The Relationship Between Entrepreneurship, Innovation and Economic Development

Entrepreneurship firstly arise from Richard Cantillons Essai sur la genius du Commerce en Gnral, pilot filmly refers to the behavior concourse aim to become an enterpriser. Currently, it is an increasingly heated issue worldwide because its index on driving ground tame, productivity, job creation and frugal instruction (Fisher, 2010). Schumpeter (1934) defined entrepreneurship as a fanciful response to potential difference opportunity and construct means creating something original, mod and significant that makes difference in a grocery store or society (Frankelius, 2009).With respect to the alliance between entrepreneurship, foundation garment and stinting organic evolution, Schumpeter (1934) highlights the role of entrepreneurship is the catalyst of stinting breeding through mutation. However, recent query discovered that the take of stintingal development, in turn, has significant influence on entrepreneurship and cornerstone. Hence, in my opinion, entrepre neurship has important compulsive effects on sparing development in terms of cornerstone, whereas stinting development in addition affects entrepreneurship and innovation.At the same time, sustainability, which is always combined with entrepreneurship, innovation and sparingal development frequently arises in administration policies or academic re depend, is another popular topic now. This essay result elaborate the birth between entrepreneurship, innovation and frugal development one by one 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 throw up forth to straighten out the relationship betweenentrepreneurship and innovation. Shane (2003) claims that the primary issue for an entrepreneur is create youthful ventures while innovatio n is a secondary consideration. Hindle (2009) in any case views innovation as an entrepreneurial process to refund economic benefits. some(prenominal) 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 laughable 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 persuasions in novel way and create something original, initiative and significant. Thus, in this way, innovation is a must for entrepreneurship. A suitable deterrent 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 provokes efficiency and convenience. He put this innovative idea into effect, established new business and launched the product in 1993, and last his product dominated the British vacuum cleaner market (Westhead, Wright and McElwee, 2011).In this example, it is homely innovative non-bag vacuum cleaner will not be getable in absence seizure 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 diligence without innovation. For these reasons, innovation is the acquaint of entrepreneurship.2.2 Entrepreneurship and economic development. In current several decades, theoretical literature and empirical indicate have been put forth to illustrate the relationship between entrepreneurship and economic development. Among these various theories, the role of entrepreneurship is to recognize opportunities, ensure resources efficiently and eventually compound economic development (Casson, 1982) has been widely accepted. Recent look conducted by Audretsch and Keilbach (2004)demonstrates the critical factor accounting for the GDP variations between the former Soviet coalescency (USSR) and the the States.Even though these two countries have similar technological sophistication, USSRs economic development significantly lagged behind the USA. With further research into it, they discover that the USA has a oversize number of entrepreneurs but it is not the same to USSR. This example highlights that negative effects on economic development in absence of entrepreneurs. Furthermore, Organization for Economic Co-operation and Development (1998) points out that a country that has a large number of entrepreneurial activities is likely to constantly pull in original or advanced goods and experience considerable economic ben efits. For these reasons, it is clear that entrepreneurship stimulates economic development.However, contemporary research highlights the point that the level of economic development also influences entrepreneurship. That is the popularity of entrepreneurship varies at diametric economic development interprets. First, in the early economic development stage, there is a negative correlation between economic development and entrepreneurship. Schuultz (1990) and Yamada (1996) based on their research proved that low level of economic development usually results low self-employment rate.This probably because manufacturing industry which takes favor of economies of scale, standardization and massive production dominates the market and the cost for individuals to establish a new business is unaffordable. In addition, the will of individuals to take risk to be an entrepreneur is reduced because of the improvement of secured income (Iyigun and Owen, 1998). In other words, few spate take entrepreneurship during this period. Nevertheless, with the further development of economies, service industry which needs secondary capital to start-up gradually takes the place of manufacturing industry and becomes the key component to make headway economies and dominates the market, providing more opportunities to entrepreneurs.Simultaneously, advanced information and communication technologies and further process of globalisation increased the economic uncertainties in turn offer an area for new enterprises founded (Acs, Audretsch and Evans, 1994) such as a large number of SMEs in IT industry arise and grow in a high speed. As a result, further economic development in this period promotes entrepreneurship. Forthese reasons, economic development influences the popularity of entrepreneurship.2.3 Innovation and economic development Innovation is the action of putting creative ideas into effect, which involves introducing creative ideas and unique way to implement. Drucker (1957) views innovation as the purposeful search for changes and the opportunities that such changes might offer. Similarly, Schumpeter (1934) presents that innovation is the engine of change in delivery. Furthermore, he raises the issue of creative destruction as a tool of entrepreneurship that distinct innovation destroys traditional market and rapidly replaces less competitive economic activities development.These suggest that innovation is the catalyst of economic development. For example, an iPod is derived from combing various technologies with unique design, which is an innovation in MP3 player industry. The production of an iPod included 41,000 jobs worldwide in 2006, creating job opportunities and boosting global trade (Linden, Kreamer and Dedrick, 2007). Furthermore, Boston Consulting Group (Collaborative Economics, 2008) also states that innovation is becoming an important economic motivator based on their research on the US Productivity Growth Outputs. For these reasons, inno vation is the major eviscerate for economic development.Nevertheless, the level economic development affects the function of innovation. According to the Artadi and Xavier (2004), the stage of economic development of a country covers factor- set stage, efficiency-driven stage and innovation driven stage. Innovation plays different roles in different development phases. In factor-driven stage, the economy of a country is primarily driven by abundant and low-cost labor and natural resources. The contribution from innovation is negligible that is not worthy considering in this period. Then, in efficiency-driven stage, countries seek to improve procession efficiency and promote productivity with existed technologies. In this phase, innovation is a secondary consideration.Later, in innovation-driven stage, innovation is an essential element of economic development. Most sectors or industries are experiencing Schumpterian renascence innovation become the crucial engine boosting economi cdevelopment. Furthermore, Romers endogenic model also documents the diverse innovation performance in different levels of economic development (Romer, 1990). For these reasons, economic development has crucial impacts on innovations function.In summary, innovation is the pre-requisite for real entrepreneurship, which adapted by entrepreneurship to stimulate economic development. However, different level of economic development affects the popularity of entrepreneurship and the function of innovation. 3. The role of sustainabilitySustainability is the impression that checking, or fostering the development of, the systematic contexts that produce the goods, services, and amenities that volume need or value, at an acceptable cost, for as long as they are needed or valued (Allen, Tainter and Hoekstra, 2003, P26).According to the definition, the objective of sustainability is to maintain an surroundings that assures to sustain the development of human beings. This issue is becoming popular in recent years because of its positive effects on entrepreneurship, innovation and economic development.It is widely accepted that generating competitive advantages is crucial for entrepreneurs that own growing firms (Penrose, 1959 cited in Kor and Mahoney, 2004). Hart (1995 cited in Paton, 2000) points out that the goal of sustainability is entirely conformable with the profit motive competitive advantages. In other words, sustainability, as the racy process of generating competitive advantages, plays a significant role in entrepreneurship. taking social responsibility is an important aspect of sustainability and helps enterprises generate competitive advantages. NIKE is a suitable example of this. NIKE was accused of using child labour in production of its sneakers in Pakistan in 1996.This unsustainable behavior incurred criticisms from several society groups and shamed its brand image, resulted numerous people refused to purchase its products. In order to brood thi s problem appropriately, NIKE formulated new policies and required its contractors must minimize potential negative environmental effects, offer a hygiene and comfortable work place and improve the healthconditions of all employees (Wright, 2013). These measures reflect NIKEs behaviour of social responsibility that meets the societys expectation for sustainable behaviour, which maintain a superior brand image and strengthen competitive position. In this case, NIKE derives competitive advantages from its sustainable management. This indicates sustainability enhances the development of entrepreneurship.It is mentioned in the Section 2 that entrepreneurship has positive effects on innovation and economic development. Kao (2010) states that entrepreneurship is a potential forcefulness for sustainability, which indicates it is likely that sustainability has important influence on innovation and economic development through enterprise performance. Haiers success in Fluorine-Free Energy-S aving Air Conditioner is a suitable example of this. The process of producing new logical argument conditioner is similar to Schumpeters creative destruction. Haier developed and combined new Fluorine-Free and Energy-saving technologies and built new venues in order to produce this product (Yao, Pan and Yuan, 2010).In other words, it destroys the traditional Fluorine-added seam conditioner industry and launched new air conditioners into the market. Through this case, the production of new air conditioner develops innovation and the new manufacture venues offer more job opportunities, which is secure to economic development. For these reasons, sustainability boosts innovation and economic development through enterprise performance.4. ConclusionIn conclusion, the relationship between entrepreneurship, innovation and economic development is complex. This essay illustrates that innovation is the premise of entrepreneurship. This paper also illustrates that entrepreneurship plays an i mportant role in economic development. It is because that large number of entrepreneurial activities can constantly allocate resources efficiently and acquire original goods. At the same time, the popularity of entrepreneurship varies during different level of economic development.Similarly, innovation, serves as the engine of economic development, also behaves differently in different economic developmentphases. In addition, the role of sustainability in innovation, entrepreneurship and economic development is vital. That is sustainability helps entrepreneurship generate competitive advantages and promotes innovation and economic development. Furthermore, it is suggested that an entrepreneur should concentrate on innovation and perform sustainably in order to generate competitive advantages and boost economic development.