Determinants of Business Creation
Business creation is the process of converting an innovative idea into a viable new business. It involves planning, making key financial decisions and completing a series of legal activities. A successful new business can help people make a living, improve their standard of living, and create jobs in the community. However, many entrepreneurs fail to take the necessary steps to transform their ideas into a business. They may lack the knowledge, skills, or resources to launch a successful enterprise. In addition, they may not understand how to market their product or service to potential customers. Moreover, they may not have the funds to develop a prototype or build a working model.
A number of factors influence business creation, and researchers have investigated various aspects of the process to understand its determinants. The main factors are economic, social, and psychological. Economically, the cost of starting a company is high, and it requires considerable capital investment. It is also important to know the market and competitors to determine if there is an opportunity for your business to succeed. Socially, entrepreneurs must overcome the fear of failure and the sense of shame associated with a failed venture.
In the case of less-developed countries, access to good employment is limited for most citizens, so entrepreneurship may be seen as a necessity rather than a desire (van der Scheer Reference van der Scheer2007; Ojasalo Reference Ojasalo2004). Psychologically, the fear of failure can discourage individuals from pursuing entrepreneurial opportunities because they are afraid of wasting their time and money in an endeavour that will probably fail (Veciana Reference Veciana1999).