Role of Entrepreneurship in Economic Development
Entrepreneurship plays an influential role in the economic growth and standard of living in the country. Entrepreneurship and economic development are intimately related. Schumpeter opines that the entrepreneurial process is a major factor in economic development and the entrepreneur is the key to economic growth. Whatever be the form of the economic and political set-up of the country, entrepreneurship is indispensable for economic development.Successful entrepreneurs contribute to the economy by by introducing innovative technologies, products, and services. Businesses can use globalization to their advantage by finding customers in other countries. Here are some of the important roles an entrepreneur plays in the economic development of a country.
(1) Promotes Capital Formation:
Entrepreneurs promote capital formation by mobilizing the idle savings of the public. They employ their own as well as borrowed resources for setting up their enterprises. Such types of entrepreneurial activities lead to value addition and creation of wealth, which is very essential for the industrial and economic development of the country. Entrepreneurs establish business entities in order to invest their own resources and to obtain capital (in the form of debt, equity, etc.) from investors, lenders, and the public. Public wealth can be mobilized this way and people can benefit from entrepreneur success. Wealth creation and distribution is one of the basic imperatives and objectives of economic development when capital is pooled.
(2) Creates Large-Scale Employment Opportunities:
Entrepreneurs provide immediate large-scale employment to the unemployed which is a chronic problem of underdeveloped nations. With the setting up of more and more units by entrepreneurs, both on small and large-scale numerous job opportunities are created for others. As time passes, these enterprises grow, providing direct and indirect employment opportunities to many more. In this way, entrepreneurs play an effective role in reducing the problem of unemployment in the country which in turn clears the path towards the economic development of the nation.The development of many new businesses helps limit unemployment.
In contrast to job seekers, entrepreneurs are by definition job creators. When you become an entrepreneur, there is one fewer job seeker in the economy, and you are then able to provide employment to multiple other job seekers. Economic development is based on creating jobs through new and existing businesses. For this reason, the Government of India has launched initiatives like Startup India, which supports businesses and startups, as well as Make in India, which attracts foreign investors. In turn, all of this creates many job opportunities and helps to raise our standards worldwide.
(3) Promotes Balanced Regional Development:
Entrepreneurs help to remove regional disparities through setting up of industries in less developed and backward areas. The growth of industries and business in these areas lead to a large number of public benefits like road transport, health, education, entertainment, etc. Setting up of more industries lead to more development of backward regions and thereby promotes balanced regional development. The establishment of new companies and industrial units in backward, underdeveloped areas contributes to regional development. By growing businesses and industries in these areas, we are able to improve infrastructure like better roads and rail links, airports, and stable electric and water supplies, as well as schools, hospitals, shopping malls, and other public and private services.
By establishing a business in a less developed area, new jobs can be created both directly and indirectly, which contributes to the overall prosperity of the region. Local and regional economies are boosted by the combined spending by all the new employees of the new businesses and the jobs in supporting businesses. Various government incentives and concessions are offered to registered MSME businesses in both the federal and state governments.
(4) Reduces Concentration of Economic Power:
Economic power is the natural outcome of industrial and business activity. Industrial development normally leads to a concentration of economic power in the hands of a few individuals which results in the growth of monopolies. In order to redress this problem a large number of entrepreneurs need to be developed, which will help reduce the concentration of economic power amongst the population.
(5) Wealth Creation and Distribution:
It stimulates equitable redistribution of wealth and income in the interest of the country to more people and geographic areas, thus giving benefit to larger sections of the society. Entrepreneurial activities also generate more activities and give a multiplier effect in the economy.
(6) Increasing Gross National Product and Per Capita Income:
Entrepreneurs are always on the lookout for opportunities. They explore and exploit opportunities,, encourage effective resource mobilization of capital and skill, bring in new products and services and develop markets for growth of the economy. In this way, they help increasing gross national products as well as per capita income of the people in a country. An increase in gross national product and per capita income of the people in a country is a sign of economic growth.
(7) Improvement in the Standard of Living:
An increase in the standard of living of the people is a characteristic feature of the economic development of the country. Entrepreneurs play a key role in increasing the standard of living of the people by adopting the latest innovations in the production of a wide variety of goods and services in a large scale that too at a lower cost. This enables the people to avail of better quality goods at lower prices which results in the improvement of their standard of living.
In addition to improving the quality of life for people in a community, economic development has another key goal. In a community, entrepreneurs play a crucial role in increasing the standard of living. This is not just done by creating new jobs, but also by developing and implementing innovations that lead to a better quality of life for their employees, customers, and other stakeholders. A business unit can, for example, increase productivity by automating production and enabling faster production, while at the same time providing its customers with the same goods at a lower price.
(8) Promotes Country’s Export Trade:
Entrepreneurs help in promoting a country’s export trade, which is an important ingredient of economic development. They produce goods and services on a large scale for the purpose of earning huge amounts of foreign exchange from export in order to combat the import dues requirement.
Hence import substitution and export promotion ensure economic independence and development. To expand their business internationally, any growing business will eventually want to start exporting. Having access to bigger markets is key to economic development since it brings currency inflows and gives access to cutting-edge technologies used in more developed foreign markets. In addition, this type of expansion occurs during recessions in the local economy and leads to more stable business revenue.
(9) Induces Backward and Forward Linkages:
Entrepreneurs like to work in an environment of change and try to maximize profits by innovation. When an enterprise is established in accordance with the changing technology, it induces backward and forwards linkages that stimulate the process of economic development in the country. When an entrepreneur initiates a change, a chain reaction occurs. The establishing of an enterprise involves a number of backward and forward links.
Establishing a steel plant is one example of an ancillary unit that increases iron ore, coal, etc. demand. In other words, there is a backward relationship. By increasing the supply of steel, the plant facilitates the manufacture of machines, tubes, vessels, and other similar units. The entrepreneurs express their enthusiasm and are determined to succeed. This is what gives an organization its momentum. A vital economy depends on entrepreneurship. Both established and new businesses can benefit from entrepreneurship.
(10) Facilitates Overall Development:
Entrepreneurs act as catalytic agents for change which results in a chain reaction. Once an enterprise is established, the process of industrialization is set in motion. This unit will generate demand for various types of units required by it and there will be so many other units that require the output of this unit. This leads to the overall development of an area due to an increase in demand and setting up of more and more units. In this way, the entrepreneurs multiply their entrepreneurial activities, thus creating an environment of enthusiasm and conveying an impetus for the overall development of the area.