The Relationship between Entrepreneurship, Innovation and Economic Development - Essay Example

will submit an individual essay to address the following ‘Discuss the relationship between entrepreneurship, innovation and economic development. What role do creativity and problem solving play in this relationship? Refer to both theory and examples from the business world to support your discussion.’ INTRODUCTION The achievement of economic development is important in all spheres of human life. From individual level to organizational level to the national level, everyone seeks some level of economic development. Once economic development comes about, it is expected that the general wellbeing of people will improve. With economic development, people are able to access not their needs but also to a very large extent, their wants also. Considering the fact that the need to meeting once basic needs for existence can be jeopardized in the absence of economic development, not much can be said on the need to promote economic development of all people at all levels of life. The understanding that economic development brings about better living and improved lifestyle does not however guarantee economic development. This is because the achievement of economic development is a complex and systematic process that demands a lot of knowledge, professional requirements, ethical know-how among other factors to achieve (Koduah, 2009). Kasof et al (2007) describe the elements that need to be put in place to attain economic development as values. In academic circles, theorists and economists have associated entrepreneurship and innovation as two of the most important values needed in achieving economic development. Lumsdaine and Binks (2007) also reiterates the fact that creativity and problem solving has a lot of role to play in ensuring that entrepreneurship and innovation are well combined to bring about the economic development. This essay therefore seeks to discuss the relationship between entrepreneurship, innovation and economic development and the role that creativity and problem solving play in this relationship. OVERVIEW OF KEY TERMS Entrepreneurship In the eyes of the everyday non-technical person, entrepreneurship may just be seen as the act or ability to set up a business venture and employ other people to work in the venture. Being rather more technical and theoretical, the Lester Centre for Entrepreneurship (2011) explains that “entrepreneurship has crossed border from the days it used to be all about “the pursuit of opportunity beyond the resources you currently control” to now include a rather broadened scope “with segmented interest across a wide variety of fields and topics, including new venture creation, venture capital, social ventures, business model innovation, open software, internet, corporate entrepreneurship, global business, and biotechnology.” Innovation Innovation in the economic sense can also be given a broader interpretation than the mere act of creating something new. Innovation is actually a compounded ability to be of use not just to one’s self but to society at large (Ampong, 2004). There are therefore several theories on innovation that guides the utilization of the phenomenon. Some of the theories can be mentioned as breakthrough, incremental and open source (Real Innovation, 2011). Fusing all these theories together, Peter Drucker explains that “innovation is the specific instrument of entrepreneurship... the act that endows resources with a new capacity to create wealth” (Real Innovation, 2011). Economic development According to Economics for Development (2011), “economic development is the development of economic wealth of countries or regions for the well-being of their inhabitants.” This confirms the point made earlier that economic development is directed towards the achievement of overall wellbeing of people. Theoretically, economic development is judged by certain indicators when the term is used by economic analysts. At the national level, there are indicators such as inflation rate, foreign exchange rate, interest rate and gross domestic product that are used to access the economic development rate of countries. Creativity Creativity and innovation are sometimes used interchangeably but the two terms are certainly not the same. Creativity assumes even a more different meaning when it is used in economic or business context. In business, creativity is all about creative thinking “as a skill that involves qualities such as the propensity to take risks and to turn a problem on its head to get a new perspective” (Julia, 2008). To this end, Martin (2009) explains that creativity must not be seen as an abstract phenomenon but as a phenomenon of realism that can be felt and experienced in the changes that it brings to the business community. Problem solving Problem solving is a special skill that makes is possible for entrepreneurs and people in the business fraternity to identify problem, face problems and manage the problem. It is said that our victory is not in never falling but in rising; anytime we fall. In the same manner, our abilities as great business people is not in never having problems but standing tall above the problems, anytime they arise. As part of the skills needed in solving problems, it is always expected that business leaders will come up with counteractive measures that will prove workable above the problems. HOW ENTREPRENEURSHIP AND ECONOMIC DEVELOPMENT RELATES Having recognised entrepreneurship as the ability to master a number of economic principles such as the creation of new venture, venture capital, social ventures, business model innovation, open software, internet, corporate entrepreneurship, global business, and biotechnology (Lester Centre for Entrepreneurship, 2011), very little can be said about how entrepreneurship and economic development interrelate. It is indeed not for nothing that in most parts of the world a lot more governments are building their economic development strategies around the making of the private sector, the engine of growth. The private sector undoubtedly has the largest percentage of entrepreneurship base. For this reason, making the private sector the engine of growth means that entrepreneurship in itself has several components that lead to economic development. For example even when one entrepreneur employs just one person in his or her work establishment, there is the creation of primary economic development in the sense that the income that the worker will make will go a long way in transforming the economic fortunes of a lot more people. Indeed, the employee, if he or she has dependents will have the economic fortunes of those dependents becoming enriched. The income that is made will also have part of it going to the payment of taxes to government, thereby improving the government coffers. Without any doubt therefore, entrepreneurship relates to economic development in the sense that entrepreneurs helps in the betterment of the lives of individuals and the nation as a whole. HOW INNOVATION AND ECONOMIC DEVELOPMENT RELATES Innovation relates to economic development because of the role innovation plays in entrepreneurship. As a matter of principle, the wealth that entrepreneurs create for their employees and other people who get their source of income from the entrepreneurs is only an end to the means. The actual means that leads to the end is the use of innovation by the entrepreneurs. It can therefore be said that innovation is the path that entrepreneurship treads to economic development. This relationship that exists between innovation and entrepreneurship therefore creates an automatic relationship between innovation and economic development. Innovation brings about success for entrepreneurs and by extension economic development because innovation is the entrepreneur’s ability to change resources with a new capacity to create wealth. A typical example can be given of how the innovative skills of world acclaimed entrepreneurs like Bill Gates, Steve Jobs and Carl Benz resulted in the creation of worth for them because they were able to maximise their abilities into bringing inventions into being: something that continues to create job and yield them profits. To this effect, it is true to argue that before there was entrepreneurship, there was innovation because the act of continually changing resources into new capacities is what results in the establishment of businesses and therefore the institutionalisation of entrepreneurship. Again, this point explains why most entrepreneurs start off successfully but fail to progress with time. The retrogression sets in basically because of lack of innovation. Once retrogression sets in because of lack of innovation therefore, the economic development that should have gone to the individuals becomes restricted. THE ROLE OF CREATIVITY IN ENTREPRENEURSHIP-INNOVATION MODEL OF ECONOMIC DEVELOPMENT Skinner studied a lot about human behaviour and came up with the assertion that such characteristics of people such as creativity may be inherent in some people. However, Epstein (1991) notes that “generativity theory suggests that simple behavioural processes of the sort Skinner studied operate simultaneously on the probabilities of a large number of different behaviours.” This means that people, who are very aggressive for success can learn, master and utilise the act of creativity. In combining entrepreneurship and innovation to achieving economic development, it is very important that entrepreneurs do so in a creative manner. Indeed, creativity has distinguished successful entrepreneurs from achievers. Mark Zuckerberg remains a living witness of how creativity results in economic development. This is because before he invented Facebook, there were other forms that social networking existed. However, his creativity led to the addition of new features that focused on client needs. Today, his invention has become one of the world’s largest platforms for advertisement, customer social networking programs and other means by which businesses grow and by extension, the economy grows. The idea here therefore is that two entrepreneurs may all be innovative but by fusing innovation with creativity, one of the two entrepreneurs is more likely to achieve increased economic development whereas the other may be an ordinary achiever. THE ROLE OF PROBLEM SOLVING IN ENTREPRENEURSHIP-INNOVATION MODEL OF ECONOMIC DEVELOPMENT In a typical case of two entrepreneurs who may all be innovative and striving for economic development; and who may all be very creative in their style of management, one of the two entrepreneurs may be a superior achiever whereas the other may be an ordinary achiever and the fundamental phenomenon that may separate the two will be the ability of one of them to cautiously manage problems. This is because in the heat of troubles when challenges arise and situations are not working according to plan, a problem solving entrepreneur can be trusted to come up with new ideas that will rise far above the problem. A typical example can be given as an entrepreneur who is faced with the problem of tax invasion. Though this is a problem that has led to the collapse of many companies, a problem solving entrepreneur will know how to communicate with authorities, seek for grace period within which to pay off, raise funds to pay and make amends not to repeat the problem. This re-echoes the point that to be a problem solver is to be a person who can overcome one challenge a solution. As solutions are put in place to ensure that problems do not swallow businesses, the aim and purpose of achieving economic development also do not ever get stack. CONCLUSION The achievement of economic development is a complex and complicated phenomenon. It is more of a puzzle that requires prudent management to ensure its realisation. Individuals, organisations and nations who want to achieve economic development are therefore admonished to put to practice; all the issues discussed in this essay thus entrepreneurship, innovation, creativity and problem solving. There should also be conscious effort to use these in a way that is well integrated to avoid haphazard implementation. REFERENCE LIST Epstein, R. (1991). Skinner, creativity and the problem of spontaneous behaviour American Psychological society, Vol. 2 No 6 362-370 •Kasof, Joseph, Chen, Chuansheng, Himsel, Amy and Greenberger, Ellen(2007)Values and Creativity, Creativity Research Journal, 19 2, 105 — 122. Martin, L., (2009). Critical Realism and Creativity: a challenge to the hegemony of psychological conceptions. Journal of Critical Realism8, 3. •Lumsdaine, E. and Binks, M, (2007).Entrepreneurship, from Creativity to Innovation; Effective Thinking Skills for a Changing World. Trafford Publishing. - Chapter 5 Daneels, E. (2004) Disruptive Technology Reconsidered: A Critique and Research Agenda. Journal of Product Innovation Management Hall, J. K., Martin, M. J. C. 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