Relationship between entrepreneruship, innovation and economic developement

Topics: Entrepreneurship, Innovation, Economics Pages: 6 (1914 words) Published: December 5, 2013
Discuss the relationship between entrepreneurship, innovation and economic development. What role do creativity and problem solving play in this relationship? Refer to both theories and examples from the business world to support your discussion.

Since last century, entrepreneurship and innovation have been heavily discussed. Entrepreneurs create new business and provide the job opportunities to society as well as promote the economic development. However, with the increasing global economic competition, normal entrepreneurship becomes less competitiveness, government committed to develop innovative entrepreneurship in recent years (Cukier, 2006). Therefore, the relationship between innovation and entrepreneurship becomes one of the most significant topics in the business field. Economists do a large number of researches to explore the connection between entrepreneurship and innovation as well as the position they related in economic development. During the process of exploring, a considerable amount of definitions are put forward by experts based on their research knowledge and the analysis of entrepreneurs developed in recent decades. This essay will list the definitions put forward by different economists, then support the ideas that innovation, entrepreneurship and economic development are deeply connected and interacted. Finally, combine with the experience of university group entrepreneurship project, attempt to explain importance role that the creativity and problem solving played in this process.

Definition of the innovation and entrepreneurship is colored by different economists according to their observation, research and knowledge. From the innovation perspective, one of the most important definitions is related to the Joseph Schumpeter, a pioneer of the innovation management, who put forward a theory according to his early studying. Schumpeter (1934) defines innovation as the combination of new goods, new methods of production, the opening of new markets, the conquest of new sources of supply and the carrying out of a new organization of any industry. Jocabs (2007) list several definitions in her article based on her study: Peter Drucker believed that innovation is a process that change and creates a new dimension of performance; Jose Campos, director of the Center for Rapid Innovation considered that innovation is kind of the ability to which can deliver value to a customer; David Schmittlen has a deeper opinion, he believed that product is not the only factor innovation related, the processes and approaches to the marketplace is where innovation occur. All these definitions have their limitations and emphasizes, but with the change of the social and economic environment, innovation may have a wider meaning such as Regins Cabral mentioned in his opinion which connect the innovation with the network.

From the entrepreneurship perspective, the word “entrepreneurship” related to many meanings. In the second volume of The Isolated State (1850) provided by Johann von Thunen, he defined the entrepreneurship as a way which earns profits after cutting over all the expenses such as payments to capital, labor and insurance, and needs to take unpredictable risk. Risk part in this theory was supported by Frank Knight, and he believed the only risk that leads to profit is a unique uncertainty resulting from an exercise of ultimate responsibility which in its very nature cannot be insured nor capitalized nor salaried” (Knight, 1921). Joseph Schumpeter is one of the most influential economists in the history. His theory of entrepreneurship heavily based on his innovation theory and roughly experienced three stages. In the early stage of his studying, his notion of entrepreneurship emphasized newness and innovation, and aimed at encouraging economic development (1928). Later, with more research had been done; Schumpeter gave up the risk-taking, one of the characteristics of entrepreneurship which is agreed by von...
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