Q.Explain the economic and non-economic factors affecting entrepreneurship.

How much entrepreneurial activity a place produces depends on both the material resources available and the wider social/psychological/political environment.

Whether entrepreneurship flourishes in a given place and time depends on both the material conditions available and the wider social, psychological, and political environment. These influences are grouped as economic and non-economic factors.

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

• Availability of capital — access to affordable finance and credit determines how many people can actually start an enterprise.
• Availability of labour — access to workers with suitable skills at reasonable cost affects how easily an enterprise can be staffed.
• Availability of raw material — enterprises dependent on physical inputs need those inputs to be accessible at reasonable cost.
• Access to markets — the entrepreneur must be able to reach buyers; poor transport or market linkages discourage new ventures.
• Infrastructure — reliable power, transport, and communication reduce the cost and risk of doing business.

Non-economic factors relate to the social, psychological, and political environment:

• Social factors — the attitudes of one's caste, community, and family toward business, the degree of social mobility available, and the social status accorded to trade all affect how many people take up entrepreneurship.
• Psychological factors — David McClelland's 'need for achievement' (n-Ach) theory holds that individuals and societies with a stronger inner drive to achieve produce more entrepreneurs; a culture that rewards ambition and tolerates failure tends to generate more entrepreneurial activity. …