About the interactive influence of culture and regulatory barriers on entrepreneurial activity

Abstract

In this paper cultural values and regulatory barriers to start-up are presented as characteristics of the business environment which influence the international differences in the level of entrepreneurial activity. A first objective of this paper is to measure the importance of a country’s cultural values in determining the national level of entrepreneurial activity, calculated by the Total Entrepreneurial Activity rate from the Global Entrepreneurship Monitor. Culture is studied using Schwartz’s value structure (Schwartz 1994). This allows for the differentiating of seven cultural orientations that are then arranged around three bipolar dimensions: Autonomy- Embeddedness, Egalitarianism-Hierarchy and Harmony-Mastery. The paper also studies the effect of regulatory barriers for business start-ups on the Total Entrepreneurial Activity in different countries. Regulatory barriers are determined using data from the “Doing Business” project of the World Bank. The role of cultural values and regulatory barriers in entrepreneurial activity is tested using data from 56 countries and Structural Equation Modeling. The paper shows that cultural values and regulatory barriers are not related to entrepreneurship in the same way in countries with differing levels of development. On the contrary, the strength and nature of the influence of both factors on entrepreneurial activity depends on a country’s per capita GDP. Furthermore, the impact of regulatory barriers on entrepreneurship is moderated by cultural values. Thus, the discouraging effect of the regulatory barriers on entrepreneurial activity is more important in those countries with a societal culture characterized by autonomy, egalitarianism and harmony values.