Obstacles and methods of financing for the development of local entrepreneurship in Iran

Abstract

Purpose The purpose of the current study is to investigate the public and private financing obstacles to medium- and small-scale entrepreneurs in rural areas in Iran. Design/methodology/approach Descriptive analytic research method is used for collecting field data among 5,770 owners of entrepreneurial businesses located in rural areas of Mashhad in 2015. Findings The results showed that there are numerous public and private obstacles in rural entrepreneurship financing in Iran, which are the main factors for short-term loan repayment in public sector, and in the private sector, they result in entrepreneurs’ lack of access to the source of financing. Moreover, there are a variety of financing methods for entrepreneurship in rural areas, among which personal resources and borrowings are the most important ones. Thus, lack of serious and persistent governmental support from local entrepreneurs causes many entrepreneurial failures at the early stages of entrepreneurial activity in villages of Iran. Originality/value So far, few studies have been conducted on the subject of the study; hence, the results of the current study may be helpful to the developing nations.

Social Capital, Financial Literacy, and Rural Household Entrepreneurship: A Mediating Effect Analysis

“…The literature has argued that social capital promotes rural entrepreneurship through financial availability and information accessibility. When private enterprises are in the earliest stages of existence, it is difficult for them to obtain support from formal institutions, while informal culture and tradition are particularly important (Xin and Pearce, 1994;Casson and Giusta, 2007) because rural households lack collateral, which reduces the possibility of rural household loans (Ahlstrom and Bruton, 2010;Schmalz et al, 2017;Sadeghloo et al, 2018). Rural households rely more on private financing (Jia et al, 2013;Hu and Zhang, 2014).…”

Increasing alertness to new opportunities: the influence of positive affect and implications for innovation

“…There are both theoretical and empirical grounds, for example, to suggest that important radical innovation is more likely to be affected by a large array of organizational capabilities (such as slack resources and network competence, e.g., Tang, Tang, Zhu, & Li, 2019;Yu, Hao, Ahlstrom, Si, & Liang, 2014) and environmental characteristics (such as dynamism and institutional uncertainty, e.g., Tomizawa, Zhao, Bassellier, & Ahlstrom, 2020). In addition, previous research indicated that innovation in Iran is more incremental due to many barriers to radical innovation such as limited or attenuated resourcesin terms of both technology and funding (Ahlstrom, Cumming, & Vismara, 2018;Sadeghloo, Sojasi Qeidari, Salehi, & Faal Jalali, 2018) and the perceived high social cost of radical innovation in the collective culture of Iran as well as other more formal institutional barriers (Kamalian, Rashki, & Arbabi, 2011;Peng, Ahlstrom, Carraher, & Shi, 2017).…”

Analysis of the factors affecting probable failure of local entrepreneurs

“…This leads researchers to further interpret their limitations from various perspectives, some of which need an interaction of external factors such as losing entrepreneurial opportunities and local view toward entrepreneurship with individual factors such as social merits (Thompson et al, 2000), effectiveness and its impact on successful or unsuccessful entrepreneurial businesses (Hoyos-Ruperto et al, 2013). Although national governments invest in initiatives aimed at encouraging rural entrepreneurship on the assumption that it contributes to competitiveness and employment (Kasabov, 2016) but factors may sometimes be caused by inappropriate conditions and legal and financial problems (Sadeghloo et al, 2018). Unstable governmental policies and changes in these policies, lack of governmental support, complex regulations, inadequate regulations, unstable economy of the country and international sanctions on the one hand and lack of coordination between business partners and high tax rates could increase the IJLMA 62,1 fear of low profit and discourage entrepreneurs.…”

“…Entrepreneurs mostly have to conduct financial analyses to get better efficiency despite the risk. However, in a conventional market in which market agents has access to information, high level of efficiency comes with a high level of risk and this necessitates the existence of a business plan (Sadeghloo et al, 2018). The proposed structure for business plan development, based on any approach or guideline, should be flexible, with slight variations in different conditions and updated to suit business requirements.…”