k b -- THE CULTURE OF ENTREPRENEURSHIP Edited by Brigitte Berger IESPRwss San Francisco, California © 1991 Institute for Contemporary Studies Printed in the United States of America on acid-free paper. All rights reserved. No part of this book may be used or reproduced in any manner without written permission except in the case of brief quotations in critical articles and reviews. This book is a publication of the Center for Self-Governance, dedicated to the study of self-governing institutions. The Center is affiliated with the Institute for Contemporary Studies, a non­ partisan, nonprofit public policy research organization. The analyses, conclusions, and opinions expressed in ICS Press publica­ tions are those of the authors and not necessarily those of the Institute, or of its officers, directors, or others associated with, or funding, its work. Inquiries, book orders, and catalog requests should be addressed to iCS Press, 243 Kearny Street, San Francisco, CA 94108. (415) 981-5353. Fax: (415) 986-4878. For book orders and catalog requests call toll free in the contiguous United States: (800) 326-0263. Distributed to the trade by National Book Network, Lanham, Maryland. Library of Congress Cataloging-in-PublicationData The Culture of entrepreneurship / edited by Brigitte Berger. p. cm. Includes bibliographical references and index. ISBN 1-55815-159-1 (cloth) 1. Entrepreneurship. 2. Political culture. I. Berger, Brigitte. HB615.C85 1991 305.5'54-dc2O 91-33622 CIP Book design by Herman + Company. Index by Shirley Kessel. 10 9 8 7 6 5 4 3 2 1 Contents FOREWORD vii Robert B. Hawkins,Jr. PREFACE ix Peter L. Berger 1. Introduction 1 Brigitte Beger 2. The Culture of Modern Entrepreneurship 13 Brigitte Berger 3. The Discovery and Interpretation of Profit Opportu'iities: Culture and the Kirznerian Entrepreneur 33 Don Lavoie 4. Culture and Entrepreneurship in Less-Developed Countries: Ethnic Trading Networks as Economic Organizations 53 Janet T. L anda 5. The Economic Fruits of the Spirit 73 David Martin 6. Entrepreneurs Embattled: Barriers to Entrepreneurship in South Africa 85 Gillian Godsell 7. Indian Entrepreneurial Culture: Bengal and Eastern India 99 Ashis Gupta 8. Culture and Entrepreneurial Behavior among the Overseas Chinese 137 S. G. Redding vi Contentu 9. The Revival of Small Business in Europe 157 Richard Whitley 10. The Rocky Road: Entrepreneurship in the Soviet Economy, 1986-1989 189 Walter D. Connor NOTES 211 INDEX 237 Foreword This book explores two things that are critical to self-governance: entrepreneurshipand culture. Why entrepreneurship? From the stalls of a Moroccan open market to the high-tech firms of California's Silicon Valley, entrepreneurship is transforming the globe in ways that many who study the world have yet to grasp. Perhaps they were expecting a different sort of revolu­ tion, one in which the chariot of development-whether socialist or capitalist-would be drawn by the state. But as The Culture of Entre­ preneurship shows, we are now witnessing the rise of an alternative development mechanism. In Latin America and Asia, Eastern Europe and Africa, a bottom-up revolution-what the Peruvian economist Hernando de Soto calls El Otro Sendero ("The Other Path")-offers a new world for the dispossessed. Why culture? The study of entrepreneurship has heretofore been dominated by economists. It is not to denigrate their many achievements to say that when it comes to entrepreneurship, economics doesn't give us the whole picture. !ndeed, many economists intentionally ignore what some think is the most important element of entrepreneurship: the influence of social forces such as morals, norms, and values. These form the framework within which individuals can pursue entrepre­ neurial opportunities. Contrary to what some think, capitalism is not evil or amoral. In its proper form it encourages such virtues as hard work, cooperation, resolve, deferral of gratification, and openness to new thinking. It is the juncture between entrepreneurship and culture that those who are interested in self-governance find most fascinating. The Culture of Entrepreneurshipshows that in certain circumstances, entrepreneur­ ship produces its own culture. It is important that this be cultivated, not least because it runs counter to the culture of bureaucracy that permeates mature organizations, both public and private. The whole point of entrepreneurship is to get around problems that others find impassable. These barrier:; are as often institutional as they are technical. To improve one's lot by making the woild work better appears to be a universal aspiration. Given the chance, Brigitte Berger reminds viii Foreword us, "individual entrepreneurs seem almost to emerge out of nowhere in societies without a history of entrepreneurship." The Culture of Entrepreneurshipis about unleashing that power worldwide. Robert B. Hawkins, Jr., President Institute for Contemporary Studies Preface The Institute for the Study of Economic Culture at Boston University, founded in 1985, is a research center for the study of the relations between culture and economic processes. From its inception it has been especially concerned with the cultural contexts of entrepreneurship. The chapters in this book were originally prepared for a conference, "The Culture of Entrepreneurship," sponsored by the Institute and held in Indianapolis, Indiana, January 26-27, 1990. The Cdture ofEntreprveurshipbrings together contributions to this topic from individuals who have conducted research under Institute auspices with contributions by others, some of rhem critical of an emphasis on culture. The conference and the preparation of the volume were funded by a grant from the Lilly Endowment. I would like to express my great appreciation to the Endowment, and personally to Gordon St. Angelo, for this indispensable help. As the topic dictates, the authors of the following papers come from a variety of disciplines and institutions. Brigitte Berger teaches sociology at Boston University. Don Lvoie and Janet Linda are economists at George Mason University and York University (Toronto), respectively. David Martin is a sociologist recently retired from the London School of Eco­ nomics. The following four authors are all connected with business schools: Gillian Godsell at the University of the Witwatersrand (Johannesburg), Ashis Gupta at the University of Calgary, S. G. Redding at the University of Hong Kong, and Richard Whiley at Manchester Business School. Walter Connor teaches political science at Boston University. The research projects by Martin, Godsell, Gupta, and Redding took place under Institute auspices. The results of the Martin and Redding projects are contained in two recently published books, in much greater detail than could be presented here: David Martin's Tongues of Fire: The Explosion of Ptestan­ tism in Latin America (Blackwell 1990) and S. G. Redding's The Spirit of Chinese Capitalism (de Gruyter 1990). Peter L. Berger, Director Institute fot the Study of Economic Culture Boston University /I1 Brigitte Berger 1 Introduction This book explores the cultural dimensions of modern entrepre­ neurship. All of the contributors-economists, anthropologists, sociologists, political scientists, and management experts-have been impressed by the importance of cultural factors at work in entrepreneur­ ship, just as they have been impressed by the culture-producing capacity of the modern entrepreneur himself. The authors are in broad agree­ ment that a fuller appreciation of the many-faceted role of the modern entrepreneur can no longer be achieved within the confines of tradi­ tional academic disciplines; and although the authors do not agree on every point, they are in accord thaz a more comprehensive approach to entrepreneurship must be interdisciplinary, comparative, and, above all, must take culture seriously. It would be presumptuous here to call for a "paradigm shift" in the study of the modern entrepreneurial phenomenon, but the contributors are persuaded that the existing lacunae on factors of culture in the voluminous iiterature on entrepreneurship need to be redressed. It is hoped that the interdisciplinary, cross-cultural research outlined in this volume will clarify entrepreneurship and the revolutionary forms of cognition and practice embodied in it. Such a revised understanding of modern entrepreneurship is long overdue. Yet the accumulated data from disparate fields of inquiry strongly suggest that the modern entrepreneur is not only extremely productive economically, but also one of the prime carriers of peculiarly modern modes of cognition and behavior that are fundamental to modern industrial society. 2 TiHE CULTURE OF ENTREPRENEURSHIIP We know that throughout human history most people in most places most of the time have existed in conditions of considerable misery. Only with the rise of capitalism and its productive dynamics was a fundamental improvement in the living standard of the general population engendered in particular societies of the West, slowly expanding through Europe and North America. For generations social scientists have been preoccupied with the identification and analysis of factors responsible for tile spectacular transformation of the West. Although scholars and visionary politicians continue to debate the causes of tile "great transformation," there can be little doubt that tile progressive improvement in the living conditions and general well­ being is real. Regardless of the significance of particular material and cultural