Entrepreneurship

What Is Entrepreneurship in Economics and Why Is It Important for the Economy?

Entrepreneurship is when someone works hard on their idea and innovates a new way of conducting business and making the world a better place around them. What it means for an economy to have an entrepreneur in it and should the economy encourage people to be an entrepreneur. Is entrepreneurship very important for an economy. Read all about how the economy is impacted by the increase of entrepreneurship and what it means for an economy.

There is a very huge difference between an entrepreneur and a businessman. A businessman grabs an opportunity and works on the gap in the market to make a profit off of it. An entrepreneur on the other hand innovates and develops goods or services which are new  to the market. Entrepreneurship can even create a whole new market niche and sometimes even a whole new industry to accommodate new and revolutionized innovations.

Like everything else, even entrepreneurship is connected to the economy and it helps the economy flourish and also creates jobs and opportunities for other businessmen to fill the gaps in the market. This way entrepreneurship helps the economy and the welfare of the society and communities around it. Here we will discover more examples of what exactly entrepreneurship means to the economy of the country.

What is entrepreneurship?

Becoming an entrepreneur means very big shoes to fill, with so many successful entrepreneurs all around the globe it is very hard to meet the benchmark. With the right motivation and understanding of the topics it can be possible for anyone to reach the summit of success.

Entrepreneurship comes with the creativity of one’s minds and how the person articulates his thoughts into reality. Much like technological innovations anyone can be an entrepreneur in his or her own field of expertise. There are creative ways to become an entrepreneur too.

Just like everything a person wishes to achieve, the first step of understanding entrepreneurship would be to study and get educated in what the subject is. Here we are going to dive into the types of entrepreneurships there are and what are the differences between them and how entrepreneurship affects the economy. We will also find out why the economy needs entrepreneurship in order to move forward.

Types of entrepreneurship

There are different types of entrepreneurships in the world. Some work in a different way than others and some have similar backgrounds but have different objectives. There are as many different entrepreneurships as there are businessmen or women. Each person has his or her own way to conduct their business and show creativity and innovation.

Since most of the entrepreneurs have their goods or services patented there aren’t many similarities between one or the other. Here we explore some of the many categories of entrepreneurship which have been used all over the world by many new entrepreneurs.

Small business

This is the type of business a person opens up with their own funds and not with the immediate goal of expanding or franchising the business. It is usually opened up by a person looking for extra income and only earns profits if the business earns profits. They are operated by family or friends of the owner to get off the ground and keep running.

Sometimes these businesses end up getting bigger and better but it takes a lot of time and investment to do so. This got very popular, as a business system to start when the pandemic hit and many people lost their jobs. To earn a little income many people started a small business

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to keep their households floating.
Example

99% of businesses are classified under the small businesses in America. These are increasing at a rapid pace since 2020.

Scalable start-ups entrepreneurship

These are the most common types of entrepreneurships there are. These are the types of businesses which intend to replicate and grow as much as they can. These businesses grow at a rapid pace to cover the market gap and most of the time create a market monopoly.

Endeavors like these are either supported by traditional financing or venture capital financing. These businesses make a lot of difference to the community around them; they also help establish other small businesses around them to help provide opportunities.

Example

Apple, amazon and Microsoft are all very good examples of scalable start -ups entrepreneurships.

Intrapreneurship

An entrepreneur is a person who innovates, develops and is the owner of the company. An intrapreneur is a self motivated employee who innovates and develops within a company and adds to the brand and becomes an important part of the company.

Example

The like button for Facebook was developed by an employee of the company and now it is an integral part of the social networking website. There is an annual event called “hackathon” showcasing and encouraging employees from different aspects of life to develop and innovate.

Large company entrepreneurship

These companies are different because they are not new businesses, but these are already existing businesses which keep innovating and developing new products and services for their consumer base. They provide opportunities for different people from within and without the company and offer them a chance to work with them.

Example

The best example for this type of entrepreneurship is Disney. Disney keeps innovating and developing new goods and services to keep the consumers in the loop because most of their products have a small shelf life.

Imitative entrepreneurship

In layman’s terms this type of entrepreneurship is when a person imitates or copies the business model of someone else or some other company and replicates it with limited resources and improves it in some ways. The improvement in this scenario is the main difference from the imitated business model.  Many people prefer this because it is better to learn from others’ mistakes and make it into a profitable business model.

Innovative entrepreneurship

As the name suggests this is the business model where the owner keeps inventing and innovating different technologies to break the market and fill in the market gaps. Even if you have the idea of how to start a new business it is considered innovative entrepreneurship. Having a groundbreaking invention or innovation which changes the way people go about their life is called innovative entrepreneurship.

Example

There are several examples for innovative entrepreneurship but the most common example would be Ali Baba.com and how it has innovated the way people import goods from another country.

Researcher entrepreneurship

Hen entrepreneurs focus all their efforts on their research, data and facts and then they make their move on the market with their product or service is called research entrepreneurship. Many people have patented and made their own products with ample research on them and have become very successful business men and women.

Example

Many entrepreneurs who come on the show shark tank have patents on their products and they rely mostly on facts and figures of their research. They can all be considered as good examples of researcher entrepreneurship.

Social entrepreneurship

Entrepreneurs or businesses who work for the social benefit of their local communities and societies all the while making a profit for themselves are called social entrepreneurs. They work for social welfare and make the local communities a better place to live. They are also very appreciated in the society because of their influence and the jobs they create for others.

Example

The best example is the shoe brand called Toms. They made a campaign to give a pair of shoes to a child in need for every shoe sold in their shops or online. It was a great way to give back to society and in the process make a lot of money by increasing the sale of their shoes.

What is entrepreneurship development

Entrepreneurship has many advantages for the business and community around them. They also help develop the economy of the country they preside in. a country grows when the people of the country become educated and innovative. It goes on to develop the civilization as a whole by encouraging people to become entrepreneurs and supporting their ideas and innovation.

Entrepreneurship development makes the country grow socially and economically. Following are the ways in which entrepreneurship has helped a country develop.

Social development

An entrepreneur not only develops himself and his business, but also develops people and communities around itself. Whether by offering jobs, offering business opportunities and by supporting local businesses, entrepreneurship helps the society flourish.

Having an entrepreneur in the midst of a community will help the people of the said community get job opportunities from the business, since every business creates jobs, so do entrepreneurships. Entrepreneurs develop and innovate ways of doing things differently and by doing so they create new markets and even industries. These new markets and industries then move on to house new businesses which try to fill the gaps in the newly established market.

Economic development

With the high amount of people getting jobs and the rate of unemployment decreases,it  paves the way to economic strength and growth. With low unemployment the collective income of the country or the economy increases which means it directly impacts the amount of taxes people pay.

Taxes or government revenue is the stepping stone of social and economic welfare. More government revenues means that the government will be able to afford more development and will be able to fund small businesses through subsidies. Subsidies also allow businesses to venture out and try more innovative techniques which lead to technological developments.

Why is entrepreneurship important?

Other than the social and economic development which happens because of rising entrepreneurship in the country, entrepreneurship is important for many other reasons too. Following are the reasons why entrepreneurship is important.

Community welfare

Building and innovating a business or a different industry in an economy would help generate jobs and activities for the people. Having a steady income or something to do would make people thrive and increase the standard of living. Better hospitals, better education and better chances of succeeding would encourage people to become productive and also help them be future entrepreneurs.

Technological advances

With innovations on the rise and entrepreneurs revolutionizing the way people work and conduct business result in a considerable amount of technological advancements. These technological advancements help the community establish new grounds of education and further research and innovations. Most first world countries in the world use technological advancement as a measure of their success.

Increase in the competitive advantage against other countries

Every country whether first world or third world has a competitive advantage against another and that initiates the trading agreement and process between the countries. Triggering international trade when you have the technological capabilities will definitely be a plus for the economy. Entrepreneurship in these specific fields with the help of government subsidies would be great for foreign trading among the countries.

This endeavor will also help correct the balance of payments deficit of the country and appreciate its currency and value in the international markets.

Why is entrepreneurship important for the economy?

After discussing why entrepreneurship is important for all the general reasons like community, socialism and forgien trade. Here are the reasons why it is good solely for the economy of the country it resides in.

Increase trading options for the country

Entrepreneurship makes innovations come true and revolutionize the way they operate their daily lives. They can patent that technology and then sell it for other companies and businesses to use it or develop it. This would trigger foriegn trading and help the nation excel through government revenues.

Makes a name for the country

Having many entrepreneurs makes different opportunities for people in the country and out will give the home nation a good name and something for other countries to look up to. It can also boost business tourism and help other small businesses flourish alongside the entrepreneur.

The best example of this is the medical tourism of turkey. How the plastics surgeons in turley have innovated low risk surgeries for cosmetic procedures. Which has increased the number of people who visit Turkey just for the surgeries. This has also helped other businesses like hotels and bed and breakfasts which thrive because of tourism.

Increases job opportunity for the people

With businesses such as these there will always be the need for hiring people who work as support staff. Support staff consists of people who help the business function on a daily basis or the people who manage the business and its daily tasks. Companies like Apple, Disney or Microsoft, need people from the technical fields for research and innovation, but they also need people for administration and human resources.

Support staff is needed everywhere, from the administration head to the coffee person. All companies who build themselves offer not only technical but a variety of jobs.

Introduces new industries

With new businesses sprouting up to support the entrepreneurship businesses, these innovations can cause a whole industry to emerge. When an entrepreneur innovates something new and tries to expand the business by either venturing for the vendor business or the retail business, can help a whole industry set up.

For example, the textile mills of Bangladesh and Pakistan. Entrepreneurs innovated and introduced new techniques of making textiles of a better quality and quantity which has given a rapid rise of a whole textile industry in these two countries. Many big brands like Zara, H&M, Primark and Costco get their textiles made from these companies.

Makes way for other businesses to flourish

Entrepreneurships pave the way for other business men and women to flourish their own businesses and increase the collective standard of living of the society. Just like entrepreneurs need support staff they also need support businesses. This way businesses providing transportation services or other services which help the business with their business model get their share of the profits by helping the entrepreneur.

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Mostly businesses who offer services which support the activities of the entrepreneur’s business, such as logistics, transportation, security and maintenance. All these businesses prevail because of the close proximity of entrepreneurship.

Helps the economy with the balance of payments

Every country has a balance of payment which is the balance of export and imports. When entrepreneurship comes into play there will be many countries who would want to buy the products from the entrepreneur and it will collectively increase the cash inflow of the country viia customs. Since the exports will be more than what the country imports, or in simple terms a country would be selling more than they would be buying it will be better for the country’s government.

This way with less import spending done by the country the government can spend the money on better projects for social welfare of the country, better healthcare or any various welfare projects.

Increases tax revenues of the country

With all the development which comes with an entrepreneurship business in the economy, it is not a far-fetched idea that the government will benefit a lot with added revenue. The government’s revenue source is income tax which will increase when an entrepreneur starts his or her business.

Firstly, the entrepreneurship business will earn profits, and those will be subjected to corporate taxes. Secondly the entrepreneur himself would be liable to give taxes on his own income. And thirdly, every employee working for the entrepreneur will have to subject his or her own salary to cuts by the government in the form of income taxes.

All these taxes are a form of revenue for the government and the government chooses to take these from every citizen and business owner in the country. These revenues are then spent on the people of the country for their social security and welfare.

Bottom line

In the end entrepreneurship is very important for any government or economy of the country. It provides a lot more than what it takes from an economy. It provides people of the country with better jobs, better salaries and a better lifestyle. Entrepreneurship also contribute alot to the development of a society and its communities. It educates people in the surrounding communities and encourages more entrepreneurships.

Entrepreneurs can become very good mentors for the future generations to make them more productive and efficient. They can provide a road map for young people to become innovative and business savvy like them in order to provide even more assistance to the economy by creating their own entrepreneurship endeavors.

In this fast paced and quick world entrepreneurship is the answer to everything and every problem that our economies or our world faces. Being self-employed doesn’t mean being um-employed, it means that the person is working hard to offer employment to others.