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Postmaterialism influencing total entrepreneurial activity across nations

Abstract

The relative stability of differences in entrepreneurial activity across countries suggests that other than economic factors are at play. The objective of this paper is to explore how postmaterialism may explain these differences. A distinction is made between nascent entrepreneurship, new business formation and a combination of the two, referred to as total entrepreneurial activity, as defined within the Global Entrepreneurship Monitor (GEM). The model is also tested for the rate of established businesses. The measure for postmaterialism is based upon Inglehart’s four-item postmaterialism index. A set of economic, demographic and social factors is included to investigate the independent role postmaterialism plays in predicting entrepreneurial activity levels. In particular, per capita income is used to control for economic effects. Education rates at both secondary and tertiary levels are used as demographic variables. Finally, life satisfaction is included to control for social effects. Data from 27 countries (GEM, World Values Survey and other sources) are used to test the hypotheses. Findings confirm the significance of postmaterialism in predicting total entrepreneurial activity and more particularly, new business formation rates.

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Notes

  1. In an earlier study, Uhlaner et al. (2002) examine the influence of postmaterialism on self-employment rate on a set of 14 OECD countries, finding a negative effect between the two variables.

  2. Verheul et al. (2002) describe a general framework which elaborates upon push and pull factors as determinants of entrepreneurship.

  3. For example, Van Uxem and Bais (1996) find that 50% of almost 2000 new Dutch entrepreneurs mention dissatisfaction with their previous job among their motives to start for themselves.

  4. For more detailed discussion of the outgroup concept and its implications, see, for instance, Mackie et al. (1992) and Baron and Kerr (2003).

  5. Self-employed people here refer to people who have moved beyond the nascent entrepreneurship stage.

  6. See also Grilo and Thurik (2005a,b) and Parker (2004).

  7. Squared terms for postmaterialism and life satisfaction are also included in certain regression analyses, but again, no evidence was found to support a hypothesis of curvilinear effects.

  8. An earlier version of the paper (Uhlaner and Thurik 2004) reports relationships between these variables and different cultural indices measured by Hofstede, including power distance, individualism, masculinity, and uncertainty avoidance. The Hofstede indices are also substituted for postmaterialism in a series of multiple regression analyses (Uhlaner and Thurik 2005).

  9. In other analyses, not shown here, postmaterialism is a significant negative predictor of nascent entrepreneurship, but only in a regression model with life satisfaction as a positive predictor.

  10. See detailed discussion of tests for mediating effects in Verheul et al. (2005).

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Acknowledgement

We would like to thank Peter van Hoesel, André van Stel, Ingrid Verheul and Sander Wennekers for helpful comments. We would also like to thank Jan Hutjes, Jacques Niehof and Hanneke van de Berg for their contributions to earlier versions of this paper. Earlier versions have been read at the Small Business and Entrepreneurship Development Conference (University of Nottingham, UK, 15–16 April 2002), the Babson Kauffman Entrepreneurship Research Conference (University of Colorado, Boulder, CO, 6–8 June 2002), ICSB 47th World Conference (San Juan, Puerto Rico, 15–19 June 2002) the BRIDGE Annual Entrepreneurship Workshop (Bloomington, IN, 21 April 2003), the Global Entrepreneurship Research Conference I, Berlin (KfW bank), 1–3 April 2004 and the Workshop on Entrepreneurship and Culture (Max Planck Institute of Economics, Jena, 7 February 2005). The present report has been written in the framework of the research program SCALES which is carried out by EIM and financed by the Dutch Ministry of Economic Affairs. Lorraine Uhlaner acknowledges financial support of Arenthals Grant Thornton Netherlands, Fortis Bank, and Fortis MeesPierson, a subsidiary of Fortis Bank specialized in private wealth management.

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Correspondence to Lorraine Uhlaner.

Appendices

Appendix: details regarding measurement of variables

Dependent variables

Data on the entrepreneurial activity variables below are taken from the Global Entrepreneurship Monitor (GEM) 2002 Adult Population Survey (Reynolds et al. 2005). This database contains various entrepreneurial measures that are constructed on the basis of surveys of—on average—some 3,000 respondents per country (37 countries in total).

Total entrepreneurial activity 2002

Total entrepreneurial activity is measured as a combination of nascent entrepreneurship (the percentage of people in the age group of 18 to 64 years who are actively engaged in the start-up process) or new business formation (those owning and managing a business less than 42 months old in 2002) (expressed in % of adults in the same age group). Source: Global Entrepreneurship Monitor.

Nascent entrepreneurship 2002

The nascent entrepreneurship rate is defined as the number of people that are actively involved in starting a new venture, as a percentage of adult population (18–64 years old). An individual may be considered a nascent entrepreneur if the following three conditions are met: if he has taken action to create a new business in the past year, if he expects to share ownership of the new firm, and if the firm has not yet paid salaries or wages for more than 3 months (Reynolds et al. 2002, p. 38). Source: Global Entrepreneurship Monitor.

New business formation 2002

New business activity is measured as the percentage of people in age group of 18 to 64 years who are managing a business less than 42 months old in 2002 (expressed in %). A firm is defined as a ‘new business’ if the firm has paid salaries and wages for more than 3 months but for less than 42 months. Source: Global Entrepreneurship Monitor.

Established businesses 2002

This variable is computed as a percentage of adult population (18–64 years old) with an ‘established business.’ A firm is defined as an ‘established business’ if the firm has paid salaries and wages for more than 42 months (Reynolds et al. 2002, p. 38). Source: Global Entrepreneurship Monitor.

Total business ownership 2002

This variable is computed as the sum of ‘new businesses’ and ‘established businesses,’ both measured as a percentage of adult population (18–64 years old), taken from the GEM 2002 Adult Population Survey. A firm is defined as a ‘new business’ if the firm has paid salaries and wages for more than 3 months but for less than 42 months, and as an ‘established business’ if the firm has paid salaries and wages for more than 42 months (Reynolds et al. 2002, p. 38). The business ownership variable thus measures the stock of incumbent business owners. Source: Global Entrepreneurship Monitor.

Independent variables

Per capita income

Gross national income per capita 2001 is expressed in purchasing power parities per US$, and these data are taken from the 2002 World Development Indicators database of the World Bank. We do not use GDP per capita from the GEM database because this variable is measured at exchange rates. We do not want fluctuations in exchange rates to impact the ranking of countries with respect to their level of economic development.

Participation in education (1997)

We have included gross enrollment ratios in secondary education and tertiary education. Gross enrollment ratios are defined as the total number of students enrolled divided by the total number of people in the appropriate age range. These data are taken from Table 2.12 of the 2001 World Development Indicators database from the World Bank. Source: World Bank.

Postmaterialism

The source of the postmaterialism data are the World Values Survey, 1990–1993 (ICPSR, 1994). Scores for individual respondents are computed on the basis of their rankings of certain items. For the four-item postmaterialism index, respondents were asked to select the most important and second important goal a country should have from the following four items: (a) maintaining order in the nation, (b) giving people more to say in important government decisions, (c) fighting rising prices and (d) protecting freedom of speech. The postmaterialism index is constructed as follows:

1 = Materialist: first choice item a, second choice item c or first choice item c and second choice item a.

2 = Mixed: first choice item a or c and second choice item b or d or first choice item b or d and second choice item a or c.

3 = Postmaterialist: first choice item b and second choice item d or first choice item d and second choice item b.

The country scores were aggregates of the individual respondent scores, thus also ranging between 1 and 3. A similar methodology was used for the ten-item indices, again with an eventual scale ranging between 1 and 3. Source: World Values Survey and European Values Surveys, cumulative data: 1990–1993.

Life satisfaction

Life satisfaction is also derived from the World Values Survey, 1990–1993 (ICPSR, 1994). The score for this variable is constructed as the average score of the inhabitants of a country rating life as a whole (life satisfaction) on a scale ranging from 1 (completely dissatisfied) to 10 (completely satisfied). Source: World Values Survey and European Values Surveys, cumulative data: 1990–1993.

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Uhlaner, L., Thurik, R. Postmaterialism influencing total entrepreneurial activity across nations. J Evol Econ 17, 161–185 (2007). https://doi.org/10.1007/s00191-006-0046-0

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Keywords

  • Comparative analysis of economies
  • Cultural economics
  • Entrepreneurship
  • Self-employment
  • Macro-economic analyses of economic development

JEL Classification

  • P52
  • Z1
  • M13
  • O11
  • O57