The Relationship between Entrepreneurship, Innovation and Economic Essay

The Relationship between Entrepreneurship, Innovation and Economic Development - Essay Example Economic theory provides a set of thoughts and methods for examining the distribution of limited resources. Unless entrepreneurship ultimately develops products from limited resources, it can be of minimum economic interest, even though it may possess greater social significance. The idea of selection and therefore decision making is essential to economic theory. Entrepreneurship acts as an individual quality which allows certain persons to make decisions with long run outcomes. When economic development is viewed from historical viewpoint, the role of an entrepreneur arrives into central focus. By acting in different ways, entrepreneurs can achieve success which causes other people to change their thoughts and therefore help to alter the historical economic progression. Entrepreneurial efforts are needed for developing an enhanced distribution of resources and transmitting their significant experience to other nations. If two nations differ in their talents of entrepreneurship, then there will be a propensity for developments to invent new things with the copious ability of entrepreneurs. If there is lack of native entrepreneurs in any nation, then foreign entrepreneurs from economically prosperous nations enter the backward country and develop new innovation through proper distribution of resources. At a macroeconomic level, an entrepreneur plays a vital role in the establishment of organizations. Economic theory suggests that there is close relation between personal qualities of entrepreneur and economic success of organization. One of the most exciting aspects of successful entrepreneurs is that they are often drawn from marginal groups in society which try to find alternative possibilities of social progression near them. Thus, it is evident that society and its traditions have a significant impact on the development of entrepreneurs (Casson, 2003). Schumpeter had defined the â€Å"entrepreneur as innovator† as one who drives economic development. A ccording to Peter F. Drucker, â€Å"Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service.† The innovative activity of entrepreneur nourishes the pioneering procedure of creative destruction by initiating continuous instabilities to the economic system and by generating prospects for economic growth. Schumpeter’s theory expects that an entrepreneur can contribute in economic development (Wong & Et. Al., 2005). He was of the view that an entrepreneur can innovate, motivated by competition to develop technology, business and organizational structure. He characterized innovation as an â€Å"industrial mutation† which continuously transforms the financial structure and destroys the existing ones. The procedure of creative destruction is a vital element of entrepreneurship (McCraw, n.d.). Creative destruction is made on dynamic, cautious and commercial efforts to modi fy market arrangements and can be favourable for further innovations and revenue opportunities. Schumpeter’s business cycle is viewed as the outcome of innovation which involves the development of new thoughts and its application in a new product, procedure or service. It can result in the dynamic development of a national economy,