Importance Of Entrepreneurship: Types, Features & Benefits
Entrepreneurship is one of the most important aspects of society, as it helps in developing products and services in the economy by turning a new concept. Entrepreneurs have a better understanding of the market forces in play, and they understand how to find an existing need in society and turn it into a profit-earning opportunity. Let’s understand the importance of enterpreneurship in details.
In this article, you will learn about entrepreneurship and its importance in society and the economy. Here, we shall discuss every important feature of entrepreneurship and how they benefit an economy as a whole. Then, we will discuss each of these major characteristics of entrepreneurship for better understanding. Hence, to find out more, read on through to the end of the article.
What Is Entrepreneurship?
According to a definition in Investopedia,
“An entrepreneur is an individual who starts and runs a business with limited resources and planning and is responsible for all the risks and rewards of their business venture. The business idea usually encompasses a new product or service rather than an existing business model.”
One of the most important things of an entrepreneur is the capability to deal with risks. Entrepreneurs have the capability to risk their careers and financial security to build a venture. They even do not shy out from spending time and capital on something uncertain.
Furthermore, entrepreneurs know how to make the best arrangement for necessary capital, resources, raw material, locations, and human resources. Furthermore, successful entrepreneurs also have the capability of making strong networks and focusing on sales and marketing techniques to make their ventures strong.
What Is The Importance Of Entrepreneurship?
If you want to understand the importance of entrepreneurship, you will need to understand what an entrepreneur does in society. The term entrepreneur comes from the French word ‘entreprendre’, which means ‘to undertake.’
An entrepreneur is an individual who undertakes or plans for every risk and responsibility that accompany new businesses that are created to make profits. The following are some of the major factors that make entrepreneurship important:
1. Creating Better Job Opportunities
The major importance of entrepreneurship in the economy lies in job creation for the people. Entrepreneurs that start new businesses mostly have the opportunity to work for themselves while they provide support to other businesses and grow their own businesses accordingly.
By starting new businesses, entrepreneurs earn profits for themselves and employ others in the business as well. This is how entrepreneurship helps in creating new job opportunities at all levels of society.
2. Reduction Of Socio-Economic Problems
As entrepreneurs start new businesses, they help to promote new industries, which in turn, helps to create employment in society. Entrepreneurship involves better utilization of resources and offering products and services at competitive costs.
With the help of all these factors, entrepreneurs help to reduce social problems like poverty. Job creation helps to eradicate crime, violence, lower-level living standards, child labor, etc. Entrepreneurship also helps to provide equal opportunities to all sections of society when it comes to work.
3. Creating New Businesses
According to Indeed.com,
“The entrepreneurs can run the vast majority of these enterprises entirely by themselves. They assemble and coordinate their operational processes that support other business ventures. It is a sector in which a person might start a business idea that could grow into a large corporation.”
Basically, entrepreneurs, in general, are people that own businesses individually. They start small in the market but have the capability to find out opportunities faster and deliver accordingly. In all economies, entrepreneurship involves a diverse range of initiatives through which businesses are created.
4. Helps In Wealth Creation
The primary role of an entrepreneur is to create and accumulate capital by making profits. As entrepreneurs generate more wealth and pay their taxes, they contribute to the national economy of the country. This helps in adding to the Gross Domestic Product of the economy.
In addition to that, entrepreneurs not only invest their own capital but also draws them from the market. Then they use these capital resources to bring new solutions in the form of products and services to create new markets. These factors help a lot in the growth of the economy.
5. Brings A Culture Of Innovation
By bringing in various resources, ideas, and human resources, entrepreneurs bring in a culture of innovation. This positively affects not only the business or an established form but also government agencies. With this process, they either generate new wealth-creating resources or enhance the existing resources’ potential to create more revenue.
With the help of such a process, entrepreneurs create new product lines and improve the quality of products with new innovative techniques, ideas, and technologies. This, in turn, helps in creating life better for all.
6. Helps To Harness Resources Better
The major factors of production are land, labor, capital, and entrepreneurship. Without these four factors of production, no entrepreneurial activity can be put into place. The fourth one is important since it helps in putting the first three into effect.
The major aspect of entrepreneurship is to make resources work better and produce better results which would otherwise not be possible. Entrepreneurs know how to use the right amount of resources at the right place at the right time to produce effective results, which is good for the business. This helps the economy too.
7. Eliminates Poverty With Community Development
According to an article in Borgen Magazine,
“Instead of giving clothes to children in impoverished communities, employment created through entrepreneurship allows parents to buy clothes for their children themselves. Instead of short-term healthcare initiatives that provide healthcare for a few months at a time, employment allows members of the community to provide healthcare all year round.”
Entrepreneurship also promotes industries and creates employment in society. Thus, better income and savings in the economy help in better capital formation and eases living standards.
Bottom Line
Hope this article was helpful for you to get an idea of the importance of entrepreneurship. You can see that there are various roles played by entrepreneurs which help in eliminating many social and economic problems.
The best thing an entrepreneur can do is find market opportunities and provide solutions. This helps in creating more economic capital and jobs. How do you think entrepreneurs help the economy? Share your views in the comments section below.
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Apart from that, the individual is able to find out better growth opportunities and fame as well. On the opposite end, the entrepreneurs that fail after taking risks suffer from losses and become less prevalent with time. Read More: What Are The Different Types Of Entrepreneurship? – Take A Look Who Coined The Term ‘Entrepreneur’? The word entrepreneur finds its origins in the late 18th century. Even after so many years, economists were unable to provide a consistent definition of the word “entrepreneur” or “entrepreneurship”. Although the concept of entrepreneurship remained in society for centuries, the 18th-century or 19th-century definition of entrepreneurship did not talk about entrepreneurs taking risks or bringing something new to the table. Only in the 20th century did economists take entrepreneurship as a serious matter for economic models and try to incorporate the same into theories. A major economist named Joseph Schumpeter was of the opinion that entrepreneurs are the ones behind the creation of new things to earn profit. Before that, economists thought companies were responsible for it. Schumpeter proved this old theory wrong. In addition to that, another economist, Frank Knight, held the opinion that entrepreneurs are the ones that bear the uncertainty of the market. He also held entrepreneurs responsible for risk premiums in the financial market. Israel Kirzner held that entrepreneurship is the process that leads to the discovery of the new. A Short History Of The Term ‘Entrepreneur’ Many people think that the famous Scottish economist Adam Smith coined the term “entrepreneur”. However, it is not true. However, Adam Smith was the first person to describe the capitalist production theory in detail and business owners’ profit motive. The entrepreneur is the type of person Adam Smith overlooks in his famous “Wealth of Nations”. However, a big admirer of Adam Smith’s book, Jean-Baptiste Say, coins the term “entrepredre” a few years later in France. The meaning of the word is simply “an undertaker”, “one who undertakes”, or “an adventurer”. Say agreed with all the points of Smith’s book, “Wealth of Nations,” and he stated that Smith’s serious flaw was the removal of the enterprising businessman from the whole subject. According to Investopedia, “Jean-Baptiste Say pointed out in his own writings that it was entrepreneurs who sought out inefficient uses of resources and capital and moved them into more productive, higher yield areas. Simply put, entrepreneurs seek opportunities for profit and, by doing so, create new markets and fresh opportunities.” Entrepreneurs are the people that constantly disrupt the balance of competition, as they prevent monopolies in the market from creating a large number and diverse range of products. Monopolies create a situation in the market that allows consumers to keep consuming and producers to keep producing. Because of taking such risks, some of the richest entrepreneurs that you see today make fortunes that are way more than the normal and small entrepreneurs in the economy. Jean-Baptiste Say put more focus on the importance of entrepreneurs. This is because he was one himself. He was a cotton manufacturer, and he knew the importance of an entrepreneur’s ability to recognize and manage market opportunities in an effective manner. Hence, Jean-Baptiste Say came up with “A Treatise on Political Economy, or the Production, Distribution, and Consumption of Wealth.” With this book, he captured the thought and imagination of a lot of economists of the time. American leaders of the time, like Thomas Jefferson, were very much inspired by Say’s outlook. Hence, Say’s theories and philosophy found a lot of mileage in the United States of America. The US combined Adam Smith’s free-market principles and Say’s entrepreneurial principles, created a major industrial revolution, and quickly became the strongest world economy within a few years. Read More: How To Become An Entrepreneur? – Steps To Follow Final Thoughts In capitalist economies like the United States, entrepreneurs play a major part in ensuring the economic growth of the country. They take on a lot of risks to bring new ideas into play and more innovation as they find new ventures in the market. The economist and philosopher Jean-Baptiste Say coined the term “Entreprendre”. This term is the root word behind the word entrepreneur. The word means a person who undertakes a new venture. What are your own opinions of the history of the word ‘Entrepreneur’? Share your views with us in the comments section below. Read More: Lead Management 101: A Comprehensive Guide to Success Is Startup Business Insurance Necessary For New Businesses? What Is Commercial Insurance? 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