“The influence of cultural diversity on the performance of business startups in South Africa, with a specific focus on Johannesburg and Durban.”
Background and Rationale
Startup companies suggest new entrepreneurial ventures in seeking, developing, and validating scalable business models. Although startups are new ventures, they are intended to grow beyond the entrepreneur to become significant businesses (Cohen & Hochberg 2014). They also operate in diverse business environments, taking advantage of business opportunities (Thiel & Masters 2014; Spender, Corvello, Grimaldi & Rippa 2017; Sedláček & Sterk 2017). Startups face numerous challenges operating in a new business environment, especially during the modern age of cultural diversity (Olawale & Garwe 2010). Therefore, researchers focus on some of the issues that affect their businesses when they are beginning operation and growing in a new market (Paradkar, Knight & Hansen 2015). Regardless of the challenges, many firms begin as startups and succeed in their operations.
Tech companies are particularly on the rise due to the high demand for innovative solutions to business challenges (Bosch‐Sijtsema & Bosch 2015). They also select business environments that will contribute to their success, such as South Africa. Regardless of their choice of the industry and operating environment, one of the barriers they should overcome is cultural diversity since many are operating in a globalized and multicultural setting. Therefore, research should focus on the diversity issues that influence tech startups’ performance in countries like South Africa. Therefore, the study’s focus is on the performance of tech startups in South Africa amid cultural diversity. The focus is on Johannesburg and Durban, which are some of the most diverse states in the country (Booysen 2007; Kennedy 2019). Therefore, the study’s rationale is to establish how tech startups are experiencing and navigating through the diversity challenge to succeed beyond their startup phase.
The study is important since it will increase the body of knowledge in the relationship between cultural diversity and performance in tech startups. The study will allow the research to collect critical data to fill gaps in the current knowledge on the topic of the influence of cultural diversity on the performance of business startups. From the beginning, the researcher selected a topic that is inadequately researched to collect and analyze data to bridge the gaps. Besides, I am developing knowledge that I can transition from theory to practice in management. Therefore, besides contributing to the management theory, the study will support management practice and policy.
Consequently, managers can use evidence and best practice in business management to improve their business operations in startups. The project will also help me to develop critical thinking and problem-solving skills. The research process allows the researcher to pursue any area of interest and explore the topic in-depth to add to the current or create new knowledge. It will help managers to use the information to understand and manage cultural diversity in their market to grow and become more productive. Research shows that cultural diversity can have a positive effect on business performance if well managed (Nederveen Pieterse, Van Knippenberg & Van Dierendonck 2013; Ozgen, Peters, Niebuhr, Nijkamp & Poot 2014; Tröster, Mehra & van Knippenberg 2014).). Managers require the wisdom to lead theory companies well amid cultural diversity.
Capstone Project Rationale
I will consider taking a dissertation as my capstone route in this project. The primary focus of taking the route is to learn how to use various research methodologies to collect and analyze data to answer a research question. The researcher collects information and presents original findings to create an understanding of a specific phenomenon (Thomas, West & Rich 2016). Therefore, writing the dissertation aims to develop research skills and transition from having random ideas to developing them further to solve a research problem. I will develop and hone skills, such as communication, data collection, analysis, and presentation. I understand that contemporary employers are looking for individuals who can use their knowledge and creativity to help in solving business problems. Besides, writing a dissertation will allow me to pursue a topic that is interesting and appeals to my current business management interests.
Diversity is one of the essential factors in the management of organizations in developing and developed countries. The variable can be discussed in various realms, but the focus of the current research project is on the effect of cultural diversity on tech startups. Cultural diversity focuses on differences in terms of an individual’s background, such as race and ethnicity (Suedekum, Wolf & Blien 2014; Banks 2015). However, scholars also focus on diversity in terms of other forms, such as economic, gender, and age. The study on diversity is particularly important in the modern job market since countries experience racial polarization and multiculturalism (Brett, Behfar & Kern 2006). In this study, the business model focuses on the influence of diversity on entrepreneurial activities within a regional economy, particularly concerning the impact on startups. According to Brixy, Brunow, and D’Ambrosio (2017), startups experience cultural diversity challenges since they begin operations in a new cultural reality. Therefore, their success depends on their effectiveness in managing its business amid diversity.
Many companies begin their operations, focusing on a specific market and economy. Startups working in a diverse cultural environment could experience challenges, but the process is inevitable since the world has become increasingly multicultural (Adekola & Sergi 2016; Korzilius, Bücker & Beerlage 2017). The logic follows that entrepreneurs and management should understand the diversity and manage their organizations effectively to achieve organizational objectives (Kirton & Greene 2015; Barak 2016). Boudreaux (2020) suggests that small businesses are most likely to benefit from diversity since the management has a close connection with their employees and other stakeholders in the market (Kokt 2003). They differ from bigger businesses since they lack a close connection to the market and fail to capture diverse preferences. Boudreaux (2020) further used the Knowledge Spillover Theory of Entrepreneurship (KSTE) in examining the impact of diversity on new small businesses. Therefore, they should predict the role of diversity in their organization since it will have critical implications on their performance in their target market.
The Knowledge Spillover Theory of Entrepreneurship suggests that small startups are more likely than the larger incumbent firms to use new knowledge within the market. As a result, they are also more capable of responding to and capturing diversity in their target market (Plummer & Acs 2014; Ghio, Guerini, Lehmann & Rossi-Lamastra 2015; Braunerhjelm, Ding & Thulin 2018) However, the idea does not mean that they do not experience challenges working amid diversity. In some cases, they are likely to simplify the impact of diversity, which could negatively affect their performance. For example, companies that do not understand and manage diversity could experience serious conflicts that can affect their performance adversely. Therefore, they should understand the role of the idea of entrepreneurial discovery amid diversity to discover opportunities to improve their performance (Alvarez, Barney & Anderson 2013; Lin & Lasserre 2015; Lin, Lasserre, Rogoff, Foo & Liu 2015).). Effective management underlies the potential for small firms to serve the needs of diverse regions.
In emerging markets, Boudreaux (2020) suggests that companies experience the diversity that can either support or break their operations. They can serve the needs of their local markets, depending on how well they are prepared for the challenges. Successful entrepreneurs are capable of customizing their products and services to serve the needs of their diverse marketplace (Camilleri 2018). Diversity emerges in terms of the workforce and consumer requirements, which might be managed effectively to achieve business goals and objectives (Dastane & Eshegbe 2015; Dalluay & Jalagat 2016). Successful businesses are in tune with local culture, while those who lose the focus could fail to succeed in the market (Light and Dana 2013). The author further adds that successful startups can take advantage of diverse social capital for business purposes, making culture a critical element of their growth. After all, culture plays an essential role in the assessment of opportunities for commercial entrepreneurship.
Adequate literature reveals that diversity is an essential variable in business performance, depending on how the management manages it. According to Paradkar, Knight, and Hansen (2015), diversity enhances business performance if the management understands the art of operating using a diverse workforce and a diverse business environment. In the regional economy, cultural diversity also impacts performance since it increases productivity (Ager and Bruckner 2013; Ayega & Stephen 2018). For example, a diverse workforce can effectively meet the needs of a diverse business environment. Thus, startups can take advantage of diversity and a highly skilled workforce to operate successfully beyond their startup phase (Kemeny 2012; Ozgen et al., 2014, 2017; Joubert 2017). However, some studies have also revealed that diversity can also become a barrier to startups’ performance if the management fails to understand and manage it effectively.
Research points to a critical relationship between cultural diversity and the economic performance of different types of companies. Companies that improve their performance amid diversity provide a “cognitively differentiated” pool of innovative individuals with the capacity to solve problems (Cooke & Kemeny, 2017; Kemeny & Cooke 2017). For example, Hunt, Layton, and Prince (2015) argue that teams with people from diverse origins and cultural backgrounds are more innovative and capable of identifying solutions to severe challenges affecting their organizations.
Although current research identifies the importance of cultural diversity in the economic performance of companies, it fails to provide the framework to take advantage of the aspect to improve productivity. Startups could do with a model or blueprint for the effective management of diversity. Current research on cultural diversity and performance are general and focus on all organizations in all sectors across an economy, but not on a specific cluster of companies. Most studies only discuss the relationship between the variables but fail to provide the best practice in improving management practice amid diversity. Besides, the current research fails to provide adequate information about how cultural diversity acts as a barrier to innovation and performance outcomes in startups (Ijabadeniyi, Govender & Veerasamy 2015; Chigudu & Toerein 2018). Therefore, the current study will explore the influence of cultural diversity on startups in South Africa, which is a culturally diverse developing country.
Research Questions and Objectives
The study seeks to establish the influence of cultural diversity on the performance of business startups in South Africa. Thus, by the end of the process, the researcher will achieve the following objectives:
- To determine the cultural elements that influence business startups in South Africa.
- To analyze cultural diversity in tech-startups in Johannesburg and Durban.
- To explore the influence of cultural diversity on tech- startups in Johannesburg and Durban.
- To critically evaluate the techniques and approaches to embrace to succeed in a culturally diverse business environment.
The study will answer the following research questions drawn from the research objectives are:
- What are the cultural elements that influence business startups in South Africa?
- What are the aspects of cultural diversity in tech-startups in Johannesburg and Durban?
- What is the influence of cultural diversity on tech- startups in Johannesburg and Durban?
- What techniques and approaches can tech- startups Johannesburg and Durban embrace to succeed in a culturally diverse business environment?
The research methods section details the researcher’s intentions to collect and analyze data to achieve research objectives and answer research questions. It includes identifying participants for the study and the methods that the researcher will use to collect and data from them.
The researcher will use a mixed-method research approach by collecting data using survey questionnaires. A research strategy shows how the researcher is going to implement the study (). In the current researcher, data will be collected in the form of qualitative and quantitative evidence to achieve the study objectives. Quantitative data is numerical and objective (Goertzen 2017), while qualitative data involves the collection of data in narratives from participants’ natural settings (Silverman 2015). The choice of the mixed-method research approach is informed by the need to collect as much data as possible and to achieve each of the four objectives.
The study will also collect documentary evidence through a secondary research strategy. Primary data for the study will be obtained from a review of the literature addressing cultural elements and diversity in South Africa. The study will use a documentary analysis by reviewing documents to assess the arising cultural themes. Statistical findings will also be obtained from government reports, previous research, and conference proceedings.
Besides the secondary data, the study will collect primary data from a sample of participants. The participants for the study are the entrepreneurs and managers of startups located in Johannesburg and Durban. The study’s inclusion criteria are tech startups in Johannesburg and Durban, which means that any startups outside the setting will be excluded from the study. Furthermore, the startups to be included in the study must meet the three characteristics, as defined by the European Start-up Monitor. First, a startup must be in operation for less than ten years and then feature highly innovative technology firms or business models before finally achieving significant employee or sales growth (Kollmann et al. 2015). Therefore, any firms that do not meet the criteria will be excluded from the study.
The study will be conducted in Johannesburg and Durban as they are some of the most diverse cities in South Africa. Tech startups in the cities will be used as case studies for the survey. However, since it is impossible to research all startups, a sample of managers in five startups will be used. Sampling involves the choice of the most effective method to provide an appropriate sample (Omair 2014). The current project will use purposive sampling to identify relevant startups and collect data from their managers.
The researcher will collect data from participants using survey questionnaires. The survey is appropriate for the study since it will enable the researcher to collect statistical data to answer the research question, although the strategy has a limitation in that it denies the researcher a chance to probe participants for more profound insight. The data collection method will be suitable for the study as it focuses on the relationship between variables, cultural diversity, and performance (Jha 2014). The survey questionnaire will be sent to the participants through email. The email survey method’s selection has been significantly influenced by the financial implications and time available for completing data collection. The self-report questionnaire is appropriate for the study since it targets an educated and busy population. Therefore, the researcher should allow the participants’ time to complete the questionnaire at a convenient time. It will consist of different types of questions, such as a set of short, comprehensive, and easy-to-understand questions to collect comprehensive data from participants. The survey questionnaires will be open-ended to allow them to express themselves and discuss their responses in greater detail. The participants will provide deep insight to establish the challenges that tech-start-ups experience and how diversity influences the challenges in South Africa.
Research ethics are critical in the data collection to uphold the integrity of participants and their organizations. Therefore, the researcher will ensure that all ethical issues are considered and that he respects the participants. The study will uphold the highest ethical standards, including ensuring that ethical approval is obtained from relevant bodies, such as the ethical review board of the participating organizations and ensuring that researchers sign and informed consent. The researcher will comply with the University’s Code of Practice Ethical Standards for Research involving Human Participants. The researcher has completed and submitted the Ethics Review Form (See appendix for the form).
The study does not involve any psychological stress, and participants will be free to quit any time if they wish to do so. Petrova, Dewing, and Camilleri (2016) suggest the need for the privacy and confidentiality of information obtained from research participants. However, since the study aims at investigating the impact of cultural diversity on startups, it might lead to the sharing of confidential information, such as cultural-based bias or inequalities. As per the Economic and Social Research Council (ESRC) guidelines for research, the study will maximize the benefits of the research, while minimizing the risk of harm to respondents (ESRC 2015). Therefore, several precautionary Measures will be taken to ensure privacy and confidentiality. First, data will be collected anonymously. The researcher will not use real names of any other identifying information. Instead, they will be assigned a code for the study. Secondly, informed consent will be obtained before participation. Informed consent is an integral part of a research process, and Hardicre (2014) suggests that participants understand the purpose of the study and agree to participate without deception or coercion willingly. Therefore, the researcher will make sure that all participants have signed informed consent without financial inducements. The form will inform the participants of the purpose and nature of the research, their participation requirements, and the intended use of data. Thirdly, approved regulatory frameworks, such as the Data Protection Act, will inform the management of personal data and confidential information. The participants will be assured of confidentiality and anonymity. The data will be stored on a password-protected computer.
Access arrangements are also necessary to collect data from the participants. The researcher will seek permission from the management of the selected startups to gain access and collect data. The researcher will approach the management with a written request to collect data from the company’s employees and records.
Adekola, A and Sergi, BS 2016, Global business management: A cross-cultural perspective. Routledge, London
Ager, P & Bruckner. M 2013, ‘Cultural Diversity and Economic Growth: Evidence from the US during the Age of Mass Migration,’ European Economic Review vol. 64, pp.76-97.
Alvarez, SA, Barney, JB & Anderson P 2013, ‘Forming and exploiting opportunities: The implications of discovery and creation processes for entrepreneurial and organizational research,’ Organization Science, vol. 24, no. 1, pp. 301-317.
Ayega, E & Stephen, M 2018, ‘Critical review of literature on cultural diversity in the work place and organizational performance: A research agenda’, Journal of Human Resource Management, vol. 6, no. 1, pp. 9-17.
Banks, J.A., 2015. Cultural diversity and education: Foundations, curriculum, and teaching. Routledge, London
Barak, MEM 2016, Managing diversity: Toward a globally inclusive workplace. Sage Publications, London
Booysen L 2007, ‘Managing cultural diversity: A South African perspective, In Diversity in Africa (pp. 51-92). Palgrave Macmillan, London.
Bosch‐Sijtsema, P & Bosch, J 2015, ‘User involvement throughout the innovation process in high‐tech industries,’ Journal of Product Innovation Management, vol. 32, no. 5, pp.793-807.
Boudreaux, CJ 2020, ‘Ethnic diversity and small business venturing,’ Small Business Economics, vol. 54, no. 1, pp.25-41.
Braunerhjelm, P, Ding, D & Thulin, P 2018, ‘The knowledge spillover theory of intrapreneurship,’ Small business economics, vol. 51, no. 1, pp.1-30.
Brett, J, Behfar, K & Kern, MC 2006, ‘Managing multicultural teams,’ Harvard business review, vol. 84, no. 11, pp. 84-91
Brixy, U, Brunow, S & D’Ambrosio, A 2017, ‘Ethnic diversity in startups and its impact on innovation (No. 25/2017),’ IAB-Discussion Paper.
Camilleri, MA 2018, ‘Market segmentation, targeting and positioning,’ In Travel marketing, tourism economics and the airline product (pp. 69-83). Springer, Cham.
Chigudu, D & Toerein, DF 2018, ‘Strength in diversity: An opportunity for Africa’s development,’ Cogent Social Sciences, vol. 4, no. 1.
Cohen, S &Hochberg, YV 2014, ‘Accelerating startups: The seed accelerator phenomenon. Massachusetts Institute of Technology and NBER, Richmond
Cooke, A & Kemeny, T 2017, ‘Cities, immigrant diversity and complex problem solving,’ Research Policy vol. 46, pp. 1175-1185
Dalluay, V & Jalagat, R 2016, Cross-cultural management of culturally diverse workforce: A challenge facing managers in the global workplace, International Journal of Science and Research, vol. 5, no. 11, pp. 663-668.
Dastane, O & Eshegbe, JW, 2015, ‘Effect of diversity elements at workplace: An empirical study,’ International Journal of Accounting and Business Management, vol. 3, no. 1, pp.62-69.
Ghio, N, Guerini, M, Lehmann, EE & Rossi-Lamastra, C 2015. ‘The emergence of the knowledge spillover theory of entrepreneurship’, Small Business Economics, vol. 44, no. 1, pp.1-18.
Goertzen, MJ 2017, ‘Introduction to quantitative research and data,’ Library Technology Reports, vol. 53, no. 4, pp.12-18.
Grant, E 2006, ‘Human rights, cultural diversity and customary law in South Africa,’ Journal of African Law, vol. 50, no. 1, pp.2-23.
Hardicre J 2014, ‘Valid informed consent in research: An introduction’, British Journal of Nursing, vol. 23, no. 11, pp. 564-567.
Hunt, V, Layton, D &Prince, S 2015, ‘Diversity matters,’ McKinsey & Company, vol. 1, no. 1, pp.15-29.
Ijabadeniyi, A, Govender, JP & Veerasamy, D 2015, ‘The influence of cultural diversity on marketing communication: A case of Africans and Indians in Durban, South Africa’, International Journal of Economics and Business Research, vol. 1, no. 6, pp. 869-882.
Jha, AS 2014, Social research methods,Tata McGraw-Hill Education, . Delhi, India
Joubert, YT 2017, ‘Workplace diversity in South Africa: Its qualities and management, Journal of Psychology in Africa, vol. 27, no. 4, pp.367-371.
Kemeny, T 2012, ‘Cultural Diversity, Institutions, and Urban Economic Performance,’ Environment and Planning-Part A, vol. 44, pp. 2134-52
Kennedy, J 2019, 9 amazing startups from Johannesburg to watch, Siliconrepublic. Available from: <https://www.siliconrepublic.com/start-ups/johannesburg-tech-entrepreneurs-south-africa> [accessed 7 June 2020].
Kirton, G & Greene, AM 2015, The dynamics of managing diversity: A critical approach. Routledge. London
Kokt, D 2003, ‘The impact of cultural diversity on work team performance: A South‐African perspective,’ Team performance management: An international journal, vol. 9, no. 3, pp. 78-83
Kollmann, T, Stöckmann, C, Linstaedt, J & Kensbock, J 2015, European Start-up Monitor, ESM.
Korzilius, H, Bücker, JJ & Beerlage, S 2017, ‘Multiculturalism and innovative work behavior: The mediating role of cultural intelligence,’ International Journal of Intercultural Relations, vol. 56, pp.13-24.
Light, I & Dana, LP 2013, ‘Boundaries of social capital in entrepreneurship,’ Entrepreneurship Theory and Practice, vol. 37, no. 3, pp. 603-624
Lin, S & Lasserre, P 2015, ‘Entrepreneurship research amid transitional economies: domains and opportunities,’. Chinese Management Studies, vol. 3, no. 2
Lin, S, Lasserre, P, Rogoff, EG, Foo, CT & Liu, X 2015, ‘The effect of entrepreneurial context on the performance of new ventures’ Chinese Management Studies.
Nederveen Pieterse, A, Van Knippenberg, D & Van Dierendonck, D 2013, ‘Cultural diversity and team performance: The role of team member goal orientation,’ Academy of Management Journal, vol. 56, no. 3, pp. 782-804.
Olawale F & Garwe D 2010, ‘Obstacles to the growth of new SMEs in South Africa: A principal component analysis approach,’ African Journal of Business Management, vol. 4, no. 5, pp. 729-738.
Omair, A 2014, ‘Sample size estimation and sampling techniques for selecting a representative sample,’ Journal of health specialties, vol. 2, no. 4, p. 142
Ozgen, C, Nijkamp, P & Poot, J 2017, ‘The elusive effects of workplace diversity on innovation,’ Papers in Regional Science, vol. 96, pp. 29-49.
Ozgen, C, Peters, C, Niebuhr, A, Nijkamp P & Poot, J 2014, ‘Does Cultural Diversity of Migrant Employees Affect Innovation?’ International Migration Review, vol. 48, pp. 377-416.
Paradkar, A, Knight, J & Hansen, P 2015, ‘Innovation in startups: Ideas filling the void or ideas devoid of resources and capabilities?, Technovation, vol. 41, pp.1-10.
Petrova, E, Dewing, J & Camilleri, M, 2016, ‘Confidentiality in participatory research: Challenges from one study,’Nursing ethics, vol. 23, no. 4, pp.442-454.
Plummer, LA & Acs, ZJ 2014, ‘Localized competition in the knowledge spillover theory of entrepreneurship,’ Journal of Business Venturing, vol. 29, no. 1, pp.121-136.
Sedláček, P & Sterk, V 2017, ‘The growth potential of startups over the business cycle,’ American Economic Review, vol. 107, no. 10, pp. 3182-3210.
Silverman, D, 2015, Interpreting qualitative data. Sage, New York
Spender, JC, Corvello, V, Grimaldi, M & Rippa P 2017, ‘Startups and open innovation: a review of the literature’, European Journal of Innovation Management, vol. 2, no.3
Suedekum, J, Wolf, K & Blien, U 2014, ‘Cultural diversity and local labour markets,’ Regional Studies, vol. 48, no. 1, pp.173-191.
Thiel, PA & Masters, B 2014, Zero to one: Notes on startups, or how to build the future. Currency, South Wales
Thomas, RA, West, RE & Rich, P 2016, ‘Benefits, challenges, and perceptions of the multiple article dissertation format in instructional technology,’ Australasian Journal of Educational Technology, vol. 32, no. 2.
Tröster, C, Mehra, A & van Knippenberg, D 2014, ‘Structuring for team success: The interactive effects of network structure and cultural diversity on team potency and performance,’ Organizational Behavior and Human Decision Processes, vol. 124, no. 2, pp. 245-255.
|Project Plan – Critical Approach to Business||MONTHS|
|Task Name||Start||Finish||Duration||Percent Complete||Jul||Aug||Sep||Oct||Nov||Dec||Jan|
|Submit Proposal||Mon 06/Jul/20||Mon 06/Jul/20||1||0%|
|Literature Review||Wed 08/Jul/20||Wed 05/Aug/20||21||0%|
|Feedback on proposal||Thu 06/Aug/20||Tue 11/Aug/20||4||0%|
|Data collection||Sat 15/Aug/20||Tue 15-Sep-20||22||0%|
|Data analysis||Fri 25/Sep/20||Thu 15-Oct-20||15||0%|
|Full draft||Fri 23-Oct-20||Fri 20-Nov-20||21||0%|
|Submissions||Tue 01/Dec/20||Tue 01/Dec/20||1||0%|
Milestones are represented by diamonds. They include completion of the literature, receipt of feedback on proposal and submission.