Explain the Relationship Between, Entrepreneurship, Innovation and Economic Development

Topics: Entrepreneurship, Economics, Innovation Pages: 6 (2043 words) Published: September 16, 2013
Joseph Schumpeter formally regarded the understanding that entrepreneurs are often innovators, bringing new, improved goods and technologies to markets, creating new niche upcoming solutions and delivering them into new markets. Entrepreneurship focuses on the creativity, moment of inspiration, the why when and how of certain opportunity recognition. According to Schumpeter “the role of entrepreneurship is implicit as an underlying cause of innovation. However, innovation is not solely the domain of entrepreneurs” - The idea of Entrepreneurship somewhat relies on the effective means of innovation. The concept of innovation allows the development of new ideas, inventions and their making come to pass. Economic development undertakes the adoption of new market technologies and industry based economies to see and improvement in economic standards as well as an increase in the net gain of money flow. In regards to the three ideas of entrepreneurship, innovation and economic development I will discuss why I believe they co-exist. Where sustainability fits in is that increasingly our society is becoming more aware of its day-to-day actions with respect to the environment around it. It is becoming increasingly important topic on businesses agendas as without a scope for future revenue streams, the very nature of what they do will not be feasible. Increasingly these days if a business is to be economically viable then sustainability has to be engrained in its model. Schumpeter progressively demonstrates the fundamental view of behaviour from an entrepreneurial point of view and how it must coincide with that of the innovative. In the book ‘The Entrepreneurial Mind’, Jeffry Timmons defined entrepreneurship as "the ability to create and build something from practically nothing." This shows that without innovation and ideas entrepreneurship cannot come to pass. Innovation is taking an idea and bringing it to market, however market attractiveness, size and dynamics are all important components and thus theory of entrepreneurial understanding plays a vital role in success The view that (radical) innovation is helpful in the promotion of growth through economic development links to the Schumpeterian understanding of ‘creative destruction’ – presupposed that it is the forceful differential that imposes a separate angle of economical structure, commonly replacing the old and imposing the new. The theory of radical innovation ties in consistently with this theory, however to fully understand the ideology behind innovation we must look at the various types. The two main types of innovation are incremental and as mentioned radical. Incremental innovation consists whereby the improvement of products, ideas, and strategies are put in place –often seen through the use of extension strategies. Positively speaking, incremental innovation helps to increase efficiency of products or services, by maximising the lifetime within their life cycle (short term innovation) and focusing on exploitation competencies. However in terms of long run economic value for development it may struggle to coincide with increases or dramatic changes in population and improvements of technology as two examples; especially in less economically development countries, thus limiting the innovative nature of an idea or action. On the other hand and more understandably tied in with entrepreneurship, we must look at radical innovation. “Radical innovation creates such a dramatic change in products, processes or services, that they transform existing market or industries, or create new ones.” Radical innovation looks to provide something new, accompanied by a disruptive or discontinuous quality that uproots markets and creates significant change within industries. This ties in coherently with entrepreneurship due to the fact that it is often these creations and innovative ideas that entrepreneurs use to bring good and services to the market place. Innovation encourages the...
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