CHAPTER 2

MBK00103
Entrepreneurship
Development In Malaysia
WAN MARJAN BINTI WAN ABDULLAH
ENTREPRENEURIAL DEVELOPMENT :- Gibb (1987) suggests the stages of
entrepreneurial development that can help us formulate the goals of an
entrepreneurial development program.

4 Stage Of Entrepreneurial Development

1. Capital
• Most important perquisites to establish an enterprise. Availability of capital
facilitates is required to purchase the land, machine and raw material for
producing goods.
• Capital is therefore, regarded as lubricant to the process of production.
• Increase in capital investment, capital-output ratio also tends to increase.
Capital supply increase, entrepreneurship also increases.
2. Labor
• Easy availability of right type of workers also effect entrepreneurship. The quality rather than quantity of
labor influences the emergence and growth of entrepreneurship.
• The problem of labor immobility can be solved by providing infrastructural facilities including efficient
transportation Moreover, this influences the emergence of entrepreneurship. Most less developed countries
are labor rich nations owing to a dense and even increasing population.
• But entrepreneurship is encouraged if there is a mobile and flexible labor force. And, the potential
advantages of low-cost labor are regulated by the deleterious effects of labor immobility.
• The considerations of economic and emotional security inhibit labor mobility. Entrepreneurs, therefore, often
find difficulty to secure sufficient labor.

3. Raw Materials
• The necessity of raw materials hardly needs any emphasis for establishing any industrial activity and the
emergence of entrepreneurship. In the absence of raw materials, neither any enterprise can be established
nor can an entrepreneur be emerged
• It is one of the basic ingredients required for production. Shortage of raw material can adversely affect
entrepreneurial environment.
• Without adequate supply of raw materials, no industry can function properly and emergence of
entrepreneurship to is adversely affected.
4. Market
• The role and importance of market and marketing is very important for the growth of entrepreneurship. In modern
competitive world no entrepreneur can think of surviving in the absence of latest knowledge about market and
various marketing techniques.
• The fact remains that the potential of the market constitutes the major determinant of probable rewards from
entrepreneurial function. Frankly speaking, if the proof of pudding lies in eating, the proof of all production lies in
consumption, i.e., marketing.
• The size and composition of market both influence entrepreneurship in their own ways. Practically, monopoly in a
particular product in a market becomes more influential for entrepreneurship than a competitive market. However,
the disadvantage of a competitive market can be cancelled to some extent by improvement in transportation
system facilitating the movement of raw material and finished goods, and increasing the demand for producer
goods.

5. Infrastructure
• Expansion of entrepreneurship presupposes properly developed communication and transportation facilities. It
not only helps to enlarge the market, but expand the horizons of business too. Take for instance, the
establishment of post and telegraph system and construction of roads and highways in India. It helped
considerable entrepreneurial activities which took place in the 1850s.
• Apart from the above factors, institutions like trade/ business associations, business schools, libraries, etc. also
make valuable contribution towards promoting and sustaining entrepreneurship’ in the economy. You can gather
all the information you want from these bodies. They also act as a forum for communication and joint action.
 2. Social Factors
Social factors can go a long way in encouraging entrepreneurship. In fact, it was the highly helpful
society that made the industrial revolution a glorious success in Europe. Strongly affect the
entrepreneurial behavior, which contribute to entrepreneurial growth. The social setting in which the
people grow, shapes their basic beliefs, values and norms.

1. Caste Factor
• There are certain cultural practices and values in every society which influence the’ actions of
individuals. These practices and value have evolved over hundreds of years. For instance,
consider the caste system (the Varna system) among the Hindus in India. It has divided the
population on the basis of caste into four divisions. The Brahmana (priest), the Kshatriya
(warrior), the Vaishya (trade) and the Shudra (artisan): It has also defined limits to the social
mobility of individuals.
• By social mobility’ we mean the freedom to move from one caste to another. The caste system
does not permit an individual who is born a Shridra to move to a higher caste. Thus, commercial
activities were the monopoly of the Vaishyas. Dominance of certain ethnical groups in
entrepreneurship is a global phenomenon
2. Family Background
• This factor includes size of family, type of family and economic status of family.
• Background of a family in manufacturing provided a source of industrial
entrepreneurship. Occupational and social status of the family influenced
mobility. There are certain circumstances where very few people would have to
be venturesome. For example, in a society where the joint family system is in
vogue, those members of joint family who gain wealth by their hard work denied
the opportunity to enjoy the fruits of their labor because they have to share their
wealth with the other members of the family.

3. Education
• Education enables one to understand the outside world and equips him with the
basic knowledge and skills to deal with day-to-day problems. In any society, the
system of education has a significant role to play in inculcating entrepreneurial
values.
4. Attitude of the Society
• A related aspect to these is the attitude of the society towards entrepreneurship. Certain societies
encourage innovations and novelties, and thus approve entrepreneurs’ actions and rewards like profits.
Certain others do not tolerate changes and in such circumstances, entrepreneurship cannot take root
and grow.
• Similarly, some societies have an inherent dislike for any money-making activity. It is said, that in
Russia, in the nineteenth century, the upper classes did not like entrepreneurs. For them, cultivating the
land meant a good life. They believed that rand belongs to God and the produce of the land was
nothing but god’s blessing. Russian folk-tales, proverbs and songs during this period carried the
message that making wealth through business was not right.

5. Cultural Value
• Entrepreneurial growth requires proper motives like profit-making, acquisition of prestige and
attainment of social status. Ambitious and talented men would take risks and innovate if these motives
are strong. The strength of these motives depends upon the culture of the society.
• If the culture is economically or monetarily oriented, entrepreneurship would be applauded and praised;
wealth accumulation as a way of life would be appreciated.
• In the less developed countries, people are not economically motivated. Monetary incentives have
relatively less attraction. People have ample opportunities of attaining social distinction by non-
economic pursuits.
 3. Psychological Factors
1. Need Achievement
• The most important psychological theories of entrepreneurship were put forward in the early 960s by David
McClelland. According to McClelland ‘need achievement’ is social motive to excel that tends to characterize
successful entrepreneurs, especially when reinforced by cultural factors. He found that certain kinds of
people, especially those who became entrepreneurs, had this characteristic.
• Moreover, some societies tend to reproduce a larger percentage of people with high ‘need achievement’ than
other societies. McClelland attributed this to sociological factors.
• Differences among societies and individuals accounted for ‘need achievement’ being greater in some
societies and less in certain others. The theory states that people with high need-achievement are distinctive
in several ways. They like to take risks and these risks stimulate them to greater effort.
• The theory identifies the factors that produce such people. Initially McClelland attributed the role of parents,
specially the mother, in mustering her son or daughter to be masterful and self-reliant. Later he put less
emphasis on the parent-child relationship and gave more importance to social and cultural factors. He
concluded that the ‘need achievement’ is conditioned more by social and cultural reinforcement rather than
by parental influence and such related factors.
2. Withdrawal of Status Respect
• There are several other researchers who have tried to understand the psychological roots of entrepreneurship. One such
individual is Everett Hagen who stresses the-psychological consequences of social change.
• Hagen says, at some point many social groups experience a radical loss of status. Hagen attributed the withdrawal of status
respect of a group to the genesis of entrepreneurship. Hagen believes that the initial condition leading to eventual entrepreneurial
behavior is the loss of status by a group. He postulates that four types of events can produce status withdrawal:
i. The group may be displaced by force;
ii. It may have its valued symbols denigrated;
iii. It may drift into a situation of status inconsistency,
iv. It may not be accepted the expected status on migration in a new society.

3. Motives
Other psychological theories of entrepreneurship stress the motives or goals of the entrepreneur. Cole is of the opinion that besides
wealth, entrepreneurs seek power, prestige, security and service to society. Stepanek points particularly to non-monetary aspects
such as independence, persons’ self-esteem, power and regard of the society.
On the same subject, Evans distinguishes motive by three kinds of entrepreneurs:
i. Managing entrepreneurs whose chief motive is security.
ii. Innovating entrepreneurs, who are interested only in excitement.
iii. Controlling entrepreneurs, who above all otter motives, want power and authority.
Finally, Rostow has examined inter gradational changes in the families of entrepreneurs. He believes that the first generation seeks
wealth, the second prestige and the third art and beauty.
Thank you