Necessity Entrepreneurship

Abokali Jimomi

 

Entrepreneurship and innovation are viewed as the key drivers of economic growth. Evidence on the role of entrepreneurship in stimulating economic growth in low-income countries however, is much debated topic.

 

The Global Entrepreneurship Monitor (GEM), the world’s leading research consortium focusing on entrepreneurship defines necessity-driven entrepreneurs as those pushed into starting business ventures due to “lack of no better choice of work.” Entrepreneurship in the poorest developing economies, accordingly, is usually driven by poverty and the need for survival while in developed economies it is mostly opportunity and innovation-driven.

 

The lack of income options and alternate employment avenues in the labour market pushes higher rate of entrepreneurial activity which according to GEM is negatively related to economic growth in middle/low-income countries whereas entrepreneurial attitudes have positive effect in high-income countries.

 

In Nagaland, with the increase in job-seeking population and the already saturated government job capacity (since it is not possible for the state to accommodate unlimited number of people), and the lack of alternate employment options, most people have no better choice but be pushed to self-employment activities. According to research findings, the supply of entrepreneurs grows more than the demand in a necessity scenario and the income per entrepreneur would decrease with the increase in the number of enterprises.

 

A key priority for policy makers in Nagaland is to understand the dynamics of entrepreneurship in the regional context and what locally-suited reforms can be made to promote entrepreneurship for economic growth, generation of employment and the reduction of the frustration-index of burgeoning number of job-seekers among the educated but with “no better choice/option for work” in the State. Every person can learn the skills to be entrepreneurial in any field of work; a large body of research work suggests that entrepreneurial traits are not innate but learned. However, it would be counter-productive to push every unemployed person into starting a business as a career choice.

 

According to a brief by UNU-WIDER, in developing countries, “well-intentioned support policies for entrepreneurship may have unintended negative consequences… If low-ability entrepreneurs also employ less productive workers at lower wages, the opportunity cost of being self-employed will fall, leading to the entrance of even more low-ability entrepreneurs. If, as a result, economic growth slows down, high-ability entrepreneurs, with fewer incentives to innovate, will exit.”

 

GEM report of a country that has undergone “series of politically-motivated reshuffle of the cabinet” likely to cause an overall dramatic negative impact on the well-being of its citizens shows extremely high income inequality, weak job-creating capacity leading to chronically high unemployment contributing to persistent poverty and inequality. The key recommendation is to bring out reforms that will create an ‘enabling business environment’ for small and medium-sized enterprises that will contribute to economic growth and employment creation.

 

Entrepreneurship research data shows that high income economies have good support systems such as business development courses through educational institutions, government grants, training facilities and programs, policies promoting and supporting entrepreneurship through institutions, facilitating access to venture capital funds and banks. Entrepreneurs in low-income countries struggle to support families and survive through necessity entrepreneurship, negatively impacted by lack of grants, institutions, access to capital and funding and due to non-existent entrepreneurial ecosystem. Findings suggest that policies need to focus on attitudes and quality of existing entrepreneurs more than quantity of people engaged in entrepreneurship.

 

In Nagaland, most self-employed individuals especially in rural areas have no access to banks and funding institutions, no formal entrepreneurship or entrepreneurial skills training and are mostly necessity entrepreneurs due to lack of choice.

 

Abokali Jimomi is a freelance writer. For comments, contact at abokali.sumi@gmail.com