Importance of entrepreneurship to an economy

Business studies study module
  1. Creation of employment-Through entrepreneurship, jobs are created which help in absorbing people who would otherwise have been jobless e.g. people employed in the jua kali sector.
  2. Formation of capital-Profit earned by entrepreneurs may be used to expand the business or even to start other businesses. Wages and salaries paid to the employees is a source of capital to them.
  3. Raising standards of living-Entrepreneurs pay wages and salaries to their employees which enable them to acquire goods and services they need to live comfortable lives. Entrepreneurs also provide a wide variety of goods and services to consumers hence leading to improved living standards.
  4. Encourages the use of local resources-Entrepreneurship makes it possible to use/exploit local resources. Idle resources such as scrap metal may be used to make jikos.
  5. Improving infrastructure-The existence of businesses in the economy makes the government establish or improve infrastructure such as roads, communication facilities and water. At other times, entrepreneurs may combine forces to improve infrastructure in their area of operation.
  6. Savings on imports-Local entrepreneurs are able to produce goods and services that are a substitute to imports. This helps the country to reduce the amount of money required to pay for such imports.
  7. Reducing foreign dominance of the economy-Participation of local entrepreneurs in various business activities helps in reducing investments by foreigners in the particular area.
  8. Promotion of technology/promotion of innovation, research and development-Entrepreneurs are creative and they come up with new and better ways of accomplishing tasks. Most of the inventions and innovations in our society have been developed by entrepreneurs.
  9. Promotion of entrepreneurial culture/helps in the creation of role models- Successful entrepreneurs/entrepreneurial ventures encourage other members of society to initiate their own businesses and hence act as role models in the business world.
  10. It contributes to government revenue-Taxes and fees paid by entrepreneurial ventures constitute part of government revenue/income that helps it to facilitate its operations.
  11. It promotes economic growth-Entrepreneurs produce goods and services. This increases the volume of goods and services in the economy leading to expansion of the economy.
  12. It may promote self-actualization and esteem-By initiating busine-sses in which they are their own bosses, entrepreneurs pride is boosted and this may promote the overall productivity of the economy.

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