The Effect of Institutional Dimensions and Cultural Dimensions on the Level of Entrepreneurial Activity Across Countries

Abstract

Entrepreneurship research is becoming more critical to policymakers and scholars around the world. However, few scholars have explored the effect of national culture or institutions on the entrepreneurial activity using cross-national data. Furthermore, most previous scholars have been limited to formal institutions as a theoretical structure to explore the entrepreneurial activity across countries. It is crucial to include formal, informal institutions and culture to better understand about how much or why entrepreneurial activity differs across countries. To fill this gap, this study investigates how national culture and institutions impact the level of entrepreneurial activity across 30 countries using cross-national dataset from the World Bank Dataset, the GEM report, and Hofstede’s cultural dimensions during the 5-year period from 2009 to 2013. Moreover, this study used two distinct measures of the level of entrepreneurial activity as dependent variables (i.e., the rate of new start-up companies and Total Entrepreneurial Activity). The results showed that individualism, uncertainty avoidance, power distance, and long-term orientation are essential for explaining the level of entrepreneurial activity across countries. However, the results indicated that only one of the regulative dimensions (i.e., the number of start-up procedures) was significantly related to the level of entrepreneurial activity. Therefore, the finding of this study concludes that national culture may play more important roles than institutions regarding the level of entrepreneurial activity across countries.