Entrepreneurial culture: essence and items

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ENTREPRENEURIAL CULTURE: ESSENCE AND ITEMS

Leontjeva L.S., Sizova Yu.S.

1PhD in Economics, Professor, 2Postgraduate student, Plekhanov Russian University of Economics

Аннотация

В статье рассматривается предпринимательская культура с точки зрения ее значимости для развития малого и среднего бизнеса. Отмечаются факторы, замедляющие развитие предпринимательства в России и обоснован тезис об основополагающей роли институциональной среды в развитии бизнес-процессов. Авторы приводят различные точки зрения к определению «предпринимательская культура». Проведено теоретическое осмысление термина «предпринимательская культура», в результате которого сформулирован авторский подход к определению как самого понятия, так и его значения для развития малого и среднего бизнеса в России.

Ключевые слова: Предпринимательская культура, предпринимательская деятельность, институциональная среда, институциональный подход, формальные/неформальные институты.

Abstract

The article focuses on Entrepreneurial Culture and its significance for Small and Medium Businesses development. The reasons of a Russian Business Development slowdown are determined and the point about the major role of Institutional Environment is established. The authors go behind differing professional views on definitions of `Entrepreneurial Culture'. An academic interpretation of the term `Entrepreneurial Culture' is given and, as a result, the authors' views are set forth not only towards the notion itself, but towards its value for Russian Small and Medium Businesses development.

Keywords: Entrepreneurial Culture, Business Activity, Institutional Environment, Institutional Approach, Formal/Informal Institutions.

To understand the clear meaning of the notion “Entrepreneurial Culture” it makes sense to turn to the concept `Culture' itself.

By one of various definitions, ` Culture serves as an estimate and belongs to such personality features which would be specified not as Culture but as a Level of Culture more precisely”[1, p.18]. There is a great variety of `Culture' definitions, it thus seems reasonable to refer to its encyclopedic implication, wit: `Culture is a specific way of human activity organization and development presented in material and spiritual products, in the system of social norms and institutions, in moral values, in total attitude towards environment, relationships between themselves and one selves' [2, p.231]. Cherenkov V. brings forward the definition of Culture accepted by many universities in the USA: `Culture is a mosaic of human life' [3, p.452]. Erasov B. defines Culture as `a specific system of norms, values and meanings distinguishing one society from another (or various parts of society - social or professional status), promoting its integration and ensuring its originality' [4, p.34].

On the one hand, within the framework of the problem at issue, it is obvious, that Economy, Management and Law have certain priority in shaping ways of Business Processes development. On the other hand, it should not go without mention, that Business Environment has cultural importance for doing business. Toyne B. and Walters P. note that `national markets are considered in terms of their economic, trading, political and legal environment. However market requirements and opportunities cannot be exclusively defined on the basis of information and data on these environmental changes. The markets and consumer market behavior are exposed to cultural factors' [5, p.379].

Entrepreneurial Culture is influenced by environmental factors, among which it is important to distinguish such cross-cultural differences as:

· business practice,

· policy,

· the law,

· government control,

· economy,

· competition,

· infrastructure and

· technology.

Thereupon the interpretation of `Culture' is construed in international business context at multiple levels:

1. Microenvironment (intra-corporate culture);

2. Mesic environment (intercorporate communication culture)

3. Macro-environment (relevant to extra-corporate culture).

In this context Entrepreneurial Culture may be defined as `the way some group of people solves problems and dilemmas' [6, p.6]. According to business-focused approach of Terpstra V. and David K., Culture is a studied, distinguished, insuperable and interconnected set of characters making the classified culture covers. These set influences orientations for members of some community. These orientations all totaled stipulate fulfilling the tasks set before any community that battle to survive [7, p.6].

Entrepreneurial Culture also plays a key role at the economic entity level. It provides not only high prestige to the enterprise, but boosts efficiency, advances products/services quality improvement and as a result raises entrepreneurial income.

According to Lapusta M. Entrepreneurial Culture is a set of principles, procedures, methods of Business Activity implementation by entities according to the laws in place, codes of business conducts, ethical and moral rules, standards of behavior at doing of civilized business [8, p. 234].

According to the German scientist Ryuttinger R., Entrepreneurial Culture is a system of commonly nourished and real beliefs and concepts of values. Concepts of values allow to realize what is important to some particular enterprise, and concepts provide insights how this enterprise should operate [9, p.33]. As defined by Kuzmina E., Entrepreneurial Culture entails the following items:

- tangible items (an enterprise level from the point of view of management and information technology);

- spiritual items (a set of entrepreneur's competencies , professional experience, professional knowledge of a businessman, know-how application, habits, commercial sense);

- personal qualities (possibility of gain, the degree of economic freedom);

- institutional aspects (social values and regulations, including beliefs and convictions). [10, p. 30].

Culture of Business Activity defines the climate, managerial style, relationship and values within a certain enterprise.

The fundamental nature of Culture in some particular organization takes shape in instructions, hosted rituals and ceremonies and examples of informal behavior. The role of Entrepreneurial Culture is connected with a solution of two main issues:

1. to contribute into survival in specific social and economic environment and

2. to ensure internal integration for achievement of goals set.

Entrepreneurial Culture shaping takes years, it is dynamic and ever-improving [11, p. 178].

There are different types of entrepreneurial culture. Thus, Ryuttinger R. distinguishes the following categories:

1. Culture of Commerce

Culture of Commerce is characterized by prompt feedback and rather small risk. Young and energetic people who throw things against the wall and see what sticks often join this sphere. These people are friendly, without great non-material values, but they are externally attractive. They skillfully use eloquence, addressing buyers with certain degree of humor. Willing communication with each other and exchange of opinions do this sphere of culture communicative, causes a sensation of interconnection, supports a community, comrady spirit.

1. Beneficial Trades Culture

Beneficial Trades Culture is characterized by prompt feedback from successful (or bad) deals and high /average financial risk. This type of culture is typical for the spheres where people strike bargains for security transactions, means of payment, raw materials etc. One can come across the items of this culture in such industries as fashion, beauty, professional sports, advertising and high risk venture funding.

2. Speculative Culture

Its spheres create favorable conditions for the businessman's subculture. He acquires new traits of character, such as combativity, aggressiveness, backbone in decision-making, competing behavior. A need to hide emotions and sensitivity arises.

3. Investment Culture

Investment Culture generally shows itself in industry, mainly in fuel branches and production of capital goods, construction, investment banks, etc. This type of culture is purely future-oriented. Representatives of this sphere are careful, prudent, patient and persistent. They are forced to overcome rather long period of uncertainty in the conditions of the minimum feedback. There is the atmosphere of respect of authority and professionalism at the level where the decisions of paramount importance are made. As a rule, people here stick to the once decisions made and arrangements agreed upon.

4. Administrative Culture

Administrative Culture manifests itself in public service, at enterprises, in major administrative companies, and also banks and insurance companies. Its representatives are usually careful and thorough. They are pedantic, captious and at the same time flexible and adaptable. Communication in spheres of Administrative Culture is characterized by thoroughness and emphasized hierarchy [9, p.33].

As far as Russia is concerned, it is worth mentioning that Institutional Environment in Russia is traditionally hostile for entrepreneurial development and Institutional Culture has not taken shape yet. According to the Business Project (Doing Business, World Bank) for June, 2014 Russia has the 62-nd grade on the Ease of Doing Business Index out of 189 countries (for comparison: Singapore - 1, the USA - 7, China - 90). As for the Ease of International Trade, Russia has the 115-th grade (if compared to Singapore - 1, the USA - 16, China - 98) [12].

The Institutional Environment is constantly in the making . Paffer M. and McCarthy J. noted, that instability and poor legal system , excessive regulation, inadequate infrastructure for business are the parts of the `labyrinth' through which the Russian businessmen have to pass from start-ups and throughout doing business [13, p.635].

Such researchers as Radayev, 1994; Chepurenko, 2012; Shirokova, Sokolov, 2013; Kleiner, 2012; Osipian, 2012; Wales, Shirokova, Sokolova, Stein, 2015 have more than once brought up the question of Institutional Environment role in Entrepreneurial Development. Kikhlgren A. tried to gain insight on what can slow down Small and Medium Businesses Development in Russia and offered two explanations:

1. Russian businessmen have less experience and skills in doing business. It is connected with lack of Entrepreneurial Tradition and a long period of communism;

2. The second explanation lies in the peculiarities of Russian Business Environment , where there is no fixed set of rules for `the game' (they are not clear and vague) and entrepreneurship itself often turns into a pursuit of a rent or illegal business. It is a consequence of a numerous obstacles in the environment, including high level of corruption, adverse legislative system and a lack of financing [14, p.199].

Institutional Environment study and its influence on Entrepreneurial Development becomes one of the major research directions. Special attention is drawn to specifics of complex and rapidly changing interaction between institutional factors and developing countries institutions. Such authors as Veblen T., Rous R., North D., Scott V., Williamson O., whose works were devoted to institutional and neo-institutional economies, laid the basis of the Institutional Environment core role. In the last decades studies based on Institutional Approach are being held. This fact is caused by transformation processes that take place in emerging economies and Russia also fits into this group. Meyer J., Peng M., Smallbone D. reasoned the importance and relevance of this approach in the emerging economies context. The works of such Russian scholars as Kleiner K., Tambovtsev V., Shastico A., Yasin E. are also devoted to institutional aspects.

Institutional Environment is unique for each country. It creates `rules of games in the society or, more formally, restrictions which structure human relationship … [and] define and limit individuals' choice' [15, p. 159]. Individuals influence Business Development and behavior of firms, regulating their interaction and defining a context for executive decision-making. Institutions are meant to regulate individuals' behavior. The Institutional Environment, in its turn, is a set of political, social and economic conditions (rules) influencing emerging businesses and their development which form a basis for production, exchange and distribution [16, p.345].

Thus, firms are dependent on that National Institutional Environment in which they were `given rise' and develop now, and this dependence is especially characteristic of small ones, and for the lack of resources they have no opportunity to change it. It is considered that in emerging economies Institutional Environment plays a special role from the point of view of speed and dynamism of changes undergoing, which can have unpredictable consequences for business [17, p.77].

According to Institutional Approach, institutions are urged to:

· reduce uncertainty in the environment,

· establish order,

· set up a framework in which economic activity has to be carried out [18, p. 137].

In the literature Institutions are generally divided into two groups:

1. Formal (laws) and

2. Informal (traditions, standards of behavior) [15, p. 237].

These Institutions appear to be the rules of conduct supported by enforcement mechanism designed to induce individuals to their execution.

Formal Institutions are in fact a set of written or formally accepted rules and regulations which make economic and legal system of the country. These rules are set and covered by public law - enforcement mechanism to regulation compliance, which can be established by judicial procedure.

Informal Institutions are traditions, social norms, unwritten rules of behavior. They are historically induced and they are preserved by means of various training mechanisms (for example, parents may transfer knowledge about `how it is done around in the society'. In case of unwritten rules, some individual or collective sanctions may play the role of enforcement mechanisms (for example, denial of assistance or `you-come-tomorrow' basis).

In case of Informal Rules, personal or collective sanctions can act as mechanisms of coercion (for example, refusal in the help or behavior by the principle “you come tomorrow” that can force the individual to obey to the established informal rules). In other words, penalties for divergence from informal institutions are developed spontaneously [19, p. 236].

Heinemann F., 2009, Freytag A. and Thurik R, 2007, have studied cultural differences and their impact on Entrepreneurship. For example, in one research it was noted that cultural features are the factors defining entry of the Russian small innovative firms into the international market [20, p. 102].

In other research (operating on the model of Hofshtede G.) the influence of National Culture on enterprise orientation was studied [21, p. 151].

It may be noted that Institutional Approach is more frequently used in Informal Institutions study. As it was stated in North's work, formal rules can change in a flash as a result of political decisions and court judgments, whereas informal restrictions (embodied in customs, traditions, and the code of conduct) are much more resistant to deliberate policy [15, p. 167].

Yet Formal Institutions analysis is extremely important in emerging economies because regulatory bodies create direct forces that influence:

· the context and

· strategic development of small and medium businesses,

· interaction between firms and the institutional environment [22, p. 246].

Tsukanova T. in her study makes a point, that Institutional Environment is the main research area within Institutional Approach and it is essential to comprehend its functions it is designed to carry out for creating favorable business conditions [23, p. 69]. Institutional Environment is meant to:

1. carry out framework regulation by means of limitation firms' options available;

2. ensure foreseeability and stability allowing the firms, that follow one or another rule set to:

- count on a certain result and

- assess expenditure for achieving this result;

3. arrange safety and security (In case some firm runs the business according to certain formal and set `rules of the game', it is more likely not to be prosecuted al law. Within the sphere of Informal Institutions it would not be under the ban of society);

4. promote minimization of the expenses connected with transaction security provision, including business partners search and tracking the subsequent implementation of the obligations undertaken;

5. promote transfer of knowledge in the society about the rules standing in the environment.

In case the above-mentioned functions are performed, it is possible to assume, that Institutional Environment is at a rather high level of development and its interaction with business can be estimated as effective. However, in many emerging economies Institutional Environment is characterized as adverse and it is still under transformation, so appears to be extremely unstable. In this regard in Russia a demand for Institutional Entrepreneurial Culture arose. By Institutional Entrepreneurial Culture we mean a body of codes of conduct, rules and institutions of entrepreneurial activity support, that shape the quality of both external and internal Entrepreneurial Environment at their multiple development levels.

It is worth mentioning, that sluggishness of Small and Medium Business in Russia is far from being connected with psychological characteristics of businessmen, but with Business Environment since this is exactly what puts breaks on Entrepreneurial Development most of all [24, p. 110].

The same argument is reinforced by Zhuplev A. and Stikhno D. in their research, in which they specify that Institutional Environment creates obstacles for business , and these obstacles remain unaltered for the last 15 years [25, p.27].

Consequently, the implication is that Institutional Culture has a demonstrative effect on the quality and level of Entrepreneurial Activity. It is possible to stimulate and generate a higher return from all tangible and intangible items of Entrepreneurial Culture by the way of introduction and adapting of Entrepreneurial Culture basic norms through Institutional Support.

entrepreneurship culture business

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