Cultural Theory of Entrepreneurship
Cultural Theory of Entrepreneurship: Why Geography Shapes Innovation
Why do some countries produce endless streams of startups while others struggle to innovate? Scholars have long argued that the answer isn't just economics—it's Culture.
Thomas Cochran (1965) was one of the first to propose that entrepreneurship is "culturally determined." He argued that an entrepreneur's performance is influenced by:
- Their own attitudes toward the occupation.
- The expectations of the groups facilitating new ventures (investors/peers).
- The operational difficulty of the career in that specific society.
Cochran pointed to historical evidence of entrepreneurial prominence in specific groups, such as Protestants in America, Samurais in Japan, the Yoruba in Nigeria, and the Parsis in India.
Hofstede’s Cultural Dimensions
Later, Geert Hofstede (1980) provided a more rigorous framework. He defined culture as the "collective programming of the mind" and argued that national cultures could be measured along six distinct dimensions.
These dimensions influence the institutions of a society, which in turn reinforce values in a continuous circle:
- Power Distance: How a society handles inequality.
- Uncertainty Avoidance: How a society deals with the unknown (risk).
- Individualism vs. Collectivism: The strength of ties between individuals.
- Masculinity vs. Femininity: The preference for achievement/heroism vs. cooperation/modesty.
- Long vs. Short Term Orientation: The focus on future rewards vs. present tradition.
- Indulgence vs. Restraint: The allowance of gratification.
The Formula for Innovation
Cultural values directly influence entrepreneurial behaviors, such as the propensity to take risks or deviate from norms. Shane (1992) analyzed these dimensions and found a specific formula for innovation:
- High Individualism is positively related to innovation (people feel free to stand out).
- High Power Distance is negatively related to innovation (people fear challenging authority).
Similarly, Davidsson and Wiklund (1997) found that societies that value Autonomy and have high Self-Efficacy (belief in one's ability) tend to have significantly higher rates of new venture founding.
Video: Hofstede's Dimensions Explained
References
Cochran, T. C. (1965). The entrepreneur in economic change. Explorations in Economic History, 3(1), 25-38.
Davidsson, P., & Wiklund, J. (1997). Values, beliefs and regional variations in new firm formation rates. Journal of Economic Psychology, 18(2), 179-199.
Hofstede, G. (1980). Culture and organizations. International Studies of Management and Organization, 10(4), 15-41.
Shane, S. A. (1992). Why do some societies invent more than others?. Journal of Business Venturing, 7(1), 29-46.
