Effects of Non-Economic Factors on the Development of Entrepreneurship

Sociologists and psychologists advocate that economic factors may be necessary conditions, but they are not sufficient conditions for the appearance of entrepreneurship. They view that the influence of economic factors on entrepreneurial emergence largely depends upon the existence of non-economic factors i.e., social and psychological factors in the society.

Some major non-economic factors alleged to influence the emergence of entrepreneurship can be listed as follows:

Social Conditions:

Legitimacy of Entrepreneurship:

The proponents of non-economic factors give emphasis to the relevance of a system of norms and values within a socio-cultural setting for the emergence of entrepreneurship. In professional vocabulary, such system is referred to as the ‘legitimacy of entrepreneurship’ in which the degree of approval or disapproval granted entrepreneurial behaviour influences its emergence and characteristics if it does emerge. While Schumpeter (1934) recognizes the importance of such legitimacy in terms of appropriate social climate for entrepreneurship, Cochran (1949) calls it cultural themes and sanctions.

The social status of those playing entrepreneurial role has been considered one of the most important contents of entrepreneurial legitimacy (Katzin 1964). To increase the legitimacy of entrepreneurship, some scholars have proposed the need for a change in the traditional values, which are assumed to be opposed to entrepreneurship.

Scholars like McClelland (1961) have also pointed out that a complete change may not be necessary for entrepreneurial appearance. Instead, they submit a re-interpretation of the traditional values or its synthesis with the newer values to increase the entrepreneurial legitimacy.

We do also believe that entrepreneurship will be more likely to emerge in settings in which legitimacy is high. But, there are others too who took the opinion that entrepreneurship can emerge even when entrepreneurial legitimacy is low or even negative provided that the Government actions can overcome the negative orientations.

Social Mobility:

Social mobility involves the degree of mobility, both social and geographical, and the nature of mobility channels within a system. The opinion that the social mobility is crucial for entrepreneurial emergence is not unanimous. Some hold the view that a high degree of mobility is conducive to entrepreneurship. Both Hoselitz’s need for “openness” of a system and McClelland’s (1961) need for “flexibility” in role relations imply the need for the possibility of mobility within a system for entrepreneurship development.

In contrast, there is another group of scholars (Hagen 1968) which expresses the view that a lack of mobility possibilities promotes entrepreneurship. Some even speak of entrepreneurship as coming through crevices in a rigid social system.

The third opinion is a combination of the first two. Rostow notes the need for both flexibility and the denial of social mobility. Brozen similarly emphasizes that a system should neither be too rigid nor too flexible. According to him, if it is too flexible, then individual will gravitate towards other roles, if it is too rigid, entrepreneurship will be restricted along with other activities.

With regard to the relationship between social mobility and the emergence of entrepreneurship, what is particularly important is the patterning of mobility channels.

Our study brought home the point that the movement of young and educated males not only results in denudation of the potential entrepreneurs in the region, but also the returned migrants did not assume entrepreneurial roles because of inter alia their lack of business knowledge due to their mobility channels to the armed forces. It is also pointed out that the degree and nature of social mobility alone is not likely to influence entrepreneurship, but its influence is largely determined by other non-economic factors.

Marginality:

A group of scholars hold a strong view that social marginality also promotes entrepreneurship. They believe that individuals or groups on the perimeter of a given social system or between two social systems provide the personnel to assume the entrepreneurial roles. They may be drawn from religious, cultural, ethnic, or migrant’ minority groups, and their marginal social position is generally believed to have psychological effects which make entrepreneurship particularly attractive for them.

The two preceding factors-the legitimacy of entrepreneurship and social mobility largely determine the influence of marginality on entrepreneurship. In situations in which entrepreneurial legitimacy is low, mainstream individuals will be diverted to non-entrepreneurial roles and the entrepreneurial roles will be relegated to marginal’s.

On the contrary, in the case of high entrepreneurial legitimacy, mainstream individuals will assume the entrepreneurship and marginal’s will have to find other roles as means of mobility. From the social mobility point of view, marginal individuals and groups will be restricted, by definition, from access to the established mobility channels in a situation. Thus, mainstream individuals and groups will have primary access to these channels. As such, marginal’s are likely to play entrepreneurial roles in a situation.

Several factors are attributed to the increase in the likelihood of marginal’s becoming entrepreneurs. For example, one of these is the presence of positive attitude towards entrepreneurship within the group (Lipset 1967). The second important factor is a high degree of group solidarity or cohesion (Young 1971).

The relative social blockage has been considered the third important factor in promoting entrepreneurship by individuals. Nevertheless, marginality alone, like many other factors, cannot be considered a sufficient condition for promoting entrepreneurship for various reasons.

For example, not all the marginal groups are likely to be entrepreneurs particularly in situations in which mainstream entrepreneurs exist. Furthermore, the vulnerable marginal efforts for entrepreneurship are most likely to be negated by political attacks. Thus, whether or not marginality promotes entrepreneurship will depend upon a favourable condition of other factors.

Security:

Several scholars have advocated entrepreneurial security as an important facilitator of entrepreneurial behaviour. Yet, scholars are not in agreement with the amount of security that is needed. While Cole (1959) suggests ‘minimal’ security, McClelland (1961) speaks of ‘moderate’ certainty, for example. However, Peterson and Berger (1971) maintain that entrepreneurship is more likely to emerge under turbulent conditions than under conditions of equilibrium.

Redlich provides the middle position in this regard when he suggests that insecurity does not hinder entrepreneurship, but rather that different kinds of insecurity will result in different kinds of entrepreneurship. We also regard security to be a significant factor for entrepreneurship development. This is reasonable too because if individuals are fearful of losing their economic assets or of being subjected to various negative sanctions, they will not be inclined to increase their insecurity by behaving entrepreneurially. A study on entrepreneurship development in the North East India conducted by the author duly supports the above statements.