The Influence of the External Environment on Enterprising Behaviour
1. Introduction
This essay mainly analyses and discusses the influence of the external environment on enterprising behaviour and activities. Entrepreneurship has become the driving force for the rapid economic development in the modern society and has attracted more and more people, but not all of the entrepreneurs are successful. Because the external environment is always changing and it has a great impact on enterpreneurial activities. In this essay, the author will critically discuss the role of the political environment, the economic environment, the scientific and technical environment and the talent environment in relation to entrepreneurship, and illustrate their influence on the firm establishment or growth. Taking the United States as an example, the essay will analyze how the political environment influences the enterprising behaviour in the history of America. Then in the case of the economic environment, the author will discuss the entrepreneurial activities in China using Timmons's theory, which includes three basic elements: entrepreneurial opportunity, entrepreneurial resource, and entrepreneurs. After that, it comes to discuss the importance of the science and technical environment and the current applications of the new technologies in entrepreneurial activities. And finally, the article turns to the analysis of the talent environment and explains the significance of the high-quality entrepreneurial teams in the establishment and development of the new corporations.
2. Descriptions of the External Environment for Entrepreneurship
Nowadays, as more and more people join in the ranks of the entrepreneurs, entrepreneurship has become the driving force of the rapid development of the economy all around the world. The entrepreneurial activities can fully promote the innovation (Davidsson & Wiklund 2001) which then enables the economic growth built on the basis of multilevel innovations, thus can effectively promote the social transformation, and create an equal and positive competitive spirit. It is said that the social meaning of the entrepreneurial activity is as significant as an industrial revolution (Drucker 2009). However, on the other hand, entrepreneurship is a complex social phenomenon. That is, the entrepreneurial activity is related to numerous different cross-disciplinary fields, such as psychology, sociology, management, and economics and so on. From the initial identification of the opportunity to the successful management of the firm growth, it involves a variety of the complex skills and expertise to deal with the external environment in entrepreneurial process, since the environment is the soil for the survival of the enterprise and is always in change.
Entrepreneurship cannot be successful only with the support of passion and dreams, it also need a clear analysis and assessment of the changing external environment. The environment research or assessment is one of the key issues for entrepreneurial activities. In general, the entrepreneurial environment (Rose 2000) includes the macro-environment and the industry environment. In detail, the former refers to the political environment, the economic environment, technical environment etc. while the later is mainly about the entry barriers and the like. The environmental analysis is a prerequisite to discover new entrepreneurial opportunity and is also the basis for the feasibility analysis of the entrepreneurship. Since the external environment for entrepreneurship is always changing, it can provide either an opportunity or a threat for entrepreneurs. Thereby, all of the entrepreneurs have to understand the impacts of the various environmental factors and their trends just in order to avoid the serious threat and win success in entrepreneurial activities.
3. The Influence of the Different Entrepreneurial Environment on the Enterprising Behaviour
As is mentioned above, the different external environment plays an important role in the entrepreneurial process. So in the following sections, the essay will discuss the environmental influence on the enterprising behaviour from the perspective of politics, economics, science and technology as well as talents.
3.1. Political Environment
The political environment affecting entrepreneurship includes the political system, political parties and party system, and national policy and political situation of the country. In addition, the laws and regulations established by the state are also of equal importance. The policies, regulations and the direct management of the enterprise by the government can influence the enterprise greatly and directly (Evans & Jovanovi 1989). When the policies or laws and regulations changes, there may be new industries, new markets and new business opportunities. If the entrepreneurs can discover and take full advantage of new opportunities, then they will be able to make a successful business more easily. However, if they do not have a full understanding of the dynamic and uncertain changes of the political environment, then it will retard the enterprising behaviour without doubt. Usually, the government establishes a series of policies or laws, such as tax preference, loan guarantees, venture capital, and the related intellectual property protection system, etc. All of these factors have optimized the external environment in the macroscopic level and will have a certain degree of influence on the enterprising behavior.
For example, in America, with the help of the public finance budget plan, the government provides free funding for the establishment and development of the SEMs (small and medium-sized enterprises) without getting any shares. In 1958, the United States issued the 'Small Business Investment Act'. The Act authorized the federal government to establish the small business administration. Thus, the small and medium-sized entrepreneurial enterprises could get a favorable credit support from the federal government as the start-up capitals. Yet, the precondition is that they should have been reviewed and permitted by the small business administration. This policy had solved the shortage of capital for the entrepreneurs and encouraged them to bravely start the first step of their careers. And all of these measures had directly contributed to the emergence of the first entrepreneurship upsurge in the United States (Baumol 1990). Then throughout the 1970s, faced with the fact that the entrepreneurial activities were at a standstill, the American government decided to reduce the highest capital gains tax from 49.5% to 28% in 1978, and further lowered it to 20% in 1981. Meanwhile, the government had also implemented another new policy, which allowed a certain percentage of the pension funds into the venture capital market (Butler 1991). The two policies of the government had greatly promoted enterprising behaviour, and as a result, formed the second entrepreneurship climax for the United States in the 1980s. After that, the American government further improved its support of the small entrepreneurial companies, and purchased a large number of high-tech products from those companies, which had greatly stimulated the transformation from the technological innovation to high-tech products, and also increased the confidence of the private entrepreneurial companies and their initiatives.
3.2. Economic Environment
The economic environment refers to the social and economic conditions and the national and regional economic policies as well. According to Timmons's theory (1999), the impacts of the economic environment on entrepreneurship are mainly reflected by the impacts on the entrepreneurial opportunity, entrepreneurial resource, and entrepreneurs. The three basic elements are an integrated organic whole. Once the economic environment has a bad influence on the enterprising behaviors and the three elements are out of balance, then the entrepreneurial activities will be affected seriously. Taking China as an example, the essay will analyze how the economic environment affects the three elements and then further influence the enterprising behaviors. Studies show that China gives priority to the opportunity entrepreneurship while taking necessity entrepreneurship as auxiliary (Collins, Shane & Locke 2003). The motive of the opportunistic entrepreneurial behavior lies in the strong desire of an individual to seize the existing opportunity and realize its value. Usually, the typical representatives are scientific and technical personnel, and these entrepreneurs are always high-quality talents. As for necessity entrepreneurs, they are often those who have no better career prospects, and have to be engaged in some kind of entrepreneurial activities. Generally, they are usually the laid-off workers and the students who could not find jobs. In 2007, the opportunity entrepreneurship accounted for 60.4% and the proportion of necessity entrepreneurship was 39.6%.
The influences of the economic environment on the entrepreneurial opportunity are mainly due to the decline in the world economy and the appreciation of the RMB. One on hand, the slowdown of the world economy in the growth rate directly affects the emergence of domestic entrepreneurship opportunities. On the other hand, the RMB will influence the competitiveness of the entrepreneurial enterprises in the international market, thereby inhibiting entrepreneurial opportunities. In short, these factors have made those export-oriented SMEs under serious threats and retard their enterprising behaviours. Besides, due to the implications of the international and domestic macro-economic environment, the cost of raw materials, capital and labor etc. has been increased constantly. As a result, it has become more and more difficult to get access to the resources for the entrepreneurs, thus, discounted the effect of the preferential policies in various industries (Kreft & Sobel 2005). In addition, with the increase of college graduate and the transfer of rural labor to urban areas, China's employment situation has become more severe. At present, as the economic environment changes, a large number of SMEs are facing the survival crisis; therefore, companies become more and more careful when recruiting staff, which would further increase the country's employment pressure. The harsh employment has increased the number of potential entrepreneurs, but the increase is mainly the necessity entrepreneur. Since the Chinese government pays more attention to the opportunity entrepreneurship, the economic environment is friendlier to the opportunity entrepreneur rather than the enterprising behavior of the necessity entrepreneur.
3.3. Scientific and Technical Environment
The technological change makes people be able to do new things or to do things existed in the past in a more efficient way. The various changes brought about by the new technology makes it the most important source for valuable entrepreneurial opportunities. And the scientific and technical environment plays a significant role in providing technical supports and expanding the market for the entrepreneurial enterprises (Shane & Ulrich 2004). For example, when the human genome has been completely parsed, it will bring about a large number of new bio-medical technologies and the corresponding opportunities for the new product development. eAlso, it will promote the flourish of the biotechnology industry in the near future which would in turn produce more opportunities for entrepreneurs. Seen from the reality, in the past decades, the rapid development, the popularization as well as the application of the new technologies has triggered a new round of the great mass fervor for entrepreneurship. And it has also promoted the rapid growth of some new technology-oriented entrepreneurial companies.
It should be noted that the changes of the scientific and technological environment gave birth to some of the new technology companies, and had won great success to an extent. However, the technology used for entrepreneurship accounted for only a fraction of the total of the new technologies. In fact, some of them were used to enhance the competitiveness of the existing companies; some were sold in the market, and some were even abandoned directly. That means not all of the new technologies are seen as the source of entrepreneurial opportunities. It is because that the different entrepreneurs have different levels of knowledge and experience, so that their identification abilities of the opportunities for entrepreneurship are also not the same. It is said that they can only recognize the opportunities related to their prior knowledge and experience (Shane 2000). If the entrepreneurs have more experience and skills, more creativity and imagination, and more need for achievement, they may be able to deal well with the risk and uncertainty, and they can make full use of the favorable scientific and technical environment. In other words, the experienced entrepreneurs (Blanchflower & Oswald 1998) can find more entrepreneurial opportunities in the technological change process. That means they can achieve the commercialization of technologies via entrepreneurship, turning the new technologies into either new products or more advanced productive forces for enterprises.
3.4. Talent Environment
The knowledge and quality of the entrepreneurs plays an important role in entrepreneurial activities, but the role of the entrepreneurial team should not be ignored. From the perspective of the talent environment, the entrepreneurial enterprises created by entrepreneurial teams are more than that created by individuals (Sarkar, Echambadi & Harrison 2001), whether in the traditional manufacturing industry, or in the modern high-tech industry. This is especially true in the high-tech industry which is developing rapidly at present. The abilities involved in the entrepreneurial process contain various aspects such as management, technology, marketing, finance and so on, and these are far beyond a single entrepreneur can have. Therefore, to start a business successfully, and ensure its healthy growth in the future, it is very necessary to rely on a good entrepreneurial team. In fact, a large number of empirical studies have shown that the corporations created by teams survive longer and grow better than those created by individuals.
For the establishment of the modern enterprises, the talent environment is of great significance, because it can provide high-quality talents for the entrepreneurial team. When establishing an entrepreneurial team, the entrepreneur should take all kinds of talents into consideration according to their different characteristics and skills. People who are good at management, finance, technology and marketing etc. are all valuable and should be paid attention to, just in order to form a heterogeneous team. Besides, as the core leader of the entrepreneurial company, the entrepreneur must make sure that all of the team member should be enthusiastic. If they have no enthusiasm and confidence in entrepreneurship, then their enterprising behaviors will be discounted and cannot meet the needs of the enterprises.
In addition, for the stable development of the entrepreneurial corporations, the entrepreneurial team also occupies an irreplaceable position. The relations between the development potential of the company and the quality of the corporate management team are very close, especially for the high-tech company. The spirit of cooperation, cohesion, and the professionalism together with the long-term goal of the entrepreneurial team will help the new enterprises go through the critical moment, and then accelerate the pace of growth (Delmar & Shane 2006). Moreover, the complementarities and coordination between the team members and the entrepreneur can reduce risks and improve the competitiveness of the company. Thus, a good talent environment and a high-quality entrepreneurial team can determine the survival and growth of the entrepreneurial enterprises.
4. Conclusion
According to the analysis and discussion of the essay, the external environment did have some influence on the enterprising behavior; it could either promote or restrain the entrepreneurial activities just depending on the changing and uncertain characteristics of the external environment. The influences of the political environment are obvious in the American case; the government had made lots of policies and laws to support entrepreneurship, especially for the SMEs which had greatly promote the enterprising behavior in the country. As for the economic environment, its influences are reflected by the impacts on the entrepreneurial opportunity, entrepreneurial resource, and entrepreneurs. And in the case of China, The harsh economic environment has increased the number of potential entrepreneurs, but the opportunities, resources and policies are friendlier to the opportunity entrepreneurship. Besides, considering the technical environment, the entrepreneurs should pay more attention to the high technologies and make full use of them since they can provide new productive force for the entrepreneurial corporation. Also, the talent environment is equally important, because the high-quality entrepreneurial team could promote the enterprising behavior and the firm growth.
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