FACTORS INFLUENCING

ENTREPRENEURIAL BEHAVIOR

ADVANTAGES AND CHALLENGES OF AN

ENTREPRENEUR
 Factors affecting entrepreneurial
behavior
There are number of factors which influence
entrepreneurial behavior. These include;
 Psychological factors,
 Sociological factors,
 Demographic factors,
 Environmental factors,
 Cultural factors.
 Psychological Factors

• Some psychologists have attempted to identify

individual characteristics capable of successfully
predicting entrepreneurial behaviour.
• These are sometimes referred to as ‘born’
models, in the sense that they tend to view
entrepreneur behaviour as a disposition of in-
born qualities.
 Cont.
• Need for achievement
• high level of motivation,
• Internal Locus of control ,
• Risk taking propensity,
• Innovation,
• Creativity, and
• Initiative.
 Sociological Factors

• Sociological theories suggest that

entrepreneurial behaviour is a function of the
individual’s interaction with society. That is,
entrepreneurs are ‘made by society’.
• These factors are;
 Family background, and
 Social development.
 Family background

• Various studies have suggested that

entrepreneurial behavior is an outcome of a
family background filled with images of
endured hardships and other deprivations.
• Others have found that entrepreneurial
behavior is largely inherited.
 Cont.
• Entrepreneurs tend to come from parents
who are/were entrepreneurs, because they
may develop skills, experiences and network
from the existing firm.
• They are likely to have better access to advice,
credit, established markets, sources of
inputs/materials, experience etc.
 Social development
• There is notion that social pressures and
circumstances change throughout one’s life
influence one’s entrepreneurial behavior.
 Demographic factors

• Age,
• Marital status,
• Education,
• Family birth order,
• Gender , and
• Occupation.
 Age
• Young people may have the energy required to
launch new ventures, but they lack the financial
means to do so.
• Older people have money, but they lack the
energy to start independent ventures and
willingness to change their lifestyles.
• Middle aged people have money and energy and
are more willingly to change their lifestyles.
 Marital status
• Entrepreneurship and Self employment is high
for married people because of financial need
to meet family expenditures.
 Education
• Studies have shown higher level of education
raises a person’s chances to start a business.
This is because with education, individual will
have acquired necessary skills to manage his
or her own business.
 Family birth order

• Studies have shown that firstborn children

tend to seek out more responsibility and be
high achievers, which researchers say is likely
to correlate with being an entrepreneur.
 Gender
• Overall, it has been found that men are much
more likely (in fact, twice as likely) to start
business than are women. This was more
practical in years ago due to some factors that
favored men more than women.
 Occupation
• There is more evidence that having worked in
a small business or having had prior
entrepreneurial experience is positively
related to being an entrepreneur.
 External Environmental Factors
• Access to information
• Access to finance
• Unemployment
• Industry structure
• New technologies
• Economic and political system
• Increasing demand for varieties
• Unemployment and job dissatisfaction
 Access to information

• Entrepreneurial behaviour can be influenced

by the information available in the locality.
• Information can be obtained from media,
conferences, exhibitions, contact with
customers, suppliers, small business owner
managers, and informal reading.
 Access to finance
• Access to finance depends on the presence of
institutions willing to provide credit to small
businesses and ability of prospective
borrowers to meet loan conditions.
 Unemployment
• High rates of unemployment are likely to force
people into self employment and therefore
increase the rate of small business formation.
• As well as low wages increases the rate of
people to start their own business.
 Cultural Factors
• Ethnicity (customs/traditions/civilization),
• Country’s (state’s or region’s) legal
framework.
 Ethnicity

• Ethnic origin of a person is said to influence the

choice between paid employment and self-
employment .

• Some authors argue that ethnic groups that have

produced high numbers of entrepreneurs are also
displaced (marginalized) groups.
 Country, state or region’s legal
framework
• The legal framework both allows and prohibits
certain decisions and actions.
• For instance, policies of socialism, capitalism
etc.
 Self-concept assessment

• Now that we know who is an entrepreneur

and his/her characteristics, you might be
asking yourself. Do I have what it takes to a
successful entrepreneur? Why or why not?
 Cont.
• If you were to make a choice now between
self-employment and being employed, what
are you going to opt for? Give reasons of your
choice.
 Advantages of entrepreneurs/ship
• Self employment-income source
• Job creation
• Innovation in the economy as the results
better products to consumers and economic
development
• Revenue to authorities
• Role models for inspiration and motivational
purposes
• Agents of Social change
• Job independence, freedom of choice, self
pride
 Challenges of entrepreneurs/ship
• Entrepreneurs must be comfortable with
changes, risk and sometimes failures,
• Decision making involves uncertainty
• Working environment involves hard working
spirit