Role of entrepreneurship in economic developmentThe role of entrepreneurship in economic development involves more than just increasing per capita output andincome; it involves initiating and constituting change in thestructure of business and society. This change is accompanied by growth and increased output, which allowsmore wealth to be divided by the various participants. What is an area which facilitates the needed change and development?Economic growth depicts innovation as the key, not only indeveloping new products (or services) for the market but also in simulating investment interest in the new venturesbeing created. This new investment works on both the demand and the supply sides of growth equation; the new capital created expands the capacity for growth (supply side) and the resultant new spending utilizes thenew capacity and output(Demand side)

In spite of the importance of investment and innovation inthe economic development of an area, there is still a lack of understanding of the product-evolution process. This is theprocess through which innovation develops and commercializes through entrepreneurial activity, which in turn simulates economic growth.

Product-evolution process Phase I Recognition of social needPhase II Initiation of technological innovationPhase III Iterative synthesis leading to inventionPhase IV Development phasePhase V Industrial phaseThe critical point in the process is the intersection of knowledge and a recognized social need, which begins the product development ( IV phase in the figure given in the next slide). This point, called iterative synthesis often fails toevolve into marketable innovation and is where the entrepreneur needs to concentrate his efforts. The lack of

expertise in this area – matching the technology with the appropriate market and making the needed adjustments- is an underlying problem in any technology transfer.

PRODUCT-EVOLUTION PROCESS (Iterative Synthesis)

PHASE I • Social need – Gut feeling , Knowledge, Vision

PHASE II• Science, Technology

PHASE III • Pressing towards Invention

PHASE IV• Modeling ( prototype) , Planning, Financing,

Manufacturing, MarketingPHASE V

• Industrial / Commercialization phase (Acid Test)

Most innovations introduced to the market are ordinaryinnovations, that is, with little uniqueness or technology. There are fewer technological innovations and breakthroughinnovations, with the number of actual innovations decreasing as the technology involved increases. Regardless of its level of uniqueness or technology, each innovation (particularly the latter two types) evolves into and developstowards commercialization through one of three mechanisms:

1. The government2. Intrapreneurship3. Entrepreneurship

Entrepreneurship has assisted in revitalizing rural areas andareas of the inner city. Individuals in inner-city areas can relate to the concept and see it as a possibility for changing their present situation. “Given its impact on both the overall economyand the employment of an area, entrepreneurship should become a focalpoint in economic development”

1.Government as an InnovatorThe government is one conduit for commercializing the results of the synthesis of social needs and technology. Thisis frequently called technical transfer and has been the focusof a significant amount of research effort. Despite this effort, relatively few inventions resulting from soundscientific government-sponsored research have reached the commercial market. Most of the by-products of thisresearch have little application to any social need. Thoughthe government has the financial resources to successfully transfer the technology to the market place, it lacks the business skills, particularly marketing and distribution, necessary for successful commercialization. In addition,government bureaucracy and red tape often inhibit the business from being formed in a timely manner.In order to help their scientists commercialize theirtechnology and think entrepreneurially, some labs areproviding training and are working with such educators.

2. IntrapreneurshipIntrapreneurship ( entrepreneurship within an existing business structure) can also bridge the gap between scienceand the market place. Existing businesses have the financialresources, business skills, and frequently the marketing anddistribution systems to commercialize innovation successfully. Yet, too often the bureaucratic structure, andthe emphasis on short-term profits, and a highly structuredorganization inhibit creativity and prevent new products and businesses being developed. Corporates recognizing these inhibiting factors and the need for creativity and innovation have attempted an intrepreneurial spirit in theirorganizations.In the present era of hypercompetition, theneed for new products and intrapreneurial spirit have become so great that more and more companies are developing an intrapreneurial environment, often in the form of Strategic Business Units (SBUs).

3. EntrepreneurshipThe third method for bridging the gap between science and market place is via entrepreneurship. Many entrepreneurs have a difficult time bridging this gap and creating newventures. They may lack managerial skills, marketing capability, or financial resources. Their inventions are oftenunrealistic, requiring significant modification to be marketable. In addition, entrepreneurs often do not know how to interface with all the necessary entities such as banks, suppliers, customers, venture capitalists, distributorsand advertising agencies. Yet, in spite of all these difficulties, entrepreneurship is presently the most effective method for the above said gap,creating new enterprises, and bringing new products andservices to the market.These entrepreneurial activities significantly affect the economy of an area by building the economic base andproviding jobs.