According to David Johnson (2001), innovation and entrepreneurship are very similar with little understanding of the differentiation between the two. The term innovation comes from the Latin innovare meaning ‘to make something new’. Modern-day understanding is that innovation is a process of turning ideas into new opportunities for value creation and putting these into widely used practice.
According to Gibb (1996), entrepreneurship is equated with new venture creation and small business management. John Schumpeter was the first economist who clearly identified innovation as an outcome of entrepreneurship. However, the relationship between innovation and entrepreneurs is that innovation is the specific tool of entrepreneurs. Not everyone who starts up a business is an entrepreneur. Entrepreneur is the one who makes the best outcome of any opportunity given throughout the life of a business.
Innovation has a lot to do with the invention of a product. A good example which would show innovation would be the movement from the telephone to the smartphone, this is a clear move with a totally different design and then became the norm. Economic development is a branch of economics that focuses on improving the economies of developing countries. Economic development undertakes the adoption of new market technologies and improving factors such as health, education, working conditions, domestic and international policies, and market conditions in developing countries to promote economic growth. Therefore, I believe that the three ideas entrepreneurship, innovation and economic development are directly co-related. At the same time, creativity and problem solving also have important positive effects on entrepreneurship, innovation and economic development whereas they will affect each other.It is becoming increasingly important that business need to generate a certain level of profits to be economic viable.
In this fiercely competitive, fast-paced, global economy, creativity and problem solving are important for survival and to be economic viable. Although not every creative business opportunity that entrepreneurs take will be successful, but many who willing to go beyond conventional wisdom will be rewarded for their efforts. Successful entrepreneurs and innovators often try to find the creative solutions for problems. They need to constantly tap their creativity in order to survive because merely generating one successful creative solution is not sufficient to keep a business successful in the long term. Creativity and problem solving also frequently arises in government policies or academic research which is important because this is directly affect the economic development. The relationship between innovation and entrepreneurs is that innovation is the specific tool of entrepreneurs according to Drucker (1985).
However, not everyone who starts up a business is an entrepreneur. Entrepreneur is the one who makes the best outcome of any opportunity given throughout the life of a business. Entrepreneur is innovative but innovation is not always entrepreneurial. Innovation is just one single aspect of the processes of the entrepreneur in continuing the success of a business.
However, entrepreneurship is more than just an idea. An entrepreneur is characterised principally by innovative behaviour and need to be able to employ strategic management practices in the business. Thus, this two concepts are correlated but does not equate to each other. Alexa Smart Home development is a great example to show that innovation is a must for entrepreneur.
Noticing a phenomenon that peoples nowadays are becoming more and more busier and technology play an important role in our daily life. Brewster Kahle and Bruce Giliat, the founder of Alexa devised the idea of creating Alexa to control smart home devises such as cameras, entertainment systems, lightning and thermostats that promotes efficiency and convenience. They put this innovative idea into effect, establish new business and launched the product in 2014, and eventually their product dominated the American market. In this example, it is evident innovative Smart Home development will not be obtained in absence of innovation. In addition, Schumpeter (1975) also emphasizes the issue that an entrepreneur cannot combine existed products and create new industry without innovation. For all these reasons, innovation is the premise of entrepreneurship. In current several decades, there is evidences that can illustrate the relationship between entrepreneurship and economic development. Entrepreneurs are creative individuals who are keen to take ownership of their own destinies which mean create and own new ventures while economic development means increase in value of the goods and services produced by an economy.
This is a process by which a nation improves the economic, political, and social well-being of its people. It is usually measured by the percentage of increase in real gross domestic product, or real GDP. Among these various evidences, it shows that entrepreneurship had become a prerequisite for economic development when economies are rapidly changing and development is uncertain. Under the change in the modern global economy, the flexibility of the entrepreneur, and his/her ability to cope with chaos and uncertainty is very important. In condition of little change and steady, predictable economic growth, entrepreneurship is less significant, perhaps, though clearly it is one of the roles and functions of the entrepreneur to disturb the status quo by seeing opportunities and innovating. However, entrepreneurship and new venture creation has flourished when an economy has been in recession. Under such circumstances, entrepreneurship represents a mean by which the economy and the population can break out of the downward spiral of unemployment and low economic growth.
When an economy flourishes, and there is full employment and high economic growth, the rate of entrepreneurship development tends to be somewhat lower. An example how entrepreneurship and economic development are linked can be shown from the internet services, Lazada created by Alexander Samwer – offering an internet based approach, allowing customers to purchase clothes online. This idea led to many traditional retail shops and shopping complex being put out of business and the sales had decreased substantially. This shows that Alexander Samwer had done a lot of contribution to the economic development because allow business and consumers to save time by being able to look and purchases for products on Lazada quickly and efficiently without having to go to the stores or spend time searching for them. It also contributes to economic efficiency due to the fact it allows companies to find goods at the most competitive prices and hence drive out firms that are uncompetitive.
Innovation is a process of translating an idea into a product that create value or for which customers will pay. Various authors (Peter,1987 ;Drucker,1898;Handy,1990) have talked about the importance of change and, in an age demanding innovation, organizations that cannot innovate will definitely experience problems. Besides that, Schumpeter (1934) presents that innovation is the engine of change in economy. Furthermore , he raises the issue of creative destruction as a tool of entrepreneurship that discrete innovation destroys traditional market and rapidly replaces less competitive economic activities development.
All of the suggestion state that innovation is the catalyst of economic development. For example, non-bag vacuum cleaner designed by James Dyson is an innovation in the vacuum cleaner market. The production of the Dyson cleaner included more than 7,000 people worldwide. Clearly the creation of new ventures creates employment opportunities for both entrepreneur and others, boost the economy. Thus, it can shows that innovation plays a pretty big role in economic development.Nevertheless,