Gone are the days when only the economic factors affected the growth of entrepreneurship. Over the past decade, various researchers from across the globe have identified how there are several non-economic factors that also significantly affect entrepreneurial growth.
I recently visited the Hourglass Escapes and encountered an old friend who is an economist. In conversation with him, I came to know about how there are several non-economic factors too that affect the growth of entrepreneurship.
So, through this article, I will briefly explain the non-economic factors that affect entrepreneurial growth. We can classify the different non-economic factors that primarily affect entrepreneurship’s growth into three categories – social, psychological, and personal characteristics. Let us look at each of them in detail:
Social Factors that impact the growth of entrepreneurship
Several social factors play a vital role in affecting entrepreneurship’s gradual growth and development. Some of the ways showing how social factors impact entrepreneurial growth are:
Rational Behaviors
It is only a society that shares an inclination toward making rational decisions that can favor the growth of entrepreneurship. Now, to define a community as ‘rational,’ you can make the decisions that affect its resources based on empirical facts and critical scientific standards.
Instead, when a society takes its decisions based on customs and traditions, it would be regarded as ‘irrational.’
One can find rational behavior of society in developed nations. At the same time, it is mostly the less developed nations that breed irrational societal behavior. The latter can never be supportive of entrepreneurial growth.
Legitimacy of Entrepreneurship
For the emergence of entrepreneurship in a given society, a system of norms and values present within the socio-cultural setup is essential. We can refer to this kind of system as a ‘legitimacy of entrepreneurship.’
While the Austrian-born political economist Joseph Schumpeter recognizes its importance in terms of proper social climate, Cochran refers to it as cultural themes and sanctions.
The social status enjoyed by entrepreneurs has long been considered an essential factor in determining entrepreneurial legitimacy.
Social Mobility
Social mobility, a non-economic factor affecting entrepreneurial growth, considers social and geographical mobility. The importance of social mobility in impacting entrepreneurship development is still a ground for much debate amongst economists.
However, we should also consider that social mobility alone is not enough to affect the growth of entrepreneurship. The influence of social mobility is generally marked and determined by yet another non-economic factor that affects entrepreneurial development.
Social Marginality
Many economists and researchers have often argued that social marginality has also profoundly impacted the growth of entrepreneurship. It is said to have promoted the development of entrepreneurship at large.
They believe that individuals or groups of people lying in the perimeter of a specific social system, or even between two social systems, have the personnel to take on entrepreneurial roles.
These groups may originate from different religious, cultural, ethnic, or even migrant minority groups. The socially marginal positions of such people tend to psychologically affect them and make entrepreneurship appear as an attractive ground.
To put it simply, social mobility and legitimacy of entrepreneurship tend to determine the overall influence of social marginality on the growth of entrepreneurship.
In conditions wherein the legitimacy of entrepreneurship is low, mainstream people tend to be diverted into non-entrepreneurial roles. Then, the entrepreneurial roles get collectively relegated to the marginal communities at large.
Family Background
The size, type, and economic status of the family also profoundly impact the growth of entrepreneurship. Studies and research have revealed how excellent financial stability and quality in the family have often facilitated certain families to gain access to political power.
It has then helped these families portray a higher level of entrepreneurship, in contrast to economically weaker families in the society. The occupational and social status of a family also affects the family’s mobility.
Psychological factors affecting the growth of entrepreneurship
Now that we have taken many social factors that profoundly impact entrepreneurial growth let us focus on the psychological aspects.
Need Achievement
David McClelland has put forth some of the most important psychological theories regarding entrepreneurship. According to him, ‘need achievement’ refers to a social motive that pushes people to excel. Through his studies, McClelland could find out how it was a common feature in successful entrepreneurs.
Withdrawal of Status Respect
According to Haggen, the withdrawal of status respect of a group of people heavily contributes to the gradual emergence of entrepreneurship. In his research, he mentions four different kinds of events that he believed would produce withdrawal of status. They are:
- The group of people might be displaced entirely by force
- The valued symbols of the group of people can be denigrated
- The group of people may drift away into a perpetual state of inconsistency in status
- The group of people might lose its expected rate of migration to an entirely new social setup
Personality factors affecting the growth of entrepreneurship
Now that we have taken various psychological factors that deeply impact entrepreneurial growth, let us focus on the personality factors. Even personality traits like one’s inner desires to control their activities, tolerance of risk, etc., can also affect entrepreneurial growth.
Psychological elements such as self-thinking, inspiration, social and economic atmosphere, tendencies, etc., impact mainly the behavior of the employees and, subsequently, the growth of entrepreneurship.
And apart from these, the following 11 concepts have a significant impact on entrepreneurial growth:
- Competition and collaboration
- Expectations from workers
- Achievement motivations
- Sense of effectiveness
- The incentive to expand and grow
- Internal conflict control
- Ability to influence others
- Group-level activities
- Concern for society
- Work flexibility
- Learning from feedbacks
Personal character traits like one’s initiative to do the work asked for or the proactiveness in doing the work impacts the growth of entrepreneurship. Factors like perseverance, problem-solving abilities, persuasion capacity, self-confidence, and risk-taking capabilities also significantly affect entrepreneurial growth.
Final Thoughts
So, while you might have nurtured the belief that only economic factors affect the growth of entrepreneurship, it is time for you to modify them.
As you know by now, several equally significant factors considerably affect entrepreneurial growth. And now that you know and understand them, you can utilize this knowledge to work on new ideas and marketing strategies to help flourish your business.
