by There are four categories of factors that impact entrepreneurship. These include economic development, culture, technological development and education. A strong and consistent growth of entrepreneurs may be observed in areas having these factors.
Emerging entrepreneurs may observe both positive and negative impact of these conditions. Positive influences constitute facilitative and conducive conditions for emergence of entrepreneurship, whereas negative influences create inhibiting milieu to the emergence of entrepreneurship.
Economic:
The most direct and immediate influence on entrepreneurship is witnessed through that of the economic environment in which it lives. This has a basis on the fact that a lot of people turn to become entrepreneurs in absence of suitable jobs or opportunities for them.
The economic factors affecting entrepreneurial growth are:
(i) Capital:
Availability of capital in adequate amount plays a significant role in setting up an enterprise. Increased capital investments in viable projects lead to increased profits which further accelerate the process of capital formation. Easy availability of funds from financial markets also promotes entrepreneurship.
It is ready capital at an entrepreneurs’ disposal which helps him to mobilize the required resources to undertake business activity. Capital is therefore, regarded as lubricant to the process of production. Countries like France and Russia have witnessed slower or negligible industrial growth due to non-availability of capital and thereby hampered growth of entrepreneurial process.
(ii) Labour:
Entrepreneurship is also affected by the availability of good quality human capital or the right type of workers. It is the quality of workers which is more important than that of quantity to affect the emergence and growth of entrepreneurship. Most of the developing or less-developed countries are labour abundant due to dense and even increasing population. But enterprises can develop only if they get mobile and flexible work force.
Hence, another problem area in case of human capital is labour immobility which can be tackled by provision of developed infrastructural facilities including efficient transportation. The potential advantages of low cost labour availability cannot be encashed due to their immobility. The considerations of economic and emotional security inhibit labour mobility. Hence, entrepreneurs have to face serious challenges to secure sufficient labour.
(iii) Raw Materials:
The necessity of raw materials hardly needs any emphasis to establish any industrial activity and its influence in the emergence of entrepreneurship. It is impossible to set up a unit or seek entrepreneurial development in absence of raw material. Raw material is an indispensable factor of production and its absence hinders the smooth functioning of industry and hence, negatively affect emergence of entrepreneurship.
In fact, the supply of raw materials is not influenced by themselves but becomes influential depending upon other opportunity conditions. The more favourable these conditions are, the more likely is the raw material to have its influence on entrepreneurial emergence.
(iv) Market:
Entrepreneurial growth and development are highly dependent on market conditions and marketing strategies. Entrepreneurs, in modern competitive world build upon their strong knowledge base about the market and various marketing techniques. It is the potential of the market that substantially determine the probable returns from entrepreneurial activities.
The act of production becomes meaningless without its consumption (i.e., marketing). Entrepreneurship is affected by both the size and composition of market. A product market set up in monopoly frame is more attractive to entrepreneurship process than that of competitive one. Though, a competitive market may be tackled to some extent by improving transportation facilities to promote free flow of raw material and finished goods, and increasing the demand for producer goods.
(v) Infrastructure:
A well-developed communication and transportation network is a pre-condition for expansion in entrepreneurship. It not only helps to enlarge the market, but expand the business horizons as well. For instance, the establishment of post and telegraph system and construction of roads and highways in India considerably promoted entrepreneurial activities.
Apart from these, a significant contribution is made by institutions like trade, business associations, business schools, libraries, etc. in sustaining and developing entrepreneurial activities in the economy.
Factor # 2. Social:
Social factors play a significant role in encouraging entrepreneurship. In fact we take up case study of industrial success in Europe, it is revealed that it was highly helpful society which contributed largely to bring about glorious industrial success in the country. The social settings in which the people grow, shapes their basic beliefs, values and norms.
Some of the important components of social environment are:
(i) Caste Factor:
Certain cultural practices and values evolve over hundreds of years and greatly influence the individuals’ personalities and actions. For instance, caste system in India divided Hindus in four divisions – the Brahmana (priest), the Kshatriya (warrior), the Vaishya (trade) and the Shudra (artisan).
This caste system also limited the social mobility of individuals. ‘Social mobility’ refers to freedom to move to a higher caste. Then, monopoly players of commercial activities were Vaishyas. Members of the other three Hindu varnas did not show interest in trade and commerce, even when India opened up and developed extensive commercial inter-relations with foreign countries. Dominance of certain ethnical groups in entrepreneurship is seen across the globe.
(ii) Family Background:
This factor includes size of family, type of family and economic status of family. In a study by Hadimani, it has been revealed that Zamindar family helped to gain access to political power and exhibit higher level of entrepreneurship.
Background of a family in manufacturing provided a source of industrial entrepreneurship. Occupational and social status of the family influenced mobility. There are certain circumstances where very few people would have to be venturesome.
For example, in a society where the joint family system is in vogue, those members of joint family who gain wealth by their hard work denied the opportunity to enjoy the fruits of their labor because they have to share their wealth with the other members of the family.
(iii) Education:
Education enables one to understand the outside world and equips him with the basic knowledge and skills to deal with day-to- day problems. In any society, the system of education has a significant role to play in inculcating entrepreneurial values.
In India, the system of education prior to the 20th century was based on religion. In this rigid system, critical and questioning attitudes towards society were discouraged. The caste system and the resultant occupational structure were reinforced by such education. It promoted the idea that business is not a respectable occupation.
Later, when the British came to our country, they introduced an education system, just to produce clerks and accountants for the East India Company, the base of such a system, as is well evident is very anti-entrepreneurial.
Our educational methods have not changed much even today. The emphasis is still on preparing students for standard jobs, rather than making them capable enough to stand on their feet.
(iv) Attitude of the Society:
A related aspect to these is the attitude of the society towards entrepreneurship. Certain societies encourage innovations and novelties, and thus approve entrepreneur’s actions and rewards like profits. Certain others do not tolerate changes and in such circumstances, entrepreneurship cannot take root and grow.
Similarly, some societies have an inherent dislike for any money-making activity. It is said, that in Russia, in the nineteenth century, the upper classes did not like entrepreneurs. For them, cultivating the land meant a good life. They believed that land belongs to God and its produce was nothing but God’s blessing. Russian folk-tales, proverbs and songs during this period carried the message that making wealth through business was not right.
(v) Cultural Value:
Motives impel men to action. Entrepreneurial growth requires proper motives like profit-making, acquisition of prestige and attainment of social status. Ambitious and talented men would take risks and innovate if these motives are strong. The strength of these motives depends upon the culture of the society.
If the culture is economically or monetarily oriented, entrepreneurship would be applauded and praised; wealth accumulation as a way of life would be appreciated. In the less developed countries, people are not economically motivated. Monetary incentives have relatively less attraction. People have ample opportunities of attaining social distinction by non-economic pursuits. Men with organizational abilities are, therefore, not dragged into business. They use their talents for non-economic end.
Factor # 3. Psychological:
Many entrepreneurial theorists have propounded theories of entrepreneurship that concentrate especially upon psychological factors.
These are as follows:
(i) Need Achievement:
The most important psychological theories of entrepreneurship were put forward in the early 1960s by David McClelland. According to McClelland, ‘need achievement’ is social motive to excel that tends to characterize successful entrepreneurs, especially when reinforced by cultural factors. He found that certain kind of people, especially those who became entrepreneurs, had this characteristic.
Moreover, some societies tend to reproduce a larger percentage of people with high ‘need achievement’ than other societies. McClelland attributed this to sociological factors. Differences among societies and individuals accounted for ‘need achievement’ being greater in some societies and less in certain others.
The theory states that people with high need-achievement are distinctive in several ways. They like to take risks and these risks stimulate them to greater effort. The theory identifies the factors that produce such people.
Initially McClelland attributed the role of parents, specially the mother, in mustering her son or daughter to be masterful and self-reliant. Later he put less emphasis on the parent-child relationship and gave more importance to social and cultural factors. He concluded that the ‘need achievement’ is conditioned more by social and cultural reinforcement rather than by parental influence and such related factors.
(ii) Withdrawal of Status Respect:
There are several other researchers who have tried to understand the psychological roots of entrepreneurship. One such individual is Everett Hagen who stresses the psychological consequences of social change. Hagen says, at some point many social groups experience a radical loss of status. Hagen attributed the withdrawal of status respect of a group to the genesis of entrepreneurship.
Hagen believes that the initial condition leading to eventual entrepreneurial behaviour is the loss of status by a group. He postulates that four types of events can produce status withdrawal – (a) the group may be displaced by force; (b) it may have its valued symbols denigrated; (c) it may drift into a situation of status inconsistency; and (d) it may not be accepted the expected status on migration in a new society.
(iii) Motives:
Other psychological theories of entrepreneurship stress the motives or goals of the entrepreneur. Cole is of the opinion that besides wealth, entrepreneurs seek power, prestige, security and service to society. Stepanek points particularly to non-monetary aspects such as independence, persons’ self-esteem, power and regard of the society.
On the same subject, Evans distinguishes motive by three kinds of entrepreneurs – (a) Managing entrepreneurs whose chief motive is security; (b) Innovating entrepreneurs, who are interested only in excitement; (c) Controlling entrepreneurs, who above all other motives, want power and authority.
Finally, Rostow has examined inter gradational changes in the families of entrepreneurs. He believes that the first generation seeks wealth, the second prestige and the third art and beauty.
(iv) Others:
Thomas Begley and David P.Boyd studied in detail the psychological roots of entrepreneurship in the mid-1980s.
They came to the conclusion that entrepreneurial attitudes based on psychological considerations have five dimensions –
(a) First came ‘need-achievement’ as described by McClelland. In all studies of successful entrepreneurs a high achievement orientation is invariably present;
(b) The second dimension that Begley and Boyd call ‘locus of control’. This means that the entrepreneur follows the idea that he can control his own life and is not influenced by factors like luck, fate and so on. Need-achievement logically people can control their own lives and are not influenced by external forces,
(c) The third dimension is the willingness to take risks. These two researchers have come to the conclusion that entrepreneurs who take moderate risks earn higher returns on their assets than those who take no risks at all or who take extravagant risks,
(d) Tolerance is the next dimension of this study. Very few decisions are made with complete information. So all business executives must, have a certain amount of tolerance for ambiguity,
(e) Finally, here is what psychologist call “Type A” behaviour. This is nothing but “a chronic, incessant struggle to achieve more and more in less and less of time”. Entrepreneurs are characterized by presence of “Type A” behaviour in all their endeavors.
