Source | Entrepreneur : By Rahul Baijal
Entrepreneurs are often thought of as national assets to be refined, motivated and remunerated to the greatest possible extent.
Entrepreneurs can change the way we live and work. If successful, their revolutions may improve our standard of living. In short, in addition to creating wealth from their entrepreneurial ventures, they also create jobs and the conditions for a flourishing society.
Entrepreneurship capital is defined as “a region’s endowment with factors conducive to the creation of new businesses” and it exerts a positive impact on the region’s economic output.
Regions with a higher level of entrepreneurship capital show higher levels of output and productivity, while those lacking entrepreneurship capital have a tendency to generate lower levels of output and productivity.
The impact of entrepreneurship capital is stronger than that of knowledge capital. Evidence indicates that entrepreneurial capital plays a very important role in the production function model presented.
The following are six reasons why entrepreneurship capital is important to the economy:
1. Entrepreneurs Create New Businesses
Path-breaking offerings by entrepreneurs, in the form of new goods and services, result 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 venture add 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 benefitted from it.
Businesses in associated industries, like call centre operations, network maintenance companies and hardware providers, flourished. Education and training institutes nurtured a new class of IT workers offering better, high-paying jobs. Infrastructure development organizations and even real estate companies capitalized on this growth as workers migrated to employment hubs seeking new improved lives.
Similarly, future development efforts in underdeveloped countries will require robust logistics support, capital investment from buildings to paper clips and a qualified workforce. From the highly qualified programmer to the construction worker, the entrepreneur enables benefits across a broad spectrum of the economy.