Entrepreneurial propensity in a transition economy: exploring micro-level and meso-level cultural antecedents Cristian Chelariu Sawyer School of Business, Suffolk University, Boston, Massachusetts, USA
Thomas G. Brashear Isenberg School of Management, University of Massachusetts Amherst, Amherst, Massachusetts, USA
Talai Osmonbekov W. Franke College of Business, Northern Arizona University, Flagstaff, Arizona, USA, and
Adriana Zait Department of Management-Marketing, “Al.I.Cuza” University, Iasi, Romania Abstract Purpose – This paper aims to analyze antecedents of entrepreneurship propensity in two separate studies, at individual and organizational levels. The first study proposes that the effect of individual cultural values on entrepreneurial propensity is mediated by the locus of control. The second study focuses on the interaction effect between the individual’s need for autonomy and a bureaucratic culture characterized by high centralization and high formalization. Design/methodology/approach – The approach takes the form of surveys of business students and retail salespeople in Romania and regression analysis. Findings – Internal locus of control predicts entrepreneurship propensity. Mediation effects were not supported. Centralization and formalization stimulate entrepreneurial propensity, especially in salespeople with a high need for autonomy. In general, the individual cultural values approach generated weak results, while the organizational culture approach showed strong support for the hypotheses. Research limitations/implications – A combination of push and pull effects determines an individual’s entrepreneurial propensity. Personality traits, such as internal locus of control and need for autonomy predict entrepreneurial propensity. But individuals are pushed into entrepreneurship by negative factors, such as dissatisfaction with existing employment. Practical implications – In transitional economies, entrepreneurial ventures are relied on to sustain a high growth rate, to serve the unmet needs of the population, and to create jobs. Multinationals operating in transition countries could improve recruiting decisions by hiring managers with a high internal locus of control and could then allow them decision-making power to satisfy their need for autonomy. Originality/value – The paper analyzes antecedents of entrepreneurship propensity in two separate studies, at micro (individual) and meso (organizational) levels, but set within the same transitional economy. This macro context is posited to shape both organizational culture and individual cultural values and personality traits. Keywords Entrepreneurialism, Control, Culture, Bureaucracy, Romania Paper type Research paper
Entrepreneurship is the goal-oriented process whereby an individual identifies marketplace opportunities using creative thinking, secures resources, and adapts to the environment to achieve desired results while assuming some portion of the risk for the venture (Smart and Conant, 1994). Individuals animated by entrepreneurial spirit are the driving force creating new markets and promoting economic development (Schumpeter, 1968; Minniti, 1999). Estimates of the impact of entrepreneurial activity on the differences in growth rates across countries range from one-third (Reynolds et al., 1999)
to one-half (Zacharakis et al., 2000). Moreover, these results are supported in both developed economies and emerging economies (Berkowitz and DeJong, 2001). Given the beneficial impact on the economy, it is important to understand what factors at the national, organizational, and individual levels predict entrepreneurial propensity. At least two major approaches dominate entrepreneurship research. One approach has focused on national cultural antecedents to explain variation in entrepreneurship across countries. This approach has generated inconsistent results (Mueller and Thomas, 2001), and more recently, researchers have begun to focus on other macro-level antecedents such as environmental uncertainty (Baum and Locke, 2004) and the institutional environment (Busenitz et al., 2000; Baughn et al., 2006). A second stream of research has focused on individual-level entrepreneurial traits, such as need for achievement, risktaking propensity, and innovativeness, as correlates of being or desiring to be an entrepreneur (Ahmed, 1985; Begley and
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Journal of Business & Industrial Marketing 23/6 (2008) 405– 415 q Emerald Group Publishing Limited [ISSN 0885-8624] [DOI 10.1108/08858620810894454]
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Entrepreneurial propensity in a transition economy
Journal of Business & Industrial Marketing
Cristian Chelariu, Thomas G. Brashear, Talai Osmonbekov and Adriana Zait
Volume 23 · Number 6 · 2008 · 405 –415
Boyd, 1987; Bonnett and Furnham, 1991). This line of inquiry also has generated inconsistent results, prompting scholars to call for research that includes not only individual characteristics, but also situational or contextual variables (Gartner, 1988; Aldrich and Martinez, 2001). The present study is situated in a transition economy, a context characterized by radical change and crisis, factors traditionally associated with the emergence of entrepreneurship (Schumpeter, 1968; Ardichvili and Gasparishvili, 2003). Macro-level, institutional factors determine the structure, roles, and “rules of the game in a society” and influence individual behavior (North, 1990). In western economies, the entrepreneurial environment is “nutrient rich” (Shapero, 1985), including access to information and to tacit knowledge, besides tangible resources, such as access to capital. The legal framework is designed to stimulate entrepreneurship and, from a sociocultural perspective, entrepreneurs possess an almost mythical, hero-like status (Welter and Smallbone, 2003). In contrast, in transitional economies, new small and mediumsized enterprises have often emerged in spite of the “formal” political and economic institutional limitations (e.g. Berkowitz and DeJong, 2001; McMillan and Woodruff, 2002; Peng and Heath, 1996; Peng, 2000; Yan and Manolova, 1998). While “formal” limitations are gradually eliminated as these countries advance on the path to a market economy, deeper cultural transformations at the meso and micro levels may be more difficult to bring about (Luthans et al., 2000). At the meso (or organizational) level, transition processes, such as privatization, were shown to impact entrepreneurial outcomes through organizational-level transformations in structures and culture (Zahra et al., 2000). At the individual level, entrepreneurship in transitional economies may still be limited by informal, normative constraints, many of them “remnants of socialist attitudes” (Lukasiewicz and Sicinski, 1992, p. 116), such as apathy, learned helplessness, lawlessness and corruption, and, more importantly, the attitude that private entrepreneurship runs counter to social norms (Smallbone and Welter, 2001). On the other hand, some scholars argue that the large size of the unrecorded economy in some countries could be interpreted as a “strong reflection of entrepreneurial behavior” (Reynolds, 1991, p. 58). This paper contributes to the existing debates within the entrepreneurship literature by analyzing antecedents of entrepreneurship propensity in two separate studies, at micro (individual) and meso (organizational) levels, but set within the same transitional economy. This macro context shapes both organizational culture and individual cultural values and personality traits. The first study posits that the effect of individual cultural values on entrepreneurial propensity is mediated by an individual’s locus of control. We attempt a departure from the existing theoretical tradition by analyzing Hofstede’s (1980) classic dimensions of culture (power distance, masculinity, uncertainty avoidance, and individualism) at the individual level. Hofstede’s typology was developed originally by measuring employees’ personal values, aggregated using Inkeles and Levinson’s (1969) modal personality concept to obtain scores for cultural norms at the national level. Lately, cultural psychologists have emphasized the need to move away from “wrestling with the ghosts” of Hofstede’s legacy to
“reclaim the individual” by studying the links between personal attributes and socialization practices or institutional processes (Bond, 2002). This approach also allows us to confirm the external validity of measurement instruments for cultural dimensions at the individual level (Donthu and Yoo, 1998). The second study, at the meso-cultural level, focuses on the interaction effect between the individual’s need for autonomy and a bureaucratic culture characterized by high centralization and high formalization (Dwyer and Oh, 1987; Aiken and Hage, 1966) and inimical to entrepreneurial manifestation. Bureaucracies are the most pervasive type of organizational culture among command economy firms and their transformation is one of the greatest difficulties facing transitional firms. Entrepreneurship has been studied by scholars in various disciplines including anthropology (e.g. Stewart, 1991), psychology (e.g. Shaver and Scott, 1991), sociology (e.g. Reynolds, 1991), economics (e.g. Kirchhoff, 1994) and management (e.g. Stevenson, 1985). However, consensus has yet to be reached on the conceptual definition of this construct (Shaver and Scott, 1991). Some researchers emphasize the behavior of creating a new enterprise (Gartner, 1985) and others argue that personal characteristics of the founders are fundamental to the definition of entrepreneurial orientation (Timmons, 1978; Dunkelberg and Cooper, 1982). For example, the term “potential entrepreneur” was used to describe individuals possessing traits, skills, and desires that can motivate entrepreneurial behavior (Krueger and Brazeal, 1994) or increase its likelihood (Mueller and Thomas, 2001; Mueller, 2004). Our dependent variable is entrepreneurial propensity, defined as an individual’s favorable predisposition towards new venture creation. Focusing on actual enterprise creation would greatly understate the entrepreneurial potential in transition economies, because economic and institutional constraints, such as lack of available credit, bureaucratic red tape, and lack of information are powerful deterrents for those who want to open a new business (Kaufmann et al., 1995). Even in a western setting, scholars found that there are many potential entrepreneurs in an organization even if intentions to start a new venture are not overtly displayed (Brazeal, 1993). From a practical perspective, entrepreneurship is particularly important in emerging and transitional economies. In this context, entrepreneurial ventures are relied on to sustain a high growth rate, to serve the unmet needs of the population, and to create jobs needed to absorb the excess numbers in the workforce resulting from the restructuring of state-owned firms (Thomas and Mueller, 2000). We begin with a study of the relationship between individual values, locus of control and entrepreneurial propensity. Then, a second study follows, exploring the interaction effect of a salesperson’s need for autonomy and the level of bureaucracy in the firm on the entrepreneurial propensity of the salesperson. In the methodology section, we discuss the data collection, the data analysis, and the results. Finally, we conclude the paper with limitations and implications for researchers and managers. 406
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Cristian Chelariu, Thomas G. Brashear, Talai Osmonbekov and Adriana Zait
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Study 1
H2.
Individual values, locus of control, and entrepreneurial propensity Societal institutions or codes of conduct, values and norms that “come from socially transmitted information and are part of the heritage that we call culture” (North, 1990) are important to the entrepreneurial spirit. To the extent that beliefs and attitudes serve primarily a social adjustment function, they are likely to change if social norms change. Accordingly, we propose that a larger transformation at the societal level modifies the individual’s value system, in terms of individualism, power distance, masculinity and uncertainty avoidance. These changes in values affect the individual’s system of beliefs (such as locus of control) and, in turn, affect an individual’s attitude towards entrepreneurship. The hypothesized relationships between individual values, locus of control beliefs and entrepreneurial attitude are summarized in Figure 1. In the following, we will examine these links in more detail.
H3.
Cultural values and locus of control Cultural dimensions give a foundation for the development of individual values that in turn influence people’s attitudes and behaviors. In many recent studies, entrepreneurship and culture have been linked (e.g. Mueller, 2004; Mueller and Thomas, 2001; Danis and Shipilov, 2002) at both macro and micro levels. For example, national culture influences the formation of technology alliances by entrepreneurial firms (Steensma et al., 2000) or shapes the manifestation of entrepreneurial behaviors, such as championing, in organizations (Shane, 1994). At the micro level, the impact of cultural values on entrepreneurship has found mixed support. Some studies have shown that entrepreneurs have higher power distance, individualism and masculinity, and lower uncertainty avoidance, when compared to managers (McGrath et al., 1992; Busenitz and Lau, 1996). On the other hand, studies done in Portugal (Morris et al., 1994) or Israel (Baum et al., 1993) found no support for the relationship between individualism and entrepreneurship. A study of Russian and Georgian entrepreneurs found that they score lower on masculinity and individualism, but higher on power distance than managers or employees from the same country (Ardichvili and Gasparishvili, 2003). These inconsistencies suggest the need to explore the possibility of mediation or moderation effects. Cultural values are considered to have a significant effect on personality traits (Hofstede and McCrae, 2004) and specifically on locus of control (Mueller, 2004; Mueller and Thomas, 2001; Kaufmann et al., 1995), thus providing us with an important potential mediator. Specifically, we posit that individual cultural values affect an individual’s entrepreneurial propensity, not directly but through the cognition of the individual and the formation of beliefs about her locus of control. In the following, we explore separately the link between locus of control dimensions and each of the individual values.
Locus of control and entrepreneurial propensity Following its emergence in social psychology, locus-of-control research (Rotter, 1966) has been applied in personality research (Cox and Ferguson, 1991; Levenson, 1974), sales (Srivastava and Sager, 1999), accounting (Frucot and Sharon, 1991), and in the entrepreneurship literature (Kaufmann et al., 1995; Shaver and Scott, 1991; Gartner, 1985). Perceived internal locus of control is defined as “the personal belief that one has influence over outcomes through ability, effort, or skills; whereas external locus of control is the belief that external forces control outcomes” (Kaufmann et al., 1995, p. 44). Levenson (1974) argues that while the internal locus of control is unidimensional, the external locus of control can be explained by people’s beliefs about powerful others that influence their lives, as well as by the influence of blind fate, luck or chance. Levenson (1974) developed the IPC locus of control scale where “I” stands for internal locus of control, “P” for powerful others and “C” for chance. The link between locus of control and entrepreneurship has been studied before, although very little in a transitional setting. In general, studies found a positive correlation between internal locus of control and various measures of entrepreneurial tendencies (see for example, Brockhaus, 1982; Bonnett and Furnham, 1991, on student samples; and Pandey and Tewary, 1979, on entrepreneurs). Based on the existing theory, we advance the following propositions: H1.
The “Powerful other” dimension of an individual’s locus of control is negatively related to the individual’s entrepreneurial propensity. The “Chance” dimension of an individual’s locus of control is negatively related to the individual’s entrepreneurial propensity.
Power distance Power distance has been defined as “the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally” (Hofstede, 1991, p. 27). People characterized by large power distance demonstrate high tolerance for lack of autonomy and greater reliance on centralization and formalization of authority (Hofstede, 1980), and show more
The “Internal” dimension of an individual’s locus of control is positively related to the individual’s entrepreneurial propensity.
Figure 1 The values-locus of control-entrepreneurship model
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Entrepreneurial propensity in a transition economy
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Cristian Chelariu, Thomas G. Brashear, Talai Osmonbekov and Adriana Zait
Volume 23 · Number 6 · 2008 · 405 –415
tolerance in accepting power hierarchy (Kale, 1993). Donthu and Yoo (1998) posit that in a society with large power distance, authoritarian and coercive power strategies perform well. Morris and Pavett (1992) found that non-coercive, participative management works well with Americans (because of the small power distance norm) but not with Mexicans (characterized by a relatively large power distance norm). Jaeger (1986) explains this phenomenon by pointing out that team building and team decision-making activities in general cannot be effective with employees characterized by large power distance because employees from different departments do not feel comfortable interacting face-to-face with higher-ranking team members. People with high power distance tend to accept power hierarchy (Kale, 1993), tend to avoid arguments with senior management, and rely on formalized and centralized authority. This could indicate that the higher the power distance in individuals, the more they will perceive that the outcomes of their activities depend on people in power and not on themselves.
(Hofstede, 1991, p. 51). In an individualistic society, people have a great sense of autonomy and personal sustainability, while in collectivist societies, people place importance on group and social needs (Hofstede, 1980). Individualistic societies such as the US value job specialization, individual rewards, flexibility, fairness, self-orientation, a competitive climate, and self-confidence. On the other hand, collectivistic societies such as China value cooperation, harmony, friendship, interdependence, conformity, forgiveness, and social usefulness (Donthu and Yoo, 1998). Consequently, individual-based training is found to generate better performance for American managers and group-based training is found to lead to better performance for Chinese managers (Earley, 1994). People from a highly individualistic society tend to be independent and self-reliant. They believe in their ability to control their achievements and success in life. In general, previous studies found lower internal control in countries that are more collectivistic than the USA, such as Russia (Kaufmann et al., 1995), China and Yugoslavia (Mueller and Thomas, 2001) or Hong Kong (Ralston et al., 1993).
H4. H5.
The greater an individual’s power distance, the greater the “Powerful other” locus of control. The greater an individual’s power distance, the lower the “I” dimension of locus of control.
H7.
Uncertainty avoidance Uncertainty avoidance is defined as “the extent to which members of a culture feel threatened by uncertain or unknown situations” (Hofstede, 1991, p. 113). People with high uncertainty avoidance have low tolerance for uncertain situations because of a fear of indeterminate outcomes. They display a great level of anxiety about their actions and require highly structured and clearly defined instructions for actions. In effect, a society with high uncertainty avoidance may be referred to as rigid, whereas a society with low uncertainty avoidance may be called flexible (Hofstede, 1991). The level of uncertainty avoidance in a society determines the types of behaviors and actions of people in reacting to the ambiguities of the environment (Hofstede, 1980). In an organizational setting, uncertainty avoidance is manifested in the clarity and precision of rules, job descriptions and procedures. Clear and precise rules trigger higher performance in high uncertaintyavoidance cultures (Newman and Nollen, 1996). People of low uncertainty avoidance tend to take risks easily, accept ambiguities in the surrounding environment and tolerate beliefs and actions dissimilar to their own. People of high uncertainty avoidance try to control the random element in the environment and strive to achieve more control over events and situations (Donthu and Yoo, 1998). Thus we hypothesize: H6.
The greater an individual’s collectivism, the lower is the “Internal” locus of control.
Masculinity/femininity The cultural dimension of masculinity/femininity represents “the dominant sex role pattern in the vast majority of both traditional and modern societies” (Hofstede, 1980, p. 277). People in highly feminine cultures value affiliation and nurturance. In contrast, people in highly masculine cultures value achievement, assertiveness and acquisition as well as action-oriented behavior (Newman and Nollen, 1996). People with a high internal locus of control exhibit strong internal motivation to reach their ambitious goals without reliance on others. Accordingly, we posit that masculinity has a positive impact on internal locus of control. H8.
The greater the masculinity, the greater the “Internal” locus of control.
On the other hand, highly masculine cultures are characterized by a variety of seemingly disparate phenomena manifested in family, work, and political settings that together point to a positive correlation with the “powerful other” dimension of locus of control. For example, highly masculine societies support strong candidates in politics and believe that international conflicts should be solved by show of force or fighting (Hofstede, 2000, p. 323). In the workplace, masculine cultures tend to see managers as cultural heroes, resolve conflicts by fighting, and see promotion as depending on protection (Hofstede, 2000, p. 318). Accordingly, we hypothesize:
The greater an individual’s uncertainty avoidance, the lower the “Chance” locus of control.
H9.
Individualism/collectivism A society is considered individualistic when the ties between individuals are loose and people are expected to look after themselves and their immediate family (Hofstede, 1980). On the other hand collectivism “pertains to societies in which people from birth onwards are integrated into strong, cohesive groups, which throughout people’s lifetime continue to protect them in exchange for unquestioning loyalty”
The greater the masculinity, the greater the “powerful others” locus of control.
So far, we have looked at how individual cultural dimensions impact locus of control perceptions and, from there, the entrepreneurial propensity. In the second study we will analyze how the individual’s need for autonomy interacts with the bureaucratic culture of the organization to motivate entrepreneurial propensity (see Figure 2). 408
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Cristian Chelariu, Thomas G. Brashear, Talai Osmonbekov and Adriana Zait
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Figure 2 The salesperson’s need for autonomy in a bureaucratic organization – moderating effects
Study 2
rules and procedures by setting up their own business (Podsakoff et al., 1986; Organ and Green, 1981).
The need for autonomy in a bureaucratic organizational culture – an interaction approach Desire for autonomy, along with interest in personal achievement and unhappiness in the current job or career, has long been identified as an important motivator for entrepreneurial action (Gilad and Levine, 1986). Autonomy refers to the ability and will of an individual to be self-directed in the pursuit of opportunities (Lumpkin and Dess, 1996). Entrepreneurial propensity requires a capacity for independent action on the part of the individual, in terms of articulating a vision for the business, implementing it, and carrying it forward to completion. Previous studies found that the most entrepreneurial firms have the most autonomous leaders, both in a developed economy and in a developing economy (Shrivastava and Grant, 1985). Consequently, we hypothesize that:
H12. Higher formalization will strengthen the relationship between need for autonomy and entrepreneurial propensity.
Methodology Instruments and data collection Data for both studies was collected in a city of 400,000 people in northeast Romania. Romania is an ideal setting for our study, because it is less advanced in the transition process than some of the Central European nations (Czech Republic, Hungary, Poland), but more advanced than some of the former Soviet republics (Moldova, Ukraine, Belarus, Central Asian republics). For both studies, we used an anonymous, self-report questionnaire for data collection. Special attention was focused on the selection of the measures and the development of the instruments due to the extension of existing constructs to an international setting (Davis et al., 1981; Singh, 1995). All constructs and their measurement items were assessed to determine if the construct of interest had both functional and conceptual equivalence (i.e. has the same meaning in the target population and refers to the same behaviors and/or attitudes). To assure linguistic equivalence, the scales were translated into Romanian independently by a native speaker, and translated back into English by a professional translator from Romania. The two English versions of the questionnaire were compared and no significant differences were observed. The survey was then pre-tested in Romania to assure equivalence.
H10. The greater the salesperson’s need for autonomy, the greater the salesperson’s entrepreneurial propensity. At least two well-established paradigms can be used to theoretically frame dissatisfaction with the current job as a motivator for entrepreneurial action. The expectancy theory assumes that individuals make a conscious choice among alternatives (current job situation versus owning one’s own business), with the purpose of maximizing pleasure and minimizing pain (Vroom, 1964). Similarly, when applying the social exchange theory, we assume that individuals compare their current occupational outcomes with the alternatives and engage in entrepreneurial action if this is a viable alternative to maximize their outcomes (Thibaut and Kelley, 1959). Two dimensions characterize bureaucratic organizations: centralization and formalization (Dwyer and Oh, 1987). Centralization refers to a limited delegation of decisionmaking authority throughout an organization (Aiken and Hage, 1966). Higher centralization reduces the employees’ involvement in decision making, their job satisfaction, and their organizational commitment (Morris and Steers, 1980). Employees with a greater desire for autonomy are more likely to resent this lack of involvement in decision making in the organization and to want to set up their own business in response.
Samples For the first study, given the focus on entrepreneurial propensity as determined by cultural dimensions, the sampling frame was formed of senior business students in a major university in Romania. A student sample was appropriate because it allowed us to isolate the impact of organizational variables like the ones we used in the second study. Moreover, student samples have been used in previous studies to look at potential in transitional and emerging markets (e.g. Danis and Shipilov, 2004; Hui et al., 2004; Mueller, 2004) and they allow us to capture the entrepreneurial propensity of future managers or entrepreneurs. One of the authors collected the data among business students at the local university, as part of a project for a marketing research class. No incentives were used and the data collection resulted in completed questionnaires from 157 respondents. For the second study, focusing on the impact of organizational variables on entrepreneurial propensity, we
H11. Higher centralization in the firm will strengthen the relationship between need for autonomy and entrepreneurial propensity. Formalization represents the degree to which administrative rules, policies, and procedures define roles, authority relations and communications, norms and sanctions, and procedures (Hall, 1972). Employees with a higher need for autonomy are more likely to avoid the constraints imposed by organizational 409
Entrepreneurial propensity in a transition economy
Journal of Business & Industrial Marketing
Cristian Chelariu, Thomas G. Brashear, Talai Osmonbekov and Adriana Zait
Volume 23 · Number 6 · 2008 · 405 –415
used a sample of retail salespeople. The retail sector witnessed the first manifestations of entrepreneurship in transition economies. By the nature of their position, retail salespeople are in direct contact with both the market and the entrepreneurial venture. Thus, they have better access to information, because they are better able to spot opportunities and also are familiar with the constraints faced by entrepreneurs. A total of 500 questionnaires were distributed in various commercial areas of the city, with an accompanying cover letter stating that the study was a joint project between universities in the USA and the local university. The cover letter also informed the potential respondents that the survey aimed to obtain salespeople’s perspective on various organizational factors that affect retail salespeople in a transition economy. Each salesperson received a monetary incentive equivalent to the price of a cup of coffee. The data collection yielded 426 returned questionnaires. Of those, 29 were found to have incomplete data or to have been completed by someone other than a salesperson. The usable sample of 397 represents a 79 percent response rate. The majority of salespeople responding to the survey were female (80 percent). The average age of respondents was 31 with ages ranging from 19 to 42. More than half were married and had children. Of the salespeople, 77 percent had high school education or some college and 10 percent had college degrees.
between the locus of control variables and entrepreneurial propensity. H1 received weak support, showing that Internal locus of control has a positive relationship with Entrepreneurial Propensity. On the other hand, H2 and H3 were not supported, indicating that Powerful other and Chance are not predictors of entrepreneurial propensity. H4 and H5 looked at the effects of Power distance on the Powerful other and Internal dimensions of locus of control. The results show that both hypotheses were supported, at 0.01 and 0.1 significance levels respectively. Thus, Power distance is negatively related to Internal, and positively related to Powerful others dimension of locus of control. H6 predicted a negative relationship between Uncertainty avoidance and Chance, while H7 predicted a negative relationship between Collectivism and Internal locus of control. These two hypotheses were not supported. H8 and H9 propose positive relationships between Masculinity and two dimensions of locus of control: Internal and Powerful others. H8, linking masculinity and the Internal dimension of locus of control, was not supported, while H9, linking Masculinity and the Powerful others dimension shows weak support. Overall, the impact of cultural values on locus of control can be characterized as weak. The only strong result links Power distance and the Powerful others dimension of locus of control, with weak support for the Power distance – Internal and the Masculinity – Powerful others relationships. These weak results suggest the need to consider moderating variables. Recent studies suggest gender can play such a moderating role, especially with respect to the masculinity dimension (Mueller, 2004). Age is also a potential moderator, because younger generations, socialized during transition, are likely to espouse different cultural values than older generations. One of the aims of Study 1 was to explore the potential mediator effect of locus of control between cultural dimensions and entrepreneurial propensity. To this end, we ran a regression using cultural dimensions as independent variables and entrepreneurial propensity as the dependent variable. As shown in Table I, none of the regression coefficients were significant. Furthermore, Sobel tests using the results in Table I showed no significant mediation effects.
Measures Measures for personal values were adapted from the Cultural Values (CV) scales that capture Hofstede’s dimensions at the individual level (Donthu and Yoo, 1998; Yoo and Donthu, 2002; Sayrac-Yaveroglu and Donthu, 2002; Kwok and Uncles, 2005). As shown in the Appendix, Power distance, Collectivism, Uncertainty Avoidance and Masculinity were measured with four to six items each, and had Cronbach alphas exceeding the recommended 0.7 threshold. To measure the locus of control dimensions, we used the scale developed by Levenson (1974) and validated by Kaufmann et al. (1995) in a study of entrepreneurship in Russia. The Internal, Powerful other, and Chance dimensions were measured with four, eight and seven items respectively and had Cronbach alphas of 0.66, 0.92 and 0.87. Finally, entrepreneurial propensity was measured with a scale used by Kaufmann et al. (1995). The alpha for this two-item scale was 0.78. For the second study, centralization and formalization were measured with two scales of five and six items respectively, adapted from Jaworski and Kohli (1993). Coefficient alphas for the measures were 0.76 for centralization and 0.87 for formalization. The need for autonomy was measured with six items and had a Cronbach alpha of 0.83. Entrepreneurial propensity was measured with the same two items that were used in Study 1, and had an alpha of 0.7.
Study 2 Study 2 proposed three hypotheses, one covering the direct effect of need for autonomy on entrepreneurial propensity, and the other two referring to the moderating effect of centralization and formalization as dimensions of bureaucratic cultures. As can be seen in Table II, the need for autonomy has a significant positive correlation with the salesperson’s entrepreneurial propensity, thus confirming H10. In terms of the two moderating effects, only H11 is supported, enabling us to conclude that centralization of the firm increases the entrepreneurial propensity of salespeople with a high need for autonomy. The analysis of the results in Table II also reveals a significant direct effect of centralization and formalization on entrepreneurial propensity. These results imply that, regardless of the individual salesperson’s need for autonomy, the level of bureaucracy in a firm’s culture tends to increase salespeople’s entrepreneurial propensity. In this case,
Analysis and results Study 1 We ran four separate ordinary least squares regressions to test our hypotheses. The parameter estimates and the associated significance levels are shown in Table I. In general, the results from Study 1 provided mixed support for our hypotheses. H1, H2 and H3 assessed the relationships 410
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Cristian Chelariu, Thomas G. Brashear, Talai Osmonbekov and Adriana Zait
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Table I Regression analysis results Independent variables
I
Power distance Uncertainty avoidance Collectivism Masculinity Internal Power Chance Adj R2 F value
2 0.143 *
P
C
0.217 * *
0.028 2 0.036 0.080
0.106 2 0.114 0.073 0.092
2 0.056 0.018 0.147 *
0.006 0.774
0.065 3.73
0.012 1.481
Dependent variables Entrep Entrep 2 0.07 0.12 0.09 2 0.02
0.004 1.14
0.152 * 0.028 2 0.029 0.004 1.21
Entrep 20.056 0.111 0.097 20.031 0.150 * 0.406 20.273 0.007 1.16
Notes: * p , 0.10; * * p , 0.01; Parameter estimates are standardized
factors, such as meeting the right people, which are beyond the control of the individual and depend in great measure on sheer luck. In contrast, in a Russian student sample, internal locus of control predicted entrepreneurial propensity (Kaufmann et al., 1995). Our findings from a sample of Romanian students found a similar (albeit weak) positive effect of internal locus of control on entrepreneurial propensity, as people with strong internal motivation to succeed are more likely to create new ventures. Entrepreneurial propensity is an important factor for creating new ventures as well as developing an entrepreneurial culture within a large company. Our findings could be useful for multinationals operating in transition countries, which could benefit from understanding local culture and its impact on creating joint ventures with local entrepreneurs. This finding could lend itself to better recruiting decisions when establishing a foreign subsidiary in a transition economy. If the strategic goal of a global company is to establish a local network, it should deploy an entrepreneurial person with a high internal locus of control and allow this person considerable decision-making power to satisfy her need for autonomy.
Table II Need for autonomy – moderating effects Main effects Centralization Formalization Need for autonomy Interaction terms Centralization 3 need for autonomy Formalization 3 need for autonomy Incremental R2 F change Significance of F change Full model F(5, 370) Significance R2 Adj. R2
0.093 0.123 0.258
(1.8) * (2.4) * * (5.1) * * *
0.17 0.08
(3.37) * * * (1.62) 0.039 2.388 0.103 12.9 0.000 0.150 0.139
Notes: * p , 0.1, * * p , 0.05, * * * p , 0.01; Parameter estimates are standardized, with t-values in parentheses
Limitations and future research
entrepreneurial propensity can be interpreted as a form of turnover intention.
Several limitations in our two studies must be pointed out. First, our samples were drawn from only one country, Romania. This limits the external validity of our findings, although one can argue that the historical events of the second half of the twentieth century had a homogenizing impact on all the countries of the former socialist bloc and replications of the present study would be likely to produce similar results. Second, we used business students and salespeople in our samples. While the entrepreneurial propensity of these future managers is important for advancement on the path of the market economy, future research should look at examining entrepreneurial propensity across other categories (Mueller, 2004). Future studies could enlarge the nomological network of culture, individual traits and entrepreneurship. With respect to cultural dimensions, future studies could explore the Confucian dynamic dimension, or other cultural dimensions, such as materialism. We analyzed only two personality traits, internal locus of control and need for autonomy. Other studies could analyze the interaction between the specific institutional conditions in transition economies and other personality traits
Discussion of results and managerial implications Based on the results from these two studies, an individual’s entrepreneurial propensity is determined by a combination of push and pull effects (Mueller and Thomas, 2001). Personality traits, such as an internal locus of control and a need for autonomy, make individuals more likely to embrace entrepreneurial propensity. On the other hand, some individuals are pushed into entrepreneurship by negative factors, such as dissatisfaction with existing employment or job loss. Our results show that centralization and formalization of the organization stimulate entrepreneurial propensity, especially in salespeople with a high need for autonomy. Kaufmann et al. (1995) find that Russian entrepreneurs, as opposed to American entrepreneurs, attribute their success to people in power and to chance. In high power distance cultures, people are more likely to accept arbitrary decisions or behavior on the part of the authority figures. In these cultures, solving one’s problems depends on a number of 411
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Cristian Chelariu, Thomas G. Brashear, Talai Osmonbekov and Adriana Zait
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suggested by the entrepreneurship literature, such as a high need for achievement, preference for challenge, acceptance of responsibility for outcomes, and innovativeness, resourcefulness, risk-taking propensity, preference for energetic action (McClelland, 1965; Begley and Boyd, 1987), the role of positive illusions about self and venture (Branzei and Zietsma, 2004), or passion for work and tenacity (Baum and Locke, 2004).
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Cristian Chelariu, Thomas G. Brashear, Talai Osmonbekov and Adriana Zait
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Further reading Levenson, H. (1981), “Differentiating among internality, powerful others and chance”, in Lefcourt, H. (Ed.), Research with the Locus of Control Construct: Assessment Methods, Vol. 1, Academic Press, New York, NY. Schumpeter, J.A. (1943), Capitalism, Socialism and Democracy, 6th ed., Counterpoint edition, Unwin Paperbacks, London.
Appendix. Scales Scales for Study 1 Locus of control – the Internal dimension (a ¼ 0.66) . When I make plans, I am almost certain to make them work. . It is usually up to me to protect my personal interest. . When I get what I want it is usually because I worked hard for it. . My life is mostly determined by my own actions. Locus of control – Powerful others dimension (a ¼ 0.92) . What happens in my life is mostly determined by powerful people. . Even though I might have good ability, I will never become a leader without asking those in positions of power. . My life is mostly controlled by people more powerful than me. . People like me have little chance of protecting our personal interests from strong pressure groups. . To get what I want I have to please the people above me. . If important people did not like me, I probably would not make many friends. . Whether or not I get into an accident depends mostly on the people around me. . In order for my plans to work, I make sure that they fit in with the plans of people above me. Locus of control – Chance dimension (a ¼ 0.87) . Many times there is no chance of protecting myself from bad luck. . I have found that what is going to happen will happen. . Whether or not I get into an accident is mostly dependent on the people around me. . It is not a good idea to plan too far ahead because too many things depend on luck. . Becoming a leader depends on whether I am lucky enough to be in the right place at the right time. . How many friends I have is mostly a matter of luck. 414
Entrepreneurial propensity in a transition economy
Journal of Business & Industrial Marketing
Cristian Chelariu, Thomas G. Brashear, Talai Osmonbekov and Adriana Zait
Volume 23 · Number 6 · 2008 · 405 –415
Power distance (a ¼ 0.92) . People in higher positions should make most decisions without consulting people in lower positions. . People in higher positions should not ask the opinions of people in lower positions too frequently. . People in higher positions should avoid social interaction with people in lower positions. . People in higher positions should not disagree with decisions made by people in higher positions. . People in higher positions should not delegate important tasks to people in lower positions.
Entrepreneurial propensity (a ¼ 0.78) . Someday I would like to own my own business. . I think that owning your own business has many advantages. Measures for Study 2 Centralization (a ¼ 0.67) . There can be little action taken in this company until upper management approves a decision. . A manager who wants to make his own decisions would be discouraged at this company. . Even small matters have to be referred to someone higher in the company for a final answer. . Any decision has to be approved by an individual at another location.
Uncertainty avoidance (a ¼ 0.87) . It is important to have instructions spelled out in detail so that I always know what I am expected to do. . It is important to closely follow instructions and procedures. . Rules and regulations are important because they inform me what is expected of me. . Standardized work procedures are helpful. . Instructions for operations are important. . I feel uncomfortable when people ask me to do something and then do not give me the information I need to do it.
Formalization (a ¼ 0.70) . I feel that I am my own boss in most matters (R). . A person can make his/her own decisions without checking with anybody else (R). . People here are allowed to do almost as they please (R). . Most people here make their own rules on the job (R). . The employees are constantly being checked on for rule violations. . People here feel as though they are constantly being watched to see that they obey all the rules.
Masculinity (a ¼ 0.73) . It is more important for men to have a professional career than it is for women. . Men usually solve problems with logical analysis; women usually solve problems with intuition. . Solving difficult problems usually requires an active forcible approach which is typical of men. . It is preferable to have a woman in a high level position rather than a man.
Need for autonomy (a ¼ 0.57) . I go on my own way in life, regardless of the opinions of others. . I disregard rules and regulations that hamper my personal freedom . In running my life, I try to be my own boss. . I prefer to work alone on a task.
Collectivism (a ¼ 0.83) . Individuals should sacrifice self-interest for the group (either at school or work place). . Individuals should stick with the group even through difficulties. . Group welfare is more important than individual rewards. . Groups success is more important than individual success. . Individuals should only pursue their goals after considering the welfare of the group. . Group loyalty should be encourages even if individual goals suffer.
Entrepreneurial propensity (a ¼ 0.66) . Someday I would like to own my own business. . I think that owning your own business has many advantages.
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