Factors Affecting Entrepreneurship

Whether entrepreneurship flourishes in a particular place and time depends not only on the qualities of individuals but also on the wider environment they operate in. These influences are usually grouped into economic factors and non-economic factors.

Economic factors. These relate to the material conditions needed to actually start and run an enterprise:

• Availability of capital — an entrepreneur needs finance to acquire assets, buy raw material, and meet running expenses; where credit and investment capital are scarce or expensive, fewer people are able to start enterprises.
• Availability of labour — access to workers with the right skills, at a reasonable cost, affects how easily an enterprise can be staffed and run.
• Availability of raw material — enterprises that depend on physical inputs need those inputs to be available locally or at reasonable transport cost.
• Access to markets — an entrepreneur must be able to reach buyers for the enterprise's output; poor transport, communication, or market linkages discourage new ventures.
• Infrastructure — reliable power, transport, and communication facilities reduce the cost and risk of doing business and make entrepreneurship more attractive.

Non-economic factors. These relate to the social, psychological, and political environment surrounding the individual:

• Social factors — the attitudes of one's caste, community, and family toward business as an occupation; the degree of social mobility available to a person; and the social status or respect a society accords to those in trade and industry all affect how many people are willing to take up entrepreneurship. Where business is looked down upon or reserved informally for certain communities, fewer individuals from outside those communities attempt it.
• Psychological factors — as discussed earlier, David McClelland's theory of the 'need for achievement' (n-Ach) holds that societies and individuals with a stronger inner drive to achieve produce more entrepreneurs; a culture that nurtures ambition, independence, and a tolerance for failure will, on this view, generate more entrepreneurial activity than one that does not.
• Political and government factors — government policy on industrial licensing, taxation, and regulation; the general ease of doing business; and the availability of institutional support such as promotional schemes, subsidies, and single-window clearances all shape how easy or difficult it is to start and run an enterprise. A supportive policy environment tends to encourage entrepreneurship, while excessive restriction or red tape discourages it. …