Entrepreneurship and Socioeconomic Development
What is the true role of Entrepreneurship in promoting the social and economic development of a country or region? Is the phenomenon of Entrepreneurship capable, on its own, of leverage the development of a society? Under what conditions can it do this?
According to the United Nations, “The Entrepreneurship hypothesis being linked to economic growth, finds its most immediate foundation in simple intuition, common sense and pure economic observation: activities that turn ideas into economic opportunities are at the heart of Entrepreneurship. Entrepreneurship is a source of innovation and change, and as such, it prompts productivity improvement and increased economic competitiveness.” (United Nations, 2005). “As regard both qualitative issues and quantitative dimensions of economic development, Entrepreneurship can make a positive contribution. This phenomenon is, generally described, as important for economic development, since it boosts job creation, alleviates the tax burden, and provides competitiveness to the economies” (Naudé, 2008).
Currently, two main models that seek to explain the correlation between “Entrepreneurship” and “Economic Development” can be identified. These are: the Wennekers and Thurik model (1999) and the GEM (Global Entrepreneurship Monitor) research model. Both put emphasis on the individual, the entrepreneur. Entrepreneurship is, above all, an innovative and proactive attitude. According to these studies, macroeconomic policies to encourage entrepreneurship are a very important factor, but not enough to stimulate economic development through entrepreneurship. It is necessary to develop entrepreneurial qualities in individuals, arousing in them the passion for undertaking. This view is shared by other authors. Murphy (1991) emphasizes that “entrepreneurial talent” is extremely important, influencing in a decisive way the size of companies and the growth of the economy. It is suggested that, in the perspective of the economic growth of a society, “it is very important that the most talented and capable become entrepreneurs” (Murphy, Shleifer, & Vishny, 1991).
Taking all this into account, and considering what has already been said about the concept of “Entrepreneurship”, it seems consensual that entrepreneurs can be a key element in the development of societies. But is it always like this? Effectively there can be what can be called of “bad” Entrepreneurship. Many authors, such as Murphy (1991), Baumol (1990), Acemoglu (1995), Mehluma, Moene, & Torvik (2003) claim that more talented and capable entrepreneurs tend to look for activities that are “more prone to profit, and not necessarily socially more useful” (Murphy, Shleifer, & Vishny, 1991).
The “entrepreneurial capacity” of the individual is then the key factor for a “positive entrepreneurship” in the sense of being a facilitator of the economic and social development of a country or region. Focusing the discussion on this point, how can the entrepreneurial capacities of individuals be improved? “Entrepreneurial skills can be improved through the acquisition of experiences, of schooling (…)” (Holmes & Schmitz, 1990). There seems to be
evidence that the way knowledge is shared is extremely important. “Learning by doing” seems to be the right way to boost entrepreneurial skills. “Entrepreneurship is best apprehended through the variety of educational experiences and real-life experience” (Consortium for Entrepreneurship Education, 2011).
In conclusion, it is fundamental that society in general, and official institutions in particular, actively promote “Positive Entrepreneurship”, which is based on the empowerment of the entrepreneurial capacities of each (and everyone), directing entrepreneurs to sustainable activities and businesses, both socially and economically, but also (and not least) environmental. “Experiences in some countries empirically evidence that entrepreneurship can be improved through, for example, education, culture, entrepreneurship awareness as an occupational choice, and through learning by doing” (Naudé, 2008).
Till next post!
Marco Libório
UWU Solutions CEO / Consultant / Lecturer