THE ROLE OF ENTREPRENEURSHIP TOWARDS EMPLOYMENT GENERATION AND POVERTY REDUCTION: A THEORETICAL DISCOURSE
Dr. Mustapha Muktar
Department of Economics,
Umaru Musa Yar’adua University Katsina
A Lecture Presented at First Annual Students’ Entrepreneurship Lecture,
Organized by the Students’ Union Government,
Umaru Musa yar’adua University, Katsina.
The concept of entrepreneurship was first established in the 1700s, and the meaning has evolved ever since. Many simply equate it with starting one’s own business. However, most scholars believed it is more than that. To some, an entrepreneur is one who is willing to bear the risk of a new venture if there is a significant chance for profit. Others emphasize the entrepreneur’s role as an innovator who markets his innovation. Still others say that entrepreneurs develop new goods or processes that the market demands and are not currently being supplied. Entrepreneur can also be viewed as a person that wants to works for himself; it is sometimes synonymous with self employment
In the 20th century, economist Joseph Schumpeter (1883-1950) focused on how the entrepreneur’s drive for innovation and improvement creates change. Schumpeter viewed entrepreneurship as a force of “creative destruction.” The entrepreneur carries out “new combinations,” thereby helping render old industries obsolete. Established ways of doing business are destroyed by the creation of new and better ways to do them. Entrepreneurship therefore, is more than simply “starting a business.” It is a process through which individuals identify opportunities, allocate resources, and create value. This creation of value is often through the identification of unsatisfied needs or through the identification of opportunities for change. It is the act of being an entrepreneur which is seen as "one who undertakes innovations with finance and business acumen in an effort to transform innovations into economic goods hence entrepreneurs see “problems” as “opportunities,”
Entrepreneurship therefore by implication is the act of being an entrepreneur, it involves all the activities and function undertaken by an entrepreneur. Entrepreneurship is believed to provide an important avenue for individuals to advance up the income ladder. For some, it may provide a better route than paid employment, while for others, who may be disadvantaged when pursuing paid employment; it may provide the only route. Entrepreneurs are charged with the responsibility of innovating new products, better production method, creation of markets and managing the production process. They are in a nutshell engaged in wealth creation. Financing therefore is needed by entrepreneurs to enable them carry out their function effectively.
WHY BECOME AN ENTREPRENEUR
1. Entrepreneurs are their own bosses they make the decisions, they choose whom to do business with and what work they will do. They decide what hours to work, as well as what to pay and whether to take vacations or not.
2. Entrepreneurship offers a greater possibility of achieving significant financial rewards than working for someone else.
3. It provides the ability to be involved in the total operation of the business, from concept to design and creation, from sales to business operations and customer response.
4. It offers the prestige of being the person in charge.
5. It gives an individual the opportunity to build equity, which can be kept, sold, or passed on to the next generation.
6. Entrepreneurship creates an opportunity for a person to make a contribution. Most new entrepreneurs help the local economy. A few through their innovations contribute to society as a whole.
CHARACTERISTICS OF AN ENTREPRENEUR
1. Creativity: this is the spark that drives the development of new products or services or ways to do business. It is the push for innovation and improvement. It is continuous learning, questioning, and thinking outside of prescribed formulas.
2. Dedication: this is what motivates the entrepreneur to work hard, 12 hours a day or more, even seven days a week, especially in the beginning, to get the endeavor off the ground. Planning and ideas must be joined by hard work to succeed. Dedication makes it happen.
3. Determination: is the extremely strong desire to achieve success. It includes persistence and the ability to bounce back after rough times. It persuades the entrepreneur to put extra effort. For the true entrepreneur, money is not the motivation. Success is the motivator; money is the reward.
4. Flexibility: is the ability to move quickly in response to changing market needs. It is being true to a dream while also being mindful of market realities. A story is told about an entrepreneur who started a provision store, but customers wanted a barbing saloon as well. Rather than risking the loss of these customers, the entrepreneur modified his vision to accommodate these needs.
5. Leadership: is the ability to create rules and to set goals. It is the capacity to follow through to see that rules are followed and goals are accomplished.
6. Passion: is what gets entrepreneurs started and keeps them there. It gives entrepreneurs the ability to convince others to believe in their vision. It can’t substitute for planning, but it will help them to stay focused and to get others to look at their plans.
7. Self-confidence: this comes from thorough planning, which reduces uncertainty and the level of risk. It also comes from expertise. Self-confidence gives the entrepreneur the ability to listen without being easily swayed or intimidated.
8. Smartness: consists of common sense joined with knowledge or experience in a related business or endeavor. The former gives person good instincts, the latter, expertise. Many people have smarts they don’t recognize. A person who successfully keeps a household on a budget has organizational and financial skills. Education and life experiences all contribute to smartness.
Every entrepreneur has these qualities in different degrees. However if a person lacks one or more, then they can be learned. Or, someone can be hired who has strengths that the entrepreneur lacks. The most important strategy is to be aware of strengths and to build on it.
ROLES OF ENTREPRENEURSHIP TO ECONOMIC DEVELOPMENT
Employment Generation/Reduction of Unemployment
Unemployment refers to a situation where people who are willing and capable of working are unable to find employment/jobs to do. It is one of the macro-economic problems which every responsible government is expected to monitor and regulate.
The process of entrepreneurship activity reducing unemployment situation in the economy is termed “Schumpeter effect”. It has been observed that, unemployment is negatively related to new-firm startups, that is, as new businesses are established employment of resources is stimulated and unemployment reduces substantially. In the same vein, it was noted that high unemployment in the society is associated with a low degree of entrepreneurial activities, that is, where propensity to set up enterprises is low; the rate of unemployment would be very high. The implication of the above assertions is that those who are unemployed tend to remain so because they possess lower endowments of human capital and entrepreneurial talents required to start and sustain new firms to keep them going. A low rate of entrepreneurship culture and skills in any society may be a consequence of the low economic growth, which also reflects higher levels of unemployment.
Wealth Creation and Poverty Reduction
Entrepreneurship enables individuals to use their potentials and energies to create wealth through the creation of goods and services. Poverty is a condition of living that is characterized by lack of the basic necessities of life. One of the major cause of poverty is unemployment and since entrepreneurship is preoccupied with employment generation, then by extension the generation of employment will therefore reduce the level of poverty. Wealth if created will definately reduce the incidence of poverty by empowering the citizens and increasing their access to basic necessities of life (food, clothing, shelter, security and education)
Reduction in Rural - Urban Migration: The burgeoning problems of urban un employment and population congestion owing to the rapid rural urban drift find its ultimate solution in the restoration of a proper balance between urban and rural economic opportunity. Rural entrepreneurial activity in generating employment is the link achieving this balance.
Reduction of Crime Rate: It is strongly believed that unemployment is responsible to a large extent for the level of social complication of armed robbery, political thuggery, drugs peddling, prostitution, money laundering, currency counterfeiting, e-mail scam, and other such related crimes. When individuals are unable to satisfy their needs, most often, frustration occurs. These frustrations breed fraudulent practices. Employment generation therefore will reduce the level of frustration and consequently, crime rate.
Raising the Standard of Living: entrepreneurship through job and wealth creation raises the standard of living of people. Owing to higher income earning and availability of disposable income, they can therefore, afford the basic necessities of life such as housing, clothing and food, education, good health care delivery, etc.
Rural Development: Rural enterprises through employment generation stimulate
rural development and the achievement of a meaningful level of broad economic
development. It decreases inequality in distribution of rural income and reduces urban-rural imbalances in income and economic opportunities.
Encourages Capital Formation: One factor responsible for the poor state of an
economy is low capital formation. When individuals are employed, they can afford to save out of their disposable income. Entrepreneurs can therefore, facilitate the use of these savings thereby stimulating capital formation, which is the engine of economic growth and development.
Skills Acquisition and Increase in the Level of Productivity
Employment generated by entrepreneurship can be a training ground where individual acquires and develops skills for creativity leading to a general increase in the level of productivity.
Entrepreneurship has been recorgnized as an important Economic activity that is involved in providing unique product and process of doing things, it is the act of being an entrepreneur and have been playing the role of employment generation, wealth creation, poverty alleviation among others, it is therefore considered to be the engine for growth and development especially in developing countries like Nigeria. Based on its central role in economic development, respective governments, non governmental organizations, community based organizations and other stake holders should promote its development in order to reap its full benefits.
Thank You all for Listening