The role of entrepreneurship in economic development
Entrepreneurship includes everything, right from the establishment of a new business to the successful management of the enterprise. The term has wide implications, and covers all activities that are performed by an entrepreneur.
Entrepreneurship thus does not exist in isolation, and is closely bound with other areas of study as well, one of which is economics.
The economic aspect of entrepreneurship
Entrepreneurship is basically utilizing in a constructive manner the different opportunities that are available in the market. This utilization is basically in the form of establishing a new business. Thus, entrepreneurs not only establish a new business, but they also help to generate new jobs in the economy by employing those people into their business.
On the whole, entrepreneurship is being able to deal with the situation of uncertainty, and also knowing how to distinguish between risks and uncertainties. Thus, an entrepreneur has to take care of the management of the production function, and has to pay compensation to the workers who are engaged in the same. At the same time, he or she will have to bear the various risks that are involved in the business, and also face different kinds of uncertainties.
According to economic theory, an entrepreneur is represented as an occupational choice between self-employment and wage employment. In simple words, this means that an entrepreneur is someone who prefers to be self-employed, instead of being employed by some other company, or working for some other business. There is another reason why entrepreneurship is considered to be self employment. And that is because a person becomes an entrepreneur when his profits and other non-financial gains exceed the compensation and other benefits that he bestows on the people who are employed under him as wage-earners.
At the same time, an entrepreneur makes use of advanced technology to maintain the efficiency and productivity of the business, and therefore contributes to the development of the economy and economic growth.
An entrepreneur starts by being an innovator. Starting up a new enterprise requires innovation and creativity, and the ability to think of something out of the box. Along with innovation, the entrepreneur should be smart enough to identify the profitable opportunities that lay untapped in front of him, and he should be clever enough to think of ideas to utilize those opportunities to make the business grow and earn profits. The entrepreneur should also be competent enough to deal with risks that will come across while running the business, and should have the prudence to distinguish it from uncertain situations.
Contribution of an entrepreneur in economic development
The contributions of an entrepreneur in the development of the economy can broadly be classified into three main categories.
First and foremost, the entrepreneur establishes knowledge overflows in the economy, which are critical to its growth. This is precisely why the government greatly favours research and development, since it helps to bring in new machinery and technology into the country.
Secondly, these enterprises increase the competition amongst businesses. In other words, new organizations mean competitions for new ideas, and more competition facilitates the entry of new and innovative firms into the market.
Lastly, entrepreneurs generate economic development by offering diversity in the market. It is the exchange of corresponding knowledge across these diverse organisations that generate profits and results in economic growth.
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