Is the entrepreneur who we have been acquainted with, in the first lesson, a machine that calculates the probabilities of profits? Not at all. He, like every one of us, is very much a part of the society. Therefore, the motivation, the modes of conduct, and the effectiveness of entrepreneurs need to be understood with reference to the general environment in which we live. What does the term ‘environment’ mean? In any society, the environment includes the economic, social, psychological and political aspect of life. In other words, it is true that an economic activity expansion depends on certain environmental forces that promote or retard the entrepreneurial thinking, behaviour and efforts. In this lesson, we are going to look at such factors that tend to influence entrepreneurship.

The countries of the world are experiencing an unprecedented burst of inventions. Even the underdeveloped countries are making conscious efforts in encouraging research and development. While the developed countries have the record of commercialising the inventions to their fullest advantage, the less developed ones find their innovations either lying idle or flowing out to the more prosperous nations. The proverbial “brain-drain” that is affecting countries, like India is due to absence of the necessary infrastructure to capitalise on the numerous inventions that are taking place. The secret of the success of most developed countries is the presence of a large member of dynamic entrepreneurs who provide the fillip for newer and better inventions. The less developed countries, on the other hand, are confronted by a situation where the entrepreneurs just do not seem to come and the existing tend to leave their countries in search of better opportunities. The economically backward nations are characterised by the scarcity of entrepreneurship. Several inimical factors are affecting the growth of this important factor of production.

Some societies – notably in the United States, South Korea and many South-East Asian Counties like Thailand and Singapore- are bound with entrepreneurs. Others like China and India have fewer entrepreneurs, although these countries recently changed their laws to encourage entrepreneurship. Countries like England, where many companies such as airlines and automobile manufacture used to be operated by the Government, have in recent times turned these firms to the private sector, encouraging entrepreneurship through, new opportunities in private ownership. Other nations, such as Japan, though are bound by strong traditions, have in recent times started favouring entrepreneurship. From the above, it can be said that economic and non-economic factors can affect the level of entrepreneurship within any society.

The emergence and development of entrepreneurship is not a spontaneous one but a dependent phenomenon of economic, social, political, psychological factors often nomenclature as supporting conditions to entrepreneurship development. These conditions may have both positive and negative influences on the emergence of entrepreneurship. Positive influences constitute facilitative and conducive conditions for the emergence of entrepreneurship, whereas negative influences create inhibiting milieu to the emergence of entrepreneurship. Various researchers world over have identified the factors that contribute to the development of entrepreneurship as are summarised below :

Economists agree that the lack of entrepreneurs is not caused by economic conditions alone as was the earlier feeling. It is also due to the whole set of socio-cultural and institutional environment prevailing in the less developed countries. Various environmental factors influencing the entrepreneurship will be discussed in this course.