What is Entrepreneurship?
The word entrepreneur is derived from the French word entreprende, which means to ‘undertake’. The Webster Dictionary explains that the term entrepreneur is applicable to one who organizes, manages and assumes the risks of a business or enterprise.
John Galbraith, a noted economist, who had also served as the ambassador of the US to India, observed that there are many aspects of life in India that can be rather daunting for the uninitiated.
Entrepreneurship has to be ready to deal with uncertainty; but, in India entrepreneurs are likely to be faced with a greater degree of uncertainty than in the developed world. On the other hand entrepreneurs in India currently have a very progressive regulatory framework and have access to many exciting market opportunities.
The Global Entrepreneurship Monitor (GEM) report in 2007 observed very high incidence of entrepreneurship throughout the world, particularly in Asia, with Thailand and India leading the way.
Through this article we will identify and discuss the many benefits afforded to Indian economy through entrepreneurs and entrepreneurship and the disadvantages of the same and draw conclusions on the overall impact of the entrepreneurs.
Positive Impacts of Entrepreneurs
1) Innovation
Individuals often resort to entrepreneurship for one of the following reasons:
- They find a market niche and have the solution to profit from such niche
- They have been unable to find suitable employment or a suitable means of income and therefore have resorted to using their creativity to generate an income for themselves
- They have the technological know-how and the financial resources (or able to source all of the above) necessary to generate income by satisfying a need in the marketplace.
2) Job Creation
As stated in the previous section one of the main reasons that individuals tend to become entrepreneurs is because they are unable to find suitable jobs. As a result, by being enterprising, creative and finding a market niche, not only are they able to generate an income for themselves but also to employ other individuals in their business operations. Therefore one of the most positive impacts that entrepreneurs make on an economy is job creation and the reduction of unemployment levels within that economy. In developed countries, we see that almost 40 – 50% of the workforces are employed in small and medium scale business enterprises that were started up by very enterprising individuals. Likewise in countries like India we see that millions of women have been able to pull their families out of poverty through self employment and entrepreneurship that has been made possible by different Non Governmental Organisations and due to the availability of such resources through micro finance etc. Africa is another good example of small scale entrepreneurs helping to reduce poverty and help many avoid destitution. Therefore based on everything that has been stated above it is apparent that entrepreneurs can cause a great degree of impact on an economy through job creation and income generation.
3) Increased Competition
Another positive impact of entrepreneurship on an economy is the increasing level of competition in that economy as new entrepreneurs joins the fray in existing domestic markets. While one may venture to say that this will only lead to market saturation, the upside of such a phenomenon is that it causes all the players in the market to re-evaluate their operational capabilities, increase value addition, lower costs and become more efficient. Thus it can be stated that competition reduces likelihood of monopolies and oligopolies in the marketplace and is beneficial to the customer and the economy as a whole.
4) Increased Productivity
One of the advantages of increased competition in an economy is that individuals and firms continue to source methods that can better improve their operations; use resources more efficiently and most importantly reduce costs while adding value. All this often results in an increase in productivity in an economy and increase in the gross domestic product (GDP), which is indeed a benefit for the economy.
5) New Markets
As stated in the previous section increased competition in the marketplace can cause saturation and as a result many entrepreneurs maybe driven to seek new markets for their products and services or adapt market penetration tactics. Either way such a phenomena of increased competition, which ultimately causes individuals to look for new markets can be considered as a positive impact on the economy and therefore entrepreneurs can be considered to play a very important role in the economy. As integration of economies continues due to globalization entrepreneurs often tend to look for markets that are outside of their domestic sphere thus generating foreign revenue and increasing the prosperity of the economy as a whole.
Negative Impacts of Entrepreneurs
The single largest negative impact of entrepreneurs on an economy is the plundering of resources, which can have a disastrous affect on the environment. While such negative impacts are mitigated to some extent in developed economies due to the enforcement of environmental protection standards and regulations, this is not the case in developing economies. Further entrepreneurship requires a certain degree of business knowledge and awareness, without which entrepreneurial ventures can often fail, which can also cause many financial hardship that in extreme cases can even lead to destitution.
Social Entrepreneurship
Today we see the realm of social entrepreneurship growing exponentially which is a very positive sign and has helped to draw millions out of poverty, decrease unemployment, decrease the number of people dependent on social welfare and all in all uplift the living standards and quality of life of millions. Further social entrepreneurship initiatives are also often seen as ‘green initiatives’ that take into consideration the impact on the natural environment and therefore strives to keep this at a minimum, thus increasing awareness about such issues, avoiding plundering of natural resources and conserving the environment wherever possible. Therefore it can be stated that the negative impacts of entrepreneurs on an economy can be mitigated to some extent through social entrepreneurship.
Women form one-third of early stage entrepreneurs in India
When it comes to entrepreneurship, Indian women are fast catching up with men as entrepreneurs, as a recent global survey pointed out that among all early-stage entrepreneurs, around one-third or 32% are women.
The Global Entrepreneurship Monitor (GEM) Survey 2013, touted as the largest annual study of entrepreneurial dynamics in the world, stated that most of the early stage entrepreneurs fall in the age group of 25-34 years.
Around 61% of people in India consider entrepreneurship as a good career choice, it said, adding that a large number of women are getting involved in starting and owning-managing new business in the country.
Final Thoughts
Based on everything that has been discussed above it is apparent that the positive impacts of entrepreneurs on an economy far outweigh the negative impacts. Job creation, reduction in unemployment levels, increased competition, opening new markets, increasing productivity, foreign income generation and poverty alleviation are some of the positive impacts that entrepreneurs have on national economy. However this is not to say that there are no negative impacts such as the wastage and plundering of resources, yet taken as a whole it is apparent that the entrepreneurs positively impact an economy.
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