Key Factors Affecting Entrepreneurship Development


Key Factors Affecting Entrepreneurship Development

Entrepreneurship is influenced by four factors: economic development, culture, technological development and education. Regions that have these factors can expect strong and sustainable business growth. These conditions can have both positive and negative effects on the emergence of entrepreneurship.

Positive influences create favorable conditions and favorable conditions for the emergence of entrepreneurship, while negative influences create an environment that hinders the emergence of entrepreneurship.

Let's take a closer look at each.


Here are the Key Factors Affecting Entrepreneurship Development

Key Factors Affecting Entrepreneurship Development

• Economic Factors Affecting Entrepreneurship Development

The economic environment has the most immediate and direct impact on entrepreneurship. This is probably because people become entrepreneurs out of necessity or opportunity when they do not have another job available.

Economic factors influencing the growth of entrepreneurship:

1. Capital:

Capital is one of the important factors of production in business creation. Increased capital investment in viable projects leads to increased income, which helps accelerate capital formation. Business activity is gaining momentum due to the availability of financial resources for investment.

The existence of capital allows entrepreneurs to combine and combine someone else's land, someone else's machinery, someone else's raw materials to produce goods.

Therefore, capital is seen as a lubricant in the production process. France and Russia show how the lack of capital for industrial activity hindered the entrepreneurial process and contributed to the provision of adequate capital.

 2. Labor:

Easy access to suitable employees also influences entrepreneurship. The emergence and growth of entrepreneurship is influenced by the quality of work, not its quantity. 

The problem of labor mobility can be solved by providing infrastructure facilities such as efficient transportation. Another factor affecting the emergence of entrepreneurship is not the quantity of work, but the quality of the work force.

Most developed countries have an abundant labor force because they have high population densities and growing populations. However, having a highly mobile and flexible workforce encourages entrepreneurship. And the potential benefits of cheap labor are tempered by the harmful effects of labor immobility. 

Considerations of economic and emotional security impede labor mobility. Therefore, entrepreneurs often find it difficult to secure a sufficient workforce.

 3. Raw Materials:

There is no need to emphasize the need for raw materials for the creation of industrial activity and its impact on the emergence of entrepreneurship. Without raw materials, the business or start-up is impossible. It is one of the main ingredients needed for production. 

The lack of raw materials can have a negative impact on the business environment. Without sufficient supply of raw materials, no industry can function properly, which also has a negative impact on the creation of entrepreneurship.

In reality, the supply of raw materials does not affect itself, but is influenced by other conditions of opportunity. The more favorable these conditions are, the more likely the product will have an impact on the creation of entrepreneurs.

 4. Market

Markets and marketing have a huge role and importance in the growth of entrepreneurship. 

In today's highly competitive world, no entrepreneur can survive without up-to-date market knowledge and various marketing techniques. It's true that market potential is a major factor in determining potential compensation for an entrepreneurial role. 

To put it plainly, if the proof of the pudding is in the eating, the proof of the whole production is in the consumption, that is, in the marketing. Both market size and composition influence entrepreneurship.

In fact, a monopoly on a particular product in one market has a greater impact on a business than in a competitive market. However, the shortcomings of a competitive market can be overcome to some extent by improving the transportation system, which facilitates the movement of raw materials and finished products and increases the demand for industrial products.

5. Social Amenities

The expansion of entrepreneurship presupposes the availability of well-developed communication and transportation facilities. This not only expands the market but also broadens the business horizons. 

Take for example the construction of India's telegraph system and the construction of roads and highways. This stimulated significant entrepreneurial activity that occurred in the 1850s. 

In addition to the above factors, trade/business associations, business schools, libraries and other institutions also have valuable contributions to the development and support of entrepreneurship in the economy. 

You can collect any information you want from these organizations. It also serves as a platform for communication and joint action.


• Social Factors Affecting Entrepreneurship Development

Social factors can play an important role in encouraging entrepreneurship. In fact, it was a very beneficial society that made the European industrial revolution a huge success. It has a strong impact on entrepreneurial behavior that promotes entrepreneurial growth.

The social environment in which people grow up shapes their basic beliefs, values ​​and norms.

The main components of the social environment are:

1. The Caste Factor

Every society has certain customs and cultural values ​​that influence individual behavior. These practices and values ​​have evolved over hundreds of years. For example, consider the caste system (varna system) of Indian Hinduism. He divided people into four groups based on caste.

It also defined the limits of social mobility for individuals such as Brahmanas (priests), Kshatriyas (warriors), Vaisyas (traders) and Shudras (artisans). Social mobility means the freedom to move from one caste to another.

The caste system does not allow a person born like Sridra to rise to a higher caste. Commercial activities thus became the monopoly of the Baishyas. The other members of Sevarna in India were not interested in trade and commerce, even though India had extensive trade links with many other countries.

The dominance of certain ethnic groups in entrepreneurship is a global phenomenon.

2. Family

Definition These factors include family size, family type, and family economic status. A study by Khadimani found that zamindar families contributed to the acquisition of political power and exhibited high levels of entrepreneurship.

Families involved in industry were the source of industrial entrepreneurship. Mobility was influenced by the professional and social status of the family. There are situations where very few people need to take risks. 

For example, in a society where the joint family system is prevalent, the members of the joint family work hard to earn wealth but are deprived of the opportunity to enjoy the fruits of their labor because they have to share the wealth with other members. of the community.

3. Education

Education enables a person to acquire basic knowledge and skills to understand the outside world and deal with everyday problems. The education system plays an important role in instilling entrepreneurial values ​​in any society. 

Until the 20th century, India's education system was based on religion. In this frozen system, critical and skeptical views of society are blocked. Through such knowledge, the caste system and related occupational structures were consolidated. He promoted the idea that business was not a respectable profession.

Later, the British came to our country and introduced the education system of the East India Company, producing only clerks and accountants.

As you can clearly see, the basis of such a system is very anti-entrepreneurship. Our teaching methods have not changed much today. Until now, the focus has been on preparing students for full-time jobs rather than helping them get back on their feet.

4. Community Perspective

A related aspect is society's attitude towards entrepreneurship. Some societies encourage innovation and discovery by supporting entrepreneurial activity and rewards such as profits. Some people do not tolerate change, and in such situations, entrepreneurship cannot take root and grow.

Also, some societies abhor all attempts to make money. It is said that in 19th century Russia, the upper class did not like businessmen. Agriculture means a better life for them. 

They believed that the earth belonged to God and that the fruits of the earth were God's blessings. Russian folk tales, proverbs and songs from this era talk about the mistake of getting rich through business.

5. Culture

Value motivation drives people to action. Entrepreneurial growth requires good incentives such as profit, reputation and social status. Ambitious and talented people will take risks if this motivation is strong. The strength of these motivations depends on the culture of the society. 

If the culture is economic or money-centric, entrepreneurship will be welcomed and praised. The accumulation of wealth is valued as a way of life. In developed countries, people lack economic motivation.

Financial incentives are relatively unattractive. People have ample opportunities to achieve social differentiation through non-economic activities. Therefore, men with organizational skills are not attracted to the business world. They use their talents for non-economic purposes.


• Psychological Factors Affecting Entrepreneurship Development

Many entrepreneurship theorists have advanced entrepreneurship theories that focus mainly on psychological factors.

It is as follows:

1. Need Achievement

The main psychological theory of entrepreneurship was proposed by David McClelland in the early 1960s. According to McClelland, the need for achievement is a social drive for achievement that characterizes successful entrepreneurs, especially when reinforced by cultural factors. He found that some types of people have these traits, especially those who become entrepreneurs.

Furthermore, some societies tend to have higher proportions of people with high "needs for performance" than others. McClelland attributed this to sociological factors. Differences between societies and individuals mean that some societies have higher "productivity of needs" and others do not.

In theory, people with a need for achievement are different in many ways. They like to take risks, and those risks motivate them to do more.

The theory identifies the factors that create such people. Initially, McClelland addressed the role of parents, particularly mothers, in raising their sons or daughters to be competent and independent. Later he placed less emphasis on parent-child relationships and more on social and cultural factors.

He concluded that "need realization" is determined by social and cultural reinforcement rather than parental influence or similar factors.

2. Cancellation Status

There are other researchers who have tried to understand the psychological roots of esteem entrepreneurship. One such person is Everett Hagen, who emphasizes the psychological consequences of social change. According to Hagen, most social groups lose their status completely at some point. Hagen associated the elimination of group status with the emergence of entrepreneurship.

Hage argues that the initial situation that ultimately leads to entrepreneurial behavior is the loss of group status.

According to him, four different events can cause the condition to go away.

i. Groups can be forced to leave.

ii. Perhaps that precious symbol has been desecrated.

iii. You may find yourself in a state of discord.

iv. The expected migration situation may not be accepted in the new society.

3. Motivation

Other psychological theories of entrepreneurship emphasize the entrepreneur's motivation or goals. Cole believes that in addition to wealth, entrepreneurs seek power, prestige, security and community service. Stepanek mainly focuses on non-monetary aspects such as independence, self-esteem, power and reputation in society.

 On the same theme, Evans distinguishes between the motivations of three types of entrepreneurs:

i. Entrepreneurial management with security as the main motivation.

ii. Innovative entrepreneurs who only care about having fun.

iii. A controlling businessman first, who wants power and authority. Finally, Rostow considered changes between classes in entrepreneurial families. It is believed that the first generation pursues wealth, the second generation pursues fame, and the third generation pursues art and beauty.


Others Factors Affecting Entrepreneurship Development

Thomas Bagley and David P. Boyd explored the psychological roots of entrepreneurship in detail in the mid-1980s. They concluded that there are five dimensions of entrepreneurial attitudes based on psychological considerations.

First came what McClelland described as the "necessary approach." A performance orientation is always present in any study of successful entrepreneurs.

The second dimension is what Begley and Boyd call "locus of control." This businessman can control his life, control his luck, destiny, etc. This means that it adheres to the idea that it is not influenced by factors. Need satisfaction logically means that people have control over their lives and are not influenced by external forces.

The third dimension is willingness to take risks. These two researchers concluded that entrepreneurs who take moderate risks earn higher returns on their assets than non-risk-takers or excessive risk-takers.

Fourthly, Tolerance is the next dimension of this study. Decisions are rarely made based on detailed information. Therefore, every business leader must have a certain tolerance for ambiguity.

Finally, psychologists call "Type A" behavior. This "chronic and continuous struggle continues in time."Entrepreneurs related to the "quadrant" behavior of all efforts.


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