DYNAMIC RESEARCH JOURNALS (DRJs)

Journal of Economics and Finance (DRJ-JEF)

Volume 2 ~ Issue 7 (July, 2017) pp: 17-21
ISSN (Online); 2520-7490
www.dynamicresearchjournals.org

Culture and Entrepreneurship: An Overview of Hofstedes

Cultural Dimensions
1
Dr. Mustapha Namakka Tukur, 2 Sadat Ibn Adam
Department of Business Administration, Usmanu Danfodiyo University, Sokoto, Nigeria

ABSTRACT: The importance of entrepreneurship has been widely recognized. It has been observed that quite a
number of factors play a significant role to determine development of entrepreneurship one of which is culture. This
paper contributes to the understanding of the positive and negative effects of culture on entrepreneurship base of
Hofstede cultural dimensions.
KEY WORDS: Culture, Entrepreneurship

I. Introduction
Entrepreneurship is a multidimensional concept popular in the fields of economics, sociology, psychology
and management. To some economists, entrepreneurship is taking of risk in expectation of profit by combining
factors of production or resources-land and capital in a way that produces something new with greater value or
utility for the satisfaction of human wants (Onmonya, 2011). This is in line with the ideas of scholars such as
Richard Cantillon an 18th century French economist and Jean Baptiste Say in their works on entrepreneurship. Far
beyond this horizon, management scientists like Mark (1982) and Drucker (1985) explained that entrepreneurship
involves different skills and abilities from others which enables the entrepreneur to take informed decision,
coordinate, locate and reorganize scarce resources-land, labour and capital.
In the economic development literature, it is said that the importance of entrepreneurship has been widely
recognized. For instance, Okpara and Wynn (2007) reported that the potential contribution of entrepreneurship
development to employment and income has been generally recognized. In line with this, previous studies have
indicated that they provide 20% to 45% of full employment and 30% to 50% of rural household income (Okpara et
el, 2007). Arowomole (2000, p.128) in his effort to examine the role of entrepreneurship development noted that
entrepreneurship development is a very important component of societal development. Still on this, Akade and
Ojukuku (2008) noted the contribution of SMEs (which is also part of entrepreneurship development) to innovation,
job creation and economic growth has been globally acknowledged and recognized.
It is observed that quite a number of factors play significant role to determine development of
entrepreneurship among which is culture. The causal relationship between culture and entrepreneurial attitude and
development has not been reputed. Krakauer et al. (2002) argued that culture refers to more than mere ethnicity, but
a constellation of shared meanings, values, rituals, and modes of interaction with others that determine how people
view and make sense of the world they live in. According to Hofstede (1991), it is a collective programming of the
mind which distinguishes the members of one group or category of people from another. Culture is a strong force
which determines the fate of entrepreneurship. On a related opinion, Kroeber and Parson (1958, p.585) maintained
that culture is a pattern of values, ideas and other symbolic-meaningful systems as factors in shaping of human
behaviour.
Abzari and Safari (2011) argue that the influence of culture on entrepreneurship was first emphasized by
Max Weber at the beginning of the twenty century. Eroglu and Picak (2011) further argue that there is an absolute
effect of culture on entrepreneurship, and entrepreneur reflects dominant values of his or her national culture;
therefore, some countries entrepreneurship is lower compared to other countries. Weber (1956) pointed that
entrepreneurship behaviour might be linked to cultural values and suggested that values and beliefs are factors that
encourage entrepreneurship.
Hofstede (2001) uses culture as the factor differentiating one society from another or one person from
another, while Muller and Thomas (2001) opines that culture affects the will of people including willingness to work
for someone or indulging in business. Lee (1999) argues that the tendency for certain cultures to produce
entrepreneurs has made it intuitively appealing to view culture as a determinant of entrepreneurship. Some cultures,
for instance, found to be more supportive of entrepreneurial activities than others. For this reason amount

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 Culture and Entrepreneurship: An Overview of Hofstedes Cultural Dimensions

entrepreneurial activities varies from one society to another depending on how culture affects their entrepreneurial
attitudes. Aldrich and Zimmer (1986) in Thornton, Robeiro-Soriano, and Urbano (2011) noted that scholars have
long pointed out the importance of socio-cultural factors in the decision to create new businesses, arguing that
entrepreneurship is embedded in a social context.
Lingelbach, De la Vina and Asel (2011) are optimistic that wealth and poverty of developing countries
have been linked in modern times to entrepreneurial nature of the economies. It has been earlier established by
Landes (1998) that where it has existed in plenty, entrepreneurship has played an important role in economic
growth, innovation and competitiveness and it may also play a role over time in poverty alleviation.
Idea for this review stemmed from the fact that in spite of the link between entrepreneurship and economic
growth and strong influence of culture on entrepreneurship still adequate research attention has been focused on that
aspect. Lee (1999) confirms that researches to show the effect of culture on entrepreneurship are mostly carried out
in the West. Hayton, George and Zahra (2002) believe that the hypothesized link between culture and
entrepreneurship activity is still not sufficiently well-established because of very few researches conducted to that
effect. Zhao, Li and Rauchthe (2011) argue that role of culture on entrepreneurial activity seems to be under
researched. There has been considerable research based on psychological and economic approaches to
entrepreneurship, the influence of socio-cultural factors on entrepreneurial development remains under studied
(Thornton et el..,2011). It is also noted that both entrepreneurship practitioners and public policy-makers have
shown a growing interest in the contextual factors in which entrepreneurial activities take place. For example,
international organizations such as Organization for Economic Co-operation and Development (OECD) and
European Union (EU) are focusing on the environmental drivers of entrepreneurship, especially the social and
cultural factors that influence the individual career choice to be an entrepreneur and to create a new business
(European Commission 2004, 2006; OECD 1998, 2000, in Thornton et tal, 2011).
The aim of this paper is to contribute to the understanding of the positive and negative effects of culture on
entrepreneurship based on Hofstede cultural dimensions and to achieve this; the paper is organized as follows: after
introduction, the second part is the review of Hofstedes cultural dimensions as they affect entrepreneurship
activities and capabilities; and lastly part three concludes.

II. Hofstede Cultural Dimensions

According to Thornton, Robeiro-Soriano, and Urbano (2011) much of the research on entrepreneurship that
considers cultural variables has followed Hofstedes (1980, 2001) seminal work showing how culture is manifested
in various forms, and how cultural values at individual or societies levels are influenced by national culture.
According to this view, cultural differences across societies can be reduced to four quantifiable dimensions: Power
Distance; Uncertainty Avoidance, Collectivism and Individualism and Masculinity and Feminity. Later fifth
dimension added and that is Long-term versus Short-term orientation (Hofstede & Bond, 1988; Schermerhorn,
2010). It is conspicuous that cultural dimensions are based on individual and socio-economic characteristics of
environments. It is good to note that the dimensions have both corporate and national or regional outlook.

2.1.1 Power Distance

Power distance is the extent to which the less powerful members of institutions and organizations within a
country expect and accept that power is distributed unequally. According to Hofstede (1991), it is the differences
between the extent to which a superior in a social hierarchy can determine the behaviour of subordinate compared to
extent that subordinate determines the behaviour of superior. Abzari and Safari (2011) opine that in terms of
organizational relationship, superiors in high power distance societies tend to exert much influence over the
behaviour of subordinates who tend to be submissive rather than independent. Organizations tend to be highly
centralized with a clear-cut separation between white and blue collar workers, characterized by relatively large wage
differentials between the groups. There is little opportunity for low-level employees to move up in organizational
hierarchies.
In contrast, low power distance societies attempt to minimize inequality between classes, emphasizing the
ideal of equal rights for all members of the society even if it is not perfectly achieved. Social mobility is relatively
easy in low power distance societies and a large middle class is usually present to bridge the gap between more and
less privileged groups. Organizations in low power distance countries tend to be relatively decentralized and less
hierarchical. There is relatively free access to promotions and expertise and performance rather than social position
are the determinants of advancement (Abzari and Safari 2011).
The preferred management style is participative rather than authoritarian or Paternalistic (Abzari and Safari
2011). However, highest power distance countries are Malaysia, Guatemala, and Panama. While lowest power
distance countries include USA, Austria, Israel, and Denmark.

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 Culture and Entrepreneurship: An Overview of Hofstedes Cultural Dimensions

2.1.2 Uncertainty Avoidance

This is the extent to which the members of a culture feel threatened by certain or unknown situations.
Abzari and Safari (2011) Uncertainty avoidance (UA) is a measure that indicates a group's level of anxiety regarding
future events. It evaluates the degree of tolerance within a culture for the ambiguity that is inherent in a continuously
unfolding future. Uncertainty Avoidance (UA) is a cultural trait strongly associated with individual attitudes towards
risk and uncertainty (Hofstede, 2001). On a related opinion, Roy and Marcus (2012) argue that a culture is
characterized by high Uncertainty Avoidance when its members feel threatened by uncertainty and unknown
situations.
In countries characterized by high degree of UA, social relations tend to be relatively formal: rules and
procedures are heavily relied on to standardize the behaviour of group members. Workers in countries that score
high on Hofstedes UA index tend to prefer larger organizations seeking the security of employment that large
companies can offer. Loyalty to the organization tends to be strong.
Individual levels of ambition are relatively low and there is a tendency to prefer group rather than
individual decision-making processes. Conflict and competition among group members is considered disruptive,
creating dissension and uncertainty: therefore, it tends to be avoided rather than confronted. There is a strong
resistance to change in high UA societies accompanied by a low tolerance for risk-taking behaviour.
In contrast, low UA societies tend to produce less formal organizations with fewer written rules and
procedures. Turnover in these organizations is often higher than in high UA regions since loyalty is not as prized.
Competition and conflict among organizational members is more accepted; in fact, they are viewed as positive
processes in many contexts, leading to innovation and improvement. Risk-taking behavior is more acceptable and
resistance to change is not as great in low UA as in high UA countries. On a related view, Hofstede (2001) opined
that countries with lower UA not only accept familiar risk but also unfamiliar risks such as doing jobs and starting
activities for which there are no rules. Low UA thus implies a willingness to enter into unknown ventures.
Roy and Marcus (2012) maintained that there exists a positive and negative influence of UA on business
ownership indicating that in the years 1976 through 2004, a climate of high UA existing firms and organizations
may have pushed enterprising individuals towards self-employment. On the negative indirect influence of UA
through a moderating effect on the influence of per capita income on business ownership. In low UA countries, the
negative influence of per capita income on the rate of business ownerships is clearly smaller in high UA countries.
On study of influence of culture on entrepreneurship and how that affects a countrys innovativeness, Shan (1993)
found that cultural value of uncertainty acceptance is strongly related to rates of innovation. Strongly UA countries
are Japan, Portugal, and Greece while weakest UA nations include Singapore, Hong Kong and Denmark.

2.1.3 Individualism-Collectivism
In individualism setting, everyone is expected to look after himself or herself and his or her immediate
family (with collectivism opposite from birth onwards (societies) are integrated into strong, cohesive in-groups,
which thought that peoples lifetime continues to protect them in exchange for unquestioning loyalty. Hofstede
mentioned that it is a measure that indicates the degree to which individual identity and self-concept are linked to
collective groups within society. In individualistic societies, personal values and goals are the prime determinant of
behaviour and self-identity. Webers (1930) classic thesis was multi-level-that culture legitimate individualism
which led to economic development.
Conversely, in collectivist societys group values and goals predominant the individual desires are
considered to be subservient to or derived from groups values; consequently, self-identity is derived primarily from
membership rather than individual characteristics (Abzari and Safari 2011).
In collectivist societies, the security that derives from group or organizational membership is of great value
and loyalty to social groups is emphasized. In contrast, individual autonomy is more important in individualistic
societies and staying a member of a single organization is not as highly prized. In general, small organizations are
favored in individualistic cultures while large organizations are more desirable in the collectivist orientation (Abzari
and Safari 2011).
On collectivism, Daly (1998) in Lucky (2011) reported a case of Japanese culture which emphasizes on
consensus, collaboration and patience and rated as more productive than the culture of other nations. Thus, the great
lesson of the last half of the twentieth century is that the values, beliefs and practice embodied in a nations culture
are not only an important productive resource, but often the most important resource. It is on this fact that one could
be able to explain how a nation like Japan with very few natural resources can prosper mightily. Therefore, Japans
entrepreneurial approach is specifically based on culture and collaboration which have survive them over the years
making them one of the biggest industrialized and advance countries in the world.

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 Culture and Entrepreneurship: An Overview of Hofstedes Cultural Dimensions

Lucky (2011) submits that another case similar to that of Japan is that of people of India. For instance,
Henry (1999, p.60) observes that the people of India have assimilated cultural values, retain family ties and
maintained traditions, which is what made them so warm, caring with immense capacity that has helped them to
grow and manage their enterprises.
Auriol (2013) observed that paralyzed by their low fiscal revenue, developing countries do not provide
much social protection to their citizens. This is especially true in sub-Sahara Africa. In the absence of public safety
net Africans have developed a culture of forced mutual help. This implies that local entrepreneurs in the formal
sector have the social obligation to subsidize their family. They fill this duty by employing their relatives. This
strategy reduces the firms productivity because family member who seek an employment in their relatives firms
are not the most productive workers. Auriol (2013) argues that it is socially costly because family members who are
seeking a job in these firms have low human capital. Recruiting needy relatives rather than the best qualified people
distorts productive efficiency.
Findings that emerge from Hofstedes study (1991) showed that countries at the two extremes of each
dimension. Most individualist cultures: USA, Austria, and Great Britain while most collectivist cultures: Guatemala,
Ecuador, Panama (Latifi, 2006).

2.1.4 Masculinity and Feminity

These measure the division of roles between sexes in the society. According to Abzari and Safari (2011)
the masculinity measure evaluates the general tendency to act either assertively(masculine) or in a nurturing
manner(feminine). In high masculinity societies, individuals tend to set high performance standards and act
forcefully to achieve these standards. Achievement motivation is high within these societies and markers of
achievement such as earnings, formal recognition and advancement are relatively more important than work climate
and the relationship issues. Independent rather group decision making is preferred.

2.1.5 Time Orientation

Hall (1959) maintained that time is part of a silent language that gives meaning to people and their
behaviors, but the informal patterning of time is one of the most consistently overlooked aspects of culture. Time is
a fundamental cultural dimension that provides clues about the values and norms in a culture. Therefore,
understanding how time is divided, scheduled, and utilized provides valuable insights into a culture (Kevin & Carlo
2012). Goodman, Lawrence, Ancona, and Tushman (2001) argue that time is surprisingly under-researched in
organizational studies even though it is a prevalent inquiry in other disciplines.
At the level of national culture, research on time supports the assertion that time perspectives in Western,
industrialized cultures are significantly different than those of developing, less industrialized cultures (Brislin &
Kim, 2003; Hall, 1959; Levine, 1997). Often, it can be generalized that cultures from the same geographic region
share the same time orientations. North America, Western Europe, Australia, and New Zealand generally cluster
together on multiple dimensions of time (Brislin & Kim, 2003).
Conversely, the South Pacific Islands constitute another cluster. With the understanding that there are
different temporal clusters, we also acknowledge that different clusters often have contrasting time orientations.
Understanding the patterns of time orientation between various clusters is a starting point for acquiring broader
cross-cultural understanding of time orientations.

III. Conclusion
This study examines culture and entrepreneurship by contributing to the understanding of the positive and
negative effects of culture on entrepreneurship based on the Hofstede cultural dimensions. Success in the global
market depends on understanding the culture one is doing business with. Studies at the individual level of analysis
show a link between values, beliefs and behaviour. It is plausible that the differences in national culture in which
these values and beliefs are embedded may influence a wide range of behaviours including the decision to become
self-employed rather than to work for others. It could also be noted that certain values may prevail in a particular
culture at a moment in time; shifts may take place over time from generation to generation particularly in societies
undergoing radical industrial transformation.

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