Benefits of Entrepreneurship to the Economy- Entrepreneurship Advantages to the Economy

Entrepreneurship is important for a number of

reasons, from promoting social change to driving

innovation. Entrepreneurs are frequently thought of as

national assets to be cultivated, motivated, and

remunerated to the greatest possible extent. In fact,

some of the most developed nations such as the

United States are world leaders due to their forward-

thinking innovation, research, and entrepreneurial

individuals.

Great entrepreneurs have the ability to change the

way we live and work, on local and national bases. If

successful, their innovations may improve standards

of living, and in addition to creating wealth with

entrepreneurial ventures, they also create jobs and

contribute to a growing economy. The importance of

entrepreneurship is not to be understated.

KEY TAKEAWAYS

• Entrepreneurship is important, as it has the ability to improve standards of living and create wealth, not only for the entrepreneurs but also for related businesses.
• Entrepreneurs also help drive change with innovation, where new and improved products enable new markets to be developed. 
• Too much entrepreneurship (i.e., high self-employment) can be detrimental to economic development .For Any Entrepreneur or Business Construction or Company Registration contact +263782818501.

Entrepreneurs Spur Economic Growth

New products and services created by entrepreneurs

can produce a cascading effect, where they stimulate

related businesses or sectors that need to support

the new venture, furthering economic development.

For example, a few information technology

companies made up the IT industry in India during

the 1990s. The industry quickly expanded and many

other sectors benefited from it. Businesses in

associated industries—such as call center operations,

network maintenance companies, and hardware

providers—flourished. Education and training

institutes nurtured a new class of IT workers who

were offered better, high-paying jobs.

Similarly, future development efforts in other

countries require robust logistics support, capital

investments , and a qualified workforce. From the

highly qualified programmer to the construction

worker, entrepreneurship benefits a large part of the

economy. In the U.S. alone, small businesses

created 1.6 million net jobs in 2019. 

Entrepreneurs Add to National Income

Entrepreneurial ventures help generate new wealth.

Existing businesses may remain confined to existing

markets and may hit a limit in terms of income. New

and improved products, services, or technology from

entrepreneurs enable new markets to be developed

and new wealth to be created.

Additionally, increased employment and higher

earnings contribute to better national income in the

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 the

blow by redirecting surplus wealth to retrain workers.

Entrepreneurs Create Social Change

Through offering unique goods and services,

entrepreneurs break away from tradition and reduce

dependence on obsolete systems and technologies.

This can result in an improved quality of life ,

improved morale, and greater 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.

However, with a project such as the U.S. Agency for

International Development's Kenya RAPID program,

an innovative and automatic pump powered by smart

sensors fills people's water containers automatically,

ensuring more than 184,000 people now have

improved access to clean and safe drinking water.

This type of innovation ensures people are able to

focus on their jobs without worrying about a basic

necessity like water. More time to devote to work

translates to economic growth.

For a more contemporary example, smartphones and

apps have revolutionized work and play across the

globe. Smartphones are not exclusive to wealthy

countries or people, as more than 5 billion people

have mobile devices around the world. 

As the growth of the smartphone market continues,

technological entrepreneurship can have a profound,

long-lasting impact on the world.

Moreover, the globalization of technology means

entrepreneurs in developing countries have access to

the same tools as their counterparts in developed

countries. They also have the advantage of a lower

cost of living , so a young entrepreneur from a

developing country can compete with a multimillion-

dollar existing product from a developed country.

Community Development

Entrepreneurs regularly nurture 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, such as Bill Gates, have

used their money to finance good causes, from

education to public health. The qualities that make

one an entrepreneur can be the same qualities that

help motivate entrepreneurs to pay it forward through

philanthropy, in a later chapter of life.

Is All Entrepreneurship Good?

Are there any drawbacks to cultivating entrepreneurs

and entrepreneurship? Is there a limit to the number

of entrepreneurs a society can hold?

Assistant Professor of Business at Columbia

Business School Tania Babina , in a report written

alongside Assistant Professors Wenting Ma and

Christian Moser, Associate Professor Paige Ouimet,

and Assistant Director of the Board of Governors of

the Federal Reserve System Rebecca Zarutskie,

found that "employees at young firms receive lower

earnings as compared to employees at older

firms." 

Italy may provide an example of a place where high

levels of self-employment have proved to be

inefficient for economic development. Research has

shown that Italy has 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 Government

Regulation plays a crucial role in nurturing

entrepreneurship. Unregulated entrepreneurship may

lead to unwanted social outcomes, including unfair

market practices, pervasive corruption, and criminal

activity.

Findings from the United Nations University also

indicate the possible implications of "over-nurturing"

entrepreneurship. European economist Wim Naudé

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.

Owing to the variability of success in entrepreneurial

ventures, the scenario of having too many

entrepreneurs may also lead to income inequality,

making citizens unhappier. 

The Bottom Line

The relationship between entrepreneurship and

economic development is important to understand

for policymakers and business owners.

Understanding the benefits and drawbacks of

entrepreneurship allows a balanced approach to

nurturing entrepreneurship to be taken, which can

result in a positive economic and societal impact.

Source:

https://www.investopedia.com/articles/personal-finance/101414/why-entrepreneurs-are-important-economy.asp