The Entrepreneurial Decision Process PDF

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The Entrepreneurial Decision Process An individual has to take a number of decisions in sequential order to become an entrepreneur Fig: Entrepreneurial Decision Process Present Status

Need for changing present status

Desire for change from present status to become entrepreneur

An entrepreneur

Present Status Change is often resisted because it involves uncertainty which causes fear. It is due to the uncertainty; the present status is considered better than the unknown one after the change. Leaving the present status and becoming an entrepreneur needs a great deal of preparations. Need for changing present status Broadly there are two reasons for individuals to become entrepreneurs: i) By choice and ii) By compulsion. By choice Reasons for change By compulsion By choice, individual working in marketing area become familiar with market gains and in turn start their own business in that market. Individual working as software developer, starts own software development company. On the other hand, disruption in the present job/unemployment, completion of education, less possibility for career, dislocation, lay-off and other factors compel people to become entrepreneurs. Desire for change from present status to become entrepreneur Desire to become entrepreneur is spawned by factors like culture, family, teachers and peers one comes into contact with. Culture: Punjab and Gujarat give high value on being entrepreneur

Educational Institutions/teachers: There should be course curriculum on entrepreneurship and enterprise management from higher secondary level to mould and stimulate individuals to become entrepreneurs. Peer group: Motivate and develops the feeling of self-efficacy in the individual An entrepreneur Entrepreneurs are not born, they develop.

Factors affecting entrepreneurial growth The various factors affecting entrepreneurial growth can be grouped under two broad categories, viz. economic factors and non-economic factors.

Economic factors The economic factors that affect the growth of entrepreneurship are the following: 1. Capital: Capital is one of the most important factors of production for the establishment of an enterprise. Entrepreneurship activity gets a boost with the easy availability of funds for investment. Availability of capital facilitates the entrepreneur to bring together the land of one, machine and raw material and combine them to produce goods. Capital is therefore, regarded as lubricant to the process of production. 2. Labour: The quality rather than quantity of labour influences the emergence and growth of entrepreneurship. Entrepreneurship is encouraged if there is a mobile and flexible labour force. The problem of labour immobility can be solved by providing infrastructural facilities including efficient transportation. 3. Raw Materials: The necessity of raw materials hardly needs any emphasis for establishing any industrial activity and its influence in the emergence of entrepreneurship. It is one of the basic ingredients required for production. Shortage of raw material can adversely affect entrepreneurial environment. Without adequate supply of raw materials no industry can function properly and emergence of entrepreneurship to is adversely affected. 4. Market: The role and importance of market and marketing is very important for the growth of entrepreneurship. In modern competitive world no entrepreneur can think of surviving in the absence of latest knowledge about market and various marketing techniques. The fact remains that the potential of the market constitutes the major determinant of probable rewards from entrepreneurial function. The size and composition of market both influence entrepreneurship in their own ways.

Non Economic factors The influence of economic factors on entrepreneurial growth largely depends on the existence of non-economic factors i.e social and psychological factors in the society

Social Conditions Legitimacy of Entrepreneurship: The non-economic factors emphasis relevance of a system of norms and values within a socio-cultural setting for the emergence of entrepreneurship. In professional vocabulary, such system is referred to as the ‘legitimacy of entrepreneurship’ in which the degree of approval or disapproval granted for entrepreneurial behaviour influences its emergence and characteristics if it does emerge. The social status of those playing entrepreneurial role has been considered one of the most important contents of entrepreneurial legitimacy (Katzin 1964). Social Mobility: Social mobility involves the degree of mobility, both social and geographical, and the nature of mobility channels within a system. The opinion that the 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 Hoselitz’s need for “openness” of a system and McClelland’s (1961) need for “flexibility” imply the need for the possibility of mobility within a system for entrepreneurship development. In contrast, there is another group of scholars (Hagen 1968) which expresses the view that a lack of mobility possibilities promotes entrepreneurship. It can be concluded 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. Marginality: A group of scholars hold a strong view that social marginality also promotes entrepreneurship. They believe that individuals or groups on the perimeter of a given social system or between two social systems have more entrepreneurial roles. 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 nonentrepreneurial roles and the entrepreneurial roles will be relegated to marginal’s.

On the contrary, in the case of high entrepreneurial legitimacy, mainstream individuals will assume the entrepreneurship and marginal’s 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’s are likely to play entrepreneurial roles in a situation. Several factors are attributed to the increase in the likelihood of marginal’s becoming entrepreneurs. Nevertheless, marginality alone, like many other factors, cannot be considered a sufficient condition for promoting entrepreneurship Security: Entrepreneurial security is a significant factor for entrepreneurship development. 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. Psychological factor Need Achievement David McClelland’s “theory of need achievement” is the best known psychological theory of entrepreneurship development. According to this theory, high need of achievement is the major determinant of entrepreneurship development. People with high need for achievement have desire for success in competition with others, or with a self-imposed standard of excellence. They try to accomplish challenging tasks, take risks and are goal oriented. In order to prove that, need for achievement can be induced through intensive training programmes, McClelland conducted an experiment in

collaboration with the Small Industries Extension and Training Institute (SIET) of Hyderabad at Kakinada, Andhra Pradesh....