The Key Cultural Difference That Makes Some Countries More Innovative Than Others
Have you ever wondered why places like Silicon Valley are home to so many start-ups? It's not because people there are inherently smarter or given better tools. There are countries with far superior education systems and vastly more educated populations, but they don't foster so many groundbreaking inventions, world-changing technologies, and bold new ideas.
Cultural tightness vs. looseness
What it really comes down to isn't intelligence; it depends on how culturally tight or loose a society is. Cultural looseness—characterized by risk-taking, individual expression—is what sets entrepreneurial regions apart. This contrasts with culturally tight societies, which are characterized by rigidity, enforced social norms, and low tolerance for rule-breaking. This idea about cultural looseness versus tightness was developed by Michelle Gelfand and her team at Stanford University.
What do the stats say?
A study published in the Strategic Entrepreneurship Journal found that cultural looseness explains as much as 56 percent of the variation in new firm formation across 156 countries, and up to 71 percent of the variation across American states in rates of new entrepreneurs.
Another paper published in the Journal of Innovation and Entrepreneurship found a clear positive correlation between looseness and “national innovativeness,” and a negative correlation between cultural tightness and innovation. This suggests that in looser cultures, people feel freer to explore new ideas, challenge norms, and aren't so afraid of failure.
You don't have to go far to see the effects of looseness vs. tightness on society. California—a state that's been associated with counterculture movements and flower children—is also the state with the greatest number of startups. On the other hand, in West Virginia, where you might be looked at weirdly if you started building new tech in your garage, only 0.19 percent of people are entrepreneurs.
Implications
When norms aren’t rigid, institutions and markets can evolve more quickly. That accelerates the adoption of new technologies, business models, or social practices, which are all crucial ingredients for success. Instead of being shunned, new ideas, even if they don't work, are generally embraced.
How comfortable people feel breaking norms, expressing new ideas, and challenging the status quo makes a huge impact on innovation.
Other factors
While cultural looseness is a major driver because it fuels creativity and risk-taking, it's not the only thing a society needs to become the next Silicon Valley. Innovation thrives where people can take risks without fear of total collapse. This means you need a strong banking system with government support and accessible venture capital.
Entrepreneurship can either be encouraged or blocked by policies, so municipalities with tax incentives, low barriers to entry, and subsidies will foster more business growth compared to those with excessive red tape.
Education is also a factor, even if it's not the main one. It takes inquisitive minds to come up with big ideas and a strong knowledge base to see them through.
Another factor is diversity. Interacting with a variety of cultures exposes you to different ways of thinking. Nicknamed "startup nation," Israel has the highest number of startups per capita. Being a country made up of Jewish immigrants from all over the world, it's also one of the most culturally diverse nations on the planet.
How to boost innovation
Boosting innovation is not so much about greater education as it is about changing mindsets. Countries with more rigid norms can adopt some of the same policies that "loose" countries already have in place. Policymakers can introduce incubators and accelerators that can help change the business ecosystem. By fostering success, you can take away the stigma of failure, empower people to take risks, and change the culture entirely.
