Are There Cultural Determinants of Entrepreneurship?

Edited by Rajkamal Iyer and Antoinette Schoar

in International Differences in Entrepreneurship

Published by University of Chicago Press

Published in print June 2010 | ISBN: 9780226473093
Published online February 2013 | e-ISBN: 9780226473109 | DOI:
Are There Cultural Determinants of Entrepreneurship?

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This chapter explores the role of entrepreneurial culture in determining contractual outcomes among entrepreneurs in countries where the legal environment makes contracts very difficult to enforce. Entrepreneurs from different communities vary in how they conduct business and negotiate contracts. Culture is an important factor in explaining how people from different backgrounds negotiate business deals. Across all communities, prices are lower when there is a match between the entrepreneur and wholesaler. However, there is no difference in the level of up-front payment, which suggests that community affiliation does not seem to function as a trust-building device but seems to invoke social norms for “fairer treatment.” There is a lot of variation in the types of individual who start businesses, and it might not be easy to predict who among these will be successful and how their transition from self-employment to larger businesses will proceed. While the underlying challenge for every investment decision is to differentiate the good from the bad projects, the difficulties might be especially increased for small businesses.

Keywords: entrepreneurial culture; cultural determinants; stationary industry; up-front payment; self-employment

Chapter.  15431 words. 

Subjects: International Economics

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