FACTORS AFFECTING ENTREPRENEURIAL GROWTH

Some of the major conditions which influence the emergence of entrepreneurship in an

economy can be classified and discussed under these categories: economic, non-economic
and government factors.
Economic Factors:
From the economic point of view, it can be said that that the same factors which promote
economic development account for the emergence of entrepreneurship also. Some of these
factors are as follows:
Capital: Capital in finance and accounting, refers to the funds provided by lenders (and
investors) to businesses to purchase real capital equipment for producing goods/services. Real
Capital or Economic Capital comprises physical goods that assist in the production of other
goods and services,
Capital is one of the most important prerequisites to establish an enterprise and is regarded as
lubricant to the process of production.
Labour: The quality rather quantity of labour is another factor which influences the
emergence of entrepreneurship. It is observed that cheap labour is often less mobile or
immobile. To a certain extent problems of labour shortage can be done away with the use of
capital extensive technologies as done by some of the developed economies like Japan,
Germany etc.
Raw materials: Raw material is the basic material from which a product is manufactured or
made, frequently used with an extended meaning. For example, the term is used to denote
material that came from nature and is in an unprocessed or minimally processed state. The
necessity of raw materials hardly needs any emphasis for establishing any industrial activity
and, therefore, its influence on the emergence of entrepreneurship.
Markets: The potential of the market constitutes the major determinant of probable rewards
from entrepreneurial function. The size and composition of market both influence
entrepreneurship. Whether or not the market is expanding and the rate at which it is
expanding are the most significant characteristics of the market for entrepreneurship
emergence.
The survival and success of each and every business enterprise depend fully on its economic
environment. The main factors that affect the economic environment are:
a. Economic Conditions: The economic conditions of a nation refer to a set of economic
factors that have great influence on business organisations and their operations. These include
gross domestic product, per capita income, markets for goods and services, availability of
capital, foreign exchange reserve, growth of foreign trade, strength of capital market etc. All
these help in improving the pace of economic growth.

b. Economic Policies: All business activities and operations are directly influenced by the
economic policies framed by the government from time to time. Some of the important
economic policies are:
a. Industrial Policy: The Industrial policy of the government covers all those principles,
policies, rules, regulations and procedures, which direct and control the industrial enterprises
of the country and shape the pattern of industrial development.
b. Fiscal Policy: It includes government policy in respect of public expenditure, taxation and
public debt.
c. Monetary Policy: It includes all those activities and interventions that aim at smooth
supply of credit to the business and a boost to trade and industry.
d. Foreign Investment Policy: It includes all those activities and interventions that aim at
smooth supply of credit to the business and a boost to trade and industry.
e. Export Import Policy (EXIM Policy): It aims at increasing exports and bridges the gap
between expert and import. Through this policy, the government announces various
duties/levies. The focus now-a-days lies on removing barriers and controls and lowering the
custom duties.