The Role of the Entrepreneur and Creativity - Term Paper Example

Entrepreneurship and Economic Growth Introduction Entrepreneurship is the process through which individuals recognize the opportunities available, allocate the resources required to maximize the opportunities identified and create value from the opportunities. To create value, unmet needs and opportunities are identified and ways to meet these needs are developed. There is a strong link between entrepreneurship, innovation, and economic development. This link arises from the fact that less entrepreneurship means fewer innovations, which in turn business development negatively. For economic growth to happen there is a need for entrepreneurs to assume, manage, and organize the risks that are in the various business ventures. While entrepreneurship is personal, it has an impact on the entire society, which affirms the positive correlation between entrepreneurship and economic growth. Entrepreneurship is usually s an outcome of complex factors that include socioeconomic, technological, and psychological factors within the environments in which the entrepreneurs live. As a process, entrepreneurship is very dynamic and risky as it involves a combination of human talent or creativity, capital and technology. The concept of entrepreneurship applies to small business enterprises as well as large businesses and multinational corporations. It also applies to economic activities and non-economic activities. Entrepreneurial activity on the other hand refers to the rate of new venture start up that is initiated or started by the entrepreneurs and is motivated by the availability of opportunities. Economic development focuses on ways in which production and competition for resources in enhanced. It also involves the process through which per capita income of a country is increased. The development of entrepreneurship is therefore an important aspect of economic development as it speeds enhances the production factors and speeds up the production process, which in turn enhance economic growth. In any given economy, there are different measures of entrepreneurial activity. Economic growth also comes due to the accumulation of capital and the development of the labor force. The growth can also be because of innovation. The economy is portrayed as a combination of enterprises and businesses each of which is a combination of the various factors of production. The Role of the Entrepreneur and Creativity The entrepreneur fulfills several functions. The most important function is that of innovation. The entrepreneur uses the available information and his creativity to come up with products that fulfill the need that has been identified in the society. The entrepreneur also comes up with improvements on the already existing products and comes up with new markets for the products. Being creative, the entrepreneur also comes up with a new organization for a specific industry. Through creative innovations, the entrepreneur converts the available material into resources. He also comes up with different ways to combine the available resources and come up with more products that are better and more productive. Creativity is therefore a very important part of the entrepreneurship process. In relation to entrepreneurship, creativity is the process of developing new services and products that were previously unavailable (Wennekers, Stel, and Carree 45). An entrepreneur also has the responsibility of organizing the resources that are a necessary part of production. This means he has to use his creative and innovative abilities, and his leadership skills to coordinate the production team, generate the resources required for production, and supervise the process of production. The entrepreneur has to ensure that the available resources are channeled towards progressive activities in the pursuit that he has chosen. If the entrepreneur is not keen on the process of the organization of the resources, he may end up using the available resources to produce goods or services that are already in surplus. This will lead to a situation in which there is a shortage of some goods and services and an excess of others. Innovation refers to the process through which new products, services, and new production processes are developed. There are different reasons as to why people choose to pursue entrepreneurship. Some of the entrepreneurs engage in the entrepreneurial activities because they recognize opportunities and have the capacity to innovate ways in which they can make maximum use of the opportunities. Such people also desire the freedom and independence that is offered by entrepreneurship. However, some people engage in entrepreneurship activities because they do not have any other source of income and not because they are motivated by the opportunities present. The different environments (social and political) that one finds themselves in can either encourage or discourage entrepreneurs to thrive. If the environment is stable, more people will venture into entrepreneurship activities. Economic Development For economic development to occur there has to be changes that occur in the character and the quantity of economic value that is added to the opportunities and the resources available. The change in the value added leads to an increase in productivity and contribute to a rise in the per capita income in a society. When entrepreneurs begin to engage themselves in the industrial activities such as the extraction of natural resources, economic growth is triggered. The people in the economy who were engaged in other activities (such as agricultural activities) then begin to engage themselves in the industrial sector of the economy. This in effect leads to an increased supply of labor in the industrial sector, which in turn causes entrepreneurs to come up with other opportunities for employment and income therefore increasing the economic growth. In an economy where there are rapid advances in the industrialization and technological innovation, economic growth is driven by different factors. In such economies, the growth process is driven by the technological innovations. The link between entrepreneurship and economic growth can also be seen using the indicators of the entrepreneurial activities in a given region. An example of such indicators is the increase in the number of competitors in a given industry. This is an indicator of entrepreneurial activity as the increase in the number of firms relate to growth in entrepreneurial activity. The increase in the number of competitors has been found to impact positively on productivity and consequently on the economic growth. Effect of Entrepreneurial Creativity and Innovation (Theory of Creative Destruction) The theory of creative destruction proposes that entrepreneurs work to distort the market equilibrium. This is done by the introduction of new products or innovations to the market. In introducing new products and innovations, the entrepreneurs make use of technology. By being innovative and making use of technology, the entrepreneurs force out the firms that are less productive and less innovative firms from the market (Wennekers, Stel, and Carree 48). The consumers on the other hand drive the process of innovation by being receptive to the new products that are introduced to the market. The change in the demands of consumers and in the supply of goods creates a potential for the entrepreneurs to make profits. The process of innovation is therefore an important process and it is through innovation that entrepreneurs are able to contribute to the economic growth. Entrepreneurs to change the market structures also build the process on a conscious and deliberate effort. The theory of creative destruction also provides the basis upon which the theory of business cycles is built. The business cycles are taken to be the result of innovation and the creation of new ideas, and the implementation of these ideas to come up with a new product or service. The new product or service contributes to the vibrant growth of the economy of the country. They (products and services) also lead to the increase in the employment rates of the country and increased profits for the entrepreneurial ventures ((Wennekers, Stel and Carree 28). The link between entrepreneurship and economic growth is also seen in the fact that entrepreneurship is a process that is flexible and driven by knowledge and innovation. This leads to competition in the globalized economy. With the technological changes and economic liberation that come about because of the entrepreneurship process, the development of entrepreneurship leads to development of the economy of a country, which makes the country more competitive in the global economy. The Nature of Entrepreneurship Entrepreneurship originates from the individual level. Entrepreneurial activities are however, realized at the firm level. At the industry level, the combination of entrepreneurial activities leads to the increased competition of new products and innovations. The competition leads to the increase in the variety of available products. It also leads to the replacement of obsolete firms. By so doing, the entrepreneurial activity leads to the expansion of the productive capacity of the given economy through the process of expansion into new productions and new industries (Wennekers, Stel and Carree 48). A report by the Global Entrepreneurship Monitor (GEM) describing the link between entrepreneurship and economic growth has shown that the level of entrepreneurship development in a given country is associated with the level of growth in the country’s economy. The countries endowed with a high level of entrepreneurial activity also have a high rate of growth for the economy. The relationship between the economy and entrepreneurship is described as being U shaped meaning that the relationship is determined by the phase of economic development that the country is in. in both the efficiency phase and the factor driven phase of economic development, entrepreneurial activity would have a negative relation with the economic growth. This is because in such phases of the economy, the people seek to move from the situation in which they depend on self-employment (which is subsistent) to the wage employment. In economies that are developed and that have entered the innovation driven phase, there is a positive relation between entrepreneurship and the economic growth as people are seeking to move to entrepreneurial activity from their wage employment (Wennekers, Stel and Carree 2). Conclusion It can therefore be seen that entrepreneurship is a result of the environment that people finds themselves in. the environment can either encourage or discourage entrepreneurship. Innovation and creativity, which are essential in the process of entrepreneurship, are also essential in the development of the local and global economy. When entrepreneurship is encouraged to thrive, the results will be greater economic growth. Governments and institutions must at all times invest in innovation and reward creativity into cultivate an entrepreneurial culture that ensures business growth and economic development. Works cited Wennekers, Sander, Stel, Andr and Careee Martin. The Relationship between Entrepreneurship and Economic Development: Is it U-shaped? Hanover, MA: Now Publishers Inc., 2010. Print. Read More