10125 FACTA UNIVERSITATIS Series: Economics and Organization Vol. 19, No 1, 2022, pp. 1 - 12 https://doi.org/10.22190/FUEO211026001A © 2022 by University of Niš, Serbia | Creative Commons Licence: CC BY-NC-ND Original Scientific Paper THE RELATIONSHIP BETWEEN NATIONAL CULTURE AND INNOVATIVE ENTREPRENEURIAL ORIENTATION: AN ANALYSIS FOR THE SOUTHEAST EUROPEAN COUNTRIES1 UDC 323.1:008]:001.895(4-12) Renata Amidžić1, Bojan Leković2, Tibor Fazekaš3, Milenko Matić4 1Republic Health Insurance Fund, Republic of Serbia 2The University of Novi Sad – The Faculty of Economics in Subotica, Republic of Serbia 3City administration – city of Subotica 4The University of Novi Sad – The Faculty of Economics in Subotica, Republic of Serbia ORCID iD: Renata Amidžić N/A Bojan Leković https://orcid.org/0000-0002-6329-8735 Tibor Fazekaš N/A Milenko Matić N/A Abstract. This paper aims to examine the relationship between entrepreneurial attitudes of national culture and innovative entrepreneurial orientation (IEO). The empirical research employs multiple linear regression models, utilizing data obtained from the Global Entrepreneurship Monitor. For the purpose of empirical research, we selected samples of early-stage entrepreneurs incorporated in Bosnia & Herzegovina, Bulgaria, Croatia, Greece, and Slovenia. The main findings highlight a significant relationship between national cultural dimensions and innovation, while absorbing the knowledge value and information through media resources equally positively related to IEO, as well as the presence of high status disparity negatively related to IEO. The results can be explained by the specific entrepreneurial context of the SEE region. We also point out recommendations for future research. Key words: national culture, innovative entrepreneurial orientation, total early activity-stage, South East Europe region JEL Classification: L26, M14, O30 Received October 26, 2021 / Revised December 21, 2021 / Accepted December 30, 2021 Corresponding author: Bojan Leković University of Novi Sad, Faculty of Economics in Subotica, Segedinski put 9-11, 24000 Subotica, Republic of Serbia | E-mail: bojan.lekovic@ef.uns.ac.rs https://orcid.org/0000-0002-6329-8735 mailto:bojan.lekovic@ef.uns.ac.rs 2 R. AMIDŽIĆ, B. LEKOVIĆ, T. FAZEKAŠ, M. MATIĆ 1. INTRODUCTION As a rapidly changing global economic system has forced entrepreneurs to increase their survival ability on the open global market, innovation became one of the most powerful tools by which nations and businesses achieve global success. Thanks to the exponential increase in cross cultural management, the main focus of researchers has been placed on approaches at the macro level conducted to investigate the relationship between national culture and innovations (Wu, 2007; Barichello, 2020). Therefore, through numerous studies, researchers have used different methods and data to investigate this connection. These authors used Hofstede’s national culture index database as an open publication from the official website of Geert Hofstede, indicators provided by The World Bank, or annual innovation data per country provided by the Global Innovation Index released by Cornell Univercity, INSEAD and The World Intellectual Property Organization (Činjarević & Veselinović, 2017; Espig et al., 2021), while the others used The Global Competitiveness Index report provided by The World Economic Forum for the purpose of measuring national competitive capacity (Handoyo, 2018), data of national culture support and the Innovation Index rate provided by The Global Entrepreneurship Monitor (Wu, 2007; Song et al., 2020), etc. With regard to the adopted multidimensional models and typology of national culture presented in literature, it is noticeable that Hofstede’s is one of the most commonly used and cited (Song, Park & Kim, 2020). Most findings show that national culture positively affects IEO, while the most desirable situation to boost IEO exists when there is low distance power, long-term orientation, femininity culture characteristics, high individualism, and a higher level of indulgence (Espig et al., 2021). Additionally, low power distance and low uncertainty avoidance are in most cases characteristics of European counties. The impact of individualism versus collectivism is more debatable, but generally in Europe, entrepreneurs from more individualistic countries achieve better innovative results (Strychalska-Rudewich, 2016 p. 121). In highly individualistic societies, creativity is related to individual expression, individuals have the freedom to conduct an experiment and it refers to a high probability of success, entrepreneurial growth, as well as a higher level of IEO (Strychalska-Rudewich, 2016). Papula et al. (2018), when referring to Germany, Austria, Switzerland and the Czech Republic, highlight that cultural aspects have a strong positive impact on perceiving business partners as reliable, having trust in the benefits of mutual cooperation, presenting positive role models or encouragement of innovation. Therefore, it is evident that previous studies conducted to explain how national culture affects innovation show discrepant results among authors (Espig et al., 2021). However, there is no universal IEO model that can be applied to all strategies and policies, without translation across cultures (Smale, 2016). In this study, we aim to fill the gap that exists in literature and which refers to the relationship between national culture and IEO, in the context of the SEE region. The present empirical research was created to extend our knowledge of factors which determine IEO. We examined the relationship between cultural dimensions and IEO, using Global Entrepreneurship Monitor (GEM) data. Therefore, a combination of terminology proposed by Hofstede and GEM innovation index was used. The research questions were: Do entrepreneurial attitudes of national culture contribute to the modelling of IEO? What factors of national culture are best associated with IEO? The Relationship between National Culture and Innovative Entrepreneurial Orientation 3 The remainder of this paper has been organized as follows. The following section contains an overview of literature according to the set of hypothesis. This is followed by sections on data, methodology and empirical results. This paper ends with a discussion and conclusion, and notes the limitations and recommendations for future research. 2. LITERATURE REVIEW The majority of individuals from a particular country or group share certain cultural characteristics. National culture, as a value system peculiar to a specific group, society or country, configures individuals’ attitudes and behaviour to act in a specific way that may not be applicable in other societies (Hofstede, 2001). In view of this definition, culture has been consider to affect not only social norms but also, in terms of economy, the level of entrepreneurial orientation (innovative orientation, international orientation, marketing orientation, etc.). Innovative entrepreneurial orientation (IEO), as one of the most desirable individual characteristics, is a multifaceted construct which relates to an innovation-based strategic orientation (Neely et al, 2001; Norris & Ciesielska, 2019). The term orientation is used to describe the overall approach that represents the competitive capabilities and strategic focus of entrepreneurs (Human & Naude, 2010). IEO pertains to entrepreneurial attitudes, capabilities and skills (Stock & Zacharias, 2011) such as competition-based understanding, organisational skills (Jalilvand, 2017; Zobel at al., 2017), and knowledge capabilities (Dobni, 2010). IEO deals with exploring new ideas, novelties and other creative processes that may result in a formation of new products, services or processes. In addition, IEO is relevant for managers and executives and those in charge of making decisions and innovation management (Norris & Ciesielska, 2019). Furthermore, a group of scholars states that IEO is a reflection of the uniqueness and a new entrepreneurial solution (Lall & Sahai, 2008). Hofstede’s original work described national culture as a set of four dimensions. They are: power distance, individualism vs. collectivism, masculinity vs. femininity, and uncertainty avoidance, while Hofstede’s revised national culture consists of long-term orientation and indulgence (Hofstede, Hofstede & Minkov, 2010). Power distance affects many organizational processes and outcomes (Keltner, Gruenfield & Andderson, 2003). It refers to the degree in which individuals or societies accept inequalities as legitimate, unavoidable or functional (Daniels & Greguras, 2014). Power distance affects the level of decision-making and formal hierarchy within organizations. Individuals lower on the power distance do not perceive many distinctions based on hierarchical position, social strata or power, they believe that all people should have equal rights and equal opportunities to succeed. Those with less power accept their place in the hierarchy, they trust their leaders, and are loyal to them (Kirkman et al., 2009). As such, cultures or individuals higher on the power distance believe that individuals with authority should be respected and show difference; those with higher power are more likely to value status and prestige (Jaw et al., 2007). At the individual level, power distance positively correlates with job satisfaction, perceptions of directive leadership, openness to experience, while lower power distance negatively correlates with team commitment, employee self-esteem, and perceptions of participative leadership (Taras et al., 2010). Some findings show a strong negative relationship between high power distance citizens and a lower level of IEO (Činjarević & Veselinović, 2017). High power distance societies may find it hard to encourage their people to participate in innovation 4 R. AMIDŽIĆ, B. LEKOVIĆ, T. FAZEKAŠ, M. MATIĆ process as inequalities among people are expected, and social networking is limited between those from different strata (Hofstede et al., 2010). However, people, in high power distance nations, belonging to the lower strata may feel little motivation to be innovatively oriented (Rinne, Steel & Fairweather, 2011). Individualism refers to societies where self-responsibility, accomplishment, independence of groups, and personal freedom are common dominant behaviours (Handoyo, 2018). The main indicators for rewarding individuals in individualistic societies are their abilities and achievements such as innovations, important discoveries, and all actions that make an individual stand out. This dimension bears negatively on cooperation, valuing harmony and relations with superiors (Gorodnichenko & Rodnin, 2012). In contrast, a collectivistic society emphasis the individual as part of a group, and therefore collectivist national culture has norms, values and beliefs such as a group membership identity, loyalty to the group, and solidarity (Handoyo, 2018). Thus, according to Hofstede’s explanation of collectivistic societies, citizens are encouraged to equally absorb knowledge value and information through media resources. In collectivistic cultures, individuals are more prone to not reveal their opinions, which often results in slowing down of innovation, while to the opposite, in individualistic cultures people tend to express their opinions (Činjarević &Veselinović, 2017). Furthermore, some recent findings show that collectivism leads to higher economic efficiency while individualism results in higher IEO because of the social status of rewarding innovation. In other words, a higher innovation rate leads to a higher level of productivity and output in the long run versus collectivism that affects static economic efficiency (Gorodnichenko & Rodnin, 2012). Dimensions of uncertainty avoidance express the degree to which individuals avoid uncertainty and ambiguity, and prefer a predictable future. Strong uncertainty avoidance societies prefer to avoid risks associated with uncertainty by emphasizing formal rules, procedures, and other constructs designed to reduce ambiguity. Societies with high uncertainty avoidance have rigid beliefs and behaviour which does not tolerate different ideas (Espig et al., 2021). For example, some findings indicate that people are ambiguous because of an ambivalent perception of technology (Shane, 1993). Research that relates this dimension to IEO mostly found that uncertainty avoidance is common to individuals who are less willing to take a risk and engage in activities that might lead to innovation (Činjarević &Veselinović, 2017). Furthermore, Handoyo (2018) found that uncertainty avoidance indicates a weak association with national innovative capacity, given the explanation that the way that society behaves is rooted in the value of national culture and will determine national innovative capacity (p. 147). Hofstede’s fourth cultural dimension, Masculinity versus Femininity, relates to the division of emotional roles between women and men. The characteristics of feminine societies refer to existing on a minimal emotional and social differentiation between gender roles. While the relationship between men and women should be modest and caring as well as that there should be a balance between family and work. Femininity is a management manner characterized by a low level of conflict and emotional support to employees (Papula, 2018). Masculine value s refer to achievement, higher goals and hard work. A positive correlation has also been observed between masculinity and entrepreneurship (Leković & Petrović, 2020). In addition, in masculine societies, entrepreneurs enjoy a higher level of innovative orientation (Papula, 2018). Long-term Orientation versus Short-team orientation and Indulgence versus Restrained are, recently added, Hofstede’s dimensions of national culture. Long-Term Orientation has to The Relationship between National Culture and Innovative Entrepreneurial Orientation 5 do with the tendency of a society to accept societal changes. Societies that score low see societal change with suspicion, deal with the past and the present, and respect tradition. Societies that score high might also be defined as pragmatic, and societies scoring low (short- term) might be defined as normative (Salis & Flegl, 2021). Indulgent society allows basic human drives related to enjoying life, while a restrained society suppresses their needs and has strict social norms (Salis & Flegl, 2021). Recent findings have shown that long- term orientation and indulgence relates to IEO. These results contribute to innovation and competitiveness perspectives, in which the intrinsic values of a national culture can favour the development of innovation and raise the level of competitiveness of nations as well as organizations (Prim et al., 2017, p. 1). Based on the previous statements, we have developed our research hypothesis: H1 – Explanatory variables of national culture predict the outcome of response variable IEO, thus, a significant relationship exists between national culture and IEO. Furthermore, taking under consideration previous studies which investigated the construct of national culture and innovation, mostly in the context of European countries, we delved deeper and presumed the characteristics of a relationship between some national culture dimensions (refers to participants’ attitudes), and IEO. That is: H1.1 – There is a significant and positive relationship between equally absorbing knowledge value and information through media resources (referring to collectivistic societies), and IEO (according to the entrepreneurial statement that in their country, most people can see the stories in media about successful business). H1.2 – There is a significant but negative relationship between entrepreneurial attitudes confirming that successful entrepreneurs receive a high level of status and respect (refers to power distance), and the IEO. 3. METHODOLOGY Empirical research was conducted on data derived from the Adult Population Survey (APS), GEM database for the year 2017. The GEM also includes the monitoring of entrepreneurial activities by using the indicator Total early-stage entrepreneurial activity (TEA) (GEM, 2018). The TEA implies: 1) entrepreneurs in the stage prior to commencing with work, 2) nascent entrepreneurs who have been settling their obligations and paying wages for at least three months, and 3) owning managers who have been paying wages in continuity for forty-two months (Reynolds et al., 2004; Wagner, 2004; Stephan et al., 2015). For the purpose of this empirical research, we selected a research sample which involved entrepreneurs incorporated in Bosnia & Herzegovina, Bulgaria, Croatia, Greece and Slovenia. Two criteria were used for selecting these five countries. Firstly, the regional aspect and similar cultural features which were observed, and secondly, we selected GEM participant countries from the SEE region for 2017. The research sample totalled 10,047 participants, with 60.1% belonging to a country marked as an efficiency driven country (Bosnia & Herzegovina, Bulgaria, Croatia), and 39.9% belonging to an innovative driven country (Greece, Slovenia). Out of the research sample, 537 individuals were involved in the TEA stage and entrepreneurial activities that included a new product market combination. The research model consisted of one dependent variable TEAyyNPMC (TEA New product market combination), which is one of the GEM Innovation Indices; it measured the IEO by indicating the level of introduction of a new (innovative) product on a market by participants between the ages of 18-64. The model also consisted of six predictor 6 R. AMIDŽIĆ, B. LEKOVIĆ, T. FAZEKAŠ, M. MATIĆ variables conducted to measure the level of the participants’ attitudes towards national culture. They were: 1) Equalinc Qi5. In my country, most people would prefer that everyone had a similar standard of living (according to GEM methodology it refers to a similar standard of living rate, and shows the percentage of the 18-64 population who agree with the statement that in their country, everyone had a similar standard of living; 2) Nbgoodc Qi6. In my country, most people consider starting a new business a desirable career choice (it refers to Entrepreneurship as a Good Career Choice Rate, and shows the percentage of the 18-64 population who agree with the statement that in their country, most people consider starting a business as a desirable career choice); 3) Nbstatus Qi7. In my country, those successful at starting a new business have a high level of status and respect (it refers to a High Status to Successful Entrepreneurs Rate, and shows the percentage of the 18-64 population who agree with the statement that in their country, successful entrepreneurs receive high status); 4) Nbmedia Qi8. In my country, you will often see stories in the public media and/or internet about successful new business choices (it refers to a media support rate and shows the percentage of the 18-64 population who agree with the statement that in their country, most people can see stories in media about successful businesses); 5) Easystart Qi9. In my country, it is easy to start a business choice (it refers to an entrepreneurial rate which shows the percentage of the 18-64 population who agree with the statement that in their country, most people easily made the choice of starting a new business), and 6) Nbsocent Qi10. In my country, you will often see a business that primarily aims to solve social problems (it refers to an entrepreneurial rate which measures the level of businesses that aim to solve social problems). 4. RESULTS In order to research the set of hypotheses, SPSS software was used for data analyses. A multiple linear regression analysis (MLR) is a statistical technique that uses several explanatory variables to predict the outcome of a response variable. MLR was used to predict the values of innovative entrepreneurial orientation, given a set of explanatory variables such as entrepreneurial attitudes about national culture. In this research, we also used MLR to determinate which variables are better predictors than others. We forced all variables into a linear regression model (method: enter). First, we tested the assumptions for MLR, and the multicollinearity. The results showed that none of the correlations appear to be large, while none of the correlations were higher than .80. Table1 Correlations Matrix shows that multicollinearity is not presents between variables. Table 1 Correlations Matrix Variable 1 2 3 4 5 6 7 TEAyyNPMC 1 equalinc 0.069 1 nbgoodc -0.07 .125** 1 nbstatus -.090* .108** .236** 1 nbmedia .079* .099** .170** .184** 1 easystart .080* .075** .105** .072** .166** 1 nbsocent -0.03 .103** .129** .099** .212** .163** 1 *Correlation is significant at the 0.05 level **Correlation is significant at the 0.01 level Source: Authors based on GEM database The Relationship between National Culture and Innovative Entrepreneurial Orientation 7 Table 2 shows the MLR model summary and overall fit statistics. The R from our model is .201 with the coefficient of determinations R2=.040 which is relatively low. This suggests: 1) that there may be subgroups of participants from whom the effect size would be larger, and subgroups of participants for whom the effect size would be smaller; 2) depending on the field, small R2 can have scientific and theoretical significance too, which may be small, but reliable (Vacha-Haase & Thompson, 2004; Lecuna & Chohen & Chavez, 2016 p. 153). The value of Durbin-Watson statistic was d=1,805 which is between the critical values of 1.5