Common Factors Between Swedish And Chinese Entrepreneurial Leadership Styles

Description
Common Factors Between Swedish And Chinese Entrepreneurial Leadership Styles

2009 9
Bremmer I. - Common Factors between Swedish and Chinese Entrepreneurial Leadership Styles
Ingmar Bremer
COMMON FACTORS BETWEEN SWEDISH AND
CHINESE ENTREPRENEURIAL LEADERSHIP
STYLES
Ingmar Bremer (PhD)
Abstract
This paper includes a comparative study of the entrepreneurial leadership of both Sweden and China,
taking into consideration such factors as their political and economic history, leadership styles, and
regulatory changes. It will conclude with an analysis of the factors that both entrepreneur leadership
styles have in common, as well as substantial differences between fundamental approaches to business
development.
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10 Business Intelligence Journal January
Introduction
In recent years, researchers have
contributed different causes as responsible
for the success of a country’s economic
system, and as a result, differing models for
economic growth suggest multiple possible
paths for success. Two countries of notable
global success, attributable to each of its’
entrepreneurial leadership skills, are Sweden
and China. The world is changing fast, and
China is now an important part of the global
economy. However, cooperation in Europe
is growing closer and broader. Sweden is a
small nation with a history of major success
on the global market, success that has been
attributable to the Swedish business sector’s
strong position and skilled company leaders.
This paper will offer a comparative study
of the entrepreneurial leadership of both
Sweden and China, taking into consideration
such factors as their political and economic
history, leadership styles, and regulatory
changes. It will conclude with an analysis of
the factors that both entrepreneur leadership
styles have in common.
The fact that entrepreneurship is a catalyst
for economic growth and development is
well known. Small businesses in the United
States, for example, account for 58% of
the private work force, 51% of GNP and
about 75% of net new jobs (Asel, 2003).
Entrepreneurship is even more important to
the growth of developing economies where
small businesses frequently account for 80%
or more of employment and virtually all job
growth (Asel, 2003). Differing economic,
cultural and political circumstances
abroad also suggest the need for a better
understanding of entrepreneurship with a
local context (Asel, 2003). Fortunately,
the ability to study entrepreneurship
abroad is expanding rapidly as a result of
the emergence of global private equity
markets and microfnance. International
entrepreneurship spans cultural boundaries
and involves a variety of stakeholders,
including the entrepreneur, investors and
policy makers (Asel, 2003).
Entrepreneurs operate at the margins
of the economy exploiting opportunities
overlooked by incumbents. They innovate
to develop promising, but untested markets
and fexibly managing scarce resources in
an uncertain, often unforgiving environment
(Asel, 2003). International entrepreneurship
thus offers a rich tapestry to explore many of
the issues that are at the heart of business
strategy and economic development (Asel,
2003). Companies play a key role with
regard to achieving long-term sustainable
development based on economic growth,
environmental considerations and social
commitment. Finally, an economically
thriving society with low infation creates an
important base for business growth.
Entrepreneurial Leadership
Entrepreneurial leadership is leadership
that is based on the attitude that the leader
is self-employed. Leaders of this type take
initiative and act as if they are playing a
critical role in the organization and energize
their people, demonstrate entrepreneurial
creativity, search continuously for new
opportunities and pursue them, take risk,
venture into new areas and provide strategic
direction and inspiration to their people
(Kotelnikov, 2005). These leaders also
take responsibility for the failures of their
team, learn from these failures and use them
as a step to ultimate success and strategic
achievement. Entrepreneurial leadership
involves instilling the confdence to think,
behave and act with entrepreneurship in
the interests of fully realizing the intended
purpose of the organization to the benefcial
growth of all stakeholders involved
(Kotelnikov, 2005). In the new era of rapid
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Ingmar Bremer
changes and knowledge-based enterprises,
managerial work becomes increasingly a
leadership task. Leadership is the primary
force behind successful change, as leaders
empower employees to act on the vision
(Kotelnikov, 2005). They execute through
inspiration and develop implementation
capacity networks through a complex web
of aligned relationships (Kotelnikov, 2005).
Venture values are different from
established corporate shared values.
Research indicates that entrepreneurial
independence demands space for action
and trust, while independence in a
corporation implies responsibility and
control imposed from above (Kotelnikov,
2005). Entrepreneurship is important
because any county’s economy demands
agility, experimentation, adaptation, and
rapid response in order to be frst to market.
Corporate experimentation comprises
analysis, review, somber consideration
of facts, and willingness sacrifce speed
for thoroughness (Kotelnikov, 2005).
Entrepreneurial paranoia, or the impending
belief that competitors are catching up, is
overshadowed by an essential need to build
corporate consensus and minimize perceived
risk (Kotelnikov, 2005). Entrepreneurial
leadership skills are important because
leading innovation is a delicate and
challenging process.
As a result, a true leader must encourage
expansive thinking in order to generate new
ideas, but also flter through these ideas to
decide which to commercialize. “Loose
tight” leadership alternates the creation
of space for idea generation and free
exploration with a deliberate tightening that
selects and tests specifc ideas for further
investment and development (Kotelnikov,
2005). Looseness usually dominates the
early stages of the innovation process; in
the later stages, tightening becomes more
important to scrutinize the concepts and bring
the selected ones to the market (Kotelnikov,
2005). Those who remain loose too long
generate plenty of ideas but have diffculty
commercializing them. Those who lock
into the tight mode choke off all but most
obvious ideas, thus confning innovation
to incremental line extensions of existing
products that add little value (Kotelnikov,
2005).
An examination of the literature
regarding entrepreneurial leadership reveals
that creativity is a continuous activity for the
entrepreneur, a method of always seeing new
ways of doing things with little concern for
how diffcult they might be or whether the
resources are available. But the creativity in
the entrepreneur is combine with the ability
to innovate, to take the idea and make it work
in practice (Kotelnikov, 2005). This seeing
something through to the end and not being
satisfed until all is accomplished is a central
motivation for the entrepreneur. Indeed once
the project is accomplished the entrepreneur
seeks another mountain to climb because
for him or her creativity and innovation are
habitual, something that he or she just has to
keep on doing (Kotelnikov, 2005).
An “entrepreneur” has been defned as a
person who habitually creates and innovates
to build something of recognized value
around perceived opportunities (Kotelnikov,
2005). The best entrepreneurs have the ability
to devise new combinations dependent on
their ability to discern relationships between
seemingly disparate items. In other words,
creativity is the juxtaposition of ideas which
were previously thought to be unrelated,
and it is the entrepreneurs ability to combine
ideas in a unique way or to make useful
associations among ideas. Entrepreneurial
leadership includes creating an atmosphere
where you and others are comfortable
expressing new ideas, an atmosphere where
ideas are not immediately evaluated and
attacked (Kotelnikov, 2005).
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The term “entrepreneur” is originally a
French word – entreprendre – that means to
undertake (Mamede & Davidsson, 2003).
According to Casson (1987), it seems to
have been introduced into economics by
Richard Cantillon in 1755. It was through
J.B. Shay in the early 1980’s that the
expression became recognized, referring to
a person who shifted economic resources
out an area of lower and into an area of
higher productivity and greater yield
(Mamede & Davidsson, 2003). The term
“entrepreneurship” was coined in the early
1900’s, to refer to the actions conducted
by the entrepreneur. Wennekers, Thurik
and Buis (1997), defned entreprenuership,
for research purposes, as the ability and
willingness of individuals, both on their
own and within organizations: to perceive
and create new economic opportunities (new
products, new production methods, new
organized schemes and new product market
combinations); to introduce new ideas in
the market, in the face of uncertainty and
other obstacles, by making decisions on
location, form and the use of resources and
institutions; and compete with others for a
share of the market.
Entrepreneurial Research and
Development and Economic
Growth
Although economic growth and
development have similar meanings and
are sometimes treated interchangeably,
there are some distinctions that should be
considered. While economic growth mainly
refers to the capacity of a nation to become
wealthier through the production of more
goods and services, economic development
ultimately implies that citizens of that
nation be better off (Mamede & Davidsson,
2003). Saemundson and Kirchhoff (2002)
defne economic growth and development
as an expression frequently used to refer
to improvement in social well being within
nations. In economic terms, development
has traditionally denoted the capacity of a
country, whose initial economic situation
has been relatively static for a long time,
to generate and maintain growth rates on
the order of 5% to 7% or more of its gross
national product (Todaro and Smith, 2003).
According to Todaro and Smith (2003),
before the 1970’s, development was normally
seen as an economic phenomenon in which
rapid increase in the gross national product
would trickle down to the population in the
form of jobs or other economic opportunities
or at least generate the proper conditions for
the distribution of the economical and social
benefts of growth.
Though different perceptions regarding the
concept may exist, the traditional economic
vision of development was reconsidered
during the 1970’s (Mamede & Davidsson,
2003). The experience of developing nations
during the 1950’s and 1960’s, in which the
realization of economic growth targets did
not mean improvement in the levels of living
of their population, indicated that the existing
defnition of the term was not adequate
(Mamede & Davidsson, 2003). As a result,
economic development was redefned in
terms of reduction or elimination of poverty,
inequality, and unemployment within the
perspective of a growing economy (Mamede
& Davidsson, 2003).
Research indicates that entreprenuership
can be both the cause and effect of economic
development in the sense of wealth
distribution. Countries in which wealth is
concentrated in the hands of a small fraction
of the population face greater diffculties
in coordinating the major components of
progress (Mamede & Davidsson, 2003).
These three components are labor, capital,
resources and innovation. According to
Mamede and Davidsson (2003), considering
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Bremmer I. - Common Factors between Swedish and Chinese Entrepreneurial Leadership Styles
Ingmar Bremer
that the three driving forces of entrepreneurial
success - founders, opportunity recognition,
and resource requirements – are more likely
to occur in a combined way, there are better
chances to prosper in regions in which
wealth is more equitably distributed. These
researchers have also observed that members
of such societies are in a more favorable
condition to get involved in entrepreneurial
endeavors.
National and international research and
development and innovation policies are
being improved around the world, in order
to increase economic growth and achieve
higher living standards (Erskine, 2003).
Understanding of the drivers of technological
progress and the key factors that underlie
successful research and development and
innovation is intensifying (Erskine, 2003).
A review of a large number of studies that
assess the factors that have helped drive
successful research and development and
innovation in countries that are research
and development and innovation leaders
confrms a few general conclusions. First,
it is very diffcult to determine exactly what
underlies a successful national research
and development effort, and it is easy
to conclude that everything depends on
everything else, but it is clear that innovation
systems and processes must be considered,
not just specifc technical issues with the
promotion of research and development
(Erskine, 2003). Culture, and in particular
an entrepreneurial spirit and a willingness
to risk and experience failure, is vital to
innovation (Erskine, 2003).
Research indicates that it is still unknown
how to change a nation’s culture, but all the
available evidence confrms that incentives
that reward particular behavior do tend to
have results and that education in processes
not well understood. Private expenditure
on research and development in any
country will be insuffcient to maximize
the nation’s productivity potential, unless
it is subsidized, either through taxes or
grants or some other mechanism (Erskine,
2003). International studies suggest that the
social return for such subsidization is high.
Research and development expenditures are
likely to have a greater commercial impact
if aggregate these funds are allocated with
commercialization potential as a key criterion
(Erskine, 2003). This is best fulflled through
competitive and market-driven or industry-
driven mechanisms for allocating research
and development funds (Erskine, 2003).
Research indicates that education, tax and
immigration policies that ensure availability
of skilled and motivated labor are a feature
of almost all the leading countries. A review
of the literature reveals that the pace and
intensity of global innovation is accelerating
and that all the international evidence is that
leadership from the top can make a critical
difference.
Diffculties faced by poor countries,
wherein low average income is a limiting
factor of savings and investments, tend to
reinforce each other in what is known as
the vicious cycle of poverty, in which low
savings and investment is followed by low
pace of capital formation, that results in
low levels of productivity, which does not
all lead to improvements in the levels of
average incomes (Mamede & Davidsson,
2003). The consequences of such cycles,
usually worsened by signifcant inequalities
in the distribution of wealth, negatively
impact the level of entrepreneurial activity
of a nation or region (Mamede & Davidsson,
2003). Baumol (1993) argues that even if
entrepreneurs are not in complete control
of their economic destiny, they infuence
its direction as few others are able to do.
Baumol (2003) also sees the entrepreneur
as responsible for a signifcant amount of
historic growth of modern society. Baumol
(2003) sees the entrepreneurial talent and
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14 Business Intelligence Journal January
motivational mechanisms of entrepreneurial
activity as one of the main explanations for
the successful growth of some economies in
contrast with others.
Studies have been conducted to assess
what the international best practices are, in
order to identify the key factors in each of
the countries that are critical for that success.
It is now well accepted that innovation and
research and development are positively
associated with productivity growth.
Research and development provides an
important contribution to output and total
factor productivity growth (Erskine, 2003).
The empirical evidence typically shows
that a 1% increase in the stock of research
and development leads to a rise in output of
0.05-0.15% (Erskine, 2003). There is also
evidence that research and development
may play a different role in small and large
economies (Griffth et al., 1998). In smaller
economies, it primarily serves to facilitate
technology transfer from abroad. The belief
that less advanced countries would catch
up with the technological world leaders
as technological knowledge is diffused
or transferred through the world has been
severely shaken over the past decade by a
widening in the productivity gap between
countries (Erskine, 2003).
The opportunities for wealth creation in
and the increasing economic importance of
‘knowledge-based’ industries has heightened
the need to understand the processes
underlying technological progress (Erskine,
2003). Firms, industries and countries are
now engaged in very direct competition
to produce technological progress, to
create wealth, jobs and human and social
well-being. Innovation and research and
development have become vital activities
in an increasingly knowledge-based world
(Erskine, 2003). No country leads in every
sphere of innovation, but some dominate in
particular industries. Research indicates that
considering research and development, the
USA is the global leader; the UK also ranks
highly, as a recent success in biotechnology
leadership and because of its relevance to
the development of Australia’s education
system and legal framework (Erskine, 2003).
Other countries of interest would most likely
include Singapore, South Korea and Taiwan,
and even perhaps China, where research
and development effort is intensifying
most rapidly and the policy framework is
developing the fastest (Erskine, 2003).
The question of whether east Asia can
compete in global markets has recently been
evaluated in a 2002 World Bank report.
According to the report, the factors that
determine whether or not countries such
as China can compete include the building
of research and development capital; the
business environment, including ease of
entry by frms, level of competition, and
protection of intellectual property; and the
effectiveness of the education system in
producing an adequate supply of skilled
and technical workers; the links among
businesses, universities, and public and
private research institutes that stimulate
innovation and its commercialization (Yusuf
& Evenett, 2002).
Also included among the factors are the
interaction among frms and agglomeration
economies in industrial clusters; the extent
of technology generation and absorption
by frms through their own research and
development, licensing, assistance from
lynchpin buyers in a production network,
new equipment purchases, and support from
equipment or component suppliers; the
degree of access to an international pool of
professionals and to centers of excellence in
East Asia and the West; and the development
status of production networking, supply
chain management, and logistics (Erskine,
2003).
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According to Stern et.al., (2000),
innovative capacity depends on the overall
technological sophistication of an economy
and its labor force, but also on an array
of investments and policy choices by
both government and the private sector.
Innovative capacity is related to but distinct
from non-commercial scientifc and technical
advances, which do not necessarily involve
the economic application of new technology
(Stern et.al., 2000). Differences in national
innovative capacity refect variation in both
economic geography and innovation policy.
Other researchers have examined fnance
and its infuence on economic growth and
technical progress, concluding that the
fundamental fnancing problem for frms
undertaking research and development is
uncertainty over the outcome of the research
and development. The frm and any fnancier
suffer from a signifcant information
asymmetry about the prospects for future
income fows, and typically a fnancier
will be unwilling to accept research and
development as collateral to a debt (Hall,
2002). Equity fnance is thus an imperative
for research and development conducting
frms. According to Hall (2002), this is
an obvious limitation in economies with
poor markets for venture capital. Finance
and access to fnance have become more
important determinants of research and
development effort as international capital
has become more mobile across borders
and as “research and development costs per
invention” have increased (Hall, 2002).
Evidence on the “funding gap” for research
and development has been surveyed, with a
focus on fnancial market reasons for under
investment in research and development that
persist even in the absence of externality-
induced under investment (Hall, 2002). The
conclusions are: 1) small and new innovative
frms experience high costs of capital that
are only partly mitigated by the presence of
venture capital; 2) evidence for high costs
of R&D capital for large frms is mixed,
although these frms do prefer internal
funds for fnancing these investments;
3) there are limits to venture capital as a
solution to the funding gap, especially in
countries where public equity markets are
not highly developed; and 4) further study
of governmental seed capital and subsidy
programs using quasi-experimental methods
is warranted (Hall, 2002).
Leadership Studies and Analysis
Since its introduction over twenty years
ago, charismatic leadership has been strongly
emphasized in the US management literature
(Bass, 1985; House,1977; Shamir, House &
Arthur, 1993). The benefts of charismatic
or transformational leadership are thought
to include broadening and elevating the
interests of followers, generating awareness
and acceptance among the followers of the
purposes and mission of the group, and
motivating followers to go beyond their self-
interests for the good of the group and the
organization (Bass, 1985). Charismatic or
transformational leaders articulate a realistic
vision of the future that can be shared,
stimulate subordinates intellectually, and
pay attention to the differences among the
subordinates. Tichy and Devanna (1990)
highlight the transforming effect these
leaders can have on organizations as well
as on individuals. By defning the need for
change, creating new visions, and mobilizing
commitment to these visions, leaders can
ultimately transform organizations (Hartog
et.al., 1999).
According to Bass (1985) the
transformation of followers can be
achieved by raising the awareness of the
importance and value of desired outcomes,
getting followers to transcend their own
self-interests and altering or expanding
Bremmer I. - Common Factors between Swedish and Chinese Entrepreneurial Leadership Styles
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Business Intelligence Journal - January, 2009 Vol.2 No.1
16 Business Intelligence Journal January
followers’ needs. Bass (1985) defned the
transactional leader as one who: recognizes
what followers want to get from their work
and tries to see that followers get what they
desire if their performance warrants it;
exchanges rewards for appropriate levels
of effort; and responds to followers’ self-
interests as long as they are getting the job
done. Numerous research studies have been
conducted in this area, and, collectively, the
empirical fndings demonstrate that leaders
described as charismatic, transformational,
or visionary have positive effects on their
organizations and followers, with effect sizes
ranging from .35 to .50 for organizational
performance effects, and from .40 to .80 for
effects on follower satisfaction, commitment,
and organizational identifcation (Fiol et al.,
1999).
Studies have been carried out in many
different countries, and research in this area
also shows that transformational leadership
is closer to perceptions of ideal leadership
than transactional leadership. As Lord and
Maher (1991) note, being perceived as a
leader is a prerequisite for being able to go
beyond a formal role in infuencing others.
They hold that leadership perceptions can
be based on two alternative processes. First,
leadership can be inferred from outcomes
of salient events, and attribution is crucial
in these inference-based processes (Lord &
Maher, 1991). For example, a successful
business ‘turnaround’ is often quickly
attributed to the high quality ‘leadership’
of top executives or the CEO (Hartog et.al.,
1999). Leadership can also be recognized
based on the ft between an observed
person’s characteristics with the perceivers’
implicit ideas of what ‘leaders’ are (Hartog
et.al., 1999).
Cultural groups may vary in their
conceptions of the most important
characteristics of effective leadership. As
such, different leadership prototypes would
be expected to occur naturally in societies
that have differing cultural profles (Bass,
1990a; Hofstede 1993). Historical research
indicates that in some cultures, one might
need to take strong decisive action in order to
be seen as a leader, whereas in other cultures
consultation may be a better approach.
Additionally, the evaluation and meaning of
many leader behaviors and characteristics
may also strongly vary in different cultures.
In a culture that endorses an authoritarian
style, leader sensitivity might be interpreted
as weak, whereas in cultures endorsing a
more nurturing style, the same sensitivity
is likely to prove essential for effective
leadership (Hartog et.al., 1999).
Research indicates that leadership
exists in all societies and is essential to the
functioning of organizations within societies
(Wren, 1995). Because individuals have
their own ideas about the nature of leaders
and leadership, they develop idiosyncratic
theories of leadership. As such, an
individual’s implicit leadership theory refers
to beliefs held about how leaders behave
in general and what is expected of them.
This type of attribution process provides a
basis for social power and infuence (Lord
& Maher,1991). In recent years, decision-
making models in business organizations
have emerged as a signifcant factor in
the determination of the organization’s
success or failure. Organizations require
that individuals carry out job assignments
dependably, make creative suggestions,
and carry out self-training (Katz, 1958).
However, the organization does not obtain
all these behaviors simply through hiring the
employee.
Research has noted the distinction
between membership and decision making
behaviors required by organizations and the
quite different sources of these behaviors.
In one such study, the motivation to acquire
and keep organizational membership from
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Ingmar Bremer
productivity was distinguished (March &
Simon, 1958). Membership motivation
results from a favorable inducements-
contributions balance. Employees must
perceive a continuing favorable balance
if they are to remain members. The
motivation to perform represents a much
more complex psychological contract
between the individual and the organization
involving perceived alternatives, perceived
consequences of these alternatives, and
individual goals (March & Simon, 1958).
Organizations have no choice but to provide
membership motivation if they wish to
remain organizations.
Process or theories explain the operation
of motivation, or the factors that infuence
an individual to choose one action
rather than another. Process theories are
subdivided into cognitive and non-cognitive
approaches. Cognitive theories see behavior
as involving some mental process. Non-
cognitive theories see behavior as caused
by environmental contingencies. The major
cognitive theories are equity theory, goal-
setting theory, and expectancy theory. All of
them focus on perceptions of the outcomes
that fow from behavior.
Equity theory suggests that motivated
behavior is a form of exchange in which
individuals employ an internal balance
sheet in determining what to do. It predicts
that people will choose the alternative they
perceive as fair. The components of equity
theory are inputs, outcomes, comparisons,
and results. Inputs are the attributes the
individual brings to the situation and the
activities required. Outcomes are what
the individual receives from the situation.
The comparisons are between the ratio of
outcomes to inputs and some standard.
Results are the behaviors and attitudes
that fow from the comparison, but other
standards of comparison, including oneself in
a previous situation, seem equally probable
(Adams, 1965).
Goals setting theories argue that
employees set goals and that organizations
can infuence work behavior by infuencing
these goals. The major concepts in the theory
are intentions, performance standards, goal
acceptance, and the effort expended. These
concepts are assumed to be the motivation.
Participation in goal setting should increase
commitment and acceptance. Individual
goal setting should be more effective than
group goals because it is the impact of goals
on intentions that is important. In goal-
setting theory the crucial factor is the goal.
Tests of the theory show that using goals
leads to higher performance than situations
without goals, and that diffcult goals lead to
better performance than easy ones (Mitchell,
1979). Although participation in goal setting
may increase satisfaction, it does not always
lead to higher performance.
Expectancy theory supports the contention
that people choose the behavior they believe
will maximize their payoff. It states that
people look at various actions and choose the
one they believe is most likely to lead to the
rewards they want the most. The elements
in the theory are expectancies that certain
outcomes will occur and the anticipated
satisfaction of those outcomes. Although
the formal elements are expectancies and
valences, in most formulations expectations
are divided into two types: expectancy,
or the expectation that effort will lead to
performance, and instrumentality, or the
expectation that performance will lead to
reward.
Expectancy theory has been tested
extensively. The usual approach is to obtain
expectancies, instrumentalities, and valences
by questionnaire or interview and to relate
these responses to self-reported or measured
choices, such as occupational choice, job
satisfaction, effort, or performance (Mitchell,
Business Intelligence Journal - January, 2009 Vol.2 No.1
18 Business Intelligence Journal January
1980). It has been found that expectancy
theory can do an excellent job of predicting
occupational choice and job satisfaction and
a moderately good job of predicting effort on
the job. Expectancy theory implies that the
anticipation of rewards is important as well
as the perceived contingency between the
behaviors desired by the organization and
the desired rewards. The theory also implies
that since different people desire different
rewards, organizations should try to match
rewards with what employees want.
Although these implications suggest that
following the requirements of expectancy
theory will lead to performance motivation
in organizations, organizations should be
aware of possible diffculties. Employees
may not believe that good performance does
in fact lead to more desired rewards, and
convincing them may require more changes
than the organization is prepared to make.
Poor selection and training of employees, for
example, even with maximum effort, results
in poor performance. Finally, it should
be noted that the components of decision-
making models are beliefs that require
a good deal of information and a rather
complex cognitive process in determining
action. Some employee groups do want
the rewards the organization has to offer,
do want to believe that greater effort results
in improved performance, and do want to
believe that better performance leads to
greater rewards.
The way in which the social environment
is interpreted is strongly infuenced by the
cultural background of the perceiver. This
implies that the attributes that are seen as
characteristic or prototypical for leaders
may also strongly vary in different cultures
(Hartog, et.al., 1999). Hunt, Boal and
Sorenson(1990) propose that societal culture
has an important impact on the development
of superordinate category prototypes and
implicit leadership theories. They hold that
values and ideologies act as a determinant
of culture specifc superordinate prototypes,
dependent on their strength.
The research in this area mentions three
elements attributable to the leadership styles
of different cultures; a stress on market
processes, a stress on the individual, and
a focus on managers rather than workers.
As a result there is a growing awareness of
need for a better understanding of the way
in which leadership is enacted in various
cultures and a need for an empirically
grounded theory to explain differential leader
behavior and effectiveness across cultures
(House, 1995). Culture profles derived
from Hofstede’s theoretical dimensions of
cultures, yield many hypotheses regarding
cross-cultural differences in leadership.
Hofstede’s dimensions of culture are:
uncertainty avoidance, power distance,
masculinity-femininity, individualism-
collectivism, and future orientation. High
uncertainty avoidance cultures, with the
resulting emphasis on rules, procedures and
traditions may place demands on leaders
not expected in low uncertainty avoidance
cultures (Hartog et.al., 1999).
According to Hofstede, innovative
behaviors may therefore be expected in low
uncertainty avoidance cultures. Cultures
that are more masculine are probably more
tolerant of strong, directive leaders than
feminine cultures, where a preference for
more consultative, considerate leaders
appears likely (Hartog et.al., 1999).
Research indicates that preferences for a
low power distance in societies could result
in other desired leader attributes than a
preference for high power distance (Hartog
et.al., 1999). Other research indicates that
managers in high power distance countries
report more use of rules and procedures
than do managers from low power distance
countries. The most cited study, by Gerstner
and Day (1994) focused on cross-cultural
2009 19
comparisons of leadership prototypes. In this
study, respondents completed a questionnaire
asking them to assign prototypically ratings
to 59 leadership attributes. Comparing the
ratings from a sample of American students
(n=35) to small samples (n= between 10 and
22) of foreign students from 7 countries,
they found that the traits considered to be
most, moderately or least characteristic
of business leaders varied by respondents
country or culture of origin. However, this
study has several limitations; small sample
sizes, student samples, only foreign students
currently in the US to represent other
cultures in the sample, and employing a not
cross-culturally validated English-language
trait-rating instrument (Hartog et.al.,
1999). Despite these limitations, presenting
conservative biases, reliable differences
in leadership perceptions of members of
various countries were found.
A new study, focusing on the
entrepreneurial leadership characteristics
of Sweden and China, would no doubt be
useful, because sampling is a problematic
issue in cross-cultural studies. As has
been noted in cross cultural research, using
national borders as cultural boundaries may
not be appropriate in countries that have
large subcultures (Hartog, et.al., 1999). In
large, multi-cultural countries such as China
it is not even clear which sample would be
most representative. As a result, the samples
from all countries need to be relatively
homogeneous within countries. An ideal
sample would consist of representatives
from the fnancial industry, food industry,
and telecommunication industry. These
industries are fairly universal and thus,
such organizations could be identifed in
participating countries. Additionally, these
industries differ in terms of the rate of
change typically experienced.
The proposed study would consist of
interviews with Swedish and Chinese
Bremmer I. - Common Factors between Swedish and Chinese Entrepreneurial Leadership Styles
Ingmar Bremer
entrepreneurs being asked the following
questions. The model consists of 5 roles
with two to three competencies each with
questions. A random sample of the questions
to be asked are as follows:
Designing (Developing executable 1.
business models)
Recognizing opportunities for value a.
creation
ƒÞ I anticipate the future course of
events
ƒÞ I understand needs of other people,
social groups and organizations
ƒÞ I have an ability to see the forest
through the trees
ƒÞ I see possibilities of combining
different products, services, or
technology to create new value
ƒÞ I successfully identify alternative
uses for different products, services,
or technologies ƒÞ I differentiate
between executable and non-executable
opportunities
Turning ideas into specifc action b.
plans
ƒÞ I understand the economics of the
business
ƒÞ I understand what is needed to make
a business successful
ƒÞ I have a long-term view
ƒÞ I recognize risks and plan how to
mitigate them
ƒÞ I convert business vision into specifc
plans which can be realized
ƒÞ I break big projects into smaller
pieces of manageable size
1c.Developing a clear and convincing
vision for the venture
ƒÞ I set and communicate a clear
direction for the venture
ƒÞ I consider the whole situation rather
than details only
Business Intelligence Journal - January, 2009 Vol.2 No.1
20 Business Intelligence Journal January
ƒÞ I convey my ideas in a clear and
understandable way
ƒÞ I can talk about complex things in
simple terms
ƒÞ I come up with powerful metaphors
and images
ƒÞ I ensure that employees and other
stakeholders understand personal
benefts of achieving the vision
Assembling (assembling stakeholders 2.
and resources into a performing
organization)
Creating performing organizations a.
and teams
ƒÞ I set clear and challenging performance
and behavior standards and goals
ƒÞ I identify required competencies and
fnd people who possess them
ƒÞ I integrate people with different
backgrounds into a cohesive working
system
ƒÞ I introduce systems and procedures
to facilitate performance
„X I develop incentives to attract and
motivate people
„X I identify resource requirements of
the business and effectively meet them
through various channels
Possessing High Emotional intel- b.
ligence
„X I analyze my feelings before acting
on them
„X I make sure that my behavior is
appropriate to the situation
„X When someone is talking to me, I
give my full attention
„X I can read other people’s feelings
quite well
„X I make sure people feel at ease with
me
„X I get people to open up by being
easily approachable
Extracting value from social net- c.
works
ƒÞ I have a large and diverse network of
contacts
ƒÞ I am able to make transactions with
others on favorable terms
ƒÞ I can ask for favors
ƒÞ I am effective in formulating specifc
requests to other people
„X I fully leverage my contacts
„X I easily develop new contacts in
different areas to help out the business
Developing others d.
„X I personally mentor some people in
my organization
„X I regularly review how my people
develop
„X I allocate adequate fnancial
and organizational resources to the
development of people
„X I adjust organizational structure
to provide better developmental
opportunities for my people
„X I advise people to leave my company
when I see that they have reached the
ceiling in their development
„X I reward and promote people with
leadership potential
Additional questions would consist of
questions addressing topics such as leading
by example, enthusiasm for the venture,
role models, rules, and interacting with
people at different levels of organization
and outside of it. Additional questions
would revolve around goals, determination,
focus, distractions, risks and external events.
Other possibilities include social interaction,
constructive disagreement, improvements,
and performance strengths and weaknesses.
Next, criteria would be established for
items to be considered universally endorsed
as contributors to outstanding leadership.
Possible criteria would be that 95% of country
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Bremmer I. - Common Factors between Swedish and Chinese Entrepreneurial Leadership Styles
Ingmar Bremer
scores had to exceed a mean of 5 on a 7 point
scale for that attribute, and the grand mean
score for all countries had to exceed 6 for
the attribute. In addition to examining the
universally endorsed attributes, the results
would also show which attributes were found
to be viewed universally as ineffective and
which were found to be culturally contingent.
Universally endorsed leader attributes, as
well as attributes that are universally seen
as impediments to outstanding leadership
and culturally-contingent attributes would
be presented. It is predicted that the results
support the hypothesis that specifc aspects
of charismatic or transformational leadership
are strongly and universally endorsed
across cultures. Sweden and China will be
compared utilizing such a proposed study
in the section following an examination of
the economic, political and entrepreneurial
leadership in both countries.
Entrepreneurial Leadership in
Sweden
Research indicates that there is strong
commitment and determination among
entrepreneurs throughout Sweden to work
for growth and increased prosperity. When
companies produce goods and services, they
also generate jobs and tax revenue, and are
responsible for research and for training
employees. To new Swedes, employment
in companies and self-employment are
important ways into Swedish society
(Advantage Sweden, 2005). Productivity
is high, the labor force is well-trained,
research and development is world
class and its global business network is
extensive (Advantage Sweden, 2005). In an
international perspective, Sweden has a low
investment level, and this undermines its’
future competitiveness. Over one million
Swedes of working age are on sick leave,
have taken early retirement, are unemployed
or are living on social allowance (Advantage
Sweden, 2005). There is imbalance in the
age structure in Sweden; after 2010, the
number of people aged over 80 will increase
faster than the number gainfully employed.
(Advantage Sweden, 2005).
In Sweden, the dependency burden is
increasing as the proportion of entrepreneurs
in Sweden has never been as low as it
currently is (Advantage Sweden, 2005).
Research indicates that Sweden faces several
big challenges, including international
cooperation. According to Advantage
Sweden (2005), trade and personal relations
bind together people from different cultures,
and build peace and tolerance. Business
affrms a freer and more open world,
where democracy and market economies
lay the foundations for better living
conditions. Thus, international cooperation
is a necessity to counteract environmental
problems, poverty and terrorism (Advantage
Sweden, 2005). Closer and broader
European cooperation is important to
enable Swedish business to be competitive
at global level (Advantage Sweden, 2005).
European Union enlargement creates new
possibilities, but also sets new challenges
such as competitiveness, growth and jobs
(Advantage Sweden, 2005).
Sweden appears to have a distinct
advantage over the potential growth
of China’s economy. Many Swedish
companies, both big and small, are world
leaders. As a result, Sweden has a strong
foundation on which to build, as well as
access to important raw materials, a well-
trained labor force, and a good level of
research. There is strong environmental
commitment, and at the local level, there is
generally good consensus between unions
and employers, and between business people
and politicians (Advantage Sweden, 2005).
Wage formation, state fnances and infation
have stabilized in recent years. Research
Business Intelligence Journal - January, 2009 Vol.2 No.1
22 Business Intelligence Journal January
indicates that to create even better conditions
for favorable development, both companies
and the public sector must continuously
become better and more effective in their
operations and must raise skills and quality
(Advantage Sweden, 2005). That will make
Sweden even more attractive to investors
and to overseas visitors
International competition has never been
as intense as now. For example, in 1997, one
million vacuum cleaners were manufactured
in China, and in 2005, 25 million (Advantage
Sweden, 2005). However, more and more
overseas companies and owners choose to
invest in Sweden, so the conditions for trade
are improved through the removal of trade
barriers and harmonization of regulations.
Additionally, legislation in the European
Union is implemented in an effective way
in Sweden, through the removal of duplicate
regulation and harmonization of legislation
so that competition between companies
is free and fair. This is important because
an advantage is created through a stable
and competitive legislative framework,
implemented consistently and smoothly
(Advantage Sweden, 2005). Regulations
that are diffcult to overview, an increasing
number of public bodies and unpredictable
implementation put unnecessary constraints
on companies (Advantage Sweden, 2005).
This hampers company performance, and
thereby companies’ competitiveness.
Since Sweden is a sparsely populated
country located far from the major markets
on the continent, for Sweden to have an edge,
there is a need for a well-constructed and
well-functioning infrastructure, as well as a
competitive transport network (Advantage
Sweden, 2005). If Sweden’s growth is to
continue, there is also a need for secure, long-
term access to energy at competitive prices
(Advantage Sweden, 2005). The energy
supply must meet the highest reliability and
environmental requirements. According
to Advantage Sweden (2005), the use of
information technology creates many new
opportunities, and is an important base for
enterprise in the future, and for continued
growth in productivity and competitiveness.
An effective capital supply for the start-
up and expansion of companies is also
important.
. In order for companies to start
and expand, there is a need for both a
technological and a mental infrastructure
that makes it attractive and straight forward
to be an entrepreneur. In Sweden, attitudes
towards business people have become
increasingly favorable (Advantage Sweden,
2005). Every year, Swedish companies
complete 73 million forms for submission
to 75 different authorities (Advantage
Sweden, 2005). In Sweden, it is diffcult to
start up companies due to the high tax rate
on labor, which acts as a deterrent to both
existing and new service-sector companies,
at the same time as the informal sector is
expanding. Good quality in basic education
and good opportunities for adults to learn
new work skills are important to a strong
and competitive business sector (Advantage
Sweden, 2005). Quality must permeate the
entire school system, not only vocational
training. Collaboration must improve
between the business sector and both basic
and tertiary education (Advantage Sweden,
2005). Increased international cooperation
in education gives new perspectives,
creates understanding of other cultures and
strengthens Sweden.
Entreprenuership evolves through faith in
people’s will and ability to take responsibility,
to have dreams, to want to develop, and to
dare to seek new challenges. This is how
an effcient public sector is created, but this
requires that work and entrepreneurship are
economically worthwhile. Furthermore,
there must also be fundamental security
for both employees and company leaders,
2009 23
as 34 per cent of students do not complete
their upper secondary education within the
three years (Advantage Sweden, 2005). To
encourage increased entrepreneurship, the
Confederation of Swedish Enterprise in the
coming years will work to ensure that it is
economically worthwhile to work, to save
and to invest in companies so that the legal
framework is changed so that entrepreneurs
are given better conditions for expansion in
the private service sector (Advantage Sweden,
2005). Another goal is for entrepreneurship
and enterprise to become a self- evident
part of all education so that quality is raised
in the entire education system and that
collaboration improves between school and
business. Also, workforce immigration
should be permitted and that the integration
of immigrants is carried out in an active and
resolute way. The end result will be that
people shall have reasonable prospects of
saving for the start-up capital to realize their
ideas.
To strengthen Sweden’s competitiveness,
investment in development and innovation
is needed. Therefore, conditions for research
and development must be given high priority
(Advantage Sweden, 2005). A clearer
link is demanded between state research
investments and the needs of the business
sector, making it easier for research results to
reach the market in the form of new products
and new services, and can create more growth
companies (Advantage Sweden, 2005). The
legislation governing public companies,
intellectual property rights and venture
and capital markets must be developed to
encourage and facilitate enterprise with
innovative business development and the
production of good sand services in Sweden
(Advantage Sweden, 2005). For a company
to develop, it must make a proft. Companies
without proft requirements are not under
the same pressure to increase effciency and
offer customers quality and new solutions.
Thus, competition stimulates new ideas, new
methods and effcient production (Advantage
Sweden, 2005). Competition also favors
consumers, through lower prices and better
quality (Advantage Sweden, 2005).
In Sweden there is considerable
knowledge within the public sector, which
through private enterprise can reach
overseas markets, generating new jobs
in Sweden. Today, there are a number of
obstacles in the way of this process. It is
crucial that these obstacles be removed and
that public procurement should always take
place openly, simply and through sound
competition (Advantage Sweden, 2005).
For example, company registration and
start-up must be a simple, brief procedure.
It must be made easier to build up equity
in a company for fnancing development
(Advantage Sweden, 2005). The tax and
levy burden must not be allowed to impede
Sweden in international competition
(Advantage Sweden, 2005). The informal
sector creates unfair competition and creates
diffculties for responsible companies.
It is becoming increasingly attractive to
own, start up, run and develop proftable
companies in Sweden. More entrepreneurs
are needed, and the necessary dynamics of
enterprise mean the start-up of companies
and the liquidation of companies. Risk-
taking must give the possibility of profts,
at the same time as bankruptcy should not
necessarily mean that one loses the chance
to try again (Advantage Sweden, 2005). In
a comparison between 28 countries of how
many new companies were started, Sweden
ranked 21st (Advantage Sweden, 2005).
The research also indicates that Sweden
needs more people to work and pay tax
on their income. It appears that too many
people of working age do not work, but have
taken early retirement, are on sick leave, are
unemployed or are in labor market schemes
(Advantage Sweden, 2005).
Bremmer I. - Common Factors between Swedish and Chinese Entrepreneurial Leadership Styles
Ingmar Bremer
Business Intelligence Journal - January, 2009 Vol.2 No.1
24 Business Intelligence Journal January
Young people, elderly people and
immigrants often have diffculty in fnding
employment in Sweden. Outmoded labor
market regulations and rules governing
taxation and allowances reduce mobility on
the labor market (Advantage Sweden, 2005).
Complicated rules and tax regulations lead to
undeclared work. High payroll costs, major
risk factors for companies, such as costs in
connection with sickness and comprehensive
legislation, have created high recruitment
thresholds (Advantage Sweden, 2005). Few
employees change employer, even if they are
not content. The labor market of tomorrow
demands increased mobility, regulations
on working hours that lead to more hours
of work input and solutions that are suited
to both the company and the employees
(Advantage Sweden, 2005). Wage
formation must be based on the conditions of
individuals and companies. Unemployment
insurance and social insurance are important
factors in stimulating labor market mobility
(Advantage Sweden, 2005). Thus, systems
must be coordinated, must stimulate work
and must provide benefts during certain
periods (Advantage Sweden, 2005).
In Sweden, through collective agreements
that give stability and support for both
development and reorientation, labor
market players can increase companies’
competitiveness and capacity to create
new jobs (Advantage Sweden, 2005). The
current legislation on labor disputes does not
provide the necessary balance between the
players, since even minor union actions can
swiftly bring disproportionately far-reaching
consequences to both companies and the
community (Advantage Sweden, 2005). A
more internationalized labor market creates
possibilities and challenges. Security on the
labor market is not primarily a question of
keeping a job, its about being able to fnd a
new job if the old one disappears (Advantage
Sweden, 2005). Statistics reveal that the
average Swede works for 8 per cent of his or
her lifetime (Advantage Sweden, 2005).
The economic background of Sweden
reveals that Sweden has faired fairly badly
in terms of economic growth for almost
three decades, but has faired very well in
terms of employment, and in terms of low
unemployment, until about 1990. At that
time Sweden had the highest employment
rate in the world, 81 percent of the population
between 18-64 years were gainfully
employed (Henrekson, 2005). Since then,
there has been a dramatic change in terms of
employment. At the peak of the employment
boom in 1989-90 there were about 4.5
million jobs in Sweden (Henrekson, 2005).
That fgure dropped by about 600,000 jobs
in just a couple of years time, and in late
1993 the economy began to bounce back,
and 150-200,000 jobs were gained, but now
those jobs have been lost again (Henrekson,
2005).
This research indicates that the recovery
of the Swedish economy after the severe
crisis of 1991-93 has been one of jobless
growth. So far there has not been any
permanent change in the job level, at the
private sector and in the public sector.
Since entrepreneurship is a key to job
growth in the private sector, the jobs have
to be created in existing frms or new frms.
Thus, the challenge is to be build institutions
and rules of the game in the Swedish economy
that render strong employment expansion
possible (Henrekson, 2005). Such incentives
include employing more people in existing
businesses or starting new businesses for
good, viable ideas. A disaggregation of
the employment record in Sweden shows
that employment growth looking over the
entire post-war period has been bleak for
the private sector (Henrekson, 2005). There
are fewer jobs in the private sector now than
there was 47 years ago, despite the fact that
there are almost 2 million more Swedes now
2009 25
Bremmer I. - Common Factors between Swedish and Chinese Entrepreneurial Leadership Styles
Ingmar Bremer
than there were in 1950.
In the Swedish economy, large
corporations play a very dominant role.
There are a number of studies showing
that Sweden is perhaps the single industrial
economy with the highest dominance of large
frms in the whole OECD area (Henrekson,
2005). There has been a low share of self-
employment, and corporate ownership has
been very concentrated, with a reliance on
large corporations. Research indicates that
corporate taxation is very important from
an entrepreneurial perspective. Historically,
Sweden has historically had corporate
taxation which has been very benefcial to
institutional owners and to debt fnancing
(Henrekson, 2005). It has been an extreme
characteristic of the Swedish tax system
benefting institutional ownership to the
detriment of private, individual ownership,
and the tax system has encouraged a high
debt-equity ratio (Henrekson, 2005).
The only types of frms that can beneft
from this type of tax system consist of
institutional ownership; as a result the
Swedish engineering industry, Swedish
raw material based large companies and
construction companies have benefted from
these tax rules. In contrast, small and new
frms, must be individually owned. Also
frms which are labor intensive or knowledge
intensive have very little collateral, so
they have to work with a high-equity ratio
(Henrekson, 2005). Likewise, new frms
based on a new innovation, where it takes
a long time for the fnished product to reach
the market, and where the risk level is high
require a low debt-equity ratio (Henrekson,
2005).
Sweden now has a 40-60 percent tax rate
schedule, rather than the 30-50 schedule
that was instituted in the 1991 tax reform.
A recent report shows that Sweden has the
highest tax burden of all countries on low
incomes, about 62 percent of labor income
for a typical low income earner is taxed away
(Henrekson, 2005). On the consumer‘s side,
demand may be very low because those who
are going to buy the service will have to pay
out of their own after-tax income. A very
high total tax burden also makes it very
diffcult to save in Sweden, and high taxes
also render it very diffcult to accumulate
wealth. As a result, an individual is unlikely
to have any capital to support a business
venture, leading to less venture capital and
fewer frm start-ups.
Labor security legislation has also
affected entreprenuership in Sweden. There
is evidence suggesting that the employment
security provisions fall more heavily on
smaller frms and some other classes of
frms (Henrekson, 2005). Sweden has a
much more centralized wage formation
structure and a narrower wage dispersion,
meaning that in the Swedish setting, small
frms have to pay a higher wage in the initial
stage of their life cycle than otherwise. As
a result, this increases their wage costs and
makes it more diffcult for them to get started
and obtain the impetus to fnally become
a large frm. Especially noteworthy is the
dramatic increase in employment in health
and medical care and social services. These
services are labor-intensive, and in many
instances are very suitable for production by
a small frm (Henrekson, 2005).
The entrepreneurial process is such a
pervasive feature of a market economy that
the most effcient way to encourage frm
births is to enhance the environment for
all business activity. Thus, Sweden should
work to create a stable and internationally
competitive economic framework for all
types of frms (Henrekson, 2005). This
framework should offer suffcient incentive
for change and for investment in real capital,
education, and knowledge capital, and it
should be neutral in terms of an enterprise’s
orientation, size, and organizational
Business Intelligence Journal - January, 2009 Vol.2 No.1
26 Business Intelligence Journal January
principles (Henrekson, 2005). The research
indicates that if Sweden succeeds in this
endeavor, Sweden can become as powerful
a job machine as the United States.
Holmberg and Akerblom (2003) studied
Swedish leadership styles, and their analysis
reveals that institutional contexts seem
to generate different implicit models of
leadership, but within the same national
framework. Excellent leadership is
evidently executed and enacted as aspects of
socially constructed institutions and socially
grounded culturally values (Holmberg &
Akerblom, 2003). According to a common
understanding of the culture concept,
collective conceptions of leadership are
therefore expressions of the culture at large
in which both leaders and followers are
embedded (Holmberg & Akerblom, 2003).
Therefore, a Swedish leadership style
would consequently be an expression of the
Swedish culture.
Researchers have noted that Swedish
leadership is vague and imprecise, and the
typical Swedish order is ‘See what you can
do about it (Holmberg & Akerblom, 2003)!’
Researchers have attributed this to a far-
reaching delegation of authority; managers
who say ‘See what you can do about it!’
demonstrate trust for their co-workers. It
is also a matter of the execution of control
by a common understanding of the problem,
rather than direct orders (Holmberg &
Akerblom, 2003). This must be regarded as a
strength with the egalitarian Swedish society
(Edström &Jönsson, 1998). Due to the
cultural similarity among the Scandinavian
countries in an international perspective,
Swedish leadership is furthermore described
within the broader notion of Scandinavian
management.
In ethnographic descriptions of Sweden,
it is often asserted that Swedes have a strict
border between public and private life,
whereas in many other parts of the world,
the two are inseparable (Daun, 1989).
Independence and solitude are important
and positive concepts for Swedes in general
(Daun, 1989), something which is enacted
in the private sphere. Hampden-Turner &
Trompenaars (1993) assert that Swedes
more than any other culture begin with the
individual, his or her integrity, uniqueness,
freedom, needs, and values, yet insist that
the fulfllment and destiny of the individual
lies in developing and sustaining others by
the gift of his or her own work and energy.
Holmberg & Åkerblom (1998) found
Sweden to be both an extremely collective
and extremely individualist society. Their
fndings can be contrasted with the result
of Hofstede (1980), in which Sweden was
labeled an individualistic culture. One
explanation to this difference is that Hofstede
did not distinguish between the small family
group, or clan, and the much wider group
constituting the society as a whole. This
distinction is obviously important in the
Swedish case, where the two life worlds
(public and private) preferably are kept
separate in time and space (Holmberg &
Akerblom, 2003). In Hofstedes (1980)
seminal work Sweden was ranked among
the least uncertainty avoiding cultures in
contradiction to the contemporary study by
Holmberg & Åkerblom (1998), who found
Sweden to be a highly uncertainty avoiding
culture with a strong future orientation.
The development of the consensus culture
is connected to the fact that the Swedish
population is unusually homogeneous,
compared to other countries (Holmberg &
Akerblom, 2003). For example, Swedes
share the same history, same language, same
religion; and differences between different
groups within the nation are comparatively
small (Holmberg & Akerblom, 2003).
Everyone’s opinions, ideas and experiences
are respected and listened to, since all are
potential contributors to the accomplishment
2009 27
Bremmer I. - Common Factors between Swedish and Chinese Entrepreneurial Leadership Styles
Ingmar Bremer
of the task in place or to the solution of the
problem being dealt with (Holmberg &
Akerblom, 2003). Mutual understanding,
collective consideration and compromised
solutions are favored (Holmberg &
Akerblom, 2003).
Entrepreneurial Leadership in
China
Rapid economic development over
20 years has led some commentators to
claim China could deliver sustained global
growth, however, it has started to falter, and
risks becoming a destabilizing factor in the
world. China, for two decades the world’s
fastest growing economy, has become a
major force in the global economy. But
as the ostensibly ‘communist’ regime in
Beijing struggles to put the brakes on an
economy which is experiencing an extreme
form of overheating, euphoria among the
capitalist class internationally has given way
to nervousness (Coates, 2004). As Steven
Roach, chief economist at investment bank
Morgan Stanley, warns, “the world may
be unprepared for the impact of a Chinese
slowdown (Coates, 2004).”
Last year, according to offcial statistics,
China’s gross domestic product (GDP)
grew by 9.1 percent (Coates, 2004). For
years, independent economists have viewed
offcial Chinese statistics with skepticism,
believing them to be exaggerated. Today,
many believe the fgures understate reality
which predicts that the economy may have
grown by 11 or 12 percent in 2003 (Coates,
2004). One reason for the discrepancy is that
city and provincial governments are playing
down local growth data in order to avoid
penalties from Beijing aimed at reining in
overheated sectors such as property, steel
and cars (Coates, 2004). Investment in new
steel capacity rose by 87 percent last year
and total output is set to double again in two
to three years (Coates, 2004). The director
of a stainless steel mill on the Yangtze river,
owned jointly by South Korea’s Posco
and China’s largest private steel company,
Shangang, recently told the UK Financial
Times that in a few years his complex alone
will be making as much steel as the whole
country of France (Coates, 2004).
In China, the steel sector is an example
of the uncontrolled expansion of capacity
taking place throughout the economy, much
of which is ‘blind’ or ‘duplicative’ according
to the government (Coates, 2004). This is
creating huge imbalances such as chronic
shortages of electricity, water and raw
materials. Blackouts, often forcing factories
to halt production, are commonplace even
in the most developed cities (Coates, 2004).
Despite huge investment in recent years,
road, rail and port capacity is overloaded.
These shortages are being exploited by
capitalists and corrupt offcials for huge
speculative gains (Coates, 2004). For
example, shipping costs for freight in
northeast Asia rose by 400% last year on the
basis of surging Chinese orders, with scrap
metal, coal and iron ore for the steel industry
accounting for half this sea-borne traffc
(Coates, 2004). While mining and energy
transnationals made bumper profts from the
Chinese boom, other branches of the world
economy have been squeezed by higher
prices for raw materials (Coates, 2004).
The question of whether China can
continue to grow at its’ current rate for the
next two decades has been speculated by
fnancial advisors. Media comment on China
in this area has struck a more cautious tone
as a result of signs including an explosion
of credit, rampant over capacity (nine tenths
of manufacturing goods are in over supply),
and the return of infation (2.8% in the frst
quarter of 2004) (Coates, 2004). President
Hu Jintao, and his prime minister, Wen
Jiabao, have assured fnancial markets that
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28 Business Intelligence Journal January
‘resolute’ measures are being taken to rein
in excessive investment and engineer a ‘soft
landing’ for the economy but, so far, with no
discernible impact (Coates, 2004). “China
is in a situation of severe over-investment,”
notes Credit Suisse First Boston’s Hong
Kong offce (Coates, 2004). Investment is
chasing diminishing returns, and according
to The Economist, China currently needs $4
of investment to generate each additional
dollar of annual output, compared with $2-3
in the 1980s and 1990s (Coates, 2004).
China’s money supply grew by 20 percent
last year, and bank credit (new loans) by
56 percent (Coates, 2004). Additionally,
the sharp rise of the US dollar in 1995, to
which most Asian currencies were linked,
priced some exports out of world markets.
China, although it exports 25 percent of
national output, is less dependent on the
world market (Coates, 2004). The super-
Keynesian measures of the government,
implemented in response to the Asian crisis
to boost demand by slashing interest rates
six times since 1997, and by fnancing huge
infrastructure projects, have increased the
specifc weight of the home market (Coates,
2004).
China is now the world leader in many
branches of manufacturing, including
cellular phones, colour TVs and computer
monitors. Since the start of its global export
offensive 20 years ago, manufacturing
industry in China has shifted from low-
tech sectors like textiles, toys and simple
manufactures to computers and electronics
which now account for 60 percent of exports
(Coates, 2004). Refecting the increased role
of high-tech production, China accounted
for 14 percent of global semiconductor
consumption in 2003 (Coates, 2004).
Additionally, 16 million manufacturing jobs
have actually disappeared since 1995, as
Chinese industry has upgraded its technology.
Shanghai Baosteel Group, for example, the
world’s sixth largest steel producer, cut its
workforce to 100,000 from 176,000 fve
years ago (Coates, 2004). As industry in the
southern and eastern provinces has become
more capital intensive, low-tech production
has shifted to the poorer (and cheaper)
inland provinces (Coates, 2004). This right
now is where there is greatest resistance to
government attempts to curb new investment
(Coates, 2004).
China still lags behind the advanced
capitalist countries in the application of
new technology, but the gap is closing.
A million engineering graduates leave
Chinese universities every year and there
is an ongoing transfer of technology from
the huge network of foreign partnerships
and joint ventures (Coates, 2004). A survey
by the Japanese newspaper, Nihon Keizai
Shimbun, based on interviews with 350
Japanese corporations, concluded that, “in
the feld of technical development China
would catch up with Germany and Japan
within ten years (Coates, 2004).” China’s
integration into the capitalist world economy
means that many facets of US and European
industry are now dependent on components
or fnished products from Chinese factories.
“In a crisis”, warned Ted Dean, managing
director of consultancy frm, BDA, “Chinese
labor could become as destabilizing a force
for the world economy as oil prices (Coates,
2004).”
These indisputable facts are often cited
by capitalist commentators to present a
picture of unstoppable economic progress:
a 20-year Chinese boom (Coates, 2004).
Take this example into consideration: with
282 million mobile phone subscribers,
China is the world’s biggest market. But
growth rates are already slowing, with fewer
new subscribers in the frst months of 2004
(Coates, 2004). Overproduction consisting
of too many phones combined with too few
buyers has caused prices to plummet, which
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in turn squeezes proft margins. Research
indicates that the re-emergence of infation
or rising prices, in China is mainly due to
the rising cost of capital goods, some farm
products and services such as education.
A more serious problem, however, is the
longer-term potential for defation, or falling
prices, arising from such extreme levels of
overcapacity (Coates, 2004). Defation
not only squeezes profts, it magnifes the
problem of debt, making repayments costlier
in relative terms (Coates, 2004). This is
a potential time-bomb for the Chinese
economy which has fnanced its investment
boom with unprecedented levels of credit
(Coates, 2004).
For years, Chinese labor has been a source
of super-profts for global corporations and
local capitalists. Manufacturing wages
averaged just 61 US cents (€0.52, £0.34)
an hour last year, compared with $16 in
the US and $2 in Mexico (Coates, 2004).
One hundred thousand Chinese workers
die every year from industrial accidents
or work-related illnesses (Coates, 2004).
Low wage levels impose severe limits on
the growth of a mass consumer market, as
Chinese workers can only afford to buy
back a fraction of what they produce. While
average per capita incomes have risen
rapidly in the last 20 years, the gap between
rich and poor is now the biggest in the world
(Coates, 2004). This has been a largely urban
boom, with average incomes in the cities six
times those of rural ones. Shanghai, with 16
million inhabitants, has the same per capita
GDP as Portugal (Coates, 2004). But the
poorest region, Guizhou, has a per capita
GDP lower than Bangladesh (Coates, 2004).
Although incomes for China’s 800 million
rural population are now rising due to a
rise in prices for farm goods, the Financial
Times pointed out that, “a consumer society
has largely failed to materialize among
two thirds of China’s population (Coates,
2004).”
The pressure of migration from the
countryside, predicted to be up to 400
million set to move to the cities by 2020,
will most likely hold down wage levels.
There are numerous plans for expansion in
east Asia, such as a new $15 billion natural
gas pipeline from Xinjiang province to
Shanghai to bring cleaner fuel to the coastal
areas, though uneconomical from a market
standpoint (Coates, 2004). Additionally,
eighty-six new subway lines are under
construction. These policies, rather than
aiming to improve living conditions for
the masses, aim to create a more effective
framework for the exploitation of Chinese
labor. In the absence of democratic control
of these projects by workers’ organizations,
waste, corruption and abuses such as
environmental degradation and the forcible
relocation of local communities are legion
(Coates, 2004).
According to prime minister Wen, the
Chinese economy has reached a critical
juncture (Coates, 2004). For example, in
April of 2004, the central bank raised the
minimum level of deposits that banks must
keep in reserve from 7 percent to 7.5 percent
(Coates, 2004). Smaller banks were ordered
to halt all lending temporarily, a measure
backed up by police measures including a
crackdown on ‘illegal’ sales of farmland,
and beefed-up environmental and other
controls at new factories and construction
sites. Furthermore, housing construction in
China is overwhelmingly pitched towards
the luxury market and over capacity in the
form of vacant properties is widespread.
Research indicates that property prices rose
by 25 percent last year and are approaching
US levels in cities like Shanghai and
Beijing. This points to the danger of a crash
in land prices which, in turn, could trigger
a banking collapse (Coates, 2004). Higher
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30 Business Intelligence Journal January
interest rates would be the most effective
way to regain some control over credit levels
and investment, but the results may be too
dramatic (Coates, 2004).
More than anything, the Chinese regime
fears political instability, and a movement
of the working class (Coates, 2004). Labor
protests in China are numerous, among
unemployed workers, laid-off from the state
sector. These movements have so far been
isolated, local outbursts, which have been
defused by a combination of concessions
and repression from the authorities (Coates,
2004). Given the now pivotal role it plays
in the global economy, it is clear that any re-
run of the Asian crisis in China, would have
major international implications (Coates,
2004). China’s role as the number one market
for capital goods (minerals, fuel, building
materials and machinery) made it the main
locomotive of global growth in 2004. World
GDP grew by 3.2% in 2003, with China
contributing a third of this growth, or 1.1%,
while US capitalism accounted for just 0.7%
(Coates, 2004). In 2003, China accounted
for 70% of Japan’s total export growth, and
40% of South Korea’s.
Last year, China became the world’s
third largest importer after the US and
Germany. For the frst time since 1993, it
is heading for a trade defcit in upcoming
years, with imports exceeding exports on an
annual basis. The surge in Chinese demand
in 2003 drove world prices for industrial
raw materials up by 73% (Coates, 2004).
China is the world’s biggest steel producer,
accounting for one ffth of global output in
2003 with 220 million tons, or as much as
the US and Japan combined (Coates, 2004).
In 2003, China also became the world’s
third largest market for motor vehicles with
sales growing 60% (Coates, 2004). By
2007, production is predicted to reach 15
million vehicles, against sales of 7 million.
Unfortunately, these prices have already
begun to fall, as steel prices rose 35% in the
twelve months to February 2004, car prices
fell 5.1%. Fierce competition between car-
makers makes it impossible to pass on rising
costs to consumers, so proft margins are
falling (Coates, 2004).
Today, China, with one quarter of
the world’s population is seen as a great
opportunity for many corporations. For the
expatriate businessperson and their family,
China can be one of the most exciting and
arduous international assignments, however,
researchers warn that before considering
any international assignment in China, a
family needs to take stock of its motivations,
expectations, strengths and weaknesses
(Goodman, 2005). Contemporary China is a
combination of Confucianism, Communism
and a free market spirit of entrepreneurship.
To be successful in China the expatriate
must understand how the mixture of these
forces impacts day-to-day living (Goodman,
2005). In China, there is no business without
guanxi or relationship. Relationships take
a considerable time to develop and are
based on many continuous signs of good
faith (Goodman, 2005). Though diffcult
to establish, once a relationship exists it
tends to be long lasting and is full of many
mutual obligations and favors; these mutual
obligations are remembered and are balanced
out over time (Goodman, 2005). The actual
“value” ascribed to each favor may differ
due to cultural factors.
Traditional Chinese values are based
on human feelings rather than political or
religious principles; respect for the feelings
of others helps to hold society together.
Considerable time and effort are spent on
“face working” particularly one’s own face
as well as that of others (Goodman, 2005).
Causing someone to “lose face” is humiliating
and will not be forgotten (Goodman, 2005).
Thus, so important is the preservation of face
that it is sometimes preferable to agree to a
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decision even if there is no intent to carry
out the decision. Additionally, China is in a
state of rapid change. This has resulted in a
situation where the rules and regulations of
government and business and the authority
to enforce the rules are constantly changing.
In China, health issues are an important
concern, as air pollution is very bad due
to the burning of coal. Furthermore, the
Chinese work ethics and educational systems
are based on socialism.
The Chinese private equity industry has
become the largest private equity industry in
Asia in recent years despite the tremendous
regulatory hurdles and institutional
uncertainties that venture capital frms
face. In 2001, China, together with Hong
Kong, captured 30% of Asia’s private equity
investment to overtake Japan for the frst time
(Batjargal, 2004). By the middle of 2002, the
total venture capital fund pool in mainland
China reached $7.15 billion. Although the
frst domestic venture capital organization
was set up in 1986, development of the
private equity industry intensifed only after
March 1998, when the Chinese government
adopted a number of policy schemes to
promote venture investments (Batjargal,
2004). In the frst two quarters of 2002,
venture capital frms raised $156 million in
funds, a steep decline from$1.86 billion in
2001 (Batjargal, 2004).
In the frst two quarters of 2002, 36 foreign
frms invested $87 million while Chinese
frms invested$70 million (Batjargal,
2004). Until 1998, venture capital frms
were regarded as fnancial institutions that
provided privileged loans to small frms.
The main legal form of venture capital
frms, limited liability partnership, is not
recognized in mainland China’s laws. As a
result, all venture capital frms are registered
and operate as limited liability companies,
adding con-fusion as well as serious risks to
the processes by which venture capital frms
raise, invest, and manage funds (Batjargal,
2004). The assets of the venture capital frm
are not separated legally from those of the
fund, thus increasing agency risks in venture
investments, such as misuse of funds.
Research on personal networks of
entrepreneurs revealed that entrepreneurs
obtain information and advice from network
members (Birley 1985) and access bank
loans through contacts (Uzzi 1999). The
idea of social capital in the Chinese context
captures the indigenous social phenomenon
called guanxi, or the Chinese version of
social networks and networking (King
1991). Researchers defned guanxi as a web
of extended family relationships (Kipnis
1997), a cluster of patron-client exchange
relationships for instrumental purposes
(Walder 1986). Research indicates that
Guanxi capital promotes inter-personal
trust, facilitates job mobility, and enhances
frm performance (Batjargal, 2004). A
study of private equity in China emphasizes
the important role guanxi plays in venture
capital practices, as a substantial portion of
the cash that goes into private equity funds
originates from government sources. As a
result, guanxi relationships with government
offcials are often regarded as a defning
factor for securing government investments
in venture capital funds.
Investors are likely to invest in only
those projects that are expected to produce
acceptable net present values. Informal
socialization such as social eating, an
important component of guanxixue, or the
art of net-working. This enables investors to
know the values and beliefs of entrepreneurs
better, and facilitate interpersonal and
cognitive trust in entrepreneurs’ abilities
and intentions (Batjargal, 2004). Cultural
features of the Chinese, such as a strong
sense of role obligation, favoritism, and
inclinations to categorize people into in-
group and out-group circles also facilitate
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32 Business Intelligence Journal January
better communication between investors
and entrepreneurs who know each other.
The Chinese context adds culture-
specifc variables that also affect investment
selections through referrals. In the culture
of shame, a favor giver (the one who
recommends some-one to a third party) is
regarded as a face giver, and a favor receiver
(the one who gets access to the third party
through the recommendation) is regarded as
a face receiver (Batjargal, 2004). Successful
transactions between face giver (referee),
face receiver (fund seeker), and investor will
enhance the face—mianzi (social standing,
symbolic resources, and reputation)—of all
parties (Batjargal, 2004). Referrals may
improve odds of obtaining venture capital
for entrepreneurs because of opportunity
fltering, matching, and trust benefts that
mitigate social risks indecisions. In the
Chinese context, venture capitalists are
likely to invest more in common stock
rather than other senior securities such as
convertible preferred stock, nonconvertible
preferred stock, debt coupled with common
stock, or common stock purchase warrants
(Batjargal, 2004).
The Chinese prefer to keep details
of guanxi deals confdential and resolve
potential issues and problems through
tacit understandings and actions. A recent
survey found that about 60% of Chinese
entrepreneurs preferred social solutions for
dispute settlement (Krug and Hendrischke
2002). Precise calculations of dividends,
conversion, liquidation, and antidilution
terms may hurt the commitment of the
entrepreneurial team and are likely to be
perceived as unenforceable by investors
and entrepreneurs (Batjargal, 2004). The
stronger the tie between the entrepreneur
and the venture capitalist, the fewer the
number of contractual covenants that protect
venture capitalists’ interests. Peculiarities
of Chinese negotiation behavior are likely
to lead to increases in venture values. A
sense of balance, modesty, and mutuality is
likely to smooth out negotiation processes
where acceptable compromises are crafted
(Batjargal, 2004). A cultural inclination of
the Chinese to favor those whom they know
also contributes to the risk-mitigating role of
personal relationships in venture fnancing
in the Chinese context.
The human quality of emotional affection
is also a factor in the Chinese culture
and rendering of human obligations. A
Confucian exchange tactic of giving more
in expectation of getting more is at work
(Malik 1997). By increasing frm values,
investors manufacture and accumulate social
receivables, and these advance monetary
favors provide leverage over entrepreneurs.
Finally, in China, social relationships
embedded in local cultures and traditions do
affect entrepreneurial process and venture
investment decisions. Changes in network
structures, compositions, and relations over
time, is an important issue, given the social
and economic transformations that are
taking place in China. An implication for
entrepreneurship research is to examine the
impact of the way in which venture capital
was raised on frm performance.
Comparison of Swedish and
Chinese Entrepreneurs
Researchers have argued that new frm
creation, innovation and competition are
the three major aspects through which
entreprenuership can contribute to economic
development in the sense of wealth
distribution. Every year, Swedish companies
complete 73 million forms for submission to
75 different authorities (Advantage Sweden,
2005). Indicated above, in Sweden, it is
diffcult to start up companies due to the high
tax rate on labor, which acts as a deterrent
to both existing and new service-sector
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Bremmer I. - Common Factors between Swedish and Chinese Entrepreneurial Leadership Styles
Ingmar Bremer
companies, at the same time as the informal
sector is expanding. In applying these facts,
it would appear that entreprenuership in
Sweden is not as strong as it could be due
to the diffculties facing new frm creation,
innovation and competition. In China, there
has been an economic boom as more and
more and more new frms are created. Due to
the fact that a million engineering graduates
leave Chinese universities every year, there
is an ongoing transfer of technology from
the huge network of foreign partnerships
and joint ventures (Coates, 2004). These
new graduates begin the creation of new
frms, however, innovation and competition
in China appear to be very high. China may
not be able to continuously put out new
frms and new innovations, as competition
is very ferce, and already it is predicted that
the Chinese economy will fail.
New frm creation is an ability and a
willingness of individuals to perceive and
create new economic opportunities (Mamede
& Davidsson, 2003). The innovative process
has been defned as occurring within new
frms which generally does not arise out of
the old ones, but start producing alongside
them (Mamede & Davidsson, 2003). This
is relative to Swedish frms, because many
old frms exist, small and large in Sweden.
Entering the markets with their innovations
entrepreneurs challenge the dominating
frms, and their willingness is motivated by
the desire of creating wealth for themselves,
and to succeed they strive in for the product
or solution they believe in (Mamede &
Davidsson, 2003). If successful in creating
demand for their innovation they expand
their business to new markets and in doing
so they also infuence economic structures in
other regions (Mamede & Davidsson, 2003).
In Sweden, many older frms exist which
are already strong and have the capability to
innovate new ideas. As a result, in Sweden,
new wealth is not only created by this
process, but also distributed along with the
previous one.
In China, however, there has been a giant
boom of new frms and innovations, which
do not have a traditional foundation to stand
on, such as in Sweden. In China, there exists
the possibility, since competition is so ferce,
that the activities of the new frms may
negatively affect the existing ones causing
them to ultimately decline. This is because
the new entrepreneurs acquire the market
shares that previously belonged to the older
companies, thus acquiring some of their
wealth. As time goes by the older companies
are not able to retain their workforce and have
to dismiss their employees. Some of them
declare bankruptcy, and a as consequence
creditors, employees and shareholders lose
part of their wealth (Mamede & Davidsson,
2003). At the same time, the new expanding
frms employ new workers, pay increase
dividends to their shareholders, and intensify
their purchases from suppliers (Mamede &
Davidsson, 2003). Thus, China bears the
example of its wealth as being in the process
of constantly changing hands, along with
the creation of new frms.
Innovation is the process of introducing
new ideas in the market in the face of
uncertainty and other obstacles (Wennekers,
Thurik & Buis, 1997). Another important
link between entreprenuership and wealth
distribution is innovation. The new products
and new processes that result of innovative
activity are seen by many economists as
the main source of dynamism in capital
development (Mamede & Davidsson, 2003).
Research indicates that the introduction of
new innovations can generate changes and
cycles in the economy, causing wealth to
become increasingly concentrated in the
hands of a few large frms, thus destabilizing
society. In China, there is always something
new coming out in the market. China
has a great number of steel products, and
Business Intelligence Journal - January, 2009 Vol.2 No.1
34 Business Intelligence Journal January
technological advances create many new
products. Through a strong belief in their
ideas and dedicated effort, they manage to
allocate resources in a better way, develop
a greater appeal to buyers and succeed in
creating demand for their new products and
solutions (Mamede & Davidsson, 2003).
Competition has been defned simply
as to compete with others for a share of
that market (Wennekers, Thurik & Buis,
1997). Competition is one of the most
important forces in the market, and often
a determining factor for the future of
many enterprises (Mamede & Davidsson,
2003). The success of these frms is in a
large extent associated with the way they
assess their business environment in order
to meet the needs of the market. In China,
the needs of the market were increasing due
to the population boom, however in recent
years, the output is exceeding the amount of
purchases in the country. The competition
in China is steadily increasing, at a faster
pace that the competition in Sweden. As a
result, in China, the disposition to compete
and face the risks and uncertainties involved
in the competitive process is an important
element of what it truly means to be an
entrepreneur.
Furthermore, not all types of competition
are benefcial to the mechanism of wealth
generation and distribution. While it is
perceived as a positive effect for many
nations as it increases the levels of trade and
the total production, to others it is harmful
(Mamede & Davidsson, 2003). Examples
of this fact are the developing economies in
east Asia. Some countries have experienced
signifcant growth throughout the nineties
and have managed to increase their standards
of living. However, other countries, by
opening their markets to international
competition, have been inundated with
imports, unable to sell their exports. This is
occurring presently in china, as production
is beginning to fall behind purchases. This
causes lower levels of growth and worse
standards of living.
The competition that creates and
distributes wealth is one that results from
innovation and new frm creation (Mamede
& Davidsson, 2003). In Sweden, this is
favorable, as entrepreneurs are willing to pay
the price assuming the risks of their choices.
In Sweden, it appears that the chance of
risk is less than that in China. As people
gain confdence, improve the fnancial
situation, and have access to information,
they also develop political will and are less
likely to accept corrupt governments and
inadequate living conditions (Mamede &
Davidsson, 2003). Consequently, they seek
better education for themselves and their
children, along with the improvements in
the household and community (Mamede &
Davidsson, 2003). It is clear from the research
that entrepreneurs in Sweden already realize
this, and are initiating changes to improve
the educational system, whose graduates
secure the future of their country.
As they create their new frms, innovate
and strive for the ideas they believe
in, entrepreneurs in Sweden not only
succeed in harvesting good profts, the
deserved outcomes of their efforts, but
also in contributing to the prosperity of
organizations and nations (Mamede &
Davidsson, 2003). As a result, it appears that
Sweden has secured their position as prime
movers of progress, and as the engine of both
economical and social change (Mamede &
Davidsson, 2003). Much emphasis has been
given to an existing association between
entrepreneurial leadership and economic
growth. Many studies have been developed,
or are being carried out, in order to analyze
the links between entreprenuership and
economic growth. Evidence shows that
this relationship is complex and that more
data are necessary in order to determine
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Bremmer I. - Common Factors between Swedish and Chinese Entrepreneurial Leadership Styles
Ingmar Bremer
the causal mechanisms of this association
(Reynolds, et.al., 2001).
The Global Entreprenuership Monitor
(GEM) is a unique, unprecedented effort
to describe and analyze entrepreneurial
processes within a wide range of nations.
By doing so, GEM focuses on one of the
most important forces driving and carrying
economic change, one that has until now
remained elusive for researchers due to a
lack of reliable, internationally comparable
data (Reynolds et.al, 2002). The major
objectives of the GEM report include
measures for the differences in the level of
entrepreneurial activity between countries, to
probe for a systematic relationship between
entreprenuership and national economic
growth, to uncover factors that lead to higher
levels of entreprenuership, and to suggest
policies that may enhance the national level
of entrepreneurial activity. In the 2002
GEM assessment, representative samples
of 1,000 to 5,000 randomly selected adults
in each country were selected to provide a
harmonized measure of the prevalence of
entrepreneurial activity (Reynolds et.al,
2002).
The GEM report also includes up to
50 face to face interviews with experts
in their country, chosen to represent the
entrepreneurial framework features. These
same experts were additionally asked to
complete a standardized questionnaire in
order to obtain a precise measure of their
judgments about their country as a suitable
context for entrepreneurial activity (Reynolds
et.al, 2002). Finally, standardized national
data was collected from international data
sources such as the World Bank and United
Nations. The 2002 GEM report indicated
that the level of entrepreneurial activity was
lowest in Central Europe, and highest in the
developing Asian countries, such as China.
The GEM report also indicated that age and
gender have a very stable relationship to
entrepreneurial activity, as men are twice as
likely to engage in entrepreneurial conduct
than are women. Additionally, those ages
25 to 44 are most likely to be involved
with all types of entrepreneurial activity.
In countries women are more likely to be
involved where there is equality in career
opportunities, whereas in developing
countries low participation of women may
refect the lack of jobs and an inadequate
education (Reynolds et.al, 2002).
Of the 2.4 billion persons comprising the
labor force represented in the 37 countries of
the 2002 GEM report, 286 million are either
actively involved in starting a business or are
the owner-manager of a business less than
42 months old (Reynolds et.al, 2002). In
China, the total population was estimated at
1,284,000,000 for 2002. The total labor force
in 2002 was 814,470,000. By comparison,
in 2002, there was a total population of
8,876,000 in 2002 in Sweden, with a total
labor force of 5,433,000 in 2002. The GEM
report indicates that entrepreneurial activity
is uniformly low in the east Asian groups,
as well as within most of the members of
the European Union. In contrast, the Anglo
nations have a relatively higher level of
activity, and the developing Asian countries
have the highest total entrepreneurial activity
rates. Paradoxically, many of the most and
least entrepreneurial countries are located
in Asia where they often share the same
cultural background (Reynolds et.al, 2002).
The 2002 GEM report also indicates the
changes in the percentile of the growth of
gross domestic products over a three year
period. Sweden’s percentile of growth
in gross domestic products for 1999 was
4.51%, in 2000, 3.61%, and in 2001, 1.21%.
The change from the previous year for
Sweden was -.90% from 1999 to 2000, and
–2.40% from 2000 to 2001. Sweden’s total
entrepreneurial activity for 2001 was 6.68%,
Business Intelligence Journal - January, 2009 Vol.2 No.1
36 Business Intelligence Journal January
and for 2002, 4.00%. China’s statistics were
not located on the 2002 GEM report.
The GEM report also indicated a
constantly negative relationship between
the quality of the infrastructure and the
level of necessity entreprenuership, as
well as the lack of relationship between
framework conditions (Reynolds et.al,
2002). Necessity entreprenuership was
most prevalent in developing nations
such as Thailand, India and China, where
fnancial support, education, training, and
infrastructure are clearly absent (Reynolds
et.al, 2002). Entreprenuership-enhancing
programs and policies implemented in a
number of developed countries, principally
in the European Union, have only resulted in
modest levels of necessity entreprenuership
(Reynolds et.al, 2002). This research
indicates that there is substantial uniformity
across the GEM countries with regard to the
concepts, language, and judgments utilized.
Additionally, it supports the notion that this
uniformity is especially prominent among
the more developed nations and may have
evolved very similar infrastructures in
support of entrepreneurial activity.
Most new frms receive their initial
fnancial support from informal investments
made by family, friends, and associates.
An extremely small proportion of the most
promising frms receive funding from venture
capital frms, which are a specialized form
of formal investment. Informal fows were
estimated in the 2002 GEM report by means
of asking all those in the adult population
surveys if they had made an investment in a
new frm, not their own, the past three years.
The 2002 GEM report indicates the amount
of venture capital invested as a percent of
gross domestic product for each of the
countries on the report. Nations that enjoyed
year-to-year increases included Sweden,
with a 101 percent increase. A large portion
of all businesses are owned and managed
by families or groups of relatives. Sweden
was one of the 10 countries in which family
owned businesses were started with family
sponsored entreprenuership. In Sweden,
the low estimate of family sponsored
entrepreneurships was 26%, with the high
estimate being 52%. Again, China was not
included in these statistics.
Conclusion
Finally, researchers’ Ralston, Gustafson,
Cheung and Terpstra (1993) analyzed and
interpreted the results of a study based on the
convergence and divergence of managerial
values in the United States, Hong Kong and
the People’s Republic of China. Although
this study did not include Sweden, the results
of the study are consistent with a review of
the literature used for this paper. The study,
which utilized four Western-developed
measures, found that both culture and the
business environment interact together to
create a unique set of managerial values
in a country. The goal of the study was
twofold: to help understand convergence
or divergence of managerial values, and to
investigate similarities and differences of
managerial values in the study countries.
The study examined the contrasting
themes of convergence and divergence.
The convergence approach proposes that
managers in industrialized nations would
embrace the attitudes and behaviors common
to managers in other industrialized nations
despite the numerous cultural differences.
The divergence view proposes that individuals
would retain diverse, culturally based values
despite any economic and social similarities
between their nations. The countries were
chosen based on criteria defned in a previous
study. The United States represented a
capitalist business environment at the height
of technological development. On the other
extreme, the People’s Republic of China
2009 37
Bremmer I. - Common Factors between Swedish and Chinese Entrepreneurial Leadership Styles
Ingmar Bremer
represented a socialist legal and political
system with communist origins. Serving
as a link between these two extremes, was
Hong Kong, with a well-developed fnancial
system at the forefront of world commerce.
It was hypothesized that convergence
would be found if the Hong Kong managers
adopted Western values, and divergence
would be found if they maintained Eastern
values. It was hypothesized that the U.S.
and the People’s Republic of China would
be polarized on the variables in the study.
The results of the data supported the theory
that there were signifcant differences
between managers in the U.S. and People’s
Republic of China. The data provided little
support for the convergence hypothesis, and
some support for the divergence hypothesis.
The majority of the fndings for measures
developed with both Eastern and Western
constructs supported the cross-vergence
view.
The data of the study summarizes the
prevailing view found in the examination
of the entrepreneurial leadership styles of
Sweden and China. As a result, it appears
that values must be viewed individually
and not together as an entity. It has been
determined that some values may change
while others do not, some may change more
rapidly, and that other values may evolve
from a combination of infuences. The
results of the Ralston et.al. (1993) study
were similar to those of a previous study,
which taken together, theorize the possibility
of a concurrent convergence, divergence
and cross-vergence which depend on the
values measured and the countries studied.
It was also concluded that different national
cultures would contribute to the unique
behaviors of managers in the different
industrialized nations.
A review of the literature on the
entrepreneurial leadership styles in Sweden
and China leave open a few important aspects
that would assist in the interpretation and
performance of future studies. One important
possibility raised is that it would be necessary
to recognize that values may differ between
groups within a nation. The implications
for future research that this raises is that
different values in the same nation may
need to be looked at from different angles
not previously thought of. For example,
comparable elements such as the differences
between male and female managers in the
same nation, or the differences in managerial
styles between the present managers and
the next generation of managers could be
examined. Other cultural differences could
be taken into consideration, such as social
class or environmental infuences of the
countries studied. The political scene of
the country, liberal or conservative are also
additional factors that can be taken into
consideration.
Finally, the results of the examination
of the entrepreneurial leadership styles in
Sweden and China have offered support
for previous research and other studies.
It is highly likely that the differences in
entrepreneurial leadership in these countries
have contributed to their respective successes
and failures. Future research using different
value sets is likely to be the fnal deciding
factor in interpreting this important research
question, the results of which have many
implications in forecasting, globalization,
and the international economy
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