Notes- cont....Entrepreneurship and Economic Development

Role of Entrepreneurship in Economic Development

The role of entrepreneurship in economic development involves more than just increasing per capita output and income; it involves initiating and constituting change in the structure of business and society. This change is accompanied by growth and increased output, which allows more wealth to be divided by the various participants. What in an area facilitates the needed change and development? One theory of economic growth depicts innovation as the key, not only in developing new products (or services) for the market but also in stimulating investment interest in the new ventures being created. This new investment works on both the demand and the supply sides of the growth equation; the new capital created expands the capacity for growth (supply side), and the resultant new spending utilizes the new capacity and output (demand side).

In spite of the importance of investment and innovation in the economic development of an area, there is still a lack of understanding of the product-evolution process. This is the process through which innovation is developed and commercialized through entrepreneurial activity, which in turn stimulates economic growth.

Entrepreneurship and economic development

Entrepreneurship and economic development are closely interknitted. The development of entrepreneurial skills and investment in the business sector increases productivity and job opportunities resulting in overall growth and economic development. Entrepreneurship development, therefore, is a precondition to economic growth, across generations and across borders. In India there is a dearth of skilled human resource in industries, and demands high level of entrepreneurship development programs for the growth of economy. Hence, our government has felt it as the need of the hour and initiated various entrepreneurial development programs to enhance economic development.

Role of an entrepreneur in the economy: The national economy depends upon the work output of the entrepreneur. The more investments an entrepreneur makes the higher his or her income contribution to the economy. The economic development of the country depends upon work output of the entrepreneur. Quality work by him or her means better economic conditions within the country.

The entrepreneur is an integral part of the economy. His or her work is very essential for the economy to run.

An Entrepreneur Stimulates the Economy: Entrepreneur’s contribution to the economy is of immense value. He or she is indispensable to the economic growth of the country. His or her products are valuable to the overall development of the society. People need their products. They simply cannot do without them.

Ours is a consumer society now. Even in the developing countries consumerism is gaining ground. Developed countries anyway thrive on consumerism. Naturally, the role of an entrepreneur is of much significance in generating products valuable for the com forts and luxurious living of the people of a particular country.

An economy is much dependent upon the performance level of its entrepreneur. He or she plays a vital role in the growth of the national income as well as raising the per capita income of the people.

How does an entrepreneur stimulate the economy?

1. Investment – Then entrepreneur has to invest in what is required for the economy. Economic progress will much depend upon his or her contributions. Any entrepreneur will invest in products and services which the people need. His or investment will ensure a better life for the people. More goods and services will be at their disposal.
2. Employment – An entrepreneur by setting up various businesses and establishments is generating employment in the economy. People need jobs. This is a major contribution that an employer can make to provide income to an employee who can meet his or her needs.
3. Diversity in products and services – An entrepreneur can provide various types of goods and services to the consumer. The latter has much to choose from. A consumer after all would like to have a good bargain, and if his or her choices are more than he or she can get these products or services at reasonable rates. Also personal desires are met if there are products and services to choose from. A person may like a particular type of tie and he can perhaps locate it in his local market. His desire to purchase a tie of his choice is thus met.
4. International trade – An entrepreneur promotes international trade by selling his or her products abroad. Any entrepreneur would like a wider market. If there are more consumers to purchase his or her products, the higher his profits.
5. Contributes to gross national product – An entrepreneur makes much contribution to the national exchequer and to the national economy as whole. The GNP of the country is calculated based upon the total number of products and services available in a respective country. The more products and services available the higher the GNP. It indicates the economic prosperity of the country.

The entrepreneur is essential for the economic development of a country. The progress of a country will depend upon his skill and talent as well as hard work to deliver necessary goods and services required by the citizens of his or her country.

Entrepreneurs help Alleviate Poverty

Businessman or women have also social commitments apart from running their business establishments. They like to share their profits with the less fortunate. It is not being condescending. Some businessmen or women do have concern for the poor. Of course, at times such acts are done as part of their tax relief measures.

In many less developed countries, severe poverty causes much misery to the people living there. Disparities exist between what they have and what they don’t have. Nevertheless, the rich do share their wealth through various measures meant to better the society, if not all, some do.

Poverty is a major issue in underdeveloped and developing countries such as India, Bangladesh, the African countries etc. and business people help improve the conditions of the poor in the following ways-

How Entrepreneurs help Alleviate Poverty? – Entrepreneurship and Poverty

• Charity work – Business people share their prosperity through charity. They run establishments such as orphanages, provide widows with pension, and also provide food and clothes for the poor. Charitable hospitals are run for improving the health of the poor. All expenses are free of cost.
• Schools are set up – Many business houses set up school for the children of the poor. Such children are provided with an opportunity to better themselves. Scholarships are given for higher education.
• Slum development – Houses are built for the poor and the sanitary conditions of the slums are improved upon. Programs are sponsored whereby health and social workers go to various slums to educate the poor about hygiene. Even the slums are cleaned up.
• Employment opportunities – Often employers of a business try to provide an opportunity to one member of the poor family so that he or she is able to support the family.
• Setting up of Foundation – Business establishments set up foundations to divert their profits towards community development. It could be perhaps for tax relief, but the money diverted is used to eradicate poverty. These foundations focus on social work.

Entrepreneurs are also concerned about society. Either for personal or religious reasons they like to share their prosperity with the less fortunate. Various measures are adopted by them to reduce poverty levels in their respective countries..

Contributions of Entrepreneurship in Society

Entrepreneurs have much to give to society. Their contribution to the welfare of society is of high order. A business person apart from making money for him or herself also helps the society in many ways financially and socially.

Financially, of course the respective country benefits by the business carried out by entrepreneurs. At the same time many of the welfare activities of the businessman improve the living conditions of the people of that particular society.

How does an entrepreneur help the society?

• Donations – A business person donates a lot of money for charity purposes. From his or her earnings, he or she would like to help the downtrodden and try to improve their living conditions.
• Charitable institutions – A businessman or woman sets up various educational, medical and vocational training institutions to provide the less privileged with benefits which they normally cannot afford. The fees may be less or waived in the case of a meritorious student. Hospitals are also run by these charitable institutions.
• Sponsorship – Many business people sponsor a candidate for higher education or fund a child in an orphanage. In fact, many orphanages are backed by these business people. Scholarships are provided to a poor student for him or her to avail of better educational opportunities.
• Welfare programs – A businessman or woman financially contributes to various welfare programs, like helping the blind, orphans, widow etc. In times of crisis, they help by donating items such as blankets, clothes, medicines etc.
• Advisors to respective government – Many successful business people participate in government activities in order to promote the well-being of the citizens. The government often seeks their advice on certain social and economic activities.

Business is essential for the progress of a nation. A successful businessman or woman is an asset to the society. He or she can contribute to the wellbeing of a society in several ways that improve the living conditions of the people.