What is the role of the entrepreneur in the economy?

The role of the entrepreneur in the economy is positive. Although, the motivations of entrepreneurs varies according to its economic development.

That is one of the findings of the Global Entrepreneurship Monitor (GEM) 2008's Report. GEM's research program is an annual assessment of the national level of entrepreneurial activity and started as a partnership between London Business School and Babson College. In 2008, 43 countries participated in the GEM project.

There is wide agreement on the importance of entrepreneurship for economic development. Entrepreneurs drive innovation, they speed up structural changes in the economy and some high-impact entrepreneurs in particular make an outsized contribution to job creation.

Entrepreneurial activity drivers

The GEM's report mentions two key drivers of entrepreneurial activity:

Necessity-driven which is high particularly at low levels of economic development, as the economy may not be able to sustain a high enough number of jobs in high-productivity sectors.

In other words if you were in a country with low economic development probably you'll begin an entrepreneurial activity because there are no jobs and you need money.

Opportunity-driven that appears as an economy develops; productive sectors grow and supply more employment opportunities.

Therefore if you live in a developed country an entrepreneurial activity isn't a need and therefore is driven by identified opportunities.

Role of the entrepreneur according to his/her country's economy

In factor-driven economies (i.e. Bolivia, Colombia, Egypt) as industrial activity starts to develop, often around the extraction of natural resources, people migrates from the agricultural sector producing an oversupply of labor and forcing people to create self-employment opportunities in order to make a living.

In efficiency-driven economies (i.e. Argentina, Brazil, Chile) there is a pursuit of higher productivity through economies of scale. That means that if you have a company your earnings increases if it produces more and keep the fixed costs invariable. Government policies help this development and give way to an emerging
small-scale manufacturing sector

In innovation-driven economies (i.e. Germany, Spain, United States) there are improvements in variety and sophistication to please your demand. This development is associated with increasing research and development and knowledge intensity. Therefore this opens the way for the development of innovative, opportunity seeking entrepreneurial activity that is not afraid
to challenge established incumbents in the economy.

As you have seen the role of the entrepreneur is very important to any economy because without consider the level of economic development or the entrepreneur's motivations, the entrepreneurial activity boosts the economy growth.

Now let's get back to the main page of this section to learn more. Just use the links below.

To top

Back from Role of the entrepreneur to Business entrepreneur or Home