Culture and International Entrepreneurship: Earth, Wind, and Fire

Morris L. Samit
Florida Atlantic University
Presented at Academy of Management Conference 2006, Atlanta, GA

Abstract
Countries worldwide have demonstrated a marked increase in encouraging
entrepreneurship because entrepreneurial ventures create jobs and aid national economies. Yet
there exist cultural and societal pressures that thwart these endeavors. Many government initiatives
to increase entrepreneurship and innovation are unsuccessful in that they fail to address the need to
change both industrial infrastructure and societal values. Culture imposes impediments and
obstacles, such as aversion to risk, attitude toward failure, and a lack of acceptance of
entrepreneurship, on the nascent entrepreneur that cannot be overcome by the mere application of
money. Economic, social, and political climates equally must support entrepreneurial activity.
Economic growth also requires a populace that is educated to create a social environment that
supports and accepts entrepreneurship. While financial resources must be available, a government
must foster entrepreneurship knowledge and skills to build companies as well as social and
economic acceptance of entrepreneurship.
Introduction
Entrepreneurship has been explored in the literature from Cantillon in the 18th century to
Schumpeter (1934) to all the writings of the past 30 years, and to the emergence of journals
devoted solely to this discipline. The obsession with entrepreneurship has spread worldwide
during this time as governments, witnessing that entrepreneurship creates jobs, believe that they
can strengthen their economies in this way (Mitchell et al 2002). Additionally, individuals
worldwide believe that their creative and innovative ideas can afford them the wealth, freedom,
and recognition to do as they wish. People of countries that exhibit high degrees of
entrepreneurship are more likely to experience a higher standard of living, wealth, and future
growth (Lee and Peterson 2000). If this is so, why is it that significant entrepreneurship is
successful only in certain areas, and only mildly successful in few other locations? The process of
prefixing silicon to geographic words such as alley, glen, coast, forest, pasture, meadow, and
trail may be done, but does not guarantee a replication of Silicon Valleys high-tech success.
Obviously, there are other considerations.
This is where earth, wind, and fire emerge as important attributes that governments,
entrepreneurs, and investors must consider. The reference is not to the 70s, 80s, 90s band, but to
geographic location, environmental conditions, and entrepreneurial passion.
Location is not only important in real estate, but in real success in new ventures. Keys to
this success are not in simply a new idea, but in the application of people, support, and finances.
These do not exist everywhere. Globally, governments dispense money to entrepreneurs in an
effort to duplicate the successful U.S. model. But, more is needed. A growing business needs
access to competent people. A high-tech company needs people proficient in technology, such as
programmers and engineers. A manufacturing business needs people capable of performing
production work. Support services in accounting, legal functions, shipping, etc. must be readily
available. Proximity to financial resources, such as angel investors, venture capitalists, and
banking is required.

Considering the environment, is entrepreneurial success in the air or in the water? In a

way, it is! Maybe not chemically, but in tempo, buzz, attitude, support, and general feeling of life
that permeates the air with conversation that occupies breakfast, lunch, and dinner exchanges.
There exists an environment where people think and act like entrepreneurs. The social and
regulatory environments must remove structural and cultural impediments and foster as societal
values the goals and rewards of entrepreneurship.
A fire about the passion for ideas, potential, and future development must exist. The
characteristics of locales where entrepreneurship flourishes is not just money and government
intervention, but thinking that does not accept mere marginal success. Rather, it is a desire for
extraordinary achievement, the real need for achievement identified by McClelland (1961). In
other words, this may be explained as thinking big!
In Silicon Valley, no one talks of a little company where the principals are satisfied with
just eking out a living. Goals are set high, often unrealistically, but that is what drives the
entrepreneur. This paper reviews the complex interactions in achieving successful
entrepreneurship, to propose both individual and societal/cultural requirements that strive to effect
a framework to support the necessary decision-making of the entrepreneur. The framework of a
societal and cultural environment helps an entrepreneur achieve his/her goals.
Entrepreneurship, Economies, and Societies
Culture influences both the innovation and resource leverage of entrepreneurs (Tiessen
1997) and cultural values are factors in economic performance explaining more than half the cross
national variance in economic growth (Franke, Hofstede and Bond 1991). Cultures differ in their
attitudes toward entrepreneurship, risk-taking, consequences of failure, and the respect shown to
entrepreneurs. In introducing new products, developing new markets, innovating, etc.,
entrepreneurs exist and flourish where these activities are fostered by economic and social changes
(Honig et al 2004). What motivates individuals in non-entrepreneurial societies to be
entrepreneurial? Even in entrepreneurial societies, if a society doesnt reward entrepreneurs
monetarily and psychologically, there is no incentive to be innovative and creative. The cultural
differences inherent in individuals affect their decisions. A societys decisions are also affected, as
culture shapes and reinforces social institutions. These institutions, in turn, reinforce cultural
values over time (George and Zahra 2002). Entrepreneurs are entrusted with making multiple,
significant decisions critical to a new ventures success. Societal reflections toward
entrepreneurship affect both an individuals decision to be an entrepreneur as well as societys
perception, and acceptance or rejection, of entrepreneurship as a valued undertaking or vocation.
Entrepreneurship in a society requires consideration of the overall institutional regulations and the
general environment for entrepreneurship and the values and norms that determine both individual
and collective perception of entrepreneurial opportunities (Achtenhagen et al 2004). Busenitz et al
(2000) refer to the degree to which society admires entrepreneurial activities and thus implicitly
influences its entrepreneurial spirit.
Jobs build a nations economy, and since entrepreneurial ventures have indeed created jobs
and aided economic improvement, countries desire to foster entrepreneurship. It has become a
major mechanism for transforming economies worldwide, and continues to be a dominant driver
of wealth creation and employment (Lee and Peterson 2000). Entrepreneurship spurs business
expansion, technological progress, and wealth creation (Lumpkin and Dess 1996). Yet, cultural
and societal pressures against such endeavors exist. Even though governments supply significant
financial resources into fostering entrepreneurship, cultural and societal issues have been noted as
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reasons why an individual with an entrepreneurial spirit would be hesitant to exercise his/her
ambition, even though both the economy and society would benefit (Achtenhagen et al 2004).
During the 80s and 90s, in the U.S., England, France and Germany employment grew at startups
while declining at older firms (Waldinger et al 1990). The German government initiated projects
to improve the environment for entrepreneurship by reducing laws and regulations but, in some
countries officially viewing entrepreneurship as being of high value would require changing
cultural values (Achtenhagen et al 2004). Laws are relatively easy to change; a peoples
perception is not. Morris et al (1994) note that risk, innovation, emotional commitment and
empowerment should exist within a culture, as these are requirements necessary for the success of
the independent entrepreneur (Moore, 1986; Gartner, 1985).
The convergence of entrepreneurship and the desire for economic growth through job
creation presents a dilemma for nations whose culture may unconsciously and unknowingly
impose impediments and obstacles on the nascent entrepreneur. Institutional regulations and the
general environment for entrepreneurship, as well as the societys values and norms determine the
collective individual perception of entrepreneurial opportunities (Achtenhagen et al 2004). But
entrepreneurship requires special types of individuals and, for economic growth, a society needs
an adequate supply of them. The U.S. culture lends itself to this (Thornton 1999). With
entrepreneurship creating jobs and fostering economic growth, nations desiring such growth have
attempted to institute policies to promote entrepreneurship, in many cases based on a U.S. model.
Increased entrepreneurial activity is seen as a means to revitalize stagnating industries and provide
new jobs to compensate for unemployment problems, with entrepreneurship touted by economists
as catalyst for technological progress and incubator for product and market innovation (Mueller
and Thomas 2000). Moore (1986) suggests that the rate of new venture formation is contingent
upon not only the economic, social, political climate which facilitate and support the activity, but
also the availability of individuals with the traits and characteristics predisposed to initiate new
ventures.
Entrepreneurs possess a universal characteristic spanning nation and cultural boundaries in
making critical decisions. Though commonalities are expected across countries, country specific
differences are also expected (Busenitz and Lau 1996). Differences in socio-cultural context may
influence the status of entrepreneurs within different countries because of numerous factors,
incidents, and national culture (Mitchell et al 2002). Even though the countries are different,
successful entrepreneurship requires certain ecological elements to be in place. In an environment
without the cultural and ecological elements, how can entrepreneurs, with their own cultural
baggage be effective at entrepreneurial ventures?
Culture and Entrepreneurship Review
Research has explored seemingly disparate areas: the effect of culture on entrepreneurs and
the effect of culture and entrepreneurship on a nations business and economy, concluding that
culture does make a difference (McGrath, MacMillan, and Steinberg 1992).
Entrepreneurship and its benefits have been extolled almost universally, extending far
beyond the U.S., a haven for entrepreneurs. The success of entrepreneurs in the U.S., many of
whom have achieved global recognition, has interested like-minded individuals globally to believe
that they too can become successful entrepreneurs. But these same individuals often fail to
appreciate how embedded in their own culture may be values that are highly different from those
of the individualistic U.S. which values personal achievement and entrepreneurship, both of which
3

may be unacceptable in other cultures (Peterson 1988). Differences in socio-cultural context

influence the status of entrepreneurs within different countries because of various factors and
national culture - political, economic, social, legal, and ethnic (Mitchell et al 2002).
Entrepreneurship requires aggressiveness and innovativeness in the face of risk and possible
failure, traits that differ by culture and social context (Morris et al 1994). The individual is
acclaimed and glorified for his/her entrepreneurship, vision, and leadership, virtues in the U.S.
(Morris et al 1994). In an attempt at homogenization, entrepreneurship courses are taught globally,
in MBA as well as undergrad programs. Schools in European and Asian countries are increasing
their course offerings. Students, educated in the U.S., return to their home country to start
businesses.
Much of the material used in teaching entrepreneurship is produced by American authors,
academics, and researchers, with allusions to U.S. companies, entrepreneurs, and venture
capitalists. This author reviewed syllabi from universities in Europe whose MBA programs
included courses in entrepreneurship, giving special attention to universities that have
relationships with partners in the U.S. The results showed the use of U.S. professors, from topranked business schools, using U.S. texts, to teach many of those courses. The texts and articles
contain prescribed directives for an entrepreneur to build a successful company. These actions are
typically the result of a decision-making process affected by that individuals and that societys
culture. Inherently, the professors lecturing at these universities bring their own cultural biases,
tacitly assuming that what works in the U.S. is transferable to other nations.
Culture and Failure
Attitude toward failure is an example of cultural difference. In the U.S., failure is not
necessarily a bad thing. Of course, no one wants to fail, but failure is treated as an important
aspect of learning that allows an entrepreneur to be able to try again. Many successful
entrepreneurs have experienced failure, both before and after success, only to try again. In some
cultures, failure brands an individual as incompetent, even a pariah. Who wants to bet, or risk
money, on a failure, yet the concept of risk taking is a trait frequently associated with
entrepreneurship (Lumpkin and Dess 1996). To not accept failure, and force an individual to be
risk-averse, culture moderates an individuals decision-making when that individual is faced with
unacceptable consequences that may determine the rate and process of entrepreneurial activity.
Cultural Effect on Entrepreneurship
The individualism/collectivism continuum, referenced by Hofstede (1980) and later by
Triandis (1988), plays a major role in identifying a cultures propensity toward entrepreneurship.
Hofstede (1980) indicated a relationship between individualism and economic development.
Individualist cultures foster development of self-concept, a sense of responsibility, and
competition that may lead to new ideas and innovations. In contrast, collectivist environments may
actually be anti-entrepreneurial as evidenced by acceptance of norms, compromise, and resistance
to change (Morris et al 1994). Even in an individualistic society, national culture may be
moderated by an organizational culture that imposes collectivist constraints on members. This may
be one explanation of why individuals leave such a collectivist culture to be entrepreneurs, for
collective orientation inhibits entrepreneurship (Morris et al 1994). Gupta et al (2004), using
GLOBE data, found that overall the entrepreneurial leader construct is related to Hofstedes
(1980) cultural dimensions in predictable ways. They also found that certain clusters (Anglo,
Nordic, and Germanic) scored higher on entrepreneurial leadership than others, such as high
power distance cultures (Middle Eastern and Confucian). This is a clear indication that emic
4

aspects of a national culture establish a societal structure that influences entrepreneurship

favorably or detrimentally. A firm in one culture may attempt to model itself after a firm in
another culture, but the individuals that comprise the firm may still exhibit culturally specific
behaviors. If entrepreneurship has any universal functions, such as innovation and leveraging of
resources, these are achieved through culturally specific means as culture influences both
innovation and resource leverage (Tiessen (1997).
A relation to entrepreneurship may be presumed in Shane et als (1994) findings that the
more uncertainty avoiding, the more power distant, and the more collective a society is, the more
people prefer a champion to work through organizational norms and rules, to gain support of those
in authority, and to get support for any innovation effort. This supports the notion that
individualist cultures tend to be more entrepreneurial in that they succeed, not by appealing to
group norms and personal ties, but by convincing others of the validity of their new vision. It
follows that some cultural groups want to be led, are resistant to new ideas, and certainly have no
entrepreneurial inclinations. If national culture values lead organizations and individuals to prefer
different behaviors, it may be that these cultures deter individuals from being entrepreneurs? It has
been demonstrated (Mueller and Thomas 2000) that an organization culture differs from the
societal/national culture in which it exists, and with which individuals may differ. Thus, in an
individualistic culture, an organization may impose a collectivist environment, adhered to by its
individualist members.
Tiessens (1997) approach to the individualism/collectivism discussion asserts that
entrepreneurship requires innovation and leveraging of resources, with the former requiring
individual creativity and initiative and the latter thriving on relationships built under collectivism.
Tiessen concludes that neither individualism nor collectivism encourages entrepreneurship but
influences how its functions are accomplished. It may be that the individualists who start a
business operate collectively as the business grows, and certain decisions require such
collaboration, but the participants are still individualists, each performing his/her responsibilities
looking forward to the individual rewards and benefits of the outcome. Operational collectivism is
a means to individualistic ends.
From Waldinger et al (1990), who hypothesize that some immigrants are predisposed
toward business, we can draw another conclusion about culture. Although their study focuses on
how different groups of immigrants are led to starting businesses, it shows that different cultural
backgrounds lend themselves to embarking on entrepreneurial ventures as some immigrants, often
for lack of an alternative due to regulations and restrictions, start their own businesses. What
prevented them from obtaining jobs, and what compelled them to start businesses, does not have
the same effect on other immigrants. It may be a purely cultural effect, and provides information
about what should be promoted by governments in order to effect entrepreneurship.
Culture and Economic Growth
Cultural values are factors in economic performance and explain more than half the cross
national variance in economic growth (Mitchell et al 2002). The investments made by nations,
regional governments, and cities exhibit a clear desire to build economic growth through job
creation. Allocations of government funds, tax incentives, etc. have been instituted to effect
entrepreneurial environments. Entrepreneurs are thought of as good guys who create jobs,
commercialize technology, and build companies (Peterson 1988). However, many programs are
5

unsuccessful with the blame ascribed to protocol and red tape that impede or dis-incentivize the
entrepreneur. It is clear that not enough thought has been given by political, social, and business
leaders to the fact that this support increases the entrepreneurial activity of any country and is
critical to the emergence of entrepreneurial activity (Mueller and Thomas 2000). According to
Franke, Hofstede and Bond (1991) differences in cultural values rather than material and structure
conditions are the ultimate determinants of human and organization behavior, and of economic
growth. The economic and institutional contexts, which include industrial infrastructure, economic
growth, and capacity for innovation are important determinants of entrepreneurial activity.
Economic growth depends on people and their environment, and economic environments are
embedded in social and structural relationships (Granovetter 1985). The people have to know what
it means to be entrepreneurial or be trained to be so, and the environment financial, political,
and societal has to be conditioned to support and accept entrepreneurship. Laws and government
policy foster entrepreneurship, knowledge and skills to build companies, and social economic
acceptance of entrepreneurship (Vinig and Van Der Voort 2004). Shane (1993) notes that
countries may not be able to increase innovation simply by spending more money; rather, they
need to change the values of their citizens. This explains why many initiatives to increase
entrepreneurship and innovation do not succeed for they fail to address the need to change
industrial infrastructure and societal values.
Morris et al (1994) note that collectivist cultures argue that great synergies can result from
the combined efforts of people with diverse skills. Yet, high levels of entrepreneurship havent
developed in such societies. Entrepreneurship calls for innovativeness, willingness to pursue
opportunities even when faced with failure, and aggressiveness. Entrepreneurial firms like most
business are formed to provide goods or service to customers from whom the firm receives
revenues to grow the company. The entrepreneur and his/her team are rewarded based on their
contributions as in a meritocracy. Such a reward system is more acceptable in an individualist
society than collectivist society.
Culture and Decision-Making
Decision makers have their own set of dynamic givens future, alternatives,
consequence, values with which they deal and incorporate into their decision-making (Hambrick
and Mason 1984). Cultural norms affect decisions; yet cultural knowledge is often latent,
influencing cognition only in certain situations (Briley, Morris and Simonson 2000). For an
entrepreneur or manager, decisions will be culturally based (or biased). Is the culture of a nations
business, societal relationships, and individuals personalities modifiable to adapt to another
cultures entrepreneurial principles? Cultural differences influence non-U.S. entrepreneurs to
make different decisions with regard to such critical issues as money, risk, social implications,
management, ownership, time, and resources. It seems logical to assume that cultural differences
in each nation/culture require entrepreneurship adaptation or culture modification to absorb
entrepreneurial principles (Shane 1992). Entrepreneurial decision-making may thrive only in a
society where irrationality (such as risk-seeking) is tolerated.
Cultures endow individuals with different rules or principles that provide guidance for
making decisions, and the need to provide reasons activates such cultural knowledge (Briley,
Morris, and Simonson 2000). If decision-making is influenced by culture, it follows logically that
entrepreneurship is different merely because of the entrepreneurs culture. It is not just cultural

background but the conditions that activate cultural knowledge and concomitant rules or decisions
(Briley, Morris, and Simonson 2000) that account for the differences.
In a nation where entrepreneurial success and activity is a norm, entrepreneurs may make
decisions confident that an ecological framework exists wherein they are free to pursue
entrepreneurial activities knowing that financial, societal, cultural, and regulatory support are
available. In a capitalist society, relationships between employer and employee are defined
economically irrespective of cultural aspects, as evidenced by the development of an organization
culture irrespective of the individualism or collectivism of the national environment or the
individual (Tiessen 1997). This allows some decisions, such as hiring, firing, outsourcing, etc., to
be considered a group process. It is irrelevant whether or not the decision-making activity is
unconscious or merely a reaction to a situation, since different cultures react differently to choice
(Briley, Morris, and Simonson 2000; Koiranen 1995). Social processes tend to become like rules
within an organization, as acceptance of the way things are or the way things are done become
culture-based directives within the structure of an organization (Meyer and Rowan 1977).
Theoretical Framework and Propositions
Entrepreneurial success requires accommodation or change of societal culture if
entrepreneurship fostering initiatives are to lead to economic growth. Environmental and structural
issues make entrepreneurship successful and possible (Jansen and Weber 2004). Fostering such
activities has been the intent of various country and regional administrations such as the
European 2003 Green Paper on Entrepreneurship and the 2004 Action Plan - by providing funds,
grants, special loan terms, and tax breaks, etc. as incentives for individuals to start and grow
companies. This has occurred in countries in Europe and in Asia and, particularly, in Israel. A byproduct is to induce private money (venture capital, funds, and investors) to also make
investments in these regions. Though successful in some countries, entrepreneurship is difficult to
transplant and has sputtered in other countries (Peterson 1988). While such programs are
important, they are typically and solely financially based, yet any successful entrepreneur or
investor will agree that money is not the sole criterion for success. There is good money and bad
money, and what entrepreneurs want from investors and governments is much more than money.
They need the added value of advice, contacts, networks, etc., and a national culture that supports
and encourages entrepreneurial activity (Lee and Peterson 2000). This leads to:
Proposition 1 Entrepreneurship can thrive only in an environment where society treats it
as a valued and respected profession.
The measure of success in these programs is moderated by an individuals and a societys
cultural traits. Replicating Silicon Valley or Bostons Route 128 can be accomplished only within
a similar ecological framework. Indicative of the success of these regions is the U.S. cultural view
toward entrepreneurship and the need for achievement, and the individualism of Americans
(Morris et al 1994). Is the belief that entrepreneurs are heroes that personify freedom and
creativity (Reich 1987) only an American concern? Additional propellants include the density of
entrepreneurs in geographical regions, the supply of talent to populate the companies, and the
American propensity to tolerate risk and associative failure. Koiranen (1995) argues that since
different countries hold different views, in societies where initiative, responsibility, and action are
not indigenous, entrepreneurship will not flourish. Since cultures look at entrepreneurship

differently, governments that initiate programs to foster entrepreneurship err when they try merely
to macro-replicate the U.S. model?
Do American entrepreneurs make different decisions due to their lack of fear of
repercussions of failure, and do entrepreneurs in other countries make safer decisions so as to
avoid failure? Hisrich (1990) writes of an individual that accepts risking failure, and McClelland
(1961) of an individual with a high need for achievement and moderate risk taking propensity.
Briley, Morris, and Simonson (2000) add that culture is a significant predictor of choices. While
these researchers seem to indicate that culture affects decisions when an individual rationally
looks for a reason, a counter view is held by Bargh (1986) who notes unconscious decision
making based on ones culture. Culture may be so internalized that it is in our subconscious (Hall
1983; Hayton, George, and Zahra 2002). We do find agreement in that culture, whether conscious
or non-conscious, affects decision-making. Thus:
Proposition 2 - Societal education and cultural growth require recognition of the reality of
failure as a necessary byproduct of entrepreneurial endeavors, and attach no negative labels to
the entrepreneur whose venture failed.
Proposition 3 Entrepreneurship can thrive only in a society or culture where propensity
toward risk-taking is acceptable.
Culture
Culture is the collection of characteristic behaviors that distinguishes one group from
another in their actions in response to their environment and, as the underlying system of values
peculiar to a specific group or society, shapes the development of certain personality traits and
motivates individuals to engage in behavior that cannot be evident in other societies (Hofstede
1980; Mueller and Thomas 2002; Erez and Earley 1993; Dahl 2004; George and Zahra 2002;
McGrath, MacMillan and Steinberg 1992; and House et al 2004). Each individual belongs to
numerous cultures of which national culture is only one. Behaviors are programmed by norms,
training, precedents, rituals, and tradition which may be both good and bad (Starbuck and Milliken
1988). Ones culture leads to certain behaviors. Adults re-apply routines that are already known
(Starbuck and Milliken 1988). Culture shapes the development of personality traits and motivates
individuals to engage in behaviors that may not be prevalent in another society. Behavior varies
across countries according to the differences in cultural values and beliefs (Mueller and Thomas
2000). If the personality or social group of an individual entrepreneur can be described, it can be
inferred where, why, and how a new venture is founded (Aldrich and Waldinger 1990). Since
culture-based behavior is programmed, it may be predicted, knowing an individuals culture, what
decisions that individual will make. Likewise, the entrepreneur with a specific cultural background
may be unable to confront the characteristic problem situations that an entrepreneur faces. Citing
time as an unalterable condition of human existence, McGrath, MacMillan, and Steinberg (1992)
relate it to uncertainty and the acceptance of ambiguity and risk and that different cultures handle
this differently. Those with low uncertainty avoidance favor more risk taking and are more
inclined to entrepreneurial activity. According to Hayton, George, and Shaker (2002) cultural
values are so embedded in political and social systems that these values indicate the degree to
which a society considers entrepreneurial behaviors such as risk-taking and independent thinking
desirable. The following results:

Proposition 4 A positive perception of risk and the ability to effect results are crucial to
entrepreneurial venture formation.
Because of the uncertainty inherent in entrepreneurial ventures, decision-making without
planning is common, yet this lack of planning may not be understood in certain structured cultures
(Stewart 1989). An individual with an entrepreneurial inclination, though working in a typical
hierarchically structured organization, such as a culture with a high power distance Hofstede
(1980), may find that the influence of this bureaucratic culture inhibits the ability to pursue an
entrepreneurial tendency. Rules and structure are typically not characteristic of an entrepreneurial
venture. When coupled with the uncertainty and competition faced by a new venture,
entrepreneurs must learn quickly and make decisions just as rapidly (Honig et al 2004). The
societal culture, therefore, must allow for organizations to accommodate this uncertainty by
allowing the individual the freedom to be innovative, take risks, and be proactive (Morris et al
1994). If the entrepreneur believes that his/her culture is a cultural model of the world, it will
define who the entrepreneur thinks he/she is or what entrepreneurship is (Dodd 2002). This may
limit or constrain what the entrepreneur visualizes as possible. Dodd (2002) concludes that culture
shapes how an entrepreneur envisions his/her goal, purpose, and expectancy. This leads to:
Proposition 5 Entrepreneurship may not succeed in an environment fearful of an
unknowable future.
Proposition 6 Entrepreneurship will succeed in an environment that values and sees
opportunity in an unknown future.
With business increasingly global, and entrepreneurs emerging in countries around the
world, individual entrepreneurs cultural differences, values, and the decisions they make become
important (Schwartz 1997). If differences in culture cause differences in entrepreneurship, and
culture causes differences in decision making, then entrepreneurs from different cultures may
make different decisions (Stewart 1989). According to Thornton (1999), if one can describe a
personality or social group, one can infer the founding of a new business. Culture, as evidenced in
a societys institutions and practices, may predict the starting of new ventures and the decisions
that an entrepreneur will make (McGrath, MacMillan, and Steinberg 1992). Smith, Bond, and
Kagitcibasi (2005) reason that if the environment is different, the behavior is different, and hence
the culture is different, so it follows that knowledge of the culture will allow one to know an
individuals behavior and how he/she will react to the environment. Briley et al (2000) conclude
that culture is a predictor of choices. Similarly, the individuals social group/culture will color
his/her decision-making so that knowing that information, it may be possible to infer how that
entrepreneur will make decisions a useful tool in business negotiations and competitive
machinations, as well as a valuable insight tool when hiring a new CEO or other high level
managers.
Entrepreneurship and Risk/Reward
Entrepreneurs introduce new products, new markets, new methods, etc. in rapidly changing
competitive environments that also change economically and socially. Mueller and Thomas (2000)
found that some cultures are more conducive for entrepreneurship in that the support of national
culture will compel potential entrepreneurs to act. The entrepreneurial culture allows, even
encourages, the individual to deal with the levels of risk and uncertainty to make the business
9

decisions necessary to take full advantage of presented opportunities. In high uncertainty

avoidance societies there is a greater fear of failure and a lesser willingness to take risks, resulting
in lower levels of ambition and a lesser tolerance for ambiguity (Mueller and Thomas 2000).
Creativity and innovativeness have been linked to a high tolerance for ambiguity which is
common to entrepreneurs (Begley and Boyd 1987). This culture allows, and fosters, individual
decision-making as the new venture may evolve differently than planned relatively easy for an
entrepreneur to accept. In exploiting opportunities, entrepreneurs are inclined to take risks and
pursue innovation to obtain competitive advantage and to enhance long-term survival (Gupta et al
2004). According to McGrath and McMillan (2000), entrepreneurs are not dealing with a reality
that exists but one that they are creating. To do this they must have ambitious foresight and pattern
recognition capabilities for framing challenges and absorbing uncertainty. To allow for this, a
government must elevate the social status of the entrepreneur initiating and implementing
mechanisms that increase social recognition of entrepreneurs and the value that they bring to a
culture (McGrath, MacMillan, and Steinberg 1992). In Silicon Valley and Boston, its may be nice
to say you are doctor or a lawyer, but when you say you are en entrepreneur, the facial and nonverbal expressions of the receiver exhibit interest, envy, admiration, awe, emotion, etc. This
provides the environment to allow entrepreneurship to root and grow (Zahra 1999). This yields the
following:
Proposition 7 Entrepreneurship will grow in a society that rewards entrepreneurs with
monetary compensation and recognition.
dePillis (1998) found that achievement motivation predicted entrepreneurial intention in
the U.S. but not in Ireland yet the students in each sample showed no difference in levels of
achievement motivation. Since McClelland (1961) noted that the need for achievement is learned,
not biological, it explains why in certain cultures entrepreneurship may not be possible (dePillis
1998). Shaver and Scott (1991) however, showed achievement motivation to predict
entrepreneurial behavior.
While entrepreneurship is accepted in the U.S., it appears to be viewed less favorably in
Europe (dePillis 1998). Since many European countries typically view failure as a social disgrace,
risk propensity and fear of failure serve to moderate the need for achievement and hence
entrepreneurship. In the U.S. failure is often seen as a positive learning experience. So, the need
for achievement, risk propensity, tolerance of failure, and financial resource availability each vary
from culture to culture. Begley and Boyd (1987) found that venture founders scored high in need
for achievement, risk taking, and tolerance of ambiguity. Because of its history, America, in its
individualism, is hospitable to entrepreneurship and romanticizes the entrepreneur (dePillis 1998)
as perceived as important to economic growth. Entrepreneurship inherently has risk and an
uncertain outcome, of which failure is a possibility. Risk-taking is an important component of an
entrepreneurial orientation and only societies with a cultural foundation that supports the tolerance
of ambiguity and uncertainty, and willingly commits, without negative repercussion, resources to
risky ventures, can possibly reap the economic benefits from those willing to engage in risk-taking
behaviors (Lee and Peterson 2000). The freedom to fail allows the entrepreneur the freedom to
take risks, make unpopular and controversial decisions, attain personal wealth, and not be
disgraced if he/she is wrong, or fails. This is a characteristic of Americas individualism.
Individualistic societies place a high value on freedom, and freedom is necessary for creativity and

10

entrepreneurship (Shane 1992). The issues to be addressed then are whether this is particularly
American, does it exist in other cultures, and can it be taught? This leads to:
Proposition 8 The U.S. model of entrepreneurship is not applicable to those cultures with
negative incentives for success and sever penalties for failure.
In their study of immigrants starting businesses, Waldinger et al (1990) addressed the
collectivist attitudes of immigrants, noting that it may be a level of risk propensity that accounts
for individuals in certain cultures being more entrepreneurial. Even where circumstance,
environment, opportunity, necessity, or lack of alternatives exist, the fact that only certain
immigrant groups gravitate toward starting a business may mean that what they brought with
them, their culture, affects their proclivity for entrepreneurship.
Summary, Conclusion and Future Direction
Achtenhagen et al (2004) conclude that there is a wide gap between fostering
entrepreneurship and discourse on entrepreneurship, such that for government initiatives to
succeed, their efforts must be supplemented with public discourse extolling the virtues and
benefits of entrepreneurship to affect societal attitudes toward entrepreneurship. Success is based
not the amount of investment, but is a measure, over at least a 5-year time period, of both total
wealth created and number of jobs created.
Success stories in U.S. publications and other media stimulate and encourage potential
entrepreneurs to believe in their goals, creating an entrepreneurial spirit amongst the populace. An
adequate supply of entrepreneurs is necessary and an entrepreneurial culture may be fostered
through education and incubating organizations (Beibst and Lautenschlager 2002). It is clear that
there are at least two obstacles to government success at fostering entrepreneurship: imposition of
American entrepreneurship and not acknowledging cultural differences (Peterson 1988), as
evidenced in some countries (such as Singapore where a low tolerance for failure pushes the best
people into government jobs). A state must examine its cultures attitude toward use of financial
resources, debt, reward/punishment incentives, and attitude toward individual initiative and
achievement (Peterson 1988). Not all societies foster entrepreneurship with equal effectiveness
(McGrath, MacMillan, and Steinberg (1992) as those countries that lack the political will and
institutions to make economic and social transformation possible will not have a bright economic
future in a global marketplace (Zahra 1999). Requirements include a knowledge base, individuals,
and a social economic culture that attaches viability and support to entrepreneurship (Vinig and
Van Der Voort 2004).
Policy makers who want to foster entrepreneurship would benefit from a clear
understanding of the different contributions of individualism and collectivism, and understand
how programs could harness cultural tendencies and address deficiencies (Tiessen 1997).
Entrepreneurs dont operate in vacuums; rather, they respond to their environments to be effective,
and a highly supportive environment is a necessity for entrepreneurship (Gartner 1985). For
instance, valuing and rewarding risk behavior promotes the development and introduction of
radical innovation (Hayton, George, and Zahra 2002).
Research must investigate if a nation or government can succeed in changing its
environment to install the structure necessary for entrepreneurial activity, and will this infuse
11

individuals whose culture is not entrepreneurially oriented with the attitude and inclination to
engage in entrepreneurial ventures? Societies which fail to change the attitudes of their citizens
will spend money on research and development and industrial infrastructure yet will fail to achieve
desired results. These countries are applying money to the wrong initiatives. The issues to be
addressed are changing attitudes toward uncertainty avoidance, acceptance of risk, and tolerance
of failure.
New venture formation is contingent upon the economic, social, and political climate that
support entrepreneurial activity, and a supportive culture to cultivate the minds of individuals
predisposed to initiate new ventures (Mueller and Thomas 2000). While individual traits may be
enduring, social structures are situational and time dependent (Thornton 1999). Business education
can play an important role if it can reorient individuals toward self-reliance, independent action,
creativity, and flexible thinking (Mueller and Thomas 2000).
Culture is depicted as a moderator of the relationship between contextual factors in
entrepreneurial outcomes (Hayton, George, and Zahra 2002). Lee and Peterson (2000) contend a
societys propensity to generate autonomous, risk-taking, innovative, competitively aggressive,
and proactive entrepreneurs are essential. Economic, political, legal, and social factors act as
moderators of the relationship between culture and entrepreneurial orientation, concluding that
only those countries with requisite cultural traits will develop a strong entrepreneurial orientation.
In addition to availability of capital and an infrastructure to support investment, a countrys culture
must allow entrepreneurs to be rewarded if it is to be effective in forging this spirit (Lee and
Peterson 2000).
It is easy to conclude that fostering entrepreneurial activity requires much more than
money. This paper has shown that an industrial structure and societal environment conducive to,
and supportive of, entrepreneurship is necessary to allow the effective infusion of capital, and the
development of individuals who believe in the potential of their ideas. Whether the structure
precedes the societal conditions, or vice versa, or if they both occur simultaneously, is the subject
for further research. Without the above described conditions in place, any attempt at
entrepreneurship will be less than successful as the entrepreneurs decision-making will be
relegated to avoidance of failure rather than the pursuit of innovation and progress. With the
interest of governments worldwide in growing their economies by promoting entrepreneurship,
these same governments would be well advised first to educate their societies to accept
entrepreneurship as a viable and purposive activity.

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