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Assignment on

“Factors affecting
entrepreneurship –
individual and
environmental factors”

Factors affecting entrepreneurship

What is an entrepreneur?
• An entrepreneur is an economic agent

• that acts in the allocation of resources

– raw materials

– intermediate goods

– physical, human, and social capital

• Either to increase the efficiency of production of existing

commodities, or to create new products.

A study of socio-political and economic environment has a great social

and economic significance to the growth of entrepreneurship. Modern
business is treated as a social and economic institution and is affected
by the political, social and economic forces. The political environment,
industrial policy, licensing policy, foreign exchange regulations,
banking policy, technological development and social change form the
framework within which an enterprise has to work. It is for these
reasons that all business plans must be based on the immediate
environment. An entrepreneurial plan cannot be framed and finalized
for its implementation without its relevance to the political, social,
economical and technological requirements. In fact, it is the
environment that regulates entrepreneurial activities. So all these
environments which affect the entrepreneurial development can be
called the Factors affecting entrepreneurship.

Basically these factors can be categorized into 4 groups-

1. Individual factor

2. Psychological factor

3. Environmental factor

4. Socio-cultural factor
Individual factors-

Occupational background- occupational background plays a very

significant role in entrepreneurial development. The person engaged in
some occupation gains a very good knowledge of his field. And then he
tries to start some new business in the same field.

Educational background-Education, entrepreneurship and

development are interrelated. Education is the best means of
developing man’s resourcefulness which encompasses different
dimensions of entrepreneurship. Thus, formal education is always
considered an important asset of an individual in building an
occupational career. It makes available more skills necessary to
entrepreneurial endeavor.

Parental background-sometimes children continue their family

business which is given by their parents. They try to bring in some
changes in the existing business in the form of some new technology,
new process, new product etc. they are called second generation

Psychological factors-

 Independence

 Challenge

 Dream desire

 Family background

 Market opportunity

 Idea driven

 Need for achievement

 Profit making
Environmental factors-
A complex and varying combination of financial, institutional, cultural,
and personality factors determine the nature and degree of
entrepreneurial activity at any time. At any point of time, the
entrepreneurs derive meanings from environment prevailing at that
time and try to adapt and change the environment to suit their needs.

The environment, particularly the external environment is dynamic. It

keeps on changing and affects different organizations to a varying
extent. The impact of environment on the organization depends largely
on the degree to which the organization depends on the environment
and organizational response to environmental changes. All the factors
outside and inside the organization interact and affect the performance
of the organization.

Entrepreneurship is environmentally determined. The most essential

for entrepreneurial growth is the presence of the favorable business
environment. A healthy business environment requires active social
and cultural behavior of the people, efficient economic conditions,
helpful and motivating government policies, etc.

Basically environmental factors can be studied under 4 categories-

Political environment-
Political environment affects the entrepreneurial growth and
accelerates the process of business activity. Law and order is of high
priority, followed by government policies in regard to the promotion of
entrepreneurship, followed by incentives, encouragement and right
institutional structure will go a long way in fostering entrepreneurship.

Economic environment-
Entrepreneurial growth and development is also governed by economic
environment. It encompasses the wide spectrum of items, namely,
land, availability of raw material, skilled labor, infrastructure,
machinery, capital and so on.

Shortage of raw materials can much adversely affect the

entrepreneurial environment. Shortage of raw materials, inferior
quality, and high price resulting in high cost of production are some of
the major factors.

Technological environment-
Technology represents the application of scientific knowledge for
practical purposes. Technological advancement has become a catalytic
agent in the promotion of entrepreneurship growth of industrial and
allied services. It creates resources and brings in cultural changes as
well as quality of life. Technological advancement continues to give
fillip to entrepreneurship in multi facet manner, affecting the life of the
entrepreneurs as well as the common man.

Legal environment-
There are various rules and regulations applicable to different groups
of industries, for various purposes. That may be regarding registration,
licensing, pollution, location, acquisition, payment of wages and labor
related laws, pollution and environmental rules, laws relating to
organization, product, patent, resource and taxes.

Findings from research-

No of people interacted with- 10

Name Place Reason behind


Mrs Suman Verma Sarika Silai Kendra, Profit making

Mr. Prabeer Kumar Management Unsatisfied from
Chatterji consultant, Varanasi existing job

Mr. Pawan Kasera Shivagi Shivani Profit making

jewelers, Unnao
Mr. Rajesh Kumar Owns a manufacturing Need for
unit of Almira, Unnao independence
Mr. Raghuveer Pratap Manufacturer of Need for
Singh Aquasoft water independence
purifier, Varanasi
Mr. Shiv Kothari Sriji store, Varanasi Family Background

Mrs. Naina Jain Bandhej Boutique, Need For achievement

Mr. Ram Kishor Yadav Kalakriti bhavan, Challenge
Mrs. Sarita Boutique owner, Profit making

Mr. Manoj Kumar Local travel operator, Profit making

Srivastav Varanasi

Thus it was found that most of the people become entrepreneurs to

fulfill their basic needs and profit making.

Some psychological factors are also responsible for a person to

become an entrepreneur like need for independence and need for