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310 X INDIAN JOURNAL OF APPLIED RESEARCH
Volume : 4 | Issue : 12 | Dec 2014 | ISSN - 2249-555X
ReseaRch PaPeR
Economic and Environmental Factors Leading to
Entrepreneurial Success
Dr. Habib-ur-Rahman Dr. H. Ramananda Singh
Assistant Professor,
Dept of Business Administration
Assam University, Silchar-788011
Professor,
Dept of Business Administration
Assam University, Silchar-788011
Management
ABSTRACT Business environment refers to different forces or surroundings that affect business operations such as
customers, competitors, suppliers, distributors, industry trends, substitutes, social and cultural factors, in-
novations and technological developments. The economic factors includes system, policies and nature of an economy,
trade cycles, economic resources, level of income, distribution of income and wealth.
Success of the entrepreneurs generally depends on different sets of factors. Many authors and researchers are of the
view that the success of an entrepreneur greatly influenced by the economic and environmental factors. The present
study is an attempt to know the important economic and environmental factors contributing to entrepreneurial success
in Assam. The study finds that there are five important economic & environmental factors which lead to the success.
These factor are - Power supply, Access to latest technology, Competitive pricing, Access to market channels and Ac-
cess to business association.
Keywords
Entrepreneurial Success, Economic Factors and Environmental Factors
1. Introduction
The term “entrepreneurs” usually refers to individuals who
undertake new initiatives that are innovative and creative.
Research into the entrepreneurial success suggests that
there are various factors which lead to success. These are
mainly internal factors and external factors. Internal factors
include personality traits and socio-cultural factors. External
factors include Economic and Environmental factors. The
present study is an attempt to know the important eco-
nomic & environmental factors leading to entrepreneurial
success.
2. Review of literature
Economic Factors are the set of fundamental informa-
tion that affects a business or an investment’svalue. Eco-
nomic Environment refers to the economic factors that
have effect on the working of the business. It includes
system, policies and nature of an economy, trade cycles,
economic resources, level of income, distribution of in-
come and wealth. For a business, key economic factors
include labor costs, interest rates, government policy,
taxes and management. Business environment refers to
different forces or surroundings that affect business opera-
tions. Such forces include customers, competitors, suppli-
ers, distributors, industry trends, substitutes, regulations,
government activities, Infrastructures, the economy, demo-
graphics, and social and cultural factors, innovations and
technological developments.
Naqvi (2011) conducted a study to highlight the critical
failure and success factors in SMEs of Bahawalpur. The
dominant failure factors which were considered are lack of
access to financial capital, inappropriate government struc-
ture and poor infrastructure as well as corruption. Thus,
success of SMEs is dependent on free access to financial
environment, strong government structure and support, ro-
bust infrastructural facilities and honesty.
Munikrishnan and Veerakumaran (2011) explored the busi-
ness success factors of budget hotels in Klang Valley. The
result of Pearson Product-Moment correlation coefficient
indicated that contextual Factor, size of business and ac-
cess to capital have a positive relationship with a p-value
of less than 0.05. Moreover, the result of regression analy-
sis indicated that a contextual factor, size of the business
and access to capital positively influence the perceived
business success of the entrepreneur of Klang Valley.
Ahmad et. al. (2010) in their study evaluated the effect of
entrepreneurial competencies and the moderating effect
of business environment on business success in small and
medium sized enterprises (SMEs) in Malaysia. The sam-
ple size of the study was limited to 212 Malaysian SME
owner-founders and structural equation modeling (SEM)
procedures were used for data analysis. The findings of
the study showed that entrepreneurial competencies were
strong predictors of business success in SMEs in Malay-
sia. It was also found that the association between entre-
preneurial competencies and business success was more
strongly evident in hostile and dynamic environments than
in more benign and stable environments.
Simon et. al. (2007) investigated that social network do
not play a significant role in determining success once the
business starts operation whereas smartness and the hu-
man capital of the entrepreneur are the most important
explanatory Factors. Mehmet Turan & Ali Kara (2007) in
their findings suggested that freedom to make decisions,
the chance of achieving a relatively higher financial gain
and some environmental factors were important to achieve
success. Al-Mahrouq (2004) in a survey report showed that
plant size are an important factor in plant growth, which
means that the smaller firms grow at faster rates in com-
parison with their larger counterparts.
Mazzarol and Choo (2003) emphasized that legality or
law and order play a dominant role in SMEs survival and
growth. The legal aspect is considered in selection operat-
ing decision in order to ensure future business success. In
this backdrop, Duh (2003) in a study found that unsuitable
INDIAN JOURNAL OF APPLIED RESEARCH X 311
Volume : 4 | Issue : 12 | Dec 2014 | ISSN - 2249-555X
ReseaRch PaPeR
legislation is the major obstacle faced by Slovenian SMEs.
Gideon D. & Robert A. Baron (2003) suggested that there
are many factors—including market forces, industry trends,
new technological discoveries, and so on—interact in com-
plex ways to ultimately determine the success of entrepre-
neurial firms.
Bosma, Praag and Wit (2002) highlighted the importance
of financial capital of entrepreneur and reported that vari-
ous financial capital such as amount of income, financed
with own capital, contribution by business partners, loan
from family members and friends are the important ingre-
dients of business success.
Kreft (2003) in a study made an attempt to highlight the
necessity of access to capital or early finance. It is true that
at the start-up or any growth stage, identifying sources of
potential capital is one of the major issues that entrepre-
neurs all over the world must face as they start their busi-
nesses. Without this capital, an entrepreneur is lacking
essential resources necessary for success. The study lists
eight core elements of an infrastructure necessary for sup-
porting entrepreneurship. Of these eight core elements, six
related to an entrepreneur’s ability to access capital. The
study concludes that access to capital plays a pivotal role
in entrepreneurial success.
Tustin (2001) emphasized the importance of location of
the business organization. Geographic location has its
implications for access to markets and other resources
like finance, skilled labours, subcontractors; infrastructure,
distribution & transport logistics and other facilities. SME
success basically depends on neighbourhood appear-
ance and continued/maintained future business opera-
tions of that particular location.
David G. & Andrew J. (1998) tried to test the impact of
finance-constraint on entrepreneurial success. The key test
in this study shows that, all else equal, people with greater
family assets are more likely to switch to entrepreneurship
from employment. Bruderl and Preisendorfer (1998) rec-
ommended that the use of traditional financial measures of
success, such as profitability, sales turnover, and return on
investment, is paramount in gauging the extent to which a
firm is successful or not. It can be concluded that organiza-
tions to be considered successful, it is important for them
to generate income and increases in profit, and to demon-
strate some level of growth, as indicated in their sales and
income.
Miller and Dess (1996) classified the external environment
of the enterprise under two broad headings namely, gen-
eral and competitive environments. The general environ-
ment consists of the political-legal, macro-economic, socio-
cultural, technological, demographic and global factors
that might affect the organization’s activities. On the other
hand, the competitive environment consists of other specif-
ic organizations that are likely to influence the profitability
of the enterprise, such as customers, suppliers and com-
petitors. The success of SMEs is highly dependent on the
interrelationship of the three strategic factors: entrepreneur
characteristics, enterprise factors and the external environ-
ment.
3. Objectives of the study
The objective of the study is to identify the important Eco-
nomic & Environmental Factors leading to Entrepreneurial
Success
4. Research Methodology
The type of research followed here is descriptive in nature.
(i) Sampling design
The type of sampling used in this study was multistage
sampling. The universe of the study consists of 756 suc-
cessful food processing entrepreneurs of Assam. A repre-
sentative sample of 85 entrepreneurs was considered for
the study at 95% level of confidence and at 10% confi-
dence Interval.
(ii) Data collection
The primary data was collected directly from the selected
entrepreneurs by serving structured questionnaire during
April 2012 – March 2013. The questionnaire includes 11
variables.
(iii) Measurement of Level of Success
Success of the entrepreneurs is measured by success of
the firm. In the present study, level of success is measured
in terms of sales growth over last three years. The com-
pounded annual growth rate of 85 entrepreneurs are nor-
malized to arrive at three linear intervals namely low level
success = 0 to 33.33%, moderate level success = 33.33%
to 66.66% and high level success = 66.66% to 100%.
(iv) Instruments for Measuring important economic & en-
vironmental factors
The following 11 variables were used as an instrument for
measuring important economic & environmental factors on
the basis of review of literature.
1. Location of business
2. Access to early finance
3. Sufficient amount of money to invest in business
4. Law & order
5. Transportation facilities
6. Power supply
7. Tax exemptions
8. Access to latest technology
9. Competitive pricing
10. Access to market channels
11. Access to business association
With reference to the above stated factors, eleven state-
ments were made and measured in the five point ordinal
scale that is strongly agree, Agree, neutral, disagree &
strongly disagree. Ultimately score of 5, 4, 3, 2 1 were as-
signed corresponding to the degree of agreement. Reli-
ability test was carried out and the cronbach’s alpha was
found to be 0. 0.594 which indicates the reliability of the
scale used.
(v) Data Analysis
Statistical software SPSS 15 was used for analyzing the
data. Descriptive statistics were used for summarizing the
collected data. Kendall’s Tau-C was used to measure the
significance of association between the factors chosen for
study and the level of entrepreneurial success.
5. Findings
On the basis of review of literature, eleven (11) ‘economic
& environmental’ factors for successful entrepreneurs were
chosen as stated under the heading research methodology.
The objective of this paper is to find out the important
‘economic & environmental’ factors contributing to suc-
cess. For which, each Factor has been tested for its sig-
312 X INDIAN JOURNAL OF APPLIED RESEARCH
Volume : 4 | Issue : 12 | Dec 2014 | ISSN - 2249-555X
ReseaRch PaPeR
REFERENCE 1. Ahmad, N.H., Ramayah, T., Wilson, G. And Kummerow, L. (2010). Is entrepreneurial competency and business success relationship contingent
upon business environment? A study of Malaysian SMEs, International Journal of Entrepreneurial Behaviour & Research Vol. 16 (3), pp. 182-203.
| 2. Bosma, N., Praag, M.V. and Wit,G. D. (2002). Determinants of successful entrepreneurship, Scientific Analysis of Entrepreneurship and SMEs, Research report.
0002/E. | 3. Bruderl, J., and Preisendorfer, P. (1998). Network support and the success of newly founded businesses. Small Business Economics, Vol. 10(3), pp.213–225.
| 4. David G. and Andrew J. Oswald (1998), What Makes an Entrepreneur, Jour nal of Labor Economics, 1998, vol. 16, no. 1, pp. 26-60. | 5. Gideon D. & Robert A.
Baron (2003), why some people are more successful as entrepreneurs than others, Human Resource Management Review, 13 281–301 | 6. Kreft (2003), Report of
Corporation for enterprise development, quoted form Toward a comprehensive model of global entrepreneurship, by Ji-Hee Kim, Alan G. Weinstein, Sara E. Shirley,
and Imad Melhern. | 7. Mazzarol, T., and Choo, S. (2003). A study of the factors influencing the operating location decisions of small firms. Property Management, Vol.
21(2), pp.190-208. | 8. Mehmet Turan & Ali Kara (2007), An exploratory study of characteristics and attributes of Turkish entrepreneurs: A cross-country comparison
to Irish entrepreneurs, Journal of International Entrepreneurship, Volume 5, Issue 1-2, pp 25-46. | 9. Miller and Dess (1996), Factors of entrepreneurs, retrieved from
www.google.com | 10. Munikrishnan, U.T. and Veerakumaran, B (2011). A survey on business success factors influencing budget hotels in Klang Valley, International
Conference on Management-ICM, Proceedings, pp.1575-1590 | 11. Naqvi, S.W.H. (2011). Critical success and failure factors of entrepreneurial organizations: Study of
SMEs in Bahawalpur, Journal of Public Administration and Governance, Vol.1 (2), pp.17-22 | 12. Simeon Djankov et al (2007), What Makes a Successful Entrepreneur?
Evidence from Brazil, retrieved from http://ideas.repec.org/p/cfr/cefirw/w0104.html | 13. Tustin D. H. (2001), Econnomic growth prospects for SMEs in the Greater
Johannesburg, UNISA, Report No. 284. |
nificant of association with the level of success.
Cross tabulation between level of success and level of
score on the factor “Location of Business” is given in Table
No.-1.
Table No-1: Location of business and level of Success
Very low
Degree of importance of the
factor “Location of business”
To-
tal
Low
Mod-
erate
High
Very
High
Level
of Suc-
cess
Low Level of
success
2 3 10 12 15 39
Moderate
level of Suc-
cess
2 2 8 11 5 28
High level of
success
0 0 3 12 3 18
Total
4
5
21
35
20
85
Table No-1 represents the relationship between the level of
score on “Location of Business” variable and the level of
success. Both level of score on the economic & environmen-
tal factor i.e. Location of Business and the level of success are
expressed in ordinal scale. Kendall’s tau-c correlation is cal-
culated in order to find the degree and direction of relation-
ship between the level of score on “Location of Business”
and the level of success.
The result of Kendall’s Tau-c correlation test between the
factor” location of business” and level of success is given
in the Table No-2.
Table No-2: Kendall’s Tau-c between Location of busi-
ness and level of Success
Value
Sig
Ordinal by
ordinal
Kendall’s Tau-c .023 .09
No. of valid
cases
85
In the Table No.-2, it is found that the value of p=0.09
which is >0.05, this indicates that the association between
Location of business and level of Success is insignificant
Similar approach is followed for the other ten remain-
ing Economic & Environmental factors also. Summary of
the result of Kendall’s Tau-c correlation test for all the 11 is
given in table No.-3.
Table No. -3: Important Economic & Environmental Fac-
tors
Economic & Environ-
mental Factors
Value of
Kendall’s
Tau-C
P Value Significant
at α=5%
Location of business .023 .09 Insignificant
Access to early finance .095 .315 Insignificant
Sufficient amount of
money to invest in busi-
ness
.029 .750 Insignificant
Law & order .139 .105 Insignificant
Transportation Facilities .021 .803 Insignificant
Power supply .243 .002 Significant
Tax Exemptions .142 .140 Insignificant
Access to latest technol-
ogy
.397 .000 Significant
Competitive pricing .303 .002 Significant
Access to market chan-
nels
.328 .000 Significant
Access to business as-
sociation
.332 .000 Significant
Table No.-3 indicates that out of eleven (11) ‘economic
& environmental’ Factors, only five (5) are found to be sig-
nificantly associated with the level of success of the entre-
preneurs. These factors are Power supply, Access to latest
technology, Competitive pricing, Access to market chan-
nels and Access to business association.
6. Conclusion
It is concluded that out of eleven (11) ‘economic & en-
vironmental’ factors considered for the study, only five (5)
are found to be significantly associated with the level of
success of the entrepreneurs. These factors are:
1) Power supply
2) Access to latest technology
3) Competitive pricing
4) Access to market channels
5) Access to business association
Uninterrupted ‘power supply’ and ‘access to latest tech-
nology’ are crucial for achieving success in manufacturing
MSME in general. The present study discards the signifi-
cant role of ‘Location’, ‘transportation facility’, ‘sufficient
money’ and ‘law & order’ situation. This should act as a
push factor for struggling entrepreneurs for the reason
that even the ‘law & order’ situation and ‘transportation
facility’ in Assam is not good enough; still there is possi-
bility of achieving high level success. If an entrepreneur
could not set up his /her business in a ‘suitable location’ or
doesn’t have ‘ample money’, still there is hope for achiev-
ing high level of success.
