What is Entrepreneurship?
Definition of Entrepreneurship
Role of Entrepreneurship
In the actual economy, which is a dynamic capitalist one, entrepreneurship has a relevant role. Entrepreneurship creates and develops different aspects in countries. It generates new productive capacities, processes and goods; promotes innovation and fosters employment creation, growth and development (Solimano, 2014). Entrepreneurship can be only done thanks to people with ideas that have been seized to fulfill an opportunity that is in the market in order to generate value and well-being for the society. The entrepreneurs undertake new or existing activities in a more efficient way, causing an impact of change to see what is needed and what is missing. Therefore, they take the risk to achieve their vision. Entrepreneurs search for the resources that are needed, face the obstacles that might be presented and assume their responsibility. The role that entrepreneurs have in society has been historically because they have taken the lead, have solved problems with their skills and their will to change have brought different types of economic and social innovations. The direct result of their actions is associated as a business venture in a private sector, but entrepreneurship has been the driving force for social, governmental and cultural development along time (ILO & UNESCO, 2006).
Impact of Entrepreneurship
Entrepreneurship has an impact in nation’s economy in different ways, where different studies confirm that there is a direct relationship between these two. According to Cuervo et al. (2007 cited in Sánchez & Martínez, 2017), the impact of entrepreneurship can be seen in different forms such as the identification and exploitation of business opportunities, the creation of new businesses and the renewal of the current business to turn them into more dynamic ones, and the economic progress that occurs thanks to innovation, competitiveness, job creation and society wealth.
Importance of Entrepreneurship
Countries develop their economies through the work that entrepreneurs do. They support and improve the country’s economy and people’s lives by generating more jobs, finding solutions to the society problems with their products and services, developing new technologies that enhance performance, effectiveness and efficiency, plus they represent an exchange for ideas at a global scale. The conditions that support entrepreneurs to undertake, also support economies as an entire environment, where if the proper conditions for entrepreneurship are given, then entrepreneurs can produce better outputs (Ács, et al., 2018).
How to improve the Entrepreneurial Ecosystem
In order to have improvements in an entrepreneurial ecosystem, governmental policies should focus and set as a goal to generate high growth firms, but in doing so it requires to cultivate an ecosystem that is supportive with the needs of ambitious entrepreneurs (Mason & Brown, 2014). The business environment in a country are established thanks to the determinants of the entrepreneurial ecosystem. If the ecosystem is strong, then it will support businesses, the difficulties for entrepreneurs will be reduced, the job creation will be promoted, the knowledge transfer can be within the reach of its actors and it will be stimulated the growth for the success of companies. In other hand, if it is weak, then the risks for starting a business increase, the formality of jobs would be threatened, and the government will see a limitation on the collection of taxes, which as consequence will slow down the growth potential of the economy. (Observatorio Nacional del Emprendedor, 2015)
The focus of developing the entrepreneurial ecosystem should direct its efforts on individualizing the improvement works according to its regional entrepreneurial assets. The customization and collaboration on the business support is needed to foster the entrepreneurial linkages that are required between large firms, funding institutions and organizations inside the ecosystems. The businesses that participate in developing the ecosystem with more success are those who are locally headquartered, in comparison to other major businesses that can be multinationals established in one place. The commitment of the business’ managers and shareholders will be stronger to contribute locally than those senior managers (Mason & Brown, 2014).
The actors that are more active inside the entrepreneurial ecosystems will engage into different activities. Some of their tasks are being part of groups that start a new business, investing and advising in new ventures, mentoring of other entrepreneurs and transferring knowledge by teaching in the whole entrepreneurial process. As well as the purchasing the goods or services that are offered by the new businesses, offering legal, accounting or marketing services to new entrepreneurs and working at a large company in their innovation activities (Auerswald, 2015).
Focus on the Local and Regional Entrepreneurial Ecosystem Development
Stam and Spigel (2016) emphasize that entrepreneurial ecosystems should be aware of the local environment to foster it. The key principles that are mentioned are that it is necessary to stop trying to be Silicon Valley; the ecosystem should be shaped based on what are the local conditions; private sector should be involved since the beginning; new ventures have to create their foundations properly. Also, the clusters should not be over engineered and should grow organically; the ambition of the entrepreneurs must be enhanced; high growth firms should move on a favorable environment; the mindset have to be shaken towards entrepreneurial culture; and for better business conditions there should be legal, bureaucratic and regulatory reforms.
Entrepreneurial ecosystems create a pool of employees that perform in different sectors and have different expertise. On developed entrepreneurial ecosystems it can be found different employees’ profiles that go from technical workers to business oriented ones. Universities are the cornerstone to develop new talent that can be used for either working in startups or start developing new businesses. Also, improving the financial capital is key, and this can be done with a supportive community formed by business angels, seed investors, venture capitalists, who make access to financing easier than in traditional environments. But in order to have a successful and improved entrepreneurial ecosystem, it is needed to have entrepreneurs who are strong leaders that are committed to turn their region into a better place so that they can start and grow their companies. An improved entrepreneurial ecosystem must have mentors and advisors who work in pro of sharing their knowledge, as well as the integrated participation of accelerators and incubators that boost entrepreneurship. The needs for entrepreneurs can be also seen in the search for professional services, therefore in entrepreneurial ecosystems are facilitated these specializations by professional actors that are also part of the environment. Cooperation between large firms and high growth firms, plus the governmental support, creates an understanding of how start-ups generate economic growth. If the community has a well connection between them, then it will be optimal to keep the engagement between them, especially if everyone is willing to give in return to the ecosystem (Stam & Spigel, 2016).
Technology and Education, important assets for Entrepreneurship.
The entrepreneurship support in the ecosystem integrates a wide diverse services available for entrepreneurs and businessmen. Business environments are changing due to technological advances. This has brought the opportunity for businesses to grow. The new complex technologies have made businesses to require new support services in which they are not specialized. The support services improve the ecosystem by bringing different solutions. Some of these solutions are the ease to access to markets, the improvement of low cost and high quality resource, the introduction to new technologies and products, the increase of technical and management capacities, ease the public policies restrictions, and find the support for proper financing methods (Observatorio Nacional del Emprendedor, 2015).
There is different course of actions that help to improve the entrepreneurial ecosystem, such as developments in education, technical assistance, networks and financing (Kantis, et al., 2014).Entrepreneurial skills can be developed through education. The abilities required for entrepreneurs should start at an early age of the individuals, so that this way it is reduced the disadvantages that a nation’s educational system might bring at the beginning of an entrepreneur’s career. At a university level, in public institutions, governmental reforms are needed to promote the changes that are needed to create programs that are planned towards the development of new entrepreneurs (Kantis, et al., 2014).
Government participation to boost Entrepreneurial Ecosystems
Institutional platforms can be a base to support new entrepreneurial projects. Some entrepreneurs might have access to better resources than others, therefore public technical platforms could rise up the bar and equilibrate the game rules for those who can’t. This way, entrepreneurs who might face disadvantages against competitors, now might see a compensation (Kantis, et al., 2014). Another important aspect to nurture the ecosystem, and that is key to keep fostering their entrepreneurial development is through networks. Entrepreneurs should build up networks that led them to global contacts and create closer relations with other business owners, and large firm’s managers. This way they can build up new and dynamic firms (Kantis, et al., 2014). Access to financial resources is one of the limitations that entrepreneurs face at early stages. When entrepreneurial ecosystems improve their financing methods, then the opportunities to create new ventures and grow them are given. The entrepreneurial ecosystem that makes easier the connection of the funding to the one who needs them, it shows a better flow of the financial mechanisms to fund (Kantis, et al., 2014). Governmental intervention in the entrepreneurial ecosystem must be as a moderator and not properly as an active participant. Public employment can have a positive or a negative outcome in entrepreneurs. When the number of public employees is increased, then in the long run those employees support that the public goods are provided, that coordination helps reduce failures, that the market is running into fair conditions where the competitiveness of markets are promoted. The increase in public employment can be seen as a promoter of formality among entrepreneurs, if the conditions for registration procedures are simplified. In other hand, when there are high taxes to cover the payroll of the public employment, then new firms would be pushed to operate in the informal sector (Anchorena & Ronconi, 2014)
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Kantis, H., Federico, J. & Trajtenberg, L., 2014. Middle-Class Entrepreneurs and Their Firms: A Regional View and International Comparison. In: Entrepreneurship in Latin America. Washington: Inter-American Development Bank.
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