Discuss the relationship between entrepreneurship, innovation and economic development. What role does sustainability play in this relationship? Refer to both theories and examples from the business world to support your discussion.
Entrepreneurship firstly arise from Richard Cantillon’s Essai sur la Nature du Commerce en Général, originally refers to the behavior people aim to become an entrepreneur. Currently, it is an increasingly heated issue worldwide because its power on driving innovation, productivity, job creation and economic development (Fisher, 2010). Schumpeter (1934) defined entrepreneurship as a creative response to potential opportunity and innovation means creating something original, innovative and significant that makes difference in a market or society (Frankelius, 2009). With respect to the relationship between entrepreneurship, innovation and economic development, Schumpeter (1934) highlights the role of entrepreneurship is the catalyst of economic development through innovation. However, recent research discovered that the level of economic development, in turn, has significant influence on entrepreneurship and innovation. Hence, in my opinion, entrepreneurship has important positive effects on economic development in terms of innovation, whereas economic development also affects entrepreneurship and innovation. At the same time, sustainability, which is always combined with entrepreneurship, innovation and economic development frequently arises in government policies or academic research, is another popular topic now. This essay will elaborate the relationship between entrepreneurship, innovation and economic development respectively with theoretic literature and business cases in section 2, and then in section 3, the role of sustainability in this relationship will be illustrated.
2. The relationship between entrepreneurship, innovation and economic development.
2.1 Entrepreneurship and innovation
Numerous theses are put forth to clarify the relationship between entrepreneurship and innovation. Shane (2003) claims that the primary issue for an entrepreneur is create new ventures while innovation is a secondary consideration. Hindle (2009) 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 (1985 cited in Lumsdaine and Binks, 2007) 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 McElwee 2011, also 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 in 1993, and eventually his product dominated the British vacuum cleaner market (Westhead, Wright and McElwee, 2011). In this example, it is evident innovative non-bag vacuum cleaner will not be obtainable in absence of innovation. In addition, Schumpeter (1936 cited in Lumsdaine and Binks, 2007) 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.
2.2 Entrepreneurship and economic development.
In current several decades, theoretical...
References: Acs, Z. J., Audretsch , D. and Evans, D. (1994). Why does the Self-employment Rate Vary Across Countries and Over Time. CEPR Discussion Paper, 871.
Allen, T., Tainter, J. and Hoekstra, T. (2003). Supply Side Sustainability. New York: Columbia University Press.
Artadi, E. V. and Xavier. (2004). The Global Competitiveness Index, Global Competitiveness Report. Global Economic Forum.
Audretsch, D. B. and Keilbach , M. (2004). Entrepreneurship Capital and Economic Performance. Regional Studies, 38(8), 949-959.
Casson, M. (1982). The Entrepreneur: An Economic Theory. Oxford: Barnes and Noble Books.
Collaborative Economies. (2008). The Innovation Driven Economic Development Model: A practical guide for the regional innovation broker.
Fisher, G. (2012). Effectuation, Causation, and Bricolage: A Behavioral Comparison of Emerging Theories in Entrepreneurship Research. Entrepreneurship Theory and Practice, 36(5), 1019-1051.
Frankelius, P. (2009). Questioning two myths in innovation literature. Journal of High Technology Management Research, 20(1), 40-51.
Hindle, K. (2010). How community context affects entrepreneurial process: A diagnostic framework. Entrepreneurship and Regional Development: An International Journal, 22(7-8), 599-647.
Iyigun, M. F. and Owen, A. (1998). Entrepreneurship and Human Capital Accumulation: American Economic Review. Ameican Economic Review, 454-457.
Kao, R. (2010). Sustainable Economy: Corporate, Social and Environmental Responsibility. Singapore: World Scientific.
Kor, Y. Y. and Mahoney, J. T. (2004). Edith Penrose 's (1959) Contributions to the Resource-based View of Strategic Management. Journal of Management Studies, 41(1), 183-191.
Linden, G., Kraemer, K. and Dedrick , J. (2007). Who Captures Value in a Global Innovation System? The case of Apple 's iPod. UC Irvine: Personal Computing Industry Center
Organization for Economic Co-Operation and Development. (1998) Fostering entrepreneurship. Paris, Organization for Economic Co-Operation and Development
Romer, P. (1990). Endogenous Technological Change. Journal of Political Economy , 98(5), 71-102.
Schumpeter, J. (1934). The theory of Economic Development. Cambridge: Harvard University Press.
Shane, S. (2003). A general theory of entrepreneurship: The individual-opportunity nexus. Cheltenham: Edward Elgar Publishing.
Westhead, P., Wright, M. and McElwee, G. (2011). Entrepreneurship: Perspectives and Cases. Prentice Hall.
Yamada, G. (1996). Urban Information Employement and Self-Employment in Developing Countries: Theory and Evidence. Economic Development and Cultural Change(44), 289-314.
Yao, Q., Pan, Q. and Yuan, L. (2010). Cases of sustainable entrepreneurship in China. Northern Economy, 6, 63-66.
Please join StudyMode to read the full document