What impact do entrepreneurs have on society?
Successful business owners create so much good – both on a national and a local scale – that the weight of their importance to economic development cannot be measured in purely monetary terms.
The entrepreneur is a resource, as well as an individual in their own right. The successful businessman or woman – whom is likely to have created a product or service of note, built a substantial customer base and turned over a profit in a period of financial doom-and-gloom around the globe – naturally has a wealth of insight, intelligence and innovation to offer.
But what are the benefits – and drawbacks – of an entrepreneurial society?
The benefits and importance of entrepreneurship in society
The bottom line of vibrant entrepreneurialism is that it creates wealth: for the entrepreneur, for the people that are employed as a result and for the local economic development. It creates wealth on a national scale for the government in the form of taxation, which is then redistributed accordingly to the services and communities that need it the most. Entrepreneurship benefits national income.
The success of an entrepreneur is ultimately in creating a product or service that adds value to the lives of its users; whether that is an inherent need for the item or a simple desire to have it. Either way, an innovation on this scale can help to push a market forwards on a domestic level, and – where relevant – drive exports to new overseas markets. This again is a wealth-creating exercise, which is a key driver of economic growth.
Often an entrepreneur has to take a risk or two to enjoy success, and it is this spirit which serves as a wake-up call for many an ailing industry and economy. As such, it is those governments that cultivate a sense of entrepreneurialism – through an effective economic and legal framework – that will reap the ultimate benefit. Prosperity is a two-way street after all.
Successful entrepreneurialism often requires the skills and labour of many hands; and that necessitates job creation. As a thriving business grows so do the opportunities for others and the cumulative impact of new start-ups in a particular geographical area will go a long way towards cutting queues at the job centre.
This facilitates economic development benefits – employees with money in their pockets will naturally spend them on local goods and services. It also helps to push societies forward too: it is well documented that unemployment causes crime, poverty and a gamut of physical and mental illnesses; adding further strain to already stretched health services.
Success in business generally has a cascading effect, and so a range of stakeholders can expect to flourish from entrepreneurial growth. Suppliers, retailers, storage facilities, courier services, recruitment agencies... any or all of these can benefit from a local company that is thriving. This helps to create jobs in these firms too, and so the cycle continues.
In the UK alone more than 15 million people are employed by small and medium businesses; many of which will have been born out of an entrepreneurial spirit.
Often the statistics are hard to measure – not all entrepreneurs wish to boast of their charitable activities – but it is fair to say that many successful business owners, some of whom will have come from financially insecure upbringings, are keen to redistribute their new-found wealth to charities and local community ventures.
As a survey conducted by Harris Interactive and Ernst & Young entitled ‘Entrepreneurs & Philanthropy: Investing in the Future’ testifies, 90 per cent of entrepreneurs donate money and 70 per cent donate a resource that is just as important: their time. A third factor, and one which cannot be overlooked, is that most entrepreneurs are successful because they were able to identify market opportunities or leverage profit from economies of scale. This kind of knowledge can be indispensable to non-profit organisations.
Necessity is the mother of invention, as the saying goes, and so perhaps its older sibling is innovation. Most entrepreneurs enter a market successfully thanks to their innovative approach: whether that’s inherent in the product/service they offer, or in the way in which they deliver it.
By finding a solution to a problem – whether it was explicit or merely an opportunity for competitive advantage, an entrepreneur can drive innovation in a market and create competition; a theorem that results in better and often more affordable products and services for consumers. Steve Jobs and his Apple colleagues invented the iPod, and this created an area of innovation in MP3 players. Today, this is a vibrant industry with many competitors; which has created technological excellence at the top end of the market and perfectly functional products at the budget end. Who wins? The buying public.
Success breeds success, and once one entrepreneur has flourished in a given market more often than not another businessman or woman looks to enjoy their own slice of the pie.
As we know, competition is a good thing for the consumer, as it requires companies to delivery a better quality product in order to survive. This can also create price wars (take a look at the ongoing battle between the Xbox and PlayStation as a good example), and it is true that often only the strongest will prosper. But the benefits to the general public are obvious.
You could be forgiven for assuming that the work of entrepreneurs is solely positive, but unfortunately there are some concerns attached to entrepreneurial activity...
Use of natural resources
While there is a subset of business owners whom we can class as social entrepreneurs, unfortunately not all are blessed with an environmental conscience.
Pretty much every company that operates today uses natural resources in some way – electricity, water, gas, paper etc – and this is simply unavoidable. Some entrepreneurs will offset their use of resources by donating to relevant charities and organisations; a form of self-taxation, if you will. Alas, not all do.
While no relevant statistics exist to back up this theory, it is believed that governments that seek to nurture entrepreneurship can actually unbalance a market by creating an environment which can be exploited by business. This can manifest itself in monopolies, unfair pricing, corruption and even fraud.
Furthermore, Wim Naude, a prominent economist and scholar at the Maastricht School of Management, writes: "While entrepreneurship may raise economic growth and material welfare, it may not always result in improvements in non-material welfare (or happiness)."
Of course this is not true in all cases, but it can also be said that while one new market entrant flourishes, so too must an existing company – who is unable or simply unwilling to compete with this innovative new player – depart the scene.
This is often the case in the UK retail sector, where a national chain may open a new store in a village or town which forces independent, local retailers into a forced ultimatum: slash prices or die.
The upshot? Unemployment and a huge sense of injustice.
Entrepreneurship: The money line
You will make your own mind up as to where entrepreneurs sit on the societal benefit/drawback continuum, but it is clear from numerous high profile examples that an entrepreneurial spirit, channelled with good intentions, can foster so many positives in a community and on society as a whole.
Many observers are resistant to capitalism through their own attitudes and philosophical misgivings, but when a successful entrepreneur is doing so much to put money in the pockets of the many – either directly or indirectly – it is hard to make an argument against such a force for good.
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