Antecedents of Entrepreneurial Intentions: A Comparative Study of Cultures

Abstract

The study examines differences in entrepreneurial intentions and its antecedents across countries and cultures. This study uses Ajzen's Theory of Planned Behaviour to compare the entrepreneurial intention of two diverse countries: Saudi Arabia and India. The study uses the non-parametric Mann Whitney U test and Structural Equation Modeling to analyze a sample of university students of the two countries. The study finds significant differences among the students of these two countries. The result indicates that entrepreneurial intention is higher in Indian students than their counterparts in Saudi Arabia. The result further indicates that attitude and perceived behavioral control explains entrepreneurial intention in both the countries. However, social norms are significant in explaining entrepreneurial intention only in India and not in Saudi Arabia. The findings of this study suggest that entrepreneurship has higher social approval in India when compared to Saudi Arabia. Social norms impact entrepreneurial intentions differently for India and Saudi Arabia. The study attributes the results to the differences in per capita income and socio-cultural norms in both countries. This study is one of the few that have explored cross-country entrepreneurial attributes as it addresses the research gap in terms of comparing entrepreneurial intentions of India and Saudi Arabia.

1. Introduction

Entrepreneurship is the modern-day ‘engine of growth’, promoted by countries across the globe. An entrepreneur is a person who owns a business or manages it. Entrepreneurship refers to the process of creation of new ventures, the development of new business concepts, or fresh value creation in the existing business (Bird, 1988). Entrepreneurs develop a city-state where new ventures appear (Karatas-Ozkan, 2014). The idea of entrepreneurship is a steppingstone to begin a new venture (Karimi et al., 2015). Establishing startup firms provide solutions to resource underutilization and unemployment (Mahmud et al., 2019). Entrepreneurship is the ‘bedrock of industrialization’ for an economy (Almahdi, 2020).

Entrepreneurship attributes have been found to vary across countries and cultures. Cultural factors are instrumental to promote sustainable entrepreneurship (Alfalih & Ragmoun, 2020). Recent empirical studies have looked at inter-country differences, for example, Fitzsimmons and Douglas (2005); Pruett et al. (2009); Linan and Chen (2009); Moriano et al. (2012); Linan et al. (2013); Nieuwenhuizen and Swanepoel (2015); Rodriguez et al. (2015); Paul et al. (2017); Sanchez- Garcia et al. (2018); and Nasar et al. (2019). Nevertheless, this study identifies a gap in the literature in terms of studies comparing the country of interest for this study, that is, India and Saudi Arabia.

Entrepreneurial intentions of students are been found to be high and the three antecedents were found to be significantly associated with entrepreneurial intentions for both India (Roy et al., 2017) Saudi Arabia (Hoda et al., 2020). Both countries are promoting entrepreneurship, albeit for different reasons. India needs entrepreneurial ventures to engage its vast population, while Saudi Arabia needs entrepreneurial ventures to diversify itself away from oil. Some of India’s successful entrepreneurial ventures are PayTM, Flipkart, OYO Hotels, Byju’s, Swiggy, and Ola. Saudi Arabians have been recently witnessing many successful start-ups; some of them are PayTABS, Uturn, Lammt.com, Hunger station, Noon, and Sawerly.

The choice of these two countries is based on similarities and dissimilarities in the same period. These two countries are poles apart (Kumar & Haque, 2019). The gross domestic product (GDP) per capita and a person employed is much higher for Saudi Arabia. There is a significant difference between the total population of India and Saudi Arabia. Both the population and labor force of India is enormous when compared to those of Saudi Arabia. However, the growth rate of the population, overall unemployment rate, and the unemployment rate for the age group between 15–24 are higher in Saudi Arabia. The procedures and the time required to start a business are almost the same in both countries. The depth of credit information required is also almost the same. Though the number of new businesses registered is higher in India, the new business density is higher in Saudi Arabia. The ease of doing business is nearly about the same for the country (Table 1).

Table 1: Economic and Entrepreneurship Related Indicators

Starting a new venture cannot be an accidental behavior. One has to respond to conditions around one, by intentionally starting a venture (Khalili et al., 2015). Entrepreneurial intent leads to the establishment of a new venture. There exists a sizeable gap between the skill set acquired through university education and what is precisely needed at the workplace for India (Sulphey, 2015) and also for Saudi Arabia(Kumar et al., 2019). The level of unawareness regarding the challenge of entrepreneurship is an issue among university students in Saudi Arabia (Tausif & Haque, 2016). Social norms are also an issue toward acceptance of entrepreneurship in Saudi Arabia (Naushad, 2018.) On the other hand, Indian students’ risk aversion attitude and the desire for social security are factors that hamper the growth of entrepreneurship (Paul & Gupta, 2014; Paul et al., 2017).

The study intends to focus on the differences in the antecedents of entrepreneurial intention between India and Saudi Arabia. Toward this, the researchers plan to test the hypothesis that there is a significant difference between the two countries in terms of the antecedents of entrepreneurial intentions. It would fill the literature gap in the comparison of these two countries regarding entrepreneurial intent. The remainder of the study is arranged as follows: the next section reviews past studies on inter-country comparisons, followed by the methodology of this study, empirical results, and finally the conclusion.

2. Literature Review

Many researchers have done comparative studies between two different countries to understand the entrepreneurial intent. In a study conducted by Bucar et al. (2003), entrepreneurs from Russia, America, and Slovenia were compared based on the assumptions of stakeholder theory. All three countries have a different level of financial risks faced by entrepreneurs. It was assumed that entrepreneurs are susceptible to ethics. The findings of the study found Americans were the most ethical entrepreneurs, this could be linked to the good economic condition in that country, Russians were found to be least ethical, and this could be understood from the prevailing economic, law and order problems in that country, Slovenian fall in between two.

In a related study conducted by Fitzsimmons and Douglas (2005), entrepreneurial intentions were measured among four countries: India, China, Thailand, and Australia. The study concluded that apart from some cross-cultural differences, attitude toward ownership was the most important factor underpinning entrepreneurial intent in all four countries. According to the study, most of the respondents wanted to be self-employed rather than employed. Urban et al. (2008) tried to understand the entrepreneurial intentions among different ethnic groups in the study conducted in South Africa. The study concluded that stereotypic deceleration of South African culture was not supported by this study in terms of entrepreneurial intentions.

Another comparative study conducted by Tajeddini and Mueller (2009) found that entrepreneurship characteristics like locus of control, risk propensity and autonomy is high in the UK, while confidence, innovativeness is higher among Swiss entrepreneurs. In the study conducted by Linan and Chen (2009), they tried to understand entrepreneurial intentions in culturally diversified countries: Spain and Taiwan. Social and cultural distinctiveness is reflected by the consequence of external variables on the antecedents of intention like Subjective norms, personal attitude, and perceived behavior control and also by the relative strength of these cognitive constructs – Taiwan has favorable perceptions about attitude and perceived behavioral control and weaker perceptions of subjective norms than those of Spain. Culture is a critical factor in explaining the differences.

Moriano et al. (2012) tried to study entrepreneurial intent in six countries: Germany, India, Iran, Poland, Spain, and Netherland. They further divided these countries into two groups based on cultures. India, Iran, Poland, and Spain were categorized as collectivistic culture and Germany and Netherlands as less collective or individualistic countries. The results of the study showed that in the collectivistic culture countries (India, Iran, Poland, and Spain) subjective norms showed a substantial effect on entrepreneurial intentions compared to Germany and Netherlands, which are individualistic countries.

Davey et al. (2011) compared entrepreneurial intent among African and European students. The study was conducted in Uganda, Kenya, South Africa in Africa continent and Finland, Germany, Ireland, and Portugal in Europe continent. Results of the study showed that students from developing African countries foresaw their career as entrepreneurs and their entrepreneurial intent was more favorable compared to the industrialized European counterpart.

In the study conducted by Linan et al. (2013), a comparison of entrepreneurial intent was made between Great Britain and Spain. The main aim of the study was to try to find some link between the Theory of Planned Behavior and cross-cultural perspective. To a great extent, most of the hypotheses supported the model and in both the countries’ intents were found to be quite similar.

In a similar study Paul and Gupta (2014) found that that most of the Indian students had positive attitude toward entrepreneurship. However, they still wanted to join secure and long-term government jobs. One of the reasons for this attitude is that Indian society still focuses on social security.

In a project thesis written by Weiss (2015), the entrepreneurial intension of Dutch and Indonesian university students was measured. The results of the study showed that the strength of the entrepreneurial intention of Indonesian students was higher than that of Dutch students. On social learning theory and entrepreneurial intents, the results of the two countries were almost the same. The Dutch students showed locus of control, and innovativeness was optimistically linked with entrepreneurial intentions. Dutch students showed a highly positive linkage between entrepreneurial education and intension.

Rodriguez et al. (2015) did a comparative study in two distinct economies, Spain and Senegal. The study showed a big cultural difference between the two countries’ entrepreneurial intents. In Senegal, it was perceived behavioral control, and in Spain, personal attitude were the primary antecedents. Pruett et al. (2009) compared entrepreneurial intent among students from China, Spain, and the USA. Results showed that university students across cultures shared almost similar views on barriers to entrepreneurship and motivations, and there were just some small exciting differences.

Nieuwenhuizen and Swanepoel (2015) made a comparison of final year students of management studies from two universities in South Africa and Poland. This study suggested that the entrepreneurial intent of Polish students was lower than that of South African students. The study suggested that that outcome could be because of the higher per-capital income of Poland.

In their study comparing the antecedents of entrepreneurial intentions for US and Turkey, Ozaralli and Rivenburgh (2016) observed that culture-specific factors lead to discrepancies between entrepreneurial intentions between countries. The study reported a lower entrepreneurial intention in US students when compared to Turkish students, though students of both the countries felt the need for further education and training on entrepreneurship.

Deepika (2017) tried to study the entrepreneurial intention concerning religious diversity. The outcome of this study suggested that people living in a religiously-diverse society had lower entrepreneurial intent compared to those living in a less religiously-diverse society. Also, the study found no cultural impact on entrepreneurship. In a study conducted by Sanchez-Garcia et al. (2018), they attempted to know how subjective norms affected entrepreneurial intent. The study was conducted in four countries, Mexico, Spain, Portugal, and India. The result of the study showed that all countries except India had a direct relationship between subjective norm and entrepreneurial intent. On perceived behavioral control and intentions, India is also not showing any relationship.

Paul et al. (2017) chose four countries from three continents: Asia, Europe, and America. The four countries studied were Japan, France, the US, and India. According to this study, despite India being a developing economy, and its economy showing strong growth, still most of the students showed more inclination toward salaried jobs. One of the main reasons for this could be the risk aversion, the mindset of Indian society.

In a global study conducted by Shirazi and Mohamadi (2018), the results showed that technological growth in 2017 was compared to 2016. As per the study, the growth in the economy led to an improvement in the entrepreneurship ecosystem all over the world. North America, as a region, had the best technical performance for the entrepreneur ecosystem, compared to Latin America, the Caribbean, and South Asia.

Munir et al. (2019) conducted their study in two countries: one emerging economy (China) and one developing economy (Pakistan). The students of both the countries had positive entrepreneurial intent. However, the intentions of Chinese students were more reliable when compared to Pakistani students. The study also focused on personality traits, namely risk-taking propensity, locus of control, and proactive personality, along with attitudinal dimensions of the Theory of Planned Behavior. The study administered and compared Chinese and Pakistani students. The results showed that Chinese had a stronger role in personality traits on the attitudinal dimension.

Nasar et al. (2019) compared the entrepreneurial intension of Pakistani and Vietnam students. They tried to study short-term and long-term entrepreneurial intentions. The outcome showed that both countries had similar results, that long-term entrepreneurial intentions were more robust when compared to short-term entrepreneurial intentions. It indicated that business students wanted to take some time to design their business idea, made arrangements for recourses, and formulate their intentions.

In almost all the studies quoted above, the researchers have used the Theory of Planned Behavior proposed by Ajzen (1991). This study addresses the basic research question on how entrepreneurial intentions vary across countries. This study examines the entrepreneurial intention of respondents from two different countries to identify differences between the three elements of entrepreneurial intentions. Toward this, the study proceeds with the hypothesis that there is no significant difference between ‘Attitude toward behavior’, Subjective norm’, ‘Perceived behavioral control’ and ‘Entrepreneurial intention’ between the two countries. A cross-country comparison would reflect upon the cultural differences with respect to entrepreneurial intentions.

3. Methodology

A questionnaire based on Ajzen’s Theory of Planned behavior was administered to a sample of students who were pursuing their studies in the business curriculum. The questionnaire was administered in Saudi Arabia and India. Unfortunately, the choice of universities where the questionnaire was administered was purely based on convenience. In Saudi Arabia, the researchers could get the survey filled in Prince Sattam Bin Abdulaziz University and the University of Business and Technology. In India, KL University and Sharda University were chosen for the survey. These are the universities from where the researchers are affiliated or had some access to through academic contacts.

A total of 803 questionnaires were filled. Out of them, 498 respondents were from Saudi Arabia, and 305 were from India. Some 463 were males and 340 were females; 651 were undergraduates and 152 postgraduates. The questionnaire was administered through Google Forms. As responses to all the questions were mandatory, there was no loss of data due to unfilled questions. The responses were collected on a 7-point Likert scale – 1 ‘strongly disagree’, 2 ‘disagree’, 3 ‘somewhat disagree’, 4 ‘cannot say’, 5 ‘somewhat agree, 6 ‘agree’, 7 ‘strongly agree’. The first four items belong to the first construct of ‘Attitude toward behavior.’ Items from 5 to 8 belong to the ‘Subjective norm.’ Items 9 to 12 belong to ‘Perceived behavioral control.’ The last four items, namely, V13 to V16, belong to ‘Entrepreneurial intention.’

The study uses Structural Equation Modeling (SEM) to estimate the model. SEM requires that the model be specified before running the analysis. It is based on a certain theoretical framework based on past theory or empirical work. This study uses SEM to estimate the relationship of attitude toward the behavior (A), subjective norm (SN), and Perceived behavioral control (PCB) and entrepreneurial intention in the framework Ajzen’s (1991) Theory of Planned Behavior (TPB). This study estimates two different structural equation models. One is for India and the other for Saudi Arabia. The study plans to compare the magnitude and significance of the coefficients of these two countries to look for the similarities and differences between the entrepreneurial intentions in these two countries.

4. Results

The questionnaire, when put through Cronbach’s Alpha test for reliability, gave a score of 0.940. This indicated that the questionnaire was reliable. The researchers further study each item of the questionnaire individually. The data were checked for normality. As the associated p-values for all the items were less than 0.05, it was believed that the data was not standard. Hence the non-parametric test was to be used instead of the regular student t-test. Mann-Whitney U test was used to study the differences between the two countries itemwise.

There is a significant difference between the students of Saudi Arabia and India in terms of ‘I wish to be an entrepreneur in the future’ (V1). More students wish to become entrepreneurs in Saudi Arabia than India, as the mean ranks are higher for Saudi Arabia. There is a significant difference between the students of Saudi Arabia and India in terms of ‘Entrepreneurship has more advantages than disadvantages to me’ (V4). More students are of this opinion in India than in Saudi Arabia, as the mean ranks are higher for India.

There is a significant difference between the students of Saudi Arabia and India in terms of ‘My teachers mentor me to be an entrepreneur’ (V6). More students are of this opinion in India than in Saudi Arabia, as the mean ranks are higher for India. There is a significant difference between the students of Saudi Arabia and India in terms of ‘Those who know me are confident that I will succeed as an entrepreneur’ (V7). More students are of this opinion in India than in Saudi Arabia, as the mean ranks are higher for India. There is a significant difference between the students of Saudi Arabia and India in terms of ‘Entrepreneurship has social approval’ (V8). More students are of this opinion in India than in Saudi Arabia, as the mean ranks are higher for India.

There is a significant difference between the students of Saudi Arabia and India in terms of ‘I will be able to manage the risks involved in establishing a new firm’ (V9). More students are of this opinion in India than in Saudi Arabia, as the mean ranks are higher for India. There is a significant difference between the students of Saudi Arabia and India in terms of ‘I can control the processes in a new firm, myself’ (V10). More students are of this opinion in India than in Saudi Arabia, as the mean ranks are higher for India. There is a significant difference between the students of Saudi Arabia and India in terms of ‘I am aware of the practical details needed to establish a firm’ (V11). More students are of this opinion in India than in Saudi Arabia, as the mean ranks are higher for India. There is a significant difference between the students of Saudi Arabia and India in terms of ‘If I start a new firm, I will definitely succeed’ (V12).

More students are of this opinion in India than in Saudi Arabia, as the mean ranks are higher for India. There is a significant difference between the students of Saudi Arabia and India in terms of ‘I have a firm intention to start a new company’ (V13). More students are of this opinion in India than in Saudi Arabia, as the mean ranks are higher for India. There is a significant difference between the students of Saudi Arabia and India in terms of ‘I will make every effort to start a new firm’ (V14). More students are of this opinion in India than in Saudi Arabia, as the mean ranks are higher for India. Items V2, V3, V15, and V16 have no significant differences between the two counties.

Next, the researchers attempt to study the differences in the entrepreneurial intention of the students of the two countries in the framework of the Theory of Planned Behavior (TPB). Toward this Structural Equation modeling, as illustrated in Table 2, TPB is used to construct a path diagram. It studies the relationship between the three constructs with the latent variables visualized in Figure 1. SEM is done for both the countries separately.

Table 2: Data and Its Characteristics

Figure 1: Path Diagram

The result of SEM is illustrated in Table 3. SEM is done for both countries separately. The variable attitude is significant toward creating entrepreneurial intention for both the countries, though the coefficient of Saudi Arabia (0.65) is higher than that of India (0.62). The variable social norm is not significant for Saudi Arabia, while it is significant for India. The variable perceived behavioral control is significant for both Saudi Arabia and India, while the coefficient value for Saudi Arabia (0.38) is more significant than India (0.35).

Table 3: Path Analysis Scores of SEM

5. Conclusion

The results indicate that in the majority of the items (12 out of 16), there is a significant difference between the students of Saudi Arabia and India, and the median scores of Indian students are bigger than their Saudi Arabian counterparts. A probable reason for this could be the lower per capita income of India as compared to Saudi Arabia. Similar reasoning was warranted by Nieuwenhuizen and Swanepoel (2015) as they justified the lower per capita income of South Africa to higher entrepreneurial intention when compared to Poland.

The results of SEM indicate that both attitude and perceived behavioral control significantly contribute to entrepreneurial intentions, while social norms are significant only for India and not for Saudi Arabia. It implies that social norms do not approve of entrepreneurship in Saudi Arabia. This finding is similar to Naushad (2018). The results of this study refute the finding of Sanchez-Garcia et al. (2018) for India as it reported a negative relationship between subjective norm and entrepreneurial intent and no relationship between perceived behavioral control and entrepreneurial intentions.

Overall, entrepreneurship has higher social approval in India compared to Saudi Arabia. Social environment plays an important role toward entrepreneurial longevity as it facilitates development of new ideas and creates value (Mailto et al., 2020). In fact, social factors like family support outcome can shift expectation of individuals toward motivation for entrepreneurship (Luc, 2020). Interestingly the median ranks of friends and family approving the decision of being an entrepreneur are higher in Saudi Arabia. Saudi Arabia fares poorly compared to India in terms of teacher mentoring their students to be an entrepreneur. It calls for increasing awareness in a university set up in Saudi Arabia. This finding is similar to Tausif and Haque (2015). Also, the level of confidence in budding entrepreneurs is higher in India. It hints at the cultural differences between the two countries.

Previous studies by Fitzsimmons and Douglas (2005); Linan and Chen (2009); Rodriguez et al. (2015); Sanchez- Garcia et al. (2018); and Munir et al. (2019) also found differences between the antecedents of entrepreneurial across countries and cultures. To add, the results of this study refute the findings of Pruett et al. (2009); Nasar et al. (2019) who found similarities in entrepreneurial intention across countries. The results of this study can help policy makers to devise suitable strategies towards inculcating entrepreneurial intentions among the university students in the respective countries.

Both countries need to focus on entrepreneurship development. It is the only way out to solve the unemployment situation that exists in both countries. Though this study fills a research gap on comparative studies on Saudi Arabia and India, it is not free from limitations, particularly to sampling. The study has used four universities each from India and Saudi Arabia. The selection of these four universities was based purely on convenience. A future study should be based on a larger sample of respondents from additional universities selected on a random basis would give more robust results. It would also validate the results of this study. Along with this, the current study identifies a more in-depth study of the cultural traits of individualism versus collectivism to explain the differences in entrepreneurial intention as to the future scope of work.