Part of my work in Ecuador has been to evaluate the entrepreneurship “climate” in the Amazon and throughout the rest of the country. It is no secret that Ecuadorians in general are very entrepreneurial, as proven by the Yachana High School students’ social business plans. I’ve mentioned before that the Global Entrepreneurship Monitor (GEM) even ranks Ecuador as 7th in the world for Total Entrepreneurial Activity (TEA). But hold on for a hot second… if this is the case, then why isn’t Ecuador pumping out innovative, high-potential ventures left and right? Because there are two main types of entrepreneurship throughout the world: necessity-driven (emprendimiento tradicional) and opportunity-driven (emprendimiento dinámico), and Ecuador happens to practice the former much much more than the latter.
Necessity-driven entrepreneurship usually entails setting up a small business selling basic product(s) or service(s) because there is no employment elsewhere due to lack of education, geographic location, economic state of the country, etc. Necessity-driven ventures in Ecuador usually employ 2 – 3 people from the same family, and often provide similar products and services to other small “pop-up” businesses close by. This type of entrepreneurship typically leads to small, local businesses.
Opportunity-driven entrepreneurship occurs when someone has the ability to choose between employment and setting up their own venture. An example from Ecuador would be a group of Amazon guides getting together, discussing the need for a tour operator in a specific region, and setting up their own independent travel agency. Without the agency, they would each still theoretically have a place of work. This type of entrepreneurship is conducive venture-level enterprises that could potentially scale throughout the nation or even internationally.
The prevalence of necessity vs. opportunity–driven entrepreneurship in a country can be influenced by many social, political, and economic factors. I have also come to believe that it is heavily influenced by culture. And from my time spent in and out of Ecuador over the past few years, I’ve begun to realize that certain culture’s tendencies may be more conducive to opportunity-driven entrepreneurship than others. I realize I’m making what many may consider a bold statement here, but read me out.
When you think of an entrepreneur, you think of someone who’s not afraid to take risks and break the norms a little bit, who’s comfortable with lots of gray area, and who’s very independent-minded. Obviously, this type of person comes few and far in any setting, but certain cultural dimensions may make him / her more common in some countries than others.
Geert Hofstede, a Dutch social psychologist and anthropologist, has spent nearly his entire professional career identifying how cultural dimensions vary from country to country and across geographic regions. In my research I’ve decided to look at 3 out of the 6 dimensions in Ecuador and compare them with the United States, which has historically generated a slew of successful entrepreneurs comparatively, and Chile, which is considered to be on the most competitive economies in Latin America and is quickly rounding the corner on one the most innovative (idisc.net).
The first dimension is Power Distance – “the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed equally” (Hofstede). The higher the score, the more a culture accepts inequalities and strict hierarchies as a fact of life. The lower the score, the more a culture expects a democratic approach to power relations and isn’t afraid to step outside the lines. Ecuador has a power distance score of 78, while the US has a score of 40 and Chile 63. This signifies that relative to the other two countries, Ecuadorian culture generally operates within very strict social and organizational hierarchies, which not only creates bureaucratic disasters but can also intimidate those in lower social or organizational positions from speaking up with new ideas.
Por ejemplo, I usually work on my laptop at the Yachana Lodge’s bar where there is reliable wifi and a consistent electrical current. We recently got a new bartender, Pepe, who is a gem of a person and has really made my working afternoons quite enjoyable with his crazy tourist stories and attempted jokes in English. One day, Pepe decided that he wasn’t comfortable with me charging my laptop when lots of tourists were around for fear of spilling something on it, having it in is way, etc. Totally fair, right? Right. Well, I actually never heard this tid bit of information from Pepe, but rather from the lodge general manager, who heard it from the assistant manager, who heard it from the head chef, who heard it from Pepe. Deciding to go directly to the source, I approached Pepe to ask if we could work out a schedule as to when I could charge my laptop. He said of course, and that he had wanted to do that from the beginning. BUT…. that we would have to get it approved by the kitchen manager, who would need to get it approved by the assistant manager, who would then need to run it by the general manager. Remember the game telephone? Where the more people you have the more the orginal sentence gets distorted? I’m sure you can imagine the communication rat race that ensued.
Uncertainty Avoidance is the next dimension, which is “the extent to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions that try to avoid these” (Hofstede). The higher the score, the more your culture makes sure to avoid any sense of ambiguity. Ecuador has a score of 67, the US 46 and Chile 86. Latin American culture in general does not tolerate uncertainty well, and this is most noted in their averseness to risk and eagerness to provide any other answer besides “I don’t know.”
In Ecuador, I see it in our students who become frustrated and almost uncomfortable with open-ended questions. I see it with young entrepreneurs who prefer to copy a business model they saw work down the street rather than go with their gut feeling to try something new. And I hear it almost daily with the response “Ya mismo!” (Soon!) if I ask a question with the word “When?” in it, even if who I’m asking has no idea “when” whatever I’m asking about will actually happen. Anything to not be responsible for leaving me in a state of uncertainty… Just 4 days ago myself and two other Yachana volunteers were left waiting at a bus stop for 4 hours thinking that “ya mismo” a bus would come. We should have known that no one really knew anything about why all the buses disappeared that afternoon.
The third cultural dimension is Individualism vs. Collectivism which measures “the degree of interdependence a society maintains among its members.” It has to do with whether “people’s self-image is defined in terms of ‘I’ or ‘We’” (Hofstede). The higher the score the more individualistic a culture is, and the lower the score the more collectivist it is. Ecuador is one of the most collectivist societies in the world with a super low score of 8, while the US has one of the highest scores of 91. Chile falls in the lower quarter with a score of 23. Extremely collectivist societies place a heavy importance on harmonious group relationships and seek to avoid conflict at all costs. The term “group” could mean anything from an extended family, to an organization, to a race or ethnicity. In Ecuador, I have seen this in the form of small enterprises over-hiring family employees as the expense of the business so as to not have to say no to their relatives. I have also witnessed this cultural tendency when Ecuadorian consumers decide against reporting bad business practices in order to avoid upsetting their neighbors.
I do not mean to shed a negative light on the beautiful people of Ecuador by sharing these little stories. Rather, I wanted to highlight how a country’s traits and characteristics can seriously play a role in the development of an “entrepreneurial” culture. Of course, the scores assigned to each culture by Hofstede do not mean that one is better or worse than the other. They simply highlight how each is different. Neither are these scores fixed, as cultures are continuously morphing and changing parallel to others that are morphing and changing simultaneously. It should also be noted that these indices paint a picture of the culture as a whole, and do not represent the traits and characteristics of individuals. I have met some amazingly innovative and non-traditional Ecuadorian entrepreneurs during my time here who honestly shatter the cultural dimensions that have been assigned to their country.
Programs like EmprendEcuador (Startup Ecuador) are working to push Ecuadorian cultural toward one that is more entrepreneurial by offering financial services that minimize risk, building relationships between existing entrepreneurs, and encouraging members from all pockets of Ecuadorian society – rural, urban, men, women, Kichwa, mestizo, etc – to try something new and different. And while it’s only 2 years old, I can already see glimpses of it working!
Well, ladies and gents… The countdown has begun. I only have 10 more days in Ecuador. As always, leaving here will be bittersweet. I hope everyone had a happy holiday season, and can’t wait to continue working on Village Capital Ecuador stateside =)
Great post, always look forward to seeing new ones.
Never heard of the concept of enterprise being opportunity-driven or necessity-driven but it makes sense in the context of the parameters set out for each type. Here in the US we take for granted how many of our necessities are so easily met that we have more working capital (time, money, etc.) to focus towards opportunity driven enterprise. I would have to think that this also has an effect on cultural dimensions. As a whole with fewer necessities so readily available people of a culture would have to rely more on group dynamics to support their way of life, hence the higher “Power Distance Score.” Really puts into perspective the amazing opportunities we are given in a more advanced economy that we take for granted.
Hope your trip is going well and that you make it back safely!
I would say that your doing a great job exploring the opportunities, there are limitless things you can do in any country, just have to think outside the box 😉