Factors impacting emergence of Entrepreneurship
Various researchers world over have identified the factors that contribute to the development of entrepreneurship. Economists agree that the lack of entrepreneurs is not caused by economic conditions alone. It is also due to the whole set of socio-cultural and institutional environment prevailing in the less developed countries. Various environmental factors influencing the entrepreneurship are as follows:
I. Economic Factors
Economic environment exercises the most direct and immediate influence on entrepreneurship. The economic factors that affect the growth of entrepreneurship are the following:
Capital is one of the most important perquisites to establish an enterprise. Availability of capital facilitates is required to purchase the land, machine and raw material for producing goods. Capital is therefore, regarded as lubricant to the process of production. Our accumulated experience suggests that with an increase in capital investment, capital-output ratio also tends to increase. This results in increase in profit, which ultimately goes to capital formation. This suggests that as capital supply increases, entrepreneurship also increases.
The quality rather quantity of labor is another factor, which influences the emergence of entrepreneurship. Most less developed countries are labor rich nations owing to a dense and even increasing population. But entrepreneurship is encouraged if there is a mobile and flexible labor force. And, the potential advantages of low-cost labor are regulated by the deleterious effects of labor immobility. The considerations of economic and emotional security inhibit labor mobility. Entrepreneurs, therefore, often find difficulty to secure sufficient labor. They are forced to make elaborate and costly, arrangements to recruit the necessary labor. It can be dealt by utilizing labor-intensive methods like Japan. In contrast, the disadvantage of high-cost labor can be modified by introduction of labor-saving innovations as was done in US.
3. Raw Materials
The availability of raw materials is very important for establishing any industrial activity. In the absence of raw materials, neither any enterprise can be established nor can an entrepreneur be emerged.
The fact remains that the potential of the market constitutes the major determinant of probable rewards from entrepreneurial function.. The size and composition of market both influence entrepreneurship in their own ways. Practically, monopoly in a particular product in a market becomes more influential for entrepreneurship than a competitive market. However, the disadvantage of a competitive market can be cancelled to some extent by improvement in transportation system facilitating the movement of raw material and finished goods, and increasing the demand for producer goods. Whether or not the market is expanding and the rate at which it is expanding are the most significant characteristics of the market for entrepreneurial emergence.
Expansion of entrepreneurship depends upon properly developed communication and transportation facilities. It not only helps to enlarge the market, but expand the horizons of business too. Take for instance, the establishment of post and telegraph system and construction of roads and highways in India. It helped considerable entrepreneurial activities, which took place in the 1850s. Apart from the above factors, institutions like trade/ business associations, business schools, libraries, etc. also make valuable contribution towards promoting and sustaining entrepreneurship’ in the economy. You can gather all the information you want from these bodies. They also act as a forum for communication and joint action. In the fast changing world of business, entrepreneurs have to move-collectively in order to be more effective and more efficient. They need to constantly check and influence the Government’s thinking and decision-making.
II. Social Factors
Social factors can go a long way in encouraging entrepreneurship. In fact it was the highly helpful society that made the industrial revolution a glorious success in Europe. The main components of social environment are as follows:
- Caste Factor
There are certain cultural practices and values in every society which influence the actions of individuals. These practices and value have evolved over hundred of years. For instance, consider the caste system (the varna system) among the Hindus in India. It has divided the population on the basis of caste into four divisions. The Brahmana (priest), the Kshatriya (warrior), the Vaishya (trade) and the Shudra (artisan): It has also defined limits to the social mobility of individuals. By social mobility we mean the freedom to move from one caste to another. The caste system does not permit an individual who is born a Shudra to move to a higher caste. Thus, commercial activities were the monopoly of the Vaishyas. Members of the three other Hindu Varnas did not become interested in trade and commence, even when India had extensive commercial inter-relations with many foreign countries. Dominance of certain ethnical groups in entrepreneurship is a global phenomenon. The protestant ethics in the west, the Sammurai in Japan, the trading classes in US and the family business concerns of France have distinguished themselves as entrepreneurs.
2. Family background
This factor includes size of family, type of family and economic status of family. 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.