The Role of Entrepreneurship in Economic Development - Term Paper Example

?Introduction The role of entrepreneurship in economic development is primarily based on the assumption that entrepreneurial creativity seeks to exploit new ideas into opportunities for economic growth and profitability. The government helps create facilitating environment of trade and commerce and develop mechanisms of control to ensure ethical business practices. Hence, economy can be broadly described in terms of constructive production that leads to development of society and nations. The various tenets of economic development focus on people’s welfare and promote employment by supporting market led business activities through available resources, including human capital, to help in development of society. Market therefore becomes central to the economic development where entrepreneurship and innovation become powerful factors to influence economic growth. Position of the paper Entrepreneurship and innovation are critical issues within socio-economic development that are intrinsically linked to growth. In the contemporary environment of competitive business, the role of creative entrepreneurship becomes vital ingredient of competitive advantage within the industry, irrespective of its structure or model. Indeed, various paradigms of economic growth are significantly impacted by entrepreneurial vision that anticipates change and competently exploits it for profit (Kuratko and Hodgetts, 2004). In the current environment of competitive business, entrepreneurship and innovation become the major enabling elements of competitive advantage and intrinsic part of economic growth. The paper would therefore be discussing the facilitating role of entrepreneurship and innovation in the economic development of society and how creativity and problem solving support the relationship. How entrepreneurship and innovation become driving force for economic development While the normal human behavior tends to follow a rational approach, an entrepreneur is highly indigenous in his/her actions and thoughts which often results in innovation and path breaking ideas, impacting human lives and leading to development (Harvey, M. and R. Evans, 1995). Oprah Winfrey is fitting example of entrepreneurial creativity who grabbed opportunity and brought about major social change vis-a-vis perspective in racial discrimination. She showed how a person can rise above the conformity of race and gender to become successful and promote socio-economic development of society. Indeed, the development of society is based on the revolutionary ideas of the few which has considerably influenced and restructured social fabric in a more rationale manner. Kirzner (1973) believes that entrepreneurs tend to identify profit opportunities and act on their insights to become more productive, thus contributing towards economic growth. A market driven economy hugely supports entrepreneurial innovation as it is able to experiment with new ideas and exploit opportunities. Entrepreneurship is dynamic and evolves with changing times to maintain its leverage against industrial rivals. Facebook, twitter, Apple, Microsoft etc. are important companies that were able to exploit new ideas and turned them into roaring businesses. Through the evolving process of entrepreneurial creativeness, the companies, that fundamentally adopt a culture of entrepreneurship and innovation, are better able to cope with increasing competition in the market and impact economic growth. The major theories that support the relationship between creative entrepreneurship and development Schumpeter (1934) has been one of the most influential social scientist to propose that economic growth is driven by innovation. He asserted that radical innovation brought disruptive changes while incremental innovations were proactive in continuous process of change. According to him, there were five types of innovation. While new product development ensured that people’s changing requirements are met, new methods of productions like lean production, TQM etc promoted efficiency and quality. Market innovation helped to differentiate goods and services to create market credibility and give a unique perspective to promote them. The example of auto dealers is good example who have now started attracting customers by giving them trial run of new fancy cars before buying them. Various social scientists believe that innovation driven strategy for product development that can address the environment issues are increasingly become core issues within the business strategy of the corporate world (Pujari, 1999; Lumsdaine & Binks, 2007). The hybrid car developed by General Motors reflects the growing need to evolve sustainable business practices and promote environment conservation and sustainable development. Fuller (2004) says that it is important for businesses to efficiently use technology and constructively contribute towards sustainable development. Powell and Grodal, (2005) affirm that innovation is intrinsically linked to novel ideas and networking of organizations demonstrates that they create platform for transfer of knowledge for economic growth and development. Indeed, the advancing technology and knowledge industry has together contributed to the expanding business opportunities across the globe. Daneels (2004) has defined disruptive technology as ‘specific type of technological change, which operates through a specific mechanism, and has specific consequences’ (247). He believes that ‘disruptive’ technology as entrepreneurial innovation becomes crucial product that might replace previous market products at comparative disadvantage relative to the importance of disruptive technology. It happens because the new product becomes unique for its characteristics and its value to the market as it brings with it new areas of opportunities and may create new segments. Internet is prime example which became catalyst of change for market. It defined new way of communication and reduced geographical boundaries not only for communication but also for expanding business across the globe. Most importantly, it raises the question of whether disruptive technologies are disruptive in general and adversely impact growth or are subject to functional perspectives relative to companies. Thus laser technology could be termed as disruptive when they are used in weapons as destructive devices but sustain business objectives when used in medical field or for enhancing business productivity, especially as precision tool in design products. Indeed, wide ramifications of disruptive technology are key elements which serve as agents of change for entrepreneurship leading to economic growth and development. Role of creativity and problem solving in the relationship between entrepreneurship, innovation and economic development Knowledge externalities are vital inputs that are influenced by entrepreneurship insight and innovation. Entrepreneur is able to look at things not as problems but as great opportunities for profit and growth (Stein, 1974: Kirkham, Mosey & Binks, 2009). The market opportunities and business environment that facilitate entrepreneurial creativity to experiment and exploit change results in economic growth. Thus, the creative impulse to exploit knowledge becomes the key factor of economic growth that is accelerated by market inputs. Interestingly, Chen et al. (2002) have described creativity as positive evaluation that cut across the cultural biases and endorses values which are common. Thus the creative entrepreneurship becomes distinct in its influence that transcends the geographical boundary and cuts across the culture, race and color, impacting economic growth and development. Technology and globalization have been instrumental in narrowing the knowledge boundary across the organizations. This has necessitated an approach that is innovative and provides organizations with goods and services that can be distinctly differentiated. Spulber (1999) claims that asymmetrical information facilitates organization to gain leverage as the information or knowledge is not available to others and therefore the company is able to exploit the knowledge to gain competitive advantage in the industry. Hence, asymmetric information can often lead to opportunistic behavior but is strongly supported by entrepreneurial competency. Epstein (1991) asserts that Skinner, eminent psychologist and scientist believed that creativity was not a generative process but random mutations. It was primarily used to solve problem and in the social environment, creativity promoted entrepreneurship when applied to changes in society. This is interesting perspective to the entrepreneurial innovation, especially in socio-economic sphere where it seeks to exploit situation or trend to make profits. It is important to understand that conception of new ideas are intrinsic part of development, which every society undergoes through the time. When these ideas are turned into profit making tools, they become creative and solve problems that are deemed detrimental to growth. It is also true that radical product developments are major ingredient of entrepreneurship and innovation as they are based on new technology that gives considerably more benefits to customers as against previous products. The evolving process of photo imaging like Polaroid camera was replaced by digital cameras which are now in the process of becoming redundant due to high-tech mobile phones which also serve as high resolution digital cameras as well as latest 3G devices for communication. Conclusion The various paradigms of development processes are interlinked to entrepreneurial innovation that becomes catalyst for economic growth of society through higher productivity. At the same time, entrepreneurial creativity supports sustainability of business through tough times by exploiting changes and looking at things from new perspective of opportunities rather than problems. In the contemporary times, entrepreneurial creativity becomes the most desirable factor of sustainable development processes as it can be used to explore new avenues of opportunities for safeguarding natural resources for future generations. Robert Solow (1992) claims that though national economic activities focus on the well being of citizens but rely on hard statistics of GDP and GNP rather than sustainability of resources. Depreciation or depletion of natural resources is not part of the broader framework of governmental policies. He argues that sustainable path for economy needs to replace ‘whatever it takes from its inherited natural and produced endowments… its capacity to produce the things that posterity would enjoy’. Sustainable development must become intrinsic part of economic activities across the globe. Entrepreneurship and innovation are intrinsic ingredients economic growth. They can therefore be applied to promote creative inputs that would help reconstruct social dynamics so as to complement and supplement the utilization of natural and man made resources. (words:1560) Reference Chen, Chuansheng, Kasof, Joseph, Himsel, Amy and Greenberger, Ellen. (2007) Values and Creativity, Creativity Research Journal, 19 2: 105-122. Daneels, E. (2004) Disruptive Technology Reconsidered: A Critique and Research Agenda. Journal of Product Innovation Management. Epstein, R. (1991). Skinner, creativity and the problem of spontaneous behaviour American Psychological society, 2(6): 362-370. Fuller, D.A., Ottman, J.A. (2004). Moderating unintended pollution: the role of sustainable product design. Journal of Business Research. Harvey, M. and R. Evans. (1995) Strategic Windows in the Entrepreneurial Process. Journal of Business Venturing, 10(5): 331-347. Kirzner, Israel. (1973) Competition and Entrepreneurship. Chicago: University of Chicago Press. Kuratko, D. F. and R. M. Hodgetts (1998), Entrepreneurship: A Contemporary Approach. NY: Harcourt Brace College Publishers. Kirkham P, Mosey S, Binks M. (2009) Ingenuity in Practice – a Guide for Clear Thinking. UNIEI. Lumsdaine, E. and Binks, M. (2007) Entrepreneurship, from Creativity to Innovation; Effective Thinking Skills for a Changing World. Trafford Publishing. Powell,W. and Grodal, S. (2005). Networks of innovators. in: The Oxford Handbook of Innovation; Fagerberg, J.,Mowery, D., Nelson, R. (Eds.), Oxford University Press, Oxford. Pujari, D., Wright, G. (1999). Integrating environmental issues into product development: understanding the dimensions of perceived driving forces. Journal of Euro Marketing 7 (4), 43–63. Schumpeter, J. (1934) The Theory of Economic Development. Cambridge, Massachusetts: Harvard University Press. Solow, Robert. (October 8, 1992). An almost practical step toward sustainability. Resources for the future. Spulber, D. (1999). Market Microstructure, Intermediaries and the Theory of the Firm. Cambridge: Cambridge University Press. Stein, M. I. (1974). Stimulating Creativity. Volume 1. London: Academic Press Read More