Why Entrepreneurship is Important to the Economy

By David S. Chang

Entrepreneurs are becoming increasingly important to the global economy. What separates America from the rest of the world is a strong entrepreneurial culture. Failure is not looked down upon as other countries. Many top college graduates in the U.S. aim to start their own business, whereas many other countries’ top graduates would rather be a civil servant or work for an established company.

In the 1980s many experts believed that Japan would overtake the U.S. economically. They were making better products, at a lower cost, and more efficiently. What these experts didn’t take into account was the entrepreneurial spirit of America. These entrepreneurs created a new tech sector, with companies like Yahoo, Google, and Amazon leading the way.

Entrepreneurship is critical to any economy for three primary reasons:

1. Economic Growth

Many new products and services are created by entrepreneurs. These new products and services produce a domino effect, where it stimulates businesses to support the entrepreneurial venture. Studies have shown that new and young businesses started by entrepreneurs account for the majority of new jobs created.

Entrepreneurs drive economic growth and create jobs at an a faster rate than big companies. Small businesses employ close to 60 million people, almost half, of all workers in the U.S. In the United Kingdom, more than 15 million people are currently or have been employed by a small business.

2. Innovation

Entrepreneurship also drives innovation. Entrepreneurs look to create new technologies or improve upon something in a better way. Economies need constant innovation, especially transformative or disruptive innovation, that significantly increases productivity.

Entrepreneurs are often the first to exploit an opportunity in specific markets. Think Steve Jobs and the iPod, which was able to put thousands of songs in a small device. The iphone and ipad followed, which in turn created a billion-dollar app market.

Entrepreneurs through trial and error create new products and services, as well improve upon existing ones. These innovations not only transform consumers’ lives, but also become platforms for many other industries that, in combination, fundamentally change entire economies.

Photo by Ruijia Wang on Unsplash

3. Productivity

In addition to innovation, entrepreneurs help increase the productivity – creating more output per unit of input. As businesses become more productive, costs fall, profits and incomes rise, which results in expanding demand, which in combination spurs economic growth and job creation.

Entrepreneurs find ways to make products or services more productive, increasing the ability for a worker to increase his or her output. In other words, they focus on achieving more with less. This helps promote more competition, which in turn promotes more innovation.

Being an entrepreneur can be quite rewarding, but can also be difficult. Many businesses fail within the first several years of starting. One way of increasing your chances of success is to take some courses or get a degree. There are plenty of opportunities to get a business degree online, like Aston University’s online MBA degree. A degree can give you the knowledge and skills you need to avoid common mistakes. More importantly, it will give you a network that you can tap into!

David S. Chang

Award-Winning Entrepreneur, Wealth Manager and CEO | Chief Editor, Author, Keynote Speaker, Consultant ArtofThinkingSmart.com | Political Consultant | Army Officer National Guard | Living To Fulfill Needs, Solve Problems, and Live Passionately!

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