The Effects of Culture on Entrepreneurship: It Matters

By SBE Council at 22 June, 2023, 1:34 pm

SMALL BUSINESS INSIDER

by Raymond J. Keating –

Myriad issues and factors affect entrepreneurship, specifically, the decision to become an entrepreneur. And that includes assorted aspects of a country’s culture, including what we might call “pop culture.”

I was reminded of this when coming across an online article – titled “The TV You Watch When You’re Young Can Make You More Entrepreneurial” – about a new study at the Harvard Business Review.

What’s this about? It’s reported that two researchers – Michael Wrywich and Viktor Slavtchev – “studied TV signals in East Germany from the 1960s to 1989 and individual and local rates of entrepreneurship there after German reunification.”

The authors discovered that “people in households with access to West German broadcasts were more likely than other East Germans to launch companies later in life. That was especially true of those who were children or at the start of their careers.”

That’s fascinating.

In the interview, Professor Wrywich explained the reasons for doing this research:

“What you observe when you’re young affects how you behave when you’re older, and that includes the professional decisions you make. We know from other research that if you grow up around lots of entrepreneurs, you’re more likely to become one yourself. My colleague and I wanted to find out whether a similar effect extends to culture – specifically, to television. We thought that if you saw people on TV acting like managers or entrepreneurs, you might think more positively about those professions. You’d also see examples of how a market economy operates.”

In looking at the former East Germany from 1993 to 2016, the authors reported that “the rate of business creation was more than 10% higher in areas that had received broadcast signals from West Germany. It was greatest among people who were children or young adults when they’d watched the Western shows. And it persisted: The parts of the former East Germany that got TV signals from West Germany are still more entrepreneurial than those that didn’t.”

Wrywich explained the difference in television shows as follows:

“West German TV was a mix of domestically produced programs and American ones, such as Dallas. The shows weren’t necessarily about entrepreneurs; it’s not as though things like Shark Tank were airing, so East Germans weren’t going to learn how to start a business. But they could see how people made a living in a market economy, and they could see that entrepreneurial behavior might lead to a fortune. East Germany aired several ideological shows. A famous one was Black Channel: snapshots taken from West German programs and overlaid with commentary to show how bad life under capitalism supposedly was. The shows in the East were pretty uninspiring, so people tended to be drawn to Western shows if they were available.”

What about negative portrayals of entrepreneurs and market economies?

Might there be negative consequences for negative portrayals of entrepreneurs and those in business in other places? Wrywich said:

“There was an interesting analysis done by a marketing firm some years ago in Germany, where there’s a popular TV detective series called Tatort. The firm analyzed the murderers on the show by occupational background. Guess which group was in the top position? Entrepreneurs and managers. Professional gangsters were second. I don’t know if policy makers could affect such things, but our work indicates that these sorts of negative portrayals could hypothetically mean fewer new companies.”

Expanding from this study, Wrywich also pointed out that differences in even regional cultures within countries with similar laws and policies can have lasting effects on levels of entrepreneurship. He explained:

“You can see this in parts of Europe and the United States that were once home to coal mines or steel factories. When the coal and steel operations began, in some cases 100 years ago, everyone worked for large companies. Very few people worked for themselves. Even after the economies of those places changed, they had relatively low levels of entrepreneurship.”

Why would such effects be long lasting? Wrywich noted:

“We know that role models and peers matter: Your chances of becoming an entrepreneur are influenced by who’s around you. But we don’t have a systematic account of how the effect continues over time.”

Wrywich concluded: “Place and context really matter for entrepreneurship.”

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist and The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist.