Entrepreneurialism in the Genes?

New businesses not only create jobs, but are also a driving force behind innovation and economic growth. According to calculations from the United States, business startups account for 25% of productivity growth. Researchers and politicians thus have a fundamental interest in understanding what exactly drives entrepreneurial activity within individual countries and regions. Alongside factors such as tax policy and competition law, discussions repeatedly return to the influence of an entrepreneurial culture.

Switzerland’s special circumstances provide opportunities for research

This notion is by no means new: at least since Max Weber, culture has been cited as an important reason for economic differences. However, in empirical terms the concept of an entrepreneurial culture causes difficulties. Ideally, the question should be answered experimentally by extracting people from their cultural space of origin and implanting them at random within a new environment. This would then make it possible to actually ascribe differences between business startups to the various cultures and to measure the role of culture. This is naturally a pure thought experiment. However, two special circumstances found in Switzerland could be of assistance here.

First, Switzerland as is known embraces German, French, Italian and Romansh linguistic and cultural areas. There are very clear boundaries between these different cultural regions: within the space of a few kilometres the dominant language can change completely. This means that any given place can be unequivocally ascribed to a particular cultural area. In fact, the German-French linguistic boundary runs for the most part right down the middle of three cantons, without any geographical barriers. On an institutional level, nothing changes when crossing the language boundary in these bilingual cantons, other than the dominant language. Our analysis therefore focuses on municipalities along the French-German language boundary situated within bilingual cantons.

The cultural background plays a role down through the generations

In order to consider culture independently from other framework conditions, the study draws on a second characteristic feature of Switzerland: the so-called “place of origin”. This is the place from which the male ancestors of any Swiss citizen originate. The registration of the place of origin makes it possible to consider people living in the same place who have a different cultural origin. In its analysis the study compares the number of businesses founded by Swiss nationals with a place of origin to the west of the linguistic boundary with startup figures for their compatriots with a place of origin to the east of it.

By comparing business startups by individuals with different places of origin within their current municipality of residence, the researchers were able to examine specifically the environment of the business and attribute all differences observed to the cultural background. The result discovered is that Swiss nationals with a place of origin within the German-speaking cultural space are more likely to become entrepreneurs. Specifically, they found on average 20% more firms than their counterparts with a place of origin within the French-speaking cultural space, irrespective of where they currently live. The study observed the same effect for people resident in Geneva and also in Zurich. And also finds the effect if the individual bilingual cantons are considered separately.

The German-speaking Swiss prefer to be their own boss

This can be accounted for by a variety of alternative explanations, as the language boundaries for the three cantons analysed – Bern, Valais and Fribourg – are not directly contiguous and are in some cases separated by a journey of up to two hours on the motorway. This strongly suggests that language and hence culture plays the decisive role. The effect also remains if one considers exclusively assimilated entrepreneurs. These are defined by the fact that their first name is typical for their place of residence. The researchers can conclude from this that cultural background also plays a role down through the generations. 

But what is it that changes between the two cultural groups? If one considers the analysis more closely, one sees not only that people with a German-speaking cultural background are more likely to set up businesses, but also that the businesses founded are equivalent.¹ This supports the claims made by Frank H. Knight (1921), who argues that risk aversion differs between cultural groups. It is also conceivable that Swiss nationals with a German-speaking background have a stronger preference for independence. Surveys have found evidence for both explanations. The French-speaking Swiss in actual fact appear to be more risk-averse than the German-speaking Swiss. The latter appear to have a stronger preference for jobs with greater responsibilities and are comfortable taking the initiative within their work.