CHAPTER 2: RURAL ENTREPRENEURSHIP AND LOCAL ECONOMIC DEVELOPMENT: THEORETICAL PERSPECTIVES
2.3 CONCEPTUALISING RURAL ENTREPRENEURSHIP
2.3.5 Factors Influencing Entrepreneurial Success
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cultural, historical, human, social, or financial resources, that a venture requires for its growth and survival (Korsgaard & Muller, 2015). This means that rural entrepreneurship is primarily reliant on the rural environment’s local resources as a primary source of income or on the usage of local labour (Pato, 2015; McElwee & Smith, 2014). Thus, rural entrepreneurship is defined as entrepreneurial activity that deals with its spatial context and is embedded in its spatial context through the use of resources (Korsgaard & Muller, 2015). Thus, rural entrepreneurship is deeply rooted in its geographic (spatial) location. Embedding refers to a conceptual and operational method to perceive the type, depth and extent of the entrepreneurial link with a (rural) location (Pato & Teixiera, 2013). The location and externality of entrepreneurs’ market and social relations, as well as the engagement of locals in rural areas in the entrepreneurial process, are used to measure embeddedness in rural entrepreneurship research. To put it another way, locality assesses whether businesses have local relationships in terms of producing for and with locals, whereas external relations focus on producing for or with people outside of rural regions (Akgun et al., 2010). This is significant since most research has overlooked the significance and influence of the relationship between the physical environment and entrepreneurial activity. As a result, understanding rural entrepreneurship requires an understanding of geography and location. According to Korsgaard et al. (2015), it is important to connect the notions of space and place with rural entrepreneurship in order to establish a more differentiated and contextualized understanding of entrepreneurship in rural areas. The spatial context (geographic location) is critical in rural entrepreneurship because it provides resources that generate value for both the entrepreneurs and the local community (Eriksson, Fellenius & Norman, 2016; Korsgaard et al., 2015). This is significant since most previous research has overlooked the significance and influence of the interaction between the physical environment and entrepreneurial activities.
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entrepreneurial success (Angel et al., 2018; Arena, Azzone & Bengo, 2015; Lumpkin, Moss &
Gras, 2013; Ruebottom, 2011; Smith & Stevens, 2010). Razmuz and Laguna (2018) state that entrepreneurial success is perceived in different dimensions, not only in economic indicators, which can limit understanding of entrepreneurial success. Moreover, higher financial outcomes and good market position as well as other economic indicators of entrepreneurial success and firm performance or productivity are seen as success indicators of a business (Razmuz &
Laguna, 2018). Entrepreneurial success is viewed as a complicated notion involving numerous financial and non-financial elements (Staniewski & Awruk, 2019; Dej, 2010). Staniewski and Awruk (2019); Razmus and Laguna (2018) point out that the importance of non-financial indicators for entrepreneurial success must not be ignored. However, a variety of factors, both internal and external to the business environment, influence entrepreneurial success.
Various elements that impact on entrepreneurial success have been discovered by a number of academics. Personal characteristics such as the need for achievement, locus of control, and desire for personal control of business, human capital, and external factors such as infrastructure, training, communication network, and financial support have been identified by Bhagat (2014) as the most likely factors to influence entrepreneurial success. Lampadarios (2017) also categorized critical factors for business success into entrepreneurial (in relation to the person), entrepreneurial (in relation to the company) and business environment (external). Al-Tit, Omri and Euchi (2019) also classified factors associated with enterprise success into individual factors such as entrepreneur characteristics and non-individual factors such as internal and external factors. Internal factors include business demographics (such as size, age structure, networks, product and competitiveness of an enterprise), human capital (including skills, abilities, attitude, commitment, knowledge and experience of an entrepreneur), demographic profile and characteristics of entrepreneur (creativity, age, education, experience, locus of control, need for achievement, confidence, and risk-taking propensity). Ridzwan, Ramzi and Zubir (2021) found out that entrepreneurs’ psychological and personality traits, management skills and the training of entrepreneurs and the external environment are critical factors influencing the success of micro and small businesses. According to Ridzwan et al. (2021) and Sánchez (2012), the competencies of an entrepreneur play an influential and direct effect on enterprise performance.
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Accordingly, a successful entrepreneur must possess distinct attributes and should feel the need for achievement (Makhbul & Hasun, 2011).
Ridzwan et al., (2021); Khan, Salamzadeh, Shah and Hussain (2021); Zin and Ibrahim (2020);
Hassan, Ramli and Desa (2014) claimed that external environmental factors can influence the success of rural entrepreneurs in developing countries. External factors include economic factors (inflation, interest rates, tax, unemployment, and business environment), political-institutional factors (such as policies, bureaucracy, regulation and laws, political instability) and socio- cultural factors such crime, culture, access to capital, technology and resources) (Lampadarios, 2017). Other economic factors may include infrastructural facilities, economic climate, state regulation, and training and guidance (Sabbarwal, 2010). Razak, Said, Ahmad and Jumain (2017) acknowledged numerous factors that influence entrepreneurial success including individuals, motivational factors, environmental settings and social support. Sabbarwal (2010) also mentioned a number of factors that can influence entrepreneurship such as individual psychological, cultural and politico-economic factors. These set of factors can negatively affect the entrepreneurial success of a particular country. Thus, the performance of a firm or enterprise is influenced mainly by factors in both internal and external environments.
2.4 LOCAL ECONOMIC DEVELOPMENT AT LOCAL GOVERNMENT
Planning for local economic development (LED) has been one of the most popular policy issues in developing countries during the last few decades. LED as a development strategy has gained considerable popularity and recognition as a grassroots approach, particularly in developing countries in the recent years (Kahika & Karyeija, 2017). According to Rogerson and Nel (2016), LED is a more localized, location-based approach to local development and over the past few decades has emerged as a development strategy or method widely considered by many countries, development policy makers and organizations or agencies around the world. Koma (2014) emphasizes that LED is a crucial tool to stimulate the local economy and to combat the high levels of poverty, unemployment and inequality that most communities face. LED has become a common practice in Mexico, with more than half of the country’s municipalities including it into
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their construction plans (Rogerson, 2013). After Uganda’s decentralisation system was introduced in the mid-1980s, the LED strategy was implemented with the goal of greater decentralisation, poverty eradication, and broad, viable, and equitable economic growth and development at the local government level (Kahika & Karyeija, 2017). According to Houghton, Dlamini, and Mthembu (2013), LED is widely supported and seen as a critical obligation of local governments. Local governments, particularly local municipalities, have developmental responsibilities to provide basic services to local communities within their domains in order to alleviate poverty, boost economic growth, and create jobs, thereby enhancing everyone’s quality of life.