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Entrepreneurial Motivations, Culture, and the Law

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Entrepreneurship and Culture

Abstract

Inspired by Schumpeter’s seminal depiction of the entrepreneur, this chapter recasts this heroic portrait in a more rigorous theoretical framework, leveraging a model of individual value preferences by Schwartz. The entrepreneurial spirit, it is argued, consists of particular value preferences: most importantly high openness-to-change and also high self-enhancement. These hypotheses are consistent with extant empirical evidence. The upshot of this theory – especially when the stability of cultural value orientations is taken into account – is that individual propensities to engage in new venture creation may not be very susceptible to policy measures. Looking specifically at legal measures, this chapter considers measures that could be narrowly targeted to promoting entrepreneurship by making entrepreneurs even more highly motivated than what they appear to be. Recent research indicates, however, that theoretical and empirical issues, which must be resolved before such measures could be employed with confidence, are intractable at this point.

Based on the entrepreneurial spirit and what the law can do about it (first published in: Comparative Labor Law & Policy Journal, Vol. 28 No. 4, 2007)

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Notes

  1. 1.

    See, e.g., Baumol et al. 2007; Carree and Thurik 2003, 2006; van Stel et al. 2005; Wong et al. 2005; Wennekers et al. 2005. On unemployment see Baptista et al. (2006).

  2. 2.

    See also Blanchflower and Oswald (1998); Blanchflower (2000); Kawaguchi (2004); Beugelsdijk and Noorderhaven (2005); van Gelderen et al. (2003); van Gelderen et al. (2006).

  3. 3.

    There is some controversy whether risk propensity is a specific combination of trait positions on the FFM or an additional, sixth, dimension of personality traits. See Zhao and Seibert (2006).

  4. 4.

    For reviews, see Wadeson (2006); Krueger (2003); Mitchell et al. (2004; 2007); see also Gaglio and Katz (2001).

  5. 5.

    Schumpeter (1934, p. 78) points out that “being an entrepreneur is not a profession and as a rule is not a lasting condition;…everyone is an entrepreneur only when he actually ‘carries out new combinations’ and loses that character as soon as he has built up his business, when he settles down to running it as other people run their business.”

  6. 6.

    For the present study, I have conducted searches in both JSTOR and Econlit databases and extensive, though obviously not comprehensive, searches of internet resources. A study that bears directly on this subject and is discussed in more detail below is Fagenson (1993).

  7. 7.

    “Other-regarding preferences” is a more accurate term than “social preferences” because the latter might mistakenly connote group preferences.

  8. 8.

    On motivated cognition, see Jost et al. (2003).

  9. 9.

    Several studies attempted linking values with entrepreneurship but they suffer from serious methodological weaknesses. For a critical survey see Bird and Brush (2003).

  10. 10.

    Schumpeter wrote the first edition of The Theory of Economic Development in 1911 and rewrote the text in 1926 for the second German edition, which appeared in English in 1934. Schumpeter (1934, p. ix).

  11. 11.

    See, e.g., Shane (2000); Saxenian (2002); Guiso and Schivardi (2005); Djankov et al. (2005, 2006); Gompers et al. (2005).

  12. 12.

    Hofstede (1980, 2001).

  13. 13.

    I assume for convenience, yet in line with the general literature, that each nation represents a single culture.

  14. 14.

    This section draws on Licht and Siegel (2006).

  15. 15.

    It is therefore clear that the scope of “property rights” in this context is broader than the usual legal meaning and includes entitlements to obligatory rights such as debt.

  16. 16.

    Another potential adversity of bankruptcy is acquiring a social stigma of failure. I abstract from this aspect here. For a short discussion and further references, see Hahn (2006).

  17. 17.

    There exists an alternative procedure to Chap. 7 liquidation in Chap. 13 of the Code. According to Berkowitz and White (2004, p. 71), “exemption levels are likely to have similar effects on credit markets regardless of the chapter that business owners would choose if they filed for bankruptcy.” Another alternative procedure exists when a debtor files for bankruptcy under Chap. 11, which provides for reorganization. The debtor usually proposes a plan of reorganization to keep the business alive and pay creditors over time. Baird and Morrison (2005) have found that the vast majority of Chap. 11 cases deal with small business entrepreneurs trying to extend the life of their business through these proceedings. Bankruptcy judges are aware of and guard against such efforts.

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Acknowledgements

This chapter is based on my article The Entrepreneurial Spirit and What the Law Can Do about It. Comparative Labor Law & Policy Journal, 28: 817–861 (2007). Thanks to participants at the conference Entrepreneurship: Law, Culture, and the Labor Market for helpful comments, to Irmi Lapid for research assistance, and to Riki Vanunu for editing assistance.

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  1. Interdisciplinary Center Herzliyah, Radzyner School of Law, 167, Herzliya, 46150, Israel

    Amir N. Licht

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  1. Fak. Wirtschaftswissenschaften, Universität Jena, Carl-Zeiss-Str. 3, Jena, 07743, Germany

    Andreas Freytag

  2. Econometrisch Instituut, Erasmus Universiteit Rotterdam, Rotterdam, 3000 DR, Netherlands

    Roy Thurik

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Licht, A.N. (2010). Entrepreneurial Motivations, Culture, and the Law. In: Freytag, A., Thurik, R. (eds) Entrepreneurship and Culture. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-87910-7_2

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