Copyright © 2015 The Authors. Published by VGTU Press. This is an open-access article distributed under the terms of the Creative Commons Attribution-NonCommercial 4.0 (CC BY-NC 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. The material cannot be used for commercial purposes. B u s i n e s s, Ma n ag e M e n t a n d e d u c at i o n ISSN 2029-7491 / eISSN 2029-6169 2015, 13(2): 276–291 doi:10.3846/bme.2015.302 Socio-cultural FactorS and international competitiveneSS madara apSalone1, Ērika Šumilo2 Faculty of Economics and Management, University of Latvia, Riga, Latvia E-mails: 1madara.apsalone@gmail.com (corresponding author); 2erika.sumilo@lu.lv Received 02 November 2015; accepted 02 December 2015 abstract. Socio-cultural factors – shared values, norms and attitudes are signifi- cant, but less acknowledged sources of international competitiveness. Previous studies have found socio-cultural factors positively affecting various aspects of international competitiveness – entrepreneurship, innovation, productivity and in- ternational cooperation. These factors are more sustainable and less affected by external environment changes in comparison with the traditional factors. Socio- cultural factors provide an opportunity to develop competitiveness strategies based on unique advantages. This research aims to explore the impact of socio-cultural factors on interna- tional competiveness in small, open economies. Analysing relationship between 400 socio-cultural indicators and competitiveness indicators such as productivity, economic development, business and government efficiency, innovation capac- ity and infrastructure in 37 countries, six socio-cultural factors have emerged: Collectivism and Hierarchy; Future, Cooperation and Performance Orientation, Self-expression, Monochronism and Rationality, Economic Orientation and So- cial structure. The first factor – Collectivism and Hierarchy – tends to reduce the international competitiveness; the other five affect it positively. Keywords: cross-cultural studies, international competitiveness, socio-cultural factors. JEL Classification: M16, F00. 1. Introduction In times of globalization, international competitiveness is an important aspect of pros- perity and development potential of countries and organizations. International competi- tiveness has several determinants – export capability (Ezeala-Harrison 1999), resource productivity (Porter 1990), as well as infrastructure, institutions and macroeconomic environment (World Economic Forum 2014). Traditionally international competitiveness depends on the available economic capi- tal, human capital, technologies, knowledge and natural resources. Competitiveness is also affected by a group of factors that could be referred to as socio-cultural factors – http://dx.doi.org/ 10.3846/bme.2015.302 mailto:1madara.apsalone@gmail.com mailto:2name.surname@dbsa.edu 277 Business, Management and Education, 2015, 13(2): 276–291 values, norms and attitudes. Classical factors do not provide a complete under-standing of competitiveness in a long-term. A country can, for example, disproportionately con- sume its natural re-sources, manipulate exchange rates, or protect certain sectors and enterprises to create a competitive advantage in the short-term. Similarly an organiza- tion can overuse its human and capital resources in the short-term. Traditional factors are affected by economic cycles. Short-term changes in economic indicators are quickly reflected in competitiveness indicators, but do not necessarily imply long-term structural improvements. Socio-cultural factors based on social priorities are more permanent and less affected by external environment changes. They provide an opportunity to develop competitiveness strategies based on unique advantages. The impact of socio-cultural factors on various aspects of international competitive- ness – external trade, entrepreneurship, innovations and knowledge transfer, produc- tivity and international cooperation – has been observed in the previous research, as explained in the model illustrated in the Figure 1. The purpose of this research is to define socio-cultural factors and explore their impact on international competiveness. 2. Socio-cultural factors – the existing frameworks Many definitions of culture exist. Culture can be seen a broader sense as a civilization, or as certain values, beliefs and attitudes characterizing a certain group or community. In this study we have approached culture using the definition of Geert Hofstede seeing culture as “the collective programming of the mind distinguishing the members of one group or category of people from others”. Each individual belongs to several groups Socio-cultural factors Environment: economics legislation social infrastructure institutional infrastructure Factors of international competitiveness: international trade entrepreneurship innovation productivity international cooperation International Competitiveness Fig. 1. Relationship model of socio-cultural factors and international competitiveness (source: authors’ model) 278 M. Apsalone, Ē. Šumilo Socio-cultural factors and international competitiveness and thus this collective programming can take place at different contexts and levels – such as at national, organizational, occupational and gender levels (Hofstede, G. H., Hofstede, G. J. 2005). In this study we focus on the national level – the impact that socio-cultural factors of a certain nation has on the country’s international competive- ness. At the same time this study recognizes that organizational culture could have significant effects on international competitiveness of this organization. Socio-cultural factors provide dimensions for measuring and comparing cultures, and they were principally defined by Talcott Parsons, Edward T. Hall and Geert Hofstede. American sociologist Talcott Parsons developed five relational orientations (Parsons 1951): – Universalism versus Particularism – universalism seeks a general and consistent application, while in particularism a situation specific context matters the most; – Individualism versus Collectivism determines self-orientation versus collective orientation; – Neutrality versus Affectivity describes the level of expressing emotions; – Specificity versus Diffuseness measures the degree to which members of a certain culture separate their personal and public lives; – Achievement versus Ascription refers to status (based on achievement or attribu- tion). American anthropologist Edward T. Hall defined three cultural dimensions (Hall 1976): – Context – high-context cultures have many contextual elements, meaning is embed- ded in the information and the listener is expected to understand the unsaid. In low context meanings are explicitly expressed; – Time – monochronic time assumes planning and sequencing, polychronic time as- sumes parallel actions; – Space – high territoriality concerns ownership, lower territoriality implies less ownership of space and less importance of boundaries. Dutch social psychologist Geert Hofstede conducted one of the most comprehensive studies of how values in the workplace are influenced by culture. He used the dimen- sion of Individualism versus Collectivism exploring the degree to which people in a society are integrated into groups, and defined four additional dimensions of culture (Hofstede, G. H., Hofstede, G. J. 2005): – Power Distance describes the extent to which less powerful members of organiza- tions and institutions accept and expect unequal power distribution. – Uncertainty Avoidance describes a society’s tolerance for ambiguity. – Masculinity values achievement, heroism, assertiveness and material rewards for success, while Femininity – cooperation, modesty and quality of life. – Long-term orientation versus short-term orientation associates the connection of the past with the current and future actions and challenges. 279 Business, Management and Education, 2015, 13(2): 276–291 Hofstede later introduced one more dimension – indulgence versus restraint – which measures happiness. These socio-cultural factors have been modified and used in further studies – for instance, Alfons Trompenaars conducted a comprehensive study, using the five factors developed by Parsons, adding time and environment as additional cultural dimensions (Trompenaars, Hampden-Turner 2005), while GLOBE project measured nine dimen- sions, using Power Distance and Uncertainty Avoidance, and further developing the dimension of Collectivism into Societal Collectivism and In-Group Collectivism. A different perspective has been provided by the World Values Survey. Analysis of World Values Survey data made by political scientists Ronald Inglehart and Christian Welzel asserts that there are two major dimensions of cross cultural variation in the world – Traditional values versus Secular-rational values and Survival values versus Self-expression values. Traditional values emphasize the importance of religion, parent- child ties, deference to authority and traditional family values. Survival values place emphasis on economic and physical security. Self-expression values give high priority to environmental protection, growing tolerance of foreigners and minorities, gender equality, and rising demands for participation in decision-making in economic and po- litical life (World Values Survey 2015). The dimension of Survival values versus Self- expression values is conceptually related to the dimension of individualism and collec- tivism. Two more indexes are calculated – Post-Materialist index and Autonomy Index. 3. Defining international competitiveness International Competitiveness can be defined in many different ways. In this study we’re interested in national level competitiveness. Initially international trade provided basis for such competitiveness – export exceeded import in a country with a competitive economy, and if import exceeded export, it was considered as not competitive (Ezeala- Harrison 1999). This approach formed Mercantilist policies. Porter’s fundamental work “Competitive Advantage of Nations” argued that the only meaningful concept of competitiveness at the national level is productivity. Porter defined that “the principal goal of a nation is to produce a high and rising standard of living for its citizens. The ability to do so depends on the productivity with which a na- tion’s labour and capital are employed. Productivity is the value of the output produced by a unit of labour or capital.” (Porter 1990). In this research we have chosen two comprehensive frameworks assessing economic competitiveness landscapes. First, the World Economic Forum defines competitiveness as “the set of institutions, policies and factors that determine the level of productivity of a country” (World Economic Forum 2014) and calculates the Global Competitive- ness Index in 144 economies. GCI is calculated using 12 pillars of competitiveness, grouped into 3 sub-indexes. GCI assumes that, in the first stage, the economy is factor- 280 M. Apsalone, Ē. Šumilo Socio-cultural factors and international competitiveness driven and countries compete based on their factor endowments – primarily unskilled labour and natural resources. As a country becomes more competitive, move into the efficiency-driven stage of development. Finally, as countries move into the innovation- driven stage, wages will have risen by so much that they are able to sustain those higher wages and the associated standard of living only if their businesses are able to compete with new and unique products (World Economic Forum 2014). So, when calculating the index, factors are weighted depending on the development level of the economy. Second, Swiss International Management Development Institute’s (IMD 2011) World Competitiveness Center calculates the World Competitiveness Index based on economic performance, government efficiency, government efficiency and infrastructure (IMD). In comparison to the GCI, the weight of WCI indicators remains constant and is not adjusted for the development of an economy. 4. Previous research on the impact of socio-cultural factors on international competitiveness Several studies have confirmed the impact of socio-cultural factors on international trade (Dwyer et al. 2005; Hewitt et al. 2006; Iwasaki, Suganuma 2013) and export capacity (González 2006). It has also been observed that economic development affects culture in different ways – increasing or lowering the impact of the socio-cultural factors (Gan- non 2008). Analyzing the impact of socio-cultural factors on entrepreneurship, studies revealed that culture can be a source of entrepreneurial attitudes towards independence, risk and the distribution of power (Shane 1994; Tan 2002; Alvarez, Urbano 2012; Noguera et al. 2013). Evidence was found that national ethics affects business ethics (Stajkovic, Luthans 1997). It was also confirmed that the role of culture is crucial for the develop- ment of innovation – long-term aims, risk-taking ability and individual responsibility increases innovation capacity (King 2007; Turró et al. 2014). Culture affects productivity through shaping social decision-making process, form- ing an attitude towards innovation, affecting the ability to adjust to economic changes and through attitudes towards social equality (Throsby 2001). Certain cultural values also affect effectiveness, productivity and welfare (House, Javidan 2002). Cultural val- ues will determine tightness and effectiveness of leadership (Aktas et al. 2015). And it has also been observed that home country’s’ culture affect performance of multinational corporations abroad (Schein 2001; Halkos, Tzeremes 2008). Previous research has also confirmed the impact of socio-cultural factors on inter- national cooperation. For in-stance, evidence has been found that culture determines how much the society is ready to invest in economic and social development and how open it is to international cooperation in general (Hofstede, G. H., Hofstede, G. J. 2005; Gannon 2008). Depending on the culture, international cooperation can become a source of mutual trust, or a source of conflicts. 281 Business, Management and Education, 2015, 13(2): 276–291 5. Data and methodology For this research, we examined 400 socio-cultural indicators assessed in 37 countries. Firstly, we assessed five cultural dimensions developed and studied by Geert Hofstede in 64 countries. Those include the Power Distance, Individualism versus Collectivism, Uncertainty Avoidance, Masculinity versus Femininity and Long-term orientation versus Short-term orientation. Lately introduced dimension – Indulgence versus Restraint was not used in this research due to data availability. Secondly, seven dimensions of culture measured in a cross-cultural study by Alfons Trompenaars, exploring cultural diversity in business, impact on the organization of the systems and management models in 51 countries. Five of these dimensions were based on relational orientations defined by Talcott Parsons. Trompenaars also studied Sequen- tial versus Synchronic attitude towards time and Internal versus External control towards environment, which refers to controlling environment or being rather controlled by it. Thirdly, nine cultural dimensions were included in the GLOBE cross-cultural leader- ship study conducted in 62 countries and especially focusing on leadership, management style and productivity. Power Distance and Uncertainty Avoidance were defined simi- larly to the respective Hofstede’s dimensions. Humane Orientation was defined similarly to Femininity – as a degree to which a group encourages and rewards individuals for being fair, altruistic, generous, caring and kind to others. This study distinguished two aspects of Collectivism – Societal Collectivism – the degree to which individuals are integrated into groups within the society, and In-Group Collectivism – the degree to which individuals have strong ties to their small immediate groups. Gender Egalitarian- ism measures the degree to which a collective minimizes gender inequality. Assertive- ness – the degree to which individuals are assertive, dominant and demanding in their relationships with others. Future Orientation measures the extent to which a collec- tive encourages and rewards future-oriented behaviours such as delaying gratification, planning and investing in the future. Performance Orientation measures the tendency towards performance improvement and excellence (House, Javidan 2002). Fourthly, we used the Cultural Orientations Indicator (COI) developed by TMCorp, which analyses 22 socio-cultural aspects organized into 10 groups in 55 countries, mainly emphasizing the intercultural aspects of cooperation. The COI includes 10 groups. Envi- ronment includes Control, Harmony and Constraint and it refers to how individuals view and relate to the people, objects and issues in their sphere of influence. Time includes 3 continuums – Single-Focus or Multi-Focus, Fixed or Fluid and Past, Present or Future oriented, and it explains how individuals perceive the nature of time and its use. Ac- tion is defined as either Being or Doing, and it explains how individuals conceptualize actions and interactions with people and objects in their environment. Communication includes 4 continuums – High Context or Low Context, Direct or Indirect, Expressive or Instrumental and Formal or Informal. Space can be either Private or Public, and it refers to how individuals demarcate their physical and psychological space. Power – Hierarchy 282 M. Apsalone, Ē. Šumilo Socio-cultural factors and international competitiveness or Equality – defines how individuals view differential power relationships. Individual- ism determines how individuals define their identity – Individualistic or Collectivistic and Universalistic or Particularistic. Societies and individuals are either Competitive or more Cooperative. Order or Flexibility in Structure determines how individuals approach change, risk, ambiguity and uncertainty. And Thinking explains how individuals conceptu- alize – it can be either Deductive or Inductive and either Linear or Systemic (COI 2011). Finally, the World Values Survey covers people’s values, beliefs and attitudes to- wards family, work, environment and society, in total 350 indicators in 87 countries. World Values Survey Wave 3 (1995–1999) was chosen based on the countries included in this period. Indicators were chosen taking into account thematic relevance to the study, sample adequacy (available results for at least 30% of the 222,732 respond- ents), sample adequacy for each country as well as correlation with the competitiveness indicators. In addition the four World Values Survey indexes (Post-Materialist index, Autonomy Index, Traditional values versus Secular-rational values and Survival values versus Self-expression values) were included in the further calculation. While recognizing that each culture has its unique set of values and heritage, only those values and norms that can be quantified and thus internationally compared and relevant to the field of economics and business were included in this study. Furthermore, the study assumes that these values and norms are broadly shared by the whole society independency of ethnical differences – we base this assumption on previous research that common social systems, such as education and economy affect the values of indi- viduals more than ethnicity (Parboteeah, Cullen 2003). All cultural indicators were tested for correlation with international competitiveness in- dicators. As international competitiveness indicators we used the World Economic Forum’s Global Competitiveness Index and its sub-indexes, IMD World Competitiveness Index and its sub- indexes. We also looked at labour productivity as an internationally accessible and comparable productivity indicator, the World Bank’s Doing Business index, Transparency International’s Corruption Perceptions Index and Political Risk Services indicators. Given the possible correlation between various cultural indicators, socio-cultural factors were determined using the Principal Component Analysis (PCA). This analysis was chosen as it does not require making assumptions about the data structure. Such assumptions would be difficult to make, given the very diverse definitions, nature and scales of socio-cultural factors. In order to perform the PCA, we made assumptions of linearity and statistical sig- nificance of the mean and of the covariance. The number of respondents and countries allow making an assumption about sampling adequacy, and as national averages are used, we can assume the significance of deviation. The socio-cultural factors have been rotated using direct oblimin method, allowing further usage of factors in a regression analysis. The number of basic factors was determined using the Kaiser criterion (drop- ping all components with eigenvalues under 1.0), the scree test, the total percent vari- ance explained and the interpretation criteria. 283 Business, Management and Education, 2015, 13(2): 276–291 6. Determining socio-cultural factors Following the methodology explained in the previous section, 6 independent socio- cultural factors emerged – Collectivism and Hierarchy; Future, Cooperation and Perfor- mance Orientation, Self-expression, Monochronism and Rationality, Economic Orienta- tion and Social Structure. The PCA is statistically significant (Table 1): Table 1. KMO and Barlett’s tests (source: authors’ SCF calculations) Kaiser-Meyer-Olkin Measure of Sampling Adequacy 0.765 Bartlett’s Test of Sphericity Approx. Chi-Square 828.890 Df 300 Sig. 0.000 and the calculated components explain 81% of the total cultural variance (Table 2). Table 2. Socio-cultural Factors and International Competitiveness (source: World Economic Forum 2011; IMD 2011; Euromonitor International 2011; Transparency International 2011; World Bank Group 2011; PRS Group 2011; authors’ SCF calculations) World Economic Forum IMD L ab ou r Pr od uc tiv ity C or ru pt io n Pe rc ep tio ns In de x E as e of D oi ng B us in es s R an ki ng PR S C om po si te R is k R at in g G C I B as ic re qu ir em en ts E ffi ci en cy en ha nc er s In no va tio n an d so ph is tic at io n O ve ra ll C om pe tit iv en es s E co no m ic Pe rf or m an ce G ov er nm en t E ffi ci en cy B us in es s E ffi ci en cy In fr as tr uc tu re Collectivism and Hierarchy –0.62 ** –0.61 ** –0.63 ** –0.62 ** –0.46 ** –0.15 –0.32 –0.38 * –0.62 ** –0.77 ** –0.77 ** 0.59 ** –0.59 ** Future, Cooperation and Performance Orientation 0.57 ** 0.38 * 0.57 ** 0.58 ** 0.70 ** 0.45 ** 0.75 ** 0.78 ** 0.49 ** 0.47 ** 0.52 ** –0.44 ** 0.49 ** Self-expression 0.52 ** 0.53 ** 0.46 ** 0.51 ** 0.32 0.12 0.18 0.17 0.52 ** 0.28 0.34 * –0.41 * 0.54 ** Monochronism and Rationality 0.54 ** 0.60 ** 0.57 ** 0.41 * 0.56 ** 0.45 ** 0.51 ** 0.40 * 0.55 ** 0.48 ** 0.51 ** –0.40 * 0.48 ** Economic Orientation 0.42 * 0.38 * 0.43 ** 0.49 ** 0.54 ** 0.33 0.38 * 0.46 ** 0.61 ** 0.49 ** 0.48 ** –0.21 0.30 Social Structure 0.60 ** 0.58 ** 0.60 ** 0.56 ** 0.57 ** 0.34 0.66 ** 0.59 ** 0.41 * 0.38 * 0.56 ** –0.41 * 0.53 ** Notes: * Correlation is significant at the p = 0.05 (asymptotic). ** Correlation is significant at the p = 0.01 (asymptotic – 2-tailed). 284 M. Apsalone, Ē. Šumilo Socio-cultural factors and international competitiveness Collectivism and Hierarchy describes the degree of integration and power distance in the society. High values for this factor indicate the importance of hierarchy and rela- tionships. Low values indicate equality, direct communication and precise approach to time. Figure 2 illustrates Collectivism and Hierarchy in regional division. Fig. 2. Collectivism and Hierarchy in regional division (source: authors’ calculations) We found high values for Africa and the Middle East, Asia and the Central Eastern Europe (the highest results in Morocco, China, Taiwan and Bangladesh). Most of the Western cultures – Anglo-Saxon, Germanic and Scandinavian countries – have low tendency towards Collectivism and Hierarchy (the lowest values in Denmark, Finland, Norway, Sweden and the Netherlands). Future, Cooperation and Performance Orientation describes the preference of future aims, tendency to reduce uncertainty, trust in social institutions and importance of team- work. Low values in this factor indicate priority of daily issues over future objectives and planning, as well as a low cooperation level in the society. Scandinavian countries and the Confucian Asia demonstrate high values for this factor (the highest values in Singapore, Switzerland, Japan and China). We found low future, cooperation and performance orien- tation in the Central Eastern Europe, Latin Europe and Latin America (Fig. 3). Fig. 3. Future, Cooperation and Performance Orientation in regional division (source: authors’ calculations) 285 Business, Management and Education, 2015, 13(2): 276–291 Self-expression explains the tendency of individuals to be independent and the mu- tual trust between the members of society. Low values of this factor indicate low au- tonomy and dominance of religious and traditional values, as well as a lack of trust between people. We found high values of this factor in the Nordic countries, the Central Eastern Europe and in the Confucian Asia, while low values in Africa, the Middle East and Latin America (Fig. 4). Fig. 4. Self-expression in regional division (source: authors’ calculations) Monochronism and Rationality refers to linear attitudes towards time. Individuals in monochronic societies tend to prioritize tasks and favour a rational assessment. In- dividuals in polychronic societies tend to multitask. In addition, they are more expres- sive. Anglo-Saxon countries, the Central Eastern Europe and Scandinavia display high values for this factor (the highest results observed in the United States, Australia, the Russian Federation and New Zealand), while South Asia and Latin countries have low values (the lowest values in South Korea, Spain, India and Italy. Figure 5. Illustrates Monochronism and Rationality in regional division. Fig. 5. Monochronism and rationality in regional division (source: authors’ calculations) Economic Orientation describes strong economic focus and achievement orientation. Lack of economic orientation indicates the importance of relationships over results. Germanic countries and Sweden score high for this factor, while we found low values for Latin America, Confucian Asia and Central Eastern Europe (Fig. 6). 286 M. Apsalone, Ē. Šumilo Socio-cultural factors and international competitiveness Fig. 6. Economic Orientation in regional division (source: authors’ calculations) Social Structure refers to universal or particular attitudes. Germanic, Anglo-Saxon and Confucian Asia have highly developed society structure (the highest values for Germany, Chile, India, Taiwan and Switzerland). Social structure has lower values in Africa, the Middle East and Latin cultures, especially Turkey, Vietnam, Bangladesh, Mexico and Italy (Fig. 7). Fig. 7. Social Structure in regional division (source: authors’ calculations) 7. Impact on international competitiveness We used multiple regression analysis to determine the impact of socio-cultural factors on international competitiveness. We found that the Global Competitiveness Index is the best explained using a five- factor regression model (it has the highest adjusted determination coefficient). Collectiv- ism and Hierarchy, Future, Cooperation and Performance Orientation, Self-expression, Monochronism and Rationality and Social Structure explain 83% of the Global Com- petitiveness Index change (Table 3). 287 Business, Management and Education, 2015, 13(2): 276–291 Table 3. Global competitiveness index regression – model summary (source: World Economic Forum 2011, authors’ SCF calculations) M od el R R-Square Adjusted R-square Std. Error of the Estimate R Square Change Change Statistics Durbin - WatsonF Change df1 df2 Sig. F Change 5 0.913e 0.834 0.807 0.2726479 0.045 8.497 1 31 0.007 2.225 Notes: Predictors: (Constant); Collectivism and Hierarchy; Social Structure; Future, Cooperation and Performance Orientation; Self-expression; Monochronism and Rationality. Economic Orientation was not included in the model, as it was not statistically significant. The autocorrelation amongst the factors is not significant (Durbin-Watson test { }0 4 2 2; .∈ = and the regression analysis is statistically significant. All the factors included in the model have a positive effect on competitiveness, except Collectivism and Hierarchy that affects it negatively (Table 4). Table 4. Global competitiveness index regression – regression coefficients (source: World Economic Forum 2011, authors’ SCF calculations) M od el Unstandardized Coefficients Standardized Coefficients 95,0% Confidence Interval for B B Std. Error Beta t Sigma Lower Bound Upper Bound 5 Constant 4.654 0.045 103.820 0.000 4.562 4.745 Collectivism and Hierarchy –0.208 0.051 –0.334 –4.087 0.000 –0.311 –0.104 Social Structure 0.180 0.050 0.291 3.577 0.001 0.078 0.283 Future, Cooperation and Performance Orientation 0.197 0.049 0.317 4.004 0.000 0.097 0.297 Self-expression 0.170 0.048 0.274 3.550 0.001 0.073 0.268 Monochronism and Rationality 0.147 0.051 0.237 2.915 0.007 0.044 0.250 IMD World Competitiveness Index is the best explained by a three-factor regression model. Future, Cooperation and Performance Orientation, Monochronism and Rational- ity and Economic Orientation explain 77% of the World Competitiveness Index changes (Table 5). Table 5. IMD world competitiveness index – model summary (source: IMD 2011, authors’ SCF calculations) M od el R R-Square Adjusted R-square Std. Error of the Estimate R Square Change Change Statistics Durbin – WatsonF Change df1 df2 Sig. F Change 3 0.879c 0.773 0.749 9.1039788 0.049 6.244 1 29 0.018 1.821 Notes: Predictors: (Constant); Future, Cooperation and Performance Orientation; Monochronism and Rationality, Economic Orientation. 288 M. Apsalone, Ē. Šumilo Socio-cultural factors and international competitiveness The other three socio-cultural factors (Collectivism and Hierarchy, Self-expression and Social Structure) do not have a significant effect. The autocorrelation amongst the factors is not significant (Durbin-Watson test { }0 4 1 8; .∈ = and the regression analysis is statistically significant. All the factors included in the model have a positive effect on competitiveness (Table 6). Table 6. IMD world competitiveness index – regression coefficients (source: IMD 2011, authors’ SCF calculations) M od el Unstandardized Coefficients Standardized Coefficients 95,0% Confidence Interval for B B Std. Error Beta B Std. Error Beta B 3 Constant 70.051 1.598 43.830 0.000 66.782 73.319 Future, Cooperation and Performance Orientation 10.271 1.602 0.588 6.411 0.000 6.994 13.547 Monochronism and Rationality 7.471 1.693 0.415 4.414 0.000 4.009 10.933 Economic Orientation 4.226 1.691 0.242 2.499 0.018 0.767 7.684 To illustrate the impact of socio-cultural factors, we provide an example of three small, open economies – Denmark, Chile and Singapore – for which international com- petiveness is particularly important, given the limited size of their domestic market. Denmark ranks as the 8th most competitive economy globally in the IMD World Competitiveness Scoreboard and the 13th most competitive economy globally in 2014– 2015 after the Global Competitiveness Index. Similarly to other Scandinavian nations, Danes demonstrate a strong equality orientation (low Collectivism and Hierarchy). High scores in Future, Cooperation and Performance Orientation impact the long-term ap- proach towards strategy. High orientation towards Self-expression is the third corner- stone of Denmark’s international competiveness (it has the 5th highest score amongst the countries included in this research). This factor drives openness towards new ideas, creativity, innovation and international cooperation. Ranking 33rd by the Global Competitiveness Index and 35th in the IMD World Competitiveness Scoreboard, Chile has the most competitive economy in the Latin America. Chile stands out with a very high orientation towards Social Structure (the 3rd highest score amongst the countries included in this research). Chile has lower cor- ruption and more transparent business environment (Transparency International 2015). It is complemented by high Economic Orientation and Monochronism and Rationality. Singapore ranks 2nd by the Global Competitiveness Index and 3rd in the IMD World Competitiveness Scoreboard. Singapore has a very interesting culture, shaped by both – the Confucian Asia and the West values. Singapore is particularly characterized by a sin- 289 Business, Management and Education, 2015, 13(2): 276–291 gle socio-cultural factor – Future, Cooperation and Performance Orientation (Singapore scores the highest amongst all the countries included in this research, and the second score is twice lower). Singapore’s international competitiveness is also positively af- fected by more direct business communication and more precise approach towards time. 8. Conclusions Based on several global frameworks, in this study we determined and calculated 6 so- cio-cultural factors – Collectivism and Hierarchy; Future, Cooperation and Performance Orientation, Self-expression, Monochronism and Rationality, Economic Orientation and Social Structure explaining 81% of the total cultural variance. This study confirms the impact of socio-cultural factors on international competitive- ness. Collectivism and Hierarchy, Future, Cooperation and Performance Orientation, Self-expression, Monochronism and Rationality and Social Structure explain 83% of the Global Competitiveness Index change. And Future, Cooperation and Performance Orientation, Monochronism and Rationality and Economic Orientation explain 77% of the World Competitiveness Index change. All of the defined socio-cultural factors except Collectivism and Hierarchy affect international competitiveness positively. The unique competitive advantage of certain socio-cultural factors has been illustrated by equality in Denmark, strong tendency towards social structure in Chile and Future, Cooperation and Performance Orientation in Singapore. However some limitations in our study must be emphasized. The data used to cal- culate the socio-cultural factors have been collected by several studies having diverse aims, diverse geographic coverage and diverse measurement scales. The data has been collected in different times. We would argue, however, that socio-cultural factors are long-term indicators and thus do not change rapidly in a relatively short time. Yet it could be further explored, how changes in socio-cultural factors result in changes of long-term competitiveness indicators. Another aspect is that not only socio-cultural fac- tors affect international competitiveness, but country’s economic development could over time change its socio-cultural factors. Future research could be directed towards an investigation of this aspect. Nevertheless this study provides solid empirical evidence for policy implications on the fact that socio-cultural factors are important and along with so-called traditional factors have a direct effect on international competitiveness. Disclosure statement We declare that we do have any competing financial, professional, or personal interests from other parties. 290 M. Apsalone, Ē. 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Available from Internet: http://www.worldvaluessurvey.org/WVSContents.jsp madara apSalone is a PhD student of Management Science at the Faculty of Economics and Management, University of Latvia. She has studied global leadership in five universities and four countries: Latvia, Denmark, France and the USA. Madara Apsalone started to work with Latvian en- terprises willing to globalize their businesses and foreign investors expanding to Latvia just after the first year of her bachelor studies, and has an extensive experience working with international affairs and European Union policy for the Latvian government. Ērika ŠUMILO, PhD, Professor, is the Head of Department of International Economics and Business at the Faculty of Economics and Management, University of Latvia. She is also the director of Inter- national Economics and Commercial Diplomacy and International Economic Relations programmes at the Faculty of Economics and Management, University of Latvia. Research interests: competitiveness, human and social capital, innovation, organizational culture, cross-cultural studies. http://epub.prsgroup.com/products/international-country-risk-guide-icrg http://dx.doi.org/10.1162/152417301750406112 http://dx.doi.org/10.1016/S1090-9516(97)90023-7 http://dx.doi.org/10.2139/ssrn.1552182 http://www.transparency.org/cpi2011/results http://www.transparency.org/country/#CHL http://dx.doi.org/10.1016/j.techfore.2013.10.004 http://www.doingbusiness.org/ http://www3.weforum.org/docs/WEF_GCR_Report_2011-12.pdf http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2014-15.pdf http://www.worldvaluessurvey.org/wvs.jsp http://www.worldvaluessurvey.org/WVSContents.jsp