The phrase “entrepreneurship” refers to beginning a business generally. For instance, Howard Stevenson of Harvard Business School describes entrepreneurship as the “pursuit of opportunity beyond resources controlled,” viewing it as a type of managerial strategy rather than a particular period of time, such as the establishment of a business, or a particular individual within a business, such as its founder.
Although the link between entrepreneurship, economic growth, development, and welfare is complicated for a number of reasons—some of which are explored below—there is still a significant rise in economic growth as a result of entrepreneurship. It is not a panacea, though, and as will be explored below, other factors in the economy besides entrepreneurship have a significant role in deciding whether economic growth takes place.
New inventions that will tackle intractable societal issues like climate change and structural racism are promised as a result of the entrepreneurial activities that have compelled new social, political, and economic developments. Notably, the consequences might change and occasionally do not produce the social justice or beneficial development outcomes that were first promised.
The ability to solve societal challenges has become more recognized as a key role of entrepreneurship as it has grown more socially aware of the effects of entrepreneurial activity on such concerns.
Though its proponents may not be aware of it, entrepreneurs do have a beneficial overall influence on economic growth, even though the research suggests that these effects vary greatly across different economic sectors.
The economy’s many sectors see uneven growth as a result of entrepreneurship. In spite of the prevalence of innovation, entrepreneurs, and innovation ideology, productivity growth has been “at best moderate in recent years,” according to studies of economic growth. This is due to the fact that innovation impacts industries quite differently, meaning that it has a significant influence on the growth of some economic sectors but not all of them, according to research from the National Bureau of Economic Research.
According to reviews of the scholarly literature, while generally positive, the relationship between entrepreneurship and enhancing welfare is also complex, influenced by elements like regional population, entrepreneurship density, and the particular industry in which the entrepreneurial activity is taking place.
Entrepreneurship may be categorized as either “opportunity entrepreneurship,” which is motivated by an apparent business opportunity, or “necessity entrepreneurship,” which results from a lack of alternative options.
It may also be linked to weak economic growth or lagging economic development, according to experts, if entrepreneurial activity is a symptom that the economy isn’t producing enough wage possibilities or jobs, as is the case with necessity entrepreneurship. Additionally, some researchers have made the case that, under some conditions, economic development may be linked to a rise in overall inequality. For instance, academics claim that since the 1970s, income inequality and economic development have been associated with one another in the US.
The Bottom Line
The current economic model places a high value on entrepreneurship, particularly in post-industrial nations like the US where platform-driven businesses and the “knowledge economy,” which frequently depends on particular innovations or “disruptions,” have dominated the market and taken significant market share.
For policymakers and company owners, it is crucial to comprehend the connection between entrepreneurship and economic development. Knowing the advantages and disadvantages of entrepreneurship enables a balanced approach to fostering it, which, if done well, may have a good economic and society impact.
