Factors Affecting Entrepreneurship Growth - Introduction, Entrepreneurship & Small Businesses | Entrepreneurship & Small Businesses - B Com PDF Download

Factors Affecting Entrepreneurship Growth

There are large number of varied factors which contribute to the growth of entrepreneurship. These factors can be broadly classified into five.

Psychological Factors : - Inspiration for achievement prepares an entrepreneur to set higher goals and achieve them. The important psychological factors influencing entrepreneurial growth may be outlined as below:

(A) Need for Achievement: - Need for achievement means the drive to achieve a goal. People having need for achievement will be so much self – confident that they do not believe in mere luck. If an individual has need for achievement, he will become a successful entrepreneur.

(B) Personal Motives: - These have been found to be one of the crucial factors responsible for entrepreneurship amongst individuals. Bill Gates dreamt that one day he would become the richest person. His dream became a reality later.

(C) Recognition: - Many people become successful entrepreneurs just for getting recognition from others. 

(D) Need of Authority: - ‘Need of authority’ will inspire men to work. When they become entrepreneurs, they can exercise authority over managers, employees etc.

Cultural Factors : - Culture consists of

(1) Tangible man – made objects like furniture, buildings etc..,

(2). Intangible concepts like Laws, morals, knowledge etc..,

(3) Values and behaviour acceptable within the society.

The important cultural factors influencing entrepreneurial growth are briefly explained as follows:

(A) Culture: - Culture is closely related with accepted values and human behaviour. For e.g. some societies have customs of polygamy and some have not.

(B) Religious Belief: - According to Max Weber, entrepreneurism is a function of religious belief and the impact of religion shapes the entrepreneurial culture. He emphasized that the entrepreneurial energies are exogenous supplied by means of religious belief.

(C) Minority Groups: - Hoselitz explained that the supply of entrepreneurship is governed by cultural factors, and culturally minority groups are the spark plugs of entrepreneurial and economic development. Minority groups like the Jews and Greeks in Medieval Europe, the Lebanese in West Africa, the Indians in East Africa has important roles in promoting economic development.

(D) Spirit of Capitalism: - It guides the entrepreneur to engage in activities that can bring more and more profits. The profit motive character coupled with the attitude towards acquisition of money urges the individual to start new venture.

Social Factors : - What mould a man into an entrepreneur is the sociological and environmental factors during childhood, and at the school, personal experience in adult life at the college and job environments, the mobility, occupation and support from parents. The social factors include:

(A) Legitimacy of Entrepreneurship: - System of norms and values within a socio – cultural setting is responsible for the emergence of entrepreneurship. The degree of approval or disapproval granted to entrepreneurial behaviour will influence its emergence and its characteristics if it does emerge.

(B) Social Marginality: - Individuals or groups on the perimeter of a given social system or between two social systems provide the personnel to assume the entrepreneurial roles. Social marginality is likely to promote entrepreneurship are largely determined by two factors, namely the legitimacy of entrepreneurship and social mobility.

(C) Family, Role Models and Association with Similar Type of Individuals: - If an individual has a supportive family, he or she is more likely to become an entrepreneur. Similarly, if an individual has role models who have been successful in entrepreneurship, certainly, he may be motivated to start ventures. If a person is in association with entrepreneurs, this may add to his or her desire of setting up a new venture. Reliance, Tata, Birla etc. are the industries depend upon family based inheritance. Roberts (1991) has developed the idea of the ‘entrepreneurial heritage ‘ to describe the importance of the family background for the entrepreneur. This heritage includes factors such as the father’s occupation, the family work ethic and religion, family size and the first born son, growing up experience and so on.

(D) Caste System: - Certain religions and caste encourage the growth of entrepreneurial talent.
Some religious communities like the parsees, marwaris and sindhees seem to have an affinity for entrepreneurial activity. The caste system in Hindu society has promoted to the growth of business and professional skills.

(E) Occupation :- Those born in rich families with silver spoons in their mouth have not only an advantage of having financial resources for carrying out business but also learn the business skill by continuous interaction and contacts with parents, customers, employees and visitors in family shops, offices and homes.

(F) Education and Technical Qualifications: - Education is the best means of developing man’s resourcefulness which encompasses different dimensions of entrepreneurship. It may be expected that the high level of education may enable the entrepreneurs to exercise their entrepreneurial talent more efficiently and effectively.

(G) Social Status: - Every human being aspires for a high social status and once he achieves a reasonable level, his aspirations and desires for its start getting multiplied. People work hard to maintain their status as it also contributes to their entrepreneurial growth.

(H) Social Responsibility: - It is the obligation to the society in which the business enterprise operates. An entrepreneur generates employment for others besides helping himself.

Economic Factors : - Economic factors also influence the growth of entrepreneurship.

The important economic factors are:

(A)Infrastructural Facilities: - Entrepreneurship development requires certain basic infrastructure like power, transportation, communication, technical information etc. These provide external economies and improve the efficiency of investments by entrepreneurs. These infrastructural facilities are scarce in less developed countries. The entrepreneurs themselves have to procure these facilities at their own cost. They have to obtain these facilities at higher costs.
This will greatly discourage the entrepreneurship development. In advanced countries, those who are desirous of starting an enterprise will find no difficulty in procuring the infrastructural facilities at reasonable costs.

(B) Financial Resources: - Finance is the life blood of business activity. Capital is required to obtain materials, machinery, equipment, etc. and to undertake innovation. Capital is regarded as lubricant to the process of production. The lack of financial resources discourages the youth and potential entrepreneurs to start new ventures. Hence, the need for fixed and working capital should be adequately met if new entrepreneurs are to come forward and grow.

(C) Availability of Material and Know – How: - Entrepreneurship is encouraged only if there is an adequate supply of materials and know- how. Easy availability of materials attracts more individuals towards entrepreneurship. Technical know-how is essential for innovation. With technical knowledge, men discover more and sophisticated techniques of production.

(D) Labour Conditions: - The quality rather than quantity of labour is another factor which influences the emergence and growth of entrepreneurship. The availability of cheep labour positively affects entrepreneurship. Labour problem can be solved not by capital intensive technologies but by increasing their mobility, by offering them facilities, incentives and concessions in every remote corner of the country.

(E) Market: - The size and composition of market influence entrepreneurship in their own ways.
Practically, monopoly in a particular product in a market becomes more influential for entrepreneurship than a competitive market.

(F) Support System: - Ability, initiative and support systems include financial and commercial institutions, research, training, consultancy services, ancillary industry etc. 

(G) Government Policy: - The socio- political and economic policies of the government inhibit or foster entrepreneurial growth. Land and factory sheds at concessional rates, adequate sources of power, supply of materials and other physical facilities should be provided by the government to facilitate the setting up of new enterprises. The government has a dominant role to play in the industrial development of backward regions with a view to attain a balanced regional development.

Personality Factors : - The supply of entrepreneurship in a society is largely influenced by the presence of individuals with the initiativeness, foresightedness and organizing and managerial competence. The following personality factors contribute to the entrepreneurial development:

(A). Personality: - The entrepreneurial personality comprises of the person, his skills, styles and motives. Impressive personality and individual skill help to develop entrepreneurship. These qualities are required for entrepreneurs because they have to work with officers, managers, engineers, labourers, customers, investors, govt. officers, ministers etc.

(B). Independence:- Another personality factors which influences entrepreneurship is independence. An entrepreneur works out plans on his own, searches and explores resources and experiences and uses inner urge to make the enterprise a success instead of waiting for suggestions or directions from others.

(C). Compulsion: - Certain compelling reasons also force the people to become entrepreneurs.
These include: (a) unemployment or dissatisfaction with existing job or occupation, (b) to use technical or professional knowledge and skills, (c) to put the idle funds to use. A large number of technically qualified people after gaining initial experience and confidence and not being satisfied by their growth in the profession have a compulsive reason to try entrepreneurship.