1042-2587
© 2010 Baylor University
E T&P
Cultural Influences
on Entrepreneurial
Orientation: The Impact
of National Culture
on Risk Taking and
Proactiveness in SMEs
Patrick M. Kreiser
Louis D. Marino
Pat Dickson
K. Mark Weaver
This study utilizes data from 1,048 firms in six countries to assess the impact of national
culture and certain institutions that are representative of national culture on two key dimensions of entrepreneurial orientation: risk taking and proactiveness. Eight hypotheses are
developed specifying the expected relationships between four cultural dimensions and
levels of risk taking and proactiveness within SMEs. Additionally, two hypotheses are
developed to explore between-country differences in the relationship between risk taking
and proactiveness and a range of institutional variables. Uncertainty avoidance and power
distance are both found to have a significant negative influence on risk taking; uncertainty
avoidance, individualism, and power distance are found to negatively influence proactive
firm behaviors. A number of institutional factors are also found to be significantly linked to
between-country differences in both risk taking and proactive behaviors. This research
contributes to existing theories of national culture by suggesting that the various dimensions of cultural values and several of the institutions that are representative of national
culture impact the willingness of entrepreneurial firms to display risk taking and proactive
behaviors.
Introduction
Societies vary in their ability to create and sustain entrepreneurial activity (Carter
& Wilton, 2006; Chrisman, Chua, & Steir, 2002; McGrath, Macmillan, & Scheinberg,
1992). While various explanations have been offered to account for these societal
differences, an ever-growing body of literature posits that cultural attributes are one of the
Please send correspondence to: Patrick M. Kreiser, tel.: (740) 597-3045; e-mail: kreiser@ohio.edu, to
Louis D. Marino at lmarino@cba.ua.edu, to Pat Dickson at dicksoph@wfu.edu, and to K. Mark Weaver at
mweaver@lsu.edu.
September, 2010
DOI: 10.1111/j.1540-6520.2010.00396.x
etap_396
959..983
959
primary determinants of a nation’s level of economic (Porter, 1990) and entrepreneurial
development (House, Javidan, Hanges, & Dorfman, 2002; McGrath, Macmillan, Yang, &
Tsai, 1992). National culture impacts levels of entrepreneurship both through the cultural
values that are part of that society (Hofstede, 1980) and through the institutions that are
representative of that culture (Ahlstrom & Bruton, 2002; Dickson, 2004). Although past
research has shown a link between national culture and entrepreneurial activity, what has
been largely unexplored is specifically how culture impacts entrepreneurial behavior
(Hayton, George, & Zahra, 2002; Zahra, Jennings, & Kuratko, 1999). In order to more
fully understand the relationship between national culture and entrepreneurial behaviors,
this study examines the impact of cultural values and institutions on two key dimensions
of entrepreneurship: risk taking and proactiveness.
Researchers have often conceptualized an entrepreneurial orientation (EO) as
consisting of three primary dimensions: innovativeness, risk taking, and proactiveness
(Covin & Slevin, 1989; Miller, 1983; Miller & Friesen, 1982). Covin and Slevin posited
that these three dimensions could be aggregated together in order to assess the overall
level of a firm’s EO. However, recent research posits that the three dimensions of EO
may offer unique contributions to a firm’s overall level of EO (Dess, Lumpkin, & McGee,
1999; Kreiser, Marino, & Weaver, 2002; Lumpkin & Dess, 1996). While previous
research has explored the relationship between national culture and rates of innovation
(Morris, Avila, & Allen, 1993; Mueller & Thomas, 2001; Shane, 1993), there has been no
empirical research examining the relationship between national culture and the other two
dimensions of EO (Lee & Peterson, 2000). This paper contributes to the existing research
by empirically examining the impact of cultural values on these two dimensions of
firm-level EO—risk taking and proactiveness—and by exploring between-country
differences in these dimensions of EO in relation to the institutions representative of
national culture.
The primary purpose of this study is to assess whether national culture plays a
significant role in determining the level of risk taking and proactive firm behaviors
displayed by small- to medium-sized enterprises (SMEs) and to explore how it might
impact such behaviors. To achieve this goal, we begin by developing eight hypotheses
detailing the expected relationships between Hofstede’s (1980) four dimensions of culture
and levels of risk taking and proactiveness within SMEs. In addition, we develop two
hypotheses that examine the relationship between the institutions that exist in a particular
culture and the willingness of firms in that culture to display risk taking and proactive
behaviors. We utilize data collected from 1,048 SMEs in six countries to test our 10
research hypotheses.
The results of our empirical study suggest that uncertainty avoidance and power
distance have a significant negative influence on risk-taking levels; uncertainty avoidance,
individualism, and power distance have a negative influence on proactive firm behaviors.
The results of a between-country analysis provide strong evidence of important differences in levels of risk taking and proactiveness between countries and link those differences to unique attributes of the institutional environment. Specifically, the results indicate
that risk-taking levels are higher in countries with smaller gross domestic products (GDP),
moderate levels of technological sophistication and political risk, and higher levels of
economic risk. Proactive firm behaviors are lowest in countries with moderate GDPs.
These same behaviors are greater in countries with moderate levels of technological
sophistication, and higher levels of economic risk and political risk. Finally, countries
whose legal systems are based on French civil law tend to display lower levels of both risk
taking and proactive behaviors. We conclude the paper with a discussion of these results
and their implications for managerial practice and theory building.
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ENTREPRENEURSHIP THEORY and PRACTICE
Theory and Hypotheses
The Link Between National Culture and EO
Culture can be defined as the system of collective values that distinguishes the
members of one group from another (Hofstede, 1980; Mueller & Thomas, 2001). Thus,
national culture acts as the frame of reference, which societal members utilize to comprehend and understand organizations, the environment, and their relationships with one
another (Geletkanycz, 1997). National culture is reflected in the cultural values held by a
society (Hofstede) and the institutions that are part of that culture (Ahlstrom & Bruton,
2002).
One of the most commonly employed measures of cultural values was developed by
Hofstede (1980), who utilized statistical analysis and theoretical reasoning to isolate four
basic cultural values: uncertainty avoidance, individualism, masculinity, and power distance. Uncertainty avoidance measures the ability of a society to deal with the inherent
ambiguities and complexities of life. Cultures that are high in uncertainty avoidance rely
heavily on written rules and regulations, embrace formal structures as a way of coping
with uncertainty, and have little tolerance for ambiguity or change (Hofstede; Mueller
& Thomas, 2001; Thomas & Mueller, 2000). Individualism describes the relationship
that exists between the individual and the collectivity in a culture. Societies high in
individualism value freedom and autonomy, view results as coming from individual (and
not group) achievements, and place the interests of the individual over the interests of the
group (Hofstede; Morris et al., 1993; Morris, Davis, & Allen, 1994).
Masculinity is concerned with the level of assertiveness and self-confidence present in
a culture. Highly masculine cultures place a high emphasis on assertive and ostentatious
behavior, material goods and prestige are highly sought after, individuals tend to exhibit
a high need for achievement, and organizations are more willing to engage in competitive
behaviors (Hofstede, 1980; McGrath, Macmillan, & Scheinberg, 1992). Power distance is
a measure of the interpersonal power or influence between the boss and the subordinate as
perceived by the subordinate. High-power distance cultures exhibit an unequal distribution of power, strong hierarchies and control mechanisms, less communication among
organizational levels, and an emphasis on subordinates being deferential and obedient to
those in positions of power (Hofstede; Shane, 1993).
National culture has been linked to the strategic decision-making process that
occurs within entrepreneurial organizations (e.g., Busenitz & Lau, 1996; Mitchell et al.,
2002; Mitchell, Smith, Seawright, & Morse, 2000). The views and assumptions inherent
in national culture are reflected in the attitudes and beliefs of key organizational members
(Geletkanycz, 1997; Hofstede, 1991; Mueller & Thomas, 2001). The argument that
national culture affects the behavior of individuals within organizations is especially
pertinent to the field of entrepreneurship, as key decision makers act as the “brain” of the
SME and determine the overall strategic orientation of the organization (Covin & Slevin,
1991; Lumpkin & Dess, 1996; Miller, 1983). The relationship between national culture
and firm-level strategies is reinforced by several recent studies that have found national
culture to have an identifiable impact on the strategic behaviors displayed by organizations
(Marino, Strandholm, Steensma, & Weaver, 2002; Tihanyi, Griffith, & Russell, 2005).
The Relationship Between Risk Taking and Cultural Values
The concept of risk taking has frequently been associated with entrepreneurial behavior. Early definitions of entrepreneurship centered on the willingness of entrepreneurs to
engage in calculated business-related risks (Brockhaus, 1980). The view of entrepreneur
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as risk taker continued to gain support throughout the twentieth century, and McClelland
(1960) posited that “practically all theorists agree that entrepreneurship involves, by
definition, taking risks of some kind” (p. 210).
Previous research suggests that entrepreneurs tend to categorize business situations as
possessing less risk than nonentrepreneurs (Busenitz, 1999; Palich & Bagby, 1995). Since
key decision makers determine the strategic orientation of their organizations (Lumpkin
& Dess, 1996; Miller, 1983), the impact of culture on key decision makers may provide
important insights into the willingness of organizations to partake in risk-taking behaviors.
Risk Taking and Uncertainty Avoidance
There is a strong theoretical link between the tolerance of uncertainty and risk taking.
Hofstede (1980) noted that a low uncertainty avoidance index would typically encourage
managers to develop a greater willingness to take risks. Since risk taking generates high
levels of outcome uncertainty, managers must be willing to cope with ambiguity in strategic
situations. Managers in uncertainty-accepting societies, who are willing to deal with
ambiguity and uncertainty, will be more willing to immerse themselves in such situations.
Managers in uncertainty-accepting societies have also been shown to score highly on
McClelland’s (1960) need for achievement (Hofstede). Individuals with a high need for
achievement tend to be ambitious and willing to take risks. This suggests that managers with
a high need for achievement, such as those in uncertainty-accepting societies, will be more
willing to take risks than will managers in uncertainty-avoiding societies.
Thomas and Mueller (2000) also studied risk taking as one of the four characteristics
of entrepreneurship in their assessment of the relevance of culture on entrepreneurial
behavior. Mitchell et al. (2000) described the risk-taking characteristic as “willingness
scripts,” which were defined as “the commitment to venturing and receptivity to the idea
of starting a venture” (p. 978). As part of this construct, Mitchell et al. relied on the work
of Ghemawat (1991) and Hisrich (1990) in describing the notion of “commitment tolerance” or the “willingness to assume the risk and responsibility of new venture creation”
(Mitchell et al., p. 978). Managers in uncertainty-accepting societies will be more willing
to display commitment tolerance and assume the risks inherent in the entrepreneurial act
than managers from uncertainty-avoiding cultures. Thus, it is expected that organizational
risk taking will be negatively associated with the level of uncertainty avoidance in a
culture.
Risk Taking and Individualism
Managers in individualistic countries will tend to be more autonomous and independent than will managers in collectivist cultures (Morris et al., 1994). A consequence of this
is that such managers will be more willing to violate group norms and will be more likely
to involve themselves in situations that other managers perceive as being extremely risky
(Morris et al., 1993). Entrepreneurs have also been shown to view the external environment more optimistically than nonentrepreneurs (Palich & Bagby, 1995). As such, individualistic managers will be more willing to make risky decisions when using solely their
own judgment than when utilizing a group decision-making process.
Managers in individualistic cultures also have a tendency to place a higher value on
individual accomplishments than collectivist managers (Hofstede, 1980). This leads to
higher levels of risk taking, in hopes of a larger strategic payoff, which managers view as
deriving from their own effort and leadership (Morris et al., 1993). Thus, it is expected
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ENTREPRENEURSHIP THEORY and PRACTICE
that organizational risk taking will be positively associated with the level of individualism
in a culture.
Risk Taking and Masculinity
Managers in masculine cultures (along with uncertainty-accepting cultures) have
been found to score highly on McClelland’s need for achievement (Hofstede, 1980). As
previously stated, managers exhibiting a high need for achievement are ambitious and
more willing to engage in the taking of calculated, business-related risks than other
managers. Hofstede’s findings also indicated that managers in masculine cultures value
decisive and immediate actions, while managers in feminine cultures are more likely to
make decisions that have been more carefully thought out.
Managers in feminine cultures spend great amounts of time analyzing strategic
situations and are more likely to talk themselves out of an action that they perceive
as containing unnecessarily high levels of risk (McGrath, Macmillan, & Scheinberg, 1992).
Managers in masculine countries have also been shown to place a higher emphasis on
showing off (“machismo”) and tend to be more self-confident than managers in feminine
cultures (Hofstede, 1980). Many such managers feel that openly displaying their willingness to take chances in an effort to gain prestige and recognition through daring strategic
action is worth the potential risks that are involved. Thus, it is expected that organizational
risk taking will be positively associated with the level of masculinity in a culture.
Risk Taking and Power Distance
In high power distance societies, there is an emphasis on maintaining your current
status in the social order (Hofstede, 1980). Conversely, individuals in low power distance
cultures are more intent on bettering their position and there is a much higher degree of
social mobility. Managers with a low power distance will be more willing to engage in
risky behaviors aimed at improving their firms’ current industry standing (Shane, 1993).
Managers in low power distance cultures will thus be much more willing to enact risky
offensive strategies, while managers in high power distance cultures will be more likely to
adopt “fortify-and-defend” strategies that solidify their current position in the industry.
Organizations in high power distance cultures also tend to maintain tight control
mechanisms and to implement hierarchical bureaucratic structures. Individuals in high
power distance cultures will have less freedom and autonomy to make bold decisions,
since high levels of control tend to encourage conservatism within organizations
(Thompson, 1967). Thus, it is expected that organizational risk taking will be negatively
associated with the level of power distance in a culture.
Combining the previous arguments regarding risk taking and the four cultural dimensions, we hypothesize that:
Hypothesis 1: The level of uncertainty avoidance in a culture will be negatively
associated with organizational risk taking.
Hypothesis 2: The level of individualism in a culture will be positively associated
with organizational risk taking.
Hypothesis 3: The level of masculinity in a culture will be positively associated with
organizational risk taking.
Hypothesis 4: The level of power distance in a culture will be negatively associated
with organizational risk taking.
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The Relationship Between Proactiveness and Cultural Values
The preponderance of research that has been conducted on proactiveness has centered
on the organizational pursuit of favorable business opportunities (Knight, 1997; Lumpkin
& Dess, 2001; Stevenson & Jarillo, 1990). Knight argued that the emphasis of proactiveness is on the pursuit of environmental opportunities and the achievement of a firm’s
objectives by any means necessary. Mitchell et al. (2004) posited that culture plays a
fundamental role in explaining how organizations proactively discover, evaluate, and
exploit such opportunities. Thus, it is likely that cultural values will play an important role
in influencing the willingness of SMEs to display proactive firm behaviors.
Proactiveness and Uncertainty Avoidance
Research has suggested that firms in uncertainty-accepting societies will be more
willing to engage in competitive behaviors than organizations in uncertainty-avoiding
cultures (Hofstede, 1980). In uncertainty-accepting societies, there is a fundamental belief
that “conflict and competition can be controlled within the rules of ‘fair play’ and used
constructively . . . in high uncertainty avoidance cultures on the other hand, it is believed
that conflict and competition unleashes destructive aggression and should be avoided”
(Mueller & Thomas, 2001, p. 61). The greater willingness of organizations in uncertaintyaccepting societies to interact with their environment will naturally increase the level of
proactive firm behaviors displayed by those organizations (Covin & Slevin, 1989).
Entrepreneurs in uncertainty-accepting cultures will also perceive more opportunities
as existing in the external environment than will entrepreneurs in uncertainty-avoiding
cultures (Mueller & Thomas, 2001). The favorable perception of the external environment
held by managers in uncertainty-accepting societies will also make these firms more
willing to act as first-movers when entering new markets (Lieberman & Montgomery,
1988). Thus, it is expected that proactive firm behaviors will be negatively associated with
the level of uncertainty avoidance in a culture.
Proactiveness and Individualism
Research examining the relationship between proactive firm behavior and individualistic values has achieved mixed empirical results. While some researchers have argued
that individualism leads to increased levels of entrepreneurship (McGrath, Macmillan, &
Scheinberg, 1992; Shane, 1993), other scholars have argued that individualism may instead
hinder entrepreneurial behaviors (Franke, Hofstede, & Bond, 1991; Peterson, 1988).
Tiessen (1997) argued that firms in highly individualistic cultures were not able to leverage
the resources necessary to proactively pursue environmental opportunities, suggesting that
individualism may discourage proactive behaviors in entrepreneurial organizations.
Morris et al. (1994) also found that individualism might limit proactive behaviors, as
“many tasks will be left incomplete as individuals are unable to obtain cooperation from
those having the expertise and resources necessary for implementation of the entrepreneurial concept” (p. 72). In other words, for firms to compete proactively, they need to
marshal all of the resources of the firm to achieve specific goals and tasks. Firms in highly
individualistic societies may not be able or willing to obtain the firm-wide cooperation
needed to accomplish this. Thus, it is expected that proactive firm behaviors will be
negatively associated with the level of individualism in a culture.
Proactiveness and Masculinity
Masculine societies tend to place an emphasis on proactive behaviors. Hofstede
(1980) acknowledged that firms in masculine societies would be more willing than firms
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ENTREPRENEURSHIP THEORY and PRACTICE
in feminine cultures to display proactive strategies, noting that organizations in masculine
cultures will display a tendency to quickly address strategic issues instead of leaving them
unresolved. This is consistent with the open willingness of companies to interact with their
external environment that is at the core of proactive firm behaviors (Lumpkin & Dess,
2001). Firms in masculine cultures are likely to implement strategic moves aimed at
creating and exploiting environmental opportunities before their competition, and these
firms will thus be more proactive in their pursuit of opportunities than will firms in
feminine societies.
On the contrary, organizations in feminine cultures are more likely to adopt a reactive
“live and let live” attitude in relation to their competition. Instead of being proactive in
nature, these firms will be less likely to willingly interact with their external environment.
As noted by Knight (1997), proactive firms will be willing to use “any means necessary”
in order to pursue their organizational goals and objectives. The natural emphasis placed
on finishing first displayed in masculine cultures will drive firms to enact highly proactive
strategies. Thus, it is expected that proactive firm behaviors will be positively associated
with the level of masculinity in a culture.
Proactiveness and Power Distance
The emphasis in high power distance cultures is on maintaining status consistency
(Hofstede, 1980). There is a society-wide view in these cultures that subordinates should
be deferential and obedient to those in positions of power over them (Shane, 1993). Given
the inclination toward improving their position in the power structure, managers in low
power distance cultures will be more forward-looking when implementing strategies for
their firm. Since power in low power distance societies must be perceived as legitimate
(Hofstede), firms will attempt to distinguish themselves from one another in an effort to
improve their industry standing. Firms are thus forced to be proactive in their orientation
since the economic environment in low power distance cultures tends to be more dynamic.
This dynamism often requires firms to enact proactive strategies and to seek the exploitation of opportunities as a means of survival (Lumpkin & Dess, 2001). Thus, it is
expected that proactive firm behaviors will be negatively associated with the level of
power distance in a culture.
Combining the previous arguments regarding proactiveness and the four cultural
dimensions, we hypothesize that:
Hypothesis 5: The level of uncertainty avoidance in a culture will be negatively
associated with proactive firm behaviors.
Hypothesis 6: The level of individualism in a culture will be negatively associated
with proactive firm behaviors.
Hypothesis 7: The level of masculinity in a culture will be positively associated with
proactive firm behaviors.
Hypothesis 8: The level of power distance in a culture will be negatively associated
with proactive firm behaviors.
The Impact of Institutions
The preceding hypotheses suggest differences in both organizational risk taking and
proactive firm behaviors based on variations in cultural values. Institutional theory provides additional insights into the specific manner in which national culture might impact
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these dimensions of EO (Ahlstrom & Bruton, 2002; Witt & Redding, 2008). Institutional
theory suggests that institutions, which are both representative of a nation’s predominant
culture and given meaning by that culture (Jepperson, 1991; Scott, 1995), impact the range
of actions available to firms. Hitt, Ahlstrom, Dacin, Levitas, and Svobodina (2004) argue
that institutions, which are comprised of the capital markets, laws, rules, and governance
mechanisms existing in a specific national setting, determine the boundaries of acceptable
strategic actions available to organizations. Institutions wield this impact by providing
legitimacy for certain firm actions and sanctions against others (Hitt et al.; Yiu & Makino,
2002). Institutions are important because they are observable manifestations of the
culturally inculcated values held by a society. In particular, institutions are important to
understanding entrepreneurial behaviors in a given society. Institutional attributes have
been found to impact levels of entrepreneurial activity (Manolova, Eunni, & Gyoshev,
2008), new venture strategies in emerging economies (Peng, 2003; Yamakawa, Peng, &
Deeds, 2008), and the decision-making policies of venture capitalists (Zacharakis,
McMullen, & Shepherd, 2007).
Since institutional arrangements have the ability to either legitimize or constrain
the actions of firms, these arrangements play a powerful role in impacting the strategies
adopted by organizations (Bruton, Fried, & Manigart, 2005; Henisz & Swaminathan,
2008; Hitt et al., 2004; Peng, 2003). The institutional factors that have been linked by past
research to organizational strategies include the attributes of national economic policy as
reflected by market size and growth rates (Dickson, 2004; Oxley, 1999); national technological policy as reflected by technological sophistication (Covin & Covin, 1990);
economic and political risk (Oxley); and the legal system (Bruton et al.; La Porta, Lopezde-Silanes, Shleifer, & Vishny, 1997; La Porta, Lopez-de-Silanes, & Shleifer, 1999).
Specifically, these institutional factors have been linked to the formation of a firm-level
EO in a specific culture (Dickson).
This study provides an examination of how the attributes of a national culture, through
the institutional arrangements that exist within that culture, might impact an organization’s level of EO. As such, we propose that institutional variables will predict betweencountry differences in both risk taking and proactive firm behaviors. We hypothesize that:
Hypothesis 9: Institutional variables will be significant predictors of betweencountry differences in levels of organizational risk taking.
Hypothesis 10: Institutional variables will be significant predictors of betweencountry differences in levels of proactive firm behaviors.
Methods
Sample
The sample used in this study was collected from independently owned SMEs
in Australia, Sweden, Costa Rica, Norway, Indonesia, and the Netherlands. Previous
research on this topic has employed samples consisting of Pacific Rim countries (Mitchell
et al., 2000). In order to replicate and extend these findings, our sample consisted of three
Pacific Rim countries (Australia, Costa Rica, and Indonesia), as well as three European
countries (Norway, Sweden, and the Netherlands). These countries were selected for
inclusion in the study in an attempt to build a sample representing a wide range of both
macro-economic and cultural attributes. The size range of firms sampled was between 6
and 500 employees, based on the U.S. government’s classification of SMEs; micro-sized
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ENTREPRENEURSHIP THEORY and PRACTICE
firms of 1–5 employees were avoided (United States Government Printing Office, 2005).
The average size of responding firms in each country was between 30 and 75 employees.
The companies in this sample consisted solely of independently owned SMEs that
were managed either by the original founder or a general manager with an equity stake in
the company. Master lists of SMEs in these six countries were established through the use
of national databases, membership lists of trade associations, and business directories.
These lists were completed with the cooperation of local officials and officers of businessrelated organizations. A stratified random sampling process was utilized with the stratification based on industry. Firms were randomly selected from fourteen industries: food
processing, lumber and wood, printing and publishing, rubber, chemicals, transport equipment, industrial and commercial machinery, electronics, computer programming, textiles,
service, construction, oil/gas, and other. The number of firms selected from each industry
group was based on the total percentage of firms represented by each group (i.e., if
companies competing in the chemicals industry represented 15% of the total firms in the
sample list, then 15% of the firms chosen to receive the survey were randomly selected
from the chemicals industry).
A two-wave mailing process was utilized. Surveys were first mailed to all of the firms
randomly selected to participate in the study. A second wave of mailings was completed
approximately 1 to 2 months later to all of the firms that had not responded during the first
wave of data collection. Consistent with previous research on key decision makers within
entrepreneurial organizations, surveys were addressed to and completed by either the
owner or general manager of each SME (Lumpkin & Dess, 1996; Miller, 1983). Approximately one-half of the respondents in each sample held an ownership position in their
company, and the remainder of the respondents were the manager/chief executive of their
firm. A key informant design was utilized because theoretical support exists suggesting
that key decision makers determine the overall strategic orientation of SMEs (Covin &
Slevin, 1991; Kirzner, 1983; Lumpkin & Dess).
The survey instrument employed in this study was developed in English and then
underwent a double back-translation process. The items were translated into the major
language of each non-English-speaking country, translated back into English, translated
again to the non-English language, and then finally translated back into English again.
This translation procedure is consistent with the framework established by Brislin (1980)
in regard to the equivalence of language translations. Once the translation process was
completed, pilot tests were conducted to ensure the accuracy of the survey translation.
After the finalized design was agreed upon, surveys were sent to firms in the selected
countries. Mail surveys were sent to 973 firms in Australia, 600 firms in Sweden, 435
firms in Costa Rica, 2,465 firms in Norway, 890 firms in Indonesia, and 300 firms in
the Netherlands. The data collection process resulted in returned mail surveys from 206
Australian SMEs (21.2% response rate), 180 Swedish SMEs (30.0%), 87 Costa Rican
SMEs (20.0%), 433 Norwegian SMEs (17.6%), 285 Indonesian SMEs (32.0%), and 131
Dutch SMEs (43.7%). The overall response rate for this study was 23.3% (1,322/5,663).
Three methods were utilized to test the representative nature of the final sample. First,
analysis of variance procedures were utilized to test for differences across all study
variables when wave was considered as a main effect. No statistically significant differences were found. Second, a random telephone survey was conducted of 50 nonrespondent SMEs in each country. The results of these surveys indicated that there were no
significant differences between the responding and nonresponding SMEs. The most
frequently cited reasons why firms did not participate in the study were lack of time and
the length of the survey. Third, no significant differences were found when testing the
representativeness of firms deleted due to missing data compared with the firms that
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967
Table 1
Sample Characteristics
Australia
Costa
Rica
Indonesia
The
Netherlands
Norway
Sweden
Total
973
206
21.2%
84
40.49
3.38
2.58
51
90
61
36
435
87
20.0%
63
36.17
3.33
2.94
86
15
21
35
890
285
32.0%
246
43.57
3.35
2.68
48
14
46
78
300
131
43.7%
116
71.04
2.60
2.27
53
80
14
38
2,465
433
17.6%
380
38.18
2.96
2.62
50
69
8
31
600
180
30.0%
159
34.82
3.18
2.65
29
71
5
31
5,663
1,322
23.3%
1,048
47.87
3.14
2.62
N/A
N/A
N/A
N/A
Surveys sent
Surveys returned
Response rate
Usable responses
Average firm size
Average proactiveness
Average risk taking
Uncertainty avoidance
Individualism
Masculinity
Power distance
comprised the final listwise sample. The total sample (using listwise deletion to delete
firms with missing data) consisted of 1,048 SMEs: 84 Australian firms, 159 Swedish
firms, 63 Costa Rican firms, 380 Norwegian firms, 246 Indonesian firms, and 116 Dutch
firms. Table 1 displays the main characteristics of the sample utilized in this study.
Measures
Cultural Values
Cultural values were measured utilizing the four cultural dimensions developed by
Hofstede (1980): uncertainty avoidance, individualism, masculinity, and power distance.
Researchers have cited numerous reasons for employing the cultural dimensions posited
by Hofstede, including the parsimony of the framework (McGrath, Macmillan, & Scheinberg, 1992); the reliability and validity of the measures (Shane, 1994); the capacity of the
model to tie cultural orientation to institutional differences between countries (McGrath,
Macmillan, Yang, et al., 1992); and the ability of the framework to accurately predict
individual behaviors (Mueller & Thomas, 2001). Hofstede’s cultural dimensions have
also been employed extensively in entrepreneurship research, having been utilized to
examine entry mode (Kogut & Singh, 1988), rates of innovation (Morris et al., 1993;
Mueller & Thomas; Shane, 1993), entrepreneurial differences between countries
(McGrath, Macmillan, Yang, et al., 1992; Mitchell et al., 2000), and behavioral differences between entrepreneurs and nonentrepreneurs (McGrath, Macmillan, & Scheinberg,
1992; Mitchell et al., 2002; Morris et al., 1994). The geographic and cultural diversity of
the sample firms is illustrated in Table 1, which provides Hofstede’s cultural dimension
scores for the six countries in the sample.
Institutional Variables
The institutional environment data were collected from a wide range of sources
and were included based on prior use in between-country analyses. Macro-economic
data were drawn from the United Nations Department of Economic and Social Affairs
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ENTREPRENEURSHIP THEORY and PRACTICE
Statistical Yearbook (UNESCO, 2002). Macro-economic data such as a country’s GDP,
GDP per capita, GDP growth, and spending on technological development have historically been used as measures of the institutional characteristics of a country in regard to
economic structure, economic development, education, and individual economic rights
(Dickson, 2004; Oxley, 1999). A 5-year average ending with the year of data collection for
each country was computed for GDP, GDP per capita, and GDP growth. Technological
sophistication was measured as the ratio of total R&D spending to GDP. Both economic
and political risks have also been argued to be important reflective measures of the
institutional environment of countries (Oxley). An economic risk index developed and
published by Euromoney (1998) to reflect the nation’s debt in international financial
markets was used. This particular measure has been validated by studies using objective
economic and political data (Oxley). A political risk measure developed by the Freedom
House (2002) to rate political rights and civil liberties was utilized. The year prior to
data collection was utilized for both the economic and political risk measures. Finally,
another important measure of the institutional environment of a country is the origin of
the legal system (La Porta et al., 1997) since it reflects choices made regarding individual and organizational rights. The origin of the legal systems for each country was drawn
from the work of La Porta et al. (1999) and La Porta et al. (1997). For this analysis, and
based on use in prior research, the French civil law countries were used as the comparison
group.
Risk Taking and Proactiveness
Risk taking and proactive firm behaviors were measured using five of the items from
the original Covin and Slevin (1989) EO measure. Each of these items was measured
using a five-point Likert scale. Three of the items were intended to measure proactive firm
behavior (a = .69) and the other two items were intended to measure organizational risk
taking (a = .74). This EO scale has been utilized in a wide variety of research settings and
has exhibited high levels of reliability and validity in numerous studies (Keh, Nguyen, &
Ng, 2007; Knight, 1997; Marino et al., 2002).
Confirmatory factor analysis was utilized to test the independence of these two
dimensions of EO. The results of the factor analysis appear in Table 2. The EO scale
exhibited significantly better model fit when structured as a multidimensional construct
rather than when structured as a unidimensional construct. The GFI, CFI, IFI, and NNFI
were all higher when risk taking and proactiveness were modeled as unique dimensions of
the EO construct. Also, the Chi-square, RMSEA, and SRMR decreased when the scale
was modeled with two distinct factors (risk taking and proactiveness) rather than with one
Table 2
Fit Indices for Entrepreneurial Orientation Scale
Chi-square
Total sample (1,048 firms)
1-factor
156.52
2-factor
38.75
September, 2010
RMSEA
SRMR
GFI
CFI
IFI
NNFI
.180
.094
.064
.035
.94
.98
.91
.98
.91
.98
.83
.95
969
general factor. These results supported modeling risk taking and proactiveness as unique
dimensions of the EO construct.
Control Variables
Four variables were utilized in this study in order to control for potential industrylevel, firm-level, and individual-level effects. First, the type of industry that the firms
competed in was considered. Industry setting has been shown to exert an influence on
entrepreneurial strategy making in past research (Covin & Slevin, 1991; Sandberg &
Hofer, 1987). Fourteen different industry types were coded and controlled for in the
analyses; these industries were categorized according to Standard Industrial Classification
industry categories. The second control variable utilized in the analyses was firm size. Past
research has indicated a relationship between firm size and strategic behavior in entrepreneurial organizations (Chen & Hambrick, 1995; Miles, Arnold, & Thompson, 1993). In
this study, firm size was measured as total number of employees within the organization.
Finally, we controlled for the age and gender of the respondents since both variables may
have a direct impact on a firm’s decision-making process (Chaganti & Parasuraman, 1996;
Hambrick & Mason, 1984), entrepreneurial activities (Brockhaus, 1980; Verheul, Van
Stel, & Thurik, 2006), and the attitudes of key decision makers within these firms (Forbes,
2005; Leitch & Hill, 2006). Table 3 reports the means, standard deviations, and correlations for the study’s control variables; the four dimensions of cultural values; and the two
dependent variables. Table 4 reports the means, standard deviations, and correlations for
the institutional variables; organizational risk taking; and proactiveness.
Data Analysis
The key research question addressed in this study was the impact of national culture
(through cultural values and institutions) on levels of risk taking and proactiveness within
SMEs. Multivariate regression was utilized in order to test the first eight research hypotheses. This statistical procedure allowed us to examine the impact of the independent
variables (the four cultural dimensions) on the two outcome variables (risk taking and
Table 3
Descriptive Statistics and Correlations for Total Sample
1.
2.
3.
4.
5.
6.
7.
8.
9.
Risk taking
Proactiveness
Uncertainty avoidance
Individualism
Masculinity
Power distance
Firm size
Age
Gender
Mean
SD
1
2
3
4
5
6
7
8
2.62
3.14
48.93
56.31
22.03
43.28
47.87
44.34
1.08
1.02
.98
12.05
27.61
19.44
19.18
70.79
10.17
.29
.51*
-.04
.14*
-.16*
-.19*
.09
.01
-.01
.04
.22*
-.20*
-.32*
.09*
.01
.06
-.32*
.18*
.01
.12*
-.16*
.01
-.47*
-.82*
-.17*
.23*
.02
.72*
.09*
-.20*
-.04
.11*
-.21*
-.03
.02
-.01
.09*
* p < .01.
970
ENTREPRENEURSHIP THEORY and PRACTICE
Table 4
Descriptive Statistics and Correlations for Institutional Variables
1.
2.
3.
4.
5.
6.
7.
8.
9.
Risk taking
Proactiveness
GDP (log)
GDP per capita
GDP growth
Tech sophistication
Economic risk
Legal system†
Political risk
Mean
SD
1
2
3
4
5
6
7
8
2.62
3.14
11.99
20,103.34
3.20
1.52
80.66
N/A
2.01
1.02
.98
.89
12,534.19
1.04
1.18
22.09
N/A
1.78
.510*
-.048
.153*
.133*
.168*
.149*
.112*
-.177*
-.122*
.244*
.305*
.175*
.231*
.125*
-.289*
.172*
-.052
.386*
.333*
-.186*
-.042
.727*
.757*
.977*
.606*
-.877*
.336*
.766*
.219*
-.873*
.783*
.466*
.-.719
.363*
-.934*
-.282*
* p < .01.
†
Legal system coded as 1 = English Common Law, 2 = French Civil Law, 3 = Scandinavian Civil Law.
proactiveness) while controlling for industry-level, firm-level, and individual-level
factors. Multivariate analysis allows for the consideration of multiple dependent variables
at one time and has been commonly employed in the entrepreneurship literature (Chandler
& Lyon, 2001). Variance inflation factors were below 10 for each of the variables included
in the study, which is below the cutoff point suggested by Neter, Wasserman, and Kutner
(1985) when assessing multicollinearity.
An analysis of between-country differences was conducted utilizing a wide range of
institutional variables in order to test hypotheses 9 and 10. A series of one-way analysis of
variance (ANOVA) procedures were run in order to assess between-country differences
for each of the institutional variables and organizational risk taking and proactive firm
behaviors. Differences in organizational risk taking and proactive firm behaviors across
the levels of each of the institutional variables were also explored via a series of graphs.
In order to test for common method variance, we subjected the data to a Harman
one-factor test (Harman, 1967; Podsakoff & Organ, 1986). All of the self-reported variables in the study were entered into a factor analysis to assess the number of unique factors
that emerged. If common method variance is a problem, then only one primary factor
should emerge, or a small number of factors should account for the majority of variance
among the variables. After entering all of the variables into an unrotated factor analysis,
five factors with eigenvalues greater than one emerged. Also, none of the single factors
explained over 25% of the total variance in the data. Therefore, it appears that common
method variance did not pose a significant threat to this research.
Results
Table 5 reports the results of the multivariate regression model testing the impact
of cultural values on both risk taking and proactive behavior within SMEs (hypotheses
1–8).
The first four hypotheses examined the relationship between cultural values and
organizational risk taking. We theorized that uncertainty avoidance (hypothesis 1) and
September, 2010
971
Table 5
Multivariate Regression Results
Risk taking
Proactiveness
Model 1
Control variables
Constant
Food
Wood
Printing
Rubber
Chemicals
Transportation
Machinery
Electronics
Programming
Textiles
Service
Oil/gas
Other (Industry)
Firm size
Age
Gender
Independent variables
Uncertainty avoidance
Individualism
Masculinity
Power distance
Model statistics
R-squared
Coefficient
Standard
error
Coefficient
Standard
error
6.68**
1.24
1.09
1.63
1.84
1.84
2.24
1.83
1.90
2.43*
.84
2.08
.95
1.83
.003**
-.01
.01
1.51
1.17
1.18
1.17
1.18
1.19
1.23
1.17
1.17
1.17
1.21
1.18
1.81
1.16
.001
.01
.01
16.03**
-1.63
-1.99
-1.22
-.69
.06
.08
-.74
-.59
.20
-1.54
-.03
-3.46
-.76
.004**
-.02
.04*
2.08
1.61
1.62
1.61
1.62
1.65
1.69
1.61
1.61
1.61
1.66
1.63
2.49
1.60
.001
.01
.02
-.02**
-.01
.01
-.03*
.01
.01
.01
.01
-.02*
-.02**
.02
-.08**
.01
.01
.01
.02
.11
.17
Sample Size = 1,048 firms.
All models significant at p < .001.
* p < .05; ** p < .01.
power distance (hypothesis 4) would be negatively related to risk taking, and that individualism (hypothesis 2) and masculinity (hypothesis 3) would be positively related to
risk taking. The study’s results offered empirical support for the proposed relationship
between risk taking and uncertainty avoidance, as well as the relationship between risk
taking and power distance. Both uncertainty avoidance (b: -.02, p-value < .01) and power
distance (b: -.03, p-value < .05) were found to have a significant negative relationship
with risk-taking levels within SMEs. However, individualism and masculinity were not
found to be significant predictors in this study. Thus, hypotheses 1 and 4 were supported,
while hypotheses 2 and 3 were not supported.
The next four hypotheses examined the relationship between cultural values and
proactive firm behaviors. We posited that uncertainty avoidance (hypothesis 5), individualism (hypothesis 6), and power distance (hypothesis 8) would be negatively related to
proactive firm behavior and that masculinity (hypothesis 7) would be positively related to
proactiveness. Three of the four hypothesized relationships were supported by our analyses. Uncertainty avoidance (b: -.02, p-value < .05), individualism (b: -.02, p-value < .01),
972
ENTREPRENEURSHIP THEORY and PRACTICE
and power distance (b: -.08, p-value < .001) exhibited a significant negative relationship
with proactiveness. However, the relationship between masculinity and proactiveness was
not significant (b: .02, p-value: .57). Thus, hypotheses 5, 6, and 8 were supported, while
hypothesis 7 was not supported.
Several control variables were found to be significant predictors in the multivariate
regression model. The programming industry (b = 2.43, p < .05) and firm size (b = .003,
p < .01) displayed significant positive relationships with risk taking. These results indicated that firms in one particular industry (i.e., programming) and larger SMEs were more
willing to engage in risk-taking behaviors than smaller SMEs. Firm size (b = .004,
p < .01) and the gender of the key decision maker (b = .043, p < .05) displayed significant
positive relationships with proactiveness. These results suggest that larger firms and firms
whose managers are male are more likely to emphasize proactive behaviors than other
firms.
The final two hypotheses explored the relationship between institutional factors,
organizational risk taking, and proactive firm behaviors. The results of the one-way
ANOVA procedures used to assess between-country differences for each of the institutional variables and organizational risk taking and proactive firm behaviors are displayed
in Table 6. All seven institutional variables included in the analyses exhibited a significant
impact on levels of risk taking and proactiveness between at least two countries. Specifically, the variables assessing GDP (GDP log, GDP per capita, and GDP growth), technological sophistication, economic risk, political risk, and legal system were all significant
predictors of between-country differences for both risk taking and proactiveness. Thus,
hypotheses 9 and 10 were supported.
Differences in organizational risk taking and proactive firm behaviors across the
levels of each of the institutional variables were explored empirically through the
ANOVA procedure and in a more qualitative process through a series of graphs.
The graphs charted the means for risk taking and proactive behaviors and the values
for each institutional variable by country. These graphs are shown in Figures 1 and 2.
The risk taking and proactiveness means by country, as well as the institutional values
by country, are provided in Tables 1 and 6. The analysis of these graphs suggested
several interesting cross-country differences. The more notable of these include: (1) In
general, as a country’s GDP increases, risk taking tends to decrease. On the other hand,
mid-range economies tend to display lower levels of proactiveness than either low or
high GDP countries. (2) Moderate levels of technological sophistication tend to be
associated with higher levels of both risk taking and proactiveness. Indonesia, with the
lowest level of technological sophistication, appears to go in opposition to this trend
with higher levels of both risk taking and proactiveness. (3) The findings regarding
economic risk appear to be somewhat counterintuitive. As economic risk increases,
so too does both risk taking and proactiveness. The highest levels of both dimensions
of EO are found in more economically risky environments. (4) Political risk levels
appear to have differing impacts on risk taking and proactiveness. In general, the greater
the level of political risk, the higher the levels of proactiveness. The relationship
between political risk and risk-taking behaviors appears to be more curvilinear with
both the lowest and highest levels of political risk being associated with the lowest
levels of risk taking. (5) A comparison of the risk taking and proactiveness means by
type of legal system suggests that the three French civil law countries as a group (Costa
Rica, Indonesia, and the Netherlands) display the lowest levels of both risk taking and
proactive behavior.
Table 7 displays information regarding each of the ten research hypotheses and
whether or not each hypothesis was supported by our analyses.
September, 2010
973
974
ENTREPRENEURSHIP THEORY and PRACTICE
.000
.000
.000
.000
.000
.000
.000
.000
.000
.000
.000
.000
.000
.000
10.15
27.79
10.15
27.79
10.15
27.79
10.15
27.79
10.15
27.79
19.69
59.65
11.68
38.32
Sign.
1
1 b,c,d
1c
1 b, c
90.91 f
90.91 c
1.5 f
1.5 c
4.40
4.40 c
21,140
21,140 c
12.86 f
12.86 c
Australia (a)
2 e,f
2 a,e,f
1.66 c
1.66 a,c,d,e,f
56.28 c
56.28 c,d
.2 c
.2 c,d
4.08 c
4.08 c,d
2380 c
2380 c,d
9.02 c
9.02 c,d
Costa Rica (b)
2 e,f
2 a,e,f
5.33 a,b,d,e,f
5.33 a,b,d,e,f
43.56 b,e,f
43.56 a,b,d,e,f
.02 b,e,f
.02 a,b,d,e,f
1.54 b,e,f
1.54 a,b,d,e,f
875 b,e,f
875 a,b,d,e,f
12.06 b,e,f
12.06 a,b,d,e,f
Indonesia (c)
2 e,f
2 a,e,f
1c
1 b,c
96.92
96.92 b,c,e,f
2.0
2.0 b,c,e,f
3.20
3.20 b,c,e
25,034
25,034 b,c,e
12.74
12.74 b,c,e,f
The Netherlands (d)
3 b,c,d
3 b,c,d
1c
1 b,c
95.83 c
95.83 c,d
1.7 c
1.7 c,d
4.04 c
4.04 c,d
30,869 c
30,869 c,d
11.80 c
11.80 c,d
Norway (e)
3 b,c,d
3 b,c,d
1c
1 b,c
93.39 a,c
93.39 c,d
3.8 a,c
3.8 c,d
2.78 c
2.78 c
26,799 c
26,799 c
12.42 a,c
12.42 c,d
Sweden (f )
‡
Based on Scheffe Post Hoc Procedure. Letters listed following means for each institutional variable indicate which countries have significantly different Risk taking or Proactiveness
means at p < .05. The values listed provide the level of each institutional variable by country. Means for Risk Taking and Proactiveness by country are provided in Table 1.
Gross Domestic Product (GDP) is the natural log of the five-year average ending with the year of data collection.
§
GDP per Capita is the average annual GDP per capita (in USD) for the five-year period ending with the year of data collection.
¶
GDP growth is the average annual growth for the five-year period ending with the year of data collection.
††
Technological sophistication is the ratio of total R&D spending to GDP—a five-year average ending with the year of data collection.
‡‡
Index rates countries on a scale of 0–100 with higher levels indicating greater stability and lower risk—based on year prior to data collection.
§§
Index rates countries on a scale of 1–7, the higher the number the greater the risk. Ratings based on year prior to data collection.
¶¶
1 = English Common Law country, 2 = French Civil Law country, 3 = Scandinavian Civil Law country.
†
GDP (log)†‡
Risk taking
Proactiveness
GDP per capita§
Risk taking
Proactiveness
GDP growth¶
Risk taking
Proactiveness
Technology sophistication††
Risk taking
Proactiveness
Economic risk‡‡
Risk taking
Proactiveness
Political risk§§
Risk taking
Proactiveness
Legal system¶¶
Risk taking
Proactiveness
F
Analysis of Variance for Risk Taking and Proactiveness Between Countries
Table 6
Figure 1
Graphs of Mean Risk Taking Values by Institutional Variable
High
High
High
Low
Low
Low
Low
GDP (log)
High
Low
High
High
Low
Low
Low
Political Risk
High
Tech Sophist.
English
Common
High
Low
French
Civil
Legal System
Econ. Risk
High
Econ. Risk
High
Scandinavian
Civil
Note: The Y-axis represents the mean risk-taking value on all graphs.
Figure 2
Graphs of Mean Proactiveness Values by Institutional Variable
High
High
High
Low
Low
Low
Low
GDP (log)
High
Low
High
High
Low
Low
Low
Political Risk
High
Tech Sophist.
English
Common
High
French
Civil
Legal System
Low
Scandinavian
Civil
Note: The Y-axis represents the mean proactiveness value on all graphs.
September, 2010
975
Table 7
The Influence of National Culture on Organizational Risk Taking
and Proactiveness
Hypothesis
1
2
3
4
5
6
7
8
9
10
Independent
variable
Dependent
variable
Hypothesized
relationship
Result
Uncertainty avoidance
Individualism
Masculinity
Power distance
Uncertainty avoidance
Individualism
Masculinity
Power distance
Institutions
Institutions
Risk taking
Risk taking
Risk taking
Risk taking
Proactiveness
Proactiveness
Proactiveness
Proactiveness
Risk taking
Proactiveness
Negative
Positive
Positive
Negative
Negative
Negative
Positive
Negative
N/A
N/A
Supported
Not supported
Not supported
Supported
Supported
Supported
Not supported
Supported
Supported
Supported
Discussion and Implications
Triandis (1995) and Hofstede (1980) set forth in their writings a value-belief theory
in which they suggest that the values and beliefs within a specific culture influence the
degree to which certain behaviors are viewed as legitimate and acceptable. Although this
theory suggests an important link between culture and behavior, what has been left to
others to explore are the various ways that culture motivates behavior. Institutional theory
suggests that culture motivates certain types of behavior both directly (through the values
that are unique to a society) and indirectly (through the institutions that are given meaning
by the attributes of the culture). The results of this study suggest that national culture, by
way of both values and institutions, impacts the willingness of firms to display risk taking
and proactive behaviors. Unlike much of the previous research conducted on this topic,
we did not examine the impact of culture on aggregated measures of entrepreneurship.
Instead, we examined the impact of national culture on two key dimensions of entrepreneurial behavior: risk taking and proactiveness.
Five of the eight hypothesized relationships between cultural values and two dimensions of EO received empirical support. Uncertainty avoidance and power distance were
both found to have a significant negative influence on risk-taking levels within SMEs. This
suggests that organizations operating and competing in cultures that are uncomfortable
dealing with ambiguity (i.e., high in uncertainty avoidance) and that display an unequal
distribution of power (i.e., high in power distance) will be less likely to take risks than
organizations in other cultures. Uncertainty avoidance, individualism, and power distance
were found to negatively influence proactive firm behaviors. This suggests that firms
operating in cultures that are uncomfortable with ambiguity, that display an unequal
distribution of power, and that place an emphasis on individual (rather than group)
accomplishments will be less likely to display proactive behaviors than other firms.
Three of the hypothesized relationships between cultural values, risk taking, and
proactiveness were not supported by our findings. First, a significant relationship was not
displayed between risk taking and individualism. Hofstede (1980) argued that individualism has been historically associated with capitalism and competition. It has been
976
ENTREPRENEURSHIP THEORY and PRACTICE
assumed that individuals within more capitalistic cultures would be more inclined toward
risk-taking behavior. The findings of this research suggest that SMEs, no matter whether
from more individualistic or collectivist cultures, have similar orientations toward risk.
Second, masculinity was found to have a nonsignificant relationship with both organizational risk taking and proactive firm behaviors. These findings are a bit puzzling since
there is an intuitive link between the self-confident behaviors encouraged in masculine
cultures and risk taking, as well as the forward-looking behaviors encouraged in masculine cultures and proactiveness. The results of this study seem to suggest that SMEs from
masculine cultures are not any more willing to display risk taking and proactive behaviors
than SMEs from more feminine cultures. Future research aimed at clarifying the relationship between masculinity and organizational risk taking, as well as masculinity and
proactive firm behaviors, may help provide an explanation for these interesting findings.
It has been argued that the enduring values and beliefs held by a culture serve as the
foundation for institutions in a given society (Bruton, Ahlstrom, & Singh, 2002; House,
Hanges, Javidan, Dorfman, & Gupta, 2004). The analyses of between-country differences
seem to support this assumption by suggesting that one avenue through which culture may
impact firm-level EO is the institutional arrangements within that culture. The results of
the analyses suggest that: (1) between-country differences vary based on whether organizational risk taking or proactive firm behaviors is the outcome variable; (2) Indonesia,
a country with both high economic risk and political risk, and Costa Rica, the smallest
economy in the study, tend to differ on most measures from more developed and less
volatile countries; and (3) the three GDP variables (GDP log, GDP per capita, and GDP
growth), technological sophistication, economic risk, political risk, and legal system
all have significant impact on between-country differences for both risk taking and
proactiveness.
The results of the analysis of economic and political risk measures across countries
suggest some important differences in the environmental factors impacting risk taking and
proactive behavior. In countries with lower levels of economic risk, SME managers tend
to engage in less risky and proactive behaviors than their counterparts that must operate in
countries with high levels of economic risk. Political risk seems to have a different impact.
Those managers engaging in the highest levels of risk taking tend to be found in countries
with moderate levels of political risk, while those engaging in proactive firm behaviors
tend to be found in countries with high levels of political risk. These findings taken
together would suggest that proactiveness is highest at high levels of economic and
political risks, while risk taking is highest at high levels of economic risk and moderate
levels of political risk.
The findings relating to the origin of laws is particularly interesting. The three French
civil law countries when considered as a group were significantly lower on organizational
risk taking than the two Scandinavian civil law countries and were significantly lower on
proactive behaviors than both the Scandinavian civil law countries and the one English
common law country (Australia). Given that the three French civil law countries in the
study include one country with high risk indices (Indonesia), one country with a smaller
economy (Costa Rica), and one country with a developed and growing economy (the
Netherlands), this finding is surprising and poses an interesting starting point for future
research.
Implications
This study offers several important contributions to the entrepreneurship literature.
First, this research extends existing views of the culture–entrepreneurship relationship by
September, 2010
977
considering risk taking and proactiveness as distinct dimensions of EO. The results
suggest that national culture has a significant impact on two distinct components of EO.
This is consistent with previous research suggesting that firm-level EO should be modeled
as consisting of various dimensions that represent unique elements of the EO construct
(Lumpkin & Dess, 1996). Second, this study further explores some of the reasons that
national culture may impact entrepreneurial behaviors by providing a unique betweencountry analysis of the differing impact of institutional arrangements on risk taking and
proactiveness. The results of this analysis provide support for a number of ways through
which culture may impact firm strategies. Third, the cultural diversity of the firms analyzed in this study (one Latin American country, three European countries, one Asian
country, and Australia), as well as the extensive sample size, strengthens the generalizability of the study’s main findings.
The assertion that national culture impacts organizational risk taking and proactive
firm behavior has important managerial implications. SMEs need to be cognizant of
possible cultural influences when attempting to predict the strategies of their competitors.
For example, it is highly likely that the home culture of an organization will have a
significant impact on how that organization formulates its strategies. This study also
provides insights into why certain cultures have a greater disposition toward entrepreneurship than others. Organizations need to take into account the cultural values of the
society in which their competitors are operating and the institutions that legitimize or
constrain behavior when attempting to explain and predict the levels of risk taking and
proactiveness that will be displayed by these competing firms.
Limitations
As with any research, there were potential limitations to this study. The most significant limitation was the collection of data from only one individual in each organization.
A potential problem with using single-source information is that the owner/general
manager of a firm may not accurately perceive the strategies of the organization. However,
Chandler and Hanks (1993) found that self-reports from the owner/general manager of
small firms were highly correlated with archival data. Common method variance was
not likely a significant threat to our research findings as we utilized objective measures
of national culture (Boyd & Fulk, 1996; Marino et al., 2002) and given the results of
the Harman one-factor test performed on the self-reported data. Future research efforts
replicating the results of this study utilizing longitudinal data from additional countries
would further enhance the generalizability of our main findings.
Conclusion
Past research has suggested an important link between culture and entrepreneurial
activity, but has left the manner in which culture impacts such activity largely unexplored.
This study has developed a framework for studying the relationship between cultural
values, the institutions that are given meaning by culture, and two key dimensions of EO.
As such, this paper provides a unique look at the role of culture in determining the EO of
firms in a variety of cultures. Uncertainty avoidance and power distance were both found
to have a significant and negative influence on risk-taking levels within SMEs. Uncertainty avoidance, individualism, and power distance were found to negatively influence
proactive firm behaviors. A number of institutional arrangements were also found to
significantly impact a firm’s risk taking and proactive behavior. Specifically, attributes of
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the national economy, national technological policy, the nature of economic and political
risk, and the foundation of the legal system were found to be linked to between-country
differences in both risk taking and proactive firm behaviors. The implications of these
findings are important to researchers who seek to understand differences in entrepreneurial behavior between countries, strategic decision makers who seek to predict the
strategies of their international competitors, and policy makers who seek to motivate
entrepreneurial activity.
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Patrick M. Kreiser is an Associate Professor of Strategic Management and Entrepreneurship in the College of
Business at the Ohio University.
Louis D. Marino is a Professor of Strategic Management and Entrepreneurship in the Culverhouse College of
Commerce and Business Administration at the University of Alabama.
Pat Dickson is an Associate Professor of Strategic Management and Entrepreneurship in the Calloway School
of Business and Accountancy at the Wake Forest University.
K. Mark Weaver is a Professor of Entrepreneurship and Thomas H. Daigre Endowed Chair of Business
Administration in the E.J. Ourso College of Business at the Louisiana State University.
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