Importance Of Entrepreneurship: Types, Features & Benefits

importance of entrepreneurship

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?

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?

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

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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Soumava Goswami

A passionate writer and an avid reader, Soumava is academically inclined and loves writing on topics requiring deep research. Having 3+ years of experience, Soumava also loves writing blogs in other domains, including digital marketing, business, technology, travel, and sports.

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which of the following is not a creative thinking exercise entrepreneurs use to generate ideas

Which Of The Following Is Not A Creative Thinking Exercise Entrepreneurs Use To Generate Ideas?

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If we look at options A, C, and D, clearly all of those options easily come under practices followed for generating ideas. However, judging an idea's feasibility and seeing how realistic it is does not fall under developing ideas. Please take a closer look at these different alternatives below to find out the credibility of this answer. Challenge The Usual Entrepreneurs usually identify opportunities for improvising, innovating, and differentiating their businesses. They do it by challenging the usual and coming up with a different idea. This tendency to question the usual gives them the capacity to break the existing norm, routines, and assumptions and come up with a new direction. This process involves the entrepreneurs questioning the pre-existing practices and norms. They examine these practices critically and identify different areas where they can solve a complexity. They introduce new ideas around those areas, breaking the norms and practices in the process. They are usually asking questions like – “why do we do it this way?” and “what could we have done better?” This is undoubtedly one of the ways for entrepreneurs to come up with a new idea for their business. Read More: What Is Social Entrepreneurship? – Steps To Become A Successful Social Entrepreneur Draw Idea Maps Another process called creating mind maps allows entrepreneurs to organize their ideas. Creating an idea map is a process where the entrepreneur creates s diagram connecting different concepts and thoughts related to a specific concept. Entrepreneurs can identify new connections through the visualization of the relationship between different elements of their ideas. This exercise leads to nonlinear thinking and allows the entrepreneur to explore different possibilities. Sometimes this leads them to follow new solutions, ideas, and more. So, based on the question asked here, clearly drawing a mind map is creative thinking. Think Backward Thinking backward takes an entrepreneur through the back steps to come up with that massive initial push for running. It allows them to imagine what they want to achieve and work backward to find out what they need to do to reach there. This imaginative situation allows entrepreneurs to envision things that are beyond their current circumstances. When they are picturing their end goal, they can challenge the constraints and the obstacles that are keeping them from achieving it. Sometimes it also leads to alternative paths that they had not considered otherwise. One can easily surmise thinking backward is a process to allow entrepreneurs to think out of the box. Which Of The Following Is Not A Creative Thinking Exercise Entrepreneurs Use To Generate Ideas? Creative thinking is the process that allows entrepreneurs to come up with divergent thinking formulates regardless of the feasibility or reality behind those ideas. The Creative Phase When an entrepreneur is looking for ideas, they allow themselves to come up with an idea first without any judgment. At this part, they do not bring reason along with them. When encouraging the free flow of ideas, one should keep judgment aside. However, it is common for some entrepreneurs to be dismissive of their ideas while they are in their premature stage. The phase of creativity is about taking risks and embracing uncertain things. They explore new possibilities, pushing boundaries and push different boundaries and think beyond their current positions. This allows an entrepreneur to make their business stand out in the market. In this phase, they come up with unconventional solutions and breakthroughs with innovative solutions. The Judgement Phase But when an entrepreneur is judging the feasibility of the idea, they are being realistic. This is not the phase where they leave an idea to the imagination, passion, or just the idea itself. They have different parameters allowing them to evaluate these ideas. Certain parameters for judging these ideas would include judging it based on market demand, resource requirement, funds, technical feasibility, regulatory restrictions, and the wide competitive landscape. Judgment during the ideation phase can cause the dismissal of lots of premature ideas. But, judging an idea based only on initial realism can result in an incremental thinking mindset. This leads the entrepreneurs to follow ideas that fit into their existing products, ideas, and services. Read More: Business Entrepreneurship  – What Should You Know Before You Start A Business? Conclusion For a new idea to come out and flourish, an entrepreneur needs an environment where the possibility of an idea is welcome. An entrepreneur needs an environment or culture where creativity is encouraged and new ideas can live and grow. Also, the idea of judging every idea is not really a realistic way to develop creative thinking. 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