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Relationship between Entrepreneurship, Innovation and Economic Development

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One of the most significant attributes of Schumpeter’ s theory is the idea of entrepreneurial profit in the theory of economic development. According to Schumpeter, entrepreneurial profit falls in the purview of temporariness. By applying new aspects of production, entrepreneurs earn the advantage of being the first mover. For example, through the innovation of a more effective production procedure, the entrepreneur will be the only manufacturer to gain the advantage of related lower expenses only for a certain period of time. As information is shared, other organizations will try to compete with the new innovation of the entrepreneur.

The gain of an entrepreneur lies in uncertainty because the demand for new innovation or new production procedure is clearly unpredictable. Entrepreneurs are also unacquainted with the period of their risk-taking profit. Thus, Schumpeter had strengthened his refusal of the marginalism in explaining economic development and progress as these factors are incapable to clarify or accommodate the innovation process i. e. how many entrepreneurs can gain from an innovation (Arena, 2002). Entrepreneurship acts as a motivating force for economic development. Schumpeter stated that every person who carries out new inventions is an entrepreneur.

These new inventions establish better means to satisfy present demand or create new demand by making existing products, technologies or processes obsolete. Organizations with innovative entrepreneurs subsequently develop their businesses through dual procedures of gaining market share from existing dealers and growing overall demand for the products presented in the market. A few real-life examples from the business world are Andrew Carnegie, Walt Disney, Pierre Omidyar, William Harley, and Arthur Davidson, Jeff Bezos, Henry Ford, Bill Gates, and Steve Jobs among others.

Andrew Carnegie was responsible for developing US Steel through innovation in a distribution network. Walt Disney is the creator of the popular animation character named “ Micky Mouse” that is renowned all over the world.

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preview essay on Relationship between Entrepreneurship, Innovation and Economic Development
  • Pages: 7 (1750 words)
  • Document Type: Essay
  • Subject: Business
  • Level: Undergraduate
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