Entrepreneurship Development

Barriers of Entrepreneurship

Entrepreneurial ventures starts with a big dream in mind with a hope of converting in into reality. But this thing requires a lot of efforts and entrepreneur faces a lot of problems during this process. Further the process of entrepreneurship is affected by lot of factors which directly or indirectly affects the success of any entrepreneurship project.

Barriers of Entrepreneurship

(1) Regulatory Barriers – It is government of the country who regulates the industries in our country. This is done by the government itself or through the approved regulatory bodies of the government. It regulates the points like entry to market, registration requirement, licensing formalities, reporting and disclosure norms, tax norms, etc. This is done by filling up different forms and by completing various legal formalities. This is generally not an easy job. These forces, force the entrepreneur to weight their relative cost and benefits. Further even for acquiring government support, they are expected to produce so many documents, business plan certified by technical consultancy organisation, etc. This is considered to be a tough, technical and complex job which adversely affects the morale of the entrepreneurs. Due to this entrepreneurship does not grow in the country.

(2) Mergers and Acquisition – In India, there are so many rules, regulations and acts governing the merger, acquisitions, take over, compromises and amalgamations of the business enterprises. But these mainly concentrate in the big size enterprises. In the small scale and medium scale industries, these are practically not much effective. So, the flexible merger and acquisition policy generally discourages entrepreneurs and forces them to keep away from entrepreneurial behaviour. They apprehend that wherever they will be able to establish themselves other entrepreneurs will take over their establishment through manipulating the rules and regulations of merger/acquisition. Further small entrepreneurs are unable to compete with medium and big enterprises and that is the main reason for growing sickness in small enterprises. So, it becomes very important to mention here that mergers and acquisitions should be transparent and should be governed by simple procedures especially for the small and medium scale enterprises.

(3) Competitive Policy – This is another area which creates barriers for new entrepreneurs and small and medium size enterprises and enterprenureship. Existing entrepreneurs show their interest in facing the competition and creating healthy business environment. This supports the market in terms of quality product and economical products. But most of the time dominating firms in the market spoils the game by using their financial power and large share in the markets. They try to restrict the new entrants in the markets, try to curb the existing one by using illegal ways. This point also discourages the entrepreneurship in the country.

(4) Defective Tax Structure – Higher rates of taxes tend to distort economic activity and reduce profit margin of entrepreneurs. High tax rates lead to under utilization of resources and a less efficient and dynamic economy. This reduces the profit rates of entrepreneurs. This also reduces the liquidity of the firms by reducing their capacity to retain more profit for their further investment. To avoid the tax burden they attempt to avoid tax through tax evasion and tax avoidance. Although low tax rates are not the only factor which can solve the problems of the entrepreneurs, but relative tax structure on different forms of business organisations can encourage the entrepreneurs to stay in the market for a long time. So this in another area which becomes a barrier in the growth of entrepreneurship.

(5) Defective Administrative and Compliance System – Government generally favours small entrepreneurs by granting them tax incentives and tax subsidies to achieve a wide range of economic and social objectives. These measures include tax benefits to promote employees, training, research and development, special provision to SSI, Special tax incentives, special facilities by creating SEZ, export promotion zones, etc. These benefits require definitions of eligible activities, accountability requirements and other administrative procedures and these generate administrative expense for government and compliance costs for business. Indian bureaucratic system known for its red tapsim also increases the delay in execution of compliance and its costs so these benefits do not reach to the expected beneficiaries in time to discourage them. This is also considered as a barrier in the growth of entrepreneurship.

Some other Barriers of Entrepreneurship

In addition to the above stated barriers, another view can also be mentioned here. Karl H. Vasker in his ‘Entrepreneurship and National Policy’ has identified the following barriers;

  • Lack of viable project
  • Lack of market knowledge
  • Lack of technical skill
  • Lack of initial capital
  • Lack of business knowledge
  • Lack of motivation
  • Time pressure and distraction
  • Legal constraints and regulations
  • Monopoly and protectionism
  • Inhabitations due to parents
  • Low quality products
  • Involvement of high risk
  • Customs and traditions
  • Lack of infrastructural facilities
  • Lack of communication network.

At the end, it can be stated that when an individual starts a new business venture, he is filled with enthusiasm and drive to achieve success but when he faces the challenges of real business, bears losses or his ideas does not work, he loses interest/ motivation. In spite of all the efforts made by individuals and government to promote entrepreneurship, some societies are unable to produce sufficient number of successful entrepreneur.

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