Journal

of the
Oriental Institute
M.S. University of Baroda
ISSN: 0030-5324
EMPIRICAL INVESTIGATION OF ENTREPRENEURIAL CHALLENGES: A
COMPREHENSIVE ANALYSIS
Dr. G. Chandramowleeswaran,Assistant Professor, Department of Commerce and Business
Administration,Vel Tech Rangarajan Dr. Sagunthala R&D Institute of Science and Technology,
Avadi, Chennai 600062.mowleehul@gmail.com
Dr.G.Manoj,Associate Professor, Department of Management Studies,Vel Tech Rangarajan Dr.
SagunthalaR&DInstituteof Science and Technology,Avadi, Chennai
600062.manoj.nmcc@gmail.com
Pavethra. R,Assistant Professor, Department of Commerce and Business Administration,Vel Tech
Rangarajan Dr. Sagunthala R&D Institute of Science and Technology,Avadi, Chennai 600062.
rameshpavithra91@gmail.com

Abstract
A business's risk-takers are its entrepreneurs. Financial experts and community organizers frequently
bring up business owners while discussing the topic of economic growth. No matter the endeavour,
entrepreneurial activity contributes significantly to economic and social development. Entrepreneurs
play a crucial role in any thriving economy. Lack of necessary abilities, such as communication,
technical, entrepreneurial, and soft skills, is a significant contributor to the failure of entrepreneurs.
Several training programmes are available, both publicly and privately, to help business owners
maintain their operations. The SEM model was used to test hypotheses about the difficulties.
Keywords: Entrepreneurship, Challenges, SEM model

Introduction
In the eyes of an entrepreneur, keeping a business afloat is a herculean task. Entrepreneurs strive to
know everything there is to know about their field. To operate as an entrepreneur is to act as a business
owner (Yoganandan & Vignesh, 2017). In order to commercialize fresh ideas, entrepreneurs are
amassing resources in the forms of innovation, capital, and business savvy. Being an entrepreneur
requires more than simply the willingness to start a firm. It necessitates a radical shift in how one
perceives foresight, adaptability, and originality. Entrepreneurs must be eager to go outside the box
and implement original strategies. They need to acquire the knowledge that will enable them to think
like entrepreneurs and equip future leaders to handle increasingly tricky issues (Andrew & Kathryn,
2015).
Business owners play a crucial role in any country's economic development. Increasing rural
entrepreneurship creates self-employment, spreading manufacturing and commerce more widely and
using available local resources and human labour better. Most rural entrepreneurs face many
challenges because of a lack of essential facilities in rural areas. These include a lack of capital, a lack
of marketing know-how, a lack of skilled labour force, an absence of adequate technical knowledge, a
lack of soft skills, a lack of competition from urban-oriented entrepreneurs, and a lack of complication
in the process of obtaining financing from banks and financial institutions. It is possible that the
establishment of rural entrepreneurs would fail if the issues facing rural entrepreneurs are not managed
and alleviated. If this happens, individuals from the countryside will leave their homes again to search
for work in adjacent cities.
Nearly three-quarters of India's population resides in rural settings. Those in rural areas typically find
work in agriculture. Small-business entrepreneurs in rural locations sometimes have to make do with
fewer resources than their urban counterparts, so they must be very frugal with what they have. Many
would-be business owners in rural areas have failed due to a lack of resources, including education,
technical expertise, marketing savvy, capital, and reliable access to high-quality inputs.1

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Literature Review
Research by Venkateswarlu and Ravindra (2015) indicated that rural entrepreneurs have trouble
getting started because of illiteracy, a lack of financial resources, and a lack of technical competence.
Women business owners confront several obstacles, according to research by Jyoti Rani and Sanjay
Kumar Sinha (2016). These include a lack of production equipment, inadequate marketing abilities,
trouble acquiring clients, and unfavourable market conditions.
According to research by Ngorora and Mago (2016), the lack of capital, the inability to get their
products to market, and mobility are the three most significant challenges facing rural entrepreneurs.
Priyanka, S. Patil and Sidharth, R. Patil (2016) observed that power outages, a lack of family support,
and a lack of technical skills are just a few of the challenges that rural entrepreneurs encounter.
A lack of infrastructure, a lack of funding, and a lack of competence in information technology are
only some of the difficulties rural entrepreneurs confront, according to research by Jayadatta (2017).
Hedge, V. (2018) investigated the unique problems faced by MSMEs in the Peenya industrial district
of Bangalore. According to the research, human resource obstacles are the most common among
entrepreneurs. This is followed by infrastructure, government, societal issues, finances, and marketing
challenges.
Pooja Khatri's (2019) research analyzed the problems and challenges faced by the micro, small, and
medium enterprise industry. Using secondary data, we identified the challenges that micro, small, and
medium-sized enterprises (MSMEs) confront, including a lack of capital, ineffective marketing and
technology, insufficient human resources, inefficient operations, and limited export potential. The
research also provided recommendations to help MSMEs succeed.
Share. A (2020) Even though they have high growth rates and promising futures, small and medium-
sized enterprises (SMEs) have been held back from reaching their full potential by several factors.
These include technological lag, high credit costs, a lack of adequate infrastructure, a scarcity of skilled
labour, and a lack of market access.

Objective:
To identify various challenges faced by entrepreneurs.
To study relationships of various challenges.

Hypotheses:
H01: There is no impact of managerial challenges on challenges faced by entrepreneurs.
H02: There is no impact of financial constraints on challenges faced by entrepreneurs.
H03: There is no impact of Procedures & formality difficulties on challenges faced by entrepreneurs.
H04: There is no impact of technological challenges on challenges faced by entrepreneurs.

Research Methodology
Primary information is essential to this research—questionnaires for primary data collection. The
survey asks questions tailored to the challenges addressed by M&S leaders. Using a convenient
sampling method, we sent out surveys to 301 manufacturing-related micro, small, and medium-sized
enterprise (MSMEs) owners in and around Bangalore. Factor analysis and the path coefficient method
of structural equation modelling (SEM) are used to examine the obtained data and determine which
specific obstacles impact the real difficulties business owner’s encounter.

Discussion of Challenges faced by entrepreneurs of MSMEs:

Financial challenges:
Small business owners have difficulty securing the funding they require for operations and growth.
Lack of collateral and knowledge about prospective government programmes, high-interest rates, and
expensive processing fees for loan requests is a significant financial concern for Indian MSMEs.

Managerial challenges:
Motivating managers and technicians can be challenging for entrepreneurs due to a lack of funds and
personnel. Lack of sufficient research, testing, and feasibility studies contribute to poor project

Vol. 72, Issue. 03, No.1, July – September: 2023 Page. 120
planning in SMEs. Problems in the small business sector include risk management, frequent
government inspections, gender inequality, and industry bias.

Government challenges:
The legislative framework for establishing and operating smaller industrial units is currently in a state
of flux, and existing regulations are inadequate for startups. The labour regulations are rigid, and the
processes required to comply with them are time-consuming and challenging to grasp. There is much
room for interpretation in regulatory policies. There is concern that the dispute settlement process will
be lengthy and costly.

General challenges:
Entrepreneurs of small businesses, especially in their formative years, face a wide range of social and
cultural challenges, including inequalities in family support and social caste. The industry's
vulnerability to environmental change is exacerbated by the risk of operating on a small scale. Many
employees leave as a result. There is a deficit of information technology literacy at both the managerial
and technical levels.

Raw material challenges:

High tariffs on raw material imports by SMEs (small and medium-sized businesses) create barriers in
export value chains. The disadvantage of being smaller than rivals causes a lack of social capital
resources such as networks, inter-firm linkages, management connections, and informal ties. It makes
it very challenging for businesses to compete on a global scale.

Human Resource challenges:

Human resources with good managerial qualities are scarce for small and medium-sized enterprises
(SMEs) due to larger organizations' high pay and benefits. Small and medium-sized businesses
struggle due to insufficient qualified workers (SMEs). There is a severe shortage of workers at all
levels who possess industry-specific credentials.

Infrastructure challenges:
The lack of adequate infrastructure has hurt the sector. There is a significant dearth of infrastructures
like clean water, power, transportation, and communication. Infrastructure issues harm SMEs, both in
terms of production and profitability.

Technological challenges:
The operating costs of Indian MSMEs have increased dramatically in recent years due to the use of
outmoded machinery and equipment. This has reduced manufacturing's competitiveness. Updating our
technological infrastructure is crucial.

Results and Discussion:

4.1 Demographic characteristics of the entrepreneurs:
Table 1: Demographic information about the respondents (N=301)
Measures Items Frequency Percentage

Gender Male 205 68

Female 96 32

Age Below 24 15 5

25-30 35 11

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 30-35 99 34

35-40 111 37

40 & above 41 13

Education Secondary 36 12

Undergraduate 65 21

Postgraduate 107 36

Others 93 31

0-5 years 102 34

Years of business established 5-10 years 86 28

Above 10 years 113 38

(Source: Primary survey)

Exploratory Factor analysis (EFA):

The current research used factor analysis, namely Principal Component Analysis with Varimax
Rotation, to uncover the numerous difficulties encountered by manufacturing sector entrepreneurs. We
have a large enough sample to proceed with our research, as evidenced by a KMO value of 0.851 and
a substantial Bartlett test of sphericity. Eigen value 1 and factor loading more than or equal to 0.7 were
used to determine which factors to extract, leading to the identification of four distinct problems and
one latent factor spanning the whole range of difficulties encountered by entrepreneurs. The retrieved
components account for 76.3% of the overall variation.

Reliability: Cronbach's alpha was utilised to determine the reliability of the scale in the current
investigation. Nunnally (1978) states that proposed scale items are dependable if and only if their alpha
is at least 0.7. Since all of the alpha values in table 2 are greater than 0.7, it may be concluded that the
current data is credible.
Table 2: Factor loading of each construct with Cronbach’s alpha values:
Factors Items Loadings Alpha value
Managerial M1 lack of funds and personnel .746
Challenges M2 Lack of sufficient research .797
M3 Lack of proper planning .755 0.778
M4 Lack of decision making skills .807
M5 Lack of communication skills .718
Financial FC1 Lack of collateral security .719
Challenges FC2 Differed payment of bills .781 0.857
FC3 Limited working capital .746
FC4 High interest on loans .769
Procedure & PDF1 Lack of coordination among .753
Formality different government 0.842
Difficulties departments
PDF2 Lack of knowledge related to .819
Banking procedures and
formalities

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 PDF3 Corruption in sanction of loan .752
and subsidy
PDF4 Non cooperative attitude of .793
government employees
Technological TC1 Lack of technological skills .898
challenges TC2 High cost of technology .806 0.813
acquisition
TC3 Inadequate technology .887
support
Challenges EC1 Inadequate power and water .769
faced by supply 0.786
Entrepreneurs EC2 Inadequate transportation .771
facilities
EC3 Poor knowledge of human .854
resource management
Source: Primary survey

Table 3: Descriptive and Correlation among variables:

Mean MC FC PDF TC EC
Managerial 4.4439 1 .482** .611** .435** .592**
challenge
Financial 4.2658 .482** 1 .664** .425* .668**
challenge
Procedure & 4.4784 .611** .664** 1 .486** .669**
Formality Difficulties
Technological 4.3953 .435** .425* .486** 1 .553**
challenges
Challenges faced by 4.5515 .592** .668** .669** .553** 1
Entrepreneurs
Source: Primary survey
Here, ** indicate correlation significant at 0.01 level.

Hypotheses testing using Structural Equation modelling (SEM):

The impact of each challenge on overall challenges faced by entrepreneurs was tested using path
coefficients. The criteria for significant path are when p value below 0.05 (at 5% level of significance)
and T value above 1.96.

Note: Here- MC: Managerial challenges, FC-Financial challenges, PDF-Procedure & Formality
difficulties, TC- Technological challenges, EC-Entrepreneurs challenges.
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The findings of the table 4, indicate the path coefficient (β) i.e., standardized regression weighs, T
value along with p value for particular relationship. The standardized coefficient (β) values inferred
the impact of the independent variable on the dependent variable, and higher the β value stronger is
the impact. By referring table 4 and figure 1, it is confirmed that managerial challenge has significant
impact on entrepreneur challenge with β = 0.292, p= 0.00, since p value less than 0.05, therefore,
hypothesis 1 was accepted.
The impact of financial challenge on EC is positive with β value = 0.480 and p=0.032. As the p<0.05
and critical ratio value above 1.96, thus hypothesis H2 is approved.
Further, procedure and formality difficulty also significantly influencing entrepreneur challenges
having β value = 0.334 and p=0.037, confirming hypothesis H3.
Finally, the Technological challenges has significant impact on overall challenges faced by
entrepreneurs. The standardized coefficient (β) of this path is 0.279 with p=0.035 (p<0.05), therefore,
hypothesis H4 was accepted.
The coefficient of determination (R2) value is 0.51, for Entrepreneur challenge inferred 51% of
variation in EC explained by managerial, financial, procedure difficulties and technological
challenges.
The structural model's overall fit statistics using goodness indices indicate that the hypothesised four-
factor model fits the sample data. The value of good indicator indices such as χ2 = 280.083, χ2/DF
=2.370, AGFI =0.914, NFI=0.893, CFI=0.918, GFI =0.920, & TLI = 0.850 is above the recommended
criteria of 0.9 (Hair et la., 2010).
Table 4: Path coefficients of the Structural model
Dependent Independents T P Regression Hypothesis
variable Variables weights (β)

5.296 0.000 Supported

EC <--- MC .292

EC <--- FC 8.323 0.032 .480 Supported

0.037 Supported
EC <--- PDF 6.470 .334
0.035 Supported
EC <--- TC 5.490 .279
Note: P refers to the differential probability.

Conclusion
Entrepreneurs survey the environment, find opportunities, and analyses them so that they can be turned
into business propositions that lead to the creation of large economic organizations that generate
profits. The practical and efficient utilization of natural and national resources makes them drivers of
economic progress and agents of social transformation. According to economist Joseph Schumpeter,
an enterprising populace is critical to a country's economic growth rate. Meir and Baldwin argue that
progress does not occur automatically, even under optimal economic conditions and with predictable
outcomes. There needs to be a substantial quantity of entrepreneurial activity for a catalyst to be
effective. The prosperity and variety of prosperous countries can be attributed to the prevalence of
self-starters throughout their populations. Entrepreneurs must learn to manage these difficulties to
overcome them and make success of their MSMEs.

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