Factors Affecting Entrepreneurship

Entrepreneurship is essential for the development of any economy. One way that entrepreneurs can grow is knowing with confidence where to invest money in Nigeria and other countries. Countries which have flourished attribute their rise to the growth of entrepreneurship. Therefore,
governments and people all over the world want to encourage this concept.
But there are some of the factors which affect entrepreneurs all over the world,
major components that affect the growth of entrepreneurship in a country
positively or negatively, a few of them are explained below:

Political Factors
Political factors play a huge role in the development of entrepreneurship in a given
geographical area. This is because politicians decide the type of market that is in
place. The market could be capitalistic, communist or some countries have adopted
a mixed economy. Each of these three markets has very different implications for
the way in which entrepreneurs are required to function. Capitalism requires
breakthrough innovation whereas communism requires entrepreneurs to be well
connected with the political class. Therefore, it has been observed that the more
capitalistic any country is, the more entrepreneurship flourishes in the region.

Legal Factors
Entrepreneurs are dependent upon law for a wide variety of factors. The strength
and fairness of the legal system of a nation affect the quality of entrepreneurship to
a large extent. This is because entrepreneurs require a wide variety of legal
services to function. For instance, entrepreneurs would require the courts to
enforce the contracts that were entered to between parties. In many countries such
contracts are not enforceable and therefore the resultant risk prohibits the
development of entrepreneurship. Then again, the entrepreneurs are dependent on
the courts for the protection of their property rights. Also, many advanced countries
have noticed that the provision of declaring bankruptcy has been positively
associated with the development of entrepreneurship. Entrepreneurs do fail a few
times before they find the right innovation that leads to their success.


The government can also influence a high degree of control on the market through
provisions of taxation. Some amount of taxation is necessary for the government to
maintain the legal and administrative systems in place for the entire economy.
However, a lot of times governments resort to excessive taxation. They usually
adopt the policy of beggaring the rich and giving it off to the poor. This goes
against the basic tenets of entrepreneurship which believes in survival of the fittest.
Therefore, countries where tax regimes are restrictive find an outflow of
entrepreneurs. In short, entrepreneurs want to set up shop in places where there is
minimal interference from the government.

Availability of Capital
The degree to which the capital markets of a nation are developed also play a huge
role in the development of entrepreneurship in a given region. Entrepreneurs
require capital to start risky ventures and also require instant capital to scale up the
business quickly if the idea is found to be successful. Therefore, countries which
have a well developed system of providing capital at every stage i.e. seed capital,
venture capital, private equity and well developed stock and bond markets
experience a higher degree of economic growth led by entrepreneurship.

Labour Markets
Labour is an important factor of production for almost any kind of product or
service. The fortunes of the entrepreneurs are therefore dependent on the
availability of skilled labour at reasonable prices. However, in many countries labour
has become unionized. They demand higher wages from the entrepreneurs and
prohibit other workers from working at a lower price. This creates an upward surge
in the costs required to produce and as such has a negative effect on
With the advent of globalization, entrepreneurs https://blog.farmcrowdy.com/category/agribusiness/ have witnessed the freedom to
move their operations to countries where labour markets are more favorable to
them. This is the reason why countries like China, India and Bangladesh have
witnessed a huge rise in entrepreneurial activity in their countries.

Raw Materials
Just like labor, raw material consisting of natural resources is also an essential
product required for any industry. In some countries this raw material is available

through the market by paying a fair price. However, in some countries seller cartels
gain complete control over these natural resources. They sell the raw materials at
inflated prices and therefore usurp most of the profit that the entrepreneur can
obtain. Therefore, countries where the supply of raw material faces such issues
witness depletion in the number of entrepreneurial ventures over time.
Lastly, there are some services which are required by almost every industry to
flourish. These services would include transport, electricity etc. Since these services
are so basic, they can be referred to as the infrastructure which is required to
develop any business. Therefore, if any country focuses on increasing the efficiency
of these services, they are likely to impact the businesses of almost all
entrepreneurs in the region. Therefore, countries which have a well developed
infrastructure system witness high growth of entrepreneurship and the opposite is
also true.

Of course, the above list of factors is not exhaustive. Entrepreneurship is too
complex a subject to capture in a few bullet points. However, the above list does
provide an indication towards the type of factors that can play an important role.