Economic Development and Entrepreneurship ARTIKEL

*Corresponding author. Email:[email protected] Management and Business Application, 1, 1 (2012):27 – 52 ISSN : 2252-8997

ARTICLE

Economic Development And Entrepreneurship:A Critical Review From A Socio-Cultural Perspective

I Putu Tirta Agung Setiawan*

Centre of Eastern Indonesia Studies, Universitas Kristen Satya Wacana, Salatiga, Indonesia.

Abstract

The aim of this paper is to briefly explain and analyse the association betweenentrepreneurship and development theories. It will trace through a literature review, from asocio-cultural perspective, the developments of entrepreneurship theories and will criticallyengage with the use of Schumpeter’s ideas on entrepreneurship, as the main engine ofeconomic development. It will describe the experience as well as the political context ofentrepreneurship in developing countries. It will also put forward several issues in relations tothe development of the study of entrepreneurship in those countries, using Indonesia as a casestudy. In the end, the paper concludes that a cultural study which links Western theories ofdevelopment and entrepreneurship with the unique cultural realities, mainly on how theyinteract and shape entrepreneurial activities, which exist only in developing countries, isimportant.

KeywordsSchumpeter, Development, Entrepreneurship, Developing Countries, Culture

Asia-Pacific Managementand Business Application

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University of BrawijayaMalang, Indonesia

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28 I Putu Tirta Agung Setiawan

Asia-Pacific Management and Business Application, 1, 1 (2012):27 – 52

Introduction

In the past six decades, numerous schoolsof thought, equipped with variousdevelopment theories, have joined theglobal ‘war’ against a disease calledpoverty. The different approaches are inconflict, each defends their preferred pathof economic system, social perspectives, ortheir hidden political agendas. Hence, theglobal ‘war’ against poverty has replacedold dictators with new ones. It has evenpromoted corrupt leaders, such asSoeharto, to be the hero of his country,crowned as the country’s ‘Father ofDevelopment’ (Tarling, 2002). From theleft to the right, from classic to neoclassic,from Marxists to Keynesians, from the oldto the neo liberalists, from the outspokeninternational dependence revolutionist tothe ‘capitalistic’ neoclassical free-marketrevolutionist, all have made attempts toexplain the causes and cure the disease, butthey keep on surviving.

Various ambitious efforts have also beenmade to integrate the partialities of manytheories to achieve a universaldevelopment model, yet, without any luck(for a comprehensive review on thisparticular matter please refers to Parsons &Smesler, 1956; Landes, 2000; Parsons,Shils & Smelser, 2001). Poverty, accordingto many neo classical theorists thatcurrently are dominating economics as adiscipline, is a universal economicphenomenon that occurs under certainconditions. It is considered as a typicalcondition of all third world nations, whoseeconomies have been shaped by a similarhistory of colonisation. They, according toNohlen and Nuscheler (1993, pp. 56-57),believe that this single cause ofcolonization is more than enough toexplain incidents of poverty across theglobe, and thus, conclude that the cure aswell can be packed into a ‘universal’formula that is ‘applicable’ to everydeveloping country in the world. Examplesof such mono-causal theories are the linearstages of growth models proposed by

Rostow (1990), Harrod (1939), and Domar(1957); the structural change theories ofLewis (1954) and Chenery & Elkington(1979); and the exogenous growth modelssuggested by Solow (1956) and Swan(1956).These single-cause theories havebeen widely criticized. The secondpresident of the World Bank, for example,argues that development programs need tobe tailored to the unique conditions of eachcase ( Black, 1961, p. 21),:

I am afraid that much of the reasonof this misdirected search [for asingular development model] stemsfrom the blinding success of theMarshall Plan [in post-war Europe].Without detracting from thatunique achievement, I amcompelled to say that it bearsalmost no comparison to thepresent problem [in newlyindependent countries] ; in fact, it isuseful only as a contrast . . . . Thegovernments participating in theMarshall Plan shared a commonheritage and a common clearlydefined predicament.

Since the end of World War II, economicdevelopment as a sub-discipline ofeconomics has indeed experienced manyperiodic changes in its leading archetype.These changes have implications for thedevelopment models that seek to ‘enhance’economic policies in developing countriesworldwide. Changes in the dominanteconomic paradigm have lead to differentstipulations for how a government shouldhandle their economy, how they shouldintervene in the market, and what kind ofintervention is appropriate in order to‘sustain’ their country’s economy.

As explained by Adelman (2001), theabove changes occurs primarily becausedevelopment studies as a sub-discipline ofeconomics learns from its mistakes,enlarging its empirical and theoreticalknowledge based upon either unambiguous

Economic Development and Entrepreneurship 29


real world successes or noticeable realworld failures. Global institutionaltransformation, rapid technologicalimprovement, and the dynamic of thedevelopment process within variousdeveloping countries have raised newissues which in turn serve as foundationsfor the emergence of new theoretical orempirical perspectives.

Yet, as different streams in economics riseto power or faded away, their ideologiespersist. Economics is a diverse disciplineand this diversity remains whether or notthe various schools of thought are popularor unpopular. As observed by Myrdal(1975), the political element in thedevelopment of economic theory tends toopportunistically condition intellectuality,and so does scientific work. Besidesproviding new prisms in reconstructing ordeconstructing old theories as well aspolicy prescriptions, this ideological shiftis introduced by each stream, which hasrisen to power and become dominantwithin the field of economics, also holdsan important key in determining the cultureused by the discipline in perceiving,structuring, and incorporating changes intotheories or models. The aims of this reviewis to briefly explain and analyse theassociation between entrepreneurship anddevelopment theories by tracing through aliterature review, from a socio-culturalperspective to the developments ofentrepreneurship theories.

Economics Development AndEntrepreneurship

Schumpeter (2002, 2003) was perhaps thefirst economist who used the term‘economic development’, even beforeHarry Truman politically introduced it inhis inaugural speech, to explain thechanges and the dynamic of economicprocess. Indeed, economics at his time didnot deal with dynamic phenomena, andtherefore, theories that might explain theprocess of economic development had notyet been recognised. Schumpeter believes

that the economy “. . . does not grow intohigher forms by itself” (Schumpeter, 2003,p. 75). Static theory, according toSchumpeter, overlooked the increase inpopulation, capital growth, technologicaldevelopment, organizationaltransformation, and consumer preferences,which substitute important factors ofeconomic.

In his Theorie der WirtschaftlichenEntwicklung, originally published in 1911,Schumpeter (2002) successfully pictures adynamic model of economy thatdistinguishes two types of changes, namely‘development’ and ‘adaptation’.Development deals with changes fromwithin the economic domain, or in his ownwords, “. . . changes in economic life thatare not forced upon it from without, butarise by its own initiative from within”(Schumpeter, 2002, p. 145). Developmentinvolves the transfer of capital from oldbusiness to a new one by utilisingestablished method of production to createinnovative approaches. For Schumpeter,adaptations the opposite of developmentrelates more to changes that are not“qualitatively new”, such as growth inpopulation or growth in wealth(Schumpeter, 2002, pp. 405-406).

Adaptation, considered by Schumpeter,occurs because of a static process, aprocess that has no change at all, or anautomatic change that is fuelled by outsideforces of the economy. Schumpeterdeemed the characteristic of humanity asstatic. While people are always eager toearn extra money and work very hard inwhat they do, they only act within givenlimits and never do anything radically new(Schumpeter, 2002, pp. 111). If changehappens, Schumpeter argues, it is onlybecause something has happened outsidethe economy, and for their survival, theyhave to adapt. He believes this staticbehaviour is caused by static socialenvironment that inclines to reactnegatively on something that is deviant innature (the sociological factor) and theresistance to new things felt individually



by the economic actors themselves (thepsychological factor).

Human action is illogical, and for thatreason, Schumpeter rejects the concept ofthe ‘rational economic man’, since it isonly appropriate for a static economy notfor economic development. Developmentinstead needs ‘deviant’ people who areequipped with various new ideas, as wellas the ability to convert those ideas intoactions. He repeatedly denotes anddescribes, in his chapter two of Theorie derWirtschaftlichen Entwicklung, this kind ofindividual as the ‘man of action’1 who doesnot accept reality as it is and is willing tofight against any oddness or obstacles.Schumpeter then identifies this person asthe entrepreneur, and characterizes him notas an inventor, but instead as an innovatorwho introduces “new ways of usingexisting means” or “factors of production”(Schumpeter, 2002, p. 409). Theentrepreneur’s talent, as noted bySchumpeter, consists of abilities to thinkand do something intuitively rather thanrationally, and a good entrepreneur alwayschooses the right intuitive choice. In short,entrepreneurs for Schumpeter are the trueagents of economic development; anddevelopment will cease to exist withoutthem (Schumpeter, 2003, p. 76).Theseentrepreneurs creatively destroy the staticeconomic equilibrium, to create a new one.

During the 1960s, as noted by Adelman(2001), economists and policy makersbegan to recognise Schumpeter’s vision inrelation to economic development. Thiswas due to serious limitations on theabsorption of foreign developmentassistance found in many developingcountries, which led to a failure ininducing sufficient rapid growth in manyprivately, owned and managed industries.There were simply not enough potentialentrepreneurs willing and able to undertakedevelopment projects in developingcountries. This situation gave a path to the

1 What Schumpeter means as the “man of action” isliterally a man, as in his eyes, an entrepreneur isalways a ‘he’ (Swedberg, 2006).

re-emergence of the Schumpeterian schoolof economic development that studied thesocial origins of entrepreneurship. It alsoinfluenced the new socio-cultural school ofeconomic development headed byMcClelland (1961) and Hagen (1962) whoanalysed the socio-cultural andpsychological barriers of entrepreneurshipamong developing countries, particularlyin relation to the differences ofentrepreneurial traits among differentcultures.

Both schools argues that governmentsshould foster the development ofentrepreneurship by subsidising privateinvestment in order to artificially increasethe rate of return, by generating jointventures with the private sectors, andfinally, by sponsoring various curricula ofentrepreneurship channelled through theireducation systems. These arguments leadto the establishment of the InternationalFinance Corporation within the WorldBank Group to finance privateentrepreneurial activity in developingcountries. Numerous aid programs havealso started to route their funds into variouseducation programs specifically dedicatedto the preparation of potentialentrepreneurs and policymakers in thosecountries. The World Bank even at thattime, in 1955, created its own institutecommitted to teach economics andmanagement named the EconomicDevelopment Institute. It was renamed asthe World Bank Institute (WBI)2 in 2000.

Starting from the next section, I will mapout, from a socio-cultural perspective, thetheoretical developments of

2Not like when it was first established, WBIactivities are currently adapted to the individualneeds of each developing country. The WBIGovernance Program will first develop a wide setof governance and anti-corruption indicators ofeach of those countries, and afterwards, theKnowledge for Development (W4D) program willevaluate each country's preparedness for theknowledge era. From these assessments, specificaction plans are developed on a country-by-countrybasis. For further detail, please refer tohttp://siteresources.worldbank.org/WBI/Resources/wbi_brochure08-5.pdf.



entrepreneurship through several streamsof thought. As a result, a battle line will bedrawn on the map, which is between those,mostly economists, who are in favour ofinstitutional factors and incentives as theirexplanation for entrepreneurship andeconomic development, and those whocome from various discipline in socialscience including economics, which useculture as the foothold of analysis. In asection that follows, I will also discussquestions that come up due to severalfrictions between the supporters of culture,concerning the position and the role ofculture toward entrepreneurship andeconomic development.

The Advent Of Socio-CulturalEntrepreneurship Study

Entrepreneurial activity is probably as oldas human history itself, yet beforeSchumpeter’s time, it was Cantillon(1931), through his Essai Sur la Nature duCommerce en Général, who primarilyintroduced entrepreneurship as a concept tothe scientific community (Swedberg, 2000;Landstrom & Benner, 2010). Since then,the studies of the role of entrepreneurs andentrepreneurship have become increasinglyprevalent within the field of economics.However, comprehensive socio-culturalstudies3 did not receive serious attentionuntil the dawn of the twentieth century(Landstrom, 2005a, 2005b; Swedberg,2000, 2006), and two seminal authorsmainly fuelled this escalation of interest(Macdonald, 1965; Thornton, 1999;Brouwer, 2002; Carr, 2003; Swedberg,2009; Lalonde, 2010). The first wasTocqueville (2003) with his ideas on theimportance of institutional and socio-cultural factors in analysing the degree of

3 Stewart (1991) even suggested thatanthropological studies on entrepreneurship startedto flourish after the Second World War, and thus,placing it as merely a post-war phenomenon. Thosestudies reached its peak through the 70s and werelargely divided into two main interest focuses,namely on social change and economicdevelopment.

entrepreneurial activity of a given society,and the second was Weber (1930) with histhesis on the significance of value systemsin explaining entrepreneurial behaviour.

Tocqueville (2003) observed, in his 1831journey, that the United States was a placewhere work was highly valued andindustriousness was an ethic. He alsowitnessed how Americans enthusiasticallypursued money, an opposing conditioncompared to Europe at that time.According to him, the poor in Europe hadno hope for prosperity and wealth, nomatter how hard they worked, and the richupper class worsened the situation, givingbad influence to the poor, suggested that itwas ludicrous to obtain wealth (Ondracek,Bertsch & Saeed, 2011).

On the other hand, Weber (1930), throughhis well-known The Protestant Ethic andthe Spirit of Capitalism published in 1905,theorizes that Capitalism and its agent, theentrepreneur, is the consequence of thebelief system of particular Protestant sects,especially Calvinism. He argues that,Calvinism with its doctrine of doublepredestination had unintentionallyprovided beneficial economicconsequences. Weber believes that self-confidence and worldly success are signalsof God’s favour and salvation forCalvinists instead (Milner, 1970).Compared to Tocqueville’s Democracy inAmerica, The Protestant Ethic and theSpirit of Capitalism of Weber clearly linksculture (manifested as religion),entrepreneurship, and economicdevelopment, and hence, it has served as afoothold for subsequent socio-culturalstudy on entrepreneurship as well aseconomic development.

The theoretical work of Schumpeter alsosets culture as a determinant ofentrepreneurship. In his famousCapitalism, Socialism, and Democracy,Schumpeter (2006, p. 132) notes that themain function of the entrepreneur ineconomic development is to bringinnovation forward through carrying outnew combinations. In the same page, he



also lists five types of what he meant asnew combinations, which are by (1)introducing new good or quality; (2)introducing new methods of production;(3) opening a new market; (4) searching anew source of supply of new materials orparts; and (5) carrying out neworganization of any industry. Schumpeter(1983) believes that innovation itselfdepends on the rate of profit, and mostimportantly, the social climate. Accordingto Higgins (1968, p. 94),

Schumpeter's concept of the "socialclimate," a complex phenomenonreflecting the whole social,political, and socio-psychologicalatmosphere within whichentrepreneurs must operate. Itwould include the social values of aparticular country at a particulartime, the class structure, theeducational system, and the like. Itwould certainly include the attitudeof society toward business success,and the nature and extent of theprestige and other social rewards,apart from profits, whichaccompany business success in thesociety.

Nevertheless, despite of our discussionabove, we should also understand that “[to]economics, or at least the version ofeconomics that became dominant in thetwentieth century [the neoclassiceconomics], culture is a very strangeanimal indeed” (Beugelsdijk & Maseland,2011, p. 15). Out of the three authors whopioneer the socio-cultural study onentrepreneurship, only Schumpeter who iswidely considered as an economist andsociologist, whereas the other two,particularly Weber4, are only regarded as

4This is something that is undeniably paradoxical.Swedberg (1996) notes that although Weberhimself, along with his colleagues, considered himas an economist, later generations, such as TalcottParsons, introduce him as a sociologist instead.Even Blaug (1986, p. 872), in his second edition ofWho's Who in Economics, writes that Weber is “. . .one of the major figures in sociology”, noteconomics. It seems that neoclassical economics as

sociologists. Economics undeniablypositions culture outside the realm of itsinstrumental design, since according to thediscipline, culture is inherited and given toindividuals (Sahlins, 1976). If we searchthrough history, this situation takes its rootfrom the ‘father’ of economics andCapitalism himself.

Smith’s (1981a) famous ‘inquiry into thenature’ and the “. . . natural course ofthings” (p. 348) have indeed led to therenunciation of culture in the newdiscipline he has established. Themateriality and the habits to provision oraccumulate matters are seen as supracultural structure for the classical and mostneoclassical theories of economic thought.This presupposition is highly reflectedthrough the term of ‘homo economicus’ orthe rational economic man, who is,according to most economists, the trueagent of economics and is characterised asan individual with an innate rationality.Likewise, Marxism, as an ‘antithesis’ ofCapitalism, also regards culture a prioriwithin their historical materialism (Zein-Elabdin, 1998). Consequently, almost allschool of thoughts5 in economics discountsculture, whilst purporting that variousachievements on economic developmentattained by the west since the IndustrialRevolution take place as merely a

the dominant stream, which claims the power tocontrol anything that belongs to economics or not,has cast Weber out from economics becauseperhaps according to it, his broad and historicalapproaches are more sociological than economicalin nature (Swedberg, 1996). The development ofeconomics and sociology as separate disciplines hasindeed been described as a turf war, particularlybefore they separated thinkers such as Max Weber,Karl Marx, Émile Durkheim as sociologists.5An exception has to be made here for theinstitutional school. Intuitionalist economistsconsider culture as one of their two mainphilosophical foundations beside technology,although they still leave the economic man‘rational’ self in place, and therefore foreclose thepossibility of any other cultural concept orsensibility. For a substantial discussion oninstitutionalism, please refer to Mayhew (1987) andHodgson (2000; 2007).



representation of their natural or historicalnorm (Zein-Elabdin, 1998).

The main goal of economics through itssupra cultural structure is to establish whatis to be believed as the universal principlesof behaviour (e.g. McClelland, 1961).Culture is a limitation for this ambition, asit constitutes worldviews, which impliesthat there are various ways of perceivingreality, resulting in various logics ofbehaviour. This opposition of cultureplaces socio-cultural study of eitherentrepreneurship or development to beshared within various disciplines, althoughit does not always follow the debates andtheoretical developments, within the socialscience, including economics, positioningthem as interdisciplinary topics.

Culture: Questions For TheSupporters

In the early 1960s, developmenteconomists started to realise that there wassomething missing within the developmenttheories, and it was not just institutionalbut more to the actors themselves (agencyin nature). To remedy the muddledsituation, Higgins (1968, p.105) put a casein his book by stating that in or currentlydeveloping countries “[t]he lack ofadequate entrepreneurship is one of themost frequently cited obstacles to take-off”. He suggests that economists shouldreturn to Schumpeter’s Theorie derWirtschaftlichen Entwicklungin order tounderstand that:

. . . [although it] appears true thatthe relatively small entrepreneurialgroup in [developing countries]frequently consists of a deviantclass[such as] the Chinese inSoutheast Asia, the Hindus in EastBengal, the Jews in Libya, theIndians in Africa, and so on[,] . ..[it] also raises doubts about thepossibilities of successfuldevelopment in [such] countrieswhich start with a climate inimical

to entrepreneurship” (Higgins,1968, p.105).

As previously noted by Adelman (2001),this position provides the opportunity forthe resurrection of various socio-culturalentrepreneurship studies. As a result, thebattle lines have been clearly drawn by thelatter half of the 20th century until now.The battle is about the attribution ofentrepreneurial action and economicdevelopment between those, mostlyeconomists, who are in favour ofinstitutional factors and incentives as theirexplanation, and those who come fromvarious disciplines in the social sciencesincluding economics, and use culture astheir foothold of analysis. Nonetheless,frictions also exist between the supportersof culture and I will discuss it in thefollowing subsections.

Only Western Culture Values Work

As I have discussed earlier, the oppositionof the deviant characteristic of aSchumpeterian entrepreneur is without anydoubt “. . . stronger in primitive stages ofculture than others” (Schumpeter, 1983, p.155). At this point, Schumpeter is right, asstated by Black6 (1961, p. 27):

All we know for certain is that oncepeople become conscious of thepossibility of economicdevelopment in their society,entrepreneurs start appearing . . . .What is true of entrepreneurship isbroadly true of all the requisites foreconomic growth. As more peoplebecome conscious of the possibilityof a better material life through adifferent use of their time, energy,and savings, there will be more

6 The notions of better and productive environment,such as noted by Black above, are in fact culturallyframed. It point to an idea of modernity introducedby Western culture in order to break the traditionalculture of a particular community by providingsurreal opportunities for choice, which eventuallycarries risks and anxieties.



productive work and moreproductive savings.

Many early societies indeed valued workas something that belonged to the lowerclass of the society, and therefore, theinnovative entrepreneur was deviant fortheir social structure. The ancient Indiansand in many ancient Indianised kingdoms,for example, put the working class or theshudras at the very bottom of their castesystem, followed by the vaishyas whoengaged in trade and commerce. Theancient Greeks sneered at crafts andoverlooked artisans as well. This can beseen through the Greek-rooted word of‘banausic’, a pejorative term related toearning a living (Landes, 2000). Bothancient Rome and China also consideredpeople who were engaged in productiveactivity and commercial activity asdisgraceful (Baumol, 2004).

Schumpeter believes that for thedevelopment of entrepreneurship and theeconomic development that follows, aculture must first value work. Before theIndustrial Revolution took place or beforework was valued by many Europeanenlightenment philosophers and politicaleconomist, such as Smith (1981a; 1981b;2002), Marx (1886), or Mill (1999),economic growth were estimated to beapproximately zero7. This figure changedrastically in the 18th century England,where the country’s GDP (Gross DomesticProduct) per capita was estimated to havegrown to 20%–30% and “[i]n the 19thcentury, this figure rose, perhaps tenfold,to some 200%” (Baumol, 2004, p. 317).Whilst in the 20th century United Statesand despite of the great depression, thecountry’s overall GDP per capita

7 Work and the value of work was in fact aphilosophical topic that was warmly discussed anddebated by many European classical economists ofthe 19th century. It took its root from Smith’sfamous ‘diamond-water paradox’ and ended withtwo revolutions, the marginal utility that fuels themain assumption used by neoclassical economicsand historical materialism as the foundation ofMarxism (Setiawan, 2007).

conservatively estimated to have risen toabout 700%.

Ondracek et al. (2011) argues thateconomic development is undeniablyimpossible if a culture only values wealthbut devalues productive works, those whowork, and their entrepreneurs who do thoseproductive works. In many societies,particularly after the Industrial Revolutiontook place, the appreciation of work is anupshot of various political and socialrevolutions, where the influence of suchevent spreads rapidly throughout eachsociety. The Communist Revolutions inRussia and China help the resurgence of apro-work culture. They have swept away tosome extent the ancient deep-rootedattitudes and the affectation againstproductive work. In the Western part ofEurope, the French Revolution saw areordering of society, cleaning up the oldspoiled aristocracy.

Compared to the west (the European andNorth American), Baumol (2004, p. 318)believes that what is missing from theeconomy of various developing countriesis un-doubtfully “. . . the productiveentrepreneur, working under the incentivesto innovate that derive from the powerfulmechanism of the competitive market”. Inthe same paragraph, he also puts a note thatfor the west:

. . . entrepreneur has not onlybecome respectable, but has alsoassumed the attributes of a hero,although, as in all subtle tales aboutheroes, with a mixed and notaltogether unsullied character(Baumol, 2004, p. 318).

This argument8, however, puts forwardquestions on its reliability, since it

8The theoretical foundation underpinning suchargument is usually based on the modernizationtheory, first suggested by Walt Rostow. This theorybelieves that development occurs in stages. Itpositions Western countries, as the most developed,at the top of those stages, which is characterised byRostow (1990) as ‘take-off’, while the rest of theworld is at the lower stages. The goal of this theoryis to describe how developing countries will



possesses “…a sulfuricodor of race andinheritance, an air of immutability”(Landes, 2000, p. 2). Does culture, in manydeveloping countries and in its real lifecontext, impede the development ofentrepreneurship, and thus, hampereconomic development? Do thosedeveloping countries need suchrevolutionary movement experience byFrance, Russia, or China, in order torecalibrate their culture and toaccommodate the so-called ‘Western’entrepreneurial culture?

National versus Local

It is only in the last four decades, when forthe first time in 1980 Hofstede introducedhis famous model of cultural dimensionbased on national culture, and therelationship between culture andentrepreneurship is empirically studied.Many academics consider the work madeby Hofstede as the most famous systematicattempt to study culture and culturaldifferences. His Culture’s Consequence isinspired by Inglehart’s (1977) research ondata collected from the World ValuesSurvey that places culture and culturalchanges as the key intervening variablesbetween institutional processes andeconomic development. He aims tomeasure cultural difference betweennations by utilizing national culture. Hiswork is based on the largest survey ofwork value at IBM subsidiaries that washeld twice, in 1963 and in 1967respectively, comprising of 116,000questionnaires, from which over 60,000people responded from over 40 countries(Hofstede, 1984).

In addition to Hofstede, there is also a widerange of cross-national empirical studiesconducted by various other researchers (fora complete catalogue of these studies andtheir measurement tools, see Taras, 2008),such as: Lynn (1991) who studied differentnational attitudes to competitiveness and

eventually reach the level achieved by Westerncountries by mean of economic modernization.

money; Mcgrath, Macmillan, andScheinberg (1992) who examined culturalvalues shared by entrepreneurs across theglobe; or Tan (2002) who studied theimpact of culture and national context onentrepreneurs and non-entrepreneurs.Nevertheless, compared to thoseresearchers, Hofstede’s research has amore remarkable effect on academics andpractitioners (Jones, 2007).

Hofstede is the most cited Dutch authorand the ninth most cited European authoraccording to the Social Science CitationIndex made in 2001 (Powell, 2006). Sincehis first publication in 1980, Hofstede’sinfluence has become so pervasive that itwas successively developed so manyoffshoots. Even those who reject his theoryor conclusions must at least acknowledgehis work. His model is taught inclassrooms and has been instrumental inthe implementation of various socialcontexts, including cross-cultural issues ofentrepreneurship (Verheul, Wennekers,Audretsch & Thurik, 2002; Dawson &Young, 2003; Jones, 2007). Manyresearchers9take up his pioneering study ofcharacter based on a huge amount of dataenthusiastically and it has been acceptedand adopted quickly within academic andorganizational environment ever since(Hayton, George & Zahra, 2002).

Hoftstede defines culture as “… acollective programming of the mind whichdistinguishes the members of one group orcategory of people from another”(Hofstede, Hofstede & Minkov, 2010, p. 6)and places value in the core of his onionmodel of culture, which, according to him,holds a critical feature that distinguishesone culture from another (Hofstede, 1984,p. 18). In regard to cultural change, hebelieves that the shifting of modern worldwill only affect the level of practices, not

9 Baskerville (2003) argues that Hofstede’sinfluences never reached areas in the mainstreamsocial science, particularly anthropology andsociology, but rather remained in areas such aspsychology, behavioural science, organizationalstudies, and management.



values. Overall, through his cross-culturalstudies, he identifies six main dimensionsof cultural values, which he claims toaffect human thinking, organizations, andinstitutions in predictable ways. Thosedimensions are power distance, uncertaintyavoidance, individualism, masculinity,long-term orientation, and indulgenceversus restraint. Although dimensions are“… hypothetical construct[s] [and] … notdirectly accessible to observation”(Levitin, 1973, p. 492), Hofstede et al.(2010, p. 31) argue that they are the “…aspect of a culture that can be measuredrelative to other culture”.

However, by assuming that there is a largedegree of homogeneity within nation statesas opposed to large differences betweennation states, and by considering thatnational culture is a common component ofa wider culture that contains both its globaland sub national constituents (Hofstede,1984, p. 29), Hofstede and his supportersoverlook cultural differences betweenregions within countries (Basu & Altinay,2002; McSweeney, 2002; Busenitz, Gomez& Spencer, 2000; Didero, Gareis, Marques& Ratzke, 2008). He also tends to ignorethe importance and variations of thecommunity (Dorfman & Howell, 1988;Lindell & Arvonen, 1996; Smith, 1998a).In fact, in a highly centralized country,cultural systems that exist locally stilldominantly influence grassrootscommunity’s way of life (Pieterse, 2001;Goodman, 2004; During, 2005; Richerson& Boyd, 2005).

Local culture serves as the community’sprimary standard entry requirement for itsmembers to acquire. In other words,compared to Hofstede’s ‘commoncomponent’ of national culture, thedynamics of culture that exist locally havea greater impact on an individual.Moreover, the evolution of local culturesand their interactions with supportingnational policies have also been a keydeterminant of success that encouragesentrepreneurship activities locally(Pieterse, 2001; Shiller, 2005). Hence,

aspects contained in a local cultural systemalong with all of its supporting attributesprevailing building a dynamic atmospherethat fosters entrepreneurship (Roberts,1991; Todorovic & McNaughton, 2007).

Magala (2004) also heavily criticizesHofstede’s theoretical framework bydenoting it as an in-built western bias. Heconcludes that all of Hofstede’s culturaldimensions are highly influenced bywestern perspectives because only westernscientists conduct the entire researchprocess (particularly the empirical datagathering and processing). If there was atall any local cultures containingdimension, which were ‘salient’ forindividuals to identify but ‘invisible’ tothose unacquainted with the localcommunity’s ‘tacit knowledge’, or‘nonlinear’ with the six dimensions, theywere unnoticed or were labelled as aspectswithin the six dimensions, not asindependent factors.

Child and Kieser (1977, p.2) admit that theboundaries in which culture is shared areproblematic, thus according to them “… itmay make as much sense to refer to a classor regional culture as to a national culture”.McSweeney (2002) argues that the limitedcharacterization of culture in Hofstede’swork, its confinement within the territoryof states, and its methodological flawsmean that it restricts, rather than enhances,the understanding of particularities. As aresult, a researcher, who wants tounderstand the national culture of aparticular country, first needs to recognisethe rich and diverse mixtures of its localpractices and institution, rather thanassuming their ‘homogeneity’. This is whyI argue that searches for culture-fit models,which provide understanding on howcultural variables explain the effect ofdifferent practices in different cultureswithin its local context, are desirable.



The Agent of Cultural Change10

In the previous subsections, we havediscussed how culture supports anenvironment that fosters entrepreneurship,and thus, facilitates economicdevelopment. Nevertheless, does culture atall times have to take the lead? Foreconomic development to be set in motion,is it always culture first, thenentrepreneurship? Is the relationshipbetween culture, entrepreneurship, andeconomic development constantly one-wayand linear in nature? If it is true that thoseentrepreneurs are deviant in nature, asSchumpeter characterised them, can thisdeviation act as the catalyst of culturalchanges that may well create a betterenvironment for entrepreneurship, andeventually, enhance economicdevelopment? In this subsection, I willdiscuss the relationship between cultureand entrepreneurship on the other wayaround.

The interaction between culture andentrepreneurship is indeed not one-way innature (Verheul et al., 2002; Steyaert &Hjorth, 2006). Beside it is one of theelements orientating further actions, inreality, culture itself is still the product ofactions (Parsons, 1949; Kluckhohn &Kelly, 1945; Kroeber & Kluckhohn, 1952;Hodgetts, Luthans & Doh, 2005; During,2005). Therefore, this condition placesculture as a subject of both repulsive andattractive forces of change. Innovations aswell as inventions change community’ssocial structures and affect culture

10 Although in social science, the terms‘cultural change’ and ‘social change’ are oftenused interchangeably, in this research, I will goalong with Landis’ (1935) classification todifferentiate both terms. Thus hereinafter,‘cultural change’ will refer to all of thechanges in norms, values, beliefs, ideologies,social collectives, statuses, and roles within aparticular community, while ‘social change’will represents changes in the patterns ofinteraction as well as the populationcomposition (age, sex, vitality, mobility, etc.)of that community.

internally (Wagner, 1981). They producechanges within a community by modifyingsocial dynamics, which facilitate creativeactions in promoting new cultural models.Subsequently, these social shifts willstimulate ideological modifications andother types of cultural changes (O’Neil,2006). Besides, in order to survive, aculture always needs to be re-acceded andre-integrated under the consensus of thecommunity where it belongs to (Parsons etal., 2001). This is where entrepreneurship,through its entrepreneurs who werepreviously shaped by culture, can take acritical role in driving cultural changes.

As I have mentioned before, forSchumpeter the function of entrepreneursthrough their innovations is to:

. . . reform or revolutionize thepattern of production by exploitingan invention or, more generally, anuntried technological possibility forproducing a new commodity orproducing an old one in a new way,by opening up a new source ofsupply of materials or a new outletfor products, by reorganizing anindustry and so on (Schumpeter,2006, p. 132).

Here, entrepreneurs act as promoters ofchange from ‘within’ the economic domainthat imagines new solutions. As the trueagents of economic development, theyendogenously (in an economic sense)destroy old ways and replace them withnew ones (Schumpeter, 1983; 2002, 2003,2006). They are fully equipped withvarious new ideas, as well as the ability toconvert those ideas into successfulinnovations and inventions in order toadjust inferior creations as a whole or inpart (for examples see: Kirzner, 1973;Leff, 1979; Baumol, 2004; Heberer, 1999;Boettke & Coyne, 2003; Coyne & Boettke,2009).

Although mostly motivated by profit, theintroduction of new products usuallybrings along with it an influence, positiveor negative, toward altering the society and



eventually triggers social and culturalchange, as noted by Schumpeter (2006)below:

Railroad construction in its earlierstages, electrical power productionbefore the First World War, steamand steel, the motorcar, colonialventures afford spectacularinstances of a large genus whichcomprises innumerable humblerones—down to such things asmaking a success of a particularkind of sausage or toothbrush. Thiskind of activity is primarilyresponsible for the recurrent“prosperities” that revolutionize theeconomic organism and therecurrent “recessions” that are dueto the dis-equilibrating impact ofthe new products or methods. (p.132)

Schumpeter (2002, 2003) furthermorepoints out that entrepreneurship might alsoproduce rather unique consequences for thesociety. We can use famous philanthropistsand their large private foundations, such asRockefeller, Ford, or Carnegie, as astraightforward example of thisuniqueness.

Those entrepreneurs, because of theirwealth, acquire a high social position insociety and use this condition to amendsocio-cultural structures according to theirpersonal view by means of theirphilanthropic acts, arguing that change isneeded for the advancement of humanity ingeneral. For instance, one of Carnegie'sgrandest philanthropic gestures was whenhe offered the people of the Philippines$20 million in 1889 to help them buy theirindependence from Spain and sparethemselves from American imperialism(Bishop & Green, 2008). Through theirscholarship programs, Ford Foundation aswell as many other foundations indeveloped countries is also responsible forthe transfer of Western culture to many

developing countries.11Likewise, WarnerBrothers, Walt Disney, and many othercompanies that are working in the filmindustries in Europe or the United Statesare also responsible for such culturaltransfer and the rise of consumerism inthose countries. However, beside all of thecontroversies surrounding their activities,overall I believe that these entrepreneursdo not only create new products or evennew business models, but they have alsoundeniably triggered cultural changesworldwide, been pressing forward thosekinds of changes, and been doing soconsciously in many cases.

11Mubyarto (2004) was convinced that thescholarships given by various foundations, as wellas by the governments of developed countries sincethe 1960s, are the core that causes the economicmess in Indonesia. He maintains that it is due toforeign generosity, Indonesian economists, who atthat time were lucky enough to receive freeeducation abroad, were instead blinded andenchanted by the great knowledge and valuessystem so proudly held by the Westerners, and theyfurthermore came to be little what is their own. Inhis own word, Mubyarto (2004, p. 22) stated:

Sebagian besar dosen Ilmu Ekonomi kitayang belajar di Amerika mulai awal tahunenam puluhan, baik di UC-Berkeley, UW-Madison, maupun di universitas -universitas lain di Eropa Barat, hampirsemuanya memperoleh beasiswa dariyayasan – yayasan atau dari pemerintahAmerika. Akibatnya jelas kebanyakan darimereka menjadi silau terhadap kehebatanilmu yang mereka peroleh termasuk sistemnilai yang dianggap lebih baik dan lebihmodern ketimbang sistem nilai diIndonesia.

The translated version:Most of our lecturers in Economics whostudied in America since the early sixties,such as at UC-Berkeley, UW-Madison, orat other universities in western Europe,almost all received scholarships fromAmerican foundations or the Americangovernment. As a result, of course themajority of them became blinded by thegreatness of the knowledge that theyreceived, including the value system,which they considered to be better andmore modern than the value system inIndonesia.



SME and Entrepreneurship InDeveloping Countries

What is the nature of entrepreneurship indeveloping countries? From here onwards,I will trace and describe the reality facedby many developing countries in regards toentrepreneurship. This section will serve asa starting point, arguing that the type ofentrepreneurship in these countries ischaracterised by SMEs (Small andMedium-sized Enterprises). I will thendiscuss specific issues in relation to thedevelopment of the study ofentrepreneurship in such countries, usingIndonesia as a case study.

Most academics agree nowadays, thateconomies discouraging SMEs are likely todiscourage newer dynamic industries fromputting down the roots they may otherwisedo (Berry, 2007). Zimmerer andScarborough (1994) even predicted in theirbook that the 21st century would dawn withthe greatest number of small businessesever. Their prediction turns out to be trueso far and, over the past two decades,many governments have identified theencouragement of new SMEs as asignificant component of economicstrategies for job creation and wealthaccumulation (Holmund & Kock, 1998;Kuratko & Hodgetts, 1995; Hodgetts &Kuratko, 1995; Birley & Westhead, 1989).Still, these achievements would beimpossible without the presence of Birch(1979).

In the mid-1970s, Birch received a grantfrom the Economic DevelopmentAdministration of the United States tostudy how the movement of enterprisesacross state boundaries initiateemployment growth. He found andreported that inter-state movement ofenterprises was a minor part of the overalljob changes, and that 82% of the new jobscreated came from SMEs (Birch, 1979).Birch’s systematic studies and empiricalresults give SMEs a place on the researchmap. His report not only opens up theresearch field, but also receives

considerable attention from politicians andmedia, which place a spotlight on thesituation and the importance of SME(Landstrom, 2005b, p. 160).

If we speak about entrepreneurship indeveloping countries, the term SME willautomatically rise up to the surface, asmost social scientists outside the field ofeconomics use both terms synonymouslyand interchangeably to describe businessactivities that include the formal andinformal sectors. A vivid example of thisstate of affairs is Turner’s (2003) bookIndonesia's Small Entrepreneurs. Turnerinterchangeably uses the term‘entrepreneurship’ with ‘small business’,and loosely defines the ‘entrepreneur’ as a‘small business owner’. Indonesians evenuse the word ‘kapitalis’ (capitalist) and‘pengusaha’ (businessman) as thesynonyms for ‘wirausahawan’(entrepreneur).This is very differentcompared to the definition used ineconomics or the study ofentrepreneurship. A famous example ofthis can be seen in one of Gatner’s (1989)papers that discusses how entrepreneurshipand entrepreneurs should be defined.

Indeed a clear distinction, such as thatinsisted by many scholars within the fieldof economics, is very difficult to beachieved because the major share ofenterprises in developing countries is smallin terms of assets and many of themoperate informally using family labour. Forexample, Fafchamps (2001) finds thatmarket intermediation in Africa ischaracterized by an excess of small tradersthat employ fewer than ten employees orfamily helpers, a case that resemblesTurner’s (2003) as well as Dahles andBras’ (1999) findings in Indonesia. Due totheir abundance, the World Bank hasinstead focused on SMEs in its effort totarget entrepreneurship-in developingcountries (Ayyagari, Beck & Demirgüc-Kunt, 2003). Even though I would suggestthat SMEs are not necessarilyentrepreneurial in nature, here I supportGartner’s (1989) vision that realizes



entrepreneurial start-ups as a subset ofSMEs. Schumpeter (1947, p. 151) oncealso observed that to “… see thephenomenon even in the humblest levels ofthe business world is quite essential thoughit may be difficult to find the humbleentrepreneurs historically”.

SMEs definitely hold the added allure ofbeing a key component of a widereconomic development and povertyalleviation in many developing countries(Kotey & Meredith, 1997). They providean avenue for entrepreneurship (Littunen,2000), where their growth in thesecountries is often used as an indicator ofentrepreneurial development. Aspreviously mentioned, SMEs tend todominate their corporate communities, atleast in terms of enterprise registrations, ifnot always in terms of aggregate size.Furthermore, since they are labour-intensive, most scholars agree that SMEsare a major and sustainable generator ofemployment, as well as income for theircitizens working outside the public sector(Banerjee &Duflo, 2007). For example, inCambodia, Laos, and Nepal, SMEsrepresent the vast bulk of the corporatesector, accounting for approximately 99%of all firms, over 70% of total employment,and more than 50% of GDP output(Freeman, Abonyi & Supapol, 2009).

Additionally, SMEs in developingcountries also serve as a useful bridgebetween the informal economy of familyenterprise and the formalized corporatesector, balancing development amongregions (Kotey & Meredith, 1997). Theyact as inter-industrial linkages or assupporting industries producingcomponents and parts for large enterprises(LEs), via market mechanisms,subcontracting systems, or other forms ofproduction relationships. SMEs are ingeneral much more self-sufficient andindependent, because they finance theiroperations overwhelmingly from thepersonal savings of the proprietors,supplemented by gifts or loans fromrelatives, from local informal

moneylenders, traders, input suppliers, orpayments in advance from consumers(Tambunan, 2008).

However beside all of the recognitionsgiven to them, SMEs are “… one of thosethings that are recognized when seen butdifficult to define” (Gore, Murray &Richardson, 1992, p. 115). Up until today,there is no single, uniformly acceptabledefinition of SME (Storey, 1994), becauseit varies significantly in line with the scaleof the economy concerned, the degree ofdevelopment, and the economic structuresthat are present (Castel-Branco, 2003).Early definitions of SME were often quitevague. The dominant principle behindthose definitions, such as adopted by theUS (Small Business Mobilization Act of1942 and Small Business Act of 1953) orthe UK (1971 Bolton Committee’sDefinition), was on defining adisadvantaged enterprise that need to besupported in terms of market share orbargaining power (Schizas, 2010).Nevertheless, because small businesspolicy has often provided direct andindirect subsidies to businesses identifiedas sufficiently ‘small’ (Levine, 2005),definitions have gradually shifted towardsmore objective sized thresholds. Currently,almost all definitions of SME adopted bygovernments worldwide employ a smallnumber of variables accepted as proxiesfor size. Yet, what is included or excludedamong those variables is ultimately apolitical decision, even though technicalarguments for different treatments abound.

Indonesia As A Case Study

Annotating the above discussions on theposition and the role of culture toentrepreneurship and economicdevelopment, as well as the characteristicsof entrepreneurship in many developingcountries, I argue that not considering thecomplexity of local cultural contexts willhinder attempts to understand thedevelopment process and entrepreneurshipin those countries. Similarly, I chooseIndonesia as a case study for this paper



because of the country’s culturaldiversities, the composition of itsindigenous population, as well as theproblems that it faces, outlined below.

Indonesia and Its Diversity

Indonesia, as the most culturally diversecountry in the world, has numerousindigenous populations, separated intovarious distinct ethnic groups. While insome colonialized countries indigenouspeople are minorities in their ownmotherland, in Indonesia they represent thevast majority of the population. This iswhy we have to trace back through historyin order to describe clearly the concept ofindigenous people in Indonesia(Koentjaraningrat, 1984).From the year 1844 until 1942, through theRegeringsreglement 1854 article 109, theDutch divided citizenship of the DutchEast Indies (currently Indonesia) into threesocial classes. The Europeanen(Europeans) was designated the highest ofthe three groups, followed by the VreemdeOosterlingen (Foreign Orientals whichconsisted of mostly Chinese, Indian, andsome Arabians), and the Inlanders whostood at the very bottom of these groups(native-indigenous). After declaring itsindependence, Indonesia recognizes onlytwo types of citizenships, the warganegara Indonesia (Indonesian) and theWarga Negara Asing (foreigner)(Diamantina, 2007). Until now, warganegara Indonesia consists of theindigenous people (the Inlanders) and theformer Europeanen as well as VreemdeOosterlingen along with their descendantswho have chosen the Indonesiancitizenship.

Since the colonial period, the indigenouspeople (Inlanders) themselves use the term‘pribumi’ to distinguish them to the ‘non-pribumi’, those whose ancestors originatedfrom other races or countries (Europeanenand Vreemde Oosterlingen) (Swasono,1997). Divided into 1,128 distinct ethnicgroups (Tobing, 2010), they furtherdifferentiate themselves mainly based upon

ancestry and residency of particular placesthat they culturally proclaim as their landof origin. This differentiation is reflected inthe existence of 746 different ethniclanguages or Bahasa Daerah (Yuliawati,2008) and informally legislate eachpribumi ethnic group its ‘local status’ asthe ‘local community’ attached to a certainareas in Indonesia, where they retain theirancestral graves and main culturalpractices.

Hence, the concept of indigenouscommunity and local community areinterchangeable, as for Indonesians, theyhave the same meaning. This conditiondefines the concept of local culture inIndonesia and raises the term of‘orang’(here: ‘a people’, but also ‘aperson’). Indonesians use orang to refer toan indigenous community and theirinherited culture, tied as the localcommunity and local culture of a particulararea. For instance, orang Bali (Balinese)and their inherited culture represent thelocal community and local culture of Bali,or orang Sunda (Sudanese) and theirinherited culture represent the localcommunity and local culture of West Java.

Referring to the above situation,multicultural interaction and acculturationamong these ethnic groups are acompulsory requirement for the country’ssustainability. Therefore, from thedeclaration of its independence, Indonesiahas been trying to strengthen its culture,unfortunately, by imposing a nationalculture in the name of national unity andintegrity through centralized politicalstructure, leadership, legislation, andeducation (Schefold, 1998; Suparlan,2000). Nevertheless, up until today, itsexpansion has never able to replace localcultures. Even under Soeharto’s centralizedregime, local cultures still dominated thelives of those pribumi ethnic groups(Budianta, 2004).

This is not surprising as the oldergenerations of each group customarilynurture the younger generation accordingto the value and mores of their own



ethnicity, culture, and tradition (Winarto,2006; Azra, 2010). In fact, the regionalautonomy law, first introduced in 1999,has reaffirmed the significance of localculture, and consequently, supported manypribumi’s increasing eagerness in wishingfor and talking about ‘local wisdom’possessed by their local cultures andtraditions. They believe that each localculture has its own genius that isinstrumental for maintaining theircountry’s socio-cultural stability andharmony.

SMEs and Entrepreneurship Studies inIndonesia

In terms of their economic activity, manypeople in Indonesia, as in other developingcountries, depend on informalentrepreneurial activities for subsistence.As a result, entrepreneurship is largelymanifested in the form of various SMEs.According to the Indonesian ParliamentaryAct No. 20 (2008), Small and Medium-sized Enterprise includes all businesseshaving a net worth of more than50 million Rupiah up to a maximum of 10billion Rupiah excluding land or otherbuilding of business premises, with anannual sales turnover between 300 millionRupiah and 50 billion Rupiah. Meanwhile,the country’s official statistical body, theIndonesian Central Bureau of Statistics(BPS-Badan Pusat Statistik) has its ownopinion that is more focused on labourquantity, and defines SMEs as all businessentities that employ between five and 100employees (Rahmana, 2009).Historically, SMEs play the main role inthe household economy of the country’spopulation as a generator of primary orsecondary sources of income for manyfamilies. SMEs in Indonesia are regionallydispersed and are mostly located in ruralareas. According to BPS (2009), in 2008the majority of Indonesian SMEs operatedin agriculture (including forestry andanimal husbandry, 52.48%), trading andhospitality (28.1%), production (6.32%),service (4.25%), and transportation(6.25%) sectors of the economy. They

employed approximately 94 million people(97.15% of the total number of nationalemployment) and contributed 55.67% ofIndonesia’s real Gross Domestic Product(GDP). Until 2009, the number of SMEs inIndonesia grew to roughly 52.76 millionunits or approximately 99.99% of allbusiness units (DEPKOP, 2010). Thisshows how deeply Indonesia relies on theentrepreneurship of its SMEs’ formaintaining economic growth, enhancingincome distribution at the rural andregional level, as well as reducingunemployment.

Yet, the country’s awareness of theimportance of entrepreneurship studies isnot primarily because of the abundantnumber of SMEs but due to their pivotalrole in sustaining the country’s economyduring the 1997 Asian Financial Crisis.Before this crisis, discussion and researchon entrepreneurship in Indonesia wereextremely limited12. Literature such as TheAchieving Society of McClelland (1961)and The Practice of Entrepreneurship ofMeredith, Nelson, and Neck (1982) weretranslated into Bahasa Indonesia more thana decade after they were first published inEnglish, in 1987 and 1996 respectively.Indeed, both texts are still used as primarytextbooks for entrepreneurship courses inthe country. The oldest comprehensiveaccount on entrepreneurship and itsrelationship with cultural attributes inIndonesia was written by Clifford Geertzin his ‘Peddlers and Princess’, whichconsists of a closely observed case study

12 An internet search made through the ‘Discovery’search engine, with ‘books” as the type of source,on ‘Indonesia’, ‘entrepreneurship’, and ‘culture’only reveals three results. Only one out of the threewas written by an Indonesian, Nurcholish Majid(1989), and was published in 1989. The title of thebook is Urbanism in Islam and Indonesianindigenous entrepreneurship and it is actually aresearch report on urbanism in Islam. While theother two were written by Western academics, andwere published after the Asian Financial Crisis tookplace. The first is Sarah Turner’s Indonesia's SmallEntrepreneurs which was published in 2003, andthe second is Tourism and Small Entrepreneurs byHeidi Dahles and Karin Bras which was publishedin 1999.



examining cultural factors of economicdevelopment through an examination ofentrepreneurs in Kediri (East Java) andTabanan (Bali). Geertz published his workin 1963, which was then translated toBahasa Indonesia in 1973.

Furthermore, entrepreneurship in Indonesiais in reality still regarded to be under thedomain of economics, not as aninterdisciplinary study. The situation isalso getting worse since the countryimplemented the Act No. 14 (2005) onTeachers and Lectures. According to theact, the degree for all academics inIndonesia must be in line with theirscientific discipline in order to receivetheir full professorship. For instance, anacademic who dreams of becoming aprofessor and who is graduated with thetitle of Sarjana Ekonomi (a graduatedegree in economics), must also have amaster and doctoral degree from the samediscipline, in order to be approved by theDirectorate General of Higher Education.(S) he will automatically be discounted, ifher/his master or doctoral degree is inanother discipline from her/his graduatedegree. An alternative is to retake agraduate degree that is in line with her/hispostgraduate degree. Indeed, scientificknowledge in Indonesia is stronglypartitioned, and as a result,interdisciplinary studies, such as onentrepreneurship, are viewed as uselessand inexplicable.

This lack of research and discussion allowsno other alternatives for academics inIndonesia but to uncritically accept variousWestern entrepreneurial indices or modelsas irrefutable (e.g. Nursjanti & Sulganef,2008; Purnomo, 2009; Suryana, 2006;Winarningsih, 2006; Handayani, 2007;Atmanti, 2005; Ciputra, 2008). Theseacademics encourage the Indonesiangovernment to foster the development ofentrepreneurship by sponsoring an‘entrepreneurial culture’ (see PresidentialInstruction No. 4, 1995; Winarningsih,2006; Atmanti, 2005; Ciputra, 2008),which is modelled on various

characteristics of entrepreneurshipidentified by prominent non-Indonesianscholars around the world. For manyIndonesian entrepreneurship scholars, localculture is regarded as a hindrance forentrepreneurial activity insofar as it isincompatible with the Western culturalunderpinnings of entrepreneurship, as theyknow it from textbooks13. From their pointof view, local culture is in capable ofassisting entrepreneurs to gain the keyentrepreneurial qualities such Lambing andKuehl’s (2000) initiative, self-confidence,self-determination, and high tolerance forambiguity and failure; Hyrsky’s (2001)innovativeness and creativity; Littunen’s(2000) ability to learn; Deakins’ (1996)needs for achievement; Mazzarol, Volery,Doss, and Thein’s (1999) locus control;Bridge, O’Neill and Crome’s (1998)autonomy and independence; orBrockhaus’ (1980) risk-taking propensitiesto gain profits.

This state of affairs contradicts theenthusiasm of many Indonesians, discussedin the previous subsection, in preservingthe existence of their local culture. Fromthis scenario, the need arises to conductempirical studies of entrepreneurship as itoperates within Indonesian culturalcontexts. Such research may indirectlysupport the argument on the significance ofspecific local cultures discussedpreviously.

Conclusion

While the phenomenon and the role ofentrepreneurship in the economy have beenwidely studied in developed countries,studies of entrepreneurship in developingcountries, such as Indonesia, are still

13 It is indeed a fact that economists in Indonesiaare poor in thought especially in terms of originalideas (Setiawan, 2007).Indonesian economists are the pride and joy of theircountry, from those who claim or are claimed to becritical as well as the most radical, those who arelabelled conservative economists, all clearly andopenly mere catalysts of knowledge.



under-represented (Bhide, 2000). Indeed,Lingelbach, De La Vina, and Asel (2005,p. 7) claim that, “Entrepreneurship indeveloping countries is the mostunderstudied important global economicphenomenon today”. The presence ofmainstream development theories andneoclassical theories of entrepreneurship inthose countries has exacerbated thissituation. They maintain their own narrowview in promoting the universality andsuperiority of their Western model (Kayed,2006). Both have failed to make a realcontribution to the developmentalaspirations of people in developingcountries because their assumptions oftenignore cultural, environmental,technological, and structural differencesfound between the developed anddeveloping countries. Even when regardedas a universal category within economics,entrepreneurship should be understood asthe country-specific experiences.Moreover, during the course of thetwentieth century, globalization hasmarginalized local people around theworld. Rapid shifts in economic forces,advances in technology, and socialacculturation imposed by the dominant‘ruling culture’, under the false premise ofits being a ‘common culture’, have hadmany negative effects and cause them tosuffer greatly.

For these reasons, Studies on the degree ofcohesion that remains and the desireamong many indigenous people to(re)build their communities on traditionallyand culturally grounded foundations areimportant (Reuter, 1999; 2003; 2010;Anderson, 2002; Peredo, Anderson, Honig& Dana, 2004). They can be used as abridge that links Western theories, oneither development or entrepreneurship,with the unique cultural realities that existin developing countries, whilst serving asthe foothold also to overcome thedeficiencies of normative Westernapproaches prescribed and promoted bymany consultants, various educationalsystems, as well as numerous trainingsystems in those countries. However, such

studies should not only be regarded merelyas a simple exercise in analysing theexistence of outliers in the global world-system. They should also comprise ofefforts in providing the empiricalfoundation for the kind of comparativeanalysis that alone will lead togeneralizable theories of entrepreneurshipand development across cultures. Such ananalysis would rest on much firmerfoundations than previous theories, whichsimply assume the universality ofeconomic western models. This kind ofstudy is also critical as it can contribute toa broader project in building a genuinelycross-cultural “world economics” theorythat would be adaptable to many settingsincluding, but not exclusive to, indigenouscommunities.

Notes on contributor

I Putu Tirta Agung Setiawan is theCommunity Research Coordinator ofJangkang Research Institute and anAssociate Researcher at the Centre ofEastern Indonesia Studies, UniversitasKristen Satya Wacana. He also had anextensive experience working inpartnership research projects with theAustralian and Indonesian Community-based Management Systems projectthrough the Australian CooperativeResearch Centre for National PlantBiosecurity. Agung was graduated with aBachelor degree in Economics, majoring inDevelopment Studies, and is currentlystudying for his Doctoral degree in AsianStudies at the University of Melbourne’sAsia Institute, under the supervision ofProf. Thomas Reuter and Dr DinaBowman. His PhD research studies therelational nature between culture’sattributes and entrepreneurship that existslocally within Indonesia, as well as howthey mutually affect one another in theirlocal settings. His research seeks tounderstand the relationship betweenculture and entrepreneurship by describingand analysing local Indonesianentrepreneurs’ social actions through the



form of various cultural mentalconstructions experienced by theentrepreneurs’, from their own perspective.Agung is interested in topics related toentrepreneurship, culture, gender, anddevelopment studies.

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