Which of the following is an economic factor affecting entrepreneurial growth?

Author: Amat Alsalam H. Al-Matari

Entrepreneurs are visionary, creative, confident, opportunity seeker, relation builder, and risktaker individuals who decided to ditch the nine-to-five lifestyle to set up their own businesses, taking on financial risks in the hope for profit. But what is the making of such individuals? What factors play behind the scenes to produce them? Entrepreneurship, in fact, is a complex phenomenon influenced by the interplay of many distinct factors.

Economic Factors

The 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 jobs. “In countries where the economy is poorer, or where unemployment rates are high, citizens turn to starting their own small
businesses where they see opportunity,” Trilby Rajna of Approved Index said. Economic factors impacting entrepreneurship include:

1. Capital
   Capital is one of the most important factors, yet one of the biggest barriers when launching a new business. Entrepreneurs require capital to start risky ventures and also require instant capital to scale up the business quickly if the idea is found to be successful. There are however numerous ways to fund a new venture including bank loans, crowdfunding, and bootstrapping.
2. Labor
   The availability of labor impacts entrepreneurship. Nevertheless, the quality rather than the quantity of labor influences the emergence and growth of entrepreneurship.
3. Raw Materials
   The necessity of raw materials consisting of natural resources hardly needs any emphasis for establishing any industrial activity and the emergence of entrepreneurship. The absence of raw materials adversely affects the entrepreneurial development.

Psychological Factors

They say entrepreneurship is not for the faint of heart. But then for whom is it! What does it take for an individual to become an entrepreneur? While there isn’t a single “ideal” entrepreneurial personality, one thing remains constant: an entrepreneurial spirit. This type of spirit entails many traits and characters that make 400 million entrepreneurs out of 7 billion people worldwide.(1)

1. Passion
   Starting up a new business is not an easy task to pull off and a consistent and constant commitment to the idea and the long hours it will require to turn it to a success is essential. Passion is the fuel of this commitment that motivates entrepreneurs to rise early in the morning and put their blood, sweat, and tears into their business.
2. Need for Achievement
   Entrepreneurs are self-starters with a need to achieve. This achievement motivation isn’t necessarily driven by the incentives of financial gain only but also by the satisfaction gain. To add, entrepreneurs’ motivation extends to reach their employees and partners to keep them on the same page and drive them to achieve as well.
3. Resilience
   Resilience comes with the package of the entrepreneurial spirit to help entrepreneurs stay determined in the face of any defeat they might encounter throughout the process. Failure is then a mere lesson to learn from and continue instead of giving up.

Social Factors

Social factors can go a long way in boosting entrepreneurship. In fact, it was the highly helpful society that made the industrial revolution a glorious success in Europe. Such factors strongly affect the entrepreneurial behavior, which contributes to entrepreneurial growth. The main components of the social environment include:

1. Family Background
   Family background including the size, type, and economic status can influence entrepreneurs and; therefore, entrepreneurship. Nonetheless, the entrepreneurial spirit does not necessarily run in the family. According to some sources, 51.9% of all entrepreneurs were the first to launch a business in their family.(2) Furthermore, less than 1% of all entrepreneurs come from extremely rich or extremely poor families.
2. Education
   Studies state that 95.1% of all entrepreneurs hold a bachelor degree, 47% of those have advanced in their education and acquired masters, Ph.D. or the like.(2) This is a well enough indicator of the importance of education to the development of entrepreneurship.
3. Social Networks
   Interacting with the surrounding society and forming a reliable network is essential. Social networks facilitate access to information and influence the quality, quantity, and speed of information reception thus help identify opportunities.

Training & Entrepreneurship Development

Although entrepreneurship education is very important, it’s been found that training is more effective in creating entrepreneurial skills. Studies found a strong relationship between entrepreneurship training and business creation on the long and short-term horizons, perceived entrepreneurial ability, and entrepreneurial mindset and thinking. (3)

The world is greatly indebted to entrepreneurs whose ideas and ventures have changed the way we live and work to the better; creating jobs, growth, and the conditions for a flourishing society. Entrepreneurs are therefore a national asset to be refined, motivated and remunerated to the greatest possible extent through learning the exact influences that impact their development and thus supporting them.

Sources:

1. Entrepreneurship Infographic: 46 Facts Every Entrepreneur Needs To Know About [Internet]. [cited 2019 Sep 3]. Available from:
   https://www.dealsunny.com/blog/entrepreneurship-infographic
2. 12 Facts About Entrepreneurs That Will Likely Surprise You [Internet]. [cited 2019 Sep 3].
   Available from: http://www.onstartups.com/tabid/3339/bid/10561/12-Facts-AboutEntrepreneurs-That-Will-Likely-Surprise-You.aspx
3. Al-Awlaqi MA, Aamer AM, Habtoor N. The effect of entrepreneurship training on
   entrepreneurial orientation: Evidence from a regression discontinuity design on microsized businesses. Int J Manag Educ [Internet]. 2018 Nov 15; Available from: http://www.sciencedirect.com/science/article/pii/S1472811718302234