Professional Documents
Culture Documents
ABSTRACT
The study analyses the cultural factors affecting entrepreneurship in the Philippines. Based
on an examination of existing ethnographic studies that look into Philippine culture, a list of
values, traits, and beliefs that could affect the conduciveness of the environment to
entrepreneurship was drawn. Twenty-five statements are then formulated to associate the list
of values, traits and beliefs to Philippine culture. Entrepreneurs are then asked to indicate
their level of agreement with the statements using a 5-point Likert scale. A factor analysis
was performed on the 25 items to determine if they can be reduced to lesser number but more
meaningful set of factors. Lastly, a regression was then executed to determine whether there
are significant relationships between these cultural variables and the conduciveness of the
Philippine environment towards entrepreneurship. This study indicates that both positive and
negative cultural characteristics impact on perceptions of conduciveness. Policymakers need
to find ways to adjust policy and programmes to cope with these cultural characteristics. In
instances where negative cultural characteristics severely affect the perceptions of
conduciveness of the environment, policy makers need to think about long-term ways to
change people’s values and beliefs.
INTRODUCTION
There is a shortage of research on institutional conditions of SMEs in Asia. Most of what has
been done is limited only to formal institutional aspects such as: support services (Sarder,
Ghosh and Rosa, 1997; Abdullah, 1999) and SME policy (Moha-Ashri, 1995; Meier and
Pilgrim, 1994; Mohd-Yusuf, 1991). Philippine studies have also been limited to formal
aspects, mostly on investigations of government macroeconomic policies on SMEs
(Theocharides and Tolentino, 1991; Llanto, 1991; Lamberte, 1991; Guevarra, 1991; Koppel,
1990; Gatchalian, 1990, Jose-Nario, 1990; Tecson, et. al., 1989), and credit/financial
intermediation (Saldana, et. al., 1993, Quesada, 1996).
It is important to view entrepreneurship from a broader perspective, and not just limit it to the
formal institutional framework. Cultural attitudes affect the way individuals perceive and act
on opportunities that are created by the institutional environment. Firm creation is a response
of the individual to certain institutional conditions that provide incentives to become
entrepreneurs. According to Lee and Peterson (2000:403), “There is a need for an
entrepreneurship model that acknowledges the individual person without discounting the
external environment that is beyond the individual or the firm’s control.” This study will,
hopefully, address the gap in this research area.
LITERATURE REVIEW
Several authors have stressed the potential importance of culture for explaining variations in
entrepreneurship and economic development. According to Carsrud and Johnson (1989:26),
the study of social norms, mores and values is an effective avenue of research investigation
with respect to the initiation and growth of new ventures. The social and cultural factors that
enter into the formation of entrepreneurial events are most felt through the formation of
individual value systems. In social systems that place high value on the formation of new
ventures, more individuals will choose that path in times of transition (Shapero and Sokol,
1982:83). Etzioni (1987:175, 183), stated that legitimation is a major factor in determining
the level of entrepreneurship that is found in a society. The extent to which entrepreneurship
is legitimate, the higher the demand for it; the higher the supply of entrepreneurship, the more
resources are allocated to the entrepreneurial function. The immediate sources of
legitimation are the values of the society and the relevant sub-societies.
Gnyawali and Fogel (1994:53) believe that socioeconomic conditions and governmental
policies play an important role in the "propensity to enterprise". They suggest that factors
such as public acceptance and support from family, community, and governmental agencies
"create an 'enterprise culture'that enables firms to take reasonable risks and seek profits".
Noting the success of Chinese entrepreneurs, Wu (1983: 112) identified some of their cultural
values: a high propensity to save and reinvest business earnings; a universally strong desire to
secure a better education for their children, who would then be expected to carry on the
business and often did (a high N-achievement); and a strong sense of loyalty and mutual
obligation within the Chinese extended family.
Min and Jaret (1985) linked cultural characteristics to entrepreneurial success among Koreans
in Atlanta. They found a strong correlation between success and adherence to the cultural
values of frugality and the work ethic.
Dana (1997) conducted an ethnographic study of entrepreneurs from Lesotho. He found that
the culture in Lesotho encourages entrepreneurship inasmuch as it values the accumulation of
wealth; however, the same culture hinders some aspects of entrepreneurial activity through
value-laden perceptions of property.
Much previous entrepreneurial research has focused upon how others perceive entrepreneurs,
or on comparisons between entrepreneurs and others in their society who are not
entrepreneurs (Sexton and Bowman, 1985; Schere, 1982). These studies demonstrate that
there are higher rates of firm formation in countries that have positive perceptions of
entrepreneurship and that perceive entrepreneurship as a desirable occupation.
RESEARCH METHODOLOGY
Selection of Respondents
The probability method of stratified random sampling was used. The sampling of the
entrepreneurs used the list of establishments from the National Statistics Office (NSO). The
researcher requested the NSO to randomly generate a sample of 400 SMEs using
employment size as criteria. Only the following four industry sectors were included in the
survey of entrepreneurs—manufacturing, wholesale and retail, finance, real estate, insurance
and business services, and community, social and personal services. These industries were
selected as almost 90% of all SMEs in Metro Manila belonged to these industry sectors. The
samples for each industry sector were then proportionately stratified according to the
distribution of all firms per industry sector and size of the firm.
Table 1 presents the distribution of establishments based on employment size and industry
sector. The total figure of 23046 firms was used to compute for the sample size, which were
376. Hence, 400 names were requested from NSO. Of the 400 only 350 responded (response
rate 87,5%). However, only 290 of the 300 responses were usable.
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Table 1 Here!
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The survey is cross-sectional (ie. the survey information was collected at one point in time).
Research assistants were instructed for two (2) two-hour sessions on how to distribute and
collect the questionnaire. The assistants were assigned to distribute the questionnaires to
SME owners all over Metro Manila. All questionnaires had a cover letter introducing the
researcher, explaining the objectives of the study, and contact information about the
researcher.
DATA ANALYSIS
All questionnaires returned to the researcher were checked. In cases where at least half of the
questions were not answered, the researcher discarded the questionnaire. After all
unacceptable questionnaires were discarded, the questionnaires were edited. Answers to
questions that are related were checked in case there were errors (i.e. if answer to a question
is no, then the related question should be disregarded/not applicable).
• Factor analysis was performed on variables indicating cultural values as well as
problematic policy areas to identify underlying factors that explain the pattern of correlations
within a set of observed variables. The objective of the principal components analysis was to
generate a first factor that would have the maximum explained variance. Then with the first
factor and its associated loadings fixed, principal components located a second factor
maximising the variance explained in the second factor. The procedure was then repeated
until there were as many factors generated as variables. Varimax rotation was the rotation
scheme used.
• Reliability was tested using Cronbach’s coefficient alphas. This statistic determined the
internal consistency of the items on the scale.
RESULTS
Factor Analysis of Cultural Factors
A factor analysis was performed on the questions related to culture. Findings from the factor
analysis illustrated in Table 2 show the emergence of a nine-factor solution that accounts for
65,571 percent of the variance.
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Table 2 Here!
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The nine factors identified in the factor analysis are - Filipino values, child rearing practices,
attitude towards work, attitude towards entrepreneurship, Filipino traits and culture, attitude
towards responsibility and failure, entrepreneurial environment, social status, and values from
childhood.
The data collected were also subjected to item analysis. The Cronbach’s alpha coefficient ( )
was calculated to determine the internal consistency of the items on the scale. The alpha
value for the entire cultural factors scale was found to be 0,7649, which indicated that the
internal consistency was quite high. Cronbach’s alpha coefficient for each factor of the scale
were as follows: factor 1 = 0,7943; factor 2 = 0,7822; factor 3 = 0,9629; factor 4 = 0,6476;
factor 5 = 0,6452; factor 6 = 0,5184; factor 7 = 0,5231; factor 8 = 0,2549; and factor 9 =
0,3281.
Only one variable was found to have a negative effect on perceptions of conduciveness viz:
“God for compassion and man for action”. In instances where individuals were found to rely
on God to work things out for them (rather than working them out on their own), this was
found to discourage the individual from becoming more entrepreneurial and tended to take
away their initiative in making decisions.
RECOMMENDATIONS
It is very difficult to change institutional factors such as culture, norms, traits and values. A
slow but realistic way to do this is to expose children to independence, free-thinking and
exploration at an early age. Schooling can be used as a conduit to do this.
Various activities can be used to foster entrepreneurial thinking. Universities can also start
offering courses in entrepreneurship. These courses can help students gain the skills they
need to start their own businesses. They can also clarify and allay students’ fears about
entrepreneurship. Career counsellors can also discuss the merits of entrepreneurship as a
career option to graduating students.
Successful entrepreneurs can also be identified and promoted as role models for
budding entrepreneurs to emulate. This initiative has been started by a few Philippine
television stations with their programmes featuring successful small business owners being
interviewed. Articles in newspapers featuring these entrepreneurs can also encourage others
to become more entrepreneurial and perceive entrepreneurship as a viable career option.
Table 2. Rotated Factor Matrix for Cultural Factors
Attitude Attitude
Child Attitude towards Filipino towards Entrepre- Values
Filipino rearing towards entrepre- traits and responsibili- neurial Social from
Item values practices work neurship culture ty & failure environment status childhood
Loss of face (Hiya) 0,817
Compassion (Awa) 0,815
Debt of gratitude (Utang na loob) 0,813
Friends and family expect different treatment 0,564 0,434
Discourage exploration 0,868
Discourage taking initiative 0,828
Discourage questioning 0,733 0,335
Blind acceptance of authority 0,511 0,382
Entrepreneurship is morally and ethically acceptable 0,882
Trading is accepted 0,877
Entrepreneurship is legally acceptable 0,946
Honest and productive work is valued 0,931
Positive environment for starting a new firm 0,382 0,333
Risk-taking (Pakikipagsapalaran) 0,729
Strong-hearted (Malakas ang loob) 0,673
Family support 0,620
God for compassion and man for action 0,482 0,478
Love for self (Amor propio) 0,686
Fatalistic -0,310 0,591
Existence of all powerful forces 0,329 0,587
Competition idealised 0,820
Long-range planning 0,359 0,537
Confer social ranks according to achievement 0,382 0,413
Ease of movement between social classes 0,614
Elders know what’s best 0,327 0,443 0,487
Colonial mentality 0,336 -0,303 0,325 0,384
Can aspire to be rich and famous 0,772
Traditional authoritarian child-rearing practices 0,332 0,318 0,511
Eigenvalue 4,640 3,652 2,071 1,790 1,420 1,349 1,249 1,120 1,068
Cronbach’s Alpha Coefficent ( ) (Overall 0,7649) 0,7943 0,7822 0,9629 0,6476 0,6452 0,5184 0,5231 0,2549 0,3281
Percent of Variance Explained (Total 65,571%) 16,571 13,044 7,397 6,393 5,071 4,818 4,462 3,999 3,816
Extraction Method: Principal Components Analysis. This table is based on Varimax Factor Rotation. Only items that loaded with absolute values > 0,35 are shown.
Table 1. Number of Establishments by Employment Size and Industry
Industry Small Medium Total
Manufacturing 6880 524 7404
Wholesale and Retail 8025 269 8294
Finance, Real Estate, Insurance and Business Services 5343 261 5604
Community, Social and Personal Services 854 36 890
Total 21956 1090 23046
Multiple R 0,602
R2 0,363
Adjusted R2 0,348
Standard Error 0,648