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Abstract
Purpose – This paper aims to analyze antecedents of entrepreneurship propensity in two separate studies, at individual and organizational levels. The first
study proposes that the effect of individual cultural values on entrepreneurial propensity is mediated by the locus of control. The second study focuses on
the interaction effect between the individual’s need for autonomy and a bureaucratic culture characterized by high centralization and high formalization.
Design/methodology/approach – The approach takes the form of surveys of business students and retail salespeople in Romania and regression
analysis.
Findings – Internal locus of control predicts entrepreneurship propensity. Mediation effects were not supported. Centralization and formalization
stimulate entrepreneurial propensity, especially in salespeople with a high need for autonomy. In general, the individual cultural values approach
generated weak results, while the organizational culture approach showed strong support for the hypotheses.
Research limitations/implications – A combination of push and pull effects determines an individual’s entrepreneurial propensity. Personality traits,
such as internal locus of control and need for autonomy predict entrepreneurial propensity. But individuals are pushed into entrepreneurship by
negative factors, such as dissatisfaction with existing employment.
Practical implications – In transitional economies, entrepreneurial ventures are relied on to sustain a high growth rate, to serve the unmet needs of
the population, and to create jobs. Multinationals operating in transition countries could improve recruiting decisions by hiring managers with a high
internal locus of control and could then allow them decision-making power to satisfy their need for autonomy.
Originality/value – The paper analyzes antecedents of entrepreneurship propensity in two separate studies, at micro (individual) and meso
(organizational) levels, but set within the same transitional economy. This macro context is posited to shape both organizational culture and individual
cultural values and personality traits.
Entrepreneurship is the goal-oriented process whereby an to one-half (Zacharakis et al., 2000). Moreover, these results
individual identifies marketplace opportunities using creative are supported in both developed economies and emerging
thinking, secures resources, and adapts to the environment to economies (Berkowitz and DeJong, 2001). Given the
achieve desired results while assuming some portion of the beneficial impact on the economy, it is important to
risk for the venture (Smart and Conant, 1994). Individuals understand what factors at the national, organizational, and
animated by entrepreneurial spirit are the driving force individual levels predict entrepreneurial propensity.
creating new markets and promoting economic development At least two major approaches dominate entrepreneurship
(Schumpeter, 1968; Minniti, 1999). Estimates of the impact research. One approach has focused on national cultural
of entrepreneurial activity on the differences in growth rates antecedents to explain variation in entrepreneurship across
countries. This approach has generated inconsistent results
across countries range from one-third (Reynolds et al., 1999)
(Mueller and Thomas, 2001), and more recently, researchers
have begun to focus on other macro-level antecedents such as
The current issue and full text archive of this journal is available at environmental uncertainty (Baum and Locke, 2004) and the
www.emeraldinsight.com/0885-8624.htm institutional environment (Busenitz et al., 2000; Baughn et al.,
2006).
A second stream of research has focused on individual-level
Journal of Business & Industrial Marketing entrepreneurial traits, such as need for achievement, risk-
23/6 (2008) 405– 415
q Emerald Group Publishing Limited [ISSN 0885-8624] taking propensity, and innovativeness, as correlates of being or
[DOI 10.1108/08858620810894454] desiring to be an entrepreneur (Ahmed, 1985; Begley and
405
Entrepreneurial propensity in a transition economy Journal of Business & Industrial Marketing
Cristian Chelariu, Thomas G. Brashear, Talai Osmonbekov and Adriana Zait Volume 23 · Number 6 · 2008 · 405 –415
Boyd, 1987; Bonnett and Furnham, 1991). This line of “reclaim the individual” by studying the links between
inquiry also has generated inconsistent results, prompting personal attributes and socialization practices or institutional
scholars to call for research that includes not only individual processes (Bond, 2002). This approach also allows us to
characteristics, but also situational or contextual variables confirm the external validity of measurement instruments for
(Gartner, 1988; Aldrich and Martinez, 2001). cultural dimensions at the individual level (Donthu and Yoo,
The present study is situated in a transition economy, a 1998).
context characterized by radical change and crisis, factors The second study, at the meso-cultural level, focuses on the
traditionally associated with the emergence of interaction effect between the individual’s need for autonomy
entrepreneurship (Schumpeter, 1968; Ardichvili and and a bureaucratic culture characterized by high
Gasparishvili, 2003). Macro-level, institutional factors centralization and high formalization (Dwyer and Oh, 1987;
determine the structure, roles, and “rules of the game in a Aiken and Hage, 1966) and inimical to entrepreneurial
society” and influence individual behavior (North, 1990). In manifestation. Bureaucracies are the most pervasive type of
western economies, the entrepreneurial environment is organizational culture among command economy firms and
“nutrient rich” (Shapero, 1985), including access to
their transformation is one of the greatest difficulties facing
information and to tacit knowledge, besides tangible
transitional firms.
resources, such as access to capital. The legal framework is
Entrepreneurship has been studied by scholars in various
designed to stimulate entrepreneurship and, from a
disciplines including anthropology (e.g. Stewart, 1991),
sociocultural perspective, entrepreneurs possess an almost
psychology (e.g. Shaver and Scott, 1991), sociology (e.g.
mythical, hero-like status (Welter and Smallbone, 2003). In
contrast, in transitional economies, new small and medium- Reynolds, 1991), economics (e.g. Kirchhoff, 1994) and
sized enterprises have often emerged in spite of the “formal” management (e.g. Stevenson, 1985). However, consensus has
political and economic institutional limitations (e.g. yet to be reached on the conceptual definition of this
Berkowitz and DeJong, 2001; McMillan and Woodruff, construct (Shaver and Scott, 1991). Some researchers
2002; Peng and Heath, 1996; Peng, 2000; Yan and emphasize the behavior of creating a new enterprise
Manolova, 1998). (Gartner, 1985) and others argue that personal
While “formal” limitations are gradually eliminated as these characteristics of the founders are fundamental to the
countries advance on the path to a market economy, deeper definition of entrepreneurial orientation (Timmons, 1978;
cultural transformations at the meso and micro levels may be Dunkelberg and Cooper, 1982). For example, the term
more difficult to bring about (Luthans et al., 2000). At the “potential entrepreneur” was used to describe individuals
meso (or organizational) level, transition processes, such as possessing traits, skills, and desires that can motivate
privatization, were shown to impact entrepreneurial outcomes entrepreneurial behavior (Krueger and Brazeal, 1994) or
through organizational-level transformations in structures and increase its likelihood (Mueller and Thomas, 2001; Mueller,
culture (Zahra et al., 2000). At the individual level, 2004).
entrepreneurship in transitional economies may still be Our dependent variable is entrepreneurial propensity,
limited by informal, normative constraints, many of them defined as an individual’s favorable predisposition towards
“remnants of socialist attitudes” (Lukasiewicz and Sicinski, new venture creation. Focusing on actual enterprise creation
1992, p. 116), such as apathy, learned helplessness, would greatly understate the entrepreneurial potential in
lawlessness and corruption, and, more importantly, the transition economies, because economic and institutional
attitude that private entrepreneurship runs counter to social constraints, such as lack of available credit, bureaucratic red
norms (Smallbone and Welter, 2001). On the other hand, tape, and lack of information are powerful deterrents for those
some scholars argue that the large size of the unrecorded who want to open a new business (Kaufmann et al., 1995).
economy in some countries could be interpreted as a “strong Even in a western setting, scholars found that there are many
reflection of entrepreneurial behavior” (Reynolds, 1991, potential entrepreneurs in an organization even if intentions
p. 58). to start a new venture are not overtly displayed (Brazeal,
This paper contributes to the existing debates within the
1993).
entrepreneurship literature by analyzing antecedents of
From a practical perspective, entrepreneurship is
entrepreneurship propensity in two separate studies, at
particularly important in emerging and transitional
micro (individual) and meso (organizational) levels, but set
economies. In this context, entrepreneurial ventures are
within the same transitional economy. This macro context
relied on to sustain a high growth rate, to serve the unmet
shapes both organizational culture and individual cultural
values and personality traits. needs of the population, and to create jobs needed to absorb
The first study posits that the effect of individual cultural the excess numbers in the workforce resulting from the
values on entrepreneurial propensity is mediated by an restructuring of state-owned firms (Thomas and Mueller,
individual’s locus of control. We attempt a departure from the 2000).
existing theoretical tradition by analyzing Hofstede’s (1980) We begin with a study of the relationship between
classic dimensions of culture (power distance, masculinity, individual values, locus of control and entrepreneurial
uncertainty avoidance, and individualism) at the individual propensity. Then, a second study follows, exploring the
level. Hofstede’s typology was developed originally by interaction effect of a salesperson’s need for autonomy and
measuring employees’ personal values, aggregated using the level of bureaucracy in the firm on the entrepreneurial
Inkeles and Levinson’s (1969) modal personality concept to propensity of the salesperson. In the methodology section, we
obtain scores for cultural norms at the national level. Lately, discuss the data collection, the data analysis, and the results.
cultural psychologists have emphasized the need to move Finally, we conclude the paper with limitations and
away from “wrestling with the ghosts” of Hofstede’s legacy to implications for researchers and managers.
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Entrepreneurial propensity in a transition economy Journal of Business & Industrial Marketing
Cristian Chelariu, Thomas G. Brashear, Talai Osmonbekov and Adriana Zait Volume 23 · Number 6 · 2008 · 405 –415
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Entrepreneurial propensity in a transition economy Journal of Business & Industrial Marketing
Cristian Chelariu, Thomas G. Brashear, Talai Osmonbekov and Adriana Zait Volume 23 · Number 6 · 2008 · 405 –415
tolerance in accepting power hierarchy (Kale, 1993). Donthu (Hofstede, 1991, p. 51). In an individualistic society, people
and Yoo (1998) posit that in a society with large power have a great sense of autonomy and personal sustainability,
distance, authoritarian and coercive power strategies perform while in collectivist societies, people place importance on
well. Morris and Pavett (1992) found that non-coercive, group and social needs (Hofstede, 1980). Individualistic
participative management works well with Americans societies such as the US value job specialization, individual
(because of the small power distance norm) but not with rewards, flexibility, fairness, self-orientation, a competitive
Mexicans (characterized by a relatively large power distance climate, and self-confidence. On the other hand, collectivistic
norm). Jaeger (1986) explains this phenomenon by pointing societies such as China value cooperation, harmony,
out that team building and team decision-making activities in friendship, interdependence, conformity, forgiveness, and
general cannot be effective with employees characterized by social usefulness (Donthu and Yoo, 1998). Consequently,
large power distance because employees from different individual-based training is found to generate better
departments do not feel comfortable interacting face-to-face performance for American managers and group-based
with higher-ranking team members. training is found to lead to better performance for Chinese
People with high power distance tend to accept power managers (Earley, 1994).
hierarchy (Kale, 1993), tend to avoid arguments with senior People from a highly individualistic society tend to be
management, and rely on formalized and centralized
independent and self-reliant. They believe in their ability to
authority. This could indicate that the higher the power
control their achievements and success in life. In general,
distance in individuals, the more they will perceive that the
previous studies found lower internal control in countries that
outcomes of their activities depend on people in power and
are more collectivistic than the USA, such as Russia
not on themselves.
(Kaufmann et al., 1995), China and Yugoslavia (Mueller
H4. The greater an individual’s power distance, the greater and Thomas, 2001) or Hong Kong (Ralston et al., 1993).
the “Powerful other” locus of control.
H5. The greater an individual’s power distance, the lower H7. The greater an individual’s collectivism, the lower is
the “I” dimension of locus of control. the “Internal” locus of control.
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Entrepreneurial propensity in a transition economy Journal of Business & Industrial Marketing
Cristian Chelariu, Thomas G. Brashear, Talai Osmonbekov and Adriana Zait Volume 23 · Number 6 · 2008 · 405 –415
Figure 2 The salesperson’s need for autonomy in a bureaucratic organization – moderating effects
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Entrepreneurial propensity in a transition economy Journal of Business & Industrial Marketing
Cristian Chelariu, Thomas G. Brashear, Talai Osmonbekov and Adriana Zait Volume 23 · Number 6 · 2008 · 405 –415
used a sample of retail salespeople. The retail sector witnessed between the locus of control variables and entrepreneurial
the first manifestations of entrepreneurship in transition propensity. H1 received weak support, showing that Internal
economies. By the nature of their position, retail salespeople locus of control has a positive relationship with
are in direct contact with both the market and the Entrepreneurial Propensity. On the other hand, H2 and H3
entrepreneurial venture. Thus, they have better access to were not supported, indicating that Powerful other and
information, because they are better able to spot Chance are not predictors of entrepreneurial propensity.
opportunities and also are familiar with the constraints H4 and H5 looked at the effects of Power distance on the
faced by entrepreneurs. Powerful other and Internal dimensions of locus of control.
A total of 500 questionnaires were distributed in various The results show that both hypotheses were supported, at
commercial areas of the city, with an accompanying cover 0.01 and 0.1 significance levels respectively. Thus, Power
letter stating that the study was a joint project between distance is negatively related to Internal, and positively related
universities in the USA and the local university. The cover to Powerful others dimension of locus of control.
letter also informed the potential respondents that the survey H6 predicted a negative relationship between Uncertainty
aimed to obtain salespeople’s perspective on various avoidance and Chance, while H7 predicted a negative
organizational factors that affect retail salespeople in a relationship between Collectivism and Internal locus of
transition economy. Each salesperson received a monetary control. These two hypotheses were not supported.
incentive equivalent to the price of a cup of coffee. The data H8 and H9 propose positive relationships between
collection yielded 426 returned questionnaires. Of those, 29 Masculinity and two dimensions of locus of control: Internal
were found to have incomplete data or to have been and Powerful others. H8, linking masculinity and the Internal
completed by someone other than a salesperson. The usable dimension of locus of control, was not supported, while H9,
sample of 397 represents a 79 percent response rate. linking Masculinity and the Powerful others dimension shows
The majority of salespeople responding to the survey were weak support.
female (80 percent). The average age of respondents was 31 Overall, the impact of cultural values on locus of control can
with ages ranging from 19 to 42. More than half were married be characterized as weak. The only strong result links Power
and had children. Of the salespeople, 77 percent had high distance and the Powerful others dimension of locus of
school education or some college and 10 percent had college control, with weak support for the Power distance – Internal
degrees. and the Masculinity – Powerful others relationships.
These weak results suggest the need to consider moderating
Measures variables. Recent studies suggest gender can play such a
Measures for personal values were adapted from the Cultural moderating role, especially with respect to the masculinity
Values (CV) scales that capture Hofstede’s dimensions at the dimension (Mueller, 2004). Age is also a potential moderator,
individual level (Donthu and Yoo, 1998; Yoo and Donthu, because younger generations, socialized during transition, are
2002; Sayrac-Yaveroglu and Donthu, 2002; Kwok and likely to espouse different cultural values than older
Uncles, 2005). As shown in the Appendix, Power distance, generations.
Collectivism, Uncertainty Avoidance and Masculinity were One of the aims of Study 1 was to explore the potential
measured with four to six items each, and had Cronbach mediator effect of locus of control between cultural
alphas exceeding the recommended 0.7 threshold. To dimensions and entrepreneurial propensity. To this end, we
measure the locus of control dimensions, we used the scale ran a regression using cultural dimensions as independent
developed by Levenson (1974) and validated by Kaufmann variables and entrepreneurial propensity as the dependent
et al. (1995) in a study of entrepreneurship in Russia. The
variable. As shown in Table I, none of the regression
Internal, Powerful other, and Chance dimensions were
coefficients were significant. Furthermore, Sobel tests using
measured with four, eight and seven items respectively and
the results in Table I showed no significant mediation effects.
had Cronbach alphas of 0.66, 0.92 and 0.87. Finally,
entrepreneurial propensity was measured with a scale used
by Kaufmann et al. (1995). The alpha for this two-item scale Study 2
was 0.78. Study 2 proposed three hypotheses, one covering the direct
For the second study, centralization and formalization were effect of need for autonomy on entrepreneurial propensity,
measured with two scales of five and six items respectively, and the other two referring to the moderating effect of
adapted from Jaworski and Kohli (1993). Coefficient alphas centralization and formalization as dimensions of bureaucratic
for the measures were 0.76 for centralization and 0.87 for cultures.
formalization. The need for autonomy was measured with six As can be seen in Table II, the need for autonomy has a
items and had a Cronbach alpha of 0.83. Entrepreneurial significant positive correlation with the salesperson’s
propensity was measured with the same two items that were entrepreneurial propensity, thus confirming H10. In terms
used in Study 1, and had an alpha of 0.7. of the two moderating effects, only H11 is supported,
enabling us to conclude that centralization of the firm
increases the entrepreneurial propensity of salespeople with a
Analysis and results
high need for autonomy.
Study 1 The analysis of the results in Table II also reveals a
We ran four separate ordinary least squares regressions to test significant direct effect of centralization and formalization on
our hypotheses. The parameter estimates and the associated entrepreneurial propensity. These results imply that,
significance levels are shown in Table I. regardless of the individual salesperson’s need for autonomy,
In general, the results from Study 1 provided mixed support the level of bureaucracy in a firm’s culture tends to increase
for our hypotheses. H1, H2 and H3 assessed the relationships salespeople’s entrepreneurial propensity. In this case,
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Entrepreneurial propensity in a transition economy Journal of Business & Industrial Marketing
Cristian Chelariu, Thomas G. Brashear, Talai Osmonbekov and Adriana Zait Volume 23 · Number 6 · 2008 · 405 –415
Table II Need for autonomy – moderating effects factors, such as meeting the right people, which are beyond
the control of the individual and depend in great measure on
Main effects sheer luck. In contrast, in a Russian student sample, internal
Centralization 0.093 (1.8) * locus of control predicted entrepreneurial propensity
Formalization 0.123 (2.4) * * (Kaufmann et al., 1995). Our findings from a sample of
Need for autonomy 0.258 (5.1) * * * Romanian students found a similar (albeit weak) positive
effect of internal locus of control on entrepreneurial
Interaction terms propensity, as people with strong internal motivation to
Centralization 3 need for autonomy 0.17 (3.37) * * * succeed are more likely to create new ventures.
Formalization 3 need for autonomy 0.08 (1.62) Entrepreneurial propensity is an important factor for
Incremental R2 0.039 creating new ventures as well as developing an
F change 2.388 entrepreneurial culture within a large company. Our findings
Significance of F change 0.103 could be useful for multinationals operating in transition
countries, which could benefit from understanding local
Full model culture and its impact on creating joint ventures with local
F(5, 370) 12.9 entrepreneurs. This finding could lend itself to better
Significance 0.000 recruiting decisions when establishing a foreign subsidiary in
R2 0.150 a transition economy. If the strategic goal of a global company
Adj. R2 0.139 is to establish a local network, it should deploy an
Notes: * p , 0.1, * * p , 0.05, * * * p , 0.01; Parameter estimates are
entrepreneurial person with a high internal locus of control
standardized, with t-values in parentheses and allow this person considerable decision-making power to
satisfy her need for autonomy.
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Entrepreneurial propensity in a transition economy Journal of Business & Industrial Marketing
Cristian Chelariu, Thomas G. Brashear, Talai Osmonbekov and Adriana Zait Volume 23 · Number 6 · 2008 · 405 –415
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