Entrepreneurship of the internet has opened up possibilities

 

Entrepreneurship begins with innovation and
innovation itself has no limits. Entrepreneurship and innovation are without a
doubt connected. However, there is a difference between the two. There is a
risk associated in entrepreneurship which is not there in innovation. Innovation
is bringing value to an idea and entrepreneurship is bringing the innovations
to life. Over the years, society has benefitted from innovation significantly. ‘Economists estimate that between 50 and 80
percent of economic growth comes from innovation and new knowledge’ (Urama and
Acheampong, 2013). This report illustrates how innovation has contributed to economic
development and the different economic theories of entrepreneurship in relation
to innovation.

 

Innovation has helped with globalization
and the interconnectedness of communities, as well as strengthening competition
and creating job opportunities for people. Entrepreneurs, who bring in
innovations, serve as agents of change, initiate creative concepts to markets
and prompt growth. There is also a “renewed focus on partnerships &
alliances within and across sectors; a rising importance of collaboration
across organizations to share knowledge, resources and capabilities; and an
associated need for a new type of leadership and skills associated with new,
cooperative approaches to social impact” (Davis, 2015). Innovation is bringing the world closer together and fundamentally
boosting economies and the standard of living. Innovation leads to new business
opportunities as well as increased competition between existing businesses
which brings about an incentive for these businesses to be more efficient and productive.
Therefore, it can be seen that innovation is necessary for economic development
and sustainable growth. Although the definition can be explained from different
angles. From customers’ perspectives, innovation can be the improvement in
quality of goods and services leading to a higher standard of living. From the
perspective of business, innovation may mean the attainment of substantial
profits, sustainable growth and development, inventions or improvements to
products that capture the market. From the perspective of employees, innovation
may suggest a more intellectually challenging job resulting in a better pay. “From
the aspect of whole economy, innovation represents a bigger productivity and
prosperity for all” (Gerguri and Ramadani, 2010). But only entrepreneurs can
bring the benefits of innovation to all parties by taking the risk involved and
going forward with the idea.

 

Developments in technology are fundamentally
reshaping the world we live in. Compared to a few years ago, the world we live
in today has changed drastically due to the vast number technological
innovations that have been created through human minds at work. One of the most
significant technological innovations of our time is the internet. It
stimulates innovation and opportunity. The internet aids with communicating,
creating networks and socializing, gaining knowledge through the unlimited
access to information available, etc. The creation of the internet has opened
up possibilities for more innovations within itself. Numerous businesses count
on the Internet to interact and deliver products/services to their customers.
Similarly, we depend on technology in our daily lives and the demands for
technology keep growing. The uses that come with the innovations in technology
is unmeasurable and has a large contribution to economic development.

 

Incremental innovation, being the ongoing
process of improving an existing product, service or process, also can have
major impacts on industries such as the iPhone to the mobile phone industry. In
2007, Steve Jobs released the first iPhone and there are more than 700 million
iPhone users worldwide today (Reisinger,
2017). The creation of the iPhone was a game-changing,
transformative invention to the industry. It brought out multiple communication
options, numerous applications and extreme convenience to the user. This
particular invention opened up even more doors to other inventions through the
form of applications such as Uber, Spotify, etc. Everything today can be done
by a touch of a screen and this would not be possible without innovation.
Critics may challenge the concept of incremental innovation by considering it a
waste of resources and conveys only slight developments of existing products
and production methods, but the evidence from today suggest that even minor
improvements to products can come a long way and the benefits are far too great
to ignore or class as a waste.

 

Innovation in general has helped to
increase productivity and efficiency in any economy. For instance, Henry Ford’s
innovation of the modern assembly line helped spark a major transformation of
both society and manufacturing. By reducing the cost of production
substantially with standardization and more efficient assembly, he was able to
produce automobiles in masses. This led to many industries adopting this method
and almost everything today, from soft drinks to electrical appliances, are made
on assembly lines. Ford’s idea is an example of one of the most revolutionary
process innovations. Joseph Schumpeter’s theory of creative destruction
observes that ‘competition, and with it a more efficient allocation of
resources, arises only through the invasion of these markets by new
entrepreneurs, who destroy the existing market equilibrium with their
innovations’ (Entrepreneurship.de, 2017). He referred to the entrepreneur as “the
agent of innovation” (Solow, 2007). He assumed that with innovation, existing
structures are destroyed and that the key to economic development is the existence
of discontinuous and profound change that helps to bring the economy out of it’s
fixed state and into a dynamic boom. That is exactly what Ford’s invention did.
It completely modified production in masses by improving the efficiency of the
manufacturing process drastically and economic productivity increased in the
long run.

 

Schumpeter’s definition
of innovation is an “industrial
mutation that incessantly revolutionizes the economic structure from within,
incessantly destroying the old one, incessantly creating a new one” (Schumpeter,
1950). He classified the process of innovation into four elements: invention,
innovation, diffusion and imitation (Burton-Jones, 1999) and puts the entrepreneur
in the centre of the analysis. ‘What matters in terms of
economic growth, investment and employment, is not the discovery of basic
innovation, but rather

the diffusion of basic innovation, which is
the period when imitators begin to realize the profitable potential of the new
product or process and start to invest heavily in that technology’ (?ledzik, 2013).

 

According to Israel Kirzner, when the
market is in disequilibrium due to the imperfection of knowledge, profitable
entrepreneurial opportunities arise. To gain pure entrepreneurial profits, it
is important to distinguish price differentials that have been overlooked.
Alertness to the existence of opportunities that have been disregarded is
necessary because capturing these opportunities is what brings the market
towards equilibrium. The availability of unexploited entrepreneurial
opportunities means that the market is in a disequilibrium position and this is
likely to change due to the existing opportunities and this is what leads to
innovation. The entrepreneur is viewed as the balancing/equilibrating force as
opposed to Schumpeter’s point of view (Hayek et al., 1971). Kirzner also
focuses on alertness as one of the core characteristics of the entrepreneur.
Alertness can be defined as the ability to realise entrepreneurial opportunities
that has not previously been perceived. However, there will always be the
factor of uncertainty to the entrepreneur due to the unpredictability of future
events and market conditions. No matter the amount of research and time that is
put into market research, the results may not be completely accurate. According
to Richard Cantillon, the real
world market place is filled with uncertainty and it is the function of the
entrepreneur to “meet and bear that uncertainty by investing, paying expenses
and then hoping for a profitable return” (Zera,
n.d.). He also sees that the prevalent uncertainty that come with entrepreneurship
is to a certain extent, a result of a decentralized market. Therefore, the entrepreneur will act with uncertainty, undertaking a
risk, and will not have perfect knowledge of whether his activity was
successful until he earns a profit or a loss as a result of his activity. In
other words, “entrepreneurship is the alertness to and foresight of market
conditions; it must necessarily precede actions taken in accordance with that
alertness” (Stolyarov II, 2005). Carl Menger of Australia (1871) also believes
that economic changes do not come about from the state of affairs but from the
individual’s awareness and understanding of the state of affairs. The
entrepreneur converts available resources into profitable goods and services.

 

In Schumpeter’s
presentation, entrepreneurial activity is seen as disrupting an existing
equilibrium position whereas Kirzner’s view indicates that the existing situation,
regardless of how stable it is, is a disequilibrium situation as long as there
are opportunities that have not been exploited as of yet. There are various
theories on entrepreneurship and everyone who developed a theory over the years
obtained ideas for it through the basis of his own understanding and experiences,
thereby providing a limited viewpoint of entrepreneurship and each theory may
lack a certain aspect but no view is right or wrong. This is because all the theories
illustrate important points of entrepreneurship one way or another, such as how
the entrepreneur is constantly looking for change, responds to it and utilizes
it as an opportunity, and when there is opportunity for innovation that can
bring about positive change to the economy, it can only get better from there.