The Importance of Entrepreneurship
Entrepreneur is a French word derived from entre, which means “to enter,” and prendre, which means “to take.” The word origin is apt since entrepreneurs look for opportunity and jump in (enter) and then try to capture (take) value that their ventures create. Entrepreneurs strive to create businesses in areas where they see opportunity and then try to reap a profit.
Entrepreneurship is all about creating an organization from a mere idea or innovation where none had previously existed. When most people see a need in the world, they either ignore it or look for an established solution, generally forgetting about it if they fail to find a solution already in place. However, entrepreneurs take an existing need, match it to a solution, and create a business around that solution. To an entrepreneur, anytime someone is in need of something there is a chance to build a potentially exciting and lucrative product and business.
Economists adore entrepreneurs so much that they consider entrepreneurship itself as a factor of production. They consider the entrepreneurial mindset as a resource in the same way that they consider land, labor and capital investments such as machinery as resources. This endorses the importance of entrepreneurship in the economy.
At this point it is important to keep things in perspective. New organizations are widely said to be the engines of job growth and the pioneers of new industries. However, it is wise to take these claims with a grain of salt since new companies usually go out of business quickly, making them a main source of job destruction as well. Many of the jobs that are created by new ventures are lower paying since these firms do not have the resources that larger, established firms have. Many new industries are also born from the efforts of established companies. It should also be noted that new ventures can be disruptive and lead to job destruction as they force older organizations to shut down. Despite the hype from politicians, new and small businesses are not the answer to every economic problem. They are not magical. Instead, they are an important part of the economy that should be recognized and fostered.
From an economic naturalism perspective, entrepreneurs are important because they create new business ventures to compete in natural selection. By incorporating new ideas into their ventures, they are providing new genetics to be sorted out by competition in the economy. This makes entrepreneurship a lot like mutation or sexual reproduction in biology as a way to create new genetic code and recombine existing genes. Though most new ventures fail, many succeed, and in doing so they will become numbered among the successful businesses and organizations of tomorrow.