Importance of promoting entrepreneurship for economic growth | Sunday Observer

Importance of promoting entrepreneurship for economic growth

21 May, 2023

Entrepreneurship is often cited as a major engine of economic growth in any country, including Sri Lanka. Particularly at this time of economic distress, creating entrepreneurs is of paramount importance for the country.

On the other hand, although businesses operate on a profit motive, good entrepreneurs focus on societal good rather than the bottom line. They contribute immensely to society by leading the way with innovative solutions to practical social issues.

What is entrepreneurship? It is a blanket term related to starting and operating a business, although the definition has been a matter of debate with multiple meanings. However, the basic classification is that it is the process of starting, organising, and managing a new business venture in order to achieve a profit or social or environmental impact.

An entrepreneur is someone who recognises a market need and starts a business to satisfy it. They are willing to take on the threats and problems that come with starting and operating a business, such as acquiring funds, employing personnel, and creating and promoting products or services.

Successful entrepreneurs are frequently imaginative, resourceful, and capable of swiftly adapting to changing market conditions.

Entrepreneurs are a vital component of the economic growth of a country. They are individuals who take on the risk of starting a new business venture, even in unfavourable economic conditions. They create innovative products and services that address unmet needs in the marketplace. Entrepreneurship drives innovation, job creation, economic growth, and many other benefits to a society.

The linkage between entrepreneurship and economic growth is shown when entrepreneurs act upon profit opportunities and, in the process, make the economy more productive by creating more economic activities that boost the gross domestic product.

Business ventures

Entrepreneurs assume the risk involved with economic development since they pursue new ideas and devote resources to new business ventures, leading to the results which are anticipated to be large, both immediately and in the foreseeable future.

The relationship between entrepreneurship and economic growth is demonstrated when entrepreneurs act on profit possibilities, making the economy more productive by establishing additional economic activities, which in turn produce job opportunities which helps social stability through revenue. Such an activity also enhances the contribution to the Gross Domestic Product (GDP) of the country.

Therefore, it is an unwavering fact that entrepreneurship plays one of the most important roles in the contemporary Sri Lankan economy. It is the driving force behind decentralisation, economic restructuring, and the transition to a market economy. Entrepreneurship is defined as the practice of capitalising on previously undetected profit possibilities to create a new process or product.

Conceptually, entrepreneurship is the process of acting upon previously unnoticed profit opportunities to produce a new process or output. Entrepreneurs bear the risk associated with economic development because they undertake new ideas and commit resources to new business ventures, from which substantial rewards are expected in the economy.

Job creation is one of the most significant contributions entrepreneurs make to the economy. New businesses require employees to run their operations, and as they grow, they often provide more employment opportunities.

In addition, entrepreneurs also create indirect jobs through suppliers and service providers who support their businesses, through which they create more jobs.

At this crucial moment, Sri Lanka is desperate for more job opportunities as factors such as Covid-19 and the dire economic crisis have immensely increased the country’s unemployment.

For example, the Covid-19 pandemic and the subsequent political turmoil have impacted the country’s tourism industry and the construction industry extremely negatively, resulting in huge job losses.

Also, in Sri Lanka, due to the escalating cost of living, many small business owners either wound up their businesses or resolved to downsize. The only solution for creating employment to replace what was lost is to encourage entrepreneurship, as the Government cannot offer any further consolation to those who lost jobs.

Entrepreneurship promotes competition in the market. When new businesses enter the market, they often disrupt existing industries, creating new standards of excellence, and driving down prices.

This forces existing firms to improve their products and services, or risk being left behind. In addition, competition encourages innovation and efficiency, which can lead to productivity gains and increased economic growth. Lower pricing due to competition also has a huge impact on society as affordability increases.

Entrepreneurship can have a positive social impact.

Entrepreneurs often identify unmet social needs and develop solutions to address them. For example, social entrepreneurs may create businesses that provide education or healthcare services to underserved populations. By doing so, they can improve the quality of life for individuals and communities while also contributing to economic growth.

Most often, modern social entrepreneurs are driven by profit, yet they also take a more holistic approach to business and appear to be more worried about the fate of humanity.

These change agents use entrepreneurial strategies to bring systemic solutions to social and environmental issues. Social entrepreneurs frequently promote the development of environmentally friendly goods, satisfy the needs of an underrepresented community, or engage in charitable activities.

Entrepreneurship also generates new wealth sources. By sharing time, talents, and treasures with others, starting and expanding a business converts resources into value. By trading markets, expertise, and advantages in groups, a firm may become more sustainable.

Without access to new markets, it can be difficult to create jobs. People and connections, together with innovation, are the true solutions to generating growth.

Entrepreneurship generates more than just revenue. Raising revenue and the skill levels of employees requires effort and a desire to improve in order to achieve the exponential advantages of a highly productive and lucrative business.

This purpose may provide far more than just income. Growing a firm opens new markets, enhances competition, and fosters innovation. It has the potential to improve communal lives by giving people new options and shifting customer demand. The backing provided by an organisation to improve the knowledge and skills of employees leads to a more sustainable workforce that can provide additional contributions to the economy.

Develop a community

Entrepreneurship is an effective way to develop a community. However, enterprises cannot work alone, and they must have the contribution of others in their chosen line of business. Starting and running a business requires employees internally to operate, and it needs other businesses and partnerships in order to grow.

Hence, entrepreneurship is an effective tool because it always requires external stakeholders to operate. Hence, it is a collective effort to flourish along with others in the community. In Sri Lanka, although intermittently the importance of promoting entrepreneurship comes to the limelight, evidently there has been no effective and tangible action taken during the past several decades.

The National Enterprise Development Authority, which operates as a Government entity to provide assistance and consultancy, has not seemed to have proactively engaged in promoting entrepreneurship thus far. The NEDA can be of immense importance to budding entrepreneurs if it takes a conscious effort with proactive actions.

Adequate support

Despite the apparent capability of many Sri Lankan youth, the start-ups have not been provided adequate support by the Government or financial institutions, according to several new entrepreneurs this writer interviewed.

The prevailing unsophisticated and disorganised system discourages young entrepreneurs. Although there are SME loan schemes available for monetary assistance, obtaining such loans can be an arduous and tedious process for a newcomer due to numerous rules, regulations, procedures, and bureaucracy.

It is a cinch that at this crucial point in time, the country needs more job creators than job seekers to mitigate the ongoing gruesome economic crisis.

The most viable solution for the country to overcome the financial crisis is to create more entrepreneurs in whatever possible segments and produce employment. The Government must take effective action to foster and maintain entrepreneurs who can contribute to the economy and social welfare.