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The Relationship Between Entrepreneurship, Innovation and Economic Development

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Autor:   •  November 15, 2011  •  Research Paper  •  1,810 Words (8 Pages)  •  2,615 Views

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Entrepreneurship has been an significant subject in business. Although there is no authoritative and specific theory to explain it, the mutual effects among ebtrepreneurship, innovation and economic development are really exist. Also, creativity and problem solving play important roles in this third-party relation. In this essay, it will generally demonstrate the relationship between innovation, entrepreneurship and economic development and in the next section, creativity , problem solving and the position they stay in the relations will be introduced and finally conclude.

The relationship between entrepreneurship and innovation is multiple and they influence each other . Firstly, it is commonly believed that innovation is an important base of entreneurship. Although there are so many definitions of entrepreneurship, all of them refer to the special and significant position of innovation in entrepreneurship.

For instance, in the entrepreneurship wrote by Robert D. Hisrich, Michael P. Peters,2008, it sates that "entrepreneurship is the process of creating something new and assuming the risks and rewards."

In 1999,Brazeal and Herbert presented a simple model of the entrepreneurial process proves that the ultimate entrepreneurial event is driven by psychological innovation, which is the consequence of creativity plus technical innovation. Meanwhile the original change leading to technical innovation is environmental change. (Brazeal and Herbert, 1999: 32)

Therefore, to consider the conceptual relationship, innovation is the indispensable element of entrepreneurship . (miller,1983; dees,1998)

Secondly, there is a positive correlation between entrepreneurship and innovation. They are complementary because entrepreneurship help the innovation more prosperity and achieve its economic value while adequate innovation offer enough spiritual resources to entrepreneurship.(zhao,2005) so entrepreneurship and innovation are both important in a business. Only innovation without entrepreneurship, that is a visionary. Only entrepreneurship without innovation, that is a manager. Zhao (2005) insists that "a combination of entrepreneurship and innovation holds the key to organization sustainability in this period of rapid change and nonlinear dynamics" Therefore, only entrepreneurship and innovation work with each other can make the business advance quickly.

However, what should be pay attention to is that innovation will not be a positive factor for the entrepreneur every time. A qualified entrepreneur should discriminate whether the idea is benefit for the business if it comes into realize. If there is no value of a idea, its development should be stop.(Hisrich, Peters, Shepherd,2010) So the entrepreneurship also has a potential guidance force on innovation, which is actually from the economic market.

"Economic development is a term that generally refers to the sustained, concerted effort of policymakers and community to promote the standard of living and economic health in a specific area. Such effort can involve multiple areas including development of human capital, critical infrastructure, regional competitiveness, environmental sustainability, social inclusion, health, safety, literacy, and other initiatives."

The relationship between innovation and economic development, firstly, which has mentioned above, is like a screening system. To develop the economy, the economic market will screen the ideas whether they take positive effect to the market. Because there is process from creativity to innovation.(Lumsdaine, Binks, 2007) business decision makers will evaluate the ideas if they are benefit the business. That is to say, the economy growth intention can be a force to influence the direction of innovation.

Then innovation will be more flourishing due to the economic development. Because economic development will lead to a more freely market, which can largely help the people open their mind and produce innovations. Also, high-level economic development means that there is enough investment in innovative activities.

For another hand, innovation guarantees the high-speed development of economy.

According to Linsu,1999, innovation can occupied more than 50 percent of long- term economic growth in some developed countries.

Eddy Chan, Commissioner for Innovation and Technology, also stated that innovation is one of the major forces to promote the economic development.

In the globalised market, all the countries and companies compete with each other in order to occupy positive position in the economic market, innovation is the key factor to increase the competitiveness. It can be proved that innovation plays a important role in the rapid growth of emerging economies. for instance, as for "the increasing innovation activities in China and other fast-growing emerging economies, it is certainly playing a role in their convergence with more advanced economies." (chandra et al,nd)

Also, Innovation,which is the "the attempt to try out new or improved products, processes or ways to do things", includes lots of fields such as economic activities, new products and process.(Kline and Rosenberg 1986, Bell and Pavitt 1993) therefore, even in a small company, a lot of innovation may be applied to the business and lead to a large economic effect. (von Tunzelmann and Acha, 2004).

In 2008, the department of Labor WIRED (Workforce Innovation in Regional Economic Development) and the BASIC( Bay Area Science and Innovation Consortium), prepared a innovation-driven economic development model and show how the"regional innovation brokers" to create more globally competitive economies. (WIRED,BASIC,2008)in this model, it proves that innovation is inextricably linked with regional environment of economic market and produce a large effect to promote the economic development.

Entrepreneurship also makes a positive effects on economic development, especially on the economy growth area. However, not all entrepreneurship will promote the economic development. Because not all tries of the business will be successful. Actually, the process from a idea to real products in the market,it is quite difficult to be successful. Many of the trials failed. A well entrepreneurship may help the business check and analysis the risk of innovation so that it largely increase the probability of getting successful.

In addition, it should be noticed that a important link between entrepreneorship and economic development is entrepreneur. To quote naude (2008),


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