Entrepreneurs are frequently thought of as national assets to be cultivated, motivated and remunerated to the greatest possible extent.
Entrepreneurs can change the way we live and work. If successful,
their innovations 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 prosperous society.
The following are six reasons why entrepreneurs are important to the economy.
Entrepreneurs Create New Businesses
Path breaking offerings by entrepreneurs, in the form of new goods
& 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
1990s as a backend programmers' hub. Soon the industry gathered pace in
its own programmers’ domain. But more importantly, millions from other
sectors benefited from it.
Businesses in associated industries, like call center 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.
Entrepreneurs Add to National Income
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. New and improved offerings,
products or technologies from entrepreneurs enable new markets to be
developed and new wealth created.
Additionally, the cascading effect of increased employment and higher
earnings contribute to better national income in form of higher tax
revenue and higher government spending. This revenue can be used by the
government to invest in other, struggling sectors and human capital.
Although it may make a few existing players redundant, the government
can soften soften the blow by redirecting surplus wealth to retrain
workers.
Entrepreneurs Also Create Social Change
Through their unique offerings of new goods and services,
entrepreneurs break away from tradition and indirectly support freedom
by reducing dependence on obsolete systems and technologies. Overall,
this results in an improved quality of life, greater morale and economic
freedom.
For example, the water supply in a water-scarce region will, at
times, force people to stop working to collect water. This will impact
their business, productivity and income. Imagine an innovative,
automatic, low-cost, flow-based pump that can fill in people's home
water containers automatically. Such an installation will ensure people
are able to focus on their core jobs without worrying about a basic
necessity like carrying water. More time to devote to work means
economic growth.
For a more contemporary example, smartphones and their smart apps
have revolutionized work and play across the globe. Smartphones are not
exclusive to rich countries or rich people either. As the growth of
China's smartphone market and its smartphone industry show,
technological entrepreneurship will have profound, long lasting impacts
on the entire human race.
Moreover, the globalization of tech means entrepreneurs in
lesser-developed countries have access to the same tools as their
counterparts in richer countries. They also have the advantage of a
lower cost of living, so a young individual entrepreneur from an
underdeveloped country can take on the might of the multi-million dollar
existing product from a developed country.
Community Development
Entrepreneurs regularly nurture entrepreneurial ventures by other
like-minded individuals. 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 motivate
entrepreneurs to pay it forward.
The Other Side of Entrepreneurs
Are there any drawbacks to
cultivating entrepreneurs and entrepreneurship? Is there an “upper
limit” for the number of entrepreneurs a society can hold?
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. There may be
truth in the old saying, "too many chefs and not enough cooks spoil the
soup."
The Role of States
Regulations play a crucial role in nurturing entrepreneurship, but
regulation requires a fine balancing act on the part of the regulating
authority. Unregulated entrepreneurship may lead to unwanted social
outcomes including unfair market practices, pervasive corruption,
financial crisis and even criminal activity.
Findings from United Nations University
also indicate the possible implications of “over nurturing"
entrepreneurship. Wim NaudΓ© argues that “while entrepreneurship may
raise economic growth and material welfare, it may not always result in
improvements in non-material welfare (or happiness). Promotion of
happiness is increasingly seen as an essential goal
.”
Paradoxically, a significantly high number of entrepreneurs may lead
to fierce competition and loss of career choices for individuals. With
too many entrepreneurs, levels of aspirations usually rise. Owning to
the variability of success in entrepreneurial ventures, the scenario of
having too many entrepreneurs may also lead to income inequalities,
making citizens more – not less – unhappy.
The Bottom Line
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.
