The term entrepreneurship is wide and covers many activities that are performed by an entrepreneur. Entrepreneurship starts from establishing a new business and continues throughout the successful management of the business.
Entrepreneurship can be explained as the process and state of being through and in which people utilize the constructive opportunities available in the market by producing a new idea in the form of a business. Entrepreneurs are people who establish a new business which helps in generating new jobs in the economy. Entrepreneurship as a whole is the ability to deal with the situation of uncertainty along with differentiating between risks (can be determined) and uncertainty (cannot be predicted). Under entrepreneurship, an entrepreneur is responsible for the management of production function and the workforce of the business by paying compensation to workers. An entrepreneur has to bear all the risks involved in the business and deal with all the uncertainties of production. In the economic theory, the model of entrepreneurship has been represented as an occupational choice between self-employment and wage-employment. In other words entrepreneur is a person who chooses to be self employed rather than getting employed by any other company or business.
People become an entrepreneur when the profits and other non-financial gains in self-employment are more in comparison to the compensation and additional benefits that people receive while being under wage employment. This is the reason why entrepreneurship is often considered as self-employment. The new employment opportunities provided by entrepreneur results in escalating competition in the market. While managing the business, entrepreneur uses advanced technologies to maintain efficiency and productivity and eventually contribute towards the development of the economy, followed by economic growth. Therefore, entrepreneurship plays an important role in the economic growth around the world.
The role of an entrepreneur in the economy starts with being an innovator. Starting a new enterprise is an innovation and the individual responsible to make that innovation successful by carrying out all the activities related to that innovation is the entrepreneur. Along with the innovation, the entrepreneur also has to focus on identifying the profitable opportunities that can be utilized to make the innovation grow and earn profits. To identify constructive openings in the market for the business, an entrepreneur has to take risks and should be careful is such situations. They should be competent to deal with a risk being faced during the business operation and distinguish it from an uncertain situation.
There are three distinct ways in which entrepreneurships contributes towards the economic development. The first way is to establish the knowledge overflows that are an essential mechanism for the development of the economy. The knowledge diffusion is significant particularly when policy inference generally driven by the growth of the economy that should increase the role of knowledge, knowledge factors like R&D that should be openly supported. The organizations should develop the capability to adapt new technology and ideas from different organizations. The second way is defined as in which entrepreneurship capital should help in the economic development by increasing the competition and enterprises. The knowledge is more helpful to the externalities of the knowledge. The increasing number of the organizations should also increase the competition of new ideas and more competition within different organizations should facilitate the entry of the new and innovative firms that have specialization in the new area. Third way of of entrepreneurial capital generates economic development by offering diversity among firms.
The entrepreneurial capital should develop more organizations. It should develop variety of organizations in particular locations. The diversity of the organizations should directly connect to the economic performance of the organizations. It analyses that most significant source of knowledge overflow are external to the industry in which firms operate effectively. It is the exchange of corresponding knowledge across diverse organizations that would generate the profit for the organization and should results in economic development.
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