Critically analyse the relationship between entrepreneur innovation and economic development

critically analyse the relationship between entrepreneur innovation and economic development

The geography of entrepreneurship, innovation and growth of the relationship between knowledge and growth on one hand, and entrepreneurship and growth on the The process of innovation is consequently considered to be one of the critical issues in physical capital, cannot alone explain economic development. Discuss the relationship between entrepreneurship, innovation and economic development. What role do creativity and problem solving play in this relationship . However, to develop economy by entrepreneurship, innovation is an The Reciprocal Relationship between Economic Development and Human Rights to analyze the competitiveness and economic development of nations, . AND THE IMPACT ON ABORIGINAL HEALTH: A CRITICAL ANALYSIS.

Relationship between entrepreneurship, innovation and economic development Essay

Besides, as two key factors in this relationship, creativity and problem solving will be also discussed in this essay. In general, innovation has been regarded as one of the most momentous factors to the whole process of entrepreneurship. Similarly, entrepreneurship has become one of the most significant factors to innovation.

It is said by Castillo that neither entrepreneurs nor innovators has considered themselves as each other, though, entrepreneurship requires innovation and vice versa. In this process, when an entrepreneur creates a new product or uses a method that is new to it, it makes a technical change.

critically analyse the relationship between entrepreneur innovation and economic development

Thus, it is the same with what Drucker said that, during this process of exploring the right way, innovation is the specific means of entrepreneurs, that is to say, innovators have the abilities to exploit change as a chance for a new product and increase the value of existing products by means of improving its quality.

Ultimately, the new and updated products will develop new markets and meet the needs to purchasers through the cooperation between entrepreneurship and innovation.

critically analyse the relationship between entrepreneur innovation and economic development

In a word, as a special section of the process of entrepreneurship, innovation always accompanied with entrepreneurship, and meanwhile, they supplement each other. In the term of entrepreneurship, it is received by a host of scholars that there is an affinitive relationship between entrepreneurship and the development of economy.

  • The Relationship Between Entrepreneurship, Innovation and Economic Development

To begin with, as a matter of fact, there is an approach of which the name is Global Entrepreneurship Monitor GEM to examining the complicated relationship between the level of entrepreneurship and the level of economic growth. After measuring large bodies of data around forty countries, the GEM consortium is sure that entrepreneurship has a positive effect on the development of economy Deakins and Freel, Moreover, as Hisrich, Peters and Shepherd stated, entrepreneurship becomes the driving force of the economy from two angles, one is to increase the outputs and profits, and the other one is to enhance the structure of business in the society to promote the development of economy.

The American multinational information technology corporation, Dell Computer Corporation, can be considered as an appropriate example. Initially, the traditional sales model of information technology industry is that manufactures produce typical products in mass production one time, after that, they sell the products to the franchisers, and purchasers get the products ultimately.

This kind of sales model results in a series of problems. When the prices of IT productions are higher than the value of them to consumers, the number of sales will decrease rapidly. That will lead to losses of large number of consumers Biebrauer, In contrast, Dell Computer Corporation centers on the needs of consumers, so Michael Dell adopt the direct selling model, which means that manufactures sell productions to consumers directly, instead of old sales systems Kraemer, Dedrick and Yamashiro, By using this kind of sales model, Dell Computer Corporation can prepare a satisfying production for every consumer at a low price.

Relationship between entrepreneurship, innovation and economic development -

That gives a great opportunity to compete in the marketplace. It is certain that the change on the sales model can increase the profits. Hence, the economy in this company is stimulated by entrepreneurship. To concluded, entrepreneurship plays a crucial role in the process of stimulating the development of economy.

Role of Entrepreneurship in Economic Development

With a mass of successful examples, innovation has becoming an exceedingly contributor to economic development. According to what Peters said, in an age demanding innovation, a company which cannot innovate and develop itself will be put to the test. Chiefly, innovation can contribute to make more profits by creating new products and improving the existing products. With a large number of competitors around a company, competitions in the market stimulate it to create and update products in order to increase its market share as well as its competitiveness.

In addition, innovation can always bring a huge profit, so it also appeals to investment which can be used in the further development. That can have a positive impact on the output and economic development.

By way of illustration, Google Inc. InGoogle Inc. UntilGoogle Inc.

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In this case, the managers in Google Inc. Hindle also views innovation as an entrepreneurial process to generate economic benefits. Both these two views reflect that entrepreneurship is the centre of the relationship and the role of innovation is limited. However, Drucker cited in Lumsdaine and Binks, points out a more reasonable relationship between innovation and entrepreneurship that innovation is a specific and unique tool of entrepreneurs. Schumpeter, as cited in Westhead, Wright and McElweealso explicitly concludes that innovation is a pre-requisite for genuine entrepreneurship.

These two points clarify that individuals who can become entrepreneurs have the capacity to combine creative ideas in novel way and create something original, initiative and significant. Thus, in this way, innovation is a must for entrepreneurship. A suitable example of this is non-bag vacuum cleaner designed by James Dyson. Noticing a phenomenon that when the bag of vacuum is full, the suction became inefficient, Dyson devised the idea of producing a non-bag vacuum cleaner that promotes efficiency and convenience.

He put this innovative idea into effect, established new business and launched the product inand eventually his product dominated the British vacuum cleaner market Westhead, Wright and McElwee, In this example, it is evident innovative non-bag vacuum cleaner will not be obtainable in absence of innovation. In addition, Schumpeter cited in Lumsdaine and Binks, also emphasizes the issue that an entrepreneur cannot combine existed products and create new industry without innovation.

For these reasons, innovation is the premise of entrepreneurship. In current several decades, theoretical literature and empirical evidence have been put forth to illustrate the relationship between entrepreneurship and economic development. Among these various theories, the role of entrepreneurship is to recognize opportunities, ensure resources efficiently and eventually enhance economic development Casson, has been widely accepted.

This example highlights that negative effects on economic development in absence of entrepreneurs. Furthermore, Organization for Economic Co-operation and Development points out that a country that has a large number of entrepreneurial activities is likely to constantly acquire original or advanced goods and experience considerable economic benefits.

critically analyse the relationship between entrepreneur innovation and economic development

For these reasons, it is clear that entrepreneurship stimulates economic development. However, contemporary research highlights the point that the level of economic development also influences entrepreneurship. That is the popularity of entrepreneurship varies at different economic development stages. First, in the early economic development stage, there is a negative correlation between economic development and entrepreneurship.

Schuultz and Yamada based on their research proved that low level of economic development usually results low self-employment rate. This probably because manufacturing industry which takes advantage of economies of scale, standardization and massive production dominates the market and the cost for individuals to establish a new business is unaffordable.

In addition, the will of individuals to take risk to be an entrepreneur is reduced because of the improvement of secured income Iyigun and Owen, In other words, few people take entrepreneurship during this period. Nevertheless, with the further development of economies, service industry which needs little capital to start-up gradually takes the place of manufacturing industry and becomes the key component to boost economies and dominates the market, providing more opportunities to entrepreneurs.

Simultaneously, advanced information and communication technologies and further process of globalization increased the economic uncertainties in turn offer an area for new enterprises founded Acs, Audretsch and Evans, such as a large number of SMEs in IT industry arise and grow in a high speed.

As a result, further economic development in this period promotes entrepreneurship.

critically analyse the relationship between entrepreneur innovation and economic development

Drucker views innovation as the purposeful search for changes and the opportunities that such changes might offer. Similarly, Schumpeter presents that innovation is the engine of change in economy. Furthermore, he raises the issue of creative destruction as a tool of entrepreneurship that discrete innovation destroys traditional market and rapidly replaces less competitive economic activities development.

These suggest that innovation is the catalyst of economic development. For example, an iPod is derived from combing various technologies with unique design, which is an innovation in MP3 player industry. The production of an iPod included 41, jobs worldwide increating job opportunities and boosting global trade Linden, Kreamer and Dedrick, Furthermore, Boston Consulting Group Collaborative Economics, also states that innovation is becoming an important economic motivator based on their research on the US Productivity Growth Outputs.

For these reasons, innovation is the major force for economic development. Nevertheless, the level economic development affects the function of innovation. According to the Artadi and Xavierthe stage of economic development of a country covers factor-driven stage, efficiency-driven stage and innovation driven stage.

Innovation plays different roles in different development phases. In factor-driven stage, the economy of a country is primarily driven by abundant and low-cost labor and natural resources. The contribution from innovation is negligible that is not worth considering in this period.