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Factors Influencing Entrepreneurship

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The emergence of entrepreneurship is not spontaneous. It is influenced by various environmental factors. In other words it is dependent upon economic, social, cultural, political and psychological factors. These environmental factors have both positive and negative influences on the emergence and development of entrepreneurship. Positive factors favourably affect and the negative factor oppositely affects entrepreneurship.

Various economic, social, political, technological and psychological factors are responsible for the emergence and growth of entrepreneurship.

All these examples clearly highlight the fact that an enterprise, however big or reputed, cannot afford to remain insensitive to the external environment. It must identify the opportunities presented by the environment, and exploit them in the best interests of the organisation. No enterprise can afford to ignore the threats arising out of the environment and in its interests; it must chalk out corrective measures for minimising adverse impact of these threats.

Some important factors that influence entrepreneurship are :

  1. Economic Environment
  2. Social Environment
  3. Psychological Factors
  4. Political Factors
  5. Competitive Factors
  6. Geographical Factors
  7. Socio- cultural Factors
  8. Technological Advancement

Factors Influencing Entrepreneurship 

1. Social Factors:

Social environment in a country exercises a significant impact on the emergence of entrepreneurship.

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The main  factors influencing social environment are as follows:

i. Legitimacy of Entrepreneurship:

The proponents of non-economic factors give emphasis to the relevance of a system of norms and values within a socio-cultural setting for the emergence of entrepreneurship. In professional vocabulary, such a system is referred to as the legitimacy of entrepreneurship in which the degree of approval or disapproval granted entrepreneurial be­haviour influences its emergence and its characteristics if it does emerge.

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While Schumpeter recognizes the importance of such legitimacy in terms of appropriate social climate for entrepreneurship, Cochran calls it cultural themes and sanctions. The social status of those playing entrepreneurial roles has been considered one of the most important contents of entrepreneurial legitimacy. To increase the legitimacy of entrepreneurship, some scholars have proposed the need for a change in traditional values, which are assumed to be opposed to entrepreneurship.

Scholars like McClelland have also pointed out that a complete change may not be necessary for entrepreneurial appearance. Instead, they submit a re-interpretation of the traditional values or its synthesis with the newer values to increase the entrepreneurial legitimacy.

We do also believe that entrepreneurship will be more likely to emerge in settings in which legitimacy is high. But there are others too who took the opinion that entrepreneurship can emerge even when entrepreneurial legitimacy is low or even negative provided that the government actions can overcome the negative orientations.

ii. Social Mobility:

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Social mobility involves the degree of mobility, both social and geographical, and the nature of mobility channels within a system. The opinion that social mobility is crucial for entrepreneurial emergence is not unanimous. Some hold the view that a high degree of mobility is conducive to entrepreneurship. Both need for “openness” of a system and need for “flexibility” in role relations imply the need for the possibility of mobility within a system for entrepreneurship development.

In contrast, there is another group of scholars who express the view that a lack of mobility possibly promotes entrepreneurship. Some even speak of entrepreneurship as coming through the crevices in a rigid social system. The third opinion is a combination of the first two. A system should neither be too rigid nor too flexible. If it is too flexible, then individuals will gravitate towards other roles. If it is too rigid, entrepreneurship will be restricted along with other activities.

A study undertaken by Khanka on entrepreneurship development also concurs, by and large, with Brozen’s point of view. With regard to the relationship between social mobility and the emergence of entrepreneurship, what is particularly important is the patterning of mobility channels.

His study brought home the point that the movement of young and educated males not only resulted in denudation of the potential entrepreneurs in the region, but also the returned migrants did not assume entrepreneurial roles because of inter alia their lack of business knowledge due to their mobility channels to the armed forces.

It is also pointed out that the degree and nature of social mobility alone is not likely to influence entrepreneurship, but its influence is largely determined by other non-economic factors. Some scholars believe that social marginality influences entrepreneurship. According to them individuals or groups on the perimeter of a given social system or between two social systems provide the personnel to assume the entrepreneurial roles. They may be drawn from religious, cultural, ethnic, or migrant minority groups.

Their marginal social position is generally believed to have psychological effects which make entrepreneurship particularly attractive for them. The two preceding factors—the legitimacy of entrepreneurship and social mobility—largely determine the influence of marginality on entrepreneurship. In situations in which entrepreneurial legitimacy is low, mainstream individuals will be diverted to non – entrepreneurial roles and the entrepreneurial roles will be relegated to the marginal.

On the contrary in the case of high entrepreneurial legitimacy, mainstream individuals will assume entrepreneurship and the marginal will have to find other roles as means of mobility. From the social mobility point of view, marginal individuals and groups will be restricted, by definition, from access to the established mobility channels in a situation. Thus, mainstream individuals and groups will have primary access to these channels. As such, marginal workers are likely to play entrepreneurial roles in such a situation.

Several factors are attributed to the increase in the likelihood of marginal becoming entrepreneurs. For example, one of these is the presence of positive attitudes towards entrepreneurship within the group. The second important factor is a high degree of group solidarity or cohesion. The relative social blockage has been considered the third important factor in promoting entrepreneurship by individuals.

Nevertheless, marginality alone, like many other factors, cannot be considered a sufficient condition for promoting entrepreneurship for various reasons. For example, not all the marginal groups are likely to be entrepreneurs particularly in situations in which mainstream entrepreneurs exist. Furthermore, the vulnerable marginal efforts for entrepreneurship are most likely to be negated by political attacks. Thus, whether marginality promotes entrepreneurship will depend upon a favourable combination of other factors.

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iii. Security:

Several scholars have advocated entrepreneurial security as an important facilitator of entrepreneurial behaviour. Yet, scholars are not unanimous on the amount of security that is needed. While Cole suggests ‘minimal’ security, McClelland speaks of ‘moderate’ certainty, for example.

However, Peterson and Berger maintain that entrepreneurship is more likely to emerge under turbulent conditions than under conditions of equilibrium. Redlich provides the middle position in this regard when he suggests that insecurity does not hinder entrepreneurship, but rather that different kinds of insecurity will result in different kinds of entrepreneurship.

We also regard security to be a significant factor for entrepreneurship development. This is reasonable too because if individuals are fearful of losing their economic assets or of being subjected to various negative sanctions, they will not be inclined to increase their insecurity by behaving entrepreneurially.

2. Psychological Factors:

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Many entrepreneurial theorists have propounded theories of entrepreneurship that concentrate specifically upon psychological factors. We consider these theories separately for that reason.

The main factors influencing psychological factors are as follows:

The main psychological factors influencing entrepreneurship are as follows:

i. Need Achievement:

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To the best of our knowledge, the best known of primarily psychological theories is David McClelland’s ‘theory of need achievement’. According to McClelland, a constellation of personality characteristics which are indicative of high need achievement is the major determinant of entrepreneurship development.

Therefore, if the average level of need achievement in a society is relatively high, one would expect a relatively high amount of entrepreneurship in that society. In his endeavour to answer a simple question as to why it is that groups respond differently to similar conditions, McClelland gives the psychological concept of achievement motivation, or no achievement, to account for the differences in response to similar conditions.

Referring to the encouraging impact of achievement motivation training programmes organised by the Small Industries Extension Training Institute, Hyderabad, McClelland argues that the need for achievement can be developed through the intensive training programmes.

ii. Withdrawal of Status Respect:

Hagen attributed the withdrawal of status respect of a group to the genesis of entrepreneurship. Giving a very brief sketch of the history of Japan, he concludes that she developed sooner than any non-Western society except Russia due to two historical differences.

First, Japan had been free from ‘colonial disruption’ and secondly, the repeated long continued withdrawal of expected status from important groups (Samurai) in her society drove them to retreatism which caused them to emerge alienated from traditional values with increased creativity. This fact led them to technological progress.

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Stonequist has also emphasised that technological innovations are caused more by the culturally marginal persons than others. He refers to Jews, Greeks and such persons in the middle ages, for example. 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:

  1. The group may be displaced by force
  2. It may have its valued symbols denigrated
  3. It may drift into a situation of status inconsistency
  4. It may not be accepted into expected status on migration in a new society

He further postulates that withdrawal of status respect would give rise to four possible reactions and create four different personality types:

(a) Retreatist – He who continues to work in a society but remains indifferent to his work and position;

(b) Ritualist – He who adopts a kind of defensive behaviour and acts in the way accepted and approved in his society but no hopes of improving his position;

(c) Reformist – He is a person who foments a rebellion and attempts to establish a new society; and

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(d) Innovator – He is a creative individual and is likely to be an entrepreneur.

Hagen maintains that once status withdrawal has occurred, the sequence of change in personality formation is set in motion. He infers that status withdrawal takes a long period of time—as much as five or more generations— to result in the emergence of entrepreneurship.

3. Governmental Influence:

The government by its actions or its failure to act does influence both the economic and non-economic conditions for entrepreneurship. Any interested government in economic development can help, through its clearly expressed Industrial policy, promote entrepreneurship in one way or another.

By creating basic facilities, utilities and services and by providing incentives and concessions, the government can provide the prospective entrepreneurs a facilitative socio-economic setting. Such conducive setting minimises the risks which the entrepreneurs are to encounter. Thus, the supportive actions of the government appear as the most conducive to entrepreneurial growth.

This is true of Indian entrepreneurship also. Scholars like Medhora conclude that the late inception of entrepreneurial growth in India was not due to lack of entrepreneurial motivation but due to non-commitment of the political structure. Somuchso, the early leader of Indian entrepreneurship, also tends to support that the government’s negative actions such as ‘colonial disruption’ acted as an inhibiting factor in the way of entrepreneurship development.

To conclude, in the societies where the government was committed to their economic development, entrepreneurship flourished and could not flourish in the societies where the government was either the least or not interested in their economic development. One way of examining the role of government influencing entrepreneurship may be the extent to which the government is a competitor with entrepreneurs from the private sector, whether for factors of production or for markets. The greater the extent of this competitive role, the less favourable the opportunity conditions for private entrepreneurship will be.


Which of the following Factor Influence Entrepreneurship

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 The following factors that influence the entrepreneurship are as follows:

1. Economic Factors:

Economic environment exercises the most direct and immediate influence on entrepreneurship. This is likely because people become entrepreneurs due to necessity when there are no other jobs or because of opportunity.

The economic factors that affect the growth of entrepreneurship are the following:

i. Capital:

Capital is one of the most important requisites to establish an enterprise. Availability of capital facilitates the entrepreneur to bring together the land of one, machine of another and raw material of yet another to combine them to produce goods. Capital is therefore regarded as a lubricant to the process of production.

ii. Labour:

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The quality rather than quantity of labour is another factor which influences the emergence of entrepreneurship. Most less developed countries are labour rich nations owing to a dense and even increasing population. But entrepreneurship is encouraged if there is a mobile and flexible labour force.

The potential advantages of low-cost labour are regulated by the deleterious effects of labour immobility. The considerations of economic and emotional security inhibit labour mobility. Entrepreneurs, therefore, often find difficulty to secure sufficient labour. They are forced to make elaborate and costly arrangements to recruit the necessary labour.

iii. Raw Materials:

The necessity of raw materials hardly needs any emphasis for establishing any industrial activity and its influence in the emergence of entrepreneurship. In the absence of raw materials, neither any enterprise can be established nor can an entrepreneur emerge. Of course, in some cases, technological innovations can compensate for raw material inadequacies.

The Japanese case, For example- witnesses that lack of raw material clearly does not prevent entrepreneurship from emerging but influences the direction 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 of entrepreneurial emergence.

iv. Market:

The fact remains that the potential of the market constitutes the major determinant of probable rewards from entrepreneurial function. The size and composition of the 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 the transportation system facilitating the movement of raw material and finished goods and increasing the demand for producer goods.

2. 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:

i. Caste Factor:

There are certain cultural practices and values in every society which influence the actions of individuals. These practices and values have evolved over hundreds of years. For instance, consider the caste system among the Hindus in India. It has divided the population on the basis of caste into four divisions.

The Brahmana, the Kshatriya, the Vaishya and the Shudra. 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 commerce, even when India had extensive commercial inter relations with many foreign countries.

ii. Family Background:

This factor includes size of family, type of family and economic status of family. 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 the joint family who gain wealth by their hard work are denied the opportunity to enjoy the fruits of their labour 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 East India.

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 entrepreneurs’ 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.

v. Cultural Values:

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.

3. Psychological Factors:

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 the social motive to excel that tends to characterise successful entrepreneurs, especially when reinforced by cultural factors. He found that certain kinds 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.

Analysing this phenomenon, Paul Wilken has said, “entrepreneurship becomes the link between need achievement and economic growth”, the latter being a specifically social factor. 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 for 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 maintains that once status withdrawal has occurred, the sequence of change in personality formation is set in motion. He says that status withdrawal takes a long period of time – as much as five or more generations-to result in the emergence of entrepreneurship.

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, a person’s self-esteem, power and regard for society.

On the same subject, Evans distinguishes motive by three kinds of entrepreneurs:

  1. Managing entrepreneurs whose chief motive is security
  2. Innovating entrepreneurs, who are interested only in excitement
  3. 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.

4. Political Factors:

An entrepreneur, however creative he/she may be, cannot function without the supportive actions of the Government. It is for the government/society to ensure the availability of required resources for the entrepreneurs and also the accessibility to them. This is because the successful entrepreneur contributes to the well-being of the society.

Policies relating to various-economic aspects like prices, availability of capital, labour and other inputs, demand structure, taxation, income distribution, etc., affect growth of entrepreneurship to a large extent. Promotional government activities such as incentives and subsidies contribute substantially to entrepreneurial performance.

At the same time, Government policies like licences, regulations, favouritism, government monopolies, etc., are undesirable for the growth of business enterprises. Above all, a Government that is politically stable and united can affect entrepreneurial activities in a significant manner.

In India, all the environmental forces have turned in favour of enterprising men and women. There is a visible change for the better in the highly inactive entrepreneurial field in the country. The tight grip of religious and traditional ideas and practices have begun to loosen. Dogmas (settled opinions) and superstitions have lost the hold they earlier had.

It is encouraging the ‘non-commercial’ classes to consider economic opportunities more sympathetically. As a result, occupational division based on caste system has undergone tremendous traditional activities, social approval etc., have become less important. More important now, are the economic factors such as access to capital and possession of entrepreneurial attitudes and business knowledge.

Development of infrastructure, changes in government policies in favour of business and industry and of course, rise in demand for products manufactured are some of the other factors that have led the Indian entrepreneurs to look for new business opportunities.


What are the Factors Influencing Entrepreneurship

The emergence of entrepreneurship is not spontaneous. It is influenced by various environmental factors. In other words it is dependent upon economic, social, cultural, political and psychological factors. These environmental factors have both positive and negative influences on the emergence and development of entrepreneurship. Positive factors favourably affect and the negative factor oppositely affects entrepreneurship.

1. Economic Factors Influencing Entrepreneurship:

The important economic factors which influence entrepreneurship are:

  1. Capital
  2. Labour
  3. Market
  4. Transport

1. Capital:

Capital is the basic requirement for any kind of economic activity. No enterprise can be established without its adequate supply. Its sufficient and timely supply facilitates the mobilisation of various inputs needed for production activities. Many enterprises either become sick or suspend their activities due to shortage and untimely supply of capital.

Thus adequate and timely supply of capital with favourable terms will promote entrepreneurship. In order to promote and strengthen entrepreneurship the governments (both state and central) have drawn various schemes of assistance besides financial help from banks and financial institutions.

2. Labour:

For the success of any enterprise, an adequate supply of the right type of labour is very essential. There are some enterprises which require a large supply of skilled labour. Therefore such units have to be located very close to supplying centres.

The localization of hosiery industry at Ludhiana (Punjab), the silk industry in Paris, the brass industry in Banaras (UP) and the lock industry in Aligarh (UP) are the best examples. These places, in addition to other inputs, supplied a skilled and quality labour force. Thus, the development of entrepreneurship depends on the supply of the right kind of labour needed for specific activities.

Enterprises engaged in manufacturing require good transportation for their development. A good transport system ensures the timely movement of raw materials to units and finished products to markets. Further, transport costs should be cheaper, and more efficient. Thus, good transportation influences the development of entrepreneurship. The Jute industry of India was located in Kolkata because of the availability of cheap water transport. Similarly, large numbers of cotton textile mills were established around Mumbai due to good transportation networks.

The other economic factors influencing entrepreneurship are – Availability of sufficient land at cheap price, availability of industrial sheds, buildings, machinery etc., at reasonable price and without much formality.

3. Market:

The output from enterprises is marketed ultimately. Thus the market is one of the major influencing factors. It not only influences the localization of enterprises but also contributes to the growth of entrepreneurship. If a product has no market or poor market base, an enterprise cannot survive. Entrepreneurship is promoted and favourably affected when there exists a good and vast market.

4. Transport:

The development of entrepreneurship requires efficient and cheap means of transport facilities also.

2. Geographical Factors Influencing Entrepreneurship:

Geographical or natural factors also influence the establishment of enterprise. Thus entrepreneurship is affected by various geographical factors.

The important geographical factors are:

a. Availability of Raw Materials:

Raw materials constitute an important input for manufacturing enterprises. The nature of raw material, its supply, the sources of supply etc., influence the location of an enterprise. The inadequate and irregular supply will harm the establishment and running of an enterprise. Many enterprises close their business due to inadequate and irregular supplies of raw material. Raw materials may be – indigenous or imported, weight losing or non-weight losing, localised or disported.

Thus, entrepreneurship depends on the sufficient and timely supply of raw materials.

b. Power Resources:

Every kind of enterprise needs the supply of adequate power. This is more essential in the case of manufacturing enterprises. A manufacturing entrepreneur needs more power supplies than a service entrepreneur. There are various sources of power, such as Coal, Oil, natural gas, hydro-electric power, etc., In India, many manufacturing enterprises are facing shortage of power supplies. It is still the worst in the case of small scale industrial units. Enterprises located in semi-urban and rural areas are worst hit due to irregular and shortage of electric power. Thus, entrepreneurship development depends upon the supply of power also.

c. Climatic Conditions:

Climatic conditions also determine entrepreneurship. Some manufacturing units need a special type of climate. For instance, cotton textile requires a humid climate, the flour milling industry requires a dry climate etc. After the development of science and technology, a suitable climate can be created artificially, but the cost of artificial creation increases much more. Thus suitable climate is also one of the influencing factors.

3. Political Factors Influencing Entrepreneurship:

Political factors refer to government attitude, preference, policy initiative etc., regarding the distribution of enterprises. Government may enact separate legislations, rules and programmes to promote entrepreneurship. The government support may be in the form of interest free loans, provision of strategic raw materials, subsidised loans, liberal terms for granting loans, tax exemptions, favourable EXIM policy, provision of marketing etc., Today political factors play a significant role in determining entrepreneurship in any country.

The government may permit the setting-up of some enterprises in some regions and restrict their establishment in other regions. It may grant financial and other facilities to encourage entrepreneurship or may restrict its supply in other regions. Thus, entrepreneurship is largely affected by political factors also.

4. Social Factors Influencing Entrepreneurship:

Social Environment in a country exercises a significant impact on the emergence of entrepreneurship. It consists of religious aspects, languages, customs, traditions, beliefs, tastes, preferences, social attitudes, living habits, eating habits, dressing habits etc., These factors of Social environment largely influence the level of consumption of people living in the society.

The main components of social environment and their relative influence on entrepreneurship are briefly described below:

a. Legitimacy of Entrepreneurship

It is found that the proponents (persons who argue) of non- economic factors stress the importance of a system of norms and values within a socio-cultural background for the origin of entrepreneurship. In a professional sense, this phenomenon is referred to as the legitimacy of entrepreneurship.

The degree of approval or disapproval granted by norms and social values of the system influence the emergence of entrepreneurship and its character. Schumpeter recognizes the importance of such legitimacy in terms of appropriate social climate for entrepreneurship. According to him, norms and social values of society are the reasons for the origin of entrepreneurship.

Cochran, another proponent, calls it cultural themes and sanctions. To increase the legitimacy of entrepreneurship, some scholars expressed their views differently. Some argued that there is a need for a change in traditional values, which are assumed to be opposed to entrepreneurship. Whereas scholars like Mc Clelland have pointed out that a complete change need not be necessary for entrepreneurial appearance. Instead, they argued in favour of re-interpretation of the traditional values or its composition with newer values to increase the legitimacy.

It is believed that entrepreneurship will be more likely to be visible in settings in which legitimacy is more. But according to others, entrepreneurship can even emerge in such environmental conditions where legitimacy is low or even negative. To support this view, they argued that governmental support, incentives have strong influence to overcome negative aspects.

b. Religion:

Religion plays a vital role in influencing the emergence of entrepreneurship- Religion takes birth in the society, remains in the society and continues in the society. It imbibes some values to people who follow it. A few religions have spread over a large area in the world. The Protestants influence is dominant in the USA, Canada and Australia with regard to production and distribution.

Islam dominates North Africa, Middle East, Malaysia etc., Hinduism and Buddhism in most part of Asia. They preach their followers differently and build ethics and morals of their own. Thus religions play a significant role in creating entrepreneurs. Entrepreneurs with a different vision, stature, attitude etc., emerge on account of diverse religions they follow.

c. Family System:

In addition to religion, the family system in a society plays a major role in creating entrepreneurs. For instance in many Islamic countries, women play a less significant role in the economy and also in the family with limited rights. However, women play a dominant role in European and North American Countries.

In addition to the above feature, joint families prevalent in the Hindu religion is a dominating factor in the emergence of entrepreneurship. There are instances where joint families have produced prominent entrepreneurs on account of their ancestral property support.

d. Social Mobility:

Social mobility refers to movement of individuals to assume entrepreneurial activities. The extent of free movement both socially and geographically, within a system influences the emergence of entrepreneurship. The opinion about the significance of social mobility for entrepreneurship development is not unanimous among the scholars.

Some argue that social mobility is the cause for the emergence of entrepreneurship. In contrast, others argue that lack of social mobility also possibly promotes entrepreneurship. Some even speak of entrepreneurship as coming through crevices (Small opportunities) in a rigid social system.

Social mobility system should neither be too rigid nor too flexible. If it is too flexible individuals may gravitate to other roles. If it is too rigid, entrepreneurship will be restricted along with other works.

e. Security:

Some scholars have argued that entrepreneurial security as an important facilitating factor of entrepreneurial behaviour. However, scholars have no similar opinion about the amount of security needed. Chole suggests a minimum amount of security and Mc Clelland asserts moderate security.

Scholars like Peterson and Besyer argued that entrepreneurship is more likely to come up under turbulent (i.e., unsteady, conflict) conditions than under conditions of equilibrium. Another scholar Radlich suggests the middle position in this respect, he argued that insecurity does not disturb entrepreneurship, but rather different kinds of insecurity will result in different kinds of entrepreneurship.

5. Socio Cultural Factors Influencing Entrepreneurship:

Culture is not a natural thing, it is a learned behaviour by people. Therefore, culture can be changed. But the changing process is slow and cannot take place overnight. It includes a set of learned values, beliefs, styles, knowledge, morals, laws and behaviours. Generally, these features have been shared by individuals and society on a continuous basis.

Culture as a substance of societal aspect determines how an individual thinks, feels, acts and behaves with his surroundings the culture of a society is passed from generation to generation. This phenomenon has a great influence on entrepreneurship.

According to Edward Burnett Tylor, “Culture of Civilisation is that complex whole which includes knowledge, belief, art, morals, law, custom and other capabilities and habits acquired by man as a member of society”.


Factors Influencing Female Entrepreneurship

Following are the factors that women face when they want to tread the entrepreneurial path:

1. Feeling that they are only supplementary earning members:

The image that women are people who supplement the earnings of the house, along with men has to change. Since men consider this at an ego level, it gets very difficult to allow capable women to contribute more and take on primary running roles in families. Supplementary earning image makes women to let go of the opportunities that they may otherwise have capitalised on. We need a fair and balanced way of allowing society to evolve, where talent – irrespective of gender, is allowed to blossom.

2. The reason for a woman to enter any industry is primarily through force or need-driven:

The reason why a lot of women came into business and eventually became successful is because they had a need. Most often, the male counterpart of the family- husbands or fathers may not have contributed much to the development of the house. So by force, many women got into employment to sustain the family.

Eventually, some of these women on seeing success and being mentored by the right people took on growth challenges and grew to higher levels. But since it was happening only by force, the numbers are far and few. Even in failed families, we find women not turning into proactive income generators. Most often, they just participate in as much activity as needed to sustain the family, because the other role of maintaining the family still continues.

3. They are expected to run the family even if they go to work:

Even today, in most parts of the society, it is the women who run the house. Very rarely do you find a male participating in running the household operations. At times even sharing some responsibility of running the house does not fall on the male counterpart. So, the pressure to maintain a house in a certain way, as per the expectations of the family while working still remains a challenge for many women.

Women are asked to adjust their work, so that home remains the primary need. This may not be really possible if serious careers or businesses have to be built. If the ecosystem does not support such a development, then it is very unlikely to see too many women entrepreneurs or women in business.

4. Marriage:

Marriage is definitely a major event in the life of a man or a woman; more so in the case of a woman. Especially in Asian countries, women typically marry and move into the family of her spouse and this movement causes a change in the ecosystem and puts her in a new environment which has high expectations. Very often, it is a big challenge for a woman to start an enterprise before marriage as she would be unclear about the turn of events based on her marriage. So continuation becomes a key concern for women to start their ventures early.

Very often, the ecosystem convinces the lady to start the business post marriage, so that she can continue it for a longer time. But there are a lot of challenges post marriage, because the environment is new and the woman has to take a certain amount of time to settle down and understand the expectations. It also takes time to settle into a new ecosystem and then gain the support to start off. Positive ecosystems, either at her maternal side or from the family post marriage can definitely enable or influence this.

5. Mobility:

Most often, because of various family restrictions, social restrictions, the risks involved; parents, spouse and family do not allow women to be very mobile. They would not want them to go away from their radar of comfort. This restricts a lot of women from utilising some of the opportunities which may come in their way. Sometimes the choice of industry, based on their interest and knowledge is allowed only in certain geographies, because of which women may have to move to another place if the venture has to get started.

Family bonding and the needs of others always take a higher priority than work for many women. Hence, they normally sacrifice the possibility of starting up new enterprises. What may help us here is instead of operating in binary mode to choose a career/business or family, one should take the call on how best one can operate with support from the ecosystem.

6. Lesser access to education:

Even today, women have lesser access to education. They are not allowed to enrol into higher programs. This restriction also creates a problem in them pursuing a vocation out of ordinary. 


Environmental Factors Influencing Entrepreneurship

According to the Oxford English Dictionary Environment means ‘Surrounding objects, regions or circumstances’. It is the sum total of external factors within which the enterprise operates. Entrepreneurs do not emerge on their own. Various economic, social, political, technological and psychological factors are responsible for the emergence and growth of entrepreneurship.

Environmental forces exert both positive and negative impacts on entrepreneurship. Positive impact refers to the existence of various factors facilitating growth and negative impact refers to those factors adversely affecting emergence and growth of entrepreneurship. The process of interaction and adaptation between an individual and the environment is ever going on. At any given moment of time; the individuals take meanings from the situations in which they find themselves through the media of social rules, group norms and cultures, past experiences and future expectations.

Entrepreneurship environment refers to the various positive and negative constraints within which various enterprises are required to operate. The environment, especially the external environment, is highly dynamic. It keeps on changing and affects different organisations to a varying extent.

The degree or extent of environmental impact depends upon the extent up to which the organisation depends on it and the organisational response to the changes in environment. An entrepreneur should understand the behaviour of key environmental forces that are going to affect the present and future operations of the enterprise.

The post-independence period has witnessed tremendous social, economic and political changes, which have directly or indirectly influenced the environment of entrepreneurship. During the last decade many established big business houses have yielded competitive advantage to relatively new entrants.

In the automobile sector Hindustan Motors and Premier automobiles had to meekly surrender their market share to Maruti Udyog Limited and the same story was repeated in the detergent market wherein a relatively unknown new entrant Nirma grabbed major market share of Surf, a product produced and marketed by a reputed multinational corporation i.e., Hindustan Lever.

All these examples clearly highlight the fact that an enterprise, however big or reputed, cannot afford to remain insensitive to the external environment. It must identify the opportunities presented by the environment, and exploit them in the best interests of the organisation. No enterprise can afford to ignore the threats arising out of the environment and in its interests; it must chalk out corrective measures for minimising adverse impact of these threats.

Various environmental factors influencing the emergence and growth of entrepreneurship and these are:

  1. Economic Environment
  2. Social Environment
  3. Psychological Factors
  4. Attitude of Government
  5. Competitive Factors

1. Economic Environment:

One of the most important factors affecting entrepreneurship is the economic environment. It comprises capital, labour, raw material and market demand.

i. Capital:

Capital is one of the most important factors of production for the establishment of an enterprise. Adequate funds are required for bringing together other factors of production. It is with the capital that other factors of production like labour, raw material, machinery etc., can be arranged. Capital acts as a lubricant for the production process. Increase in capital investment in viable projects results in increase in profits which help in accelerating the process of capital formation. Entrepreneurship activity too gets a boost with the easy availability of funds for investment.

ii. Labour:

Easy availability of the right type of workers also affects entrepreneurship. The quality rather than quantity of labour influences the emergence and growth of entrepreneurship. The advantages accruing to an entrepreneur due to low cost labour are often offset by the disadvantages arising out of immobility of unskilled workers.

The disadvantages arising out of immobility and high cost labour can be better tackled by resorting to capital intensive technologies. But a country like India, confronted with the twin problems of unemployment and shortage of capital, cannot afford to adopt capital intensive technologies. Labour intensive rather than capital intensive technology will serve our interests in a better manner. The problem of labour immobility can be solved by providing infrastructural facilities including efficient transportation, wherever entrepreneurship is to be promoted.

iii. Raw Material:

Raw material is one of the basic ingredients required for production. Shortage of raw material can adversely affect the entrepreneurial environment. Without adequate supply of raw materials no industry can function properly and emergence of entrepreneurship too is adversely affected. Shortage, high prices and inferior quality of raw materials are the major problems confronting entrepreneurs. The more favourable these conditions are, the better would be its influence on entrepreneurial emergence.

iv. Market:

The role and importance of market and marketing is very important for the emergence and growth of entrepreneurship. Monopoly in a particular product line is more tempting to an entrepreneur than a competitive market. In the modern competitive world no entrepreneur can think of surviving in the absence of the latest knowledge about the market and various marketing techniques.

The benefits of improved and healthy market conditions in the environment on entrepreneurial growth are self-evident. Germany and Japan are examples where rapid improvement in the market was followed by rapid entrepreneurial appearance. Entrepreneurs should keep track of main trends in the economic environment.

Market demand depends upon purchasing power. Which in turn depends upon current income, prices, savings and availability of credit. Changes in major economic variables like money income, cost of living, interest rates, savings and credit availability have an immediate impact on the working of an enterprise.

2. Social Environment:

Social environment strongly affects entrepreneurial behaviour, which contributes to entrepreneurial growth. The social setting in which the people grow, shapes their basic beliefs, values and norms.

The social factors can be:

  1. Family Background
  2. Social Status
  3. Cast and Religion
  4. Social Mobility and Social Marginality
  5. Friends, Relatives and Teachers 

a. Family Background:

Family background greatly influences the entrepreneurial environment and maintenance of the social system. The environment of the family affects entrepreneurship. Joint family can provide family resources to invest and expand family business. If the father is a professional, entrepreneur or businessman, the son is more likely to enter the same line because of certain inherent advantages.

Background of a family in manufacturing provides a source of industrial entrepreneurship. Mobility of the entrepreneur is influenced by the occupational and social status of the family.

b. Social Status:

Social status too affects entrepreneurship.All human beings aspire for high social status and on attaining a particular level they start aspiring for higher & higher levels. People become quite responsible in their pursuit of protecting and developing their status. Chester I Bernard believes that the desire for improvement and protection of status forces people to behave responsibly. People work hard to maintain and improve their status, and it contributes to entrepreneurial growth.

c. Caste and Religion:

Caste and religion of entrepreneurs are contributory factors of entrepreneurial growth. Some of the castes have inculcated in themselves a particular culture that fosters entrepreneurship. In India certain ethnical communities engaged in trade and industry for centuries like Jains, Baniyas, Vaishyas and Khatris have been the dominant sources of entrepreneurship.

Similarly certain religious communities like the Parsees, Marwaris and Sindhis have an inclination for industrial activity and this has definitely helped in the emergence and growth of entrepreneurship. A person is likely to assume the guidelines or rules of the reference group to which he belongs.

The reference group can be religious groups, close circles of friends and relatives. The prospective entrepreneur would discuss his business ideas with them and seek their advice before starting a new business.

d. Social Mobility and Social Marginality:

Social mobility involves the degree of social and geographical mobility and the nature of mobility within the system. The opinion that social mobility is crucial for entrepreneurial emergence is not unanimous. There are persons of the view point that a high degree of mobility is conducive for the emergence of entrepreneurship.

At the same time there are others of the opinion that lack of mobility would result in the emergence of entrepreneurship. There are still others putting forth the argument that the system should not be too flexible nor too rigid because the former would pull the entrepreneur away from his role and latter would restrict the entrepreneur. Social marginality also positively influences entrepreneurship.

Social marginality implies a situation in which there is a discontinuity between the individual’s personal attributes (consisting of physical characteristics, intellectual makeup and social behaviour patterns) and the role or roles which the individual plays in the society. A person belonging to a social group traditionally constrained to enter economic activity and barred from any other activity by the society is expected to choose the ownership manager role in a small industry.

The number of openings available also affects the emergence of entrepreneurship. Expanding economy and increase in per capita income give a boost to entrepreneurial activity. Similarly the pace of structural change in the economy opens new opportunities for the prospective entrepreneurs.

Environmental addicts have repeatedly highlighted the havoc caused by some of our petro chemical, heavy chemical, dyestuff and other polluting industries as also the environmental damage caused by large scale deforestation, open mining, quarrying etc., which will take decades to rectify.

Technology has advanced significantly to allow efficient use of resources. Throughout the world industry has become conscious of the need to use renewable resources as far as possible and utilise nonrenewable resources within planned limits. With potential development taking place in the industry we should learn from past incidences of industrial disasters leading to environmental disasters and ensure further growth consistent with environmental protection.

3. Psychological Factors:

McClelland developed the theory of Achievement Motivation. Achievement motivation is a drive to overcome challenges. According to McCelland a constellation of personality characteristics which are indicative of high heeled achievement is the major determinant of entrepreneurship development.

If the average level of achievement in a society is relatively high one can expect a relatively high amount of entrepreneurship in the society. The trait of need for achievement is not by birth and can be developed through intensive training programmes.

In India Small Industries Training Institute (SIET) Hyderabad and Small Industries Service Institutes (SISI) and others all over India are extensively conducting training programmes aimed at generating confidence amongst new entrepreneurs. In the Kakinda Experiment McClelland carried out a fully-fledged programme in Kakinada City of Andhra Pradesh.

The training was to be given to a group of persons and was designed primarily to stimulate the imagination and encourage introspection of personal motivation and community goals. McClelland concluded that those participating in the programme displayed a more active business behaviour and worked for longer time.

He found that caste, traditional beliefs or even western ways of life did not determine the mental makeup of participants. McClelland explains that people with low achievement motivation are prepared to work hard for money or other such incentives but the people with high achievement motivation work for status.

He states that people with high need for achievement possess the following attributes:

  1. Prefer personal responsibility for decisions
  2. Are moderate risk takers
  3. Possess interest in complete knowledge of the results of decisions

McClelland believes that achievement motivation can be developed through intensive training programmes.

Hagen was of the opinion that the withdrawal of status respect of a group led to the emergence of entrepreneurship in Japan.

Hagen states that the initial conditions leading to eventual entrepreneurial behaviour is the loss of status respect by a group and four different types of events can produce status withdrawal:

  1. The group may be displaced by force
  2. It may have its value symbols denigrated
  3. It may drift into a situation of status inconsistency
  4. It may not be accepted into expected status on migration in a new society

Whenever there is any withdrawal of status respect it would lead to four different responses and create four different types of personalities:

i. Retreatist:

It refers to the person who continues to work in the society but remains indifferent to his work and position.

ii. Ritualistic:

He is the type of person who adopts a kind of defensive behaviour and acts in a way accepted and approved in his society but with no hope of improving his position.

iii. Reformist:

He is the one who ferments a rebellion and attempts to establish a new society.

iv. Innovator:

A creative individual who is likely to be an entrepreneur. Hagen believes that creative personalities emerge when the members of some social group experience the withdrawal of status respect. Innovation, which is basic for the emergence of entrepreneurship, requires creativity and such creative individuals act as catalytic agents for economic growth.

4. Attitude of Government:

Governments all over the world can play a very important role in the emergence of entrepreneurship. Positive actions by the government can facilitate growth of entrepreneurship whereas negative actions can adversely influence entrepreneurial emergence and growth.

The Industrial Policy framed by the government proves to be a crucial factor for the setting up of industrial units. The government by providing the right type of infrastructural facilities and other incentives can definitely play a positive role leading to the emergence of entrepreneurial class and setting up of more and more viable industrial units.

The supportive actions of the government help in creating a conducive environment which finally leads to entrepreneurial growth. It is only due to the various steps initiated by the government under development planning over years that a positive environment for entrepreneurial growth has been created. The slogan ‘Export or Perish’ led to export promotion.

The government took three important steps in various industrial resolutions:

  1. To maintain a proper distribution of economic power between the private and public sector
  2. To encourage the tempo of industrialization by spreading entrepreneurship to every city, town or village
  3. To disseminate the entrepreneurial talent concentrated in a few dominant communities to a large number of people of varied social and economic groups

It is the government which regulates business activities. Government policies are going to influence all the decisions of the entrepreneurs regarding what to produce, how much to produce, what quality to produce, where to produce and for whom to produce. The entrepreneurs are to operate within the concessions and limits set by the government. It is in the interest of the potential entrepreneur to thoroughly scan the government policies before taking decisions with regard to setting up his enterprise.

Governments can affect the environment in many ways. Some of them are as follows:

i. Education and Technical Know-How:

Education, entrepreneurship and development are interrelated. Education helps in the development of capabilities of individuals which facilitates the emergence and growth of entrepreneurship. An alert entrepreneur in order to survive, in the modern competitive world, has to keep an eye over the technological advances taking place around.

These technological developments provide opportunities for the entrepreneurs to develop and produce new products. Moreover various studies too have revealed that many entrepreneurs have been driven to the threshold of entrepreneurship for making use of their technical and professional skills.

After acquiring these skills they want to use these skills for themselves rather than benefiting others by taking employment. Thus the high level of education and training may enable the entrepreneurs to use their entrepreneurial talent more effectively and efficiently.

ii. Financial Assistance:

Liberal financial assistance on easy terms & conditions act as a motivating force for boosting the morale of the young entrepreneurs to set up their own enterprises. To create an environment conducive to entrepreneurial growth, a policy of support and incentive has been introduced by the government.

Various types of subsidies, concessions and facilities are extended to attract entrepreneurs in backward areas. The government of various states has floated various schemes aimed at providing adequate financial assistance to the entrepreneurs on easy terms and at a low rate of interest.

iii. Mobility of Entrepreneurs:

Mobility refers to the drive in the entrepreneurs to locate green postures for setting up their units. It is an urge to move to other places in search of better opportunities. In India, Marwaris, Sindhis and Sikhs have moved to every corner of India and abroad to carry on business and entrepreneurial activities.

This will help in reducing regional imbalances in economic growth. In the initial phase of industrialisation entrepreneurs set up their units at or near their places due to limited resources, communication bottlenecks and absence of institutional support. An entrepreneur after tasting success and gaining experience is ready to make investment anywhere.

He is always on the lookout for opportunities, which can be exploited for furthering his business interests. He is not tied to any place and is ready to move to any place wherever viable business opportunities exist.

5. Competitive Factors:

No prospective entrepreneur can afford to ignore competitive factors. Study of competitive factors covers members of competing firms, their scale of operation, product range and features, prices, channels of distribution, terms & conditions of sale etc.

Michael E Porter states the following four factors for the analysis of industry and competitors:

i. Existing and Potential Entrants:

Various aspects studied are capital requirement, scale of operation, product differentiation, channels of distribution etc. Threat perception from existing and potential entrants is scanned under this head.

ii. Bargaining Power of Buyers:

Keeping in mind demand and supply position, bargaining power of buyers is studied.

iii. Bargaining Power of Suppliers:

Bargaining power of suppliers of raw materials and other factors can be assessed keeping in mind the demand and supply position.

iv. Availability of Substitutes:

Demand for a particular product will depend upon the availability and prices of substitutes.

v. Competitive or Industrial Environment:

An industry comprises a group of enterprises offering similar products or services. Industry includes close substitute products or services that satisfy the same consumer needs. No prospective entrepreneur can afford to ignore competitive factors.

Study of competitive factors covers members of the competing firms, their scale of operation, product range and features, prices, channels of distribution, terms and conditions of sale etc. An entrepreneur as a strategic manager has to analyse competitive forces in industrial opportunities and threats that a company will meet.

Michael E. Porter has suggested a five forces model that helps the strategic manager to focus his attention on following five forces that determine the competition within an industry.

In case the above forces are strong, there is danger to the enterprise as it cannot earn more profits by increasing prices. On the other hand in case these forces are weak, they provide opportunities for the enterprise to earn more profits by increasing prices. An entrepreneur must assess these forces objectively and pick up strategy which is most appropriate keeping in mind these opportunities and threats.

Michael E Porter states the following factors for the analysis of industry and competition:

  1. Risk of entry of Potential Competitors
  2. Rivalry amongst existing companies
  3. Bargaining power of buyers
  4. Bargaining power of suppliers
  5. Threat of close substitute products

The Five Forces Model of Competition:

Adapted from. Michael E Porter “How competitive forces shape strategy”.

These forces can be discussed as under:

1. Risk of Entry of Potential Competitors:

Potential firms are presently not posing a threat but can certainly do so if they decide to take the plunge. Existing firms try to discourage potential entrants as their entry can adversely affect the market share of existing firms and can force them to resort to price cutting or offering additional services to consumers at the same price. Greater risk of entry by potential competitors poses a threat and lower risk of new entry presents enhanced opportunities for the existing firms.

However there are various barriers restricting entry of new competitors and these are:

i. Cost Advantage:

An established enterprise can enjoy absolute cost advantages due to economies of scale, superior and tested production techniques, efficient & mature managerial skills and knowledge about cheap sources of raw materials. These advantages provide opportunities to the existing firms to earn profit and restrict entry of potential entrants.

ii. Brand Image:

An entrepreneur can build brand image or loyalty through innovations, product differentiations, aggressive advertising, providing better quality products and efficient after sale service. Brand loyalty proves to be an asset for existing firms and a deterrent for potential competitors.

iii. Government Policies:

Entry of foreign companies is restricted due to preferential and protective policies of the government. Licensing system practised in India before liberalisation served more the interests of existing units and prevented entry of new entrants.

iv. Rapports with the Channels of Distribution:

Established firms normally have efficient distribution channels whereas new firms have to spend more time, effort and money developing rapport with channel members. It provides opportunities for the existing firms and challenges for the new firms.

2. Rivalry amongst Existing Companies:

Competitive force refers to the extent of rivalry amongst existing firms within an industry. Intense rivalry benefits consumers as they are able to get the same goods at lower prices and channel of distribution to provide economical and efficient services. On the other hand if the competitive force is weak, it generates opportunities for the existing firms to raise prices and earn more profits.

Extent of rivalry amongst established firms depends upon:

i. Demand Conditions:

Growing demand will lessen rivalry as companies can increase their sales without grabbing market share of rivals. Growing demand creates opportunities for companies to expand. Competition becomes all the more fierce in the event of fall in demand.

ii. Competitive Structure within Industry:

Competitive structure represents the number of competing firms and their relative market share. Consolidated industry structure enables firms to charge more price. In order to maintain their position the firm will have to innovate and differentiate. In a fragmented structure the firms will be required to cut costs because of higher rivalry and price war.

iii. Exit Barriers:

These represent economic compulsions and emotional factors that keep companies competing in the industry despite low returns. These barriers are threats to industry when demand is going down. If exit barriers are high companies resort to excess production and price war in order to sell more.

If exit barriers are high and demand is growing companies have opportunities to raise prices. If exit barriers are low and demand is declining there are moderate threats of excess capacity and price war. On the other hand if exit barriers are low and demand is going up the firms will have opportunities to increase prices and expand operations. These exit barriers represent fixed cost, retrenchment compensation and emotional attachment to a unit.

3. Bargaining Power of Buyers:

Buyers can be a competitive threat when they demand better quality and additional services or when they force down prices. Whereas weak buyers provide opportunity to the firm to increase prices and earn better returns.

According to Porter buyers are most powerful in the following circumstances:

  1. When the suppliers are composed of small companies and their number is very high and the buyers are few in number and are large in size
  2. When the buyers purchase the goods in bulk quantities
  3. When the suppliers are dependent upon the buyer for a large percentage of total orders
  4. When the buyer can switch orders between supply companies at a low cost and encourage competition amongst each other to force down prices
  5. When it is economically feasible for the buyers to purchase the raw material from several companies at the same time
  6. When the buyer can supply its own needs through vertical integration

4. Bargaining Power of Suppliers:

It proves to be a threat when suppliers are able to force up the prices and the company has to pay or settle for inferior quality. Weak suppliers on the other hand provide the company an opportunity to force down price or demand higher quality resulting in the profitability of the company going up.

According to Porter suppliers are most powerful in the following situations:

  1. When the suppliers’ products have few substitutes and the company is dependent on the supplier for the product
  2. When the company’s industry is not as substantial and significant a customer to the suppliers and consequently the suppliers have little incentive to reduce price or improve quality
  3. When the suppliers’ products are differentiated widely and the company is dependent upon its suppliers. In such a situation, it is costlier for a company to switch from one supplier to another
  4. When suppliers can integrate vertically forward into the industry and can do the business of the buyer’s company directly
  5. When the buyer company cannot be in a position to integrate vertically backward and fails to produce the raw material on its own

5. Threats of Close Substitute Products:

Products serving similar consumer needs or purposes are called substitute products e.g. coffee and tea. The presence of close substitutes pose a strong competitive threat that limits the prices a company can charge and affects the profitability of the company. On the other hand if a firm’s products have few close substitutes, it will enjoy more liberty to raise prices and earn more profits.


Various Factors Influencing Entrepreneurship

There are various factors such as the following that influence entrepreneurship:

1. Attitude of the People:

A positive attitude of people in a society towards entrepreneurship is among the main forces behind encouraging entrepreneurial activities. People seldom take to a profession that has a relatively poor perception in the society they belong to. For instance, in Indian society, traditionally, the attitude towards business was virtually negative, until a few commercial entities got international recognition.

By the turn of the last century, there was a marked shift in the attitude of people towards business and entrepreneurship, and it is attracting many people.

2. Demographic and Economic Factors:

Till not so long ago, in the days of a strictly regulated economy, entrepreneurship was taken up by people in their middle age. That is the age profile of an Indian entrepreneur was, generally, a middle-aged one. A first generation entrepreneur was supposed to have acquired professional skill and ‘tricks of the trade’ under someone, before branching out on his own.

The economic environment was also different then. However, since 1991, there has been a sea change in the economic Environment with the government emphasising the need to speed up the development process and make the country an economic power in the world. A host of policy measures were also introduced by various governments to encourage the growth of business. This resulted in people taking to business and entrepreneurial activities in a big way.

3. Entrepreneurial Education:

Entrepreneurial orientation in education is also one of the reasons for the growth of entrepreneurship in the society. Post-liberalization, there has been a perceptible difference in the approach towards entrepreneurship in the educational sector.

Many institutions and universities have recognised the significance of orienting students toward business and entrepreneurial careers by honing such skills in classrooms supplemented by practical education. The inclusion of entrepreneurship development in the curriculum of most higher educational institutions in the country has provided a fillip to the profession.

4. Shift to Service Economy:

With the service sector offering more job opportunities for every rupee invested and contributing significantly to the GDP in India, there has been a sharp rise in the growth in this sphere over the last decade. Further, because of their relatively low start-up costs, service businesses have become very popular among entrepreneurs.

The information technology sector could be a case in point. However, the booming sector continues to provide many business opportunities, not just in the high technology fields but in areas such as tourism and hospitality also.

5. Technological Advancement:

Advances in information technology and the advent of user- friendly equipment such as personal computers, photo-copiers, fax machines, Internet, etc., a person can operate from his/her home just like any other big business organisations. Investment in office infrastructure no longer remains an impediment.

At one time, the high cost of such state-of-the art equipment made it impossible for small enterprises to compete with large organisations. Today, people can carry out even service-oriented business activities such as railway reservations from small kiosks or rooms also. As a result, we notice a spurt of business activities on a mass scale.

6. International Opportunities:

Thanks to liberalisation and globalisation, business activities and market opportunities are no longer confined to the domestic market. Due to a marked shift in the global market environment, innumerable business opportunities are available to entrepreneurs. People are also willing to trot the globe to prove their abilities and avail the opportunities. This too is creating a positive environment for the growth of entrepreneurs.

Thus, we observe that globally the atmosphere could not have been more conducive for the rise and growth of entrepreneurship.


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