Lindsay Hirschhorn
Econ 346/Phil 447
The Influences of Culture on Entrepreneurship: United States vs. China
Entrepreneurship as a solely western phenomenon is a commonly held, yet
sorely mistaken idea. While many believe American culture causes higher levels of
entrepreneurship in the west, when looked into further, culture has a different
effect on innovation and entrepreneurship. The consequences of traditional
cultures are seen in the types of entrepreneurship that a country tends to
participate in, rather than the rate of entrepreneurship found in that country. For
example, American culture focuses on individualism, as it values independence and
personal goals, while Chinese culture is based on Confucian principles of family and
community objectives. As a result of these distinct sets of values, entrepreneurship
in America is often manifested in new inventions, product innovations or small
businesses, while Chinese entrepreneurship tends to be found in innovative
management techniques within large companies, and particularly within the hightech industry. Furthermore, the two different cultures inspire similar traits in
entrepreneurs, and suggest that while cultures may differ, basic characteristics of
entrepreneurs remain constant throughout different countries.
Americans have historically been known for their individualist attitudes in all
aspects of life. In the mid-19th Century the American philosopher Ralph Waldo
Emerson urged Americans in his essay Self Reliance to “insist on yourself; never
imitate. Your own gift you can present every moment with the cumulative force of a
whole life’s cultivation; but of the adopted talent of another, you have only an
extemporaneous, half possession” (Emerson, 45). Emerson’s values and enthusiasm
about the individual’s capabilities have continued to prove themselves as part of
American’s lives today. In a study performed in the 1970’s at the European Institute
for Advanced Studies in Management in Brussels, the United States was found to be
the single most individualist country of the forty that were studied (Hofstede, 49).
This suggests that Americans are often “motivated by self-interest and achievement
of personal goals” (Morris, 598). Furthermore, Morris et al. put forth a theory of
individualism-collectivism that more completely encompasses the ideas of American
culture. As defined in the paper, Individualism and the Modern Corporation, Morris et
al. show that individualism-collectivism can be found in “employees who bring a
particular orientation, say individualistic, to an organization whose values are more
collectivist” (Morris, 599). Therefore, even in a bigger firm or generally large group
within society, Americans still bring to the table individualist attitudes that, in turn,
can have effects that will benefit a whole organization.
The effects of American individualism are exhibited in the active startup
culture present in the United States. Proof of this can be seen in entrepreneurial
literature and advice, which is often focused on how to create successful startups
and new businesses. For example, Steve Blank wrote an article entitled Why the
Lean Start-Up Changes Everything in which he explains how “new ventures of all
kinds are attempting to improve their chances of success by following its principles
of failing fast and continually learning” (Blank, 66). This entrepreneurial method is
directed towards, and particularly helpful for product innovators and entrepreneurs
in the startup world, as it relies heavily on consumer feedback and quick adaption to
new information. Furthermore, the Lean Start-Up Method requires a culture of
people who are willing to learn from failures and have a strong work ethic, which is
certainly true of those who live in the United States: “In some countries bankruptcy
spells social death. In America, particularly in Silicon Valley, it is a badge of honour”
(Economist). American individualism has instilled a strong sense of resilience in the
American culture, providing a fundamental basis for a method reliant on
perseverance. In an article in The Economist entitled The United States of
Entrepreneurs the author puts forth an interesting argument that solidifies the idea
and origin of individualism’s influence on the American entrepreneur:
"Entrepreneurialism is so deeply rooted in its history. It was founded and
then settled by innovators and risk-takers who were willing to sacrifice
old certainties for new opportunities. American schoolchildren are raised
on stories about inventors such as Benjamin Franklin and Thomas
Edison. Entrepreneurs such as Andrew Carnegie and Henry Ford are
celebrated in monuments all over the place… America's infatuation with
entrepreneurialism has deepened further of late. People like Bill Gates
and Steve Jobs have all the upsides of Carnegie and Ford without the
downsides—the useful products and the open-handed philanthropy
without the sweatshops and the massacres.” (The Economist)
American culture has instilled in its educators, students and citizens a sense of
heroism in those who have followed the Lean Start-Up Method, and more
specifically, who have successfully invented some tangible product. Rarely does a
student learn about a group of entrepreneurs, but nearly every student has read
about Bill Gates, or Steve Jobs, because these figures have such a strong sense of
independence and accomplishment.
Steve Jobs does serve as a very effective example of the entrepreneurial
industry in the United States. American Steve Jobs was the brains behind Apple’s
revolutionary iPhone. He focused on an innovation that would make people fall in
love with his product. This innovation was a simple, mobile phone that “changed the
rules in the industry. A revolutionary 3.5 inch touch-screen interface placed
commands at the touch of users’ fingertips without a physical keyboard. The
iPhone’s entire system ran on a specially adapted version of Apple’s OS X platform.
Above all, users found it intuitive to use” (Kim, 10). This entrepreneurial venture
that Jobs entered into pursued a product innovation that was mass marketed and
loved because of its ease of use, one of the iPhone’s most important innovations.
While he had certainly failed early in his career, Jobs as the quintessential American
entrepreneur persevered and eventually became incredibly rich by providing an
innovative product that consumers fell in love with. He introduced innovative
features that influenced an entire industry and was able to market them using
entrepreneurial skills he gained by learning what not to do first, before he became
the CEO of Apple. He is world renowned for his success in revolutionizing the mobile
phone industry by creating a new product that other companies envied and
emulated.
In contrast to the independence of American entrepreneurs, Chinese
entrepreneurs are influenced by their historical, Confucian values and culture.
Confucian principles support values of persistence, resourcefulness and family. They
do not value profit seeking and focus particularly on the community, rather than the
individual. In Morris et al. terms, Chinese culture falls more on the collectivist side,
as it “condemns pure profit-seeking as well as advocates group orientation,
conformity and respect for authority” (Liao, 29). It is easy to assume that some of
these Confucian principles are inconsistent with entrepreneurial ventures, however
they are only inconsistent with certain types of ventures. For example, with strong
family values, the Chinese are often hesitant to participate in entrepreneurial
ventures that will involve excessive amounts of funding because “tight kin
relationships—as customary in Confucian cultures—tends to make the average
Chinese person hesitant in accepting money and sacrificing equity control to a
stranger” (Liao, 27). Consequently, unlike American entrepreneurs who benefit
from the funding of venture capitalists, the Chinese fund their enterprises through
personal and family funds. Rather than deterring entrepreneurship, these values
inspire a different type of entrepreneurship than is traditionally found in the west.
Chinese Confucianism has played a big role in management
entrepreneurship. Because Chinese entrepreneurs place more value on a communal
group, such as a large firm, their innovations often take shape in reorganization
within a company. Management entrepreneurship usually requires less capital than
traditional startups, which is necessary to the Chinese entrepreneurs who are
hesitant to borrow money that they do not have to finance their ventures. This sort
of process innovation employs both the values and resources that China offers. An
example of this is the utilization of traditional mass-production techniques to break
up and speed up the innovation process (Economist). These large manufacturing
companies often use their access to their vast work force and their traditional values
and customs to innovate. The use of these tools as an approach to entrepreneurship
is more creative and innovative than it may seem; “this sort of accelerated
innovation may not generate stunning breakthroughs. But that is not what it is for.
China’s success has depended on its ability to be a ‘fast follower’, copying foreign
ideas and turning them into mass-market products” (Schumpeter). Therefore,
although this type of entrepreneurship takes a very different form than that of the
American startup, it is still innovative in producing new processes that generate
new outcomes. Furthermore, entrepreneurship within a large company
encompasses Confucian principles of community. Unlike the individualistcollectivist method that Americans follow in innovation within a large company,
where the individual has a self-motivated reason to pursue an entrepreneurial
solution, Chinese entrepreneurs have a more communal mindset. While the
outcomes can be similar within the context of a large firm, the processes and initial
motivations differ based on culture.
Another result of Chinese Confucianism is the entry into specifically hightech sectors of entrepreneurship. American-like startups are looked down upon in
Chinese culture because “traditionally, merchants have occupied the bottom rung of
Chinese society, and this position was reinforced under the Maoist persecution of
the bourgeois” (Liao, 28). However, the Chinese have been found to participate in
Internet startups and technological innovation. Since the Internet and technology
sector is relatively new and growing very fast on the global scale, the Chinese have
begun to accept it as a higher status industry, rather than characterizing it as
traditional merchant work. Additionally, these types of ventures require low
manufacturing costs, important to entrepreneurs who are hesitant to borrow
money. The technology sector is also one that in particular, benefits from research
and development (Bian, 27). Similar to the ways in which Chinese culture promotes
management entrepreneurship, research and development can follow similar
patterns, as it is a process innovation, rather than a product innovation.
China gets involved in American Steve Jobs’ innovation on the manufacturing
side. The Chinese company, Foxconn, produces thousands of iPhones every day by
employing one million Chinese workers to work in exceptionally efficient
production lines. Because the manufacturing business, specifically in China, is so
competitive, companies like Foxconn are “always looking to develop new materials,
processes, and business models” (Manker). For example, Foxconn does not use
machines to make their products, but people, to ensure consistent quality. While
they have not created the innovative product, they have created the innovative
process of the exceptional, mass production of it. Without Foxconn and its incredible
capacity to create processes that churn out thousands of iPhones per day, Apple and
Jobs would not have been able to put their product innovation into action.
Another manufacturer that has used management innovation to improve
their productivity is WuXiAppTec, a drug company that has applied the massproduction technique to the innovation process itself. This company has created a
type of assembly line for innovating different parts of a process or product by
assigning different groups to work on different parts of a larger project (Economist).
Additionally, unlike American companies that use beta tests on their products,
WuXiAppTec releases their products straight into the public for immediate feedback
and more useful research and development. This is another process innovation that
helps the Chinese increase their efficiency. It is unlike American beta testing with
products such as the iPhone, which are kept secret in order to improve their
products to maximize profits once they are released. Both at FoxConn and
WuXiAppTec, Chinese innovators, are less concerned with the recognition of their
innovations, and more with maintaining their image and status among the
competition by increasing productivity. Working within a community of a large
company and maintaining status among a community of competitors are Confician
principles that the Chinese value very highly.
It is also important to note that not all Confucian or American principles are
consistent with the principles of entrepreneurs. For example, Chinese values
condemn profit seeking and self-motivation for pursuing ventures. While many
assume that entrepreneurs enter into their respective fields to pursue profits, this is
not a universal characteristic. Astebro et al. clarify this further by explaining how
“the fact that individuals enter and persist in entrepreneurship despite low risk
adjusted returns suggests that standard theories of risk and return provide an
incomplete basis for entrepreneurship and may need to be complemented with
richer foundations” (Astebro, 50). Thus, although the culture does not support profit
seeking, this is reconciled by the fact that entrepreneurship often does not return
high profits because of the disproportional risk that entrepreneurs experience. The
anti profit seeking culture can also be found in their focus on process innovations.
The goal of management entrepreneurship is often efficiency, rather than pure
profits. It is the behind the scenes aspect of industries, rather than the flashy, profit
making products that Americans are often drawn towards.
Similarly, not all American culture is consistent with entrepreneurial values.
Morris et al. discuss the drawbacks to an overly individualist culture: “a focus on
pure individualism will likely result in strong incentive for entrepreneurship, but
will also produce gamesmanship, zero-sum competition, sequestering of
information, and the chaotic pursuit of tangential projects” (Morris et al, 600).
Therefore, while the United States is one of the most individualist countries in the
world, it seems as though entrepreneurship should not be as present or successful
because participants would be overly competitive, driving each other to fail rather
than succeed. However, analogous to Chinese anti profit seeking culture, American
individualism can be reconciled with entrepreneurial culture using of Morris et al.’s
idea of individualism-collectivism, that self motivation within an organization can
have beneficial effects on the overall firm. This idea follows closely the theory that if
the individuals participating in the firm succeed, the firm will succeed as well.
What can be seen from the effects of culture on entrepreneurship is a
profound theory of entrepreneurs. Clearly, the individualist culture of the United
States and the collectivist culture of China, influenced by Confucianism, are radically
different. However, entrepreneurship exists in both countries, suggesting that there
are some similarities that lead to this economic phenomenon. While the cultures
differ, the effects that they have on people inspire similar character traits, which are
common among entrepreneurs all over the world. As Anisya Thomas and Stephen
Mueller argue in their article A Case for Comparative Entrepreneurship, “to form new
ventures, entrepreneurs require foresight and energy, passion and perseverance,
initiative and drive” (Thomas, 290). While these may not be specifically cultural
values, they are all traits learned from certain aspects of a culture. Through
Confucian encouragement of communal and familial ties, the Chinese have learned
loyalty and perseverance, two traits that are necessary in entrepreneurs because an
entrepreneur is almost never successful in their first venture and needs to be
dedicated in order to further pursue it until the point of success. Furthermore,
Americans, while living in a self-motivated culture, have learned to strive for
achievement and take the initiative, important to entrepreneurs who must be
confident as they take on unusually high risks. Many of these characteristics are the
results of two very different cultures, but carry the same moral principles that are
inherent in all entrepreneurs.
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