Values, beliefs and regional variations in new firm formation rates

There are recurrent claims that culture, understood as prevailing values and beliefs, is an important determinant of the level of entrepreneurship in a society. In spite of this, relatively few empirical studies with this focus seem to have been carried out. While some studies of national culture and the rate of economic development have been published and received wide readership, empirical studies of values and beliefs in relation to variations in new firm formation rates are lacking. In a previous study in that vein by one of the authors, it was found that possible cultural and economic-structural determinants of the new firm formation rate were positively correlated, so that the unique contribution of each type of explanation could not be determined. In the present follow-up study, three matched pairs of regions are investigated. While the regions in each pair are similar on economic-structural dimensions, one region in each pair has shown a higher and the other region a lower rate of new firm formation than predicted by carefully developed regression models that use economic-structural factors as explanatory variables. To determine whether cultural differences can explain the deviations from the predictions based on economic-structural variables, large samples of 35-40 years old inhabitants in each region were surveyed for cultural values and beliefs data. The results of this study suggest that both values and beliefs of the kind investigated do have an effect on regional new firm formation rates. The cultural variation is small, however, and for contemporary Sweden it appears to be a relatively less important determinant of new firm formation rates than are variations in economic-structural conditions.