Across the country, communities are floundering. Inner cities are abandoned and torn from within. Workers are concerned about their futures, and youths see little prospects for a better life. Solutions are not clear, and improvements are difficult to find and are not on the horizon.
Entrepreneurship will not solve all the problems of a disintegrating community, but entrepreneurs do offer some solutions. They have a reputation for being innovators and job creators, and they provide benefits to society.
What are the benefits of entrepreneurship to society?
Entrepreneurs Are Innovators
Technology is rapidly changing the fabric of the nation's workforce. Old, blue-collar manufacturing jobs are declining, and other occupations simply don't exist anymore. Remember telephone switchboard operators, movie film projectionists or elevator attendants?
Entrepreneurs observe these changes and step in to fill the voids. They see the negative consequences and the losses of some occupations caused by technology, but they sense opportunities in the new landscape. As a result, entrepreneurs innovate. They create new products and services that advances in technology have made possible.
Look at what Steve Jobs did. He knew that everyone liked music, and he suspected people would like to have their own personal collection to carry around. Hence, the iPod. Apple sold millions of iPods and went on to develop more related products.
Like Steve Jobs, entrepreneurs don't stop with just innovating one product or service. They find related products. They grow by developing new markets. In the process, they hire more employees.
Nobody likes to pay high hotel rates, right? Some people wouldn't mind making a little money renting out their home, cottage or room. The founders of Airbnb saw this need and found the opportunity to fill it. They match homeowners with people who want to rent something short term.
Airbnb now has an inventory of over 800,000 properties located in 34,000 cities, and they have expanded by adding experiences. Paddle down a river to local breweries in North Carolina or take a photoshoot on the Brooklyn Bridge in New York City. Airbnb stirs the imagination of renters and property owners in ways they had never considered.
Innovators look for consumers' needs and find ways to fulfill them. It's this innovation that creates employment.
Entrepreneurs Create Jobs
As entrepreneurs start new businesses, they need to hire employees. These new companies become engines of job creation. According to the Small Business Administration, small firms have created 62 percent of new jobs since the Great Recession.
Entrepreneurs create entirely new industries and opportunities for employment. Take, for example, a football coach in Nebraska. He noticed that young athletes received their coaching when they were on the practice field, but after they left, they got nothing. So, he created a business that collected videos for all types of sports training and put them on a website. Now the aspiring athletes can get professional instructions and practice anytime and anywhere at their convenience. This company now has over 450 employees in the United States and six foreign countries. None of these jobs existed before this coach in Nebraska started his business.
Entrepreneurs are at the leading edge of the economy. They are the source of the energy that drives economic growth.
Consider the development of the internet. Most of this progress is good, but the expansion of the internet has spawned a whole new problem: cyber attacks by criminals looking to steal identities and money. In response, a software company creates apps to detect and defend against bot attacks on websites. The idea was new at the time, but it has since spread with competitors getting into the business by creating and offering similar products. An entire new industry has been created to defend against cyber attacks. The result is more new jobs for skilled software developers.
Employees of these new industries are seeds that entrepreneurs plant for growth. Workers spend their income at other businesses, increasing employment opportunities for other workers. Quality of life improves for the employees and the people around them.
Entrepreneurs Raise Standards of Living
Entrepreneurship is a process. Entrepreneurs see a need in the marketplace and use their innovative talents to find a solution. They start a new business and hire employees. The workers earn an income, which they spend in the local economy. All of this creates wealth for the population and raises the standard of living for everyone involved.
Studies from economists show that increases in productivity improve the standard of living for a population. The process of entrepreneurship leads to higher productivity. Innovation applies more efficient technologies to create something new or improved. It finds more superior ways of doing something.
The result is that employees become more efficient. Profits go up, and costs go down. Incomes rise, and demand increases. Altogether, the economy gets stronger, creating more jobs.
When one company comes out with a better product or service, the competition has to improve its game or go out of business. The increased competition forces everyone to become more efficient and better at their jobs. In other words, they become more productive and enjoy a higher standard of living.
Entrepreneurship Creates Economic Growth
What do entrepreneurs contribute to the economy?
It starts with new businesses generating wealth for the population. New markets add wealth to the economy when entrepreneurs invest their own money to develop innovative products and services. Lenders and other investors contribute more capital to the new ventures to put more funds at work.
Businesses pay taxes on their profit, and employees pay taxes on their income. The government takes this added income and spends it to stimulate the economy.
The gross domestic product is a measure of the economic status and improvement of a country. A stronger economy increases the gross domestic product per capita of the country. An improving gross domestic product is an important goal for economic development because it means that each individual is becoming more productive and earning more money.
Benefits of Entrepreneurship to Society
Social entrepreneurs apply their innovative instincts to important societal issues. They build profitable businesses that deal with hunger, education, health problems and financial literacy. The early founders of the internet did not just want to make money, they wanted to give the public more access to information, ideas and communication.
Entrepreneurs do more than form new companies. They effect social changes. Andrew Carnegie did more than build a steel empire. He also built a system of public libraries. Carnegie designed a formula that combined funds from his foundation with a local commitment from the community to contribute a building site. Over 36 years of operation, his program helped to create over 2,500 public libraries.
Innovators have a term for social-impact businesses: base of the pyramid. This refers to creating businesses that target the most people with the lowest economic status. The objective is to find new ways and products to improve the living standards of this sector of the population.
One example of an impact product is an inexpensive, solar-powered lantern developed by a California company. These lamps are designed for use in impoverished countries where electricity is not available and families depend on kerosene lanterns for light. Kerosene is expensive, dangerous to use and gives off pollutants, which are trapped indoors and create a poisonous environment.
Solar-powered lanterns eliminate all of these problems. This California business has already sold several thousand of its lamps to countries such as Indonesia, Cameroon and the Republic of Congo. In addition to improving people's lives, the company is also making a profit.
Entrepreneurs Are Philanthropists
Entrepreneurs give back to their communities. They not only earn money for themselves and their employees, they donate to local organizations and charities too. A common sight on a baseball field is a Little League team with the name of a local company on its T-shirts. That company probably paid for the bats, balls, equipment bags and uniforms. Kids who may not have had the money to pay for gloves now have the opportunity to enjoy America's greatest pastime, courtesy of an entrepreneur.
Mark Cuban, businessman and owner of the Dallas Mavericks, is an example of a self-made entrepreneur philanthropist. He started the Fallen Patriot Fund to help military families who had relatives injured or killed during Operation Iraqi Freedom. The Mark Cuban Foundation has donated to support research to find treatments and cures for cancer, autism, mental problems and AIDS.
Alfred Mann's father was a grocer, and his mother was a pianist who immigrated from Poland. Mr. Mann made his first fortune designing solar cells for spacecraft, but he became more well known for his work with cardiac pacemakers and other medical devices. His charitable organization, the Alfred Mann Foundation, has donated millions of dollars to several universities to fund more research in biomedical engineering.
Other recipients of entrepreneurs' generosity are libraries, veterans' groups, homeless shelters and health organizations. None of this would be possible if entrepreneurs didn't start new businesses and hire employees.
Entrepreneurs Change the Community
What role does the entrepreneur play in the local community?
A business started by an entrepreneur impacts the local community. The new company reduces unemployment by hiring employees who spend their income in local stores, generating more business for those owners. The success of one business drives the progress of other organizations.
Suppose the new business needs highly educated employees with specific skills. A community might respond by creating technical training schools and intern programs that provide these workers. Everyone gains. The company gets the workers it needs, and the community gets a more educated population with higher incomes.
Entrepreneurs invest in community projects by giving to local charities, volunteering for food drives, working at soup kitchens and building houses. They sponsor cleanups to create green spaces and parks. These community-minded businessmen may even continue to make donations for park and roadway maintenance. Over time, these entrepreneurs become active members in the chamber of commerce and encourage other business people to develop and grow their community.
Entrepreneurs Help Other Entrepreneurs
Mentorship: It's not always about the money. Entrepreneurs have an enthusiasm and passion for their businesses that they like to share with other aspiring innovators.
Seasoned entrepreneurs can tell newcomers about the mistakes they made that could have been avoided if forewarned by someone already experienced in a startup. When guided by a mentor, a neophyte can avoid wasting time on mistakes as a result of ignorance or business immaturity.
They form local groups that meet to discuss the problems of starting a business, finding employees and overcoming the hurdles of introducing new markets for products and services. These entrepreneurial booster groups serve as motivators. They are available to constantly encourage other entrepreneurs when the path gets tough. Success breeds success.
Entrepreneurs do more than just find innovative solutions for products and services. Their work benefits society by hiring employees, buying supplies and materials from local vendors and becoming active donors to charities and organizations. The businesses that entrepreneurs form are engines that drive the economic growth of a community.
- Entrepreneur: 7 Ways Entrepreneurs Drive Economic Development
- Investopedia: Why Entrepreneurs Are Important For the Economy
- Virgin: What Impact Do Entrepreneurs Have on Society?
- Inc.: 5 Benefits of Community for Entrepreneurs
- The Harvard Gazette: Want to Do Well? Then Do Good
- Brookings: Entrepreneurship: An Engine For Job Creation and Inclusive Growth in the Arab World
- Entrepreneur: Why Schools Should Teach Entrepreneurship
- Penn State University: Entrepreneurship and Economic Development: Theory, Evidence and Policy
James Woodruff has been a management consultant to more than 1,000 small businesses. As a senior management consultant and owner, he used his technical expertise to conduct an analysis of a company's operational, financial and business management issues. James has been writing business and finance related topics for National Funding, bizfluent.com, FastCapital360, Kapitus, Smallbusiness.chron.com and e-commerce websites since 2007. He graduated from Georgia Tech with a Bachelor of Mechanical Engineering and received an MBA from Columbia University.