Examining the impact of culture on entrepreneurial propensity: an empirical study of prospective American and Egyptian entrepreneurs.

Parnell, John A. ; Crandall, William "Rick" ; Menefee, Michael 等

INTRODUCTION

Over the past decade, the academic and popular literatures have experienced a resurgence in entrepreneurship-related issues. Researchers have begun to critically address the processes surrounding venture creation, small business development, innovation, creativity, and intrapreneurship--entrepreneurship within large organizations. Of particular interest to practitioners has been the means through which entrepreneurship is cultivated and its historically uneven distribution throughout demographic segments of society. Specifically, questions as to why some college-educated business professionals choose entrepreneurial careers and others do not remain largely unanswered.

With recent gains by women and minorities in entrepreneurial ranks and the recognition that a growing number of new American jobs created in the next decade will be self-generated, academics have begun to emphasize the critical nature of America's entrepreneurial climate. In a similar vein, many leaders in developing countries in regions such as Eastern Europe, the Middle East, and Africa have begun to emphasize the type of social climate conducive to new venture creation. However, one's proclivity for an entrepreneurial career is not only a function of the economic environment, but also of personal (Johnson, 1990) and cultural factors (Brodsky, 1993). In an effort to identify cultural and other factors that impact the likelihood of entrepreneurial career selection, the present study compares and contrasts prospective entrepreneurs (i.e., upper division undergraduates) in American and Egyptian universities.

This study employs a scale to measure entrepreneurial propensity--a prospective entrepreneur's proclivity for choosing an entrepreneurial career--utilizing the EP scale developed by Parnell, Crandall, and Carden (1995). Parnell, et al. identified three factors associated with EP: (1) one's perceived level of entrepreneurial education, knowledge and competence concerning new venture operation, (2) one's beliefs concerning entrepreneurial opportunities in the economy, and, (3) one's confidence in one's ability to access the available opportunities. It is believed that each of these three factors is associated with cultural influences to some extent.

Following an overview of the relevant literature, the Egyptian business environment will be outlined. Scale development issues and research methodology will be presented. Findings, implications, and directions for future research will follow.

BACKGROUND

The literature is replete with differing perspectives on entrepreneurship. Rumelt (1987) defined the term as the creation of new businesses with some element of novelty. Mintzberg (1973) viewed the entrepreneur as one who seeks to improve the organization through change initiation. Vesper (1983) provided the economists' perspective; an entrepreneur is one who coordinates resources to create profits. Entrepreneurship has also been viewed as the identification of market opportunities and the recombination and allocation of resources to pursue them (Kirzner, 1973; Schumpeter, 1934; see also Chamberlin, 1933). Indeed, much of the present entrepreneurship literature has rested on the assumption that the entrepreneur is a risk-taker (Balkin & Logan, 1988; Corman, Perles, & Yancini, 1988; Dunphy, 1990; Flamholtz, 1986; Johnson, 1990).

The economic importance of entrepreneurship is well established in the literature (Ireland & Van Auken, 1987; Krueger & Brazeal, 1994; Stumpf, 1992). According to government labor statistics, approximately 20 percent of all new jobs in the U.S. economy were created by individuals who put themselves to work. The rate of increase for this segment of new jobs is presently twice that of overall job growth (Malone & Jenster, 1991). Much of this growth in new venture creature may be due to middle management layoffs and a frustration with career plateaus.

However, the entrepreneurship paradigm is one of the youngest in the management sciences and has not yet developed distinctive methods and theories of its own. Much of the research has been exploratory in nature, and is not well grounded in theory (Dolinsky, Caputo & Pasumarty, 1994; Gartner, Shaver, Gatewood & Katz, 1994; Low & MacMillan, 1988). Bygrave (1989) argued that this may result in entrepreneurial research being driven by other fields. Thus, research has suffered from problems of focus and disjointment (Bygrave, 1989; Cooper & Dunkelberg, 1987; Schendel, 1990).

The earliest work in the field of entrepreneurship focused on personal characteristics that distinguished entrepreneurs from non-entrepreneurs (Brockhaus, 1982; Naffziger, Hornsby & Kuratko, 1994). For example, numerous studies have found consistent relationships between individual factors, namely achievement locus of control, motivation (McClelland, 1961), and entrepreneurship (Brockhaus, 1982; Gartner, 1985, 1988; Johnson, 1990). McClelland (1961, 1962) identified three behavioral traits associated with high need for achievement (nAch): (1) taking personal responsibility for finding solutions to problems, (2) setting moderate achievement goals and taking calculated risks to achieve them, and (3) desiring concrete feedback concerning performance. McClelland later reported a series of studies linking high nAch with entrepreneurship (McClelland, 1965a, 1965b; McClelland & Winter, 1969). Later studies reinforced McClelland's motivation-entrepreneurship linkage (Klavans, Shanley, & Evan, 1985; Moore, 1986).

Miner, Smith and Bracker (1989) provided additional insight into the motivation-entrepreneurship association. Their research concluded that positive relationships exist between managerial motivation, firm expansion, and firm growth. However, the level of motivation of entrepreneurial type managers was found to be lower than that of corporate managers. In a similar vein, Brodsky (1993) found that female corporate managers tended to be more trusting and comfortable in organizations, while female entrepreneurs perceived the organization as confining and limiting.

A distinctive stream of research has begun to focus on the entrepreneurship

process and de-emphasize distinctive characteristics of the entrepreneur (Gartner, 1988; Katz, 1992; SAM Advanced Management Journal, 1994; Sexton & Bowman, 1986). Indeed, there is little conclusive evidence of differences between founders and non-founding managers or between successful and unsuccessful founders (Begley & Boyd, 1987; Chandler & Hanks, 1994; Low & MacMillan, 1988; Stuart & Albetti, 1990). Nonetheless, much of the literature remains primarily concerned with the uniqueness of the individuals behind the ventures (Krueger & Brazeal, 1994). As Shaver and Scott (1991, p. 39) noted, separating the entrepreneurship from the venture is analogous to separating the "dancer from the dance" (see also Carland, Hoy & Carland, 1988).

There is a general agreement throughout the field that women and minorities have been historically under-represented among successful ventures. Problems include discrimination ranging from the "glass ceiling" phenomenon (Godfrey, 1993) to financing difficulties (Buttner & Rosen, 1992; Fay & Williams, 1993). However, new reports suggest that women and minorities' opportunities and success have improved considerably in recent decades, both in the U.S. and in other countries (Buttner, 1993; Rosa, Hamilton, Carter & Burns, 1994; Zellner, 1994). Several recent research efforts have noted differences between male and female entrepreneurs. For example, Olson and Currie (1992) found that the strategies of male entrepreneurs tended to mirror their personal values, whereas female entrepreneurs were more likely to pursue strategies that highlighted the organization's need to conform to its environment.

THE EGYPTIAN MANAGEMENT ENVIRONMENT

Despite a growing interest in international comparative management, cross-cultural, empirical studies have been lacking to date (Atiyyah, 1993; Kozan, 1993). Specifically, a recent extensive study of such literature relevant to Arab countries produced little empirical work (Atiyyah, 1992). However, one study found Arab managers to prefer consultative decision making styles (Ali, 1993).

The impact of culture on a variety of management processes is well documented. Kozan (1993) highlighted the cultural influence on participative management techniques and individual initiative. Head and Sorenson (1993) found that the effectiveness of organizational development (OD) interventions is directly linked to the congruency between the values of OD and the culture in which the organization operates. However, not all studies have found differences attributable to culture (Ghosh, 1994; Terpstra, Ralston, & Bazen, 1993).

There are a variety of differences in the management environments in the U.S. and Egypt. Consider Yehia Ali Hassan, who operates a small grocery store in Cairo (El-Dabaa, 1995). He opens his store at 10:00 a.m. and closes late in the evening after all of his regular late customers have come, typically after midnight. Thirty percent of Hassan's sales are on credit for customers who would otherwise not be able to shop there.

According to Hassan, a grocer must have patience, discretion, and discrimination. First, a grocer must discern good credit risks from poor ones--without the assistance of credit reports. Second, a grocer must quickly identify the fastidious type of customer who asks "for dozens of things and is hardly ever satisfied with anything." Such customers inspect all of the merchandise for as much as half an hour, only to purchase little or nothing.

The Egyptian healthcare industry illustrates the application of business practices to an area not traditionally subject to such practices. For example, some private hospitals in Egypt have resorted to advertising discounts on surgery fees (Egyptian Gazette, 1995). Since numerous doctors graduate from Egyptian medical schools each year, many must find employment at private hospitals for low wages. The private clinics use these physicians to perform medical check-ups and low-price surgeries. Private hospital owners defend the practice, suggesting that people assume that such clinics are more expensive than public hospitals. They claim that the hospitals abide by these advertised fees, 150-180 Egyptian pounds plus a twelve percent tax (totaling about $50) for tonsillitis surgery.

Although such practice is a violation of Egyptian law, authorities have recently begun to promote privatization of the economy through decreased interference in private businesses (Tesche & Tohamy, 1994), including the regulations that have been responsible for severe limits in foreign investment (Heges, 1994). In 1993, Egypt announced plans to privatize its steel industry (Abu-Fadil, 1993). In sum, although Egypt presents economic opportunities for new venture creation, government restrictions and low income levels likely dampen the aspirations of many qualified entrepreneurs.

THE ENTREPRENEURIAL PROPENSITY (EP) SCALE

Entrepreneurial propensity is a function of three factors, each associated with one of the three relationships (Parnell, Crandall, & Carden, 1995): (1) one's perceived level of entrepreneurial education, knowledge and competence concerning new venture operation, (2) one's beliefs concerning entrepreneurial opportunities in the economy (i.e., financial rewards, employment, etc.), and, (3) one's confidence in one's ability to access the available opportunities (i.e., self-employment, risk, etc.). The final instrument consisting of these three factors addressing entrepreneurial intentions, and a variety of demographic items (see appendix) was administered to 204 students at two American universities and 147 students at one Egyptian university.

PROPOSITIONS

Five propositions were tested in the present study. They are displayed in the following exhibit.

RESEARCH PROPOSITIONS

1. American students will report greater intentions to open their own businesses than will their Egyptian counterparts.

2. American students will report greater perceived levels of entrepreneurial training than their Egyptian counterparts.

3. American students will report greater perceived levels of entrepreneurial opportunity than their Egyptian counterparts.

4. American students will report greater confidence in their abilities to successfully operate their own businesses than their Egyptian counterparts.

5. American students will possess greater entrepreneurial propensity than their Egyptian counterparts.

FINDINGS

The first step in the data analysis stage concerned the validation of the scale used to measure entrepreneurial propensity. The eleven EP scale items were factor analyzed and results provided moderate support for the existence of one construct consisting of the three hypothesized factors. The factor analysis is displayed in Table 1. Factor loadings varied from .31 to .69 for the one-factor model. Loadings varied from .54 to .79 on the items on their appropriate subscales. The first column in Table 1 lists the factor loading of each item on the EP scale. The next three columns provide the loadings on the three subscales following an oblique minimum rotation of the scale. The final column consists of loadings of the items when three one-factor models were generated (i.e., one for EDU items, one for SLF items, and one for OPP items). Regression factor scores were calculated for these three one-factor models as well as for the overall scale and utilized to represent the three EP dimensions in the analysis.

As shown in Table 1, coefficient alpha for the EP scale was calculated at .71; alphas for the EDU, SLF, and OPP subscales were .61, .67, and .63, values which lend moderate support to the internal consistency of the subscales considering the small number of items on each one.

Table 2 displays a correlation matrix for all of the variables collected in the survey. As the table shows, there were a number of significant relationships.

The first proposition was partially supported. American students expressed greater intentions to open their own businesses both immediately after graduation (PLAN1) and within five to ten years following graduation (PLAN2). However, no differences were found in intentions to open businesses ten or more years following graduation (see Table 3).

The remaining propositions were fully supported. American students reported greater levels of each of the three dimensions of entrepreneurial capacity--education (EDUX1), perceptions of entrepreneurial opportunity (OPPX1), and self-confidence (SLFX1)--as well as the overall measure (ENTX1). In addition, American students were more likely to plan to operate their own businesses both immediately after graduation (PLAN1) and within ten years after graduation (PLAN2). However, there were no significant differences in long term plans for new venture creation.

There appear to be several viable explanations for the differences found between the two samples. The American educational establishment--and particularly business schools-provides a balance between careers in "the corporation" and careers as entrepreneurs. Although improvements in the American system are needed, it nonetheless offers solid exposure to the opportunities that exist as an independent player in the business community.

The greater perceived entrepreneurial opportunities among American students were probably justified for several reasons. Although complaints about government bureaucracy have almost become an American pastime, they do compare to similar woes in the Egyptian environment. Egyptians complain that any requests for government services result in waits of at least several days. Once a man went to the Egyptian Society for Insurance and Pensions to secure the proper pension for his ill, retired father. The office worker demanded that papers be produced to prove the man is alive. Two weeks later the appropriate papers were delivered to the same employee, who then asked that papers be provided proving that the father is not dead (Hosni & Shams, 1995).

A second justification for the greater perceived opportunities is the difference in per capita income. Egyptian estimates vary, but most economists agree that the mean per capita income in Egypt is well under $1000. Although living costs and other variables suggest that direct comparisons of income are not appropriate, the availability of disposable income is clearly limited in the Egyptian economy and concentrated in the hands of a much smaller segment of the population than in the U.S. Hence, the identification of profitable and sizable markets, even where accurate economic data exists, is difficult.

The difference in self confidence may be attributable to the lack of a strong, independent business heritage in Egypt. Government ownership and partial ownership of key enterprises is common in Egypt. On the contrary, U.S. governmental agencies control few industries, and stories of average, hard working Americans finding success in private business ownership abound. Hence, it is not surprising that Americans preparing to enter the work force are less intimidated about the prospects for failure than are their Egyptian counterparts.

The differences in plans for new venture creation also require elaboration. Perhaps the most interesting finding in this area is that Egyptian students are not as likely to pursue entrepreneurial careers within ten years of graduation, their long term plans for business ownership are similar to those of the American students. Perhaps this reflects a feeling of confidence about the direction in which the country is headed over the long haul, juxtaposed with a realization that present opportunities are limited.

CONCLUSIONS AND FUTURE RESEARCH

The present study provided insight into factors associated with college students and their plans to pursue new venture creations. Variances of entrepreneurial propensity and direct plans for starting one's own business varied significantly between American and Egyptian college students.

Several avenues for future research have been identified. First, although the EP scale represents a solid step in the assessment of entrepreneurial intentions, additional modifications are needed. Several factor loadings were below the desired .70 level and may be improved by modifications in wording, the addition of items, or elaboration of the EP construct. Such development is germane. Further, comparisons of loadings among samples from more institutions may also be insightful.

Second, research has considered EP levels in only a few countries. With the recent opening of Eastern European nations, as well as the developing regions of Africa and the Middle East, studies examining a greater number of countries and cultures would be useful. Findings would help identify why EP levels may vary among similarly developed nations.

Finally, the link between education programs--particularly those in business schools-and EP needs to be assessed. The present study does not address how entrepreneurial training or course work influences the individual's career choice. Such research could aid in the development of more effective curricula for preparation to enter independent business careers.

APPENDIX

SURVEY ITEMS *

Education (EDU) items

1. If I decided to go into business for myself, I wouldn't know where to start.

2. I am developing the skills necessary to successfully operate my own business.

3. Going into business for myself is too risky.

4. I'm not sure how I would keep up with all aspects of running my own business.

Personal Confidence (SLF) items

1. Starting one's own business is a great opportunity for success.

2. I do not like working for someone else.

3. I believe I could operate a successful small business.

4. I would rather operate a small business than be a middle manager with a larger organization.

Entrepreneurial Opportunity (OPP) items

1. It is possible for small business owners to be successful in today's economy.

2. I have a lot of respect for successful small business owners.

3. With all of the regulation and red tape today, it is simply too difficult to run a profitable business.

Intentions items (PLAN)

1. I plan to operate my own business immediately after graduation.

2. I plan to operate my own business within five or ten years after graduation.

3. I plan to operate my own business, but not after ten or more years of other experience.

Demographic items

1. What is your class? (freshman, sophomore, junior, senior, graduate) (AGE)

2. What is your overall GPA (A=4.0)? (GPA)

3. What is your gender? (GENDER)

4. What is your age? (AGE)

5. How many years of full-time employment experience do you have? (FTEMP)

6. How many years of part-time employment experience do you have? (PTEMP)

* Non-demographic items were scrambled and accompanied by a five-point Likert scale (1=strongly agree, 5=strongly disagree).

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John A. Parnell, North Carolina Central University

William "Rick" Crandall, Concord College

Michael Menefee, Purdue University

TABLE 1
THE ENTREPRENEURIAL PROPENSITY SCALE

Item EP Scale EP Factor Loadings

Explained Loading EDU SLF OPP

EDU1 .39 .78
EDU2 .69 .54
EDU3 .68 .66
EDU4 .30 .75
SLF1 .60 .61
SLF2 .31 .66
SLF3 .69 .72
SLF4 .55 .68
OPP1 .60 .66
OPP2 .43 .76
OPP3 .47 .79
Coeff Alpha .71 .61 .67 .63

Item Subscale * % Var

Explained Loading Eigenvalue

EDU1 .75 3.13 28.4
EDU2 .68 1.60 43.0
EDU3 .73 1.54 57.0
EDU4 .72 .83 64.5
SLF1 .65 .77 71.5
SLF2 .64 .66 77.5
SLF3 .77 .59 82.9
SLF4 .70 .55 87.9
OPP1 .66 .51 92.6
OPP2 .71 .45 96.6
OPP3 .78 .37 100.0
Coeff Alpha

TABLE 2
CORRELATIONS **

 PLAN1 PLAN2 PLAN3 GPA
ENTXI

PLAN1 1.0000
PLAN2 .2768 * 1.0000
PLAN3 .2045 * .3608 * 1.0000
GPA -.0285 -.0138 .0197 1.0000
AGE .0381 .0507 .1872 * .1804 *
FTEMP .0282 -.0344 .1292 * .0594
PTEMP -.0239 .1121 * .1159 * -.0715
SLFX1 .2113 * .4032 * .062 .0253
OPPX1 -.0391 .1917 * -.1302 * -.0406
EDUX1 .3028 * .2671 * .067 -.0393
ENTX1 .2318 * .4061 * .0277 -.019

 AGE FTEMP PTEMP
ENTXI

PLAN1
PLAN2
PLAN3
GPA
AGE 1.0000
FTEMP .7888 * 1.0000
PTEMP -.0521 -.2492 * 1.0000
SLFX1 -.0808 -.1002 * -.0438 1.0000
OPPX1 -.1204 * -.1217 * -.0874 .2707 *
EDUX1 -.1273 * -.2142 * .0724 .3327 *
ENTX1 -.1204 * -.1850 * .0006 .7651

 SLFX1 OPPX1 EDUX1
ENTXI

PLAN1
PLAN2
PLAN3
GPA
AGE
FTEMP
PTEMP
SLFX1
OPPX1 1.0000
EDUX1 .2775 1.0000
ENTX1 .6571 .7401 1.0000

* Significant at the .05 level.

** SLFX1, OPPX1 and EDUX1 are factor scores for the three one-factor
scales.

ENTX1 is the factor score for the overall one-factor EP scale.

TABLE 3
T-TESTS OF SIGNIFICANCE

 Americans Egyptians
 (n=204) Std (n=147) Std
Variable Mean Dev Mean Dev

PLAN1 3.70 1.27 4.12 0.99
PLAN2 3.00 1.33 3.58 1.22
PLAN3 3.19 1.25 3.30 1.26
SLFX -.12 1.02 .17 .95
OPPX1 -.23 .88 .32 1.07
EDUX1 -.14 1.05 .19 .91
ENTX1 -.22 1.00 .32 .92
AGE 23.0 5.19 21.9 2.85
FTEMP 2.87 4.82 1.08 1.24
PTEMP 3.30 2.24 3.14 1.96

 Significance
Variable T-Value Level

PLAN1 3.47 .001
PLAN2 3.95 .000
PLAN3 0.82 .411
SLFX 2.66 .008
OPPX1 5.16 .000
EDUX1 3.14 .002
ENTX1 5.01 .000
AGE 2.46 .015
FTEMP 5.07 .000
PTEMP 0.71 .475