Importance of Entrepreneurs to the U.S. Economy - Essay Example

Importance of Entrepreneurs to the U.S. Economy On Merriam-Webster Online we find three main definitions of the term “Enterprise”: “1 : a project or undertaking that is especially difficult, complicated, or risky 2 : readiness to engage in daring action : INITIATIVE 3 a : a unit of economic organization or activity; especially : a business organization b : a systematic purposeful activity” (Merriam-Webster, 2005-2006). According to the Wikipedia, “almost any business or organization can be called an enterprise, possibly led by an entrepreneur” (Wikipedia, 2006b). It also states the following about a business: “Business refers to at least three closely related commercial topics. The first is a commercial, professional or industrial organization or enterprise, generally referred to as "a business". “ (Wikipedia, 2006a). It is clearly stated that individual businesses are established to endeavor in economic activities. It means that businesses exist with the aim of producing profit. The exceptions are the cooperatives, non-profit organisations and government institutions. But all of them can be considered to be an enterprise in which time, effort and capital are invested to achieve certain specific economic, social, spiritual, political or economic goals. As we can see the term enterprise is really a broad concept. Now we are concerned with enterprise in relation to entrepreneurship and entrepreneurs in general. According to the Wikipedia “entrepreneur” is “a loanword from the French language that refers to a person who undertakes and operates a new venture, and assumes some accountability for the inherent risks.” (Wikipedia, 2006c). This term applies to a person who creates a new entity in order to offer a new or existing product or service into a new or existing market, whether for a profit or not-for-profit aim. The Wikipedia states the following about the entrepreneur as a distinctive characteristic: “Business entrepreneurs often have strong beliefs about a market opportunity and are willing to accept a high level of personal, professional or financial risk to pursue that opportunity.”. (Wikipedia, 2006c). Even though there is a general agreement that entrepreneurship is mainly related to the creation of a new venture while taking some of the risks involved, scholars don’t agree in the way they define an entrepreneur because the word has been used for many people giving this term a lot of meanings. We can define an entrepreneur according to different points of view like the following: 1.- Entrepreneur as a risk bearer. 2.- Entrepreneur as an organizer 3.- Entrepreneur as an innovator 4.- Entrepreneuer as a person willing to engage uncertainty 5.- Entrepreneur as a leader (Wikipedia, 2006c). The Wikipedia also points out the following ideas about entrepreneurship: “Entrepreneurship is the practice of starting new organizations, particularly new businesses generally in response to identified opportunities. Entrepreneurship is often a difficult undertaking, as a majority of new businesses fail. Entrepreneurial activities are substantially different depending on the type of organization that is being started. Entrepreneurship may involve creating many job opportunities.” (Wikipedia, 2006d). Peter Schumpeter made a great deal of emphasis on innovation as a force that drives forward the efforts of an entrepreneur. Economic growth is achieved thanks to the power of innovations. But entrepreneurship involves the “creative destruction” in the economy as Schumpeter pointed out in great detail in his theoretical works around 1911 about innovation, entrepreneurship and economic progress. The Wikipedia deals with this creative process through destruction as follows: “Entrepreneurship forces "creative destruction" across markets and industries, simultaneously creating new products and business models and eliminating others. In this way, creative destruction is largely responsible for the dynamism of industries and long-run economic growth.” (Wikipedia, 2006d). In order to have a better idea of innovation and entrepreneurship at work, it is appropriate to take a look at some case examples that reveal certain characteristics of how an enterprise can be successful. Let’s see. Benjamin Cole in his article entitled “Designer learns creativity is not enough to sustain her company” in Bizjounals.Com gives his account of the success story of purse designer Erin Lareau. She was helped by the Small Business Administration (SBA) in her way to a bigger piece of the business. Her case is given as an example by Cole in regards the beneficial help the SBA can give to entrepreneurs without giving out any loans. The SBA consultant that help Lareau just gave her sound advice on product mix and marketing. Cole begins his story as follows: “How many entrepreneurs start by landing marquee actress Jamie Lee Curtis as their first customer? And not only that, Curtis then waves the new product on national television and for hordes of clicking photographers while waltzing down the red carpet at the 1999 Golden Globes awards.” (Cole, 2003). It all started when Erin Lareau was enjoying a brief downtime backstage at the Tonight Show with Jay Leno. She worked for this TV show in the costume department. Jamie Lee Curtis was waiting for her appointed time with Leno and at the same time she was spying at Lareau while she was “applying small, high-quality crystal jewels to almost completely cover her father’s vintage home movie camera, with the idea of turning it into a woman’s purse.” (Cole, 2003). Curtis liked it so much that she demanded it for her own. A few days after, Curtis waved it to the hordes of photographers at the Golden Globes. She even play with the camera creation pretending to take pictures of the photographers. This was worth a million dollar of free publicity for Erin Lareau as a purse designer. After that, many more celebrities wanted to buy Lareau’s purses. A new business was born. Lareau had a strike of luck at the beginning, but later on she didn’t know how to handle her new business, so she asked for help at the North Los Angeles County Small Business Development Center, where she found marketing advice from Peter Krause, a Small Business Development Center consultant provided for free. As a result of her meeting with Krause, Lareau took the following decision: “She added higher- and lower-priced items to both make money on a regular basis (the lower-priced items) and to make an occasional killing (the big stuff). She also attended SBA workshops for a nominal sum. Unlike many SBA clients, she did not apply for a loan.” (Cole, 2003). Lareau has grown little by little. She has learned a lot about marketing, and she is designing new objects now. Cole speaks about her success as follows: “Production has risen enough that Lareau has added two employees, freeing her to spend more time marketing. Such magazines as Style, People and Wired have featured her work. Lareau's diverse background and exposure to the arts and entertainment fields serves her well.” In this success story we can see that chance and luck played their parts, but the entrepreneur spirit of Erin Lareau was also very important in further succeeding. The help from the SBA was also very valuable as Lareau learned a lot about the marketing mix as a way of building up her enterprise on solid ground. On the other hand, social entrepreneurship is really prominent nowadays, and it is helpful to deal with an example case related to this field of entrepreneurship. Ashoka.Org is an institution dedicated to give support to social entrepreneurs. They define social entrepreneurship as follows: “The job of a social entrepreneur is to recognize when a part of society is stuck and to provide new ways to get it unstuck. He or she finds what is not working and solves the problem by changing the system, spreading the solution and persuading entire societies to take new leaps. Social entrepreneurs are not content just to give a fish or teach how to fish. They will not rest until they have revolutionized the fishing industry.” (Ashoka, 2006). There is a real need for social entrepreneurs as Ashoka states it very clear in the following words: “Identifying and solving large-scale social problems requires a social entrepreneur because only the entrepreneur has the committed vision and inexhaustible determination to persist until they have transformed an entire system. The scholar comes to rest when he expresses an idea. The professional succeeds when she solves a client's problem. The manager calls it quits when he has enabled his organization to succeed. Social entrepreneurs go beyond the immediate problem to fundamentally change communities, societies, the world.” (Ashoka, 2006). All this means that social entrepreneurship is a special case of entrepreneurship that we have to take into consideration when studying any kind of enterprise. Ashoka gives its account of an example case in social entrepreneurship in the person of Veronica Khosa from South Africa. She was frustrated with the health care system in South Africa. Ashoka explains it as follows: “A nurse by trade she saw sick people getting sicker, elderly people unable to get to a doctor and hospitals with empty beds that would not admit patients with HIV. So Veronica started Tateni Home Care Nursing Services and instituted the concept of "home care" in her country. Beginning with practically nothing, her team took to the streets providing care to people in a way they had never received it — in the comfort and security of their homes.” This social enterprise was very successful from its very beginning. It is important to keep in mind that the concept of “home care” is not known in South Africa, so that was a brand new idea that was put into practice thanks to a social entrepreneur initiative. But the story doesn’t end here. Ashoka gives the following account of the consequences of Khosa’s social enterprise: “Just years later, the government had adopted her plan and through the recognition of leading health organizations the idea is spreading beyond South Africa. Social entrepreneurs like Veronica redefine their field and go on to solve systemic social problems on a larger scale.” On the other hand, speaking about entrepreneurship and economic growth in a nation, this topic has been studied in great detail by many researchers, theorists and scholars. For example, Joseph Bordogna of the National Science Foundation considers the entrepreneurs to be main actors in the economic progress of the United States. His insights can be applied to any nation. For Bordogna (2004, p. 1) entrepreneurs are “risk takers, implementers, rule breakers, adventurers; or in a word: innovators.” When it comes to innovation, Bordogna thinks the following about this relevant topic in relation to economic growth: “And there’s no question that innovation is the heart of economic progress. Innovation is the very bones and sinew of our economy and society. It enables us to compete in the global marketplace, raises our prospects for more productive and satisfying lives, and strengthens our national security.” (Bordogna, 2004, p. 1). Another researcher, Marcus Dejardin, deals with Schumpeter’s points of view about innovation and states the following: “An increase in the number of entrepreneurs leads to an increase in economic growth. This effect is a result of the concrete expression of their skills, and more precisely, their propensity to innovate.” (Dejardin, 2000, p. 2). Innovation activity according to Schumpeter takes five different forms as follows: 1.- Creation of a new good. 2.- Introduction of a new method of production. 3.- Creation of a new market. 4.- Conquest of a new source of supply of raw materials or half-manufactured goods. 5.- Creation of a new organization of any industry. So Dejardin recovers the concept of Schumpeter when dealing with economic growth in any nation thanks to the fresh blood of the entrepreneurs. Let’s see: “Through his innovative activity, the Schumpeterian entrepreneur seeks to create new profit opportunities. These opportunities can result from productivity increases, in which case, their relationship to economic growth appears quite clearly. (…) Moreover, the disequilibrium created by the entrepreneur can be propitious for additional innovations and profit opportunities. Therefore, more entrepreneurs means more growth, which in turn leads to more entrepreneurs… The phenomena seem to be self-feeding.” (Dejardin, 2000, p. 2). There is no doubt that entrepreneurs help in a great scale and at a high degree the economic growth of any nation as their activities bring innovation to the marketplace as a driving force that creates wealth for everybody in the long run. References Ashoka. “What is a Social Entrepreneur?”. (2006). (online). Available from http://www.ashoka.org/fellows/social_entrepreneur.cfm (Accessed 10 February, 2006). Bordogna, J. “Importance of Entrepreneurs to the U.S. Economy”. (2004). 2003 ECI Conference on Teaching Entrepreneurship to Engineering Students. Editors: Baum, E., and McHargue, C. National Science Foundation. (online). Available from http://services.bepress.com/eci/teaching/3/ (Accessed 10 February, 2006). Cole, B. “Designer learns creativity is not enough to sustain her company”. (2003). Bizjournals.com. (online). Available from http://www.bizjournals.com/sba/6.html (Accessed 10 February, 2006). Dejardin, M. “Entrepreneurship and Economic Growth: An Obvious Conjunction?”. (November, 2000). CREW, Faculty of Economics and Social Sciences. University of Namur, Belgium. (online). Available from http://www.spea.indiana.edu/ids/pdfholder/IDSissn00-8.pdf (Accessed 11 February, 2006). Merriam-Webster Online. “Enterprise”. (2005-2006). (online). Available from http://www.m-w.com/dictionary/enterprise (Accessed 10 February, 2006). Wikipedia. “Business”. (10 February, 2006a). (online). Available from http://en.wikipedia.org/wiki/Business (Accessed 10 February, 2006). Wikipedia. “Enterprise”. (6 February, 2006b). (online). Available from http://en.wikipedia.org/wiki/Enterprise (Accessed 10 February, 2006). Wikipedia. “Entrepreneur”. (10 February, 2006c). (online). Available from http://en.wikipedia.org/wiki/Entrepreneur (Accessed 10 February, 2006). Wikipedia. “Entrepreneurship”. (7 February, 2006d). (online). Available from http://en.wikipedia.org/wiki/Entrepreneurship (Accessed 10 February, 2006). Read More