Dissertation_v5

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The effect of cultural, industrial and regional factors on
leadership challenges that biotech and high-tech
SME leaders are facing in
different types of economies

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The effect of cultural, industrial and regional factors on
leadership challenges that biotech and high-tech
SME leaders are facing in
different types of economies
Submitted by: Peter Ferenc Baumgartner
to the University of Exeter
as a dissertation towards the degree of
Master of Science by advanced study in International Management
in August 2013
I certify that all the material in this dissertation which is not my own work has been identified
and that no material is included for which a degree has previously been conferred upon me.
……………………………………………………
Word count: 10,005 words

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Acknowledgements
I would like to express my gratitude to my academic supervisor Catherine Jones, for her support and
encouragement during the entire period of this project. I would also like to thank Zsombor Lacza for his
ideas, recommendations and contacts which were vital for carrying out this research.
This study was a fantastic experience for me as I could get in touch with company leaders from all over
the Globe. Their opinions, views and stories seriously formed my thoughts not only about the challenges
of being responsible for a company and its employees but made me think about my own life,
relationships and future in general. This short, but meaningful journey was much more than just writing
a dissertation while gaining some academic and professional knowledge. I also got answers to personal
questions in the last few months that I would not expect before.
For all of this experience I am very thankful for everyone who helped my job during the process: all the
respondents who spent time and effort on the interviews to provide valuable answers for my questions
and all my friends around the world who supported me with ideas, contacts or encouragement.
As the space is limited here to mention everyone by name I rather give the countries of their origin:
Austria, Azerbaijan, China, Denmark, France, Germany, Greece, Hungary, India, Iran, Italy, Japan,
Pakistan, Palestine, Russia, Singapore, Slovakia, Sweden, Ukraine, United Kingdom, United States of
America and Vietnam.
Most gratitude goes to my family Anya, Apa, Balázs and of course my partner Mesi. It is clear that they
had the biggest and hardest role in the completion of this dissertation. Thank you for the understanding,
support, encouragement and love what I got from you. Without you I could not be there. Köszönöm!
Lastly, I shall thank you for everyone else, who are not mentioned but still helped me in the last few
months.
“It always seems impossible until it is done.”
Nelson Mandela

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Abstract
In different areas of world, basic cultural differences, accompanied by various industry
structures, cause large variances in the everyday operation of SMEs from the same sector. This
is the case, even if companies are quite similar in terms of size, profitability, stability, maturity
and geographical spread. By conducting 26 interviews this research investigates the challenges
SME leaders in knowledge-intensive activity focused - primarily biotech and high-tech
industries - face in the three types of economies: developing, semi-developed, and developed.
This study seeks to determine whether differences stem from cultural or industrial roots, as in
current studies the basis of this is not unequivocal. Furthermore, this research intends to
identify the most determinant regional factors affecting the operation of these companies, to
compare these and then offer suggestions as to which regions are most appropriate for such
business, plus establish what could be done to make other regions more competitive.
Based on the results of this study, the influence of culture on biotech and high-tech SME
leaders’ challenges seems much stronger than the effects of the industrial environment.
Culture appears to be affecting the way political and legal systems operate and to have a
strong influence on the company’s opportunities in several other indirect ways. While
industrial factors seem to be less influential than culture in this sample, but do appear to have
some influence over companies’ welfare, by contributing to providing a stable and reliable
frame for businesses in Innovation-Driven economies and having a neutral or slightly hindering
role in Efficiency- and Factor-Driven ones, according to the interview results. Knowledge hubs
and technological clusters in more developed regions may be able to provide an advantageous
environment for high-tech and biotech companies because of the presenting special eco-
system.
Regional innovation policies & support said to be the main regional factors in influencing
leaders’ challenges. Recruitment of qualified personnel also seems to be a strong bottleneck in
such company’s growth due to the specific knowledge needed. The level of industrial
development, local culture and the legal & societal framework are also able to cause issues,
but this is typical only in Efficiency- and Factor-Driven countries in this sample. Regional factors
appear to strongly determine leaders’ challenges and their nature seems differing in every
type of economy and country. The following table below summarises the main influencing
factors in each type of economy in the sample.

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Economy Main influencing factor
Factor-Driven Culture
Efficiency-Driven Legal & societal framework
Innovation-Driven Regional innovation policies & support
Innovation-Driven economies appear to be the best places for biotech and high-tech
businesses, due to the mixture of appropriate culture, industrial environment, policies and
regulatory framework. For biotech and high-tech company founders, these results would
suggest it is advisable to take more locations into account, when thinking about establishing a
new company or relocating the current one. For those who are already leading a company, the
results would suggest it is sensible to aim at a global market with their developments and
products, as the results of this study show regional markets may quickly become too small.
Based on the research results, to create knowledge-hubs in order to boost local economy
purposefully, it seems necessary to establish a supportive environment and to identify and
clear all bottlenecks at the same time. Long-term governmental innovation policies would
arguably prove beneficial together with a suitable regulatory framework (which cannot be
done without a stable political and economic background) to establish an ideal ground for
businesses.
A leader’s challenges are always changing based on the prevailing economic circumstances and
the current condition of his company; this is why arguably there are no unique business model
or leadership patterns which would work successfully in all regions.

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Table of Contents
Acknowledgements....................................................................................................................... 3
Abstract......................................................................................................................................... 4
Chapter 1 - Introduction ............................................................................................................... 9
1.1 Introduction ............................................................................................................................ 9
1.2 Research topic......................................................................................................................... 9
1.3 Research aim........................................................................................................................... 9
1.4 Research objectives and research questions.......................................................................... 9
1.5 Justification........................................................................................................................... 10
1.6 Research structure................................................................................................................ 11
Chapter 2 - Literature Review..................................................................................................... 12
2.1 Introduction .......................................................................................................................... 12
2.2 Overview of cultural influences ............................................................................................ 12
2.2.1 Defining culture.............................................................................................................. 12
2.2.2 Cultural layers ................................................................................................................ 13
2.2.3 Cultural differences........................................................................................................ 14
2.3 Linking culture and economy................................................................................................ 14
2.4 Overview of industrial influences ......................................................................................... 15
2.4.1 Defining industry............................................................................................................ 15
2.4.2 The three industry categories........................................................................................ 16
2.4.3 Industrial and regional factors....................................................................................... 16
2.5 Leadership, culture and strategy .......................................................................................... 17
2.6 Summary............................................................................................................................... 18
2.7 Literature gap........................................................................................................................ 18
Chapter 3 - Methodology............................................................................................................ 19
3.1 Introduction .......................................................................................................................... 19
3.2 Research attributes............................................................................................................... 19
3.3 Research instrument - Interviews......................................................................................... 20
3.4 Selection of respondents and access.................................................................................... 21
3.5 Research questions and analysis........................................................................................... 22
3.6 Limitations and data quality issues....................................................................................... 22
3.6.1 Reliability........................................................................................................................ 22
3.6.2 Bias................................................................................................................................. 23
3.6.3 Validity ........................................................................................................................... 23

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3.6.4 Generalisability .............................................................................................................. 24
Chapter 4 - Findings and Discussion ........................................................................................... 25
4.1 Introduction .......................................................................................................................... 25
4.2 Topic 1 – The role of culture................................................................................................. 25
4.2.1 Research Question 1...................................................................................................... 25
4.3 Topic 2 – The role of industry ............................................................................................... 26
4.4 Topic 3 – Regional factors..................................................................................................... 27
4.5 Discussion.............................................................................................................................. 30
4.5.1 The role of culture – Research Question 1 .................................................................... 30
4.5.2 The role of industry – Research Question 2................................................................... 31
4.5.3 Regional factors and leadership challenges – Research Questions 3, 4 and 5 .............. 32
4.6 Limitations and recommendations for further research...................................................... 35
Chapter 5 - Conclusions and Recommendations........................................................................ 37
5.1 Introduction .......................................................................................................................... 37
5.2 Conclusions ........................................................................................................................... 37
5.2.1 Culture............................................................................................................................ 37
5.2.2 Industry.......................................................................................................................... 38
5.2.3 Regional factors ............................................................................................................. 39
5.3 Recommendations................................................................................................................ 41
5.4 Areas for further research .................................................................................................... 42
5.5 Closing remarks..................................................................................................................... 42
Appendix ..................................................................................................................................... 44
2.1 Appendix ............................................................................................................................... 44
Bourgeois’ model.................................................................................................................... 44
Changes in culture .................................................................................................................. 44
2.2 Appendix ............................................................................................................................... 45
Diagram 2.1 Cultural Map of the World ................................................................................. 45
2.3 Appendix ............................................................................................................................... 46
Table 2.1 Economies by Geographic Region and Economic Development Level ................... 46
2.4 Appendix ............................................................................................................................... 47

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Further details and theories about regional factors............................................................... 47
2.5 Appendix ............................................................................................................................... 48
Table 2.2 Early-Stage Entrepreneurial Activity Rates and Per Capita GDP in 2007................ 48
2.6 Appendix ............................................................................................................................... 49
Defining leadership’s role ....................................................................................................... 49
2.7 Appendix ............................................................................................................................... 50
Culture and leadership............................................................................................................ 50
2.8 Appendix ............................................................................................................................... 51
Culture clusters, values and leadership types ........................................................................ 51
3.1 Appendix ............................................................................................................................... 52
Table 3.1 Summary of research attributes ............................................................................. 52
3.2 Appendix ............................................................................................................................... 53
Table 3.2 List of interview respondents.................................................................................. 53
3.3 Appendix ............................................................................................................................... 56
Implementation of interviews ................................................................................................ 56
Interview administration and ethics....................................................................................... 56
3.4 Appendix ............................................................................................................................... 58
Sample interview sheet .......................................................................................................... 58
3.5 Appendix ............................................................................................................................... 63
Interview transcript ................................................................................................................ 63
3.6 Appendix ............................................................................................................................... 71
Interview summaries .............................................................................................................. 71
3.7 Appendix ............................................................................................................................... 89
Table 3.3 Topics and research questions................................................................................ 89
3.8 Appendix ............................................................................................................................... 90
Further details on generalisability .......................................................................................... 90
4.1 Appendix ............................................................................................................................... 91
Table 4.1 Culture’s and industry’s influence on certain organizational functions ................. 91
4.2 Appendix ............................................................................................................................... 92
Leaders about the role of culture ........................................................................................... 92
Leaders about the role of industry ......................................................................................... 92
Leaders about regional factors ............................................................................................... 93
References .................................................................................................................................. 94

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Chapter 1 - Introduction
1.1 Introduction
This chapter intends to identify the research topic, the aim and objectives of the study as well
as the research questions, justifies the research questions both managerially and academically
then it gives an overview of the project structure.
1.2 Research topic
This dissertation will study cultural, industrial and regional factors’ influences on high-tech and
biotech SME leaders’ challenges in developing, semi-developed and developed economies.
1.3 Research aim
Determining whether these leaders’ challenges are coming from a cultural or industrial base
and how do regional factors of certain economy types influence the issues companies have to
face with.
1.4 Research objectives and research questions
Table 1.1
Research objectives
1. Examine the strength and nature of cultural and industrial influences across the different types of
economies
2. Identify the most determinant regional factors that affect the operation of these companies to
compare results
3.
Offer suggestions as to which regions are most appropriate for such business
4.
Suggest what could be done to make other regions more competitive

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Research questions Explanation
1. To what extent do high-tech
company leaders’ challenges
come from a cultural base?
Investigation of culture-related leadership challenges of SMEs
pursuing knowledge-intensive activities in biotech and high-
tech industries across developing, semi-developed and
developed economies.
come from an industrial base?
Investigation of industry-related challenges of previously
specified types of SMEs’ leaders’ challenges in the same
context.
3. Which regional factors are the
most influential?
Investigation of regional factors’ influence and nature on
previously specified types of SMEs’ leaders’ challenges in the
same context.
determined by regional factors?
Examination of regional factor-related challenges of
previously specified types of SMEs’ leaders’ challenges in the
same context.
5. To what extent are these factors
regionally determined?
Examination of the relationship between the nature of
regional factors and their relationship to companies’ location
in the sample.
1.5 Justification
Since my undergraduate studies I have found the world of high-tech SMEs interesting due to
success stories and case studies. As both my undergraduate and postgraduate programmes
were focused on MNCs I wanted to gain a deeper knowledge in the field of managing SMEs. As
establishing, building up and leading an SME is a complex and risky business which requires
several skills, leadership challenges seemed to be a suitable topic to get an insight into this
world when writing about it.
There are several types of business environments across the world due to the variety of
cultural, industrial and regionally specific factors at different locations. As the cultural and
industrial environment of a company and other factors may seriously influence leaders’
challenges, getting a brighter picture about the nature of the influencing forces could have
benefits from both academic and managerial aspects.

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These can be the better understanding of advantages and disadvantages of locations in the
sample; knowing the importance of culture and industry in everyday challenges; seeing the
strength of regional factors; getting information about circumstances in different types of
economies; experience leadership solutions to different challenges; help creating suggestions
that may support economic improvement regionally and establishing the base for further
research in this area.
1.6 Research structure
Table 1.2
Chapter Content
Literature Review - present the theoretical background to the research
- help the understanding of theories related to the topic
- recognize latent gaps in the existing literature
- providing an overview of cultural influences, industrial factors then
leadership and management theory
Methodology - summarise the steps of carrying out the project
- demonstrate and justify the methods used in the implementation of the
research
- introduce research attributes, the use of interviews, selection of
respondents, access to sample and the limitations
Findings and Discussion - present findings of the interviews conducted with SME leaders across the
three economy types
- results will be analyzed to point out the underlying reasons, connect
them to theory and answer the identified/stated research questions
Conclusions and
Recommendations
- summarise the main conclusions that have been found by this research
- give answers to the research questions
- provide logical recommendations regarding leaders’ challenges and
regional factors when linking academic and managerial aspects
- outline areas for further investigation

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Chapter 2 - Literature Review
2.1 Introduction
This chapter aims to present the theoretical background to the research, to help the
understanding of theories related to the topic and recognize latent gaps in the existing
literature. To this end, the first section provides an overview of cultural influences as these
determine the human issues of a leader’s challenges through the internal and the external
organizational environment too. The second section focuses on industrial factors that impact
firms externally while company leaders have less control over them. The third section will
investigate the importance of leadership and management to the theme of leadership
challenges that high-tech SME CEOs are facing in a different types of economies. As these
areas are in close relation to each other, there is a big overlap in literature: most of the
relevant works can be related to more areas of research and the role of culture is essential in
both leadership and industrial questions.
2.2 Overview of cultural influences
2.2.1 Defining culture
To begin with, several attempts have been made to establish a definition for culture in the last
three decades. It is important to overview various opinions then define what culture is as
academics tend to disagree about this question. In Victor Barnouw’s view (1985 cited by Adler
2002: 16), culture is “a way of life of a group of people, the configuration of all the more or less
stereotyped patterns of learned behaviour, which are handed down from one generation to
the next through means on language and imitation.”
According to Hofstede (1997: 5), national culture is “a collective phenomenon that is shared
with people who live or lived within the same social environment, which is where it was
learned. It is the collective programming of the mind which distinguishes one nation from
another”, as it is a kind of “software” being responsible for the differences between various
nationalities it is learnt, not inherited.

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Hodgetts and Luthans (2003) argue that culture is intangible in nature; learnt; shared (only
groups can have a culture); trans-generational (being passed over generations); symbolic;
patterned and adaptive (it is able to change). Although each of these authors emphasize
different features, all these definitions have the notion of living together in groups and
learning while being on the same point about the basic meaning.
2.2.2 Cultural layers
In this research, culture is viewed from more than one aspect covering two of its many
possible interpretations to raise the strictness of the study. The first one is the national
culture, which is the part of the bigger, external environment where the investigated firms
operate. The second meaning of culture is that of organizational culture, which belongs to the
internal environment of the company and arguably has a serious influence on leaders’
challenges.
Hofstede’s “layers” (2001 cited by Hollinshead, 2010: 31) help to create the link between
national and organizational culture. He states that the outer core symbolizes the country in
which we live or lived earlier while the inner one is the organization where we work and
between these two extremes more layers can be found: age, gender, social class, religion,
ethnicity and spoken language(s). From outside in, all these elements in order influence
people’s behaviour in a workplace which affects interactions and performance as well. From
the view of Deal and Kennedy (1982 cited by Sun, 2008: 137), every company, even the
smallest ones has a culture that is unique and the authors typify that organization based on
the interactions of its members: “the way we do things around here.” Based on the model of
Bourgeois (1980: 30), the latter quotation describes culture as part of the inner circle (called
the ‘internal environment’) which additionally contains ‘management’ and ‘employees’.
Bourgeois’ (1980) model has two more layers: the middle one (Task Environment) consists of
the industrial elements, while the outer one (General Environment) is basically a collection of
PESTLE environmental factors – where we find Socio-cultural factor. For details and criticism of
the model and theories about changes in culture please see Appendix 2.1.

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2.2.3 Cultural differences
To see the differences among national cultures several models exist which help to explain why
and how people’s mindset varies around the world. The most famous is the classification of
Hofstede (1997) using cultural dimensions such as power distance, uncertainty avoidance,
individualism, masculinity and long term orientation to put similar countries into categories
(Pyramid of People, Well-Oiled Machine, Village Market, Family). Another aspect to sort
cultures is the one created by Hall and Hall (1990), based on the context of communication
(low or high) that is influenced by norms, expectations and values. A more recent study, the
World Values Survey in 2008 (Hollinshead, 2010) presents information about global value
systems based on information about a nation’s democracy, work motivations, governance, etc.
and puts countries onto a scale according to their Traditional/Secular-Rational Values and
Survival/Self Expression Values. Diagram 2.1 in Appendix 2.2 shows the Cultural Map of the
World, created by the World Values Survey (2013).
These models together are able to give a clearer view about a region’s culture and show which
information combined with knowledge about the level of economic development can act as an
indicator to describe the roots of challenges and issues companies have to face in that culture
or country. For example, a country where Secular-Rational values dominate, uncertainty
avoidance is low and the economy is stable, it is possibly easier to be an entrepreneur and
establish a start-up successfully.
But Hofstede’s (2001) methods should be used with caution: in their research Steel and Taras
(2010) found that culture can be a result of certain individual and national-level factors, not
culture determines these factors as most academics agree. Moreover, Hofstede’s (2001)
original work on cultural dimensions is not free from bias because he carried out research
based on only one company from the United States, IBM. Even though he investigated
employees from 70 countries, the company’s own culture and the fact that the original study is
almost 40 years old can be disfiguring factors from today’s aspect.
2.3 Linking culture and economy
The “Unified Framework” (Peng et al., 2009: 3; Peng and Meyer, 2013: 8) summarises the
external and internal factors which determine the success and failure of firms around the
globe.

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This framework has two big forces which drive companies: factors of the Institution-based
view and of the Resource-based-view. The former contains everything outside the
organizations’ boundaries, e.g. culture, political and legal environment, infrastructure, level of
industrial development and other given factors that cannot be changed. Peng and Meyer
(2013: 9) claim these are “the formal and informal rules of the game”. The latter is about the
firm-specific resources and capabilities that come from inside the company and over which
leaders have control. Of course, the two views cannot be separated absolutely as they are
strongly interdependent. Using this theoretical basis influences the research design. The
current study investigates the factors of the Institution-based view and their effects on the
internal elements of an organization.
2.4 Overview of industrial influences
2.4.1 Defining industry
In the case of high-tech industry also a definition needed first to build further theories upon.
According to Avnimelech and Teubal (2006), a new industry (e.g. biotech) is more than a
simple agglomeration of firms, as it facilitates specialization and the division of labour, and
through these a knowledge-based economic growth, whilst also involving greater stability. The
industry emergence model of Phaal et al. (2011: 12) and the industry life cycle model of
Klepper (1996) show various challenges companies must face when going through the
maturation process.
According to the different historical and developmental background among countries, the
current state of this process is different in every region. This difference influences the
challenges organizations must deal with and causes inequalities in growth prospects across
regions. Biotech and high-tech industries are hypercompetitive (De Wit and Meyer, 2010: 192)
and this requires high levels of responsiveness and specific organizational advantages, as the
environment is extremely volatile. In the view of Lumpkin and Dess (2001) being highly
proactive and responding immediately to opportunities is the key for companies in such
conditions.

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2.4.2 The three industry categories
Based on the Global Entrepreneurship Monitor (GEM) report from 2012, dividing economies
into three categories – Factor-Driven, Efficiency-Driven and Innovative-Driven – gives a more
precise picture of their relative industrial development level than the classic “Developing
countries – Developed countries” formula. In Table 2.1 in Appendix 2.3, differences between
countries from the same geographic region can be clearly seen.
With very few exceptions, this kind of categorisation is in parallel with the GDP per capita
rankings of the 2012-2013 Global Competitiveness Report (World Economic Forum, 2013:
384), where Innovative-Driven/Developed countries are followed by the other two groups. In
Efficiency-Driven Economies, institutional frames are given, but economies have not reach a
high potential yet, while in Factor-Driven Economies both factors are on low levels. The level of
economic development determines what kinds of industries are preferred in the region:
agriculture-intensive, labour-intensive or knowledge-based. (Powell and Snellman, 2004;
Djeflat, 2009) Table 2.1 in Appendix 2.3 shows GEM’s surveyed economies by geographic
region and economic development level.
2.4.3 Industrial and regional factors
Belgian public entities on federal and regional levels are preparing to make changes in key EU
policies to raise industrial competitiveness in the region (European Cluster Alliance, 2013: 1):
“A particular focus will be placed on an ambitious and pro-active European policy to sustain
clusters and cluster cooperation in a view to stimulate industrial innovation and face global
competition.” These actions can help European SMEs in the high-tech industries (biotech, web
entrepreneur start-ups, etc.) to get a boost and be the new engines of European growth in the
next decade. These plans are part of a “Third Industrial Revolution” (European Cluster Alliance,
2013: 1) that aims to make European production determinative worldwide through the
performance of cutting-edge companies by overcoming the so-called ‘European Paradox’,
described by Dosi, Llerena and Labini (2006). For scientific and industrial reasons, “EU
countries play a leading global role in terms of top-level scientific output, but lag behind in the
ability of converting this strength into wealth-generating innovations”, Dosi, Llerena and Labini
(2006: 1452) argue. More theories and information can be found about regional factors in
Appendix 2.4.

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Table 2.1
Identified factors which have a determining effect on industrial actors
1. Culture
2. Level of industrial development
3. Legal and societal framework
4. Regional innovation policies & support
5. Clusters in the region
6. Links to research institutions, universities
7. Recruitment of qualified personnel
8. Meeting & networking opportunities with other SME leaders
2.5 Leadership, culture and strategy
About leadership’s general role information can be found in Appendix 2.6. According to the
United States Air Force’s National Defense University (2013) and the studies of Shane (1992)
organizational culture has a crucial effect on leader’s strategic decisions. This is how cultural
factors can affect the direction and overall success of the company: while some leaders from
an individualistic background might favour profit-oriented, aggressive ways, others coming
from a collectivist environment might choose gentler growth and more service-orientation.
Dickson et al. (2012) also states that organizations’ strategic responsiveness is also dependent
on their culture.
The research results of McGrath and MacMillan (1992: 131) strengthen the view that
“entrepreneurs have persistent and characteristic values orientation, irrespective of the values
of their base culture.” In most countries, entrepreneurship is connected with high scores on
masculinity, power distance and individualism, while uncertainty avoidance points are low.
These factors can contribute to the evolution of regions that support entrepreneurial and
innovative activities by formulating industrial clusters, such as in the Silicon Valley. Further
theories can be found on leadership and culture in Appendix 2.7.

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2.6 Summary
The basic cultural differences accompanied by various industry structures across the world
cause large variances in the everyday operation of SMEs, even if they are quite similar in terms
of size, profitability, stability, maturity and geographical spread. This research aims to
investigate knowledge-intensive activity focused SME leaders’ challenges in the three types of
economies and determine whether these stem from cultural or industrial roots, as looking at
current studies, the basis of this is not unequivocal. Furthermore, this study intends to identify
the most determinant regional factors affecting the operation of these companies, to compare
these and then offer suggestions as to which regions are most appropriate for such business,
plus establish what could be done to make other regions more competitive.
2.7 Literature gap
Although there has been much research on the different elements of external and internal
environments have an effect on corporate culture, including industry events and
managerial/leadership issues in general, most of these findings were conducted several
decades ago and given the fast-paced nature of change in modern society, are potentially out-
of-date or focus on the challenges of MNCs. The effects of globalization have changed the
formal and informal rules of doing business in the last ca. 30 years (Peng and Meyer, 2013: 14),
so these findings should be viewed with precaution. The case of SMEs is different in many
terms from big companies as they seem to be more dependent on their external environment
and more fragile (Crutzen and Van Caillie, 2010: 26). The literature on managerial and
leadership issues in SMEs relating to cultural and industrial influences appears to be
underdeveloped at the moment. No literature could be found at the time of this research that
would give answer to the questions of this study.

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Chapter 3 - Methodology
3.1 Introduction
This chapter intends to summarise the steps of carrying out the project then demonstrate and
justify the methods used in the implementation of the research. The following pages introduce
the research attributes, the use of interviews, selection of respondents, access to sample and
the limitations.
3.2 Research attributes
The effect of cultural and industrial factors on leadership challenges that high-tech company
leaders face in a growing market was explored by inspecting the views of selected CEOs in the
three different types of economies identified by the GEM 2012 report, using primary research.
According to Wilson (2010), carrying out primary research is necessary when finding
appropriate data or accessing to data is not possible.
Influenced by the chosen theoretical basis called “Unified Framework” (Peng and Meyer, 2013:
9) to match with the topic, this research was “Qualitative” in design as based entirely on
interviews and has been implemented using the philosophy of “Interpretivism” that means
during the investigation the researcher had to adopt an empathetic stance by entering the
social world of the respondents and understanding issues from their aspect (Denzin and
Lincoln, 2011) while he remained in an “external” role as a university student. It was beneficial
because the respondents accepted the researcher’s objective viewpoint and independence
from the organisation which resulted in very honest answers and their daily challenges could
be deeper investigated. (Saunders, Lewis and Thornhill, 2012)
Getting straight and candid answers from the company leaders helped the apprehension of
their real situation and provided an insight to their activities. This study follows “deductive”
approach where the conclusion is derived logically from a set of premises and the conclusion is
true if all premises are true (Ketokivi and Mantere, 2010) while theoretical perspectives being
tested (Yin, 2009) what helps to make clear which one describes the situation of these leaders
best.

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Based on the categorization of Wilson (2010), the current type of research project is “Causal”,
because it aims to investigate the reasons behind challenges of high-tech company leaders,
while comparing the strength and the origins of the factors. At the same time, it contains some
“descriptive” elements as it gives a short comparison about the attributes of each economic
region based on the findings and theory. Its nature can be classified as “explanatory”, because
it studies a situation in order to explain the relationships between variables while its time
horizon is cross-sectional, providing a snapshot of the current conditions (Saunders, Lewis and
Thornhill, 2012). This was important to understand the relationships between variables such as
cultural environment, geographical location and level of industrial development.
“Grounded Theory was developed as a process to analyse, interpret and explain the meanings
that social actors construct to make sense of their everyday experiences in specific situations.”
(Saunders, Lewis and Thornhill, 2012) This is the reason why Grounded Theory method of
Charmaz (Saunders, Lewis and Thornhill, 2012: 568) was chosen as a research strategy: it fits
perfectly to explore the relationship between the influences of cultural and industrial factors
and leadership challenges.
3.3 Research instrument - Interviews
Wilson (2010) suggests that by using interviews the researcher can get an insight into the
attitudes and beliefs of the respondent. According to Robson (2011), based on the most
commonly used typology, interviews can be grouped as structured, semi-structured and
unstructured (in-depth). As qualitative research interviews the last two types are the most
common (King, 2004).
Blumberg et al (2008) state that by using semi-structured interviews the interviewer has a
bigger influence over the flow of the discussion because he/she can change the order of the
questions (or even rephrase/skip) based on the respondent’s answers and that provides higher
flexibility. At the same time, when answering open-ended questions the respondents are able
to say things more freely, in their own way while they have the chance to go deeper into some
details. By using this method, some previously unexpected information also could be obtained.
Moore (2006) also emphasizes the consequent and controllable nature of these kinds of
interviews. The aim was to get closer to deeper underlying reasons by obtaining rich, quality
data from what the researcher had to unpack and explore the final answers.

21
Due to the various reasons discussed above (insight to beliefs, flexibility of interviews, get
underlying information), conducting semi-structured interviews was the selected research
method for this study, as the direct guiding of respondents had to be avoided. Table 3.1 in
Appendix 3.1 summarises research attributes.
3.4 Selection of respondents and access
Access to respondents and data were reached “Internet-mediated” way. Their selection was
based on “Non-probability sampling” approach with “Self-selection”, “Snowball” and
“Convenience” sampling techniques aiming to reach 26 respondents which number is above
the 5-25 minimum recommended range for this type of study (Saunders, Lewis and Thornhill,
2012). According to Easterby-Smith et al (2008), researchers are more successful when having
a friend, relative or student working in the organisation.
All the responding company leaders were accessed through the use of existing contacts from
friends and colleagues. The reasons behind these choices were the non-availability of sampling
frame; the lack of need to make statistical inferences; the nature of the study (does not have
to represent the whole population); the difficulty of access to biotech/high-tech SME CEOs and
the easy identification of individual cases (Saunders, Lewis and Thornhill, 2012: 282). Table 3.2
in Appendix 3.2 contains the list of respondents.
Twenty-six companies have been selected for investigation, seventeen biotech/high-
tech/medical companies, five manufacturing/producing and four service organizations. The
collocation was based on the three different levels of economic development, defined by the
Global Entrepreneurship Monitor Global Report from 2012: Factor-Driven, Efficiency-Driven
and Innovative-Driven economies. The high percentage of biotech, high-tech and medical SME
leaders and their geographic spread was the result of the selected sampling method.
The selection process was related to economic observations too: in Innovative- and Efficiency
driven regions the institutional and infrastructural background is given for the successful
operation of high-tech SMEs, especially in bigger cities. Such a supportive environment can be
found in some Northern- and Western European hubs while Factor-Driven economies lacking
these centres which are more developed than usual in their own region.

22
Due to these differences high-tech firms are able to exist in such environments only with
serious constraints. To show a different aspects regarding the challenges faced, some
manufacturing and service companies were selected, which are matching in every other
criteria to the biotech/high-tech firms: with two exceptions small and middle-sized
organizations that are financially stable (even profitable) in the last three years and having
frequent buyers - meaning their activity is feasible. The other important aim was to represent
all three types of economies equally. This criterion has not been achieved as 11 respondents
were from Innovation-Driven Economies, 11 from Efficiency-Driven ones while only 4 from
Factor-Driven countries - this can be a limitation of the current research and will be discussed
further later. For details about implementation of interviews, administration and ethics please
see Appendix 3.3.
3.5 Research questions and analysis
Table 3.3 in Appendix 3.7 shows the arrangement of research questions and topics which
structure was followed in the Findings chapter of the study. The analysis principles were based
on the research attributes mentioned in section 3.2 and at the examination of collected data a
generic approach was followed, suggested by Saunders, Lewis and Thornhill (2012).
3.6 Limitations and data quality issues
3.6.1 Reliability
There are many factors that can cause distortion in data and divert reality. Reliability is
threatened by the lack of standardisation at semi-structured interviews as circumstances
change (Bryman, 2012), because this data collection method may prevent other researchers to
reveal similar results (Silverman, 2007). In this study the interview questions followed a given
order, but sometimes this had to change slightly to fit the momentary situation. In the view of
Bailey (2008) a measure is reliable only if it does not change over the duration of the studies.
However, as the small variances among interviews were coming from the nature of the
selected method and from different world views of respondents, this can be considered as
acceptable because generalisability of results was not the main goal of the study.

23
3.6.2 Bias
Another significant limitation comes from different types of bias (Saunders, Lewis and
Thornhill, 2012). In terms of interviewer bias the collected information could not be utilized in
full depth due to the inexperience of the researcher and time pressure. Participation bias could
be caused by the sample selection methods and the time horizon of the project while
interviewee bias also could not be fully excluded: language skills coupled with limited
understanding of the theories and terms could cause answers from the respondents which not
covered in total depth their real opinion. Table 3.1 shows the techniques (Saunders, Lewis and
Thornhill, 2012) which were used to overcome the mentioned forms of bias.
Table 3.1
Techniques to reduce bias
1. Thorough research about each company and respondent before the interview to ensure an
appropriate level of knowledge
2. Respondents got necessary amount information before the interview to be prepared, but they
didn’t know the questions
3. The researcher’s behaviour was right and attentive listening skills were demonstrated
4. Open, probing, specific and closed questions were used in a proper way, without leading questions
5. Data was fully and accurately recorded
3.6.3 Validity
According to Neuman (2012), when carrying out qualitative research most researchers are
aiming to create a close relation between their viewpoint and reality. In the current study
emphasis was placed on to reveal challenges, experiences and attitudes of high-tech SMEs
leaders in different economic environment then link them to theory. The lack of all detailed
interview transcripts (due to time constraints and the scope of the research) can be considered
as a limitation because not every valuable information piece could be used in the study to
match with theory – for example in some cases quoting word-by-word is a really effective way
to present the weight of an opinion, but due to scope constraints of this project results could
not be introduced in such detail.

24
3.6.4 Generalisability
Thomas (2009) argues generalisability means the degree to which the outcomes of a research
can be used to the adjustment of another one. To fulfil this criterion qualitative data from
various types of respondents were collected, aiming an equal geographic and characteristic
spread across the sample. The result is a research method which gave space for making some
generalisations, but with clear limits.
The main weakness of this study was the small sample size: investigating only high-tech and
biotech companies gives a very narrow insight about the dimensions of the topic, especially
when looking across three regions. For more details about the generaliasbility please see
Appendix 3.8. An extended, more detailed future study which has larger scope, longer time
horizon, accompanies with quantitative methods and uses bigger sample size could overcome
these limitations and be more representative.

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Chapter 4 - Findings and Discussion
4.1 Introduction
The first part of this chapter presents findings of the interviews conducted with SME leaders
across the three economy types. The data collection, allocation and analysis followed the
process described in the Methodology chapter and results are represented according to the
research questions. The second part contains the discussion where these results will be
analyzed to point out the underlying reasons, connect them to theory and answer the
identified/stated research questions. Due to the scope of this dissertation, its aims and word
count limits, this section will simply report on those findings that are directly related to the
identified research questions. However, a summary of each interview can be found in
Appendix 3.6 and key quotations from respondents relating to Culture, Industry and Regional
factors are presented in Appendix 4.2.
4.2 Topic 1 – The role of culture
4.2.1 Research Question 1
“To what extent do high-tech company leaders’ challenges come from a cultural base?”
The role of both national and company culture is strongly influential in all regions. Almost all
respondents marked culture as the root of their main challenges directly or indirectly. For
example, respondent O quoted Churchill: “Culture eats Strategy for breakfast.” The direct
influence of culture appears to come from the attitude and motivation of workers which is
strongly seems to be influenced by the indirect impression of national culture. Table 4.1 in
Appendix 4.1 shows organizational functions in order based on the extent to which culture
influences them, according to interview results.
As biotech and high-tech companies are pursuing knowledge-intensive activity and creating
solutions for a global market, they require highly educated people with relevant international
experience – this fact was confirmed by every interviewed leader from these fields. The
leaders of these companies, regardless their geographic location, reported easy
communication and teamwork among their colleagues while saw cultural differences rather
helpful than hindering.

26
Conversely, production and service company leaders think these differences are less
advantageous and are able to effect revenues more directly e.g. through work ethics
differences between employees or changes is buyers’ consumption behaviour.
Although culture is influential in every type of economy its effects vary. In the sample
interviewed, western and other more developed countries’ CEOs reported that national
culture and cultural differences affects them positively or neutrally, while leaders from less
developed regions said cultural issues have sometimes serious negative impact on their
business. In terms of change, only respondents from Factor-Driven economies and from
rapidly developing Efficiency-Driven ones reported perceptible cultural changes in the last
couple of years: suggesting that people and informal rules in all countries are becoming more
open and supportive towards private enterprises. Contrarily, in every investigated Innovation-
Driven country long-term fixedness presents in culture.
Another issue about culture in the sample was the acceptance of cutting-edge technology.
According to Respondent D (Austria) and Y (Vietnam), some people even a few investors do
not fully understand their new technology and they might afraid of using it despite it is proven
safe.
4.3 Topic 2 – The role of industry
“To what extent do high-tech company leaders’ challenges come from an industrial base?”
Industry and the level of industrial development appear to be less influential for leaders than
culture in every region; however, this affects the welfare and opportunities of the firms. Table
4.1 in Appendix 4.1 shows organizational functions in order based on the extent to industry
influences them, according to interview results. In Innovation-Driven economies industry
simply seems to provide a stable and reliable frame for businesses that gives advantage for
companies there, in Efficiency-Driven countries it is neutral and in Factor-Driven countries its
underdeveloped state is less constraining than expected. Generally, the complicated legal
framework and the unpredictable political background (which affects the industrial
environment) appear to be the only strong pressures in non-Innovation-Driven countries; weak
infrastructure is only at very poor places, like the Ukrainian countryside.

27
Access to cutting edge technology (what is vital in this industry) is ensured even in the poorest
regions, the only barrier can be the higher price due to taxes and other additional costs. In
well-developed regions, like Silicon Valley and the North-West of Europe industrial
development (and the regulatory environment what comes with it in the sample) provides an
ideal place to pursue knowledge-intensive businesses. As Respondent C mentioned, developed
economies have an atmosphere that affects people in a positive way and encourage them to
work well – much less administrative work and better genetics regulations can be found in
Western economies which respondents claim to concentrate on real biotech business issues.
In the sample interviewed, the presence of other biotech and high-tech firms is desired by the
local company leaders in every economy, as these improve business culture, create
partnerships and help to concentrate knowledge to deal with common problems. For these
reasons, clusters and technical hubs have been created in some cities to boost economy in the
region. In terms of their usefulness, there is no agreement among the investigated leaders.
4.4 Topic 3 – Regional factors
“Which regional factors are the most influential?”
Influencing power of regional factors
1 Regional innovation policies & support
2 Recruitment of qualified personnel
3 Culture
4 Level of industrial development
5 Legal & societal framework
6 Links to research institutions, universities
7 Meeting & networking opportunities with other SME leaders
8 Clusters in the region

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The ranking of regional factors in this table is the summary of all interviews’ results across all
economy types and also indicates the nature of a typical SME CEO’s everyday challenges. Due
to regional characteristics, this order is not the same everywhere. While in Hungary legal and
societal framework comes at first place, in Sweden and USA regional innovation policies &
support while the level of industrial development in Ukraine. In the sample interviewed,
recruitment of qualified personnel or culture stands at second place in every country, followed
by all remaining factors in various order. In China, according to those interviewed, an
additional factor is the growth rate of the biotech and high-tech sector which creates a huge
opportunity and pressure at the same time.
“To what extent do high-tech company leaders’ challenges determined by regional factors?”
In the sample, regional factors strongly influence leaders’ challenges directly or indirectly.
Regional innovation policies and support and the legal framework have the strongest direct
effect everywhere, except in Factor-Driven countries. In these less developed economies,
cultural effects seem to cause the most work for leaders through the high importance of
relationships, networking opportunities, politics, corruption, low levels of working culture, the
strong overlap between personal life and work life and the issue of recruiting qualified
personnel. Leaders from Factor-Driven economies have marked legal & societal framework
and the level of industrial development as a moderately hindering factor while clusters do not
exist. Financial issues stem from the uncertainties, but their importance varies in every country
in the sample.
In Hungary, which country gives most respondents among Efficiency-Driven economies in the
sample, taxation, administration and legal issues are the most challenging. Leaders report
having to make serious efforts to overcome financial hurdles (especially getting venture
capital) and struggling with human-related issues in these countries. Finding qualified,
appropriate personnel appears to be an obstacle in every region and can be a barrier of growth
at any of the investigated companies, but this issue is not a continuous problem a daily basis.

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“To what extent are these factors regionally determined?”
There was a huge difference among respondents in their own country’s or economic region’s
judgement. Innovation-Driven economies’ leaders could hardly mark a much better place for
their activity than the current one. Respondents mentioned most frequently Silicon Valley,
clusters in Germany or Sweden. Almost every Respondent from Efficiency-Driven economies
(China and Russia are the exceptions) also prefer these regions, but their answers were
immediate, and they followed by emphasizing the huge differences between their actual
locations – especially in Hungary. CEOs from the less developed countries report that they
would prefer to do business more in Dubai, counties of the Middle-East and Asia, while they
are aware of the possibilities elsewhere.
The reasoning of these answers from the respondents from the most developed countries was
clearly related to the advantages what the environment can provide there: stability,
predictability, closeness of other industrial actors, good legal framework or culture. In
Efficiency-Driven economies, especially in Hungary and Ukraine arguments were instable
regulatory environment, taxation and politics. In Factor-Driven economies (Palestine, Pakistan
and Vietnam) previous causes were accompanied by high levels of ambiguity, financial
instability and negative cultural impacts.
These factors appear to be strongly regionally determined, as most of them work within a
country’s borders. By changing the location of business activity, these probably can be tackled.
Nevertheless, no leader reported planning to relocate his company completely to earn the
benefits of a better environment – in general, these leaders said they would rather set up an
additional office or find business partners from that region. According to Respondent X from
Austria, despite many East-Asian and African countries are lacking a true innovative approach
and deep knowledge-base yet these will be the new centre of growth. In the sample
interviewed China is the only country which has a market and an economic growth rate that is
big enough to provide enough space when the business grows – all the other biotech and high-
tech leaders had global plans from the beginning.

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4.5 Discussion
4.5.1 The role of culture – Research Question 1
The results of this study largely agree with Hofstede (1997: 5) and his argument that culture
distinguishes nations. From the respondents’ answers, international differences can be clearly
seen and these variances truly affect the interviewed leaders’ challenges. For example, in this
sample, the general pessimism of Hungarian employees hinders business activity indirectly,
while the self-confidence of American ones could seriously help, according to most Hungarian
leaders.
The reason why cultural differences is said to be advantageous in knowledge-based SMEs
while they are said to be neutral or slightly hindering in production and service companies
appears to be related to values: each type of company prefers different ones. In this sample,
biotech and high-tech employees have international experience and are highly educated. They
talked about individualism, low uncertainty avoidance and low power distance because of the
nature of business requires these values – it was not the same in the other types or
organizations in this study. By the use of mixed teams and building international relationships
these drawbacks could be overcome and be used in an advantageous way.
The results of this study support Hofstede’s (1997) categorization of countries (Pyramid of
People, Well-Oiled Machine, Village Market, Family). For example, people of the Village
Market-type UK were said to be more flexible than those from Germany, a Well-Oiled
Machine. However, there was a difference in the entrepreneurial attitude of UK and US
nationals in this study, despite being in the same category.
The cause behind the positive attitude towards cultural differences in the examined leading
economies could be the openness and tolerance in the countries: these countries have high
secular-rational / self-expression points, while others in the sample, with less developed
economies have lower points (World Values Survey, 2013). “Liability of Outsidership” (Peng
and Meyer, 2013: 10), high uncertainty avoidance and low working culture are more common
in these countries.
Human-related issues had high importance to each leader interviewed, even at those for
whom their work was expected to be more technology-oriented. This could be due to the
double layers of culture (Hofstede, 2001 cited by Hollinshead, 2010: 31) presenting both inside
and outside the company. Via these layers culture affects whole national systems and their
(in)effective operation indirectly through the actions of individuals.

31
This might be the reason why culture is stronger than the effects of industry and this is the link
between culture and economy, the “Unified Framework” by Peng and Meyer (2013: 8).
Culture’s strength in leadership challenges is also supported by the theory of Byrne and
Bradley (2007: 173) arguing that a manager’s national culture is determinant in the success of
her/his business.
Interestingly, both the viewpoints of Oudenhoven (2001), Lewitt (1983) and of Laurent (1983:
91) seem to be true in the sample. Organizational cultures do seem to tend to converge, as
leaders reported similar things about the human issues of their own organization in every
country (mainly due to the high proportion of international workforce, according to most
biotech company leaders’ answers) – however, local culture is still influential and must be
taken into account. In cultural terms, the differences between big cities, clusters or other
technology hubs and the remaining part of the region can be related to the effect of the
developed environment what influences people’s life style, world view and historical
background.
Concerning changes, the economic growth of Efficiency- and Factor-Driven economies in the
sample is probably supported by the ability of local cultures to internalize change and support
new ways of doing business, while developed economies’ people are enjoying the safety of the
welfare environment - that is why they are not stimulated to change (and even follow
entrepreneurial attitudes as it means less safety). This kind of rigidity can be the reason why
people accept cutting-edge solutions slower, even though their economy is really developed.
4.5.2 The role of industry – Research Question 2
The opinion of Avnimelech and Teubal (2006) concerning the complexity and positive effects of
a knowledge-intensive industry (such as biotech or high-tech) appears to be true in this
sample. Although the effect of the local industrial environment is weaker than of culture, the
frame and stability that a well-developed industry can provide for a knowledge-based SME is
vital. This is why the supportive effect of local biotech and high-tech industry in Efficiency- and
Factor-Driven economies is not as important as in Innovation-Driven ones. Because of more
industrial actors and better opportunities companies there are more interdependent.
The eco-system that has emerged for example in Silicon Valley or in Northern-European
clusters is a system that most of the leaders of the examined companies would like to belong
to.

32
By supporting existing hubs and purposefully creating new ones with appropriate
infrastructures, countries might be able to boost their economic output in the long run.
However, as respondents from Palestine and Pakistan outlined, knowledge-based companies
might be able to exist in less advantageous environments too, because international trade
opportunities allow access to the technology needed.
The results of this study might lead to the deduction that political and legal framework can
determine the life cycle (Klepper, 1996) and the emergence (Phaal et al., 2011: 12) of an
industry by helping or obstructing the establishment and work of companies in that industry.
Due to this, there can be a big difference in high-tech or biotech industrial terms among
countries within the same type of economy – this sector is not preferred everywhere equally in
the sample, regardless the general industrial development of the country. This is another
reason why in industries where more companies from the same field are concentrated in a hub
can create a good place for that activity.
Knowledge-sharing, common work and better use of resources in order to reduce costs, raise
flexibility and responsiveness is easier this way which is important in a Hypercompetitive
industry (De Wit and Meyer, 2010: 192); all the company leaders investigated report using
these options when they are able to do so.
The disagreement on clusters’ usefulness is related to financial reasons: those who are not
part of a cluster claimed they would prefer to be in one, while leaders from, for example,
Swedish clusters reported that these systems do not provide sufficient enough financial
support.
4.5.3 Regional factors and leadership challenges – Research Questions 3, 4 and 5
The ranking of influencing regional factors might be related to the nature of biotech and high-
tech business. Regional innovation policies & support and recruiting qualified personnel are
issues which are reported to strongly determine the opportunities of a start-up which operates
with a few people with special knowledge, strongly relying on external funding and the
legislation which sets the barriers of their operation. These were common attributes of all the
investigated SMEs, especially in their early stages - this is the reason why these factors seem to
be the most determining.

33
Culture, the level of industrial development and legal & societal framework in this sample are
unique in every country, even though if there are overlaps or they are in the same economic
category. The supporting or hindering effects of these factors might be managed through
strategy and planning, that is why their influence seems lower. Links to research institutions
and networking with other SME leaders are rather opportunities to reach competitive
advantage than manipulating factors so their non-existence or weakness do not makes biotech
and high-tech focused work impossible.
The order of factors follows the characteristics and endowments of the country, which is why
they appear to be regionally determined. For example, the end of Soviet Union brought 20
years of growth in Eastern-Europe meaning fast development and a special form of western
capitalism. By selecting (or even changing) location purposefully the advantages caused by
regional factors can be used more effectively and the disadvantages can be reduced to some
extent.
This kind of transition can be executed more easily and quickly between countries that have
highly developed economic and regulatory system like members of the European Union or the
internal market on the United States. This is the next reason, why doing business in
Innovation-Driven economies seem to be more advantageous than in the other two types of
economies.
Based on the results of this study, the planned “Third Industrial Revolution” (European Cluster
Alliance, 2013: 1) appears to be a suitable way of overcoming the problem of EU countries
wealth-generating capabilities from scientific output, described by Dosi, Llerena and Labini
(2006: 1452). The prepared actions fit the requirements that the interviewed leaders
suggested.
In all Factor-Driven economies in the sample (Pakistan, Palestine and Vietnam), the
underdeveloped state of innovation policies, the sometimes instable political background and
the unreliable legal framework puts culture as the main determinant within the
sample/leaders interviewed. Culture can be what controls processes from behind in these
countries (based on the responses of leaders), not the prevailing institutional system. In the
more developed Efficiency-Driven economies these institutions are stronger and established
for more sophisticated control, but still not good enough to be arguably supportive for biotech
and high-tech activities. In such countries the legal and societal framework could be what sets
the limits for this kind of business.

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Innovation-Driven economies seem to have everything which is needed for balanced
knowledge-based business operation, but other economies do not appear to have this.
Culture, institutional background, legal environment, economic stability and positive industrial
effects present there. The main reason why a country in this economic category could be
better than another one is nature of regional innovation policies & support. If this latter factor
works well, everything is given to create an environment that is ideal for biotech and high-tech
SMEs.
The issue of finance in this sample is equally important everywhere as biotech and high-tech
requires huge amount of capital but include significant amount of ambiguity and risk. The
theory about a leader’s varying challenges by Muna and Khoury (2012) appears to be
supported by the results: these issues seem to always changing according to the current
surrounding environmental situation and the condition of her/his business.
Finding the suitable, supportive location appears to be crucial as the first three years are said
to be determinative in a company’s life and during this time the organization strongly depends
on external effects, as some leaders emphasized. The “worldly view” of Gosling and Mintzberg
(2003: 56) proves useful to see true differences between locations and use them with
advantage and understand people internationally – these elements seem to be important
because of the global scope of biotech and high-tech business.
According to Shane (1992: 31), cultural differences can seriously influence which countries are
better for example R&D activity – this theory was also supported by the interviews. The
characteristics of entrepreneurs (McGrath and MacMillan, 1992: 131) can be argued the
reason why specific locations, like Silicon Valley became the global centres of cutting-edge
innovation: in these places entrepreneurial values are dominant and they are fitting to the
established “rules of the game” (Peng and Meyer, 2013: 9).
Summarizing the studies of Vecchi and Brennan (2009), Hofstede (1984), Shane (1993) and
Hussler (2004) brought up the assumption that countries with low power distance,
individualism, femininity and low on uncertainty avoidance are ideal places for knowledge-
based start-ups. Such environments can be found in the Nordic economies, which appear truly
advantageous locations for biotech and high-tech SMEs, based on this study’s research results.

35
As Daft, Kendrick and Vershinina (2010) argued, a country’s growth is largely determined by
the risk-taking attitude of its inhabitants which supports economic growth. This could be the
reason why almost every respondent marked East-Asian and African countries as possible
relevant economic hubs in the future. Despite this, these countries seem to be lacking the
factors what more developed countries have; due to their ability to internalize changes rapidly
they could dramatically modify the current economic line-up of the world.
4.6 Limitations and recommendations for further research
Due to the scope of the research and time constraints, the results have some limitations.
Because of small sample size, the selection methods of respondents and their dispersion
among regions this study covers only a small selection of the global economy. To minimize the
distortive effect of these factors, only 1-2 respondents were selected from every country,
except Hungary. This eventuated in unequal distribution of respondents among Efficiency-
Driven economies in the sample.
Hungary’s role was special due to existing company contacts prior to the study which resulted
in high number of respondents that may have skewed some of the results. To make results
comparable, the same numbers of people were asked from Innovation-Driven and Efficiency-
Driven economies. Factor-Driven economies’ results are rather explanatory (being too general
and they are coming from three countries) because only four respondents could be found from
there, but give a reasonably good basis of comparison with the other two types.
With a very few exceptions, only high-tech and biotech company CEOs were asked so that
their answers could be measured against each other. Production and service firm leaders’
answers helped to suggest some previously unseen elements of the regions characteristics.
To get a broader view in future research, with a better comparison and more generalisability, it
would be necessary to conduct the study with a larger number of respondents (using more
statistical methods in the selection of the sample) and ensuring that all continents and every
economic region are represented within this. With the investigation of other industries and
bigger companies, valuable information could potentially be uncovered, especially when
comparing the results between regions and areas. The current study suggests the present
situation, but does not give information about the trends, preludes and future expectations.

36
Carrying out research with a longer time horizon would provide new and more accurate
findings. To get clearer results, personal characteristics and the disfiguring effect of cultural
differences (like the varying importance and influence of personal relationships when doing
business in each country) should be taken into account.
Appendix 4.1 contains information about additional ideas for further research that have
emerged during the interviews but are not closely related to the research topic. Due to the
scope of the study and issues related to the word count limit, these could not be discussed
here.

37
Chapter 5 - Conclusions and Recommendations
5.1 Introduction
This chapter aims to summarise the main conclusions that have been found by this research,
give answers to the research questions, provide logical recommendations regarding leaders’
challenges and regional factors when linking academic and managerial aspects then outline
areas for further investigation.
5.2 Conclusions
5.2.1 Culture
Research Question 1: “To what extent do high-tech company leaders’ challenges come from a
cultural base?”
Based on the results of this study, the influence of culture on biotech and high-tech SME
leaders’ challenges seems much stronger than the effects of the industrial environment. This
might be due to the duality of culture, presenting on both national (external) and company
culture (internal) level. Culture appears to be affecting the way political and legal systems
operate and to have a strong influence on the company’s opportunities in several other
indirect ways.
Conclusions on culture
Due to the high proportion of well-educated people in the biotech and high-tech industries
who have international experience (according to interviewed company leaders), cultural
differences are reported by the sample as advantageous in knowledge-intensive SMEs and
neutral or in a few cases disadvantageous in service or production companies in this sample. It
would seem that having mixed teams and using different cultures’ strengths purposefully
might give advantages to companies.

38
The research findings suggest that Factor- and Efficiency-Driven economies’ cultures may be
adapting and changing to internalize economic development and growth while most
Innovation-Driven economies’ culture appear to remain the same. However, it seems that
people are not always able to fully understand to accept the existence of cutting-edge
technology and its usefulness.
The level of entrepreneurial attitude seemed to affect the welfare of the investigated SMEs
indirectly through recognition of their work, support and recruitment issues. In cultural terms,
it would seem that huge differences may exist between big cities, clusters or other technology
hubs and the remaining part of the region.
5.2.2 Industry
Research Question 2: “To what extent do high-tech company leaders’ challenges come from an
industrial base?”
Industrial factors seem to be less influential than culture in this sample, but do appear to
have some influence over companies’ welfare, by contributing to providing a stable and
reliable frame for businesses in Innovation-Driven economies and having a neutral or slightly
hindering role in the other two, based on the interview results. However, these effects may
not put companies in Efficiency- and Factor-Driven economies in a much worse position, as
most of these do not appear to depend strongly on other regional industry members. Instead,
the disadvantages in these less developed economies appear to stem from regional factors.
Conclusions on industry
Knowledge hubs and technological clusters in more developed regions may be able to provide
an advantageous environment for high-tech and biotech companies because of the presenting
special eco-system. The targeted establishment of new, and the development of existing
centres seems to be beneficial in a longer time horizon for the region’s economy, but local
characteristics should be considered because they are related to the boundaries of
opportunities – not every action might work the same way everywhere.

39
Industrial factors appear to be influenced by culture indirectly and also cannot be separated
from the legal framework, political background and infrastructure in this sample. In terms of
industrial environment development levels, considerable inequalities can be found among
countries within the same type of economy that should be taken into account when doing
business internationally. The presence of more companies in one location reported to be
advantageous for existing organizations because of knowledge-sharing, common work and
better use of resources – competition is not an issue, as generally every company in high-tech
and biotech field has a global scope, leaders said.
5.2.3 Regional factors
Research Question 3: “Which regional factors are the most influential?”
Research Question 4: “To what extent do high-tech company leaders’ challenges determined
by regional factors?”
As investigated biotech and high-tech start-ups appear strongly dependent on funding
(according to the study results), regional innovation policies & support said to be the main
regional factors in influencing leaders’ challenges. Recruitment of qualified personnel also
seems to be a strong bottleneck in such company’s growth due to the specific knowledge
needed. These two factors are common in every region in the sample. The level of industrial
development, local culture and the legal & societal framework are also able to cause issues,
but this is typical only in Efficiency- and Factor-Driven countries in this sample. Other factors
also can help the investigated organizations (based on the interviews), but their non-existence
do not constrains high-tech and biotech SMEs’ operation directly. However, it would seem,
based on the results of this research, that economic stability and the political environment can
seriously affect future decisions of company leaders in every country.
Research Question 5: “To what extent are these factors regionally determined?”
Regional factors appear to strongly determine leaders’ challenges and their nature seems
differing in every type of economy and country – sometimes even within the country’s
borders. Table 5.1 below summarises the main influencing factors in each type of economy in
the sample.

40
Financial issues do not appear to conform to patterns as they are coming from the
uncertainties and the nature of the business (huge investment is needed, uncertainty is high,
accompanied by long period of return on investment, as mentioned by most of the leaders
interviewed). This is why financial issues seem equally important in every country and not
being shown in the table.
Table 5.1 Summary of influencing factors
Economy Main influencing factor
Factor-Driven Culture
Efficiency-Driven Legal & societal framework
Innovation-Driven Regional innovation policies & support
In comparison, Innovation-Driven economies appear to be the best places for biotech and
high-tech businesses, due to the mixture of appropriate culture, industrial environment,
policies and regulatory framework – those companies from the sample which are operating in
the most developed type of economy seem to have real advantages compared to those which
are not. Some specialized hubs provide extremely good opportunities but for a high cost,
respondents said.
There are a few locations in Efficiency-Driven economies which can be suitable accompanied
by clear relative disadvantages that might be mostly overcome through planning of the
company’s operation. Factor-Driven economies probably cannot make available a supportive
environment for such business activity at the moment, even though some businesses are able
to exist and grow under these hard circumstances. However, future economic trends might
dramatically change the current situation.
The examined literature about culture, industry and regional factors appeared to be in line
with the literature, providing a good theoretical basis for practical use in this research.

41
5.3 Recommendations
For biotech and high-tech company founders, these results would suggest it is advisable to
take more locations into account, when thinking about establishing a new company or
relocating the current one. Selecting a location based on the cultural, economic and regulatory
environment seems to offer a real potential to improve the efficiency of their business and
may give competitive advantage later. The costs possibly can be outweighed by future
benefits, for example when establishing a biotech research company in Austria as a Hungarian.
For those who are already leading a company, the results would suggest it is sensible to aim
at a global market with their developments and products, as the results of this study suggest
regional markets may quickly become too small. Establishing close international industrial
relations and building up a team of mixed nationalities may be the first steps towards that. By
having partnerships or subsidiaries in more developed economies, companies may be able to
gain some of the regional benefits of these areas too (e.g. spreading activities among sites in
Hungary, Germany and the UK based on regional factors of the countries).
To create knowledge-hubs in order to boost local economy purposefully, as in Silicon Valley,
the Singaporean or Nordic biotech and German automotive clusters decision-makers appear to
have to take many factors into account. Based on the research results, it seems necessary to
create a supportive environment and to identify and clear all bottlenecks at the same time.
Long-term governmental innovation policies would arguably prove beneficial together with a
suitable regulatory framework (which cannot be done without a stable political and economic
background) to establish an ideal ground for businesses.
The Hungarian Biotechnology Association (2008) created a detailed strategy model which
contains 22 points that cover every aspect of biotech companies’ support over their life cycle.
Together with the points mentioned earlier, it suggests providing subsidies, setting up biotech
incubators, organizing thematic biotech management trainings, enabling tax exemptions for
biotech companies and their employees, repatriating senior researchers from abroad,
increasing biotech education, promoting venture capital import and global marketing of local
biotech companies. The results of this study seem to support these points made by the
Hungarian Biotechnology Association.

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5.4 Areas for further research
No study is perfect (Saunders, Lewis and Thornhill, 2012), and this research has specific
limitations linked to time constraints and the scope of the study. The most significant one is
the small sample size. With an extended sample, selected on statistical grounds, covering more
countries and all three regions equally, more precise and comparable results could be
achieved.
Alternatively, it could be seen if the results are replicated in a series of studies, with each one
focusing on one sector inside one region. Including other industries and bigger organizations
also would lead to wider range of information and draw more general conclusions about
culture, industry and regional factors. This study gave a snapshot about the current situation
across the three types of economies. Following changes for a longer time with a larger sample
could uncover trends, preludes and future expectations on a global scale.
A leader’s challenges are always changing based on the prevailing economic circumstances and
the current condition of his company (based on the results), this is why carrying out a
longitudinal study would be beneficial. Furthermore, during the interviews new topics, ideas
for extending the current ones and non research-related but valuable information emerged,
like the role of personal characteristics and the disfiguring effect of cultural differences.
This could be the part of a further research, as due to time constraints and the scope of this
project, additional factors could not be explored in this dissertation. Further research
considering the issue of company strategy, changes in factors over time and leaders’ personal
traits would result in a deeper and fuller insight into challenges of these company leaders.
5.5 Closing remarks
Overall, the research project has met the original objectives and offered interesting answers to
the research questions. Additionally, it has broadened the researcher’s thinking about the
responsibilities, personal traits and lifestyle of a leader, formulating his personal viewpoint
about leadership challenges by getting a practical insight into these peoples’ lives. These
experiences seem to offer valuable extensions to existing academic knowledge and provided a
useful additional perspective to deepen the researcher’s interest in this direction in the future.

43
As we are living in a “VUCA-world” (Volatile, Uncertain, Complex and Ambiguous, according to
Respondent V from Russia), arguably there are no unique business model or leadership
patterns which will work successfully in all regions. There are however, clear regional
characteristics to be uncovered and explored. Learning more about these and using them
consciously may provide an SME leader a competitive advantage in a longer timeframe.

44
Appendix
2.1 Appendix
Bourgeois’ model
Bourgeois’ (1980) framework positions the industry in which the company operates in the
intermediate section which is the micro-environment of the companies within that industry.
These models’ layered view of the overall environment gives a logical frame to categorise and
see the relevance of the various elements which affect every organization and show both
meanings of culture. These models’ only drawback can be their static nature: due to the
effects of globalization the boundaries and distances got blurred nowadays and it is not always
clear what is inside and outside (e.g. in virtual organisations). Despite this small absence, these
models show that culture influences organizational life from inside and outside at the same
time.
Changes in culture
According to Oudenhoven (2001) and Lewitt (1983), globalization and internationalization lead
to a convergence in organizational cultures, while in other fields of life (religion or family)
changes come at a slower pace. Conversely, Laurent (1983: 91) state that organizations are
strongly linked to culture and the effective ways of managing them impends on the culture
involved, which means divergence and the lack of basic change over time, although academics
agree that cultures are not static. In their view, national cultures are able to change in some
aspects very slowly but they still keep their variegation. As organizational culture exists in a
more versatile environment and is formed by the organizations’ members, especially leaders
(Hillis, 2004) it can be formulated in a shorter time horizon. These theories are vital in order to
understand the aims of this research and evaluate the outcomes.

45
2.2 Appendix
Diagram 2.1 Cultural Map of the World
Source: World Values Survey (2013), The WVS Cultural Map of the World [Internet], Available
from: <http://www.worldvaluessurvey.org/wvs/articles/folder_published/article_base_54>
[Accessed 4 August 2013].

46
2.3 Appendix
Table 2.1 Economies by Geographic Region and Economic Development Level
Source: Global Entrepreneurship Monitor (2012: 20)

47
2.4 Appendix
Further details and theories about regional factors
Audretsch and Feldman (1996) emphasize that working in clusters helps only in the early
stages of companies’ activity to effectively support innovation locally. In the more mature
stages, too much geographic concentration can disperse innovative activity of the region. In
newly established regional innovation systems special needs and issues can occur, such as a
shortage of qualified personnel or the high importance of synchronizing activities with
research and higher education institutions. (Andersson and Karlsson, 2006: 77).
As the working document of the European Commission (2013) describes, there are many hubs
– especially in Northern and Western Europe - which provide services, infrastructure and
access to funding, bringing together various economic actors to exchange services and
cooperate. However, these initiatives can be successful only if companies are able to attract
investors and skilled people to whom entrepreneurial and risk-taking behaviour is vital. This is
the connection with culture: the findings of the Global Entrepreneurship Monitor (GEM 2007
Global Report results, cited by Daft, Kendrick and Vershinina, 2010: 203) show that in countries
with low GDP per capita levels, particularly in developing countries, more small businesses are
present than in most developed countries. These results come from economic pressure
(people must create a workplace for themselves) and the more risk-taking behaviour of the
society. The figures of the GEM (2012: 27) report show a significant difference between the
three economy types. A country’s growth is largely determined by the risk-taking attitude of its
inhabitants (Daft, Kendrick and Vershinina, 2010) which come mainly from cultural roots:
providing the legal and technical support to help any industry’s development is necessary but
not enough alone.
Both Keh, Nguyen and Ng (2007) and Li, Huang and Tsai (2009) also found evidence that
entrepreneurial orientation plays an important role in enhancing firm performance in both
direct and indirect ways. In the view of Steel and Taras (2010) personal characteristics (age,
gender, education, socio-economic status) and country characteristics (wealth and freedom)
are commonly responsible for cultural values on a national and individual level. However,
national averages poorly represent specific individuals. To get a less distorted view about
influencing cultural factors, information about the investigated companies’ national and
organizational culture should be collected and the personal characteristics of interviewees also
into account. Table 2.2 in Appendix 2.5 shows Early-Stage Entrepreneurial Activity Rates and
Per Capita GDP in 2007.

48
2.5 Appendix
Table 2.2 Early-Stage Entrepreneurial Activity Rates and Per Capita GDP in 2007
Source: Global Entrepreneurship Monitor (2007: 13)

49
2.6 Appendix
Defining leadership’s role
According to the European Monitoring Centre on Change (EMCC, 2004: 1), the word
“leadership” is Nordic in origin and means ‘one who sets directions’. A leader’s idealistic
picture is often mixed together with expectations from good managers; however, these two
ways of functioning slightly differs. Jackson and Parry (2011) state that problem solving and
progress monitoring belongs to managers while leaders develop visions and drive changes –
that is why not all managers can be considered as leaders and vice versa. In the case of CEOs
and other top company leaders, both of managerial and leader personal traits must present.
In their article Gosling and Mintzberg (2003: 56) argue that managers have to use five
perspectives to be successful (reflective, analytic, worldly, collaborative and action mind-sets).
This means they have to act as leaders at the same time as they carry out activities related to
their formal position. Following a “Worldly View” instead of simply a “Global” one (to avoid
over-simplification of differences) and using engaging, collaborative management patterns,
rather than classic heroic ones, are key points in leading an organisation while adapting to
circumstances. Muna and Khoury (2012) state that a leader’s challenges have various origins:
Political & Economic, Business & Labour and Social & Cultural. These categories contain
elements from both the Institution-based view and the Resource-based view. (Peng and
Meyer, 2013)
Byrne and Bradley (2007: 173) found that “a manager's national culture plays the dominant
role in the ultimate success of international and global business, through the mediation of
his/her cultural values on leadership style.” This is the proof of culture’s strong impact on daily
managerial issues while other employees of the firm are similarly driven by their cultural
characteristics. Hillis (2004: 1) states that while the establishment of cultural basics in the
organization’s early stages is the leaders’ task (“culture follows the leader”), later culture
creates leaders as the company matures.

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