Entrepreneurship, Innovation, and Economic Growth

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Does creativity and problem solving play in this relationship? Refer to both theory and examples from the business world to support your discussion.’

There is a clear relationship between entrepreneurship, innovation and economic development. Creativity and problem solving play a huge role in this unambiguous relationship. An entrepreneur is someone who organises a business whom is willing to take risks. Characteristics such as imagination, creativity, effective problem solving and vision are vital attributes to becoming a successful and effective entrepreneur. Innovation is the process in which an idea is renewed rather than the introduction of something new. For the renewal to take place people must change the way they make decisions, it is essential for them to perform things in a different manner and make choices out of their norm. Economic development is the rise in the population of one’s nation with sustained growth from a simple, low-income economy to a modern, high-income economy. If the quality of life of the local people could pick up, economic development would increase gradually. The rate in technological change has gradually increased over the last 100 to 200 years, if not longer. In today’s world, it is very common to speak of how successful firms are due to the fact that they control innovation and technological change in a thriving manner.

John Schumpeter, an Austrian economic and political scientist coined that innovation and technological change are derived from entrepreneurs. He was also a major contributor of “The Theory of Economic Development”. (Lumsdaine & Binks, 2007, p14) This contribution connects entrepreneurship, creativity and economic development. To understand the definite and possible affects of entrepreneurship, it is vital the analysis is looked at. Schumpeter “portrayed any economy as a collection of enterprises and businesses where each presented a particular combination of production factors in the form of people, machines, land, premises, finance, and so on.” (Lumsdaine & Binks, 2007, p14) In some sense, some businesses relied on its competitors to have undertaken successful activities. The mutual support “through customer demand meant that changes in the nature or level of economic activity would be caused only when” (Lumsdaine & Binks, 2007, p14) more creative and amalgamated problem solving aspects of production have been instituted.

The aspect of variation, uniqueness, innovation and alteration “that is missing from many perceptions of entrepreneurship is the central feature of entrepreneurs as depicted by Schumpeter”. (Lumsdaine & Binks, 2007, p13) This quote depicts the fundamental nature of Schumpeter’s view: “Whatever the type, everyone is an entrepreneur only when he actually carries out new combinations, and loses that character as soon as he has built up his business.” (Schumpeter, 2007, p.13) Schumpeter emphasized his theory of change and innovation with the quote: “They have employed existing means of production differently, more appropriately, more adventurously. They have “carried out new combinations”. They are entrepreneurs” (Schumpeter, 2007, p.15)

Schumpeter’s crucial distinction was the idea of gradual change and discrete change. This is the idea that was reflected in the Innovation Theory. The idea of gradual change, Schumpeter suggests that the product or process, which is being improved all the time (innovation) which will be closely connected to similar versions. Opinions and specific improvements derive from market research or customers and customers usually acquire the latest and newest model of the innovation. This will always exist in the sense that an innovation is always renewed rather than creating a product from the beginning. Innovation and entrepreneurship have a very strong link when a product or idea is being updated. Creativity and problem solving play huge parts in this relationship because once a product has been innovated, new...
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