Why are Some Nations More Entrepreneurial than Others? Unraveling the Link Between Cultural Tightness-Looseness and New Firm Creation
42 Pages Posted: 16 Jun 2022 Last revised: 25 Jul 2023
Date Written: July 24, 2023
Abstract
Grounded in cultural systems theory, we evaluate the role of cultural variation along the tightness-looseness continuum as a potential explanation for cross-national differences in the propensity to engage in entrepreneurship. Employing a novel research design that instruments for cultural tightness-looseness, we investigate whether greater cultural looseness explains higher rates of new firm creation using global data on entrepreneurship rates from national business registries. Our results reveal that the construct of cultural tightness-looseness explains 40 percent of the variation in new firm creation rates per 1000 people in the working age population in a sample of 57 nations. Nations with higher cultural looseness also exhibit stronger cultural support for entrepreneurship, greater entrepreneurial opportunity perception, and greater entrepreneurial aspirations, on average, than those with lower cultural looseness.
Keywords: culture; entrepreneurship; opportunity recognition; entrepreneurial firms; international entrepreneurship; entrepreneurial behavior; entrepreneurial orientation
JEL Classification: L26, M13, O57, O44, Z13
Suggested Citation: Suggested Citation