Abstract
Necessity-driven nascent entrepreneurship, which often associated with new firm creation and innovation, has emerged as a topical issue in entrepreneurship scholarship across the globe in recent times especially in developing countries. While the increase in necessity-driven nascent entrepreneurs appears to be widely regarded as a powerful tool for the reduction or elimination of unemployment and poverty worldwide, insufficient attention has been given to the challenges faced by necessity-driven nascent entrepreneurs. With this literature gap in mind, this chapter aims at providing a comprehensive understanding of challenges faced by necessity-driven nascent entrepreneurs. The research establishes six challenges, namely, personal or family problems, lack of entrepreneurial self-confidence, lack of information, lack of entrepreneurial mentorship, legal and regulatory issues, and lack of adequate personal funds. The recommendations to deal with these challenges are proffered and the suggestions for further study are captured.
TopIntroduction
During the past decade, many governments of both developed and developing countries have witnessed the significance of nascent entrepreneurship when it comes to innovation and new firm creation. It is within this context that nascent entrepreneurship is hailed for economic development and growth around the world (Mohan, Strobl, & Watson, 2018). With this in mind, nascent entrepreneurship has received much attention from scholars and researchers in recent times. It appears to be most appropriate to extend our understanding of the concept of entrepreneurship through fine-grained analysis of nascent entrepreneurship. In this regard, it is deemed necessary to mention that business cycle movements have an effect on nascent entrepreneurship. Unfortunately, little is known about the challenges faced by necessity-driven nascent entrepreneurship.
Going forward, there is a great deal of entrepreneurship literature that captures the motivation for entrepreneurship. In this respect, the motivation for entrepreneurship can be categorized into two distinctive groups, namely, opportunity and necessity. More interestingly, González-Pernía, Guerrero, Jung, and Legazkue (2018) underscored that people can establish new ventures with different motivations in different contexts. Nonetheless, high unemployment levels can decrease or increase nascent entrepreneurship in different contexts. Notably, unemployed people are inclined to entrepreneurship provided that the opportunity cost of being employed is very low as compared to being an entrepreneur (Gonzalez-Pernia et al., 2018). It is within this context that Simón-Moya, Revuelto-Taboada, and Ribeiro-Soriano (2016) expressed that unemployment and entrepreneurship can be linked to the business cycle.
By definition, nascent entrepreneurship is closely linked to people that are actively engaged in co-owned ventures or creating new ventures and such ventures have not yet paid wages, salaries, or any other form of payments to the founders for more than three months (França, Frankenbach, Vilares, Vereb, & Moreira, 2017). Given this definition of nascent entrepreneurship, it is salient to observe that this concept has led to the emergence of necessity-driven nascent entrepreneurship in the academic literature as a new entrepreneurial concept given the high levels of poverty and unemployment. Practically, necessity-driven nascent entrepreneurship as a phenomenon has attracted attention from policymakers of both developed and developing countries as they are now supporting necessity-driven nascent entrepreneurs more aggressively than before. Following a thorough survey of recent entrepreneurship scholarship, it is necessary at this juncture to mention that individuals are motivated to start-up a business venture by two factors, that is, necessity-driven and opportunity-driven (Benz, 2009; Nasiri & Hamelin, 2018; Williams & Williams, 2014).
Drawing from the existing literature on entrepreneurship, the issue of how the business cycle can influence entrepreneurship is controversial. Nonetheless, a thorough examination of available entrepreneurship scholarship shows that two issues surround the explanation of the linkage between entrepreneurship and economic recessions. These two issues are counter-cyclical and pro-cyclical prediction (Gonzalez-Pernia et al., 2018). In the case of counter-cyclical prediction, it is accepted that a recessionary economic environment can positively affect entrepreneurial activity (Gonzalez-Pernia et al., 2018). This suggests that people can be pushed into entrepreneurship owing to the shrunk of the job market. On the other hand, the pro-cyclical prediction is based on the view that a recessionary economic environment negatively affects entrepreneurship activity (Gonzalez-Pernia et al., 2018). This implies that business opportunities are very difficult to locate during a recessionary economic environment due to contraction in demand. Accordingly, the debate on opportunity-driven and necessity-driven entrepreneurship is linked to the business cycle. To this end, entrepreneurship literature has yielded mixed results when it comes to the nexus between entrepreneurship and business cycle.
Key Terms in this Chapter
Entrepreneurship: Is a process that involves discovery, appraisal, and utilization of avenues of opportunities that exist in the market in an attempt to introduce new services, goods, markets, raw materials, and processes profitably. It is widely acknowledged that entrepreneurship is about risk-taking.
Poverty: Is generally defined as a proxy of deprivation of the basic needs that a person, household or community necessitates to have as a basic standard of living. The poverty rate can be used to proxy the number of persons living below the poverty datum line.
Opportunity Entrepreneur: Is a person who is motivated to start a new business with the availability of unexploited entrepreneurial opportunity in the market. Opportunity entrepreneur aimed at business growth and economic development rather than survival.
Challenge: It is a strategic, human resource, procedural structural, and contextual factor that inhibits entrepreneurial success.
Push Factors: These are factors that force individuals to engage in entrepreneurship. These factors include unemployment and poverty.
Unemployment: Defined as the number of persons who can be employable and looking for a job but are not finding a job. The unemployment rate is used to measure the level of unemployment in a county. Unemployment is equal to the total number of people who are unemployed divided by the total number of people in the workforce.
Necessity Entrepreneur: Defined as a person who was unemployed before creating a new business venture. The main purpose of necessity entrepreneurs in business is survival. In this regard, they can be called survival entrepreneurs.
Nascent Entrepreneur: Refers to an individual who tried to establish a new business venture in the past 12 months and the new business venture did not generate positive net cash flow for more than three months. Nascent entrepreneurs can have full-time or part-time engagement in the business.
New Venture Creation: Defined as a process that involves an establishment of a new business venture from scratch, growing the venture and then effectively harvesting the business venture.