Power, Individualism and Indulgence: How to Leverage Cultural Factors in Entrepreneurship Training
Throughout the year, NextBillion is organizing content around a monthly theme, dedicating special attention to a specific sector alongside our broader coverage. This post is part of February’s focus on education.
Cultural factors can influence just about every aspect of an entrepreneur’s journey: from how they seek funding, to how they deal with setbacks, to how aggressively they grow.
We compared our countries, the USA and the Philippines, to explore how cultural background influences entrepreneurs. The William Davidson Institute (NextBillion’s parent organization) is home to the Entrepreneurship Development Center and deploys instructors to emerging markets to train entrepreneurs and entrepreneurship faculty members/educators. In our experience, instructors must closely consider cultural differences to offer truly contextualized training. One size does not fit all in entrepreneurship training. But how exactly should cultural factors influence entrepreneurship training design?
Geert Hofstede’s cultural dimensions tool provides an ideal starting point. Input any two countries into the tool and you will find the similarities and differences across his six dimensions of culture. With the USA and the Philippines, we found a large difference across three dimensions: power distance, individualism and indulgence. We first explore how these differences might influence entrepreneurs in the Philippines and then look at how we can tailor entrepreneurship training accordingly.
Influence on entrepreneurs in the philippines
Power distance: Here the USA scores 40 and the Philippines scores a high 94 (out of 120). Those from high power distance countries tend to accept the notion that everyone has a set place in the hierarchy and that people in power are owed respect by virtue of their position. Titles and status are important. Conversely, those from low power distance countries expect power relationships to be democratic and participatory and are less likely to accept power inequalities.
How does this manifest itself in entrepreneurial activity? According to the Global Entrepreneurship Monitor report, Filipinos regard entrepreneurship “as a reliable means to improve one’s economic and social standing.” Entrepreneurship can be used as a tool to struggle for independence and increase one’s position. It seems logical that fewer people pursue entrepreneurship in high power distance countries, as it requires breaking out of traditional roles and structures to succeed.
Yet according to the GEM report, the Philippines is the 10th most entrepreneurial country in the world, with 10.5 percent of its population involved in entrepreneurship (compared with 4.3 percent in the USA). So the high power distance culture may actually drive some Filipinos to pursue entrepreneurship. In fact, studies indicate a positive effect on high power in low- and medium-GDP countries (such as the Philippines), due to two possible factors: (1) traditional hierarchies may soften some of the insecurities of entrepreneurship; and (2) entrepreneurship may provide an attractive alternative to the all-powerful boss more likely found in high power distance cultures.
Despite the high entrepreneurial activity in the Philippines, the 2014 GEM report indicates that a substantial percentage (29.4 percent of total early-stage entrepreneurial activity, or TEA) of enterprises are necessity-driven (compared with 13.5 percent of TEA for the USA). This implies that Filipino entrepreneurs start businesses because there are no better options to make a living. This contrasts with the USA, where 81.5 percent of TEA is classified as opportunity-driven (versus 70.5 percent of TEA in the Philippines). Furthermore, the 2013 GEM report cited the youth factor as strong in the Philippines: around 45 percent of early-stage entrepreneurs were 18-34 years old and mostly high school graduates. This contrasts with the USA, where a high rate of young college graduates and MBAs start businesses.
Individualism: Here our comparative bar chart again revealed a gaping difference: 32 for the Philippines, 91 for the USA. Countries high on individualism feature a loosely knit social structure in which people value personal achievement and self sufficiency; conversely, countries scoring low on this dimension are collectivist and stress group goals over personal ones.
When we think of entrepreneurship in the USA, we tend to think of the individual: Steve Jobs, Bill Gates, Mark Zuckerberg, Oprah Winfrey. These hero entrepreneurs all reflect the pinnacle of personal achievement and serve as role models for aspiring entrepreneurs in the USA. They embody the American ethos of the self-made man – or woman – who, through talent and determination, propels himself or herself to success. When entrepreneurship is invoked in the Philippines, the primary models are family businesses. There is not much premium on “making your mark” as an individual and, unsurprisingly, not many local entrepreneurs are elevated as inspirational examples. This may dampen the environment for entrepreneurial activity – at least the high-growth type. Furthermore, striking out on one’s own as an entrepreneur requires a certain amount of personal risk. Risk taking is not common in collectivist societies such as the Philippines. On the flip side, collectivist societies tend to have stronger social support networks. Thus, some people might be more risk prone, knowing that they can fall back on family support.
Indulgence: This third dimension placed the USA at 68 and the Philippines at 42. Societies with high indulgence scores have few constraints on the pursuit of fun and enjoyment of life; those with low indulgence scores restrain these pursuits through strict societal norms.
In the USA, the pursuit of enjoyment extends to the workplace: Americans feel the right to be happy at work. If they are not, they are likely to leave their workplace – and some of them will start a business believing they will be happier without their boss or office life. Conversely, in the Philippines, there is the ideal of “matiisin” – extreme patience and stoicism in the face of hardship. These values could hinder entrepreneurial engagement and make a Filipino entrepreneur satisfied with only a micro- or small-scale business. There is also the “bahala na” attitude – roughly, “come what may” or “everything will be provided for.” This can have two divergent influences: It can make Filipinos accepting of their suboptimal lot in life or, more positively, it can prompt them to jump into new situations and take risks, since a certain invisible force is controlling everything. Of course, it can also make them jump into new situations unprepared, assuming that everything will turn out fine.
Tailoring entrepreneurship training
These three cultural factors influence how an entrepreneurship training program should be designed for the Philippines. Let’s look at a few considerations:
Power distance: An entrepreneurial development program for Filipino entrepreneurs should aim to improve their access to resources as well as their skills. There should be technical, business training and mentoring components to these programs to empower younger, less-experienced entrepreneurs. Participants should be encouraged to venture into higher value-added enterprises and more innovative products.
Individualism: The program should show examples of Filipino youth who created successful businesses on their own (versus joined a family business, the more traditional path). Cases created for the program could emphasize what drove the entrepreneurs to start their own businesses and how they successfully navigated their journeys. The program should consider that collectivist societies can offer some cushion for risk taking, mitigating the fear of failure.
Indulgence: The program should offer examples of successful Filipino entrepreneurs who have countered “matiisin” by recognizing that they want to improve their lives and that starting a business could help them do so. Given the prevalence of the “bahala na” spirit, the program should also clearly lay out the roadblocks entrepreneurs typically encounter and discuss strategies for overcoming them.
Amy Gillett is vice president of the Education Initiative at the William Davidson Institute at the University of Michigan. Dinah Pura T. Depositario is a professor in the Department of Agribusiness Management and Entrepreneurship, College of Economics and Management, University of the Philippines Los Baños.
Photo: Kim Ian Dumagco at his goat’s milk-based cream cheese business startup in Los Baños, Laguna, from a case study written by Dinah Pura T. Depositario for WDI Publishing at the William Davidson Institute.