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1. ©2015 Mbasa Mwawembe, 15/ME/005, BBM, PLU 1
POSITIVE CONTRIBUTIONS ENTREPRENEURS HAVE TO THE ECONOMIES OF
THE WORLD
It is widely believed that entrepreneurial activity is a critical component to a prosperous
society in that entrepreneurs create jobs, drive progress and contribute to economic growth.
Consequently, many governments and their policymakers aim to increase the number of
entrepreneurs in their countries and aid their development, Global Entrepreneurs Monitoring,
(2012). However, providing this support is no easy task, as entrepreneurs are not
homogeneous even within a country, and, in fact, often appear in different pretexts depending
on the country in which they are located. In this context, the discussion will focus on the
positive contributions entrepreneurs have towards economies of the world, henceforth,
economic development.
The term “entrepreneur” is a French word derived from the verb “entreprendre”, which
means to do or to undertake. It can be divided into two parts, “entre”, meaning “between”,
and “preneur” meaning “taker”. Literally, then, an entre-preneur is a “between-taker”, or
“gobetween”.
The term “entrepreneur” first appeared in the literature in 1253, when it was used in different
forms like empreneur. It appears to have taken on its present, definitive spelling in 1433
(Rey, 1994). It is known that the word was used commonly in the 1500s and 1600s through
an example of Champlain, speaking of his first voyage to explore the St. Lawrence River in
1603, who wrote that he had been invited to make the trip “to see the country and what
entrepreneurs would do there” (Champlain, 1632, in Giguère II: 702, free translation from the
French).
Hélène Vérin (1982) wrote a doctoral thesis in literature in which she discusses the shades of
meaning of the terms “entrepreneur” and “enterprise” through history. She notes that the
ancestor of the term “enterprise” – “emprise” (from the Latin imprisia) – referred to
something bold, firm and daring (Vérin, 1982: 31-33). She also examined variations in
meaning over the centuries, and especially between the 13th and 18th centuries. The current
meaning that also refers to an enterprise leader first appeared in the early 19th century (Rey,
1994: 700).
Three authors in particular were among the first to reflect extensively on what entrepreneurs
do. The concept of entrepreneur can be understood more easily through the writings of these

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main pioneers. The first, Cantillon, was what we would now call a venture capitalist looking
for investment opportunities with better than average yields. His perspective as an investor
meant that the element of risk was a core aspect of how he viewed entrepreneurial projects
and defined what he considered to be an entrepreneur (Cantillon, 1755). As Schumpeter
pointed out that Cantillon had a clear conception of the function of the entrepreneur that
nobody before Cantillon had formulated it so fully. And it may be due to him that French
economists never lost sight of the entrepreneurial function and its central importance”.
(Schumpeter, 1954: 222)
Cantillon described the entrepreneur as a person who purchases a raw material at a known
price in order to sell it at an unknown price (Cantillon, 1755). In Cantillon‟s definition, an
entrepreneur‟s role lies between that of two or more other actors. He or she is an
intermediary (or go-between) who instigates a transformation.
After Cantillon, the author who had the greatest impact on the field of entrepreneurship as it
is today was Jean-Baptiste Say, nearly a century later. Say was himself an entrepreneur, and
came from an entrepreneurial family. He was also a prolific writer, and wrote from the
standpoint of someone preparing others to become entrepreneurs and hoping to convince
them of the importance of entrepreneurs in economic development. He identified the element
of innovation as being most characteristic of the entrepreneur; in other words, he regarded
entrepreneurs as being people who could do new things, people who could do more with less,
and people who would obtain more by doing something in a new or different way (Say, 1815;
1996). Therefore, Say saw the entrepreneur as an economic actor whose activities generated
an added value. In his monumental work on the history of economics, Schumpeter pointed
out that Say was the first to draw a clear distinction between the role of the entrepreneur and
the role of the capitalist (Schumpeter, 1954: 555).
Joseph Alois Schumpeter is the author to whom the association between entrepreneurs and
innovation is most often attributed by experts. In fact, as Schumpeter himself pointed out, he
simply took over the definition presented by Jean-Baptiste Say (Schumpeter, 1954). He went
further, however, postulating that “the essence of entrepreneurship lies in the perception and
exploitation of new opportunities” (Schumpeter: 1928). When he went into politics in an
Austrian-Hungarian empire that needed to become more dynamic, Schumpeter identified
entrepreneurs as being the people most needed to revitalize the economy and the
organizations. Writing one century after Say, his thinking appears to be more complex and

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more complete. He associated innovation by entrepreneurs with five elements, which
include; the introduction of a new good; the introduction of a new method of production; the
opening of a new market; the conquest of a new source of supply of raw material; and the
carrying out of the new organization of any industry, (Schumpeter, 1934:66).
(Bhagwati, (2012), defines economies of the world as integration of national economies into
the international economy through trade, direct foreign investment, short-term capital flows,
international flows of workers and humanity generally, and flows of technology. Economies
of the world refers to different financial prudence of individual countries, with each economy
related with the other in one way or another, according to Global Entrepreneurs Monitor
Report, (2011).
A key concept in the world economy is globalization, which is the process that leads to
individual economies around the world being closely interwoven such that an event in one
country is bound to affect the state of other world economies. More and more trade has been
done between different countries, and restrictions on movement and business across borders
have been reduced a great deal. The resulting phenomenon is that people are now able to sell
their commodities in any market across the world. Likewise, consumers also enjoy a much
wider variety of goods and services since they can sample them from other places and not just
their own countries alone.
Economic development denotes to the improvements in quality of human life. According to a
widely acceptable definition, Economic Development means the changes in local economies‟
capacity of wealth creation, (Kane & Sand, 1988). According to traditional view, Economic
Development refers to the Economic System that might be a means to increase the absolute
size of, for instance, capital or annual production regardless of the size of population.
However, in the modern sense, economic development is used in relation to the movement in
real income per head and to potential in this respect (Robbins, 1968).
Entrepreneurs introduce innovations and induce economic growth by creating new
technologies, develop new products or process innovations, and open up new markets. There
are many examples of radical innovations introduced by entrepreneurs such as Pierre
Omidyar (eBay), Larry Page and Sergey Brin (Google), Larry Ellison (Oracle), Dietmar
Hopp and Hasso Plattner (SAP), Bill Gates (Microsoft), Steve Jobs (Apple), and Stelios Haji-
Ioannou (easyJet), to name just a few.

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Radical innovations often lead to economic growth, bringing innovations to the market
offering a key value-generating contribution to economic progress. Compared with
incumbent firms, new firms invest more in searching for new opportunities. Existing firms
might be less likely to innovate because of organizational inertia, which numbs their
responsiveness to market changes, or because new goods would compete with their
established range of products. Incumbent firms often miss out, sometimes intentionally, on
opportunities to adopt new ideas because of the fear of cannibalizing their own markets. For
inventors and innovators (who sometimes come from established firms), setting up their own
businesses often appear to be the only way to commercialize their ideas.
By establishing new businesses, entrepreneurs intensify competition for existing businesses.
Consumers benefit from the resulting lower prices and greater product variety. Researchers
have developed a measure of market mobility, which identifies the effects of new business
formation on existing firms. A change in the ranking of established firms by number of
employees indicates a transfer of market share and higher market mobility. Furthermore, new
business formation has an indirect competition-enhancing effect by pushing established firms
to improve their performance. In offering new goods & services results in new
employment, which can produce a cascading effect or virtuous circle in the economy.
The stimulation of related businesses or sectors that support the new ventures adds to
further economic development. For example, a few IT companies founded the Indian
IT industry in the 1990s as a backend programmers' hub. Soon the industry gathered
pace in its own programmers‟ domain, but more importantly, millions from other
sectors benefited from it, www.investipodia.com/.
Entrepreneurs stimulate employment growth by generating new jobs when they enter the
market. There is a direct employment effect from new businesses that arises from the new
jobs being created. There is usually a stagnation phase or even a downturn as new businesses
gain market share from existing firms that are unable to compete and as some new entrants
fail. After this interim phase of potential failure and displacement of existing firms, the
increased competitiveness of suppliers leads to positive gains in employment once again.
About ten years after startup, the impact of new business formation on employment will
finally fade away. This type of wave pattern has been found for the US and for a number of
European countries, as well as for a sample of 23 Organisation for Economic Co-operation
and Development (OECD) countries.

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Competition between new and existing firms ideally leads to survival of the fittest. Even
though overall employment may decline, new firms can foster productivity. The productivity-
enhancing effect of business formation occurs in the medium term, when the employment
effect is dominated by the displacement of existence, which happens for two reasons. Firstly,
new firms increase competition in the market and thus diminish the market power of
incumbent firms, forcing them to become more efficient or go out of business. Secondly, only
firms with a competitive advantage are more efficient than incumbents, will enter the market
of which the subsequent selection process forces less efficient firms (both entrants and
incumbents) to drop out of the market.
In the initial years following entry, the productivity effect can sometimes be negative,
probably a result of adjustments to routines and strategies in response to the new entrants.
The overall positive relationship is particularly strong for entrepreneurs with high-growth
ambitions and a high degree of innovation; the effect on productivity is weaker for
entrepreneurs with low-growth ambitions. This pattern indicates that entrepreneurs generally
increase the productive use of scarce resources in an economy, with the strongest impact
coming from innovative entrepreneurs.
Existing firms often struggle to adjust to new market conditions and permanent changes,
getting locked into their old positions. They fail to make the necessary internal adjustments
and lack the ability for “creative destruction,” famously described by Schumpeter (1934). The
entry of new businesses and the exit of worn-out firms can help to free firms from a locked-in
position. Moreover, entrepreneurs may create entirely new markets and industries that
become the engines of future growth processes.
Entrepreneurs give security to other people; they are the generators of social welfare,” Carl J.
Schramm, president and chief executive officer of Ewing Marion Kauffman Foundation, said
in February 2007. The foundation is dedicated to fostering entrepreneurship, and Schramm is
one of the world‟s leading experts in this field.
As entrepreneurs play a big role in contributing to economies of the world, simultaneously,
economic development is taking place through the five stages of development history by an
American economist, Walt Rostow.
The first stage is the traditional society, described by subsistence economy; an example is
Lesotho where 86% of the resident workforce is engaged in subsistence agriculture,

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according Tracy Wade, http://www.sxc.hu/. At this stage output is not meant for sale,
henceforth, no records are kept. Such countries use barter for trade. There are high levels of
agriculture and labour intensive. This strategy relies on enterprise and innovation based
solutions to foster social change and bottom-up economic growth (Wheeler III, et al,. 2010),
where entrepreneurs areresponsible for opportunity spotting and accumulating the factors of
production (Robson P J A & Obeng B A 2008) necessary for new ventures to be created
The second, pre-conditions stage, there is use of some capital equipment to help increase
productivity and generate small surpluses which can be traded, Tim & Annette,
http://www.sxc.hu/. Countries develop mining industries, like Zambia, increase capital use of
agriculture by using machinery like tractors. External funding is accessible to such countries.
Purchase of investments and savings are quite possible.
Take off: Increasing industrialisation, further growth in savings and investment, some
regional growth, and number employed in agriculture declines. At this stage, industrial
growth may be linked to primary industries. The level of technology required will be low,
Ramon Venne, http://www.sxc.hu/.
Drive to Maturity: Growth becomes self-sustaining, wealth generation enables further
investment in value adding industry and development, industry more diversified, and increase
in levels of technology utilised. As the economy matures, technology plays an increasing role
in developing high value added products, Joao de Freitas, http://www.sxc.hu/.
High mass consumption: High output levels, mass consumption of consumer durables, and
high proportion of employment in service sector. Service industry dominates the economy,
banking, insurance, finance, marketing, entertainment, and leisure Elliott Tompkins,
http://www.sxc.hu/.
Entrepreneurs play a vital role in contributing towards economies of the world, even-
though drawbacks are also there depending on the way they carry out their operations.
An example is Italy where high levels of entrepreneurs impacted negatively on the
growth of its economy because of self-employment. There may be truth in the old
saying, "too many chefs and not enough cooks spoil the soup."
www.academia.edu/1600957/.

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National regulations play a crucial role in nurturing entrepreneurship, but require a
fine balancing act on the part of the responsible authority. Unregulated
entrepreneurship may lead to unwanted social outcomes including unfair market
practices, pervasive corruption, financial crisis and even criminal activity.
Findings from United Nations University also indicate the possible implications of
“over nurturing" entrepreneurship. Wim Naudé (2011), argues that “while
entrepreneurship may raise economic growth and material welfare, it may not always
result in improvements in non-material welfare (or happiness). Promotion of
happiness is increasingly seen as an essential goal.”
Paradoxically, a significantly high number of entrepreneurs may lead to fierce
competition and loss of career choices for individuals. With too many entrepreneurs,
levels of aspirations usually rise. Owning to the variability of success in
entrepreneurial ventures, the scenario of having too many entrepreneurs may also lead
to income inequalities, making citizens more – not less – unhappy.
The thought-provoking collaboration of entrepreneurship and economic development
has vibrant inputs and suggestions for policy makers, development institutes, business
owners, change agents and open-handed donors. Therefore, the understanding of the
benefits and drawbacks, a balanced approach to nurturing entrepreneurship will
definitely result in entrepreneurs‟ positive contribution to economies of the world.

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REFERENCES
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Europe‟, Atlantic Economic Journal 26(2), 137–146.
Carree, M. A. and A. R. Thurik, 1999, „Industrial Structure and Economic Growth‟, in
D. B. Audretsch and A. R. Thurik (eds.), Innovation, Industry Evolution and
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Jacobs, J., 1984, Cities and the Wealth of Nations: Principles of Economic Life,
Random House, New York;
Osborne, D. and T. Gaebler, 1992, Reinventing Government: How the Entrepreneurial
Spirit is Transforming the Public Sector, Reading, MA: Addison-Wesley
Schumpeter, J. A., 1934, The Theory of Economic Development, Harvard University,
Cambridge;
Solow, R. M., 1970, Growth Theory: An Exposition, Oxford University Press, Oxford;
Stevenson, H. H. and D. E. Gumpert, 1991, „The Heart of Entrepreneurship‟, in W. A.
Sahlmann and H. H. Stevenson (eds.), The Entrepreneurial Venture, MA: Harvard Business
School Publications, Boston.
Witt, U. (ed.), 1993, Evolutionary Economics, Edward Elgar Publishing, Aldershot;
World Bank, 1993, The East Asian Miracle: Economic Growth and Public Policy,
World Bank Policy Report, Oxford University Press
www.investipodia.com/;
www.academia.edu/1600957/.