The following are presented four basic points in the theoretical background of the present paper, regarding the interrelationships between the terms that are analysed. (a) Cultural traits are a reflection of cultural evolution which is a long-term endogenous process. (b) Cultural evolution is embodied in institution settings and transactions characteristics of the economies. (c) Opportunity entrepreneurship (where to discover opportunities theories) is a by-product of cultural traits, institution settings and transaction characteristics. Their influence is exercised by their portfolio consistency of interactions and their levels of operation. (d) In the medium- (and short-) term, cultural traits, institution settings and transaction characteristics are exogenous to opportunity entrepreneurship.
Cultural traits are a reflection of cultural evolution which is a long-term endogenous process
Cultural evolution is a set of processes (Richerson and Boyd 2005), and the cultural transmission process centrally involves psychology and communication. The cultural traits of societies reflect psychological social stereotypes that have been created over time and are prior human constructs to the current transactions and institutions (Petrakis and Kostis 2013a). People are influenced by norms, and hence the more frequent a variant is, the more likely it is to be adopted (Rozin 2010). People growing up in different societies exhibit measurably different ways of thinking and behaving due to different cultural norms and beliefs acquired from other members of their societies (Mesoudi 2011). Actually, culture can be defined as a product made by the significant contribution of human cognition and motivations, interpersonal interactions and communication and differences in ecology and geography across the earth (Conway and Schaller 2007).
However, it should be noted though that individuals are not passive receivers of their cultural environment. They use cultural background as a tool to understand their experiences (Hong 2009). Thus, any matching of geographical boundaries and uniqueness in cultural background characteristics cannot be accepted, as this would reduce the likelihood of the appearance of the same syndromes at the same periods of time in different societies. Cultural syndromes constitute a link between the distant factors that created such syndromes and today’s cultural conditions.
Spolaore and Wacziarg (2013) discuss different channels through which intergenerationally transmitted characteristics may impact economic development culturally and biologically via behavioural or symbolic transmission. They examine the very long-run effects of geographic, historical, cultural and institutional factors on productivity and per capita income, through reviewing the new literature on these relationships, and present empirical evidence documenting such effects. They point that the evidence suggests that economic development is affected by traits that have been transmitted across generations over the very long run.
Individuals have a storage room fulfilled with information and data due to the existence of a cultural and institutional background in the societies they live. These two kinds of background are deeply rooted in the subconscious and the environment of individuals and are responsible for shaping human behaviour to deal with various aspects of daily life. Their shaping is essentially based on the historical and cultural heritage of each nation. Individuals are able to use these elements in order to structure their cognitive background or their reasoning processes (Douglas 1987). In this way, the cultural and institutional background offers a series of habits and rules that the individual can use as a standard to check whether they have identified the best solution or to identify which existing solution is the best according to the standards set by their cultural and institutional background (Hodgson 1988).
Cultural evolution is embodied in institution settings and transaction characteristics
As pointed by North (1990), institutions can be divided in formal and informal. Mental models, such as culture, determine the way information is managed by individuals and the criteria through which decisions are made.
There are some first-, second- and third-round effects regarding the relationship between cultural traits and institutions. As first-round effects can be seen the influences of the cultural traits on the operations of political institutions. As second-round effects can be seen the fact that political institutions shape economic institutions, which then create incentives. Aside from this indirect effect between cultural traits and economic institutions, the secondary elements of economic institutions are also directly influenced by cultural traits; the extent to which the goal setting of a society is linked to the per capita product, income or its happiness, depends on its culture. Economic institutions, in the form of property rights and contractualization, are influenced by the characteristics of trade and the cultural stereotypes (Boyer and Petersen 2012). Lastly, as third-round effects, the distribution of wealth and the extent of economic growth are shaped by economic institutions.
There is also a significant relationship between cultural traits and the transaction cost of the economies, which can be considered as an important extension of the transaction cost theory. Cultural background is a determinant of consumer behaviour (Cleveland and Laroche 2007) and of social structures in economic relationships (Greif 1994). When choosing a strategy for the international expansion of activities and transactions, the study of this relationship is particularly important. Shane (1992) tried to make a connection between the differences in the cultural background among societies and the perceptions on transaction costs observed and the differences in societies’ preferences for licensing and international joint ventures. There is a remarkable literature that focuses on the role of cultural differences in creating intercultural uncertainty which has a direct effect on transaction costs (intercultural communications and trade) (Jonsson 2001).
According to Chen et al. (2002), not collectivist cultures display more opportunistic behaviour in transactions within the same group compared with collectivist cultures which display greater opportunistic behaviour in transactions with other groups. Furthermore, there can be a connection between cultural traits and the choices made in transactions. Firstly, regarding the ‘uncertainty avoidance’ cultural trait, Hofstede (1980) concludes that lower scores result to more easy interactions with strangers. He also states that in societies where individualism and collectivism co-exist, the transaction value is low (in-group transactions) and when either individualism or collectivism is dominant, the transaction value is relatively high. Lastly, Petrakis and Valsamis (2013) argue that the cultural traits that promote economic growth reduce the transaction costs and enhance economic institutions, while the cultural traits that promote the social characteristics of a society increase transaction costs.
Opportunity entrepreneurship as a by-product of cultural traits, institution settings and transaction characteristics
The influence of cultural traits, institution settings and transaction characteristics on opportunity entrepreneurship is exercised by their portfolio consistency of interactions and their levels of operation.
An important part of the entrepreneurial process is the identification and the exploitation of entrepreneurial opportunities. There have been considered three basic schools of thought for the identification of entrepreneurial opportunities (Companys and McMullen 2007): (a) the ‘Economic School’ in which an entrepreneurial opportunity is defined as an objective phenomenon that exists in time and space and may be unknown to some people (Shane 2003; Shane and Venkataraman 2000), (b) the ‘School of Culture’, which supports that entrepreneurial opportunities are subjective and not objective constructions-phenomena (Sarasvathy et al. 2003) and finally, (c) the ‘Sociopolitical School’ which supports the important role administrative mechanisms play in the definition of entrepreneurial opportunities (Granovetter 1985). It seems that two key factors seem to play a role first in the identification of entrepreneurial opportunities and then in their activation as entrepreneurship events: knowledge levels (Marsili 2002; Mueller 2007; Acs et al. 2008; Acs et al. 2009) and the cultural background of the societies (Petrakis and Kostis 2013b).
Chen et al. (2002) try to identify which factors shape opportunistic behaviours, mainly concentrating to the role of culture and more specifically on the role of individualism/collectivism and the moral barriers. Salamouris (2013) points that overconfidence matters for entrepreneurship but overconfidence is affected by the perceptions about the cultural value of uncertainty. Pinillos and Reyes (2011) argue that a country’s entrepreneurship rate is negatively related to individualism when development is medium or low and positively related to individualism when the level of development is high. Culture contributes to the emergence of entrepreneurial activity (Tominc and Rebernik 2007; Kreiser et al. 2013). Thus, entrepreneurship is different among countries or for different time periods because societies have embraced it to various degrees (Reynolds et al. 2002; Freytag and Thurik 2007). Stuetzer et al. (2013) argue that knowledge creation, the economic context and an entrepreneurial culture have an indirect effect on the individual perception of founding opportunities, which in turn predict the start-up intentions and activity. However, Ghoshal and Moran (1996) point that despite the opportunistic propensity of an individual, he will not act opportunistically in all transactions. More recently, Uzunidis et al. (2014) point that entrepreneurial function relies on the individual characteristics of the entrepreneur and the importance of the social, economic and political environment. Furthermore, in-group collectivism, which is highly represented through strong family ties, matters on the size of entrepreneurial activities (Del Giudice et al. 2013; Lingas 2013).
Furthermore, the role of institutions is crucial for entrepreneurship (Karlsson and Acs 2002; Karlsson and Karlsson 2002; Acs et al. 2008). Institutions, resources and history, among other factors, determine the success of an entrepreneurial activity (Baumol Baumol 1990). Entrepreneurial opportunities and the starting up of businesses, in order to exit, require clear institutional and legal environment, the smooth operation of the markets under specific rules, privatisation and collectivization (Wennekers et al. 2002).
If steps are taken to apply policy measures which support entrepreneurship in the fields of financing and entrepreneurial abilities, then we can expect to see more numerous and more vigorous entrepreneurial events, with positive consequences for the process of economic development (Petrakis 1997, 2004).
The long-term endogeneity and the medium- and short-term exogeneity
If we accept that entrepreneurship also requires suitable institutions and a specific environmental background, the basic question raised is why countries with ineffective institutions do not ‘copy’ the institutions of developed countries (Fukuyama 2001). The answer lies on the fact that institutions do not change easily; it takes 10 to 100 years for formal institutions and 100 to 1,000 years for informal in order to be changed. Informal institutions are human creations based on the values, ideas and perceptions of their creators. Thus, any changes are limited.
Moreover, the social stereotypes forming the cultural traits may be characterised as long lasting, as the forces that have shaped the construction of the stereotypes are considered exogenous (e.g. climate and environment) (Schwatrz 2009). Thus, cultural values present stability through time. In general, cultural stereotypes present a great resistance towards change and to their own redefinition (Johnston 1996).
However, under certain and strong shocks (a war, a great recession, etc.), cultural background may change, but institutions and transaction characteristics will still remain unchanged even after such a shock. This is what the present paper investigates through the sensitivity analysis (see ‘Empirical results and discussion’ section). In such cases, institutions and transaction characteristics are affected in the long run and in an indirect way through the cultural traits that are embodied in these. The embodying procedure is a long-term evolution process. Therefore, in the short- and the medium-term horizon, there are not any possible observed interconnections between the three groups of variables.
According to Spulber (2008), the economic equilibrium, including the structure of transactions, prices and allocation of goods, depends on the entrepreneurs’ actions. Entrepreneurs will be successful in establishing firms only if firms provide transaction benefits that cannot be achieved by consumer organisations. Similarly, societies with already developed entrepreneurship levels may lead to the cultural trait formation of their members, e.g. by creating members with a greater assertiveness and performance-oriented characteristics. Thus, is it cultural traits, transaction characteristics and economic institutions that influence entrepreneurship, or does entrepreneurship itself affect them? The previous question and concern creates a need to check for the endogeneity problem between opportunity entrepreneurship and these variables.
Perhaps there is a two-way effect between entrepreneurship and institutions (and culture and transactions as well) in the long run. However, in the medium-term or the short-term these are exogenous to entrepreneurship (as will see in the empirical results).
Based on the definitions of the variables used to express cultural traits by House et al. (2004), we can assume that societies with high values for performance orientation (see definition in Table 1) should be associated with higher opportunity entrepreneurship levels, given that they promote profit and performance improvement in their economies. Such societies value training, development, assertiveness, competitiveness, individual achievement and taking initiative, and opportunity entrepreneurship contributes towards these goals. High values for future orientation (see definition in Table 1) should be related to increases in opportunity entrepreneurship too. Indeed, such societies tend to achieve economic success, have flexible and adaptive organisations and managers and favour financial prosperity, which can facilitate new businesses. Furthermore, a decrease in gender egalitarianism (see definition in Table 1) differences should reflect greater opportunity entrepreneurship because more women will have the chance to exercise their entrepreneurial skills. Such societies tend to afford women a greater role in community decision-making and have a higher percentage of women participating in the labour force and in positions of authority. Moreover, it is expected that a positive correlation exists between higher values of assertiveness (see definition in Table 1) and opportunity entrepreneurship given that aggression and austerity drive global competitiveness. Such societies value success, progress and competition and tend to act and think of others as opportunistic. Generally, collective activity in a society (institutional collectivism - see definition in Table 1) should be positively related to opportunity entrepreneurship, as group loyalty is encouraged even if individual goals suffer. In contrast, in-group collectivism (see definition in Table 1) is expected to be associated with lower levels of opportunity entrepreneurship because, in essence, in-group collectivism is incompatible with competitiveness and the development of free entrepreneurship (with no obstacles): it favours conceptualism and small, low-risk businesses. High levels of power distance (see definition in Table 1) indicate that economic development occurs only for those who (mainly) have economic power in societies. Consequently, it is expected to have a negative correlation with opportunity entrepreneurship. In such societies, only a few people have access to resources, skills and capabilities. Human orientation (see definition in Table 1) is expected to have a positive correlation with opportunity entrepreneurship because, in societies with a high level of human orientation and that have the primary aim being profits, the government’s focus should be on individuals. There is expected to be a negative correlation between uncertainty avoidance (see definition in Table 1) and opportunity entrepreneurship because lower levels of uncertainty avoidance have been repeatedly associated with higher levels of economic activity (Swierczek and Ha 2003; Hofstede et al. 2010). Such societies tend to be less calculating when taking risks and show less resistance to change.
All cultural traits dimensions of the societies positively affect opportunity entrepreneurship levels, except from in-group collectivism, power distance and uncertainty avoidance that seem to have a negative effect.
Based on the definitions of the variables used in this paper to express transaction costs, we can assume that the high levels of composite risk are positively related to increases in opportunity entrepreneurship. Composite risk is used as a proxy of economic uncertainty in the economy because an increase (i.e. decrease in risk) is correlated with higher levels of opportunity entrepreneurship. In addition, uncertainty has a more prominent role in the entrepreneurial economy because the knowledge capital is inherently less certain than physical capital (Audretsch 2007). When more time is necessary to start a business, opportunity entrepreneurship may be inhibited. Furthermore, the relationship between the levels of corruption, as expressed by the corruption perceptions index variable, and the opportunity entrepreneurship is also expected to be negative. Corruption adds an element of unpredictability in the economies. When an economy is in high corruption, it is hard to understand whether you will be penalised or not. In such an environment, entrepreneurs might be deterred from starting companies if they do not know when or if they will be punished for being successful. Furthermore, high corruption can also distort incentives and cause general misallocation of resources in a society. Lastly, it is expected that the greater a population’s literacy rate, the more rational the decision-making and promotion of opportunity entrepreneurship will be.
Higher levels of transaction costs, as expressed through high composite risk, much time to start a business, high levels of corruption and low levels of literacy rates, inhibit opportunity entrepreneurship levels.
A high value for the property rights variable indicates that a country’s laws protect private property rights, the government enforces those laws, the judiciary is independent, there is no corruption and it is easy to enforce contracts. These conditions are expected to facilitate opportunity entrepreneurship and encourage the new businesses foundation. For the same reason, high values for the rule of law variable are expected to have a positive correlation with opportunity entrepreneurship.
Well organised economic institutions, as expressed through high property rights protection and high sentiment of rule of law in societies, enhance opportunity entrepreneurship levels.
Table 2 indicates the overall relationships expected between the variables used in this paper as independent (cultural traits, transaction characteristics and economic institutions characteristics) and dependent (opportunity entrepreneurship), which is based on various studies in the literature and the definitions of the variables.