ED/U4 Topic 1 Role of Entrepreneur in Economic Growth as an innovator
Entrepreneurs play a vital role in economic growth of a country. Economic growth is a process by which the per capita income and total income of a country increases during a given period. Entrepreneurs serve as the catalysts in the process of rapid industrialisation and economic growth. In the process of economic growth of a country, the entrepreneur plays a motivator role. The process of economic growth cannot proceed onwards without the active support of the entrepreneur. It is the entrepreneur who collects the natural, economic, human and technical resources of a county and exploits them in the economic growth of a country. An entrepreneur is more a true leader of economic progress. He is by nature a visionary. He has innovative attitude. He loves risk-taking behaviour. He contributes to economic development in many ways, viz., capital formation, technological breakthrough, innovating skill, market expansion and organisation of productive resources. He scents new market opportunities and takes the
creative decisions to exploit them. The major role of an entrepreneur in the economic growth may be summarised as under :
(1) Role of an Entrepreneur in Economic Development: One of the most important and basic role of an entrepreneur is to innovate. India would not have been discovered to western world if Vasco Diagama would not have sailed to India. The natural resources of Africa would not have been exploited if Britishers, French and Portugese would not have ventured there. Most of discoveries would not have been translated and implemented if entrepreneurs were not willing to establish units for setting up industries. The development of railways, telecommunications, agriculture and industry has been possible due to innovations. Entrepreneurship essentially means doing things that are not generally done in ordinary course of business. An entrepreneur discovers and develops new ideas, new product, new methods of production, opening new markets, new sources of supply of raw-material, new type of industry, new enterprises, new methods of solving business problems, new organisations, new combinations, and new opportunities. Innovation is the process of putting new ideas into action. The higher the rate of innovation, the higher will be the rate of economic growth. He is a catalyst ofchanée. According to W.T. Esterbook, “Entrepreneur is an innovating giant who encourages production of new products in the industry, new techniques of production, new machinery, use of new raw- material, use of new technology and establishment of netv industries. ” According to Edmunds Bark, “Entrepreneur, in the true sense, is a greedy for new things. ” According to Peter F. Drucker,
“Innovator is always in search of changes and exploits it as and when the opportunity arises. “Innovation is the creative endeavour that creates wealth. Entrepreneurs develop new ideas and, from their ideas, establish new enterprises that add value to society. In fact, entrepreneurs create wealth by creating something new or different or by searching for new opportunities as they arise to inspire new ventures. Indian entrepreneurs have set up those industries which had opportunity. There has been fast growth of food processing, beverages, petroleum, rubber, plastics, fertilizers, caustic soda, steel, etc. Many sophisticated industries have also been set up but most of knowledge based industries have not been innovated by Indian entrepreneurs because of limited interest in R & D; they have been based largely on with foreign technical and financial collaborations.
(2) Generation of Employment Opportunities: An opportunities. An employment entrepreneur generates entrepreneur generates employment not only for himself and members of his family but also for others who work with him. However, the number will depend upon the size and requirement of the enterprise concerned. Indirectly, by setting up large, medium and small scale sized business units they offer jobs to millions. For example, if one hundred person become entrepreneurs, they not only create a hundred jobs for themselves but also provide employment to an army of unemployed youth. As the time passes, these entrepreneurs grow providing direct and indirect employment. Thus, entrepreneurship is the best way to fight the evil of unemployment and generate employment opportunities in the country. National Alliances of Young Entrepreneur (NAYE) is rendering
assistance to young entrepreneur in collaboration with public sector banks in the country. It helps in identifying potential projects, conducting project feasibility report and providing financial assistance and other logistic support to the young entrepreneurs.
(3) Role of Entrepreneur in Complementing and Supplementing the Economic Growth: In recent decades, the role of an entrepreneur has been to supplement and acclerate the pace of growth and economic development in both the developed and developing countries When an entrepreneur sets up an industrial or service unit it helps in economic growth. Similarly, when economy grows it creates opportunities for further growth. Thus, every economic growth has a multiplier affect; one complements the other and one supplements the other. When an entrepreneur establishes a bank it complements other economic activities as it helps further growth. When any
engineering and electronic unit is set up it requires components from large number of manufacturers. In most engineering, electronic and electrical industries like T. V. , refrigerators, computer growth of one large unit gives birth to a number of ancillary units. This is true not only for engineering and electronic industry but also for steel, textiles, chemicals, food processing and so on. Along with complementary development there is also supplementary development. When a spinning mill is set up it leads to development of thread units and cloth weaving units. When a computer hardware industry is developed it leads to the growth of software industry. The development of software industry led to its exports from India in a big way. Thus, one leads to growth of another activity.
(4) Bringing about Social Stability: Economic power denotes the power and wealth owned by an individual. Economic power is the natural result of the business activities. Establishment of large enterprises leads to concentration of econornic power in a few hands in the society. Such concentration has its own evils in the form of monopolies and monopolistic exploitation of the consumers and the society as a whole. Hence developing a large number of “small entrepreneur” helps in even distribution of economic power in a wider range, ultimately bringing about social stability. Entrepreneurs bring such stability also by generating self-employment and facilitating development of rural and backward areas. Generally, entrepreneurship is taken to be synonymous with small scale enterprises. Entrepreneurs have a definite social role and responsibility towards the society. They must act in ways that enhance the community’s well-being. Socially responsible behaviour of an entrepreneur not only helps the consumers and company but it also ensures social stability and order.
(5) Balanced Regional Development of Industries: Industrial development has a tendency to establish and develop industries, big or small, in metropolitan cities like Delhi, Mumbai and Chennai and in big towns, This brings to unbalanced regional development of industries. In this context also, entrepreneurs are required to play an important role in balanced regional development of dunes. They set up industries particularly in backward areas to avail the various concessions and subsidies offered by the Central and the State Governments. The Government of India and the State Governments are also trying to disperse the industries by establishing industrial estates and creating infrastructural facilities in backward areas.
(6) Role of Entrepreneur in Export Promotion and Import Substitution: Export Promotion refers to the policy of the govt. designed to encourage the exporters to export more goods from the country than before. An entrepreneur being an industrialist has a major role to play in export promotion. Export promotion reduces unfavourable balance of trade, decreases imports and increases exports. It also increases valuable foreign currency reserves. Various facilities, incentives and subsidies are provided by the Central and State Governments in the field of export promotion. Increasing number of entrepreneurs, both old and new, are taking benefits of incentives, conscessions and subsidies offered by the Government. Entrepreneurs establish units for meeting domestic and export demand of goods and services. He also looks opportunities for export promotion of surplus goods and services if he can export to international markets. For promoting export, an entrepreneur has to take many decisions and have to implement them. In short, he has to play following roles to promote export
(1) Exploring export promotion possibilities.
(2) Decision regarding entry in international market for export.
(3) Creation of demand in international market.
(4) Decisions regarding pricing and costing.
(5) Decisions regarding distribution or middlemen.
(6) Promotional decisions.
(7) Availing of export promotion schemes.
(8) Getting institutional support.