An Investigation into the Most Important Factors to Assist with Business Start-Up in Nepal: A Case Study of PIDA VDC of Dhading District

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TABLE OF CONTENTS

LITERATURE REVIEW1

The Cost of Doing Business1

Non-Monetary Obstacles to Growth2

Transaction Costs and Business Growth4

Internal Transaction costs and Other Non-Monetary Factors Affecting Labor Hiring7

Lack of honesty and reliability among Workers8

Attitudes towards work9

Legal Risks and Costs11

Limited Skills and Training12

ANALYSIS14

Cross tabs14

Descriptive statistics16

Internal factors30

Transaction Costs31

Strategy analysis31

Microenterprise Development Interventions33

Conclusion34

CONCLUSION AND RECOMMENDATIONS36

Barriers to Innovation36

Underestimating the process of innovation36

Personalities and personal motivation37

REFERENCES45

LITERATURE REVIEW

The Cost of Doing Business

When speaking of business costs, economists subdivide costs into a series of categories. For example, direct costs include the actual expenses on raw materials, labor, and business services employed by the business. These costs can be paid either in money or in goods or services (Cliff 2007, p.541). Non-wage direct labor costs include, for example, thefts, wastage of materials, or social benefits paid to the workers. Indirect costs are those that derive from other investment decisions but are not involved in the actual production of the product; e.g., administrative costs or the cost of the space needed to house more employees. There are also transaction costs which may be monetized (e.g., credit card fees) or non-monetized, which involve expenditure of time and energy to complete a transaction; and social costs which are used here to refer, for example, to loss of self-esteem or social standing with the family (Chrisman 2003, p.467).

The emphasis of microenterprise programs has been primarily in giving micro entrepreneurs the opportunity to reduce their direct costs by providing them with credit to buy material in bulk (and thus at lower cost) or to increase access to capital inputs. The focus has been on monetized costs (Chisman 2009, p.24). Although in the end money can help solve most business problems, the amounts required are usually beyond the monetary thresholds that can be reasonably assumed by informal micro entrepreneurs. For example, transportation problems would be resolved by buying a car or taking a taxi; however the amount of money required is so great that it is beyond the reach of most micro entrepreneurs. Similarly, a lack of space may be resolved by renting a larger place, but the possibilities of doing so may be minimal (Caverly 2007, p.25).

Thus, although problems of transportation or space are monetary problems for micro entrepreneurs, the problems translate primarily into transaction costs, i.e., into the amount of time and energy in addition to money that a micro producer needs to invest to transport goods to market or buy material. It is in this sense that the term non-monetary costs are used (Carter 2008, p.85). This differentiation is fundamental in understanding the types of interventions needed to help micro entrepreneurs move along the path of growth or improve their standard of living. The objective here is to identify those factors social, cultural, and environmental which translate into transaction costs and prevent micro entrepreneurs from achieving greater business efficiencies or increasing their profits (Carnevale 2007, p.25).

Non-Monetary Obstacles to Growth

The gap in ...