The Importance of Entrepreneurship in Economic Growth

entrepreneurship small business and economic growth

The economy develops when the real per-capita income of a nation increases over some time. Entrepreneurship is one of the factors that cause the economy to develop.

In today’s era, entrepreneurship is vital to the economy. Entrepreneurship has several factors that make it so important, such as promoting social change and innovation. Entrepreneurs are the greatest assets of a country that needs to be cultivated, motivated, and rewarded to the greatest possible extent. 

Entrepreneurs explore the potentiality of the country’s resources such as land, labor, capital, and technology. The resources are used to make new and improved products and services out of them. These goods and services contribute to the economic development of the country. 

Entrepreneurs differ from country to country depending upon their material resources, industrial climate, and government responsiveness towards the entrepreneurs. Countries with favorable conditions have more entrepreneurs contributing towards the development than countries with less favorable conditions. Hence, a country with more entrepreneurs contributing means a country with a strong economy. 

Why Entrepreneurship Is Important in the Economy

  • Entrepreneurship Increases National Income
  • Balances Regional Development
  • Disperses Economic Power
  • Improves Standard of Living
  • Increases Employment Rate
  • Promotes Country’s Export Trade
  • Facilitates Overall Development

The above mentioned are some of the roles entrepreneurship plays in the local economy. Keep reading the article as I’m about to explain in detail each point. 

Entrepreneurship in Economic Development 

Entrepreneurship Increases National Income

The national income consists of the services and goods produced in the country and imported. The goods which are made by a country are for their consumption and as well as for exports. The domestic demand for goods increases when the population and standard of living increase. 

Entrepreneurs create new and improved services, products, or technology to fulfill the demand, generating more wealth. Hence, more wealth means more tax to be collected, which means more national income. 

Additionally, entrepreneurial ventures create jobs that increase the rate of employment. The government can collect tax from the revenue generated by the entrepreneurs and use it in areas that lack capital, such as local police departments, hospitals, and schools. 

Balances Regional Development 

When entrepreneurs start successful businesses, it leads to many public benefits like developing transport facilities, improved health systems, entertainment, etc… Entrepreneurs from rural areas help in the development of their cities. This way, backward regions are developed. 

Disperses Economic Power

Dispersal of economic powers means suppose in an area there is one shop and that area does not have any other competitors of that shop and the area is far away from the central city. So, the residents have to buy everything from that one shop. Hence the shop has a monopoly. 

The shop owner can sell you products at the price he desires even if it’s overpriced, and helplessly you have to buy at that price because it’s the only shop providing the product. Entrepreneurs disperse that economic power by building competition in the market.

Hence, the development of many entrepreneurs helps in dispersing the economic power among the population. Entrepreneurs help in weakening the harmful effect of monopoly. 

Improves Standard of Living

Entrepreneurs play an important role in achieving a high rate of economic growth. Entrepreneurs will introduce new and improved products and services in the local market at reasonable prices; hence, the country’s imports will decrease, and the country’s exports will increase, which means more money will come into the country.  The funds can be used for the development of education, health, and industrial sectors. 

In this way, entrepreneurs can increase the standard of living of the people. 

Increases Employment Rate

Entrepreneurs are independent, so they are self-employed. They also start large and small-scale business units which offer jobs to millions. Entrepreneurs help in reducing the unemployment problem of the country. So the more the number of entrepreneurs in the country, the more there will be jobs for other needy workers.

Promotes Country’s Export Trade

A country’s export trade is an integral part of economic development. Entrepreneurs produce products and services on a large scale which promotes the country’s export trade. They bring money from foreign countries to their countries through foreign exchange.  They also help in balancing the export-import ratio of the country. 

Facilitates Overall Development

The actions of entrepreneurs lead to cascading effects. When entrepreneurs launch a successful business, it leads to industrialization. The infrastructure of the area starts to develop. People who need a job and are suitable for the position are hired in the company. 

Wealth is generated by both the entrepreneur themselves and the workers. 

Also, the local people benefit from industrialization as the money collected in taxes is used to build educational institutes and hospitals. As the number of educational institutes increases, so does the literacy rate of the country increases. When people are educated, their living standards also improve, which means the country will prosper. 

Women Entrepreneurs and Economic Development 

Women entrepreneurs differ from economy to economy because their productivity and contribution to the country’s development are different on its cultural norms and development. Women’s empowerment in developed countries is far ahead of those in developing countries. 

Women entrepreneurs help increase the employment rate, improve the standard of living, and promote industrial and economic development in the country. 

Men and women entrepreneurs are pretty similar as they have something in common: they both have a sense of independence and confidence

Types of Entrepreneurs

Not all entrepreneurs are the same, but they all play their roles in the economy. Entrepreneurs can be classified into four different categories. 

The four categories of entrepreneurs are:

  • Innovating Entrepreneurs
  • Imitative Entrepreneurs
  • Fabian Entrepreneurs
  • Drone Entrepreneurs

#1: Innovating Entrepreneurs

These are entrepreneurs who work on producing new products and services. They are creative-minded people, and they constantly engage in doing things differently; hence are called innovators. Such entrepreneurs work on discovering new markets and new methods of productions. These entrepreneurs improve the standard of living of the nation and world.

Innovating entrepreneurs could mostly be founds in developed countries as there are many resources available to them. 

Examples of such entrepreneurs are Elon Musk, Mark Zuckerberg, Bill Gates, Jeff Bezos, and many more. 

#2: Imitative Entrepreneurs

Now let’s come to discover the next type of entrepreneur. The Imitative entrepreneurs are those who use the innovations of other entrepreneurs for their own business. These entrepreneurs don’t create new products and services but instead only imitate techniques and technology innovated by others.

This second type of entrepreneur can be found anywhere, including developing and underdeveloped countries. 

#3: Fabian Entrepreneurs

The third type of entrepreneur is those who take great caution at taking risks. These entrepreneurs are lazy and lack the will to adopt the new methodologies in the market.

#4: Drone Entrepreneurs

The last type of entrepreneur is boring. The drone entrepreneurs are boring because these are those people who would not take any sort of risk, even if it means a loss in business. They traditionally operate their business and resist any kind of change, such as adopting to internet business. 

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