Opportunity Recognition in Rural Entrepreneurship in Developing Countries

By Ozgen, Eren; Minsky, Barbara D. | International Journal of Entrepreneurship, Annual 2007 | Go to article overview

Opportunity Recognition in Rural Entrepreneurship in Developing Countries


Ozgen, Eren, Minsky, Barbara D., International Journal of Entrepreneurship


ABSTRACT

The Rural Poverty Report 2001 stressed the need to develop poverty-reduction policies and programs with a primary emphasize on rural areas. This paper promotes rural entrepreneurship development as an effective strategy in alleviating rural poverty in developing countries and summarizes some policy options that would be helpful in implementing rural entrepreneurship. We focus specifically on opportunity recognition, a key element in the entrepreneurial process, and introduce a model that emphasizes intellectual, human, environmental and socio-cultural resources and the mediating effect of national framework conditions. Since the concepts behind the model tend to be applicable across all settings, it is important to study this model at the general level and then draw implications for the other countries. By studying what influences recognizing opportunities in rural areas, it may be easier to offer assistance to developing countries.

INTRODUCTION

According to the 2001 Rural Poverty Report (RPV), 75% of the world's poor live and work in rural areas, and the majority will remain so for several decades (IFAD Rural Poverty Report, 2001; IFAD 2002). The International Fund for Agricultural Development (IFAD) stressed the need for developing poverty-reduction policies and programs with a primary emphasize on rural areas (IFAD Rural Poverty Report, 2001). Rural areas in developing countries are experiencing poverty and depopulation, are geographically more isolated, require infrastructure and subsidies, and have a lack of structural and institutional factors (IFAD Rural Poverty Report, 2001). Various social, economic, political and ecological problems in rural areas in developing countries create challenges in employment and cause increasing migration towards cities, decreasing agricultural production and increasing food shortage. A sustainable reduction in rural poverty necessitates the adaptation of further research and programs that help promote economic growth and development. Prior research indicates positive strong relationships among entrepreneurial activity, economic growth and poverty reduction (UN ICD Task Force, 2002).

Entrepreneurship is a vital component of productivity and growth (Baumol, 1993). The Organization for Economic Cooperation and Development (OECD) defines entrepreneurs as "essential agents of change who accelerate the generation, application and spread of innovative ideas and in doing so ... not only ensure efficient use of resources, but also expand the boundaries of economic activities" (Reynolds, Hay & Camp, 1999, p.10). The Global Entrepreneurship Monitor (GEM) reported a strong positive correlation between the level of economic activity and overall economic performance (Zacharakis, Reynolds & Bygrave, 1999). GEM reported that as firm startup rates increased, growth in national GDP and the employment rate increased (Zacharakis, et al, 1999). Therefore, acting as market innovators, entrepreneurs play critical roles in economic development (Schumpeter, 1934).

To date there are some high-level initiatives and projects underway in supporting entrepreneurial activity in developing countries (IFAD Rural Poverty Report, 2001; UN ICD Task Force, 2002). Although these efforts to foster entrepreneurial development were recorded effective in creating employment, many developing countries are still unable to provide an environment conducive to entrepreneurship (UN ICD Task Force, 2002). This is due to a number of barriers (e.g., the lack of economic, social and community development) that hinder entrepreneurial talent in rural areas (Petrin, 1994).

Rural entrepreneurship occurs in economically and socially depressed areas with inadequate infrastructure, economic stagnation, low levels of education, low skilled workers, low income, and a culture not supportive of entrepreneurship (Kulawczuk, 1998). Fostering entrepreneurship is a crucial factor in energizing the rural economy (Petrin & Gannon, 1997) in impoverished rural regions because entrepreneurship creates wealth and employment and has a profound impact on the quality of livelihood of rural populations (FAO Corporate Document Repository). …

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