Southeast Asian culture, human development, and business competitiveness.

• Author: LaVan, Helen

ABSTRACT

Competition and entrepreneurship are driving forces in the development of economic systems. They create jobs, new opportunities to generate value, and lead to the fulfillment of personal career and life goals. As such, it is important to understand the basic economic and cultural factors that influence these activities in developing economies. We undertook a series of analyses in an examination of a heterogeneous sample of economic zones in Southeast Asia. Results illustrate relations between national culture, human development, and business and growth competitiveness. Implications hold that human development and power distance are enablers of entrepreneurial activities in these cultural and national settings. Our contribution is instrumental to development of public policy and regulatory guidelines for facilitating entrepreneurial activity in the developing economies of Southeast Asia.

Keywords: International, Entrepreneurship, Competition, Hofstede, Asia

INTRODUCTION

The Asia-Pacific region is distinguished by discontinuous and rapidly changing innovation, geopolitical forces, and international trade policy. The resulting business environment has been marked by competition, economic conflict, government intervention, and strategic alliances across cultural and national boundaries. Friction and uncertainty created by these conditions bears upon the operational aspects of many types of organizations conducting business in the fast-developing Asia Pacific region. Moreover, the international business research literature has not given much formal attention to the relations between human development (HD), national culture, and entrepreneurial activity. As such, the specific entrepreneurial climates of Asia-pacific countries are virtually unexamined (Tan, 2004). Research in this topic area promises to generate evidence instrumental for guiding policy toward more effective encouragement of entrepreneurial activity in those regions. In this paper, we focus on 12 economic zones in the Asia-pacific region to generate such evidence.

Competition and entrepreneurship are driving forces in the development of a nation's market and economic systems (Kirzner, 1973). International entrepreneurship research has delineated some factors that promote innovation and entrepreneurship across national and cultural boundaries (Shrader, Oviatt, & McDougall, 2001; Zapalska & Edwards, 2001). As well, research on human resource decision making, organization studies, and business policy has found reliable relations among antecedents and outcomes of entrepreneurial activities (Bucar, Glas & Hisrich 2003; Cherry, Lee, & Chien 2003). We incorporate all these foundations in this undertaking. Our contribution helps raise understanding about the linkages between organizational and policy decisions and entrepreneurial activity in 12 specific Southeast Asian locales (China, Hong Kong, India, Indonesia, Japan, Malaysia, the Philippines, Singapore, South Korea, Taiwan, Thailand & Vietnam). The principal question we address is, what is the relative importance of human development and national culture to entrepreneurial activities? We measure those activities based on country scores on the Human Development Index (HDI: United Nations Human Development Program), Growth Competitive Index (GCI:World Business Forum) and the Business Competitive Index (BCI:World Business Forum).

BACKGROUND

Entrepreneurial activity is important to economic growth and effective management practices are critical for all organizations in developing economies. The cultural and ethical forces of nations in which such organizations are embedded also weigh upon these activities. To this end, indices such as the HDI, BCI, and GCI measure the key aspects of national economic vitality. In what follows we organize prior research and theory in categories reflecting these three indices and review the relevant literature that shaped our study.

HUMAN DEVELOPMENT

A country's level of human development refers to national life quality achievements. Life quality contains three principal dimensions: life expectancy, literacy rates, and school enrollments, and GDP. Research on the linkages between these aspects of human development and entrepreneurial activity has generated evidence that literacy rates and education are associated with entrepreneurial activity. For example, entrepreneurial firms utilizing higher levels of technology achieve faster employment and revenue growth when venture team members have higher education (Baum, Locke & Smith, 2001). Research examining human capital linkages with entrepreneurial activity operationalizes education and years of schooling as a measure of human capital (Bruderl, Preisendorfer & Ziegler, 1992; Cooper, Gimeno-Gascon & Woo, 1994; Gimeno, Folta, Cooper, & Woo, 1997).

The results of research examining the linkages between education, venture creation (Evans & Leighton, 1989), and the discovery of opportunities (Daviddson & Honig, 2003) are mixed. However, it has been noted that the measures used in such research do not have adequate sensitivity for detecting the effects of human capital in different entrepreneurial contexts (Dimov & Shepherd, 2005). Thus, using more established measures such as the HDI may offer better operationalization of education and literacy than the usual scales used in entrepreneurship research. A national HDI ranking reflects a nation's living standards beyond commercial health and productivity. As living standards are not exclusively tied to material well-being and not wholly indicative of pure productivity, the HDI offers a measure of business climate, especially in terms of affordances available to individuals who may wish to undertake a new business venture.

GLOBAL AND BUSINESS COMPETITIVENESS

The Global Competitiveness Report (GCR) is an annual publication by the World Economic Forum (WEF). The GCR analyzes, interprets, and ranks national business and industry growth rates for 102 countries. Its two principal indices are the Business Competitiveness Index (BCI) and the Growth Competitiveness Index (GCI). The BCI evaluates current productivity of a country as a measure of its economic health. The BCI framework is based on microeconomic foundations reflecting the level of sophistication by which domestic and foreign companies operate and compete. It reflects the quality of the commercial environment in which companies operate by indexing the national spending of a nation's businesses. It reflects the hospitability of a country to business and how well companies are able to exploit their environments. The WEF describes such quality of the commercial environment in terms of marketing, availability of venture capital, intensity of local competition, and quality of local suppliers (Maidment, 2004).

The GCI is concerned with underlying conditions for business growth and viability forecasted over five years as reflected in new venture startups and business expansion. It provides an overview of factors critical to driving productivity and competitiveness. The factors fall into nine dimensions. A principal dimension among them is innovation, the key component in entrepreneurship (Drucker, 1985). The framework has been used to examine national growth and competitiveness from many angles Journal of Industry, Competition and Trade, 2006). Large scale research and technical reports utilize the GCI to assess new business activity in emerging markets. For example, Radelet (2004) undertook a comparative analysis of Mozambique based on delineation of developmental patterns in mature national business environments. Its dimensions have been also used in competitive analyses of emerging markets. For example, these analyses include the Chinese textile and apparel manufacturing industry (Smook, 2005) and the developing economies in eastern Europe (Yuliya, 2007).

Given the international applications of the GCI and the BCI, national culture is relevant when utilizing the frameworks to explain business activity in developing economic systems. In what follows, we introduce national culture and also the nature of entrepreneurial activity as we conceived it in this study.

NATIONAL CULTURE

A national culture reflects the norms and values held by its members. One common model of culture used in business research includes five...