Culture and Entrepreneurship in the United Arab Emirates

Abstract

It is well known that entrepreneurship plays a key role in economic development; however, its cultural underpinnings remain a marginal field of study. This paper is an attempt to fill this gap. The development trend of the oil-rich United Arab Emirates (“UAE”) is at the heart of debates surrounding the effects of culture on economic choices and outcomes. In order to move away from an oil-based economy and provide private sector jobs for its growing number of nationals, the UAE has promoted and implemented diversification strategies over the last 20 years. Yet, less than 2% of the private sector workforce is composed of UAE nationals. The latter prefer working in the public sector because of better salary and working conditions. This paper seeks to explain the cultural foundations of the lack of entrepreneurship among UAE nationals. It conducts a survey among students from United Arab Emirates University and tests the determinants of their entrepreneurial intentions. It shows that the students’ culture is holistic and rather hostile to entrepreneurship. Such disinterest is stronger because of fear of stigmatization associated with business failure and because of social prestige associated with public sector jobs. Our results not only confirm the cultural specificity of Rentier States but also invite the launching of educational programs aimed at modifying students’ beliefs over entrepreneurship. Such cultural change seems inevitable in the context of a transition from an oil-based to a knowledge-based economy.

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Notes

  1. 1.

    The six GCC countries are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE.

  2. 2.

    Source Summary Index, Fraser Institute. https://www.fraserinstitute.org/sites/default/files/economic-freedom-of-the-world-2016.pdf. The Fraser Institute estimates that economic freedom is present when individuals are permitted to choose for themselves and engage in voluntary transactions so long as they do not harm the person or property of others. Individuals have a right to their own time, talents and resources, but they do not have a right to take things from others or demand that others provide things for them. The use of violence, theft, fraud and physical invasions are not permissible in an economically free society, but otherwise, individuals are free to choose, trade and cooperate with others and compete as they see fit.

  3. 3.

    See Hayton and Caciotti (2013) for an excellent survey of the literature.

  4. 4.

    Total early-stage entrepreneurial activity, or TEA, measures the percentage of the adult population age 18–64 years who are in the process of starting a business (a nascent entrepreneur) or have started a business less than 42 months before the survey took place (owner-manager of a new business).

  5. 5.

    UAE Bankruptcy Law, (Federal Decree Law No. 9/2016) was published on 29 September 2016 and came into force on 29 December 2016. The UAE government stated that the new bankruptcy law in the UAE was needed to “help owners of small and medium-sized enterprises weather rising levels of bad debt”.

  6. 6.

    Source Summary Index, Fraser Institute. https://www.fraserinstitute.org/sites/default/files/economic-freedom-of-the-world-2016.pdf.

  7. 7.

    Power distance is defined as the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally.

  8. 8.

    Rate of fear of failure measures the percentage of the population age 18–64 years perceiving good opportunities, but who indicate that fear of failure would prevent them from starting a business.

  9. 9.

    High status of successful entrepreneurs is measured by the percentage of the adult population age 18–64 years who believe that high status is afforded to successful entrepreneurs.

  10. 10.

    Cultural diversity can be defined as the cultural differences between people. These cultural differences are the differences in the way to learn, in values and in beliefs. There will be large cultural diversity in a group, if each individual has his/her own values, beliefs and heuristics. Culture is, however, characterized by internal diversity, propensity to change and mutual influence in its relationship with other questions. It is not a “homogeneous mass” (Coyne 2005). It is an internal diversity. In a same culture, people are not homogeneous.

  11. 11.

    Kapiszweski (2006). Arab versus Asian Migrant Workers in the GCC Countries, Beirut: United Nations Expert Group Meeting on International Migration and Development in the Arab Region. To illustrate the demographic diversity in the UAE, data from the 2005 Census in the Emirate of Dubai are as follows: According to the 2005 Census, residents in Dubai consisted of 56% Indians, 11% Pakistanis, 6% Filipinos, 5% Bangladeshis and only 8% Emirati nationals. Non-GCC Arab expatriates constituted another 6.5% of Dubai’s population in 2005. Arabs from the other five GCC countries (Oman, Qatar, Saudi Arabia, Kuwait and Bahrain) accounted for only 0.18% of the population in total. Among expatriates from Western Europe and North America, British nationals were the largest group (51%), followed by Canadians (11%), Americans (10%), Germans (6%) and French (6%).

  12. 12.

    Paldam (2007) also supports such cultural singularity by arguing “governments in oil countries have to pass on a fair amount of the resource rent to the native population, who then become rentiers living on resource rent. This allows them to live a traditional life devoted to religion, and at the same time enjoy the goods of the rich countries”. (Paldam 2007, p.11).

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Appendix

Appendix

Table 2 The results for the dichotomous variables
Table 3 The results for t test
Table 4 Fitted logistic regression model with all variables
Table 5 The refined logistic regression model

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Facchini, F., Jaeck, L. & Bouhaddioui, C. Culture and Entrepreneurship in the United Arab Emirates. J Knowl Econ (2020). https://doi.org/10.1007/s13132-020-00663-z

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Keywords

  • Culture
  • Entrepreneurship
  • Middle East and Rentier State