Necessity entrepreneurship has been an important part of the economic landscape of high-income countries, particularly in times of economic distress. Necessity entrepreneurship is defined by individuals starting a business in order to make ends meet or to provide a livelihood when other options are unavailable. This type of entrepreneurial activity is often seen as a way to increase economic activity and create jobs.
This article will discuss the true stories of individuals who were motivated to start their own business due to economic necessity and the impact their businesses had on their communities.
Which of the following statements is true of necessity entrepreneurship in high-income countries?
Necessity entrepreneurship is defined as starting a business primarily due to underlying financial necessity, and not due to an innate desire for entrepreneurship. Necessity entrepreneurship typically exists in high-income countries and is largely driven by economic uncertainty and the need for employment income. It encompasses much of the informal economy, with entrepreneurs using an array of resources from their local environment to establish small firms.
Due to the nature of necessity entrepreneurship, these businesses are often characterized by:
- Low start-up funds
- Limited entry barriers to enter the entrepreneurial environment
- A lack of human resource management practices
- Weak or informal business networks
- A lack of investment in marketing and product innovation
These firms all tend to be small-scale and are concentrated in low-wage sectors that yield relatively low returns on investment. As such, they face greater difficulties than other businesses in attempting to access long-term capital or venture funds necessary for future growth.
There are many stories of economic struggles faced by those within high-income countries who have chosen necessity entrepreneurship as a way out of unemployment or underemployment. Common examples include:
- Immigrants from developing countries who locate themselves in urban centers where there is an abundance of unskilled labor and oftentimes tighter labor regulations relative to home countries;
- Displaced middle class workers who have become unemployed due to job market changes or technological advancements overtaking their profession.
Despite the inherent challenges associated with this kind of entrepreneurship, there are some success stories indicating that hard work and creativity can lead to success even in such situations.
Impact of Necessity Entrepreneurship
Necessity entrepreneurship describes the phenomenon where business owners create their own businesses out of necessity, often due to a lack of job opportunities. Although necessity entrepreneurship is more common in developing countries, it is also a driving force behind entrepreneurial activity in high-income countries. Necessity entrepreneurs often impact their local economies through the creation of new jobs, encouragement of innovation and reinvestment of profits back into their communities.
One example of economic impact in high-income countries can be found through research conducted by the Global Entrepreneurship Monitor (GEM). According to GEM’s 2017 report, necessity driven entrepreneurs are more likely to reinvest profits generated from their businesses back into their local economies than those driven by opportunity alone. This reinvestment can provide financial injections that create jobs and encourage sustainable economic development.
Additionally, necessity entrepreneurs may help shape knowledge systems and introduce innovative products or services within markets that were once dominated by traditional methods or technology. They are often less risk-averse than opportunity driven entrepreneurs and more willing to take risks with new ideas or technologies when resources and support structures are unavailable through traditional channels.
In summary, while higher rates of unemployment can spark increase levels of necessity entrepreneurship activity in high-income countries, these entrepreneurs have an important role in enabling economic growth when traditional forms of job creation may suffer during difficult financial times.
Necessity Entrepreneurship in High-Income Countries
Necessity entrepreneurship has become a key driver of economies in high income countries, with people starting businesses because they have found themselves out of work or in need of a new income source. This type of entrepreneurship has also led to a surprising amount of success stories in areas such as new technology, finance, and healthcare.
In this article, we will explore some of the different ways that necessity entrepreneurship has been successful in high-income countries:
Overview of Necessity Entrepreneurship in High-Income Countries
Necessity entrepreneurship is the process of starting a business to meet a necessary need that cannot be met by existing resources. This form of entrepreneurship is characterized by individuals that are economically driven, either due to financial hardship or to the lack of job opportunities. Necessity entrepreneurs often have limited capital and resources and must leverage what they have in order to start a successful business.
In high-income countries, there have been many success stories of individuals overcoming obstacles and demands to become successful necessity entrepreneurs. To succeed, necessity entrepreneurs must demonstrate a high level of creativity and dedication, as well as being willing to take risks when necessary. Necessity entrepreneurship also requires perseverance since most businesses will not turn a profit in the first few years due to inadequate capital or insufficient sales.
Necessity entrepreneurs in high-income countries face unique challenges related to access to capital, credit markets and networks that might not be available in lower-income countries. Despite the risk associated with it, necessity entrepreneurship has the potential for significant economic benefit when compared with traditional employment due to greater autonomy for individuals and higher returns on investment in terms of income generation over time on average.
Overall, necessity entrepreneurship in high-income countries can open up new opportunities for individuals who are looking for alternative forms of income generation as well as providing valuable economic contribution from an entrepreneurial standpoint. It is also an important opportunity for entire economies as these businesses can generate jobs and bring much needed skills that would not be available otherwise into their markets.
Characteristics of Necessity Entrepreneurs in High-Income Countries
The increasing prevalence of necessity entrepreneurs in high-income countries reflects the changing nature of the labor force and growing financial insecurity among many people. Necessity entrepreneurs are those who start their own business out of necessity, either due to a lack of job opportunities, to supplement their income, or to increase their livelihood security. This type of entrepreneurship requires investing resources into an enterprise with little or no access to external capital and facing reduced chances for traditional ownership and higher levels of risk than other kinds of entrepreneurs.
Characteristics that differentiate necessity entrepreneurs from other types include:
- A lack or limited access to resources such as capital and education.
- Perception of taking risks as a personal opportunity rather than a threat.
- An increased reliance on informal networks and relationships.
- Self-motivation and personal commitment.
- Limited geographical mobility.
- Long working hours.
- Lower profit margins.
- Delayed financial returns.
- Minimal government support.
Additionally, these individuals are more likely to be female, single heads of households with children, immigrants, older adults close to retirement age without pension plans in place, people who have been unemployed for some time due to economic downturns or globalization processes.