Does Social, Cultural, Economic, and Political Environment Promote Entrepreneurial Activity - Essay Example

Social, Cultural, Economic and Political Environment Promotes or Inhibits Entrepreneurial Activities In the Pacific Rim Introduction Entrepreneurship is the nature of one being innovative and consequently investing with an aim of realizing profits and returns from an enterprise. Entrepreneurial activities are all the activities involved in the process of entrepreneurship, including one’s ability to be innovative and creative in identifying a need that needs to be met through investment, and the possible returns related to it, ability to source for capital to start up an enterprise and funds to run it successfully, being in a position to expand the investment, ability to overcome challenges faced on the way, and many other objectives and goals of investment. The ability for an investment undertaking to be successful is affected by various factors. Some of the main factors that determine the success or failure of entrepreneurial activities include the Social, Cultural, Economic and Political Environment within which the activities are being carried out. Not only do these factors have a large impact in determining the degree to which an entrepreneurial activity is successful, they also influence an entrepreneur’s decision on the actual choice of investment area to venture into, its size and what to actually deal with, amongst other choices and decisions made for the entrepreneurship. There is a close relationship between entrepreneurship and a country’s economic growth. If a country emphasizes on entrepreneurship in its national planning and policy formation, then this allows more investments, improving both the citizens’ living standards and boosting the overall economic growth. Therefore, most countries, especially those in the Pacific Rim have put all the effort possible to enhance entrepreneurship ultimately boosting growth of the economy. Below is a chart showing the comparison made for different countries, most of them in the Pacific Rim and others involved in the chart for the study just for comparison purposes. The comparisons are made for the total entrepreneurial activities within the countries. (Fitzsimons, 2004 ) Table 1: comparison for Total Entrepreneurial Activities among Countries From the table, it is clear that most of the countries in the Pacific Rim, like China, have a fairly high level of entrepreneurial activities compared to other countries. However, compared to the current global economic growths, there is a need for improvements to be facilitated to ensure more growth ion entrepreneurship. Political Intervention There are many different aspects in the political affairs of a country that affect the development or downfall of entrepreneurship within that country, both by its citizens and also by foreign investors. Most of the governments have put policies in place and enhanced the political environment with an aim of encouraging entrepreneurship, as well as allowing for growth and development of the economic world in that country. However, there are different factors in the political environment that affect the well-being of the economic position of the country, and subsequently, the entrepreneurial activities. There are different modes of political interventions present in a country. Some lead to promotion of the entrepreneurial activities while others inhibit them. There are different political interventions which are aimed at promotion of entrepreneurship. Such factors include funding provided by the government departments either on credit or as a grant and enhancement of the political environment in order to encourage entrepreneurial activities. The political interventions through facilitation of a conducive environment for carrying out economic activities include peace-building and ensuring security within the country. Also, the government facilitates the raising of living standards as well as reduction of unemployment rates in order to encourage entrepreneurship. On the other side, such problems as political instability and its consequences such as insecurity, increased inflation rates and low unemployment rates lead to very diverse and immeasurable effects on entrepreneurial activities within the country. In the United Arab Emirates for example, the government has been intervening in all possible ways in the development of real estates industry. The government, for example, has been leading in the construction and sale of real estates, as well as giving incentives, including soft loans, to those investing in real estates so as to facilitate faster and more effective development of the industry. Factors Affecting the Entrepreneur-Formation Phase There are different factors associated with influencing the formation phase of an entrepreneur. Most of these factors are related to an entrepreneur’s background. However, some of the factors are due to experience and knowledge accumulated over time. One of the main factors that affect the formation phase of an entrepreneur is his socio-cultural background. The background in which one has been brought up determines a lot in terms of the ideas that one has and his level of innovation, as well as his decision on the kind of investments to make. Many entrepreneurs tend to stick to the same fields of investment as has previously been carried out in their societies. An entrepreneur level of education also has a major role in the type of innovations and ideas that one is bound to make, and subsequently on the decisions one makes in entrepreneurship. A high level of illiteracy implies conservativeness and limited innovation leading to less productive entrepreneur decisions, while most of the entrepreneurs exposed to higher levels of quality education is able to think more broadly and become more successful entrepreneurs. The experience one has in the entrepreneurial activities is a very important factor to consider as far as investment ideas and innovation is concerned, and hence influences in a great deal the type and level of entrepreneurial activities one undertakes. As one gets exposed to different activities and experiences, he gains skills and is ultimately able to become a better entrepreneur compared to the unskilled ones. The financial background and current financial position of an entrepreneur determine the kind of investments one is able to undertake, irrespective of his innovation, skills and creativeness. One is able to only invest in an area in which he can raise the required capital. The Social-Cultural Structure There are different social and cultural factors that lead to either promotion or inhibition of entrepreneurial activities in a country or region. One fact that stands is that the running of Entrepreneurial Activities cannot be separated with social and cultural factors since they have a direct impact into them. In the society, and culturally in general, the age of the members of the society affects in a big deal the types and levels of investments made and generally the kind of entrepreneurial activities to be carried out in such a society. Young people are known to be more innovative and come up with greater ideas in terms of investment. However, the older generation is able to carry out most of the main investment work, especially since they are usually well furnished financially and can afford investing in enterprises requiring large amounts of capital. Hence, age variations and designations in the society determine in a great way the kind of entrepreneurial activities carried out in the society. Gender differences and gender perceptions as dictated by cultural factors has been a major determinant of the kind of activities carried out in a society. In different societies, there are different cultural factors that dictate the kind of decisions made by the different genders as far as entrepreneurship is concerned. Most of the cultural activities as well as responsibilities associated to different genders usually determine the level of innovation and decisions that one can make and also the investment areas that one can take. Therefore, such cultural factors are an important factor to consider as far as entrepreneurial activities are concerned. However, some societies have integrated development and all the changes associated to it, leading to lower influence of the cultural factors as far as entrepreneurial activities are concerned. On the other side, the balance between genders is an important factor that may affect ones decision and level of entrepreneurship. While planning to invest in a given society it is well known that some businesses can only thrive given a higher percentage of either of the genders, while others can only thrive if there is a good balance between the two genders. The socio-economic background of the citizens in a country determine to which extent a society is able to invest in. Different societies are associated with different trends and ways of entrepreneurship. Consequently, most of the members of the society tend to learn and be perfect in entrepreneurial activities that are popular in their society. Therefore, not many are able to invest successfully in a field they are not very familiar with, and hence he expectation is that one’s investment activities are determined by their socio-economic backgrounds. The society in which one has been brought up determines a lot in terms of the entrepreneurial activities that a society is involved in. Different social and cultural factors determine the motivation behind one’s ability to be an entrepreneur as well as what to invest in and even the level of investment. One is usually not able to change their mindsets and overcome the barriers associated with their entrepreneurial capabilities. Diversity in socio-cultural backgrounds always leads to diversity in entrepreneurial activities in a country, leading to its economic growth. Therefore, the socio-cultural factors have a great influence on the kind and level of entrepreneurial activities in a society. Some societies are quite conservative while others are interactive and allow integration of other cultural activities as well as their ability to trade and improve their different entrepreneurial activities. Those societies that are too conservative are very slow as far as diversity of entrepreneurial activities is concerned, limiting the diversity and level of such activities. On the others hand, most of the societies allow for integration of foreign cultures and cultural activities, leading to very diverse and well-developed entrepreneurial activities. In such societies, the level of innovation and creativity is high and better results are expected as far as entrepreneurship is concerned. For example, in the United Arab Emirates, due to the vast growth in real estates industry, there are more people investing in the industry, more as a tradition and not necessarily due to other influences. This way, a person brought up in a family that has been investing in such an industry is expected to follow the same way and venture into real estates industry, compared to one from a different background. The ‘Dark-Side’ of Entrepreneurship There is a dark side of entrepreneurship that not many refer to and that has been completely ignored as far as entrepreneurial activities are concerned. However, most of the activities associated to entrepreneurship can have a negative effect on the society, leading to the “dark side” of entrepreneurship. One of the main causes of the dark side of entrepreneurship is the insatiable desire for profit making. Most entrepreneurs are usually ready to go to any extents possible provided they make profits and see their enterprises running smoothly as they expect. In this way, they usually forsake their humanity at the expense of financial gain. They usually do not consider the implications of their decisions on such factors as prices, quality and quantity of goods and services offered to the society, and will aim at raising their profits at the lowest possible expenses. Another factor that leads to the dark side of entrepreneurship is the thirst for ownership of a business. One becomes a boss and wishes t take advantage of his workers subjecting them to serving his interests at the expense of their own personal needs. This is a very unfortunate position held by most of the entrepreneurs leading to a “dark side” of entrepreneurship. Government Policies Designed to Increase Entrepreneurial Activity in UAE Most of the governments have realized the importance of enhancing the different environments and conditions with an aim of promoting and increasing Entrepreneurial Activities. The main way in which a government is able to influence and enhance the entrepreneurial activities within its country is by review and consideration of the policies governing the business environment and undertakings. The same has been the case in United Arab Emirates, a country that is at the peak of its economic development, and whose economy has been rapidly growing in the world and hence attracting all forms of Entrepreneurial Activities into and within the country. One of the major factors and policies that affect the Entrepreneurial Activities are taxes and ways in which the government collects its revenue. For a long time, this government has been under some strict policies aimed at raising the greatest amount of revenue possible. However, with the realization of how much effect such policies had on the business environment, the government has reviewed its policies so as to enhance entrepreneurship. In so doing, the government has reduced the taxes for most of the businesses, especially the small-scale and developing businesses, and imposed the high taxes on already developed and sustainable businesses. In the same way, taxes on new investments have been reduced in order for more people to be motivated into investing. An example of such an industry that has received a boost due to lowered taxes is the tourism industry and the real estates industry. In the real estate industry, the taxes for imports which account for the larger part of the construction materials, machinery and all the other building requirements have been reduced in a great deal to enhance and encourage investment in the industry. Another policy that has been reviewed for the sake of improving the business world and encouraging entrepreneurship has been the control of competition through reducing monopoly by government agencies and large investments and also through privatization of most of the investments that are doing well in the economic world. This has enabled many entrepreneurs to invest in shares and partnerships and hence enabled more Entrepreneurial Activities. On the other side, investments that have been practicing monopoly are heavily taxed while the upcoming ones experience a smaller taxation hence increasing competition between the two differently-leveled enterprises. In this way, private firms in the real estates industry, for example, have been able to do better and attract more investors both from within and outside the country. The government has also dedicated itself to enhancing the banking systems and credit services by both the government agencies and the private sector. This has mainly been achieved by facilitating reduction of interest rates on credit facilities so as to encourage borrowing for capital by entrepreneurs so as to ensure more investment. Now, it is easier for investors to acquire more capital to either start up new investments or expand the already existing ones since the conditions for acquiring credit as well as the terms of payment have been made friendly. In the real estates industry, for example, private practitioners are able to acquire more funds for their capital and hence invest in better quality and more appealing estates that attract more clients. The government has started up many projects aimed at reducing the employment rates within the country and raising the living standards of its citizens. This way, more people are able to invest since they can afford to raise the capital required through any of the ways available. Also, when the living standards of the citizens are high, more people are able to spend hence the spending rate rises facilitating a good environment for carrying out Entrepreneurial Activities. Finally, the government has reviewed its foreign policies and set them at a position that is an incentive to many foreign investors. This way, foreign investment has grown and more entrepreneurs have gotten a better channel through which to venture into the country. For example, there are more foreign investors venturing into the real estates industry in the country than ever before. This way, there is an improvement in the entrepreneurial activities than ever before. References Berger, J.(2009). The 'Dark Side' of Entrepreneurship. New York: McGraw hill. Drucker, P. (1985) Innovation and entrepreneurship. New York: Harper & Row. Jalbert, S.(2000). Women Entrepreneurs in the Global Economy. London: Croom Helm. Kenneth L. Kraemer; Jason Dedrick and Sheryl Jarman.(2006.) 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