CHAPTER 2: RURAL ENTREPRENEURSHIP AND LOCAL ECONOMIC DEVELOPMENT: THEORETICAL PERSPECTIVES
2.3 CONCEPTUALISING RURAL ENTREPRENEURSHIP
2.3.3 Forms of Entrepreneurship: Necessity-based vs Opportunity-based Entrepreneurship
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and culture that influence human behaviour, and he further strongly argued that societal values are the key elements, which explain the growth of entrepreneurial activities as well as the behaviour of entrepreneurs. The existence of a culture, social class or group compatible with entrepreneurship can produce behaviours that encourage and enhance entrepreneurial activity, according to proponents of this school of thought (Edewor, Abimbola & Ajayi, 2014).
This point of view implies that an individual’s or a group’s entrepreneurial qualities are deeply rooted in the society to which they belong (Chetty, 2020). Dedekuma and Akpor-Robaro (2015) observed that, in the sense that a good value system provides a cogent moral argument for entrepreneurial behaviour; moral beliefs act autonomously on the minds of individuals, forming character that views entrepreneurship as a duty; and value, embodied in an institution, define groups with social cohesion and bring economic benefit, societal values and value systems which can aid in the development of entrepreneurship. According to Edewor et al., (2014), social systems that emphasize innovation, risk-taking and independence are more likely to create entrepreneurial events than systems with opposite values. The perspective suggests that entrepreneurship development is strongly influenced by social values and beliefs an entrepreneur subscribes to. The next section provides a conceptual framework as far as theorising and understanding rural entrepreneurship is concerned and focuses on what rural entrepreneurship entails and clarification of the definitional issues of the concept.
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advancement, structural change and economic growth and development. This section focuses on opportunity-based and necessity-based entrepreneurship.
2.3.3.1 Opportunity-based Entrepreneurship
The idea of opportunity in entrepreneurship is the subject of an expanding corpus of literature in entrepreneurship. Instead of using the current theories of entrepreneurship to understand entrepreneurial processes, entrepreneurial activities are understood in terms of specific opportunities that potential entrepreneurs experience and the actions taken by such entrepreneurs to take advantage of these possibilities (Olcay & Kunday, 2017). The entrepreneur in opportunity-based entrepreneurship identifies and evaluates opportunities in the environment before investing resources to the venture based on their merits (Udimal, Luo, Liu & Mensah, 2020). When an entrepreneur sees a business opportunity, he or she establishes a company. Any entrepreneur who pursues entrepreneurship in order to capitalize on a business opportunity or to seek better opportunities engages in opportunity-based entrepreneurship. Fairlie and Fossen (2018) refer to opportunity entrepreneurship as the creation of a business when an entrepreneurial opportunity exists. The recognition that an entrepreneur makes a voluntary career choice to pursue an entrepreneurial activity is a key distinguishing feature of opportunity-based entrepreneurs.
According to Audretsch et al. (2022), opportunity-driven entrepreneurship happens when entrepreneurs have other job opportunities but still choose to pursue entrepreneurship. Fairlie and Fossen (2018) argue that individuals who are working for a living, are enrolled in school or college, or are not actively looking for work are classified as ‘opportunity’ entrepreneurs. In other words, an opportunity-based entrepreneur chooses entrepreneurship to take advantage of the available business opportunity or seeking greater opportunities. Opportunity-driven entrepreneurship is when an individual becomes self-employed or an entrepreneur as a result of available opportunities that may arise as a result of both economic and non-economic factors.
Due to adverse economic conditions, necessity entrepreneurs are forced out of the labour force and into entrepreneurship (Audretsch et al., 2022; Shiller, 2017). Different factors within the
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person, as well as environmental and economic factors, influence the decision to become unemployed, employed, or self-employed. Creating and discovering opportunities to start new businesses rather than being pressured into working for oneself out of necessity plays a crucial part in an individuals’ ability to be an entrepreneur (Olcay & Kunday, 2017). Fairlie and Fossen (2018) consider business creation to be an ‘opportunity’ if it occurs in one of the three preceding labour market states.
According to Udimal et al. (2020); Acs and Varga (2005), opportunity-based entrepreneurship has a significant positive impact on economic growth and development. The entrepreneurial effect is used to explain opportunity entrepreneurship, which occurs when a thriving economy provides numerous opportunities for entrepreneurs, enticing both the unemployed and the employed to become entrepreneurs (Veel, 2010). Entrepreneurship is whereby an individual discovers, evaluates and exploits opportunities in order to introduce new goods and services, ways of organizing, markets, processes and raw materials through previously unorganized efforts. According to Olcay and Kunday (2017) and Short, Ketchen, Shook and Ireland (2010), opportunities in entrepreneurship are crucial since there is no entrepreneurship without an opportunity. Despite its paucity, empirical evidence shows that opportunity-driven entrepreneurs tend to have greater levels of entrepreneurial satisfaction than those motivated by necessity (Olcay & Kunday, 2017; Olcay & Kunday, 2016). Entrepreneurs that are opportunity-oriented start their businesses because they see an opportunity that no one else does and commercialise it out of inspiration rather than necessity.
2.3.3.2. Necessity-based Entrepreneurship
While the idea of opportunity is fundamental to entrepreneurship studies, the other side of the medallion represents the motivations for people to engage in entrepreneurial activities out of necessity (Fairlie & Fossen, 2019; Block, Kohn, Miller & Ullrich, 2014). Even though opportunities and entrepreneurship are inextricably linked, necessity entrepreneurs make up a sizable portion of the entrepreneurial population, particularly in nations with high rates of entrepreneurship and low GDP per capita (Olcay & Kunday, 2017; Poschke, 2010). The term
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‘necessity entrepreneurship’ refers to a situation in which an individual decides to become an entrepreneur because of lack of available opportunities (Udimal et al., 2020). ‘Necessity entrepreneurship’ was originally used in GEM studies in 2001, referring it to compelled entrepreneurship, which is employed by those who have no other options for employment (Olcay
& Kunday, 2017). According to data from the GEM, the proportion of entrepreneurs who start businesses out of necessity is 18.6% in Germany, 25.9% in Spain and 21.24% in the US (Block et al., 2014; Kelley, Singer, & Herrington, 2012). According to earlier studies, many entrepreneurs launch their business since they have few meaningful opportunities to find compensated work (Block et al., 2014). In other words, a person who starts a business because there are no other options or opportunities is classified as a necessity-based entrepreneur.
According to Block et al. (2014); Block and Wagner (2010), entrepreneurs that operate out of necessity differ from other entrepreneurs in terms of their socioeconomic traits. With necessity- based entrepreneurship, entrepreneurs are compelled to establish a business out of necessity due to lack of other employment options in the labour market. Individuals who are unemployed prior to starting a business venture are referred to as ‘necessity’ entrepreneurs (Fairlie & Fossen, 2018). This ‘necessity’ criterion is crucial since it may be related to the entrepreneur's drive, human capital, and resource endowments, which can have a significant impact on the character of a business (Block et al., 2014). Individuals who are unemployed prior to starting businesses are regarded as necessity entrepreneurs, because an unemployed person is, by definition, looking for work. Entrepreneurs who start businesses out of necessity are less likely to do so because they have no other alternative employment opportunities. Entrepreneurs who start businesses out of necessity frequently have less time than other business owners to meticulously organize their new ventures (Block et al., 2014). Necessity entrepreneurship is the concept in which an inconvenient initial situation leads to the decision to become self-employed, which could be the case if your current position as an employee has bleak future prospects or inadequate financial rewards (Veel, 2010).
Generally, necessity entrepreneurship is seen as the creation of a business in the face of limited alternatives and opportunities (Fairlie & Fossen, 2018). The defining feature of necessity
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entrepreneurship should be the understanding of adverse employment conditions as stimulators for the person to become self-employed. Thus, entrepreneurship motivated by necessity may be considered as being largely influenced by unfavourable external employment conditions of an individual (Haas, 2013). However, there can be no necessity entrepreneurship without someone who feels the need to engage in some type of entrepreneurial activity. The unemployment push effect can also be used to explain necessity entrepreneurship (Veel, 2010). Where there is a need to become an entrepreneur, but future objectives or current financial rewards are insufficient, economic factors clearly drive necessity entrepreneurship. With necessity-based entrepreneurship, an entrepreneur chooses to undertake entrepreneurial activities or start a new business venture because there are no other available options or options are limited. Due to the low opportunity cost of starting a business, necessity-based entrepreneurship is a situation where there are no better employment opportunities available for an individual seeking to establish a business enterprise.