Creative destruction definition economics11/30/2023 ![]() ![]() ![]() This overview is the first in a series of one-page essays about the fundamental elements of entrepreneurship. A culture or policy that accords high status to the "self-made" individual is more likely to encourage entrepreneurship. A community that accords the highest status to those at the top of hierarchical organizations or those with professional expertise may discourage entrepreneurship. Different levels of entrepreneurship may stem from cultural differences that make entrepreneurship more or less rewarding personally. The culture of a community also may influence how much entrepreneurship there is within it. Among these are laws to enforce property rights and to encourage a competitive market system. Government officials can provide incentives that encourage entrepreneurs to risk attempting new ventures. Therefore, government support for entrepreneurship is a crucial strategy for economic development.Īs the Business and Industry Advisory Committee to the Organization for Economic Cooperation and Development (OECD) said in 2003, "Policies to foster entrepreneurship are essential to job creation and economic growth". In the developing world, successful small businesses are the primary engines of job creation, income growth, and poverty reduction. Most economists today agree that entrepreneurship is a necessary ingredient for stimulating economic growth and employment opportunities in all societies. A quick look at changes in communications – from typewriters to personal computers to the Internet – illustrates these ideas. Established ways of doing business are destroyed by the creation of new and better ways to do them.īusiness expert Peter Drucker (1909-2005) took this idea further, describing the entrepreneur as someone who actually searches for change, responds to it, and exploits change as an opportunity. The entrepreneur carries out "new combinations", thereby helping render old industries obsolete. Schumpeter viewed entrepreneurship as a force of "creative destruction". In the 20th century, economist Joseph Schumpeter (1883-1950) focused on how the entrepreneur's drive for innovation and improvement creates upheaval and change. Still other economists say that entrepreneurs develop new goods or processes that the market demands and are not currently being supplied. Others emphasize the entrepreneur's role as an innovator who markets his innovation. To some economists, the entrepreneur is one who is willing to bear the risk of a new venture if there is a significant chance for profit. Most economists believe it is more than that. Many simply equate it with starting one's own business. What is meant by entrepreneurship? The concept of entrepreneurship was first established in the 1700s, and the meaning has evolved ever since. ![]()
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