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‘Branson factor’ behind West’s lower entrepreneurship rates

richard branson

5 September 2017

  • New research shows international differences in entrepreneurship rates are partly due to cultural stereotypes about what constitutes the ‘ideal leader’
  • Countries where charisma is favoured and ruthlessness tolerated in business have the highest enterprise rates
  • Cultural leadership values could explain as much as half the difference in entrepreneurship rates globally

Western preferences for ‘charismatic’ business leaders like Sir Richard Branson and Mark Zuckerberg could explain lower levels of entrepreneurship than other parts of the world, new research suggests.

The study by academics at Aston University in Birmingham shows that Western societies have an in-built preference for maverick entrepreneurs who inspire and motivate others with their bold personal vision.

In contrast, the more ‘ruthless’ qualities of many successful business leaders – such as a willingness to engage in hostile competition to achieve their goals - find greater approval in non-Western cultures.

Countries with the highest rates of entrepreneurship globally are those that can simultaneously tolerate this ‘ruthlessness’ and find charismatic leadership highly desirable. Latin American and South East Asian nations were found to favour both traits and also exhibit the highest rates of entrepreneurial activity. Around 25% of the adult population in the Philippines and Bolivia are entrepreneurs, compared to around 7% in the UK.

Moreover, the researchers found that as much as half the difference in entrepreneurship rates across the world could be down to these differences in leadership ideals, after controlling for other factors such as gender, education level and GDP per capita.

The research analysed entrepreneurship decisions of representative samples of over 560,000 people in 42 countries using data from the Global Entrepreneurship Monitor (GEM) and Global Leadership and Organizational Behaviour Effectiveness (GLOBE) studies.

Two main styles of leadership, or ‘culturally-endorsed implicit leadership theories’ (CLTs) – ‘charismatic’ and ‘self-protective’ – were found to be the biggest determinants of entrepreneurship.

Self-protective leaders take a hard-nosed approach to getting what they want, readily engaging in competition and even conflict while simultaneously embracing ‘face-saving’ behaviour so that their relationships with others are not badly tarnished. This style is seen as more acceptable in ‘Confucian’ Asian, Middle Eastern and Latin American cultures.

The same leader attributes are generally frowned upon in more egalitarian Northern European and ‘Anglo-Saxon’ cultures, which view self-protective leadership negatively. In these cultures, leaders are expected to be approachable, to de-emphasise differences in social status and to consult with their followers.

All cultures globally view charismatic leadership favourably. But when combined with a positive view of self-protective leadership, this appears to create the best environment for entrepreneurs to flourish.

The research, published in the Journal of Business Venturing, won the 2016 GLOBE Robert J. House Best Research Paper Award.

Ute Stephan, Professor of Entrepreneurship at Aston Business School and Director of the Aston Centre for Research into International Entrepreneurship and Business, who led the research, said the findings could help higher education bodies and enterprise support agencies tailor their programmes to reflect cultural preferences for certain types of leader.

She said: “Our findings are consistent with the multiple and often conflicting demands that entrepreneurs face. On the one hand, they need to be cooperative to initiate change, which is made easier by cultural support for charismatic leadership. On the other hand, they need to be self-protective and competitive in order to avoid being exploited.

“With this research we find that cultural stereotypes about ideal leaders drive entrepreneurship rates – and that there are indeed different ‘types’ of entrepreneurial cultures. So one size does not fit all.

“For instance, the idea of entrepreneurs as charismatic leaders seems a very Western ideal and entrepreneurs who fit this model certainly thrive in Western countries such as the UK or US. But the same is not true for South America, Asia and the Middle East.

“There are important lessons for us as educators regarding how we present leaders and entrepreneurial role models. There are also important lessons for entrepreneurs who trade across borders – they are going to be perceived as more competent and desirable collaboration partners if they comply with the dominant leadership ideals in the host countries.”

ENDS

Notes to editors

1. Chart


Entrepreneurship rates by country (from Global Entrepreneurship Monitor 2016 – data available 
here)

gem graph

2.    Research publication

Professor Ute Stephan’s full paper is published in the Journal of Business Venturing, available here.

It is co-authored by Saurav Pathak based at Kansas State University, USA.

3.    Global Entrepreneurship Monitor (GEM)

The Global Entrepreneurship Monitor is the largest single study of entrepreneurial activity in the world. GEM is a not-for-profit academic research consortium that aims at making high quality information on global entrepreneurial activity readily available to as wide an audience as possible. Based on a harmonized assessment of the level of national entrepreneurial activity for all participating countries, the research involves exploration of the role of entrepreneurship in national economic growth. In the UK, data collection and analysis for GEM is led by Professor Mark Hart from Aston Business School and Professor Jonathan Levie at the University of Strathclyde, Glasgow, Scotland. http://www.gemconsortium.org/

About Aston University

Founded in 1895 and a University since 1966, Aston University has been always been a force for change. For more than 50 years the University has been transforming lives through pioneering research, innovative teaching and graduate employability success. Aston is renowned for its opportunity enabler through broad access and inspiring academics, providing education that is applied and has real impact on all areas of society, business and industry.

For more information, call James Tout on 07989 610276 or email james@journalista.co.uk