Since the beginning of 21st century, entrepreneurship has become much more popular. It is published by Yoodoo that during the first six months of 2010, there is a total of 204,361 new firms which is a 51 percent rise on the first six months of 2008 established in the UK (BBC, 2010). There is obviously a reason why entrepreneurship is prevalent that researches have shown that entrepreneurship can not only make fortune for entrepreneurs but also motivate the economic development (Hisrich, et al. 2010). However, to develop economy by entrepreneurship, innovation is an essential element if more profit and fortune are desired through entrepreneurship. The increase in innovation courses in universities reveals that innovation has been attached more and more importance to as the key to the entrepreneurship and further economic development (Legrenzi, 2005). This essay will explain the relationship between innovation, entrepreneurship and economic development in three parts. It will be stated that innovation is the foundation of successful entrepreneurship in the first part. Additionally, the significant role of creativity and problem solving in the relationship between innovation and economic development will also be explained. The second part will illustrate that entrepreneurial innovation would motivate economic development from the view of developing and developed countries. In the last part, the impact on entrepreneurship of economic development will be analyzed finally.
Entrepreneurship and innovation are inseverable because entrepreneurship is the execution of innovation. The definition of entrepreneurship referred to this essay is the process of combining many inputs in a new way in order to produce output and making profit by filling the gaps in the market earlier than others (Leibenstein, 1976). Schumpeter (2004) classified entrepreneurship into two types. One is catalytic and the other is allocating. Catalytic entrepreneurship is the act of catalytic entrepreneurs who create new production possibilities, ideas and concepts, while allocating one is to observe the opportunities catalytic entrepreneurs present in economic activity. However, no matter what type the entrepreneurship is, it cannot be apart from innovation which is the key to the entrepreneurship. Innovation is the foundation of successful entrepreneurship (Lumsdaine and Binks, 2007). It can be defined as commercial or industrial application of something new such as a new production, a new market or source of supply and a new form of business or commercial organization (Schumpeter, 2004). Catalytic entrepreneurship mainly refers to four kinds of acts of innovation: introduction of a new good, introduction of a new way of production, finding a new source of supply of raw materials and carrying out a new organization of an industry. For example, William Gates who is one of the catalytic entrepreneurs started his business relied on the innovation of creating Microsoft which is an unprecedented product and became the world’s richest man (Zcs and Sany, 2009). Allocating entrepreneurs always utilize the innovation of opening a new market for production needed (McDaniel, 2002). The expansion of McDonald restaurants is such a typical example of allocating entrepreneurship that so far McDonald has operated over 31,000 worldwide since the first restaurant was opened by Richard and Maurice McDonald in 1940 (McDonald’s Canada, 2010). Once a chain store is founded in a new promising area, the entrepreneur will always get extra profit on the basis of imitation innovation. In summary, entrepreneurship and innovation are in an interdependent relationship because entrepreneurship cannot be successful without innovation and innovation cannot be executed without entrepreneurship.
In the process of applying innovation to entrepreneurship successfully, creativity and problem solving play an extremely significant role. The importance of creativity and problem solving could be...
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