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How does Entrepreneurship Aid the Economy?

ArticleID 120  
Writer Isaac Thuku
Category Personal Article

Most economists agree that entrepreneurship is essential to the vitality of any economy, developed or developing. Entrepreneurs create new businesses, generating jobs for themselves and others as well. In many cases, entrepreneurial activity increases competition and with the right combination of factors, it increases productivity too.

In the United States, for example, small businesses provide approximately 75 percent of the net new jobs entering the American economy each year and represent over 99 percent of all American employers. The small businesses in the United States are often those created by self-employed entrepreneurs.

Many experts agree that entrepreneurs give security to other people; they are the generators of social welfare. Others agree that the benefits of small businesses go beyond income. Hector V. Baretto, administrator of the U.S. Small Business Administration (SBA), explains, “Small businesses broaden the base of participation in society, create jobs, decentralize economic power, and give people a stake in the future.”

Entrepreneurs innovate and innovation is a central ingredient in economic growth. The entrepreneur always searches for change, responds to it, and exploits it as an opportunity. Entrepreneurs are responsible for the commercial introduction of many new products and services, and for opening new markets. A look at recent history shows that entrepreneurs were essential to many of the most significant innovations, ones that revolutionized how people live and work. From the automobile to the airplane to personal computers individuals with dreams and determination developed these commercial advances. Small firms also are more likely than large companies to produce specialty goods and services and custom-demand items. As suggested by many economists, entrepreneurs provide consumers with goods and services for needs they didn't even realize they had.

Innovations improve the quality of life by multiplying consumers’ choices. They enrich people’s lives in numerous ways – making life easier, improving communications, providing new forms of entertainment, and improving health care, to name a few.

Small firms in the United States, for instance, innovate far more than large ones do. According to the Small Business Administration, small technology companies produce nearly 13 times more patents per employee than large firms. They represent one-third of all companies in possession of 15 or more patents. This indicates that entrepreneurship is certainly beneficial to the economic growth of any country.

How does Entrepreneurship Aid the Economy?
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