Entrepreneurship and Economic Growth

Both these terms are in well conjunction with each other as they are very closely linked together in every respect. As far as economic growth of a country is concerned, entrepreneurship plays a vital role in upbringing the economy of any developed or developing country. This multidimensional concept of entrepreneurship and economic growth leads to innovation and thus, new innovative entrepreneurs are born. Many people might think that how entrepreneurship is useful in managing and maintaining the economy of a country. So, the answer to this question lies in these following points:

1. The first and the major fact is that entrepreneurs are the ones who create and bring new business ventures in the society.

2. These big or small projects in turn create more and more jobs, providing employment.

3. The above mentioned step then intensifies the competition due to which there will be an increase in the productivity. Moreover, many technological changes also occur.

4. Thus, we can see the effect of entrepreneurship directly on our economic growth.

Let's explain economic growth in its more general term. Economic growth means an increase in value of goods and services produced by the economy of a country.

1. Introduction of new goods and services: By increased number of upcoming business ventures the new quality of products and services are being introduced in order to meet the requirements of people.

2. Introducing new methods of production: With this increase in productivity the ratio of demand and supply will be balanced, or in other words we can say that new ways are being evolved in a way a commodity is being handled commercially.

3. Opening of new markets: This means that the productivity is increasing

4. New sources of supply: There will new sources of supply of raw materials irrespective of the fact that whether this source previously existed or not.

5. There will be formation of new departments and organizations within an industry.

Apart from all the above mentioned points there are various factors that influence entrepreneurship and in turn it affects the economy of the country. One can observe the phenomenon at various levels however; it requires a deep analysis and your observation power should be strong enough to calculate. If we talk in general, then these factors which influence entrepreneurship can be divided in two basic categories.

1. The first category focuses on factors influencing industrial structure including technological developments, globalization and standard of living.

2. The second category includes various other structural components such as population growth, age structure, and participation of women in different market sectors.

The link between entrepreneurship and economic growth fosters because of the link between entrepreneurship and innovation. There are studies which show that we can establish entrepreneurship in an existing company as well. Moreover, entrepreneurship leads economic growth of a country in the sense that there are people known as entrepreneurs who establish small or big business firms but they also require few people those who feed them up with new and refreshing ideas all the time, which can only be done by an innovative entrepreneur. Secondly, there are entrepreneurs who specifically deal in transforming these ideas into a proper and fruitful entity. Furthermore, the entrepreneurs who are performing the function of converting the ideas into new business entities are subdivided as: self-employed entrepreneurs and existing business entrepreneurs.

These two types of entrepreneurs affect the economic growth differently as there are even two different kinds of innovation. One is the product innovation and the other one is the process innovation. Moreover, product innovation is more advantageous as it creates a new market however, it's not necessary that the product will do well in the market.

Innovation and Economic Growth:

Innovation is necessary for economic growth but it does not automatically affect it unless and until the key factors are involved in which are: firms, universities and government. If we talk about government's role and responsibilities, it keeps a check on the infrastructure and the basic research. So, all these three aspects contribute in the innovation process.

Importance of Entrepreneurial Activity in Economic Growth:

From past many years the economists have been constantly proving the importance of entrepreneurship with respect to economic growth. They keep on explaining that as per the current market scenario and strategies are, entrepreneurs have to explore new opportunities and try to do more of research and evaluate opportunities after that. Thus, without the help of entrepreneurs this step won't be possible. Similarly, they are responsible for making financial arrangements. Not only this, but the time management has to be done by him alone. Since people have realized that entrepreneurial activity is a major factor in building up a successful economy, many local governments and such law building organizations have started making policies in order to promote entrepreneurship in a better way.
This is especially done in the case of youth entrepreneurship. They are giving chance to the budding talent. There is a global entrepreneurship model which shows a relation between entrepreneurship and economic growth. It shows that the general national framework conditions such as government, financial markets, infrastructure, management etc is directly related to various entrepreneurial framework conditions which includes risk capital, internal market, education and training etc. If we talk about potential entrepreneurs, then their decision of staring a new business is greatly influenced by additional characteristics prevailing in the existing business environment. These are referred as entrepreneurial conditions.

Summary:

The impact of entrepreneurship on economic growth is very much persuasive however; it's not acknowledged that much. There is one school of though of entrepreneurship, which suggests that the role of the entrepreneur is that of a person who bears risk in the face of uncertainty and imperfect information. It claims that an entrepreneur is a person that can bear the risk if a new venture fails. Although, there are many current theories on entrepreneurship and economic growth but the one which will also be prevailing in future is the dependency of economic growth on entrepreneurship or we can say that the two concepts go hand in hand.