Does culture impact on entrepreneurial activity?

Entrepreneurship, Key Topics - Posted: November 8, 2010

Editor’s note: Guest author Perry Kanvar is the director of albumlover.com, A 24 year old graduate of a degree in Entrepreneurship & Marketing BA (hons).

Abstract

The following paper will discuss how the variations of culture between societies impact entrepreneurial activity. The cultural differences between Afro-Caribbean and Russian entrepreneurs will be discussed around the work of Gerard Hendrik (Geert) Hofstede and his four cultural dimensions. Eventually a conclusion will scrutinise the work and will discuss to what degree culture has an effect on an entrepreneur within a society.

The Russian entrepreneur vs. the Afro-Caribbean entrepreneur

Parks (2006, pg 3) almost conveys entrepreneurship in a poetic idiom; “an enterprising person is one who comes across a pile of scrap metal and sees the making of a wonderful sculpture. An enterprising person is one who drives through an old decrepit part of town and sees a new housing development. An enterprising person is one who sees opportunity in all areas of life”.

The disposition of an entrepreneur can be profoundly influenced by their surrounding cultures. Some cultures appear to be more naturally inclined towards enterprise than others (Lowe and Marriot 2006, pg 16). In regards to an entrepreneur, culture’s can indicate how they are likely to act and react in a given situation. This can be in response to shared sets of beliefs and values, codes of behaviour, and can set minimum standards of behaviour (Irwin 2000).

Various writers including Thomson & McHugh (1995) have argued that cultures which experience dislocation and hardship are more directed towards enterprise. The very experience of surviving in a new and hostile environment requires certain qualities. Certainly it would appear that in troubled times, some minority groups have had little to lose and much to gain from enterprise, leading in some cases to the global organisations of today (Lowe & Marriot 2006, pg 16). Either way it is somewhat accepted that entrepreneurial activity blends from both culture and the way that past experiences have helped to mould these cultures.

One of the major anthropologists to study cultural variations on a global scale is Gerrt Hofstede. He demonstrated that there are national and regional cultural groupings that affect the behaviour of societies and organizations (Hollensen 2004, pg 205). According to Hofstede, the way people (or more specifically in this case, entrepreneurs) in different countries percieve and interpret their world varies along four dimensions; power distance, uncertainty aviodance, individualism and masculinity (Yuet-Ha 2006, pg 28).

This depiction of cultural influence on entrepreneurial activity can be demonstrated through dissecting these cultural dimensions. While entrepreneurship research has continued to expand and increase in western states (Hisrich & Grachev 1995, pg 3), there has been limited research on entrepreneurship in Afro-Caribbean, Asian and Eastern European cultures mainly because of the lack of enterprise in relation to its western counterparts (Vadi and Vereshagin 2006, pg 188). Although this research has been somewhat limited within these parts of the world; much of this narrow examination has been focused on the personality characteristics of entrepreneurs.

According to Hofstede’s Cultural Dimensions, Russia has had a long history of accepting authority and therefore has a high power distance. This history has predominantly been related to the fact that under a communist regime, state capitalism is usually enforced while private enterprise is ostracized, or in the extreme made to be extinct. According to Barany and Moser (2007, pg 345) communism is the political, social, and economic system of certain countries in which the state, governed by a single party without formal opposition to a great extent, controls the social and cultural life of the people. Consequently, in such an “inhibited” society, accepting authority is mandatory and after generations of communism, this acceptance can therefore become rooted in the culture of the people.

Resultantly, on a political level, only transformed and surrogate forms of entrepreneurial behaviour managed to survive the communist regime (Dickenson pg 236, 2004). Ageev (1991) takes this claim even further through declaring that in Soviet Russia the culture that stemmed from the ruling government was so anti-innovative and anti-entrepreneurial that to try to now improve Russia’s entrepreneurial augmentation would be an extremely lethargic progression. The reason for this is simple; Russia’s deep rooted attitudes are so strong that change would be impossible unless there were profound structural reforms in the economy, politics and ideology.

However, Hisrich and Grachev (pg 7, 1995) contest Hofstede’s claim that the Russian people are directly obedient to the cultural policies of their state. They claim that Russian entrepreneurs are energetic, independent, competitive and self-confident individuals. From this description of Russian entrepreneurs it would be fair to conclude that they are actually low followers of authority and therefore score low on power distance.

They argue that rather than a lack of innovativeness from Russian entrepreneurs, the reason for such a lack of enterprise is mainly because the state-owned sector has continued to dominate the economic scene (Hisrich & Grachev 1995, pg 3) over more than twenty years after the end of its former state of the USSR preventing private capitalism.

In Hofstede’s study, the Caribbean (Jamaica) scored low on the power distance dimension. This indicates a contrast to Hofstede’s conclusion of the Russian entrepreneur, and means that Afro-Caribbean entrepreneur is likely to take instruction to some degree, but still retains a sense of independence (Sriram et al pg 236, 2005). This is probably a result of the countries’ colonial histories and their fight for independence. After breaking away for the British Empire, most countries ex-colonies have gained a sense of liberty and have tended to create a less autocratic society (www.geert-hofstede.com).

A more pressing reason to explain the Afro-Caribbean’s low power distance is perhaps owed to the realisation that the governments of these states have “failed” the people in one way or another. Ryan (1992) reported that although there have been various political regimes throughout the region to promote black business, many black business people argue that such efforts are far less than those which have, historically, been provided for the traditional white business elite (Sriram et al pg 236, 2005). Assuming this is true, the promotion of black business support within the Caribbean has been merely a charade, with governments more enticed on occupying financial deals with the non-black elite, rather than helping the people of their state (Boxhill 2003, pg 36). The realisation of this from potential Afro-Caribbean entrepreneurs could have led to this ‘low power distance’, as they well may have lost some sort of “respect” for their apparent “authoritative” figures.

According to Hofstede, different cultures’ perceptions of their futures vary in some degree in the sense of anxiety of such an uncertainty (Yuet-Ha 2006, pg 28). Some cultures prefer formal rules and fixed patterns of life, such as career structures and laws, as a means of enhancing security, while others have more of a gung-ho view of their futures. The former are known as high(er) uncertainty avoidance cultures and the latter as low(er) uncertainty avoidance cultures (Hollensen 2004, pg 206).

Predominantly owing to the communist regime of the late USSR, Russia’s uncertainty avoidance is recorded to be very high. This is because under such a bureaucracy there is a pressurised need to avoid failure, both individually and nationally. This can be reflected onto Russia’s current lack of entrepreneurial activity (according to Hiscrich and Grachev 1995, pg 4) as under the Soviet government, culture was forced to be anti-innovative and anti-entrepreneurial, (Ageev 1991) as to limit risk taking and thus avoid failure. Therefore in such a state, employment within public sector tends to be favoured as it offers career assurance and a stable rate of income; thus restricting entrepreneurial activity.

This greatly varies with black entrepreneurship in the Caribbean. In Hofstede’s Dimensions, Jamaica was ranked low in terms of uncertainty avoidance. The Jamaicans acceptance of change is indeed low in a colonial protective context (Sriram et al pg 236, 2005). According to Boxhill (2003, pg 36) this socio-psychological factor is a result of colonialism and slavery. This is because during the slave trade, slaves did whatever their white owners commanded them to do, and thus never envisaged progression of their futures. In other words, Boxhill is arguing that as a result from this oppression, the Afro-Caribbean people face their futures without trepidation. This characteristic could indeed inhibit, or alternatively facilitate entrepreneurial activity depending on whether the low uncertainty avoidance meant that black entrepreneurs took tougher decisions and gambles on their enterprise (which again could of course go either way), or whether it would provide a lack of motivation to engage in entrepreneurial activity at all.

An additional perspective of their subdued approach to their futures could be explained by Phatak’s (1986) five cross cultural values, one of which includes “change”. This value almost coincides with Hofstede’s value of “uncertainty avoidance”. Phatak explains that Non-Western people, in this case the black Caribbean’s, look on change as a phenomenon that occurs naturally and is a part of the overall evolution of humans and their universe. Changes in these societies are accepted, but passively. He goes on to add that on the other hand, Western people (Russian’s), feel that the future is not predestined and humans are capable of manipulating the environment in which they will live in future and can change it to their liking.

Another comparison that can be performed is the different classifications of whether each culture is more masculine or feminine. Masculinity relates to the degree to which ‘masculine’ values, such as achievement performance, success, money and competition prevail over ‘feminine’ values, such as quality of life, maintaining warm personal relationships, service, care for the weak, preserving the environment and solidarity (Hannagan 2002, pg 262).

Russia is one of these states that gained quite a feminine status in Hofstede’s research. Although Russian’s are independent, self-confident and more importantly competitive individuals, all of this is succumbed by their value for good relations with colleagues and close family bonds. In the Baltic Journal of Management (2006, pg 190), this view extends further as it mentions that the Russian attitude in terms of feminine characteristics heavily coincide with that of the Japanese.

Within the culture of black entrepreneurs in the Caribbean, this is quite the opposite. In Hofstede’s research, he established that Jamaicans were more competitive in terms that they valued success as more important than maintaining good personal relationships, solidarity among other feministic features.

However, many anthropologists and researchers have agreed that this has not necessarily contributed to a more dynamic and successful breed of entrepreneurs; in the Caribbean anyway. This is simply because black people in the Caribbean are more interested in the accumulation of status rather than they are in wealth (Boxhill 1995, pg 35). This interest in status leads to the practice in symbolic articulation, rather than the flourishing of entrepreneurship. The reason business and enterprise in this culture is in this fashion, is due to the need to deal with the negative effects of the past and has resulted in the yearning among Afro-Caribbean’s to seek recognition. This attempt to seek recognition by way of achieving high status has meant that accumulation has been held hostage to symbolic articulation. This is because the need to engage in symbolic articulation is a coping mechanism for low self-concept (Boxhill 1995, pg 36). Therefore it could be assumed that the lack of black entrepreneurs is partly owed to their need to acquire status, rather than wealth (Sriram et al pg 236, 2005).

Individualism denotes the degree to which people in a country learn to act as individuals rather than as members of groups (Hannagan 2002, pg 262). In individualistic societies people are self-centred and feel like little need for dependency on others. They seek fulfilment of their own goals over the groups. In collectivistic societies members have a group mentality. They are interdependent on each other and seek mutual accommodation to maintain group harmony (Hollensen 2004, pg 206).

According to Hofstede’s cultural dimensions Russia appear to be a collectivist society, mainly because historical hardship under the communist regime cultivated collective support. This collectivism occurs in the form of close family support and links. This can be reflected in Vadi and Vereshagin’s (2006, pg 190) report where they indicate that in terms of raising capital for their ventures, no entrepreneurs had any outside financing. Instead all of the financial support raised came from personal and family assets.

This is quite the opposite for Afro-Caribbean entrepreneurs. Instead their culture is more individualistic as mentioned by (Danns 1995, pg 45). He states that one of the explanations for the failure of black business in the Caribbean is that these businesses lack family involvement, be it moral support or finance. According to Ryan et al (1995), even when a black entrepreneur receives this assistance, their legacy is rarely retained as their children tend to opt out of the family business because of a lack of interest or because they prefer to pursue higher education.

After assessing both cultures, it is clear that various elements in each culture can significantly influence entrepreneurial activity. Although entrepreneurs can appear from any background, it is clear that their general success arrives from a diversity of channels. Furthermore, quoting Parks (2006, pg 3), that “an enterprising person is one who comes across a pile of scrap metal and sees the making of a wonderful sculpture [regardless] of their background”, indicates that the entrepreneurial drive to some degree is ever-present within an individual (although this can lead to a whole new argument of whether entrepreneurs are born or made), and that their background does not necessarily hinder their entrepreneurial potential, but can instead lead them to a different opportunity.

Bibliography

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Internet Sites

www.geert-hofstede.com/hofstede_jamaica.shtml

www.pittstate.edu/mgmkt/culture.html

References