Entrepreneurship and UKs Economic Recovery and Growth - Literature review Example

Entrepreneurship and UK’s Economic Recovery and Growth ENTREPRENEURSHIP AND UK’S ECONOMIC RECOVERY AND GROWTH Entrepreneurship is the incorporation of new combinations and ideas today defined as activities, which act to convert various business ideas into economic opportunities. The entrepreneur is considered a superhero in most cases for their ability at change stimulation in a country. The UK government has in recent times moved toward an economy that is based on entrepreneurship for it to spearhead a much-needed economic recovery. The private sector has been turned with the express aim of replacing the employment opportunities that have been surrendered in the public service due to job cuts and for the emphasis on starting up of businesses in order to create jobs rather than lose them. Entrepreneurship is indeed the answer to the United Kingdom’s economic recovery and growth. For many a decade, British sociologists have been puzzled by entrepreneurship values atavistic persistence and about the aspirations of the labour force. This is despite the decrease in return on investment of entrepreneurial role and the dwindling numbers of new entrepreneurs in the UK. Given the laissez-faire traditions of the United Kingdom as far as business is concerned, entrepreneurial ambition is easier to understand as residual of the culture of the by-gone economic era. Max Webber, who founded the entrepreneurship research, has laid claim to the fact that Puritan theology once encouraged all its believers to adopt the role of the entrepreneur and define anew the content of the role. As a result, European form of capitalism, including the United Kingdom’s, was given a stimulus which gave it the chance to move its focus the restraints of guild traditionalism, which had earlier frustrated the development of capitalism in other regions of the world. Webber was able to identify a significantly causal form of entrepreneurship since he linked a determinant that was not economic, theology, to entrepreneurial supply. Webber was also of the belief that huge bureaucratic organizations were the future model of business (Søe, 2009 p88). This particular view can be construed as anti-entrepreneurial since most of these mammoth organizations are not in need of many entrepreneurs. His supposition that the twentieth century’s victorious capitalism did not need the support of any kind of religious asceticism was also significant at the time. His work tried to imply that capitalism, which could be considered mature, was reliant, upon, signals from the market that could be relied upon to provide entrepreneurs needed from a materialistic idealized population. This would result in the provision of entrepreneurs by the market, which was in place to replace the role of the wider society in providing these entrepreneurs. Webber’s vision took the presumption that capitalism had matured enough and had moulded a crucial labour force where there was cultural enshrinement and legitimization of entrepreneurship (Søe, 2009 p65). In the wake of this shift in culture in the United Kingdom, entrepreneurship has become an elastic, fungible, and inexhaustible commodity of labour. He concluded that entrepreneurship had lost the connection it historically had to supply sources that were of a non-economic nature, and, therefore, had lost its significance causally. Schumpeter expressed the theory that entrepreneurship can be distinguished from economic innovation by treating entrepreneurship as one of the ways via which economic innovation can occur (Søe, 2009 p89). He supposed that professionally managed, large, and corporately organized firms had the impetus to replace owner-operated small firms as the industrial combination that was dominant in societies with advanced markets. However, management of giant corporations would take the duties of entrepreneurship. Professional managers thus would take over the tasks of entrepreneurs in plan execution, risk evaluation, and innovation planning. Karl Marx who was uninterested in entrepreneurship, having more interest in what can be referred to as the bourgeoisie put forward an argument against the role of entrepreneurship in economic development (Marriot, 2008 p43). His evaluation, which is steeped in pessimism, had a political convergence that was unusual with the conclusions reached by the conservative economists in Webber and Schumpeter. Marx was analytical of the tendency historically of capitalism to accumulate, looking at the progressive small capital reduction on one hand and the absolute and proportional increase in big capital. Marx expected the reduction progressively to be accomplished by immanent laws inherent of production in capitalism via capital centralization. Marx, by overlooking the influence that entrepreneurship had on politics, expressed the fact that, large firms possessed preponderant strength economically, which arose from awakening market power, capital access that enabled big firms to absorb much smaller competitors after vanquishing them, and economies of scale. After the disappearance of small firms, he supposed that the entrepreneur would likewise go under since small firms acted as entrepreneurial vehicles. His predictions came to be remarkably prophetic as many small businesses went into a state of decline, and as he had forecast, big business gained a lot from this. As these expectations came to materialize significantly, including in the United Kingdom, social scientists and economists began to lose all interest in research to do with entrepreneurship, deeming this subject as of interest only to research in the third world development strategies and for historical sociology (Godley, 2009 p3). As late as the late 60s and early 70s, there existed firm grounds for concluding that the apparent decline of small business was a continuing and universal process. This came under broad and stinging criticism in most western countries including the UK in the 80s after a couple of decades that consisted of rhetoric claiming that the death of small business was to be accepted without question. New arguments arose claiming that small business, as well as entrepreneurship, remained too crucial and vital to be ignored and that this was most likely to remain as a vital component of economic growth in the future. The word entrepreneur had actually disappeared in the 50s but was revived by Redlich and Chandler (1964) and the British psychologists Unwalla, Moore, and Collins (1964). The search for this elusive entrepreneur and the revival of interest in him was welcomed in some quarters. Entrepreneurship and its importance in economic recovery and growth cannot be defined under one dimension, rather by looking at it as a resident of conceptual spaces bound by economic innovation, market sector profit seeking, and organization creation. In the UK, today, the most important entrepreneurs like Sir Richard Branson are able to make important, original, and frequent innovations. These can be considered as the elite businesspersons. At the other end, of the pole one can identify non-elite entrepreneurs who create innovations that are derivative, inconsequential, and infrequent. However, they are still innovators in some minimalist sense, with a large majority of UK entrepreneurs falling into this undistinguished category. This kind of entrepreneur surprisingly form a large part of the UK workforce, and it is thus important to give them all the support they need in order to drive the recovery of the country’s economy (Gavron, 2008 p35). Approximately a quarter of the labour force in the UK is either self-employed or has been in the past. The majority of current employees formerly practiced entrepreneurship before opting for formal employment. This has been cited as a contributing factor to the teetering economy as ideas for economic growth became centralized in large companies. This can be remedied by improving entrepreneurial capabilities of the population. A true entrepreneur always is in the search for any changes in market dynamics, is ready to respond to it, and even more ready to exploit these changes as opportunities (Fayolle, 2010 p65). The current boom in restaurant ownership is such an example in the UK. The increase in eating out popularity can be considered a bona fide change, which would act as justification for entrepreneurs to respond. Thus, the owners of these restaurants can be considered entrepreneurs. This shows that entrepreneurship in the UK is still healthy and should be given priority as a vehicle for economic recovery and growth. It is crucial that larger firms strive towards increasing entrepreneurial spirit among their workforce in order to drive their profits upward and drive the recovery and growth of the UK economy (Evans, 2008 p78). Entrepreneurs affect location, form, and rate of economic growth. The quality of available entrepreneurs, as well as their abundance, is vital cogs in economic development and growth. It is important to divorce any assumption that the activity of entrepreneurship in the UK is in a way controlled by circumstances of the economy. Instead, Entrepreneurial sociology posits markets, which are dependent, on these entrepreneurs for non-economic and exogenous societal conditions. Entrepreneurs have an important role to play in the recovery and growth of the UK economy, acting as vital contributors in the growth of new jobs and technological innovation that will drive the UK’s competitiveness in the global market (Organisation for Economic Co-operation and Development, 2010 p243). Entrepreneurs are also of great importance in the building of communities in such various ways as support for local charities, investment in projects aimed at the community, creation and participation in networks of entrepreneurship, conduction of local business, and job provision. The UK government has realized the social and economic impact of business and have begun to re-introduce aggressive strategies aimed at nurturing and cultivation of entrepreneurs. Most enterprises have innovation as their central crux, especially if they cannot afford to compete against large multinational companies in capital and size. Since these multinational companies are labour intensive and thus have limited ability to create more jobs, it is important for the government to provide support for these innovations, which could create jobs and thus drive economic recovery and growth. Some of this support could come in through the development of human capital in schools, which will aid the entrepreneur, materialize his innovation. The drive by the government towards increased access to secondary and tertiary education should act as motivation for the society to see the role of entrepreneurship in driving a wounded economy (Company, 2011 p45). The presence of a trained workforce should be exploited to motivate innovation since most entrepreneurs can now hire qualified people who would have otherwise been hired into public service. The competence of the personnel is a crucial factor in the success of entrepreneurial innovations, which will create a strong workforce capable of driving market share in global markets and in turn jumpstart the economy. A GEM report on activities of entrepreneurship in ten developed countries made the revelation that entrepreneurship is a factor of individual toil and economic necessity (Commons., Great Britain. Parliament, 2011 p198). Approximately two thirds of all individuals interviewed reported that, at some point, they had pursued an attractive opportunity in business. The remaining group reported that their involvement was due to lack of any other choice that was better, referred to as necessity entrepreneurship. Opportunity entrepreneurship was revealed, as dominant in the UK meaning that the possibility of entrepreneurial explosion in the UK is very real, especially coupled with the job cuts in the public sector. This should act as proof that entrepreneurship is the most positive option of economic recovery and growth. Entrepreneurship in the UK has remained vital to the people despite the economy’s precarious position. UK’s entrepreneurial activity, in fact, has remained steady through the last decade and was, in fact, higher, by fifty percent, as compared to 1998. It is of importance to note that the highest rate of entrepreneurial activity coincided with the UK’s high economic growth of the early noughties, which points at entrepreneurship’s great ability to drive the current required economic recovery and growth (Great Britain Parliament Committee, 2010 p345). It is also becoming a common occurrence to choose to pursue entrepreneurship in the UK as a long-term path. Supported by ever evolving financial venues and institutions network such as venture capital, IPO’s, incubators, and angel investors, entrepreneurship is beginning to look like a growth industry again, and the government has recognized this and made entrepreneurial support a cornerstone of its economic policy. This shows the belief that it has in entrepreneurship as a “saviour” of the economy. However, while it could be unerringly argued that entrepreneurship is the answer to the UK’s economic conundrum, the culture itself in the UK has to change before the full effect can be felt. Entrepreneurial activity rates have seemed to stagnate between 2002 and 2010 and compared to some countries like the United States is still relatively low. This can be put down to unwillingness of banks to fund start up businesses (Blanchflower & Chris, 2007 p78). The UK would do well to consider the culture of entrepreneurship in various countries like Saudi Arabia, which encourages entrepreneurship in the country by offering help to emerging entrepreneurs and giving them encouragement to make attempts at risks. The Bab Rizq Jameel program also offers loans free of interest to upcoming entrepreneurs, which are due in manageable five years. Entrepreneurship is also a risky business since most of the new ideas proposed are consistent of high risk factors even though they are highly rewarding if successful. Were the government to offer these entrepreneurs with grants and banks to lend money to upstart businesses with a high failure rate, money could be wasted which could lead to even graver consequences to the economy. In conclusion, entrepreneurship can be the answer to recovery and growth of the UK economy although it must be stressed that the government needs to be extra proactive in order to make the project a success. This could be achieved by encouragement of back lending and lowering of taxes. It is evident that the government needs to do more to improve conditions for entrepreneurs to thrive. References Blanchflower G, and Chris S. Entrepreneurship in the UK. Hanover, MA: NOW, 2007. Evans K. Macroeconomics for managers. Oxford : Blackwell,, 2008. Fayolle A. Handbook of research in entrepreneurship education. Cheltenham : Edward Elgar, 2010. Gale Research Company. Small business sourcebook. Detroit, Mich: Gale Research Co, 2011. Gavron R. The entrepreneurial society. London : Inst. for Public Policy Research, 2008. Great Britain Parliament Committee. House of Commons. Home Affairs, and Great Britain. Parliament House of Commons. Immigration cap : first report of session 2010-11 : report, together with formal minutes, oral and written evidence. London : : Stationery Office, 2010. Great Britain Parliament Commons. House of. Government reform of higher education : twelfth report of session 2010-12. 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