Factors Affecting Entrepreneurial Growth

Entrepreneurship does not grow in a vacuum. Whether entrepreneurs emerge in large numbers and thrive depends on the surrounding environment. These influences are grouped into economic factors, non-economic factors and government policy.

(a) Economic factors

These relate to the availability of resources and markets:

• Capital. Adequate finance is the lifeblood of enterprise; easy access to funds encourages more people to start ventures.
• Labour. Availability of skilled, trainable and mobile workers at reasonable cost supports industrial activity.
• Raw materials. Assured supply of good-quality raw materials at fair prices is essential for manufacturing enterprises.
• Market. A large and growing market — with buyers who have purchasing power — makes ventures viable and worth expanding.
• Infrastructure. Roads, power, water, transport, communication and banking facilities reduce costs and make it easier to set up and run an enterprise.

(b) Non-economic factors

These are the social, cultural and psychological conditions of a society:

• Social attitudes and legitimacy of enterprise. A society that respects business and risk-taking produces more entrepreneurs than one that looks down on trade.
• Culture and social mobility. Values that reward achievement, and a flexible social structure that lets people rise by merit, encourage enterprise.
• Education and training. Education spreads knowledge, skills and awareness of opportunities; specific entrepreneurship and skill training builds competence.
• Family background and role models. Coming from a business family, or seeing successful entrepreneurs, inspires others to follow.
• Need for achievement and psychological drive. Societies with a strong achievement motivation tend to be more entrepreneurial.

(c) Government policy

Government shapes the climate for enterprise through its policies and support:

• Industrial and licensing policy. Rules on what may be produced, and how easily a business can be started, either encourage or discourage new entrepreneurs.
• Taxation and incentives. Tax concessions, subsidies and rebates lower the cost and risk of starting up.
• Financial and credit support. Loans, seed capital and priority-sector lending through banks and development institutions ease the capital constraint.
• Infrastructure and industrial estates. Providing developed land, sheds and utilities in industrial areas reduces the burden on the entrepreneur. …