Business Startups: Cultural-Economic Controversy

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