberg (2010) highlight that numerous factors influence a favourable environment for EO, culture in particular has been subject to a great degree of academic research since it is deemed as a possible explanation for the varying rates of entrepreneurs and their success across countries (Busenitz et al., 2000). Berger (1991, as cited in Lee and Peterson, 2000:403) argues that “it is culture that serves as the conductor, and the entrepreneur as the catalyst (to entrepreneurship).” This is in line with Bateman (1997) arguing that economies that have flourished in the late 20th century exhibit a similar business culture that may be broadly described as entrepreneurial.

This paper aims to explore the cultural aspects of the nations Germany and Japan, and their effect as a macro-level facilitator of EO considering the dimensions developed by Hofstede (1991) and Trompenaars (1994). Therefore, the author firstly addresses the universal influence of culture on entrepreneurship by reviewing a range of existing literature. Secondly, the current state of entrepreneurial activities within the two countries is summarized before they are analyzed within the context created by the cultural dimensions. The research paper concludes with a discussion on the implications for EO encouragement in the named countries.

Entrepreneurial Orientation & Culture

Lumpkin and Dess (1996) argue that EO is determined by five variables: Autonomy, innovativeness, risk taking, proactiveness and competitive aggressiveness. Hence, a strong EO is characterized by high values within each factor. However, the actual level is highly reliant on the culture exhibited by a nation as Lee and Peterson (2000:406) argue that “entrepreneurship depends upon the unique blend of cultural factors [...] that together combine to foster (or not) a strong EO.”

Whereas culture is commonly described as a set of shared values, beliefs and expected behaviours (Hayton et al., 2000), Garrison (1996) stresses that attempts regarding its definition are challenging due to its shifting and amorphous character. Still, the five dimensions developed by Hofstede (1991), which are defined in Table 1, are widely used in the context of cultural assessment on national level since they are a useful guide to categorize a culture’s important aspects (Morrison, 2000). In accordance with the five variables of EO, Lee and Peterson (2000) highlight that a culture conducive to entrepreneurship exhibits a low power distance (autonomy), a weak level of uncertainty avoidance (risk taking), and a masculine orientation (competitive aggressiveness) following individualism (innovativeness and proactiveness), which conforms with earlier research by McGrath et al. (1992, as cited in Hayton et al., 2002). Morrison (2000) additionally states that entrepreneurial cultures show low long-term orientation.

However, the usage of Hofstede’s dimensions in the context of EO is not free of criticism as e.g. Tiessen (1997) argues that individualism and collectivism have to be seen as two separate factors and not as a continuum since both may contribute to economic growth and innovation by entrepreneurial activities. Moreover, Tayeb (1988, as cited in Morrison, 2000) highlights that individual members may not necessarily follow the set dimensions of their national culture leading to possible deviation and hence to entrepreneurial activities despite unfavourable cultural circumstances. Therefore, Morrison (2000:64) concludes that “at a macro-level it can be accepted that people belonging to a certain culture tend to exhibit collective cultural similarities; however, at a micro-level an individual’s cultural orientation may indicate differences.”