The significance of theory in entrepreneurship cannot be overemphasized. Similarly, the absence of properly documented and applicable theory in entrepreneurship is not acceptable (Anderson & Starnawska, 2008). Many of the present entrepreneurship theories have no common consensus and definitive thought about the phenomenon and there is an ongoing debate about the theoretical foundation of entrepreneurship (Afrin et al., 2008; Kuzilwa, 2005).
Various theories have been put ahead by researchers to explain the discipline of entrepreneurship; for example, some researchers deal with entrepreneurship from the economic viewpoints, others deal with psychological viewpoints, some others also from the viewpoints of management, and other researchers also deal with the social viewpoints (Simpeh, 2011). These indicate that entrepreneurship concepts, theories, and definitions are derived from a variety of the arena, for example, psychology, management, economics, and sociology (Bula, 2012; Simpeh, 2011). Therefore, the concept of entrepreneurship is broadly defined by a wide range of meaning and still in dispute.
The economic theory of entrepreneurship assumption indicates that an entrepreneur is an agent that takes risks for the balance of supply and demand in the economy (Iversen et al., 2008).
Sociological theory is one of the most common theories in entrepreneurship and mainly focuses on the social context of the entrepreneurs. The individual gets conditioned due to the relationship between the social environment and the individual being reciprocal (Simpeh, 2011).
The anthropological theory mainly focuses on the ancestry, evolution, traditions, and beliefs of people. This paradigm shows that in order to initiate a successful business the entrepreneurs, social and cultural context should be considered (Simpeh, 2011).
In the entrepreneurship literature, the availability of resources is the major determinants of business success. The theory of resource-based entrepreneurship argues that new business growth is determined by access to unique and valuable resources of the entrepreneurs (Alvarez & Busenitz, 2001; Barney, 2001).
The factors of entrepreneurship are multidisciplinary in nature, for example, from the perspective of economic, social, cultural, and psychological viewpoints (Audretsch et al., 2002). This indicates that entrepreneurship research is interdisciplinary in nature and reflects phenomena across multiple units of observation, such as the individual, groups, and countries.
Therefore, to address the varied nature of entrepreneurship, scholars introduce the new paradigm of entrepreneurship, which is an eclectic theory of entrepreneurship since it used a holistic approach. Audretsch et al. (2002) have presented more analytical and representative framework into which all the above theoretical as well as practical considerations can be grasped. It is called the eclectic framework which is the basic conceptual framework for the current study.
This eclectic theory provides an integrated framework or pattern of the literature into a unifying framework (Audretsch et al., 2002). Therefore, for this study, entrepreneurship can be analyzed according to various factors such as finance-related factors, market-related factors, infrastructure-related factors, and perceived institutional factors in the case of Ethiopia.
Review of other countries studies
Fatoki and Chindoga (2011) conducted research on the barriers of “Youth entrepreneurship in South Africa” as a target of latent entrepreneurship. The study collected data from 600 samples through simple random sampling and descriptive statistics; the principal component analysis (PCA) was used for analysis. The study found that finance, skills, and absence of assistance were critical challenges. Affum et al. (2012) in Ghana carried out a study on the “challenges of young entrepreneurs.” The study unveiled that the lack of credit access, corruption, lack of market access, lack of education and training, government regulations, work experience and business information, infrastructure, and high interest rates are the major challenges of youth entrepreneurs. Consequently, Dzisi (2014) also conducted research on the “barriers to youth enterprise creation in Ghana” using 720 young entrepreneurs. Based on the study, the researcher found that inadequate access to finance, management experience, and socio-cultural attitude were the major constraints of youth entrepreneurs.
Jakubczak (2015) also conducted research on youth entrepreneurship barriers with reference to Poland respondents. The study found that charges of administrative procedures, finance, fear of failure, lack of knowledge, inadequate supportive, complex tax system, and laws and regulations were the main constraints of youth entrepreneurship. Another study was carried out by Muruganantham and Natarajan (2015) on the barriers of entrepreneurship by using 95 numbers of respondents in India. The findings of the study indicated that the lack of adequate capital, lack of skills, inadequate support, fear of failure, and the lack of awareness were the main constraints. On the other hand, Potabatti and Boob (2015) found that entrepreneurship education and training, prior work experience, business skills, social attitude, business connection, capital, and limited access to the market were the major challenges hindering youth entrepreneurship opportunities in India.
Okirigiti and Rafey (2015) conducted research in Kenya on the challenges facing youth entrepreneurs. The study used a descriptive research design with 98 youth entrepreneurs who operate registered businesses as a sample. Based on the study, they found that limited capital, very high bank interest rate, and lack of work premises were major challenges facing youth entrepreneurs. Similarly, Nyanga (2013) conducted research on the challenges faced by young entrepreneurs in Zimbabwe by using 20 numbers of respondents through interview. The study found that poor leadership skills, limited working capital, inadequate infrastructure, legal constraints, and the economic crisis were the major challenges of young entrepreneurs.
Chiloane-Tsoka and Botha (2015) in their study titled “Factors influencing urban youth entrepreneurship in Sub-Saharan Africa” found that access to finance and role models were the most encountered constraints of youth entrepreneurs in the region. Similarly, Naudé et al. (2008) conducted research on the determining factor of entrepreneurial start-ups in the developing countries particularly Sub-Saharan Region data from the 2003 and 2004 Global Entrepreneurship Monitor (GEM, 2012) report. Accordingly, the study also was used as a Tobit model for measuring the potential start-up rate as dependent variables, and population density, profit, unemployment, education, and economic size are considered as independent variables. Based on the study, they found that the level of education, the rate of profit, economic size, and access to finance reflected as significant factors in the study areas.
Other scholars also carried out researches on factors influencing entrepreneurship and youth of entrepreneurship in particular. For instance, Krasniqi et al. (2008) conducted research in Kosova on the “The determinants of entrepreneurship and small business growth evidence from new and established firms.” The study found that business ownership, firm size, segregation of management and ownership, the age of the business operators, and team size have positive significant outcome on the business growth, and the previous unemployment experience of the entrepreneurs has the negative significant relationship with the current business growth.
Ahmed et al. (2018) carried out a research on “Critical factors of entrepreneurial competencies for successfully managing micro and small enterprise in Ethiopia.” Total sample size was 200 by using factor analysis. The study has identified 8 key factors: strategic competencies, conceptual competence, opportunity recognition competence, personal competence, organizing competence, relationship competencies, network competence, and commitment competence. The study found that the 8 key factors have a significant effect on successfully managing micro and small enterprise in Ethiopia.
The research has been conducted by Sayed and Slimane (2014) on “An appraisal of the determinants of entrepreneurship in developing countries, particularly; Middle East, North Africa and selected gulf cooperation Council Nation.” The variables used in the study were GDP, population growth, the rate of employment, access to the internet per capita, secondary school enrollment, internal credit for private business, depth of credit information index, cost, capital, the total tax rate, and the strength of investor protection, while the data on corruption and political stability. Furthermore, the study used multiple linear regression models to analyze the dependent variable of new business entry density against the above independent variables. The result of the study shows that all listed independent variables have a significant relationship with new business entry density in the study areas.
Challenges of youth entrepreneurs in Ethiopia
Despite of the recent years of strong economic growth in Ethiopia, the creation of decent employment opportunities for the growing numbers of young Africans remains an elusive development goal. Across the continent, most young people continue to eke out a living in the urban informal economy or in subsistence agriculture. The majority of those who are working are still poor since they do not earn enough to lift themselves and their families out of poverty. Beyond this aggregate picture, young people in particular face some of the greatest barriers to find decent employment in African countries including Ethiopia because they lack experience, the necessary skills, and suffer from discriminatory attitudes about their role in the workplace.
It is one area of youth employment interventions that has attracted considerable attention from governments and development partners in Ethiopia and is promoting entrepreneurship among young people as a means of creating sustainable livelihoods. The report about young people by youth employment opportunity in Africa putting Ethiopia as a case study (2009), young women, in particular, needs financial and technical support to overcome the barriers they face in becoming entrepreneurs, such as difficulties in getting start-up financing, inadequate business skills, burdensome administrative, regulatory frameworks, and poor access to premises and infrastructure. Furthermore, a major challenge for young people is the absence of a culture of entrepreneurship, which is reflected in the low value attached to learning entrepreneurship skills in formal education and following this career path once they have left school. The situation is more pronounced for young women who suffer from cultural and societal attitudes about the role of women in business, which subsequently hampers their aspirations to become entrepreneurs. Singh and Belwal (2008) also found that social acceptability, gender biases, family responsibilities, political instability, poor infrastructure, high production costs, poor access to market information, limited access to technology and finances, and poor linkages with support services were the major constraints impending upon women entrepreneurs.
Kidane et al. (2015) carry out a research on the relationship between micro-enterprises and socio-economic development among youth group in Addis Ababa, with emphasis on micro-enterprises targeting youth to socio-economic development in terms of poverty reduction, and the result of the survey shows that it has a big role to reduce poverty. However, the available psychosocial constraints such as fear of failure and criticism, faulty socialization, low dignity of labor, and inadequate motivation are the most serious problems that young entrepreneurs are facing. Tessema (2012) also has undertaken a research on assessing the challenges of youth entrepreneurship in micro and small-scale enterprises in the case of the North Gondar zone, Ethiopia. The survey result confirmed that poor credit access, education and training, business support, market accessibility, government regulation, and infrastructure are critical challenges for youth entrepreneurs in the North Gondar Zone.
Woldehanna et al. (2008), in their study “Business Survival and the associated Factors: Empirical evidence from youth-owned micro and small enterprises in Ethiopia,” found that gender, age, previous labor market experience, motivation, entrepreneurial education and training, initial size, legal form, size of start-up capital, industry type, and formality are the most important predictors of the MSEs’ survival in Ethiopia. In the study of Amha (2015) “Growth of Youth-owned MSEs in Ethiopia with emphasis characteristics, determinants, and challenges,” it has found that education, the form of business organization, type of sectors, experience, and gender have positive and a significant influence on the growth of the youth operators. However, access to training before starting the business, social networking, and access to the loan are statistically significant variables that negatively affect the growth rate.