Summary Entrepreneurship and Innovation 348 Notes

THE ROLE OF INNOVATION AND ENTREPRENEURSHIP IN ECONOMIC GROWTH 1 The role of innovation and entrepreneurship in economic growth Name Instructor Institution Course Date THE ROLE OF INNOVATION AND ENTREPRENEURSHIP IN ECONOMIC GROWTH 2 Executive Summary This report aims at discussing the role that innovation and entrepreneurship play in the economic growth of a country or region. The report’s content was developed through an extensive literature review of previous studies and research materials on the topic. The report indicates that throughout history, entrepreneurship and innovation have been at the core of economic growth. Therefore, it is essential for governments and businesses to develop ways to promote innovation and entrepreneurial activities. The report also indicates that entrepreneurial activities create employment opportunities. The creation of employment increases the income of a country’s population. Consequently, this increases per capita income and fosters economic growth. Besides, innovation helps businesses to explore new markets, develop new business models, introduce new products into the market, and improve the competitiveness of businesses. The report also shows that innovation improves the competitiveness of a business in the international market. This is because innovation enables businesses to develop products and services that solve the problems encountered by the target market. It also facilitates the creation of merchandise that met the needs of the target market. Furthermore, the report indicates that innovation and entrepreneurship facilitates the effective use of a country’s resources. Furthermore, the aspects help a business to make the best use of technology to facilitate economic growth. Innovation and entrepreneurship also promote a country’s export trade. THE ROLE OF INNOVATION AND ENTREPRENEURSHIP IN ECONOMIC GROWTH 3 Table of Contents Executive Summary.........................................................................................................................2 Introduction......................................................................................................................................3 Literature Review and Critical Analysis..........................................................................................4 Creation of employment..........................................................................................................................5 Effective use of a country’s resources......................................................................................................6 Competitive advantage............................................................................................................................6 The use of technology..............................................................................................................................7 The formation of capital..........................................................................................................................8 Promotion of export trade........................................................................................................................8 Recommendations............................................................................................................................9 Conclusion.....................................................................................................................................10 Bibliography..................................................................................................................................12 Introduction Entrepreneurship fosters the economic growth of a region or country considerably. Entrepreneurship describes the discovery, evaluation, and exploitation of opportunities in the THE ROLE OF INNOVATION AND ENTREPRENEURSHIP IN ECONOMIC GROWTH 4 process of business startup, creation, and growth (Maritz & Donovan 2015, 75). Entrepreneurs are the principal leaders of innovation. Innovation is the development, implementation, and utilization of value-added functions in social and economic sectors (Maritz & Donovan 2015, 75). Entrepreneurial dynamism and innovation are key factors that shape the competitiveness and growth of a business or country. Through innovation, entrepreneurs develop new products and improve the existing ones to not only improve their quality but also meet the demands of the population. A study carried out by Alex Maritz and Jerome Denis Donovan (2015) points out that innovation and entrepreneurship are essential sources for creating competitive edges in the dynamic global business arena (75). Maritz and Donovan (2015) add that innovation and entrepreneurship enhance the capability of a country for growth (75). In his innovation theory, Schumpeter explains various kinds of innovation (Śledzik 2013, 90). Such include the launch of either a new product or a new type of an existing product, the opening of a new market, and the creation of a new industry structure (Śledzik 2013, 90). Innovation also comprises the application of production and sale methods and the attainment of new sources of raw materials (Śledzik 2013, 90). According to Schumpeter, businesses seeking to make a profit must innovate because innovation is a vital driver of economic dynamics and competitiveness (Śledzik 2013, 90). Since profit enhances growth, innovation facilitates the growth of businesses. Similarly, countries seeking for growth must innovate. Śledzik (2013) also explains that according to Schumpeter, entrepreneurs are characterized not by the profit that they make, but by their desire to act and gain, and their joy of creation (93). This report takes this perspective of entrepreneurship and innovation and describes how the aspects facilitate economic growth. THE ROLE OF INNOVATION AND ENTREPRENEURSHIP IN ECONOMIC GROWTH 5 Literature Review and Critical Analysis Dhaliwal (2016) considers entrepreneurship to be the most essential input in a country’s economic growth (4262). This is because entrepreneurs spark economic activities (Dhaliwal 2016, 4262). The act of looking for business ideas and implementing them fosters economic growth and development (Dhaliwal 2016, 4262). Studies also point out that innovation is an essential aspect of entrepreneurship. Entrepreneurship drives innovation (Dhaliwal 2016, 4264). As a result, successful entrepreneurs innovate to stay ahead of their competitors. They assess the needs of customers and develop new and improved merchandise to meet them. For instance, the telecommunication industry is very competitive. Therefore businesses such as Apple Inc. have to regularly come up with new products and services and improve their existing ones to maintain their market share. Such companies have to develop not only innovative products but also those that meet the demands of their target market and solve some problems that the population may be experiencing. Thus, innovation and entrepreneurship jointly impact the success or failure of businesses. Throughout history, innovation and entrepreneurship have increased the growth of businesses and the economic growth of countries through developing products and services that result in increased sales and income (Agarwal & Bayus 2002, 1027). For instance, during the industrial revolution, innovation led the creation of new merchandise such as the Watt steam engine, the locomotive, telegraph communications, the typewriter, and the photograph (Rosen 2010, 161). Such inventions created business opportunities for entrepreneurs and solved various needs of people. The entrepreneurial exploitation of these inventions improved the economic growth of countries such as France and the United States. Similarly, modern businesses use technological innovation to create competitive advantages over their rivals. THE ROLE OF INNOVATION AND ENTREPRENEURSHIP IN ECONOMIC GROWTH 6 A study carried out by Daniel Smith (2010) shows that a country’s level of entrepreneurship positively influences its level of economic growth (1). Countries such as China and the United States are economically successful because of their ability to not only discover, assess, and exploit economic opportunities but also to innovate. The World Bank (2