The Importance of Entrepreneurship

Entrepreneurship is the process by which an individual or team identifies a business opportunity and acquires and deploys the necessary resources required for its exploitation. The entrepreneur then uses the opportunities identified to develop new products and services, launch a new start-up and create wealth.

• Importance of Entrepreneurship to Individual
• Importance of Entrepreneurship in Society
• Importance of Entrepreneurship in Economic Development
• Importance of Entrepreneurship in Developing Countries
• Importance of Entrepreneurship Education
• Contribution of Entrepreneurship

While entrepreneurship is often associated with new, small or medium-sized business ventures, entrepreneurship cuts across a broad range of establishments including huge corporations, government agencies and charitable organizations. Though highly rewarding, the entrepreneurship journey is filled with fundamental uncertainties due to the high risks involved in launching a start-up, and according to some statistics, as many as 50 percent of all new businesses fail within the first five years.

A significant proportion of new businesses fail due to unforeseen developments, a bad business model, unsustainable markets, poor funding, an economic crisis or a combination of all of these. Nevertheless, an entrepreneur is gifted at perceiving new business opportunities and a willingness to take risks that make them choose to exploit the opportunity and take on new challenges. So rather than settle for life as an employee, an entrepreneur founds and runs a business, assuming all the risks and rewards of the venture.

Importance of Entrepreneurship to Individual

All over the world, Small and Medium Scale businesses (SMEs) that entrepreneurs operate are the engines of growth that propels and powers the free market economy. So by default, entrepreneurs need to be self-driven and proactive to launch and run a successful start-up. Over time, the challenges that come with owning and managing a business build capacity and confidence in entrepreneurs and many of them typically exhibit a higher level of independence and resilience.

Entrepreneurs who are owners of highly successful businesses enjoy fantastic financial rewards and many of them go on to be very wealthy and influential persons in the society especially when their startup becomes a globally recognizable brand with several hundreds of millions in revenues annually.

In addition, entrepreneurs are their own bosses and this means that they are answerable to no one else but themselves, many of them thus enjoy a flexible work schedule that allows them to work at their own pace and allows them to be at their creative best, while also pursuing several different interests.

Importance of Entrepreneurship in Society

Entrepreneurs are the drivers of social change. They are thinkers and innovators who shake things up by developing new ideas that improve or change the old way of doing things. For instance, since the turn of the last century, Silicon Valley’s tech entrepreneurs have completely changed the concept of work and play with the development of smartphones and related software applications which are now very popular worldwide.

Entrepreneurship stimulates production and consumption. Entrepreneurs understand that they can only be relevant to the economy when they offer products or services that fulfil a need or demand, so they put a lot of work into deciding on how their business can add value to society.

Entrepreneurship constitutes a significant part of any country’s national economic output. The businesses that entrepreneurs own pay taxes and other levies with which the government provides basic social services like roads, healthcare, education and national defence.

Entrepreneurship serves as an important vehicle for job creation while also encouraging employees to develop new skills needed in the workplace. Employees in start-ups are known to benefit from a culture that encourages them to develop their sellable skills and other personal qualities such as creative thinking and communication.

In addition, the businesses created by the entrepreneurs stimulate the local economy in the area where the industry is sited. In many places, entrepreneurs have also become powerful agents of social change, with many of them using their skills to tackle a number of societal issues like crime, food security and global warming.

Importance of Entrepreneurship in Economic Development

Entrepreneurs play an important and pivotal role in a capitalist economy. They stimulate production, commerce and innovation. It is often said that the economic prosperity of a nation is often a measure of how well entrepreneurs are thriving within the country. The level of entrepreneurial activity is often a critical determinant of the level of success, growth and opportunity in any economy.

Entrepreneurs assume the role of a risk taker and they typically venture out of their comfort zone in search opportunities and profit by satisfying an identified need.
After finding a gap between current or future demand and available supply, the entrepreneur then assembles the factors of production required to produce, offer and sell the desired products and services.
Entrepreneurs are proactive and confident about the future.

They believe that they can predict the future by creating it and they contribute to national economic development in the following ways:

• Create new businesses that can have an extended value chain. For example, following the launch of a chain of McDonald-styled fast food eateries in some urban centres across Ghana, other associated businesses including poultry and vegetable farmers witnessed a boom in demand

• Most leading economists now agree that the overall health of an economy is an effect caused by the availability or capacity of entrepreneurs in the local market. Businesses explore the potentials of production using a country’s available resources and they actively create new products and markets. In addition, the taxes that businesses pay from the profits they earn, contribute in no small way to a nation’s total revenue, helping to fund new public infrastructural projects.

• Entrepreneurs are also known as disruptors. This is because their relentless drive for innovation continues to shape and reshape the world that we live in. For example, at the turn of the 21st century, the work of IT entrepreneurs completely changed the way we transact business, how we communicate and how we find information.

• Most entrepreneurs are passionate about sharing their life experiences, developing human capital and making the world a better place. Many of them either sponsor or are committed to several charities that are committed to education, agricultural or public health initiatives.

Importance of Entrepreneurship in Developing Countries

The economy of a developing country is significantly different from a developed economy. The economy in many developing countries is based on agriculture with little or minimal levels of industrialization.

Most developing and underdeveloped countries are however working towards improving their technological capacity. To join the league of industrialized nations, many underdeveloped countries require extensive and sustained capital investment over a period of years.

The activities of entrepreneurs can bring in some of these much-needed investments, effectively supplying a developing country with immense benefits such as jobs, skill transfer and infrastructural improvements.
The businesses that entrepreneurs establish also stimulate regional development when they are located in particularly deprived and underdeveloped areas that are lacking in social infrastructure.

• Employment generation: Unemployment remains a serious social and economic problem in many developing and underdeveloped countries. The business activities of an entrepreneur provide a source of direct and indirect employment for the entrepreneur and as many other people involved in the business.

• Capital formation: Entrepreneurs put together all the necessary factors of production to create products and services that satisfy the demands of the purchasing public. In many cases, they create wealth by assembling previously idle or unused resources.

• Spread of economic development: Many entrepreneurial ideas are cottage industries and they require a relatively small amount of money to launch their start-up. They also do not always need hi-tech equipment and as a result, they can be located even in the rural and semi-urban areas thus limiting the flow of rural-urban migration and congestion in urban areas.

• Improved living standard: Steady economic growth inevitably leads to improved standards of living. As industries scale up, higher quality goods can be produced at even lower costs. This reduction in prices means more purchasing power for consumers and an improvement in the general standard of living.

• Stimulates development: Entrepreneurs are proven change agents. They have written and continue to rewrite history with their radical innovations and creative business ventures. Their activities are pivotal to the industrialization process as they begin the crucial process which connects production to supply and demand.

Importance of Entrepreneurship Education

While entrepreneurship may seem like a natural talent that only a lucky few are born with, the basic skills of entrepreneurship can be taught and mastered by everyone who so desires.

Today, several variations of entrepreneurship training are now offered at all levels of education, from primary or secondary schools through graduate university programs.

The entrepreneurship training is designed to provide students with the useful skills and knowledge needed to think and thrive as an entrepreneur in their chosen fields of interest.

The training which takes the form of a practical hands-on approach helps to equip students with the right skills needed to thrive as job creators in a constantly evolving labour market and secure their economic future.

The following also elaborates more on the importance of entrepreneurship education.

• Entrepreneurship is a key driver of the economy: Wealth and a high majority of jobs are created by small businesses started by entrepreneurially minded individuals, many of whom go on to create big businesses. There is no doubt about the role of entrepreneurship as a key driver of economic activity. Many start-ups which began as small businesses have gone on to become large corporations and it is now widely acknowledged that there is always room for immense growth in properly managed businesses. As a result, educationists, business leaders and economists now recommend that basic entrepreneurial skills should be taught on a local, national, and global scale.

• Entrepreneurship education is a lifelong learning process: Entrepreneurship is now considered so important, the skills necessary to succeed as an entrepreneur are now been taught to elementary school kids. This education continues as they progress through secondary and tertiary schools. Standards, Performance Indicators and Frameworks have been made available for teachers to use in formulating learning objectives, schedules and assessments for their students. This curriculum ensures that students will be exposed to progressively more challenging learning programmes which in turn help them to develop into entrepreneurs who can identify opportunities and turn them into successful businesses

Contribution of Entrepreneurship

Every free market economy needs entrepreneurship to grow and thrive. The contributions of entrepreneurs cannot be overemphasized; they drive innovation, open new markets and create wealth. They also pay taxes, provide jobs and stimulate growth.

Entrepreneurs stimulate the economy in the following ways:

• Investment: Before production begins, an entrepreneur makes the needed human and capital investment necessary for developing and manufacturing the products and services which the people need. That investment goes a long way towards improving the living conditions of the people and providing more goods and services.

• Employment: An entrepreneur is by default a job creator. Entrepreneurs provide jobs for themselves and often go on to employ several more people as the business expands and scales up. With unemployment continuing as a major socio-economic problem in many countries, the contributions of entrepreneurs are vital to the overall economic health of a country.

• Diversity in products and services: The work of several different entrepreneurs can provide the much-needed variety in the number of goods and services available for purchase. Entrepreneurship encourages a healthy competition among producers. This kind of competition, in the long run, is beneficial to everyone; because to remain in business, entrepreneurs are forced to find more cost-efficient to produce, prices inevitably drop for the consumers, in addition, there is also a wide range of products and services to choose from.

• International trade: Entrepreneurs can significantly improve a country’s balance of trade when their products or services successfully penetrate foreign or overseas markets. Those businesses go on to earn foreign exchange and improve the foreign currency reserves of their home country.

• Contribution to Gross National Product: Entrepreneurship always leads to increased production in an economy and an increase in the Gross National Product (GNP) of a country. The GNP is an index that measures the country’s production output. It is also used to measure the level of economic prosperity and development in the country. The more products and services available, the higher the GNP.

The importance of entrepreneurs to the economy of any nation cannot be oversold; their activities make all the difference to the health and performance of the economy. They create opportunities, jobs, wealth and they are fundamental to the prosperity of any nation. They expand capacity, encourage personal development and drive innovation. They are perhaps the most important people in a market economy and they should be encouraged and supported by governments to grow and flourish.

Photo by Andrew Neel on Unsplash