6. Entreprenial Behaviour and Socio-physchological Factors Influencing Entrpreneurship Development
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Transcript of 6. Entreprenial Behaviour and Socio-physchological Factors Influencing Entrpreneurship Development
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VI. ENTREPRENIAL BEHAVIOURVI. ENTREPRENIAL BEHAVIOUR
AND SOCIOAND SOCIO--PHYSCHOLOGICALPHYSCHOLOGICALFACTORS INFLUENCINGFACTORS INFLUENCING
ENTRPRENEURSHIPENTRPRENEURSHIP
DEVELOPMENTDEVELOPMENTBehavioral Pattern of Entrepreneurs:Behavioral Pattern of Entrepreneurs:
Habits attitudes, perception etc. of people reflect the socioHabits attitudes, perception etc. of people reflect the socio--economic background from which they come. People witheconomic background from which they come. People with
varied backgrounds undertake entrepreneurial activities.varied backgrounds undertake entrepreneurial activities. The type of industrial activity they undertake has a lot to doThe type of industrial activity they undertake has a lot to do
with their personal traits. This behavior pattern ofwith their personal traits. This behavior pattern ofentrepreneurial can be observed in the entrepreneurial historyentrepreneurial can be observed in the entrepreneurial historyof India.of India.
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Aman and his son are in a serious carAman and his son are in a serious caraccident. The father is killed, and the sonaccident. The father is killed, and the son
is rushed to the emergency room. Uponis rushed to the emergency room. Uponarrival, the attending doctor looks at thearrival, the attending doctor looks at thechild gasps, This child is my son! Who ischild gasps, This child is my son! Who isthe doctor?the doctor?
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SocioSocio--economic factors affectingeconomic factors affectingentrepreneurship developmententrepreneurship development ::
The socioThe socio-- economic back ground from whicheconomic back ground from whichthey come affects the behavior patterns ofthey come affects the behavior patterns ofentrepreneurs.entrepreneurs.
In order to understand their behaviorIn order to understand their behaviorpatterns, one has to analyze their background.patterns, one has to analyze their background.
The background can be studied by analyzingThe background can be studied by analyzingthe different sociothe different socio-- economic factors.economic factors.
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SocioSocio--Economic Origins / FactorsEconomic Origins / Factors
SocioSocio--Economic factors are analyzed for studying theEconomic factors are analyzed for studying the
behavior patterns of entrepreneurs, in other wordsbehavior patterns of entrepreneurs, in other wordsentrepreneurs behave in aparticular manner becauseentrepreneurs behave in aparticular manner becauseof the influence of socioof the influence of socio--economic factors. Followingeconomic factors. Followingare some of the factors that are considered in such aare some of the factors that are considered in such a
study:study:
1.1. Caste origins:Caste origins: Certain religions and castesCertain religions and castesencourage entrepreneurship. Caste system in India ledencourage entrepreneurship. Caste system in India ledto rigid customs and traditions. Economic activitiesto rigid customs and traditions. Economic activities
were also castewere also caste--oriented. The caste system in Indiaoriented. The caste system in Indiaexercised an influence on the occupation of a person.exercised an influence on the occupation of a person.Certain castes have a culture that encouragesCertain castes have a culture that encouragesentrepreneurship.entrepreneurship.
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It was because of this that few communitiesIt was because of this that few communitieswere engaged in trade and industry forwere engaged in trade and industry for
centuries in India e.g. the Vaishyas, Khatris,centuries in India e.g. the Vaishyas, Khatris,Baniyas, Parsees, Jains and Marwarirs haveBaniyas, Parsees, Jains and Marwarirs havebeen responsible for supply ofbeen responsible for supply ofentrepreneurship in India.entrepreneurship in India.
This is also true in case of a number ofThis is also true in case of a number ofcountries e.g. the Protestant ethics in the west,countries e.g. the Protestant ethics in the west,the trading classes in the United States, thethe trading classes in the United States, the
family business concerns of France and thefamily business concerns of France and theSamurai in Japan. Samurai in Japan.
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2.2. Time and age of entry:Time and age of entry:
The time and age of entry are important factorsThe time and age of entry are important factors
to be considered in the behavioral pattern ofto be considered in the behavioral pattern ofentrepreneurs e.g. the Marwaris enter businessentrepreneurs e.g. the Marwaris enter businessat a much younger age than the Parsees orat a much younger age than the Parsees orKhatris.Khatris.
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3.3. Family Background:Family Background:
This includes the economic status, size and theThis includes the economic status, size and the
type of family e.g.because the Zamindartype of family e.g.because the Zamindarfamilies bad greater access to political power,families bad greater access to political power,they were more entrepreneurial.they were more entrepreneurial.
Again; the joint families could expand their
Again; the joint families could expand theirfamily business projects considerably becausefamily business projects considerably because
the family property could be invested.the family property could be invested.
If the family came from a rural area, they couldIf the family came from a rural area, they couldnot enjoy the advantages like families fromnot enjoy the advantages like families fromurban areas did, though that' consideration wasurban areas did, though that' consideration wasnot a hindrance to entrepreneurship.not a hindrance to entrepreneurship.
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4.4. Religious background:Religious background:
Certain religions condemn the indulgence inCertain religions condemn the indulgence in
material gains.material gains. On the other band, Max Weber say theOn the other band, Max Weber say the
protestant ethic among the Christians developsprotestant ethic among the Christians develops
the right attitude for entrepreneurship.the right attitude for entrepreneurship. religions teach a man to refrain from materialreligions teach a man to refrain from material
comforts, as he has not come to this world tocomforts, as he has not come to this world tomake money and indulge in pleasures.make money and indulge in pleasures.
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Anumber of subsequent studies show thatAnumber of subsequent studies show thatreligions in India do not kill thereligions in India do not kill the
entrepreneurial spirit.entrepreneurial spirit.
It is not the form of religion that is practicedIt is not the form of religion that is practicedbut the type of interpretation that is given tobut the type of interpretation that is given to
the religious values and that is important forthe religious values and that is important forentrepreneurial success. But religion hasentrepreneurial success. But religion hasdefinitely had an impact on the entrepreneurialdefinitely had an impact on the entrepreneurialbehaviorbehavior ofof an individual.an individual.
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5.5. Education and technical knowEducation and technical know--how:how:
Ahigher level of education enables entrepreneursAhigher level of education enables entrepreneurs
to use their talent more profitably.to use their talent more profitably.
Education is considered to be a good means toEducation is considered to be a good means to
develop man's resourcefulness.develop man's resourcefulness.
A study has shown that a majority ofA study has shown that a majority of
entrepreneurs in the technicaland, engineeringentrepreneurs in the technicaland, engineeringindustries were graduates and postindustries were graduates and post--graduates.graduates.
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6.6. Occupational background:Occupational background:
For starting enterprise what is required is theFor starting enterprise what is required is the
entrepreneurial spirit .entrepreneurial spirit .
Most of the entrepreneurs have come fromMost of the entrepreneurs have come fromfamilies where theparental occupation wasfamilies where theparental occupation was
employment or agriculture.employment or agriculture.
It was not necessarily the business &It was not necessarily the business &
background that influenced them intobackground that influenced them intoundertaking the entrepreneurial activity.undertaking the entrepreneurial activity.
This provided a base for study.This provided a base for study.
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7.7. Migratory character:Migratory character:
The study shows that fourThe study shows that four -- fifths offifths of
entrepreneurs were immigrants who had comeentrepreneurs were immigrants who had comefrom places within and outside the state.from places within and outside the state.
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8.8. Type of industry started:Type of industry started:
Out of the forty enterprises in two districts ofOut of the forty enterprises in two districts ofAndhra Pradesh, where the study wasAndhra Pradesh, where the study wasconducted, nearly twoconducted, nearly two--thirds of thethirds of theentrepreneurs started industries in engineeringentrepreneurs started industries in engineering
works. This factor provided scope for theworks. This factor provided scope for theanalysis of entrepreneurial behavior.analysis of entrepreneurial behavior.
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9.9. Type of ownership preferred:Type of ownership preferred:
The type of ownership organization theThe type of ownership organization the
entrepreneurs prefer also helps inentrepreneurs prefer also helps inunderstanding the socio economic background.understanding the socio economic background.
They come from e.g. the above study showedThey come from e.g. the above study showedthat nearly fifty percent of the entrepreneursthat nearly fifty percent of the entrepreneurshad launched their units in the partnershiphad launched their units in the partnershipform, about oneform, about one--third in the sole trading form.third in the sole trading form.
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This shows that they wanted, to avoid legalThis shows that they wanted, to avoid legalformalities that existed informalities that existed in the Indian society forthe Indian society for
launchinglaunching companies.companies.
Thus one may conclude that the socioThus one may conclude that the socio--economic background exercises an influence oneconomic background exercises an influence onthe entrepreneur's motivation, access tothe entrepreneur's motivation, access toresources, riskresources, risk-- bearing capacity etc. that inbearing capacity etc. that inturn determine, entrepreneurial behaviour andturn determine, entrepreneurial behaviour and
the growth of entrepreneurs.the growth of entrepreneurs.
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Factors Determining the Growth ofFactors Determining the Growth ofEntrepreneurship:Entrepreneurship:
Research has shown that entrepreneurs areResearch has shown that entrepreneurs aremotivated by a combination and interaction ofmotivated by a combination and interaction ofa number of factors.a number of factors.
Entrepreneurship does not spring and growEntrepreneurship does not spring and growautomatically.automatically.
It does not emerge spontaneously.It does not emerge spontaneously.
It is the result of the availability of anumber ofIt is the result of the availability of anumber offactors. These factors can also be known asfactors. These factors can also be known as"supportive conditions" or "facilitating"supportive conditions" or "facilitatingconditions. "conditions. "
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Entrepreneurship can flourish under anEntrepreneurship can flourish under anatmosphere that is conducive; where theseatmosphere that is conducive; where these
factors are favorable or have a positivefactors are favorable or have a positiveinfluence entrepreneurial activities can growinfluence entrepreneurial activities can growand develop.and develop.
Factors that determine the growth orFactors that determine the growth orentrepreneurship can be broadly divided intoentrepreneurship can be broadly divided intotwo categories viz. the economic and the nontwo categories viz. the economic and the non--economic factors.economic factors.
Besides, the Government actions alsoBesides, the Government actions alsodeterminel the entrepreneurial growth in adeterminel the entrepreneurial growth in acountry.country.
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OTHER FACTORS DETERMINING GROWTHOTHER FACTORS DETERMINING GROWTHOF ENTREPRENEURSHIP DEVELOPMENT:OF ENTREPRENEURSHIP DEVELOPMENT:
AA--Economic FactorsEconomic Factors-- The economicThe economicfactors that affect the growth offactors that affect the growth ofentrepreneurship in a country are as follows:entrepreneurship in a country are as follows:
1.1. Capital:Capital: Capital is required forCapital is required for
establishing and running an organization. It is aestablishing and running an organization. It is aprerequisite for expansion and developmentprerequisite for expansion and development--programmes of an enterprise.programmes of an enterprise.
Since capital is the life
Since capital is the life--blood of trade andblood of trade andcommerce, it is the basic requirement forcommerce, it is the basic requirement for
entrepreneurial activities. If it is available inentrepreneurial activities. If it is available inabundance then the entrepreneurial activitiesabundance then the entrepreneurial activities
will also grow.will also grow.
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In the less developed countriesIn the less developed countriesentrepreneurship has a slow growth on accountentrepreneurship has a slow growth on account
of lack of capital.of lack of capital. In such countries there is less domestic saving.In such countries there is less domestic saving.
There is also the problem of channelisingThere is also the problem of channelising
savings for productive purposes.savings for productive purposes. Entrepreneurs in such countries always faceEntrepreneurs in such countries always face
the problem of inadequate finance.the problem of inadequate finance.
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Besides, entrepreneurs do not get capital forBesides, entrepreneurs do not get capital forexperimenting on new ideas.experimenting on new ideas.
Innovations require financial resources inInnovations require financial resources inabundance.abundance.
On the other hand, entrepreneurship growsOn the other hand, entrepreneurship grows
in the more developed countries on account ofin the more developed countries on account ofavailability of financial resources. Capital,availability of financial resources. Capital,therefore, becomes on important determinanttherefore, becomes on important determinant
of entrepreneurial growth.of entrepreneurial growth.
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2.2. Labour:Labour:
The type of labor available in a countryThe type of labor available in a country
determines entrepreneurialgrowth. The labor isdetermines entrepreneurialgrowth. The labor ismobile and flexible then the entrepreneurs canmobile and flexible then the entrepreneurs canget the rlght type of !abour.get the rlght type of !abour.BesideBesideentrepreneurs also require skilled labor forentrepreneurs also require skilled labor forcertain business activities.certain business activities.
In less developed countries though, labor isIn less developed countries though, labor isavailable in a large number, it is not mobile. Inavailable in a large number, it is not mobile. In
such countries cheap labor is always immobilesuch countries cheap labor is always immobileon account of emotional and economicon account of emotional and economicinsecurity.insecurity.
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3. Raw Materials:3. Raw Materials: The easy availability of rawThe easy availability of rawmaterials is a must for any industrial activitymaterials is a must for any industrial activity
Thus factor influences the growth ofThus factor influences the growth ofentrepreneurship . Without its availability,entrepreneurship . Without its availability,neither can any enterprise nor canneither can any enterprise nor canentrepreneurship emerge.entrepreneurship emerge.
Innovations require experimentation onInnovations require experimentation onmaterial resources. If raw materials arematerial resources. If raw materials areavailable in abundance then entrepreneurshipavailable in abundance then entrepreneurship
can grow and develop easily. However to acan grow and develop easily. However to acertain extent this problem can be solved.certain extent this problem can be solved.
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4. Market:4. Market:
All production and trading is done forAll production and trading is done for
consumers. Until and unless the products andconsumers. Until and unless the products andservices reach the consumer who is the last linkservices reach the consumer who is the last linkin the chain of distribution and who isin the chain of distribution and who isresponsible for its consumption the objective ofresponsible for its consumption the objective ofentrepreneurial activity is not achieved.entrepreneurial activity is not achieved.
Awell regulated and a developed marketAwell regulated and a developed marketdefinitely promotes entrepreneurship. Its sizedefinitely promotes entrepreneurship. Its size
and composition also influences theand composition also influences theemergence of entrepreneurs.emergence of entrepreneurs.
as a determinant of entrepreneurial growth.as a determinant of entrepreneurial growth.
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Favorable marketing conditions haveFavorable marketing conditions havepositive influences on entrepreneurship.positive influences on entrepreneurship.
If the market has a good potential, it isIf the market has a good potential, it isexpanding and offers good prospects forexpanding and offers good prospects fortrade then definitely entrepreneurship willtrade then definitely entrepreneurship will
grow.grow. Market under the economic factors can beMarket under the economic factors can be
regardedregarded
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5.5. Adequate Overhead Facilities:Adequate Overhead Facilities:
Successful entrepreneurial activities requireSuccessful entrepreneurial activities require
certain basic facilities and services likecertain basic facilities and services liketransportation, communication, technical andtransportation, communication, technical andeconomic information,, supply of power,economic information,, supply of power,irrigation facilities etc.irrigation facilities etc.
They provide economies and make theThey provide economies and make theinvestments of entrepreneurs fruitful.investments of entrepreneurs fruitful.
They reduce the cost of production and help inThey reduce the cost of production and help inthe increase of output.the increase of output.
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In Less developed countries, entrepreneurialIn Less developed countries, entrepreneurialgrowth is restricted on account of scarcity ofgrowth is restricted on account of scarcity of
these facilities.these facilities. These services are inadequate and lessThese services are inadequate and less
developed and sometimes very, expensive.developed and sometimes very, expensive.These problems affect the profit margins ofThese problems affect the profit margins ofentrepreneurs. They pose severe problems andentrepreneurs. They pose severe problems anddiscourage entrepreneurial activity.discourage entrepreneurial activity.
On the other hand, entrepreneurship has moreOn the other hand, entrepreneurship has more
scope to grow in advanced countries as thesescope to grow in advanced countries as theseoverhead facilities are well developed and areoverhead facilities are well developed and areavailable on a larger scale.available on a larger scale.
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6.6. business Risks:business Risks:
Economic risk and risks arising out ofEconomic risk and risks arising out of
uncertainties are more in less developed thanuncertainties are more in less developed thanin developed countries. This is because there isin developed countries. This is because there islack of reliable information on cost, sizelack of reliable information on cost, size--ofofmarket, conditions of demand,overheadmarket, conditions of demand,overheadfacilities etc.facilities etc.
An entrepreneur cannot. make correctAn entrepreneur cannot. make correctestimates under such circumstances andestimates under such circumstances and
therefore faces more risks and uncertainties intherefore faces more risks and uncertainties inless developed countries. Besides, the marketless developed countries. Besides, the marketfor goods and services is smaller.for goods and services is smaller.
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There is also the problem of lack of stability inThere is also the problem of lack of stability inboth the domestic and foreign economic policy.both the domestic and foreign economic policy.
All thesesituations make business extremelyAll thesesituations make business extremelyrisky and sometimes less viableand thisrisky and sometimes less viableand thisdiscourages entrepreneurs.discourages entrepreneurs.
When entrepreneurs are put to the mercy ofWhen entrepreneurs are put to the mercy ofunforeseen conditions they either make shortunforeseen conditions they either make short--term investments or do not take up project interm investments or do not take up project inwhich the risk element is high.which the risk element is high.
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B.B. NonNon--Economic Factor:Economic Factor: The nonThe non--economic factors that determine the growtheconomic factors that determine the growth ofofentrepreneurship are as follows:entrepreneurship are as follows:
1.1. SocioSocio--cultural Factors:cultural Factors:
According to Joseph A.Schumpeter, there hasAccording to Joseph A.Schumpeter, there hasto be an appropriate social climate forto be an appropriate social climate for
entrepreneurship. Cochran calls it culturalentrepreneurship. Cochran calls it culturalthemes and sanctions.themes and sanctions.
They both talk about the existence of normsThey both talk about the existence of normsand values within a socioand values within a socio--cultural setcultural set--up.up.
These have influence on entrepreneurialThese have influence on entrepreneurialbehavior. The behaviour can favor orbehavior. The behaviour can favor ordisfavor entrepreneurial growth.disfavor entrepreneurial growth.
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To increase the level of entrepreneurial activityTo increase the level of entrepreneurial activityin a country, many scholars have proposed ain a country, many scholars have proposed a
change in traditional values and beliefs.change in traditional values and beliefs. If these are traditional in nature, they do notIf these are traditional in nature, they do not
favor entrepreneurial growth. For example, iffavor entrepreneurial growth. For example, ifthe people in a follow certain customs andthe people in a follow certain customs andtraditions rigidly then certain entrepreneurialtraditions rigidly then certain entrepreneurialactivities may not be undertaken at all.activities may not be undertaken at all.
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For example, business in hides, meatFor example, business in hides, meatcanning, poultry farming, etc. While otherscanning, poultry farming, etc. While others
may not develop enough.may not develop enough. If people are superstitious and beiieve inIf people are superstitious and beiieve in
astrology and destiny, then business mayastrology and destiny, then business mayreceive a set back.receive a set back.
People may not get into some businessPeople may not get into some businessactivities, as the stars do not favor them. Theyactivities, as the stars do not favor them. Theymay launch business projects only when themay launch business projects only when the
time according to their stars is auspicious. Thetime according to their stars is auspicious. Theeconomic policy or market conditions mayeconomic policy or market conditions maynot necessarily be favorable then.not necessarily be favorable then.
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Entrepreneurs may not get to the root cause ofEntrepreneurs may not get to the root cause ofinefficiency or ineffectiveness in theinefficiency or ineffectiveness in the
organizations as they may feel their stars areorganizations as they may feel their stars arebad or they are not destined for progress.bad or they are not destined for progress.
Scholars like McClelland suggest that aScholars like McClelland suggest that acomplete change intraditional values maycomplete change intraditional values maynot be necessary for entrepreneurialnot be necessary for entrepreneurialappearance.appearance.
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They suggest a synthesis of old values withThey suggest a synthesis of old values withnewer values or their reinterpretation.newer values or their reinterpretation.
Sometimes government actions can also help aSometimes government actions can also help asociety to overcome negative orientations.society to overcome negative orientations.Under this factor, the opinion of social mobilityUnder this factor, the opinion of social mobility
is not unanimous.Some hold the view that ais not unanimous.Some hold the view that ahigh degree of mobility is conducive tohigh degree of mobility is conducive toentrepreneurship.entrepreneurship.
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Social mobility involves the degree of mobility,Social mobility involves the degree of mobility,both social and geographical and the nature ofboth social and geographical and the nature of
mobility channels within asystem.mobility channels within asystem. Scholar; like Hoselitz and McClelland proposeScholar; like Hoselitz and McClelland propose
openness of asystem and flexibility in roleopenness of asystem and flexibility in rolerelations. If there is mobility within asystemrelations. If there is mobility within asystemthen entrepreneurship development isthen entrepreneurship development ispromoted.promoted.
On the other hand, a group of scholars feel thatOn the other hand, a group of scholars feel that
entrepreneurship comes from a rigid socialentrepreneurship comes from a rigid socialcombination of both the systems.combination of both the systems.
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According to Rostowand Brozen, a socialAccording to Rostowand Brozen, a socialsystem should neither be too rigid, nor toosystem should neither be too rigid, nor too
flexible.flexible. If it is too flexible then an individual may moveIf it is too flexible then an individual may move
into other roles easily and not slick to theinto other roles easily and not slick to theentrepreneurial one.entrepreneurial one.
On the otherhand if the social system is tooOn the otherhand if the social system is toorigid then entrepreneurship will be restricted. Itrigid then entrepreneurship will be restricted. Itwill not have a wide scope for growth andwill not have a wide scope for growth and
development.development.
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Social mobility can therefore, have a strongSocial mobility can therefore, have a stronginfluence on entrepreneurial growth.influence on entrepreneurial growth.
Social marginality like social mobility is anotherSocial marginality like social mobility is anotherfactor under social conditions that acts as afactor under social conditions that acts as adeterminant of entrepreneurial growth.determinant of entrepreneurial growth.
S
ocial marginality also promotesS
ocial marginality also promotesentrepreneurship according to a groups ofentrepreneurship according to a groups ofscholars.scholars.
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Social marginality implies a situation in whichSocial marginality implies a situation in whichthere is a discontinuity between thethere is a discontinuity between the
individual's personal attributes (eg physicalindividual's personal attributes (eg physicalcharacteristics intellectual makecharacteristics intellectual make--up, socialup, socialbehavior patterns) and the role or roles, whichbehavior patterns) and the role or roles, whichthe individual holds in society.the individual holds in society.
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Aperson is likely to adopt owner manager roleAperson is likely to adopt owner manager roleas a solution to marginality. e g a Brahmin whoas a solution to marginality. e g a Brahmin who
performs religious duties and rituals and earnsperforms religious duties and rituals and earnshis living from such activities may switch overhis living from such activities may switch overto entrepreneurial activity when the societyto entrepreneurial activity when the societydoes not give much importance to these rituals.does not give much importance to these rituals.
However there are some purely structura;However there are some purely structura;factors like the entrepreneurial opportunityfactors like the entrepreneurial opportunityavailable in the society, rate of structuralavailable in the society, rate of structural
change in the economy etc. that facilitatechange in the economy etc. that facilitateentrepreneurial activities.entrepreneurial activities.
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2. Pshychological Factors:2. Pshychological Factors: A number of entrepreneurial theorists have givenA number of entrepreneurial theorists have given
theories of entrepreneurship, wrich highlight thetheories of entrepreneurship, wrich highlight thepsychological factors affecting entrepreneurial growth.psychological factors affecting entrepreneurial growth.
David McClelland has propounded the need forDavid McClelland has propounded the need forachievement, Theory.achievement, Theory.
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3. GOVERNMENT ACTIONS:3. GOVERNMENT ACTIONS: The government of a country can influenceThe government of a country can influence
both the economic as well as the nonboth the economic as well as the non--economiceconomicfactors affecting entrepreneurship.factors affecting entrepreneurship.
Its failure to act can create a negativeIts failure to act can create a negativeinfluence on these factors. On the other hand,influence on these factors. On the other hand,if it is interested in developing entrepreneurshipif it is interested in developing entrepreneurshipit can frame suitable industrial policies. It canit can frame suitable industrial policies. It canprovide basic facilities, utilities and services.provide basic facilities, utilities and services.
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It can provide basic concessions and create aIt can provide basic concessions and create aconductive socioconductive socio--economic set up. Such aneconomic set up. Such an
atmosphere minimizes the risks andatmosphere minimizes the risks anduncertainties that entreprenurs have touncertainties that entreprenurs have toencounter and induces them to perform.encounter and induces them to perform.
Supportive action of the governmnet canSupportive action of the governmnet can
promote the entrepreneur growth.promote the entrepreneur growth.