Individualistic culture and entrepreneurial opportunities

The present paper evaluates the effect of the cultural trait “individualism” on opportunity entrepreneurship, using cross-country data from the Global Entrepreneurship Index (GEI). We use a combination of the fractional probit regression model and an instrumental variable approach to avoid biased estimates. Individualism emphasizes freedom, personal achievements, and encouragement of change, i.e., values related to the entrepreneurial spirit. Accordingly, we find that in individualistic countries opportunity entrepreneurship is higher. About half of the magnitude of this effect is transmitted indirectly because people in individualistic countries tend to perceive better opportunities and because those nations are more innovative. The direct effect seems to occur because people derive more utility from their outstanding position in society, and/or due to personal attitudes and social legitimation. These findings are robust to the sample composition and to differences in institutions, religious affiliation, unemployment, education, and wealth.