Entrepreneurship And Innovation
Innovation and entrepreneurship are closely related business concepts and are often mistakenly used interchangeably although they are distinct concepts. The idea of entrepreneurship encompasses a wide variety of activities and goals. Thus, according to Drucker (2015), scholars have presented varying definitions mainly touching on the creation of an organization to create value. Sobel (2017) defines entrepreneurship as the process of discovering new ways of combining resources to create value. In effect, an entrepreneur is a person who initiates a business and takes a risk to create value by incorporating new patterns of doing business (Drucker, 2015). Innovation, on the other hand, can be defined as the process creating new ideas and implementing them into new products, services, and business processes so as to meet business goals (Drucker, 2015). Therefore, innovation involves the use of information, creativity, and initiative to create ideas that come up with new goods and services that satisfy customer needs.
Similarities and differences and the between Entrepreneurship and Innovation
Entrepreneurship involves the establishment of new business ventures, and as such, the entrepreneur faces a risk of loss emanating from business failure. Thus, to ensure business sustainability, entrepreneurs incorporate new ways of doing things or innovation to promote growth and competitiveness. Just like entrepreneurship, innovation involves the incorporation of new, untested ideas, products and services thereby also creating risks. These two concepts are therefore similar in that they include the process of establishing something new through risk taking (Stokes et al. 2010). In a business environment characterized by heightened competition and constant change, entrepreneurial attributes can no longer guarantee the success if e new venture. Thus entrepreneurs incorporate innovation ideas that address inefficiencies in the existing modes of operation and products to reduce the risks involved in a particular venture. Ultimately, entrepreneurship and innovation share the common goal of ensuring the sustainability of an investment thus creating economic and social benefits (Allocca & Kessler, 2009).
When innovation and entrepreneurship are utilized successfully, they have an undeniable potential to bring about significant social and economic change (Drucker, 2015). In recent years there has been increased recognition of the significant role played by innovation and entrepreneurship in bringing about social-economic change (Abu-Saifan, 2012). Entrepreneurship and innovation, therefore, have been key contributors to the economic and social development of many states through the introduction of new technologies and industry which in turn create jobs and overall welfare of the people (Kritikos, 2014).
Economies like the United States and Japan rely heavily on innovation and entrepreneurship as key drivers of the economy. Tesla Motors, for example, has been successful in the revitalization of the declining U.S motor industry and has created more than 25,000 jobs in the face of heightened unemployment. Besides the economic benefits through innovative and entrepreneurial skills, Tesla Motors has created an innovative product that limits environmental degradation caused by the combustion of fossil fuels by conventional cars (Morris, 2015). Thus, innovation positively contributes to the economy by creating more competitive products and using more efficient processes that make those products appealing to customers. In turn, increased demand for such products creates more job opportunities and finances which contribute to society through taxes. Similarly, entrepreneurship brings about new possibilities both for firms and prospective workers as well (Kritikos, 2014).
In the last decade, entrepreneurship and innovation have had a significant impact on society, especially in the developing world. The advent of telecommunications technology has especially had significant social-onomic consequences across the globe. In Kenya for example, access to cell phone technology saw the introduction of M-Pesa an entrepreneurial venture by Safaricom and Vodafone mobile service providers, and in a country where a majority of the people lack access to formal banking services, the money transfer service quickly embraced by the population (Runde, 2015). By 2013, 43% of the country’s GDP was flowing through the service which besides providing financial inclusion to many also saw the creation of thousands of business opportunities for ordinary people seeking to provide services including money transfer, bill payment, and microcredit under the platform. Similar services have since sprung up across other nations like India and Bangladesh that previously faced similar problems (Runde, 2015). From these examples, it is clear that entrepreneurship and innovation in the telecommunication sector have socially and economically empowered many people.
As previously observed, entrepreneurship and innovation are beneficial in because they provide a way of solving existing social-economic problems. Innovation benefits the entrepreneurs by providing more effective ideas that increase their competitive advantage and efficiency leading to a greater creation of value. Innovation also helps society through eliminating redundant and inefficient establishments through “creative destruction” which creates new industries prosperity and jobs (Mazzucato, 2013). On the other hand, entrepreneurship provides many benefits to the entrepreneur. First, when ventures succeed, they provide the entrepreneurs with the opportunity to accomplish their economic or social goals. Thus the accomplishment of these goals brings about increased self-esteem, and personal fulfillment as society often honors successful entrepreneurs. Also, entrepreneurship provides an opportunity for people to become independent in their undertaking by becoming their own bosses (Holden, 2011)
Detriments of Entrepreneurship and Innovation
While entrepreneurship and innovation certainly offer a myriad of benefits to society, they can at times have negative impacts as well. Innovation, for instance, is often characterized by increased use of technology which results in decreased reliance on human labor. Thus, there is a potential risk of unemployment if innovation overly relies on automation. Moreover, as innovation eliminates inefficient businesses, it often leads to a decline of the informal sector from which millions of people rely on as a source of income and can thus lead to the social and financial exclusion of many( Sobel, 2017). Moreover, innovation and entrepreneurship heavily rely on capital and knowledge which are not accessible to all thus increasing the potential for financial exclusion especially when geared only towards financial gain.
Entrepreneurship and innovation involve the bearing of heightened financial risks, and as such, many people are faced with a real threat of financial loss resulting from business failure as 40–50% of startups fail within the first five years. Furthermore, entrepreneurship and innovation lead to new industries and technologies that increase environmental degradation and intellectual property rights violations (Kritikos, 2014).
Innovation and entrepreneurship have a tightly intertwined relationship. They complement each other whereby innovations transform inventive ideas into products that appeal to customers while entrepreneurship offers a way of managing innovation by initiating new business prospects. Together, innovation and entrepreneurship have the capacity to bring about social and economic change in society through the identification and elimination of existing problems. For innovation and entrepreneurship to succeed, they require adoption new ideas and products which present uncertainty and risks. Therefore it is important for policymakers to create conducive environments for innovation and entrepreneurship.
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