Entrepreneurial Motivations in Start-up and Survival of Micro- and Small Enterprises in the Rural Non-Farm Economy (Survey‪)‬

The rural non-farm economy (RNFE) has emerged as an important employer of labour in the developing world (Saith, 1992). In India, employment in this sector has been growing at the rate of 5.4% per annum in the years 1977-78 to 1987-88 (Fisher and Mahajan, 1997). This is so even as employment in agriculture grew at 0.92% per annum in the same period and that in private organised sector at 0.5% per annum (Papola, 1991). The capacity of the agricultural sector to absorb labour in the future is extremely limited as seen from the elasticity of labour use with respect to output; it is estimated at below 0.35 and has been falling over time. The formal sector has not been absorbing labour either; more than 95% of the jobs in the 1990s were created outside the formal sectors. Most of the increase in the employment in the rural non-farm economy is coming about by the setting up of new enterprises and not by the expansion of existing enterprises (SDC-Nabard, 1996). The literature on the reasons for farmers switching to non-farm activities have conventionally classified them into two categories: push factors such as those that have to do with the inadequacy of subsistence farming as a full time activity and pull factors which have to do with the attractiveness of the non-farm enterprise (Liedholm and Mead, 1999, Chandrashekhar, 1993). However, it is possible to go into finer classification of the entrepreneurial motivation to explain the setting up of new units in particular activities (Basu, 1998). Thus while one rural entrepreneur might have been driven to a non-farm activity because it was easy to enter and easy to run, the other might have been driven by the fact that other family members were already in the business or because the entrepreneur's expertise lay in that activity. We make use of the technique of factor analysis to bring together motivations that show high correlations. This gives us a pattern of categorization which may be important in identifying the type of entrepreneurs who faced particular constraints such as credit, infrastructure, or skill availability. Literature Review