The Relevance of Transition to Free Market, Attitude towards Money, Locus of Control, and Attitude towards Risk to Entrepreneurs: A Cross-Cultural Empirical Comparison
Farid, Mamdouh, International Journal of Entrepreneurship
This paper compares an emerging market (Egypt) with a developed market (U.S.A.) in terms of their impact on entrepreneurial characteristics and behavior. The differences are discussed along the dimensions of transition to free market, money and its cultural meanings, locus of control, and attitude towards risk. A number of hypotheses are tested using a sample of MBA students from Egypt (n = 214) and the USA (n = 112). The result with its implication is discussed.
This paper compares a less development country (LDC) on a transition stage to free market (Egypt) with a development country (DC) (U.S.A.) in terms of their impact on entrepreneurial characteristic and behavior. In order to stimulate economic growth and employment, entrepreneurial traits and activities are often encouraged by countries in terms of creating appropriate environment and market conditions which may enhance the rate of entrepreneurship (see for example, Farid, 2007, for more discussion on this issue). Research support the notion that national entrepreneurial characteristics and entrepreneurial opportunities are stimulated by multiplicity of cultural and environmental factors (e.g., Hayton et al, 2002). The AmericanEgyptian entrepreneurial differences are discussed in this paper along the dimensions of transition to free Market, attitude towards money, locus of control and attitude towards risk. The next sections discuss these themes. Hypotheses, to be tested later, are introduced throughout the discussion.
TRANSITION TO FREE MARKET
Factor of Market Liberation
To understand dynamic environmental changes which are occurring especially in transition economies, studies use leading theories of Institutional Development Theory (IT) and Resource- Based Theory (RBT) ( Wright et al, 2005). From the IT perspective (North, 1990), successful transformation to free market requires positive changes in political, economic, social, and governmental institutions. Traditional IT international research suggests that these entities play major role in developing new business in emerging economies (e.g., Hoskisson et al, 2001). For example, successful transition requires greater government openness and accountability and changes in power relations and cultural conditions to enable individuals to see and use market, economic, and financial opportunities. The emerging economy in Egypt is engaging government, communities, bureaucrats, and market and is supported by a number of international (e.g., World Bank) and intergovernmental and international NGOs as agencies for change. Still, the market is lacking strong market institutions, access to technological inputs, and property right, among others (e.g., Fattah & Butterfield, 2006).
The RBT perspective (Barney et al, 2001) is concerned with how environmental tangible and intangible resources and capabilities, including human capital and organizational knowledge and learning, provide for hospitable environmental conditions that stimulate entrepreneurial characteristics and behavior. Elyachar (2006) notes that micro-enterprise lending and other projects intended to promote small business in Egypt have not been effective.
In addition, transition to free market should provide for more transparency, including greater disclosure, or that government, institutions, and market resources become visible and explicit so that individuals can see through and get access to resources and opportunities. While there is a general trend of increasing demands for transparency in most Western countries, mechanisms for ensuring government transparency and accountability have yet to become established in the Arab region (Sakr, 2003). Nelson (2000) and Elyachar (2002) note that international NGOs are exerting influence on the World Bank to emphasize transparency issues of micro-credit lending, human rights, gender, and corruption. The lack of free market institutional environment in Egypt has resulted in lack of reporting and transparency of corporate economic and social performance (e. …