Entrepreneurs and firm growth under guilt vs shame cultures

Abstract

“To try and understand under what cultural conditions entrepreneurship will thrive and prosper. Whether under shame cultures or guilt cultures. We use basic game theory to model the conditions under which entrepreneurship will thrive. We anticipate that guilt cultures allow for the development of a rules-based culture that allows for the development of impersonal exchange, whereas, shame cultures, which are relationship-oriented, the focus is on strong ties and hence lack the means to expand firms from small and medium family/clan-based businesses. Empirical results are completed to see whether guilt-dominating cultures are more conducive to having larger firms and whether guilt-dominating cultures have less informality. We find support for the latter but lack the right data to test the former. We use a new measure of culture to see how it impacts entrepreneurship.”