Professional Documents
Culture Documents
1. Introduction
Rationale
Micro Enterprise Development Programme (MEDEP) has indeed increased the number
of enterprises in the 21 districts of Nepal. Parbat, one of the Programme districts, has
also witnessed this trend. The district has now a total of 1,056 entrepreneurs created
by the motivation and support of MEDEP. However, during the course of development
stages of enterprises, the following situations of the entrepreneurs have been
observed:
Lack of confidence in starting business enterprise
The business enterprises began but couldn't continue due to personal disinterest,
financial problem, family volatility, etc
The entrepreneurs found to be just engaged in the enterprising activity due to
lack of motivation in other sectors.
Some have expanded their business successfully
Despite all the entrepreneurs being supported by the MEDEP in equal terms, the
following questions have been raised:
Why are some of the entrepreneurs unable to run their enterprises with full
potentiality, but continuing the enterprises?
1
Ms Pun is a masters degree student of population, gender and development, Pokhara
University. She is grateful to her thesis supervisor Mr. Deepak Raj Paudel, lecturer of Pokhara
University.
48 Gyanu Maya Pun
Objectives
The studys overall objective is to identify the factors influencing the entrepreneurs
entrepreneurship ability. The specific objectives are:
to analyse the business characteristics of the entrepreneurs
to explore the positive or pull motivating factors affecting the entrepreneurs
entrepreneurship ability
to identify the challenges or problems faced by the entrepreneurs in regard to
entrepreneurship development
Hypotheses
The following hypotheses have been formulated:
Socio-demographic characteristics of the respondents like sex, age, marital status,
educational attainment, caste/ethnicity, and birth place influence the
entrepreneurs entrepreneurship ability
Business characteristics including the enterprises status, ownership type,
condition, number of employees and types likely affect the entrepreneurship
ability of the entrepreneurs
Motivating factors affect the entrepreneurship ability of the entrepreneurs.
The entrepreneurship as the dependent variable has been assessed by two major
independent variables and their sub-variables (Frear 2005). They are socio-
demographic characteristics and business characteristics of the entrepreneurs. The
socio-demographic variable has been described comprising: (i) sex, (ii) educational
attainment, (iii) age, (iv) marital status, (v) caste/ethnicity, and (vi) birth place to
indicate migrant or not. Likewise, the business characteristic of entrepreneurs has
been described in terms of: (i) status, i.e. registered or not, (ii) types of ownership -
single, two partners or more than two partners, (iii) condition just continuing or
expanding, (iv) number of employees - ranging from 1 - 9, and (v) types of enterprises
one of the 13 categories as stated above.
This study has also considered two other concepts related to enterprising development
like motivation and challenges. Motivation is essential to driving persons to take
enterprising activities. The motivational factors in terms of positive pull factors
considered here include:(i) persons of inspiration such as neighbors including friends or
relatives, family members, and role model (exemplary) persons. (ii) individual reasons
like sufficient capital, desire of earning more money, and independent work; and (iii)
environmental factors including family background - having family member already
involved in the enterprises, MEDEP intervention with support schemes (training, skills,
finance, & technology), sufficiently available raw materials and labor and market
demand of the products (Dollinger 1999). The challenging factors the entrepreneurs
faced regarding continuing or expanding their enterprises include the direct related
variables like (i) economic factors - access to finance, availability of raw material,
contemporary machine technology, labor supply or availability, and marketing and (ii)
non-economic factors like social values and norms, decision making of enterprise
related works, household work, mobility, and networking (Khanka 1990).
The data and information was acquired from the sample entrepreneurs by using the
semi-structured interview questionnaire form. The data were processed and analysed
with SPSS (Statistical Package of Social Sciences) programme.
3. Review of Literatures
The review deals with major studies so far available concerning with concepts and
factors of enterprises.
Entrepreneur and Entrepreneurship
The word entrepreneur has been evolved passing through various meanings from
musical instrument in France, to military expeditions and to economic aspects
(Cochran 1950). Under economic terms too, several scholars have coined it differently
such as risk taker, innovator, organizer, opportunity taker, marshaling the
resources for advantage, etc (Knight 1965; Hisrich 1986; Bygrave and Hofer 1991;
Huefner and Hunt 1994; Begley 1995).
Measurement of Entrepreneurship
Measurement of entrepreneurship is the most complicated work, as its determinants
vary considerably among the countries and there is lack of universally commonly
agreed set of indicators (Verheul et al. 2000). Indeed enterprise is of interest to
several disciplines, but each discipline considers determinants according to its fields
of area.
Motivational Factors
Motive may be defined as an inner state of mind that activates and directs the
behavior of entrepreneur toward achieving the goal of successful enterprise. Among
the motivation theories related to entrepreneurship, the Need Hierarchy Theory of
Maslow is the most relevant to this study (Khanka 2002). Two among the five types of
Maslow theory to motivate people to become entrepreneurs in low income countries
like Nepal are physiological needs (economic rewards to meet basic needs) and safety
and security needs (earn money for economic security and protection).
Two main motivation factors of entrepreneurs are push or necessity and pull or
opportunity. The former is termed as negative circumstance, whilst the latter is
positive circumstance. Pull factors encourage potential entrepreneurs by virtue of
attractiveness options like financial reward, independence, need for achievement,
social recognition etc. Family background or support usually acts as a positive factor
for entrepreneurship. Push factors are due to unemployment, job insecurity, less
attractive, etc. In Nepal, the main motivation factor for entrepreneurs is to earn
money due to majority of the people without adequate income (Ranabhat 1995;
Tuladhar 1996).
52 Gyanu Maya Pun
Challenging Factors
Saying has it that any new venture is challenging. Successful entrepreneurs overcome
several challenges in running enterprises. Existing studies indicate that barriers to
entrepreneurships are of internal and external nature. Lack of self-confidence,
assertiveness, communication skill, motivation, etc comes under internal barrier:
Whilst lack of basic management training, lack of ability to market the product, etc
comes under external barriers. Khanka (2002) has broadly classified barriers into
economic and non-economic factors. The economic factors comprise financial capital,
labor, raw materials, and market, whereas the non-economic factors may include
legitimacy of entrepreneurship, mobility, socio-cultural values, etc. The economic
factors are, however, prerequisites for the start-up of any enterprising activities, for
their continuation and expansion as well. Easy access to institutional source for credit
is a basic hurdle for enterprising activities, particularly in rural areas of Nepal. In
absence of institutional credit facility, the credit from informal sources is often not
competitive ones due to higher interest rate, which, therefore, results into low saving
pattern. It is applicable more in the case of females than in males in rural Nepal
(Dhakal 2006). If an enterprising activity is contingent upon far-fetched raw materials
and market is at a distance for hauling the finished product, it poses enterprises major
challenges. Other marketing problems of the products in MEDEP districts are damaged
goods; due to poor packaging, credit sales, lower price, etc (Subedi 2006).
Transportation linkages reduce risks production costs and improved easy access to
markets, business ideas, knowledge, and capital (Reavley, Lituchy, and McClelland
2005). The prevailing social values, culture, and perception have become a restraint
to the growth of women entrepreneurs in society (Ranabhat 1995). Restriction in
decision-making and mobility in Nepal has inversely affected the entrepreneurship
ability.
Characteristics
Socio-demographic
Among the 253 sample entrepreneurs, 150 were females and 103 males, of which 213
were married and 40 were unmarried. The age of the entrepreneurs ranged from 16 to
65 years, with 40 percent of age group of 16-35 years, followed by age group of 36-45
with 26 percent. Among the social groups, 108 were Bahun/Chhetri, followed by Dalits
with 30 percent and Janajati with 27.3 percent. Most of the entrepreneurs (90%) had
attained formal and informal schooling and the remaining 10 percent was illiterate.
Factors Influencing Entrepreneurship Ability 53
Majority with 221 were born in the same district of Parbat and about 13 percent
migrated to the district.
Business characteristics
Two-thirds (166) of the enterprises were informal, whereas over 34 percent was
registered one. The number of agricultural-based enterprise was 201 in comparison to
52 (21%) of non-farm based enterprises. Individual owners owned 122 enterprises. The
number of enterprises in partnership with two partners was 81 and with more than two
partners were 50. Self-employed enterprises shared 35.2 percent, while the
enterprises with two were the largest (38.3%). The number of enterprises that
generated employments to over two employees was 67. Majority of the enterprises
(77%) have continued their enterprising activity, while only 23 percent have expanded
their size.
Entrepreneurship ability
Of total 253 entrepreneurs, 140 (55%) have high entrepreneurship ability that have
scored 14 and over2, whilst 113 have got low score3. The efficiency measure has also
been performed at different socio-cultural variables. There is relatively slightly
greater high ability value in the female entrepreneurs than their male counterparts
(57 versus 53 percent. Among the age groups, entrepreneurs with 26-35 years of age
have highest high ability value (60.4%), followed by the age group of 36-45 with 58.5
percent. The married entrepreneurs are found more efficient (58%) against the
unmarried entrepreneurs (42%). In case of social groups, there is no significant
difference in entrepreneurship ability; all three types (Dalit, Janajati and
Bahun/Chhetri) have values lying within 55 56 percent. The entrepreneurs with
formal education have higher entrepreneurship efficiency (59%) as compared to 40
percent of the illiterate entrepreneurs. The migrated entrepreneurs have shown
slightly higher value of entrepreneurship efficiency (63%) than the non-migrated
entrepreneurs (54%).
2
Two parameters with mean = 13.12 and SD = 1.81 indicate that the distribution of score is
fairly good.
3
All the values have been calculated at p<0.10, p<0.05, and p< 0.01 (p- value) based on Chi-
Square statistics.
Factors Influencing Entrepreneurship Ability 55
Business characteristics and entrepreneurship ability
On the whole, the business features have shown better high ability with 55 percent
as against low ability with 45 percent. These features have been analysed on five
variables at p< 0.01 (based on Chi-square statistics). The registered enterprises have
shown 81 percent high entrepreneurship ability as compared to 42 percent of the
informal enterprises. Likewise, the non-agricultural enterprises have definitely greater
entrepreneurship ability (77%) than the agricultural based enterprises (50%). The
enterprises with two partners and more hired labours (>2) have shown better
entrepreneurship ability than others. Their efficiency values are 72 and 85 percent
respectively. Similarly, the expanded enterprises have better entrepreneurship ability
(71%) than stagnant one (51%), which is obvious, otherwise no enterprises will be
expanded if there is dim chance of improvement.
or spouse decision on enterprise matters have shown higher relative percentages for
low ability.
This analysis has placed environmental motivational factors as most influencing one.
For instance, highly demanded products appear 37.747 times more likely to influence
on high entrepreneurship ability. Two other relatively better factors are family
background and adequate raw materials, which have yielded probability values of
4.939 and 3.558 times for high entrepreneurship ability. Other factors have yielded
very low probability values.
Though the problems of economic challenging factors appear to be responsible for low
entrepreneurship ability, their probability measurement scales are unexpectedly very
low with below 1.000 except for changing machines and low market demand. The
latter two variables have shown 3.064 and 2.588 times more likely to be for high
entrepreneurship ability respectively. The non-economic factors are seen relatively
more significant, however. Two factors like priority on enterprise work and enterprises
having network with organization have yielded 8.353 and 4.416 times more likely to
have influence on high entrepreneurship ability. Others non-economic factors have
shown low influencing values.
Of the motivating factors, the environmental factors including family background are
found to have positive influence on entrepreneurship ability. This is consistent with
the results carried out elsewhere in other areas (Tuladhar 1996; Bosma, et al. 2000).
Likewise, other factors like sufficiently available raw materials and high demand of the
products have also shown positive influence on high entrepreneurship ability. That is
why MEDEP has consistently putting emphasis on the enterprises that use local
resources and produce goods according to the market demand.
Strangely, the non-economic factors seem to be stronger than the economic factors to
influence the entrepreneurship ability. Perhaps, it may be due to the lack of facilities
and infrastructure, predominant of primary production sector, faulty government
policies, etc. Among the economic factors, high entrepreneurship ability is likely to
occur due to replacing the old machines by advance ones. In non-economic factors, the
household workload is negatively correlated with entrepreneurship ability. It is argued
that the entrepreneurs with less household workload are more likely to have high
entrepreneurship ability, because they can devote more time to their enterprises.
Networking has mixed result with entrepreneurship ability. In Parbat District, social
network seems to have favorable for the entrepreneurship. The restricted mobility has
positively influenced the entrepreneurship ability, which may be due to high demand
of goods at local markets.
6. Conclusion
This study has made an attempt to identify factors influencing the entrepreneurship
ability of the entrepreneurs. The analysis, based on series of logical steps, has shown
both positive and negative associations. For instance, the socio-demographic
characteristics of the entrepreneurs have shown little positive influences on the
entrepreneurship ability. In case of business characteristics, the status of enterprises
and the number of employees in the enterprises have positive influence on the
entrepreneurship ability, whereas the partners in the enterprises and the types of
58 Gyanu Maya Pun
7. Recommendations
Based on the above findings, the study suggests the following recommendations for
further improvement of enterprises and their entrepreneurship ability:
Imparting more knowledge to the rural people about increasing the
entrepreneurship ability of the entrepreneurs should be continuous
Enterprises should be encouraged for registration
Single-owned enterprises require to be stimulated
More enterprises based on the non agricultural activities require to be created and
their entrepreneurship ability should be increased
The government and the concerned stakeholders should create environments so
that the supply of raw materials is available adequately for running the enterprises
smoothly
Market based enterprises should be enhanced
In addition, if a research including both qualitative and quantitative approaches is
conducted in future, it would provide triangular results.
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