Why entrepreneurs are important to the economy

Entrepreneurs can change the way we live and work. If successful, their revolutions may improve our standard of living. In short, in addition to creating wealth from their entrepreneurial ventures, they also create jobs and the conditions for a flourishing society. Entrepreneurship capital is defined as "a region's endowment with factors conducive to the creation of new businesses" and it exerts a positive impact on the region's economic output.

Regions with a higher level of entrepreneurship capital show higher levels of output and productivity, while those lacking entrepreneurship capital have a tendency to generate lower levels of output and productivity. The impact of entrepreneurship capital is stronger than that of knowledge capital. Evidence indicates that entrepreneurial capital plays a very important role in the production function model presented.

The following are six reasons why entrepreneurship capital is important to the economy:. Path-breaking offerings by entrepreneurs, in the form of new goods and services, result in new employment, which can produce a cascading effect or virtuous circle in the economy.

The stimulation of related businesses or sectors that support the new venture add to further economic development. For example, a few IT companies founded the Indian IT industry in the s as a backend programmers' hub. But more importantly, millions from other sectors benefitted from it. Businesses in associated industries, like call centre operations, network maintenance companies and hardware providers, flourished.

Education and training institutes nurtured a new class of IT workers offering better, high-paying jobs. Infrastructure development organizations and even real estate companies capitalized on this growth as workers migrated to employment hubs seeking new improved lives. Similarly, future development efforts in underdeveloped countries will require robust logistics support, capital investment from buildings to paper clips and a qualified workforce.

From the highly qualified programmer to the construction worker, the entrepreneur enables benefits across a broad spectrum of the economy. Entrepreneurial ventures literally generate new wealth. Existing businesses may remain confined to the scope of existing markets and may hit the glass ceiling in terms of income. Since entrepreneurs think differently, they can come up with innovative ways to expand and develop the existing enterprises.

For example, modernizing production processes, implementing new technology in the overall distribution and marketing processes, and helping the existing enterprises to utilize existing resources in more efficient ways. Skip to content. March 30, Blog Mirna Dave by Najm Mohamed, Digital Marketing Intern Entrepreneurship can be considered a national asset, and entrepreneurs are the drivers of that asset for any country.

Importance of Entrepreneurship In entrepreneurship , unutilized resources, labor, and capital are utilized most efficiently. Entrepreneurship Accelerates Economic Growth Entrepreneurs are important to market economies because they can act as the wheels of the economic growth of the country. Entrepreneurship Promotes Innovation Through the right practices of research and development, entrepreneurs bring new innovation that opens the door of new ventures, markets, products, and technology.

Entrepreneurship Can Promote Social Changes Entrepreneurs change or break the tradition or cultures of society and reduce the dependency on obsolete methods, systems, and technologies. Entrepreneurship Promotes Research and Industrial Development Along with producing new business ideas and thinking out of the box, entrepreneurs also promote research and development. Entrepreneurship Develops and Improves Existing Enterprises We often think of entrepreneurs as inventing totally new products and ideas, but they also impact existing business.

Recent Posts. DCID on Instagram dukedcid. In , Colin Powell helped dedicate Rubenstein H. We are pleased to welcome Dr. Jim Yong Kim, former. It's finally here Are you an international development professional. They also invest in community projects and provide financial support to local charities.

This enables further development beyond their own ventures. Some famous entrepreneurs, like Bill Gates, have used their money to finance good causes, from education to public health. The qualities that make one an entrepreneur are the same qualities that motivates entrepreneurs to pay it forward.

Are there any drawbacks to cultivating entrepreneurs and entrepreneurship? Italy may provide an example of a place where high levels of self-employment have proved to be inefficient for economic development. Research reveals that Italy has in the past experienced large negative impacts on the growth of its economy because of self-employment. The interesting interaction of entrepreneurship and economic development has vital inputs and inferences for policy makers, development institutes, business owners, change agents and charitable donors.

If we understand the benefits and drawbacks, a balanced approach to nurturing entrepreneurship will definitely result in a positive impact on economy and society. And these types of innovations depend heavily on the contributions of entrepreneurs. A large and growing body of evidence supports this understanding.

Entrepreneurs play a disproportionate role in commercialization of new products, and essentially all of the most transformative innovations have been brought to the fore by entrepreneurs. During the industrial era, economies of scale prevailed — bigger was better, and the largest businesses employed most people. That began to change with the decline of manufacturing and a shift towards knowledge-intensive activities — smaller, more nimble firms started factoring more prominently in the American economy during the s.

By the s, the notion that small businesses were the engine of job creation had been set in stone — it was politically popular, consistent with the American cultural vision, and was empirically verifiable.

The data, and narrative, were clear — small businesses accounted for the majority of employment and new job creation. But a small group of economists began to challenge this thinking in the mids, and by the mids, aided by a breakthrough in data availability at the U.

Census Bureau, turned this concept upside down. In fact, outside of new and young firms, small businesses as a whole are net job destroyers — some create jobs, while others destroy them, but overall the second effect is larger.

Put differently, small businesses as a whole are disguised as net job creators simply because young businesses tend to be small.

Untangling the size-age relationship has been a critical development for policy development — traditional small businesses have fundamentally different characteristics and objectives from growth-oriented companies in their formative years i.