Role of entrepreneurship in economic growth


Article written by Alauddin Masood

Business entrepreneurs play a key role in promoting the economic growth and social dynamism of states, whether developed or developing.

By floating new companies, they not only create most of the new jobs but also contribute to innovations that promote human welfare.

While the link between entrepreneurship and economic growth is well-established, but when academicians, officials, analysts and commentators discuss “business” and “commerce”, they invariably mean big business enterprises. Though big business is imperative to the financial health of nations, mega companies are not essentially the only source of innovation that makes an economy to grow.

Economic growth does not just entail producing extensive products and services, it also means better and cheaper products and services and an overall improved quality of life. Pharmaceutical companies offer a good example: they continue to contribute substantially to the increase in life expectancy by discovering, manufacturing and marketing new drugs.

The moving spirits behind these innovations are entrepreneurs who set-up and start new companies as one of the essential functions of investors. They establish new companies as vehicles for introducing and promoting innovations. If successful, those companies grow, eventually giving a boost to the economy of their nation. In other words, when business enterprises grow, the economy grows; and entrepreneurs are drivers who steer the firms towards growth.

Only a small number of new and young companies, of course, succeed in creating jobs and growing into larger firms. But, once entrepreneurial companies turn into larger firms, they often start blocking innovation and the emergence of next generation of firms. This is a dilemma that has continued to confront policymakers, economists and corporate leaders for almost a century, with no resolution in sight.

Political leaders and policymakers must remember that the cluttered process of starting firms, competing, failing and growing is absolutely essential to achieving economic growth. But, scale and growth, and their underlying corollaries of failure and shrinkage can only be achieved through this chaotic process. Both public and private institutions, including large corporations and universities, need this process to continue and proceed, accepting that it cannot be dictated or controlled. Rather, it can only be supported and promoted.

Currently, many organisations, including Kauffman Foundation and TiE, are engaged in a wide range of research on entrepreneurship and they also operate and organise a number of programmes aimed at helping budding entrepreneurs – preparing students at all levels – for launching new business ventures and guiding them towards success in an entrepreneurial economy, according to Dr. Imran Ghaznavi, Advisor, Advocacy & Outreach, Planning Commission of Pakistan. Kauffman Foundation was founded by a philanthropist and successful entrepreneur, Ewing Kauffman, who earned fame by establishing a pharmaceutical company and creating thousands of jobs and innovations.

TiE was founded, in 1992, in Silicon Valley, by a group of successful entrepreneurs, corporate executives and professionals with roots in the Indus region to foster entrepreneurship through educating, mentoring and networking. Dedicated to various cycles of wealth creation and giving back to the community, TiE’s focus is to generate and nurture the next generation of entrepreneurs. This global powerhouse claims to have helped hundreds of companies to launch their business and generated over $200 billion in venture capital, a figure that even surpasses the GDP of some countries.

In Pakistan, in addition to provincial capitals, TiE has one of its chapters in Islamabad, which was inaugurated by the Prime Minister Syed Yusuf Raza Gilani in June 2008. Each chapter of TiE organises programmes and conferences, every year, to promote and encourage the concept of entrepreneurship and the crucial role that they can play in leading the country towards progress, growth and prosperity, says Imtiaz Rastgar, one of the founding members of TiE Islamabad and Chairman of the Rastgar Group, which is one of the top exporters of auto-parts from Pakistan.

While addressing a TiE conference, recently held in Islamabad, Hussain Dawood, Chairman of the Dawood Group of Industries stated that if Pakistan has to come out of its economic difficulties, the citizens have to act as engines of growth, organising and running their business enterprises on ethical lines. As the country’s education system has become decadent, he asked the citizens to take the education system into their own hands, if they want the country to make rapid progress and achieve economic prosperity.

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