National Culture and Business Systems

Abstract

We extend existing research in cultural economics and offer a comprehensive analysis on the impact of culture on the structuring of business systems. In a series of cross-country comparisons, we show that national culture is statistically significant in determining the main business systems practiced in a country. Using the Schwartz cultural value model and data on the structuring of business systems, we analyze the impact of national culture on four dimensions of business systems – business strategies, firm-specific human capital, employee participation, and dismissal protection. According to our study, the impact of culture is considerable, having even stronger influence than financial systems. In a systemic approach we find that the bank-based business system is particularly related to the cultural dimensions of Autonomy, Egalitarianism, and Harmony, whereas the market-based business system is notably connected to Embeddedness, Hierarchy, and Mastery. Our findings suggest several implications for the comparative advantages of business systems and the choice of corporate strategies.

Keywords: business systems, innovation strategy, finance, national culture

JEL Classification: A13, D92, P51, Z10