The role of entrepreneurism in the economy
When teachers ask students what an entrepreneur is, a common response is "someone who runs a business." While that definition is true in the strictest sense, it ignores the contribution that entrepreneurs make to the economy. An entrepreneur introduces change into the marketplace. That change might be creating a brand-new business with entirely new ideas for products and services. Or it might be changing the product line or marketing strategy for an existing business or adding enhancements to existing items, such as new features, packaging, or pricing schemes.
A unique profile
In addition to generating new ideas, entrepreneurs share several other traits. They are risk takers who are not content with following the status quo of the marketplace. They are also networkers who bring together the factors of production necessary to make their new ideas a reality. While entrepreneurs are frequently business owners, they can affect the economy by stimulating growth for businesses other than their own. For example, Simon Cowell, of American Idol fame, is an innovator who has had a sizable impact on the music we listen to and the television programs we watch as a result of his work with a variety of corporate entities, including Bertelsmann Music Group and Fox Broadcasting Company.
From startups to giants
Anyone can be an entrepreneur, and entrepreneurial activity can take place in any type of business organization—from sole proprietorships to large corporations. Much of the economy's entrepreneurism occurs in small businesses. According to the U. S. Bureau of Labor Statistics, approximately 57 percent of all private sector jobs in 2007 were in firms that employed 100 or fewer workers.
One of the important functions that small businesses perform is to provide the seeds of growth for larger enterprises. From Ford Motor Company to McDonald's to Google, today's large corporations had their start as small businesses that changed their industries in important ways. Even the world's largest private employer, Wal-Mart, had its start as a small chain that eventually pioneered the concept of the big-box store and the innovation of a computer network-driven inventory system. An interactive map (see the related link) shows how the company remained a small, local chain for several years before its innovations transformed it into a nationwide presence.
Playing a critical role
These examples show how entrepreneurs are critically important to the global economy. While we may take the presence of the world's largest corporations for granted, their success usually stems from an innovation that changed the landscape of an entire industry. Many of the products and services that we value today might never have made it to market without the ingenuity, risk taking, and creativity of the entrepreneurs who took action to create something new.
By Alan Melchior, economic and financial education specialist, Miami Branch