The relationship between entrepreneurship, innovation and economic development - Essay Example

? The relationship between entrepreneurship, innovation and economic development affiliation The relationship between entrepreneurship, innovation and economic development Thesis There is a significant relationship and dependence between innovation, entrepreneurship and economic development. This paper will analyze the relationship of the three factors and develop arguments that support the factors in the relationship. Additionally, the paper will analyze the influence of creativity and problem solving in enhancing this relationship. The discussion in the paper will be supported by theories and examples from the corporate world. Introduction The 21st century corporate world is characterized by numerous business entities that are based on the suitability in their respective markets. Jones (2006) defines entrepreneurship as a way in which an organization or a person realizes a business opportunity, gathers resources and puts in place effective strategies and plans to launch their idea into making profit. Additionally, the author points out that entrepreneurship also involves detecting gaps in the market and using appropriate strategies to take advantage of the opportunity (Jovanovic, 2001). Innovation refers to the ability of an organization to develop strategies and practices that would appreciate factors on globalization and technology (Warsh, 2006). Innovation is a practice that recognizes technological advances and the benefits that comes with it to generate business opportunities and develop existing business ideas. In an argument by Jones (2006) innovation is an important factor in the corporate world as it is used to effectively put organizations is position in line with the current emerging trends in the corporate world. For instance, Cullen & Gordon (2007) cite that the use of social media marketing is an innovation example which most organizations in the modern century have implemented into their systems. With social media marketing a company greatly cuts its marketing costs and reaches out to a greater consumer population. Economic development on the other hand refers to the steps which the financial and economic status has improved in a particular period of time. Economic development is enhanced by the indulgence of more organizations and entrepreneurs in the corporate world. This increases the work input hence enhancing the level at which finances in a particular location is generated. Economic development is also defined by Nanda &Sorenson (2007) as the rate of equity turnover increase in a country. Apart from the factors influenced on the financial status, economic development can also be defined by the rate at which entrepreneurs venture into the corporate world. Entrepreneurial activity and its influence on innovation In an argument by Salgado-Banda (2005) entrepreneurial culture aids in the development of innovation and also promotes the culture. Innovation depends on people or organizations to develop new strategies and plans to venture into the market. On the other hand, entrepreneurship depends on innovation for originality and new market entrance. Jones (2005) argues that innovation significantly shapes the direction of both economic development and entrepreneurship. The greater the population of entrepreneurs the greater the level of innovation would rise in the corporate world. While defining entrepreneurship, Salgado-Banda (2005) points out that the vice is a development of ideas and creation of new market strategies. These are the main components of innovation. Additionally, entrepreneurship promotes competition and the emergence of new business entities in the market. An increase on the number of suppliers creates a need for every entity to gain a great competitive advantage. For this to be achieved, new entrances need to develop new and unique ideas to satisfy the demanding consumer market. This strive to gain superiority enhances the level of innovation (Salgado-Banda, 2005).The author further argues that innovations are enhanced by the increase of competition created by the requirements that are accompanied by entrepreneurship (Salgado-Banda, 2005). A major characteristic of entrepreneurship is the ability of an entrepreneur to take advantage of a gap in the market. With the emergence of many entrepreneurs, these gaps are filled and exhausted thus creating the need to find ideas to locate new market gaps. This greatly promotes the level of innovation (Cullen & Gordon, 2007). In analyzing the effects of entrepreneurship in the corporate world, Rosenthal &Strange (2009) refer to the mobile phones and gadget market. A century ago the number of organizations in the industry were minimal with mobile giant such Motorola and Nokia dominating the industry. However, the products created were of low quality and rarely satisfied the consumer market. Analyzing the market in the modern century, there is a great difference in terms of the level of innovation and number of competitors. Additionally, the products in the modern market are of high quality with competitors creating new model of products to satisfying the demanding the taste of the consumers. A focus on an organization like Apple reflects the real picture in the development of innovation levels in the industry. The organization has a wide range of phones and other gadgets that are developed periodically depending on the demand available in the market. The influence of innovation and entrepreneurship on economic development The economic development of the corporate world and the globe as a whole depends on the ability of organizations to develop new ideas in the market thus increasing investors and creditors involvement in organization. Economic development refers to the steps towards financial stability. Economic development also depends on the ability of a market to enhance entrepreneurship to increase the exploitation of available resources to increase productivity. Entrepreneurship, innovation and economic development are economic factors that are developed by the enhancement of the other. However, economic development is directly dependable on the enhancement of both entrepreneurship and innovation. Rosenthal &Strange (2009) argue that it is an obvious assumption that a market with great competition and a large number of entrepreneurs has a great economic development growth. In this case, innovation is at the top of the chain. Innovation aids in developing the entrepreneurial culture which is the most important factor in economic development. Additionally, economic development relies on the ability of a market to ensure that organizations contribute to the growth of markets. This can be done by the use of innovation to develop new investment ideas to attract more investors and allocation of credit (Cullen & Gordon, 2007). In providing real examples in analyzing the relationship between development and innovation and entrepreneurship, Nanda & Sorenson (2007) point out that the entire global market has greatly developed economically die to the increased number of organizations and innovation levels. For instance, the economic status in the United States a century back is miles behind the current financial status. This can be attributed to the fact that there were few organizations in its market thus exploitation of resources was minimal. The modern market however, has many organizations in every industry which has increased innovation levels and investments opportunities. This has greatly reflected on the economy of the United States. For this reason, the nation spends most of its revenue to enhance the creation of business entities and supporting existing entities in venturing into new products and practicing ideas. With great levels of innovation, there is an assurance of great levels of entrepreneurship and high rates of economic development. The role of problem solving and creativity in the relationship Rosenthal &Strange (2003) argue that creativity and innovation have the same characteristics and the relationship between the two is dependable to develop future frameworks in which organization can base their practices on. Salgado-Banda (2005) defines creativity as the ability of an entrepreneur to develop ideas and strategies that are unique and relevant to the market. The author further gives three characteristics of creativity as unique, reliable and advanced. Creativity also aids in the development of entrepreneurial idea. Through creativity, an entrepreneur realizes there is a deficit of a certain product or service in the market. It is also through creativity they come up with strategies and tools to venture into the new market and utilize the available resources. Problem solving is also part of coming up with innovative and entrepreneurial ideas. Problem solving refers to the releasing there is a problem or an error and finding effective ways of solving a problem. In business, problem solving may refer to realizing the deficiency in a particular market and coming up with an entrepreneurial idea to generate strategies to solve the problems. For instance, a market may be lacking proper banking services which have resulted to limited investments in the market. The most appropriate problem solving solution in this case is to create a banking institution. While problem solving, the entrepreneur would have come up with a business entity. With such solutions in the market, the relationship is greater enhanced and made easier. Michelacci (2003) argues that an entrepreneur may just solve a persistent problem in the market and create a business entity with great potential in the market. Conclusion From the analysis, one could easily point out that the relationship between innovation, entrepreneurship and economic development is based on the ability of a market to be creative enough to realize the opportunities available in a particular market. Additionally, problem solving is significant component in the creation of this relationship. References Cullen, J. and Gordon, R., 2007.Taxes and Entrepreneurial Risk-Taking: Theory and Evidence in the U.S.. Journal of Public Economic, 91, 1479-1505. Jones, C., 2005. ‘Growth and Ideas’, in Aghion, P. and Durlauf, S. eds., Handbook of Economic Growth. Amsterdam: Elsevier. ----------- 2006. Knowledge and the Theory of Economic Development. Berkeley: Department of Economics. Jovanovic, B., 2001. New Technology and Small Firm. Small Business Economics, 16, 53-55. Michelacci, C., 2003. Low Returns in R&D dueto the Lack of Entrepreneurial Skills. Economic Journal, 113, 207-25. Nanda, R. and Sorenson, J., 2007. Peer Effects and Entrepreneurship. Harvard, Boston: Harvard Business School. Rosenthal, S. and Strange, W., 2009. Small Establishment/Big Effects: Agglomeration, Industrial Organization and Entrepreneurship, forthcoming in Glaeser, E. Ed., Economics of Agglomeration. London: Pinter Publishers. Rosenthal, S. and Strange, W.C., 2003. Geography, Industrial Organization and Agglomeration. The Review of Economics and Statistics, 85, 377-393. Salgado-Banda, H., 2005. Entrepreneurship and Economic Growth: An Empirical Analysis. New York: Cengage. Warsh, D., 2006. Knowledge and the Wealth of Nations. New York: W.W. Norton & Company. Read More