We all know and it is obvious that entrepreneurship is everywhere. Until now, we saw that entrepreneurship is not all about creating new companies; rather it can also be exercised in existing organizations. For this reason along with my personal interests, I became concerned with the relationship between entrepreneurship and a government. Besides, I am interested how entrepreneurial activities lead to economic development of a country.
After exploring several books, I think that entrepreneurship is directly linked to economic development of a country. To simply illustrate this, first lets look at the definition of economic development: “the institutional changes made to promote economic betterment. It is the social organizational changes made to promote growth in an economy.” (http://oregonstate.edu/instruct/anth370/gloss.html) Furthermore, economic development is “typically measured in terms of jobs and income, but it also includes improvements in human development, education, health…” (http://government.cce.cornell.edu/doc/html/MethodologyGuide_TermsUsed.htm) So, I want to emphasize on the measurement of the economic development in terms of jobs. If we look at the outcomes of entrepreneurial activities we see that as new companies are established or new products and services are offered in the market, which is the result of company expansion, more jobs are created in an economy. If it is so, job creation leads to economic development, all other things being equal. This was the simple illustration of the very deep and tough matter of discussion in the literature on entrepreneurship for the last several years.
According to Shane (2005), entrepreneurship is often perceived by policy makers as a key instrument for boosting economic development. ‘To policy makers, entrepreneurship is a good solution because it provides a relatively non-controversial way to increase the proverbial pie, creating jobs and enhancing per capita income growth. Therefore government officials frequently search for mechanisms to enhance entrepreneurial activity in their regions, whether those mechanisms are tax policies, financing subsidies or other tools.’ (Shane, 2005, p.1)
Source: Global Entrepreneurship Monitor, 2003 and International Monetary Fund
Accordingly, from this figure we see that there is a positive relationship between entrepreneurship and economic growth at the national level, which means that as entrepreneurial activities grow in a country, average GDP growth raises in that country. Besides, the most important is that the figure below shows that the benefits of entrepreneurship grow over time:
Source:http://www.kc.frb.org/regionalaffairs/speeches/2006Henderson_IowaBankers.pdf
And the last figure shows the significance of entrepreneurial developments not only for home countries but for the neighboring countries as well.
Source: http://www.kc.frb.org/regionalaffairs/speeches/2006Henderson_IowaBankers.pdf
To summarize, my strong opinion about the topic is that entrepreneurship constitutes largely to the economic development of countries applying it. Furthermore, it has positive effects also on the neighboring countries. It is evident that there is a positive relationship between entrepreneurial activities and GDP growth, which in long run leads to overall economic well-being of a country. These all, emphasizes and reflects the huge impact of entrepreneurship on the economic development of a country or a region.
References:
Shane, S. (2005). Economic Development through Entrepreneurship.
2008-09-26 from http://oregonstate.edu/instruct/anth370/gloss.html
http://government.cce.cornell.edu/doc/html/MethodologyGuide_TermsUsed.htm
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