Business Startups: Cultural-Economic Controversy

The purpose of this paper is to examine whether national cultural differences and/or economic, macroeconomic indicators are dominant in explaining business startups in selected EU countries. Among Hofstede’s national cultural differences, we have used the individualismcollectiveness indexmeasuring preference behavior that promotes one’s self interest, while the power distance index measures tolerance of citizens in terms of social inequality in terms of superiors or subordinates; the uncertainty avoidance index reflects tolerance towards uncertainty and ambiguity among citizens, while the masculinity index measures whether the society is male centered (Hofstede 2003). The last variable in the model related to culture is the corruption index (Transparency International 2008), which reflects how sensitive the nation is towards corruption. Among the macroeconomic indicators we have looked at whether the firm birth rate in an economy is strongly influenced by the given average wage rate, overall productivity level among nations, index for profitability and real per capita GDP growth. Findings show that with some exclusion, cultural factors are as important as economic indicators in explaining national business startups. Towards this end we have used factor and principle component analysis towards explaining the strength of the relationship among the variables.