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ENTREPRENEURIAL ACTIVITIES : A FACTOR IN ECONOMIC DEVELOPMENT
Adesoga Adefulu
The engine room for the development of any Economy is Entrepreneurial activities or
opportunities in the form of self-employment, creation of family business, small and
medium scale enterprises.
This paper examines the potent place of entrepreneurial activities as a factor in economic
development of a nation. It holds that the birth and development of new businesses which
is the central point of entrepreneurial activities presents employment declines and equally
leads to economic growth. It also argues that there is a circular relationship between
entrepreneurial activities and economic development. In effect, entrepreneurial activities
creates economic development and in the same breath, economic development creates
entrepreneurial activities. The contributions of small and medium enterprises were
discussed to buttress the significant position of entrepreneurial activities in economic
development.
INTRODUCTION
Pursuing an entrepreneurial opportunity in the form of self-employment, creation of a
family Business or a New Venture is increasingly becoming popular and widely
embraced. In both developed and developing nations, small and medium scale enterprises
are widely encouraged because of its causal role in economic development.
The birth and development of new businesses which is the case of entrepreneurial
activity are widely recognized as a critical aspect of market economies. Firm births are
seen as a major source of new jobs. New firms therefore may have a critical and causal
role in economic development.
METHODOLOGY
This paper is divided into seven parts including this introduction. Part two discusses the
Concept of Entrepreneurship; Part three identifies the Cannons of a Successful
Entrepreneur; Part four examines the Theories of Entrepreneurship; Part five dwells on the
Nature and Scope of Development; Part six looks at the Relationship between
Entrepreneurship Activities and Economic Development with special emphasis on the
contribution of small and medium scale enterprises and the Nigerian Economic
development while the paper is concluded in Part seven.
THE CONCEPT OF ENTREPRENEURSHIP
Entreprerieurship is the process of combining factors of production i.e. land,, labour and
capital to produce goods and services. Also, a dynamic process of creating incremental
wealth. This wealth is created by individuals who assume major risks in terms of equity, time
or career commitment of providing value for some products or services. The product or
service may or may not be new or unique but value must somehow be infused by the
Entrepreneur by securing and allocating the necessary skills or resources.
Haggens (1958) defines Entrepreneurship as function of seeking investment, production
opportunity, organizing an enterprise to undertake new production process, raising capital,
hiring labour, arranging resources and introducing new organization.
In the past, economists regarded entrepreneurship as a factor of production along with
land, labour and capital. But nowadays, treating entrepreneurship as a factor of production
has fallen out of popular usage. This is because entrepreneurship cannot be measured like the
usual factors of production Land, Labour and Capital. Moreover, entrepreneurship is
believed to be available in plentiful supply. This, like air, is not an economic good.
Entrepreneurship is very important because it's the source of new job created in an economy
and consequently the source of economic growth.
The word "entrepreneur" - originated from the French word "entreprendre", meaning to
"undertake". The word came to be used in 1885 in what was called political economy to
mean a contractor acting as intermediary between Labour and Capital.
Before attempting to define the concept of entrepreneur, it should be noted that we do not
have one indisputable definition of the term Entrepreneur and Entrepreneurship. An
Entrepreneur can be defined as a person with vision, original ideas, decision making, and
daring to try; one who decides how business has to be done, who co-ordinates and arranges
all the factors of production, one who has expertise in the field, who anticipates the market
trends, demand patterns and prices.
According to Jhingan (1975) An Entrepreneur is an economic leader, who possess the
ability to recognize opportunities for successful introduction of new commodities and
techniques and new sources of supply and to assemble the necessary plant and equipment,
management and labour-force and organize them a running concern. In other words, an
Entrepreneur has the ability to take the factors of production i.e. land, labour and capital and
use them to produce new goods and services.
An Entrepreneur could be a highly educated, trained and skilled person or
he may be an illiterate person, who possesses high business acumen. Entrepreneurs make
tough and risky decisions to produce new goods and services.
According to Sexton (2005), we are all entrepreneurs when we try new products or when
we find better ways to manage our households or our study time.
The Entrepreneur is an inventor who brings in new ideas, new commodities, new
processes and encourages his team in new activities. In the view of Schumpeter (1934),
Entrepreneur is basically an innovator who introduce new combinations, different forms of
innovations as given below:
Schumpeter's View of Entrepreneur Source: Badi & Badi (2005) Entrepreneurship
Classification of Enterpreneur
Innovative Entrepreneurs -They have initiative to start new ventures and find innovative
ways to start an enterprise. New products, new techniques and new markets are found out by
innovative entrepreneurs. The enterprising spirits of the innovative entrepreneurs open new
markets and develops enterprises.
Initiative Entrepreneurs - They copy or adopt suitable innovations made by the innovative
entrepreneurs. They contributed to the development of the economy in underdeveloped
countries.
Fabian Entrepreneur - They are shy and lazy by nature. They follow the set procedures,
customs, traditions and religions. They do not venture to take risks. They are second
generation entrepreneurs in a business family enterprise.
Drone Entrepreneur - They refuse to copy or use opportunities that come on their way. They
are conventional in their approach and stock to their set practices, products, production
methods and ideas.
CANNONS OF A SUCCESSFUL ENTREPRENEUR
The qualities of entrepreneur as an individual are essential to contributing to the success of
an enterprise.
McClelland (1961) stated the qualities of a successful entrepreneur as an individual with
technical competence, risk taking, high initiative, good judgement, intelligence to analyse
and solve problem areas, leadership qualities, confidence, positive attitude, high level of
energy, creativeness, honesty, integrity, emotional stability and fairness.
Some complementary qualities that are necessary for success of an enterprise are
- Longterm involvement: Commitment for longer period is necessary for
conceptualization, building and running an enterprise.
- Initiative: Entrepreneur must have initiative to use the available resources, draw plan of
action for all those who are involved in the enterprise.
- Goal setting: An entrepreneur must be able to set realistic but challenging goals.
- Moderate risk taking: A learner from his failures and risk taker at every stage of the
growth of an enterprise.
- High Energy level: Entrepreneur must be a man of high energy level as 1 managing
resources and running an enterprise calls for long hours of
work.
- Good Human Relations: Tactful and warm human relation is an important factor which
brings success to an entrepreneur.
- Mental Ability and Clarity in Objectives: Entrepreneur must be a man of high level of
intelligence, creative, positive thinking and decision maker with clear objectives in
mind.
REVIEW OF LITERATURE
Different eminent thinkers propounded distinctive dimensions of
entrepreneurship. Entrepreneurship involves creation of value through fusion of
capital, risk taking, technology and human talent. It's in fact, a multi - dimensional concept.
Innovation: Schumpeter (1934) defines entrepreneurship as "a creative activity". An
innovator who brings new products or services into the economy. Its essential to differentials
between invention and innovation.
Invention vs Innovation Source; Badi & Badi (2005) Entrepreneurship
Schumpeter has introduced a concept of innovation as key factor in entrepreneurship in
addition to assuming risks and organizing factors of production.
- A function of High Achievement: McClelland (1961) emphasizes achievement orientation
as the most important factor for entrepreneurs. Individuals with high achievement
orientation are not influenced by considerations of money or any other external
incentives. The individuals with high achievement orientation take calculated risks and
can make decisions where there are incomplete information.
NATURE AND SCOPE OF ECONOMIC DEVELOPMENT
Development was traditionally.seen as significant increase in the level of GNP/GDP and
the resultant per capital income. It's also seen as axountry's ability to expand its output faster
than the population growth rate. These perspectives were mostly economic and quantitative,
they provided average measures and there has never been an average citizen and did not
reckon much with poverty, income distribution, unemployment and other social indicators of
well-being (Muo, 2006).
Sears (1971) holds that in discussing development, three questions are critical; what has
been happening to poverty; what has been happening to unemployment and what has been
happening to inequality and goes on to argue that development could not have taken place
unless these three variables are declining.
Alkali (1977) sees development as a dynamic process that involves quantitative growth
and qualitative change and must ultimately lead to improved natural welfare of the people.
Rodney (1972) look at development from the individual level as implying increased skills
and capacity, greater freedom, creativity, self-discipline, responsibility and material well
being and agrees that this is tied to the state of the society as a whole.
Ojo (2003) Posits that in addition to improvement in standard of living that encompasses
material consumption, education, health and environmental protection, development involves
some equal opportunities, political freedom and civil liberties.
Sandstorm (2005) widens the concept of development to include an enabling environment
for people to enjoy long, healthy and creative lives, an inner dimension which incorporates
the moral and spiritual angles people becoming better people, and cultural liberty. He holds
that development is a peoples movement, not a government funded affair since development
issues relate to values and relationship which you cannot buy with government funding, and
that the ultimate goal of development is freeing the human being to become as good a human
being as humanly possible.
From the foregoing, the following are now generally accepted as the core values and
objectives of development
- Sustenance the ability to meet basic needs: food, shelter, health and protection.
- Self Esteem to be a person. Enhancing the sense of worth, and self-respect of
individuals.
- Freedom from Servitude to be able to choose freedom.
E N T R E P R E N E U R I A L A C T I V I T E S A N D E C O N O M I C DEVELOPMENT
There is no doubt that there is a circular relationship between the two concepts.
Entrepreneurship activities creates economic development and vice versa Economic
development creates entrepreneurial activities. Entrepreneurial activities generating new
business presents employment dealings and leads to economic growth/development. In the
same breath, when the economic powers of the people are enhanced, it equally leads to
various entrepreneurial activities.
In the light of the above therefore, the various contributions of small and medium scale
enterprise to the Nigerian Economic Developments are examined below. The SME are
believed to form the large chunk of entrepreneurial activities and therefore are considered as
the engine room for the development of any economy.
( 1 ) Creation of Employment Opportunities SME's play the critical
role of principal safety net for the bulk of the population in Nigeria and their labour
intensity structure accounts for their recognition as a job creation avenue. The SME's
employs the largest number of people in many developing countries.
- Capacity Building - They serve as bedrock who are expected to assist in further
entrepreneurship and skill developments.
- Servicing of Large Scale Industries The SME's provides intermediate or semi-processed
goods for the use of Large Scale firms. On this regard, they provide linkages between
local producers of raw materials and large industrial concerns.
- Technological Acquisition Rudimentary technology of small business offers veritable
outlets for technological advancement. For example, the moulds for the production of
plastic chairs are now produced in Nigeria.
- Even Development SME's can easily be located in any part of the country including
rural areas since they can survive on rudimentary industrial infrastructure. They
therefore serve as major facilitators for industrial spread and rural development, thus
helping in mitigating rural-urban drift.
- Poverty Alleviation Small businesses help to reduce poverty and inequality in the
economy because capital required to set up small business are easily affordable. On the
other hand, the nature of such industries allows the employment of both skilled and
unskilled labour inequality gaps.
- Improvement in Rural Infrastructure and living standard of the people - Whenever small
business are cited in rural areas, they help to improve rural infrastructure and the living
standards of the people. They help to attract electricity, roads, and telecommunication
facilities to the host communities and also create linkage business that can improve the
earning power of rural dwellers. This apparently impacts on the quality of life of local
dwellers.
- Provide Regular and Variety of Choices to the Customer The SME's engages in a
variety of goods and services, therefore, the customer can regularly make their choice,,
and the business will also enjoy competitive advantage over Large firms.
- Economic Growth and Industrialization The national economic development prospects
hinge on entrepreneurial energy of vibrant SME's as most big business concern grew
from small scale to become big icons, and as they grow, they protect the nation from the
geographical cost benefit permutations of a few multinationals who are ever prepared to
close up their business and relocate at the slightest provocation or appearance of
economic downturn.
- (10) Better Utilization of Indigenous Resources The considerable low capital outlay
required for setting up SME's enable them to - convert minimal resources into
productive ventures. They also provide veritable outlets for technological
advancement especially in businesses with rudimentary technological requirements.
CONCLUSION
From the foregoing analysis, it is logically clear that entrepreneurial activities whether small
or medium scale dimensions is a critical factor in economic development of any nation.
Small business industries are major catalyst to economic development as evidenced by the
rapid transformation of the Asian Tiger countries of Malaysia, Indonesia, Taiwan, and
Hongkong in the recent past. Developing countries having realized the importance of small
business for economic growth now look for ways and means to achieve this objective by
encouraging and assisting small business to grow. Indeed, the small business enterprise is
crucial to economic development vis-a-vis its contribution to the Gross Domestic Product
(GDP) as well as export.
The contribution of entrepreneurial activities to the nation's economic development is
paramount. In the same vein, where there is economic wellbeing of the people or
development, it also speaks volume that various shades of entrepreneurial activities will
develop when the environment is right in terms of basic infrastructural facilities, adequate
and harmonized tax regime, and where large number of the nation and society live above
poverty line, obviously there will be attraction to entrepreneurial activities. There is therefore
a circular relationship between entrepreneurial activities and economic development
following the various contributions of small and medium scale business and their umbrella
body NASSI Nigerian Asspciation of Small Scale Industries to the economic growth of
Nigeria.
In the final conclusion, (Ogunleye, 2000) submitted that Small Business should be seen as a
means for enhanced economic opportunity, innovation and growth.
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