Living in today’s information-driven world, we all now understand that entrepreneurship is very important. But before diving deep into the realm of why entrepreneurship is considered this important, it is crucial to clearly understand what do we understand by the term ‘entrepreneurship’
Entrepreneurship is considered as the ability and the preparedness to develop, assemble, arrange and run a business enterprise and handle all the uncertainties that come along with it to make a profit. One simple example of this could be starting up a new clothing business or any type of business for that matter.
1. Small Business Entrepreneurship
This type of entrepreneurship includes people running their own small business to feed their families, their purpose is not to take over any industry or make millions off of a business. In this, people usually hire their family members or local employees to help with the work. Some examples could be a small grocery store, carpenter business, electrician, hairdressing salon, etc.
2. Scalable Startup Entrepreneurship
This type of entrepreneurship begins with a motive of changing the world and making an impact with their business. While going on and about their business, they attract like-minded creative people and investors who have the same interest and goals for their business. Their business is based on research that pays attention to scalable business and experimental models. They usually go for employees that are highly intelligent, most creative, and well trained. This type of entrepreneurship requires a lot of venture capital to run the business.
3. Large Company Entrepreneurship
These are the huge companies that are set up to build new pressure in the market, to provide new competition, to bring innovation and technological advancement, and creativity in the market. These types of companies sustain and grow by providing new innovative products that work on their main products.
4. Social Entrepreneurship
This type of entrepreneurship is all about producing products that will be beneficial for society as a whole, these enterprises acknowledge the social needs and work towards resolving those problems and needs. Making profit or many is never their agenda, their whole motive is to work for the betterment of society.
Now that we have understood what is entrepreneurship and how does it work, we shall look at how is it important for the economy of the country and what levels does it affect the economy as a whole.
1. Job Growth
It is evident that with the introduction of small businesses created by entrepreneurs, countries have witnessed a growth in the overall jobs. In the United States, it is reported that small companies create more than 1.5 million jobs which constitute about 64% of the total new jobs growth.
New jobs are very important for an economy to grow, more jobs would mean more employment, more employment means more people working, which translates to growth in the GDP. Furthermore, if more and more people are working, they have the opportunity to save up and start their own business in the future as entrepreneurs.
2. Impact On Other Businesses
The emergence of new small businesses will automatically affect the working of other businesses as well. An example that would explain this clearly would of a situation. Let’s say, you have opened your own small business, now to grow that business on a larger scale, you would require a digital marketing firm for you, you would require local vendors that you can coordinate your business with and get the raw materials from, so you would hire them and would pay for their services, clearly impacting the growth of their businesses. So we can say that one small business impacts many other businesses.
3. Innovation And Technology
Few of the most important factors on which businesses affect us all and the economy of any nation are technology and innovation. Most of the highly technological advancements that we are exposed to in our daily lives in terms of google, amazon, tesla, etc. came from the ideas that the entrepreneurs were able to implement. Think of it this way, these companies that have proven to provide us with so many tech tools to make our lives easier, that did not even exist 20 years ago, are beneficial for the entire world. With more and more entrepreneurship activities, we have seen more and more technological advancements and productivity.
4. Challenge On Existing Businesses
When businesses have gotten bigger and grown to a sufficient amount, they lose interest in making their business more efficient and innovative, they just stick to what is going and how it is going, what they already know so they don’t have anything new to offer to their consumers. While, on the other hand, with the emergence of a small business having strong and creative minds, these smaller companies provide strong competition to the existing big companies in terms of new services, technological advances, and efficiency, etc.
5. Investment Potential
The new businesses not only just benefit the employees, or the entrepreneur, instead, they also benefit the investors who decide to put money in their business. So a lot of investors could also benefit from the establishment of such businesses, providing they know how to choose the right business which is likely to grow in the market.
Now that we have listed all how entrepreneurship can impact the economy of a country, we should also understand that just like every coin has two sides, there are many downsides to this dependence on entrepreneurship.
1. Lack Of Entrepreneurship Interest: If nobody seems to be interested in starting a business in a country, the country’s economic reliance on entrepreneurship could prove to be destructive.
2. Risk Of Failure: Not every business that starts is bound to succeed at the first attempt half of the businesses collapse during the first five years leading to a lot of loss for investors, employees, entrepreneurs, and everyone who was involved with the business.
3.Unpredictable events: Most businesses’ growth is not immune to unpredictable events such as the pandemic which is going on right now. Therefore, these companies, unable to cope up with such situations, lose their progress and experience loss.