Entrepreneurship is a complex term that’s often defined basically as running your own business. But there’s a difference between a “businessman” and an “entrepreneur,” and although one can be both, what differentiates entrepreneurship is a person’s approach. Entrepreneurship is a mindset. It’s a way of thinking and acting. It is about imagining new means to solve problems and create value. The concept of entrepreneurship can be supported by economic theory such as the school of thoughts. The economic themes include Uncertainty (French – Cantillon, Say), Equilibrium (Austrian – Kirzner), Innovation (German – Austrian – Schumpeter) and others. Entrepreneurship can take place through inventions or/and innovations. In its simplest way, Invention can be defined as the creation of a product or introduction of a process for the first time whilst innovation, on the other hand, occurs if someone improves on or makes a significant contribution to an existing product, process or service. Nowadays entrepreneurs are often involved in ether radical innovations or incremental innovations rather than inventions. An entrepreneur combines and utilizes all the factors of production and risks his resources in order to be successful. Famous entrepreneurs such as Bill Gates, Steve Jobs and Mark Zuckerberg have completely transformed their markets and they are one of the wealthiest people in the world after their product was a successful hit. Thus a life of an entrepreneur has ups and down before they become successful.
Economic development usually refers to the adoption of new technologies, the transition from agriculture-based to an industry-based economy, and general improvement in living standards.
Economic development is often done by entrepreneurs and sometimes. A new product in the market benefits others if it is successful. Innovation is divided into 2 parts, radical innovations, and incremental innovations. Incremental innovation is a series of small improvements or upgrades made to a company’s existing products, services, processes or methods. Gillette may not be one of the great innovation leaders but in actual fact, the brand is a great example of a company that has used incremental innovation to stay ahead of the competition. Gillette razors started life with a single blade but their product has evolved, adding different features and more blades as the company has sought to better meet customer needs. Big companies have been modifying and updating their products now and then to stay ahead in the market as Coca-Cola has been adding new flavours such as Cherry Coke, Coke with Lime to keep their brand alive and ahead. Competition often leads to innovations. Hence a good enterprise requires incremental innovation to stay ahead in the game with their competitors. This led to consumers getting more variety and high-quality products which eventually led to high living standards.
However radical entrepreneurship is believed to be the key to economic development. Radical innovation is another type of innovation that has a significant impact on economic activity that leads to a new market and value network and eventually disrupts an existing market and value network, displacing established market-leading businesses, products and alliances. With the modern technology nowadays, there’s been a lot of radical innovations in the last few decades. Amazon stood out as truly newsworthy when it launched its Dash Buttons, little Wi-Fi associated gadgets that enable you to reorder family unit basics, for example, bathroom tissue, razors or washing powder at the snap of a catch. Both the innovation and the plan of action of depending on repeat orders are both and thus it disrupts the supermarket or grocery business as customers are likely to order online then visit the store. Entrepreneurship is not the same as innovation but successful entrepreneurship requires innovation. These innovation does not only change the market but also destroys the previous market. This is called creative destruction by Joseph Schumpeter. As the market is transformed by radical innovation it leads to a new market where the entrepreneur hires people and thus jobs are created. A consumer also benefits from a life-changing product.
However, this destroys the previous market and hence the products become of less value and outdated. People also lose jobs and become unemployed. The creation of Spotify disrupted the CD, DVD and MP3 companies.
One of the characteristics of an entrepreneur is that they are risk takers. This often involves uncertainty. However, uncertainty and risk-taking are not the same. Uncertainty is a situation where the entrepreneur is unaware of the outcomes while risk-taking is a situation where there is a chance of damage or loss. An entrepreneur can be enriched with knowledge and thus can judge the outcome to be less uncertain. Entrepreneurs get used to uncertainty because they see no other alternative. Entrepreneurs overcome uncertainty because they are certain about their idea. So knowledge is the key factor here. However, uncertainty can be determined by the type of innovation. Incremental innovations have less uncertainty and less likely to make a significant impact on the industry whilst radical innovations often involve a high level of uncertainty and it is likely to make a huge impact on the market if it is successful. All entrepreneurs are uncertain at one point but the uncertainty drives an entrepreneur as it has great incentives than something that is certain. Hence Radical innovation has greater uncertainty as it involves transforming a certain industry completely and could make a lot of money in the meanwhile as competitors take time to get into the new market. Such as Amazon transformed the shopping market totally and the competitors took a while to get into the market while they made the brand name and reputations.
The modern economic theory used nowadays to explain entrepreneurship is innovation. Some entrepreneurs believe this gives them a sense of direction. Joseph Schumpeter believed radical innovations lead to creative destruction.