15 Importance of Entrepreneurial Environment

With growing academic interest in entrepreneurship, a lot of recent research has concentrated on the reasons for the apparent spurt in entrepreneurship. The Global Entrepreneurship Monitor (GEM) report in 2007 observed a very high incidence of entrepreneurship throughout the world, particularly in Asia, with Thailand and India leading the way.

Importance of Entrepreneurial Environment

However, a lot of this entrepreneurship from the developing and underdeveloped countries was at a subsistence level and the result of lack of employment opportunities. The importance of entrepreneurial environment is:

  1. Importance of Entrepreneurial EnvironmentIndustry Structure
  2. New Technologies
  3. Deregulation and Privatization
  4. Formation of New Business Communities
  5. Increasing Demand for Variety
  6. Service Sector Growth
  7. Government Incentives and Subsidies
  8. Increasing Flow of Information
  9. Easier Access to Resources
  10. Entrepreneurial Education and Education in General
  11. Return on Innovation
  12. Successful Entrepreneurs as Hero
  13. High Regard for Self-Employment
  14. Rising Dissatisfaction at Job
  15. Acceptance of Ex-Entrepreneurs in Job Market

Importance of Entrepreneurial EnvironmentIndustry Structure

Performance, in terms of economic growth, is shaped by the degree to which the prevalent industry structure efficiently utilizes scarce resources. The recent technological changes have led to an industry structure that is generally shifting towards a bigger role for small firms.

New Technologies

This factor is related to the changes in industry structure. Fundamental changes in the nature of technological development have led to diseconomies of scale.

Deregulation and Privatization

Now companies have to deal with fewer licenses and government controls. Many state-owned enterprises have also been privatized leading to a greater role for the private sector in general and entrepreneurs in particular.

Formation of New Business Communities

Efficiency across markets, primarily resulting from the use of new technologies has led to declining costs of transactions. Recent advances in information technology and the internet have made inter-firm coordination relatively cheaper compared to intra-firm coordination. This promotes the setting up of new firms in the new-age business communities.

Increasing Demand for Variety

Increased wealth has led to an increase in the demand for variety, which in turn is advantageous to small firms.

Service Sector Growth

An increase in per capita income leads to a greater share of the services sector in the national economy.

Government Incentives and Subsidies

Government incentives and subsidies encourage entrepreneurship.

Increasing Flow of Information

Information is the lifeblood of business and it is being increasingly democratized. Information technology has revolutionized the way business is transacted.

Easier Access to Resources

It is easier for an entrepreneur to access debt and equity finance than ever before.

Entrepreneurial Education and Education in General

Many universities and institutions are nowadays offering entrepreneurship education.

Return on Innovation

The strengthening of intellectual Property Rights (IPR) has acted as a major boost to entrepreneurs willing to take a risk on innovation.

Successful Entrepreneurs as Hero

Dhirubhai Ambani and Narayan Murthy have become heroes to the middle class. The middle class reveres them as super-achievers and tries to emulate them.

High Regard for Self-Employment

Self-employment is not looked down upon and is thought of as the best way to achieve a variety of personal goals.

Rising Dissatisfaction at Job

Employers are finding it hard to retain talented employees. People have confidence in their abilities, which in turn prompts them to find alternate employment.

Acceptance of Ex-Entrepreneurs in Job Market

Companies are willing to re-employ people who have been entrepreneurs.

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