Why Is Entrepreneurship Important?

What Is Entrepreneurship? 

Entrepreneurship is the process of starting new businesses, generally in response to opportunities. Entrepreneurs are pursuing opportunities by changing, revolutionizing, transforming, or introducing new products or services. For example, Nanxi Liu, founder of start-up Nanoly Bioscience, recognized the challenges of refrigerating vaccines, which is necessary to maintain potency. Nanoly Bioscience develops and distributes polymers that allow vaccines to be stored without refrigeration. This innovation enables doctors to provide lifesaving vaccinations in developing countries where millions die from preventable diseases.

Entrepreneurship Versus Self-Employment?

Self-employment refers to individuals who work for prot or fees in their own business, profession, trade, or farm.2 This arrangement focuses on established professions such as electricians and insurance agents. For comparison, recall that we described entrepreneurship as the process of capitalizing on opportunities by starting new businesses for the purposes of changing, revolutionizing, transforming, or introducing new products or services. Now let’s consider three points of comparison.

Why Is Entrepreneurship Important?

Entrepreneurship is, and continues to be, important to every industry sector in the United States and in most advanced countries.3 Its importance in the United States can be shown in three areas: innovation, number of new start-ups, and job creation.

Entrepreneurship is the process of starting new businesses, generally in response to opportunities. Entrepreneurial ventures are different from small businesses. Entrepreneurial ventures are characterized by innovative practices and have growth and profitability as their main goals, whereas a small business is one that is independently owned, operated, and financed; has fewer than 100 employees; doesn’t engage in any new or innovative practices and has relatively little impact on its industry. Entrepreneurship is also not the same as self-employment. Entrepreneurship is important because it brings forward innovative ideas, creates new startup firms, and creates jobs. Entrepreneurs must explore the entrepreneurial context, identify opportunities and possible competitive advantages, start the venture, and manage the venture. Entrepreneurs must also manage concerns related to social responsibility and ethics.

Entrepreneurs do in the planning process for new ventures

Entrepreneurs must identify environmental opportunities and competitive advantage. They must research a venture’s feasibility, first generating and then evaluating ideas. A feasibility study is an analysis of the various aspects of a proposed entrepreneurial venture designed to determine its feasibility. This analysis includes looking at the competitors, determining how to get financing, and developing a business plan. The business plan should include an executive summary, an analysis of the opportunity, an analysis of the context, a description of the business, financial data and projections, and supporting documentation. The sharing economy that is emerging is creating many new entrepreneurial opportunities through people sharing something they own or providing a service for a fee.

The six legal forms of organization and the choice of appropriate organizational structure. 

Two primary factors that affect the decision about how to organize a business are taxes and legal liability. In a sole proprietorship, the owner maintains sole and complete control over the business and is personally liable for business debts. In a general partnership, two or more owners share the management and risk of the business. A limited liability partnership is formed by general partner(s) and limited partner(s). A corporation (C corporation) is a legal business entity that is separate from its owners and managers. It is a closely held corporation when it is owned by a limited number of people who do not trade the stock publically. An S corporation is a corporation that is unique because the owners are taxed as a partnership as long as certain criteria are met. A limited liability company (LLC) is a hybrid between a partnership and a corporation. As an organization grows, the entrepreneur must decide on an appropriate structure for the organization. The entrepreneur must also face human resource management issues such as employee recruitment and employee retention. Entrepreneurs must be open to initiating change and must also continue to innovate.

How entrepreneurs lead organizations. 

While there is no specic personality characteristic that all entrepreneurs have, researchers suggest that there are several personality traits that are more common among entrepreneurs. These include a high level of motivation, an abundance of self-condence, the ability to be involved for the long term, and a high energy level. Entrepreneurs are often persistent problem solvers; have a high degree of initiative; have the ability to set goals; are moderate risk-takers; possess great persistence, resourcefulness, the desire and ability to be self-directed; and have a relatively high need for autonomy. Entrepreneurs may also have a proactive personality trait, which means they are more prone to take actions to in£uence their environment. Entrepreneurs motivate employees through empowerment. Entrepreneurs must lead the venture and also lead employee work teams.

How managers control organizations under different  circumstances. 

Entrepreneurs must manage growth through planning for growth, organizing for growth, and controlling for growth. Entrepreneurs must manage downturns through recognizing crisis situations and then dealing with downturns, declines, and crisis. At some point an entrepreneur may determine that it is time to exit a venture in order to capitalize nancially on the investment (called harvesting) because the entrepreneur is facing serious organizational performance problems or because the entrepreneur wants to pursue other business or personal opportunities. To do so, the entrepreneur must use a method to value the business and consider a variety of other important factors in the process.