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Does cultural diversity help or hinder entrepreneurs? Evidence from eastern Europe and central Asia

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  • Elena Nikolova

    ()
    (EBRD)

  • Dora Simroth

    (European School of Management and Technology)

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    Abstract

    This paper studies the effect of religious and linguistic diversity in a given locality on individual entrepreneurial behaviour, and finds that cultural diversity and entrepreneurship follow an inverted U-shaped pattern. We make three theoretical contributions. Unlike previous research, we are able to analyse both the attempt to establish an entrepreneurial business (‘entrepreneurial trial’) and success of entrepreneurs. Moreover, we argue that the two types of diversity matter at different stages of entrepreneurship – religious diversity is tightly linked to entrepreneurial trial, while linguistic heterogeneity affects entrepreneurial success. In addition, by identifying a non-linear relationship between diversity and entrepreneurship, we put into perspective previous research that is divided on whether cultural heterogeneity positively or negatively affects firm, regional and country performance. We use a new survey data set that covers more than 30,000 households in eastern Europe and central Asia (the Life in Transition Survey 2010).

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    Bibliographic Info

    Paper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 158.

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    Length: 55 pages
    Date of creation: Jun 2013
    Date of revision:
    Publication status: Published in Working papers 158, European Bank for Reconstruction and Development
    Handle: RePEc:ebd:wpaper:158

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    Web page: http://www.ebrd.com/pages/research/publications/workingpapers.shtml
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    Keywords: entrepreneurship; transition region; diversity;

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