Discuss the relationship between entrepreneurship, innovation and economic development. What role does sustainability play in this relationship? Refer to both theory and examples from the business world to support your discussion.
In today’s economy, entrepreneurship is an important subject and entrepreneurial abilities have become a pivotal requirement both nationally and globally. However, enterprises that succeed mostly do so as they are capable of change for the better, through innovation. So for an enterprise to be successful innovation is required. Creativity and innovation is at the heart of the 21st century. For example in the United States alone, more than 16,000 firms operate their own research labs! These successful enterprises and their advancements in innovation as a result lead to a country’s economic development. Economic development has become a focus of attention by governments around the world. As the UK Office of Science and Technology (2007) put it, “Innovation is the motor of the modern economy..” Thus there is no doubt that a connection between entrepreneurship, innovation and economic development prevails. The three factors are complementary because innovation helps any form of entrepreneurship to prosper, thereby increasing its economic value, thus contributing to economic development. This paper will examine this relationship of entrepreneurship, innovation and economic development, and explore the extent of its connection. To begin, it will define these terms, and then connect them accordingly, using economic literature and real life examples for evidence. Secondly, the essay will look at what sustainability is, types f sustainable innovation, whether it’s a threat or opportunity for enterprises, and its effect on economic development.
The term entrepreneurship can take numerous definitions. Simply put, entrepreneurship is the act of an entrepreneur, and that is someone who assumes the risk for and organizes a business project. Economist Richard Cantillon first used the term entrepreneurship in his book Essai Sur La Nature de Commerce en General (1959) where he explains that an entrepreneur is one who buys things at a lower price, and sells them at a higher price, undertaking the risk factor. More recently, Joseph Shumpeter provided a thorough description, where he divided entrepreneurship to two types: allocating and catalytic. Further, Shumpeter (1934) stressed on the importance of an entrepreneur to be innovative, “Whatever the type, everyone is an entrepreneur only when he actually carries out a new combinations and loses that character as soon as he has built up his business”. This leads into the connection of entrepreneurship with innovation. Mintzberg (1983) defined innovation as “the means to break away from established patterns.” Innovation is the creation of something new; and in the business world, it would be for moneymaking benefit. According to Shumpeter, it can be the creation of a new product, opening a new market and so on. Thus, it can be stated that innovation is required for an enterprise to succeed, so is a factor contributing to the process of entrepreneurship. Innovation can take two forms, incremental or radical. A radical innovation can be stated as a “gap-filler” as economist Harvey Leibenstein (1968) put it, which is a novel creation that fills a “gap” in the market. Radical innovation is a vital for economic development as the problem is missing markets is solved. There we see the connection of innovation with economic development. Economic development can be defined as a positive progress in an economy, usually through government expenditures to promote the wellbeing of the economy and society as a whole. It can be measured by taking into account a country’s standard of living, economic health, environmental sustainability and other factors.
According to Harvey Leibenstein in his book The American Economic Review (1968 p77), there is no universally accepted...
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