There are many links that bring together a relationship between entrepreneurship, innovation and economic development, and both creativity and problem solving play a large role within this relationship. Entrepreneurial activity can lead to innovation within a market for a product or service, which can therefore lead to increased economic development. Within this report I will attempt to analyse this relationship and create further links.
The definition of an entrepreneur and entrepreneurship has been argued since introduced by Richard Cantillon in 1755 in his work ‘Essai Sur La Nature de Commerce en General’. He originally suggested that an entrepreneur was an “individual who pursue(d) the profits from buying at a lower price than they expect to sell under conditions of uncertainty” (Entrepreneurship from Creativity to Innovation, 2007, p.12). However, under Joseph Schumpeter, the term has since developed into recognising “the element of difference, uniqueness and innovation” and he believed that “to generate a new product or process, then we can be called entrepreneurial” (Entrepreneurship from Creativity to Innovation, 2007, p.12). Here it has been shown that an entrepreneur is required to have the ability to be creative to ‘generate a new product or process’ and that innovation is often a necessary skill to succeed as an entrepreneur.
Entrepreneurship is a combination of what entrepreneurs do and refers to the events and results they produce and their economic impact. However, by going into this in more depth, we are able to reveal that entrepreneurship requires creativity to survive. Creativity arguably allows us to construct something new and so far unimagined and is essential to what Harvey Liebenstein believes an entrepreneur has the ability to “gap-fill (and) spot opportunities in the market earlier than others” (Entrepreneurship from Creativity to Innovation, 2007, p.13). Creativity can be brought about from a variety of sources, such as: “divine inspiration and through determinism” (Entrepreneurship from Creativity to Innovation, 2007, p.19) and there are millions of recent examples that show this, such as: The Million Dollar Homepage (MillionDollarHomepage, 2005), Social Networking sites e.g. Facebook (Facebook, 2004) and the Apple tablet Computer, the iPad (iPad, 2010). Clearly creativity can also be seen as a form of innovation, as many products such as: the original iPod are a development upon an already existing product, the MP3 player, which has gone on to be an extremely successful product, with over 250 million sold since their release in 2001 (Apple, 2010). Apple’s brand has risen significantly since this introduction and has been put down to the opinion that “they used better hardware, software, packaging, and marketing techniques than anyone else” (BestTech, 2010), helping increase their market share. Therefore, there are clear links shown here between entrepreneurship, creativity and consequently, innovation, which have lead to economic success within specific markets.
However, this relationship does not end there, as ‘Schumpeter’s Theory of Economic Development’ shows. Schumpeter was able to “highlight the entrepreneur’s role as the catalyst for economic development” (Entrepreneurship from Creativity to Innovation, 2007, p.14) as he explained 2 separate types of change within ‘Schumpeter’s economy’. Schumpeter’s economy consists of a collection of businesses where each represented a particular combination of production factors. As all enterprises relied upon customer demand and for all businesses, changes in the level of economic activity and development would only be generated via either “gradual” or “discrete” change (Entrepreneurship from...