Report on Economics of Entrepreneurship

1)      Introduction of Economics of Entrepreneurship

The entrepreneurship concept was introduced in 1732, to represents the individuals who are willingly contributing to the industries by introducing a new venture. These new ventures can also carry financial risk. However, entrepreneurship is highly important in societies as it encourages and supports individuals to become independent and economically stable. Moreover, Entrepreneurship also contributes to the strength of the overall national economy of a country. In Entrepreneurship, individuals take the decision and execute business operations. Decisions taken by the individual's entrepreneurs directly impact the profitability and growth of business in the selected industry. According to economists, economics, management sciences, and Social sciences assist us with understanding how decisions are taken by individuals on a particular event or business situation (Glaeser, Rosenthal, & Strange, 2009).

Economics of entrepreneurship is a complete study that provides an understanding of how individuals running entrepreneurship intentionally or unintentionally draw impact on at macro-economics and micro-economics levels. Additionally, it studies how entrepreneurship influences the growth and development of macro-structures at national economic level and regional levels. Insights took from economic analysis enable policymakers to introduce better policies for the country and businesses (Baum, Frese, & Baron, 2014). Economic theories written on entrepreneurship topics discuss all major factors which should be in the mind of the economist, entrepreneurs, and policymakers.

 Economics theories cover information about men's continuous quest toward the improvement of the condition, consumer behavior, and overall human behavior. In the present work, the economics of entrepreneurship is discussed in detail along with various research studies. Various research theories and research findings are also presented as evidence and prove to support or critically analyze arguments presented on the economics of entrepreneurship topics. Key areas and aspects discussed in these documents are an explanation of entrepreneurship, the economics of entrepreneurship, Use of Economics For better Decision, Opportunity Cost, Scarcity and Tradeoffs, Market Price Emerge, and Institutional factors encourage Entrepreneurship. Followed by discussion, recommendations and conclusions are presented to enclose all arguments and suggest strategies to current entrepreneurs to be successful entrepreneurs of the future.      

2)      Entrepreneurship of Economics of Entrepreneurship

Entrepreneurs are the individuals who work in the markets with new discovers and innovative solutions to the needs of the consumer market. According to the research findings of Mehta, Yoon, Kulkarni, & Finch, (2016) and Reed (2018), entrepreneurs create wealth and solve problems of the consumer market with the purpose to enhance economic growth in a country and enable the consumer market to lead a better life with innovative solutions to their issues. According to the modern concepts about entrepreneurship, entrepreneurs are the heroes for the society as they stand for the needs and rights of people and create such things for their users which are not made by the large scale corporations. Some famous companies of the present time are presenting the success of entrepreneurship and its contribution to the development of our society (Mehta, Yoon, Kulkarni, & Finch, 2016; Reed, 2018). 

Examples:

Well-known companies that were started as entrepreneurs include Google, Dell, Microsoft, FedEx, and Facebook. These well-known companies have a history of great struggle in the past. However, still, these companies have a great role in encouraging entrepreneurship in our society and the overall developing world. Here brief details about these successful companies and entrepreneurs are presented to project the importance of entrepreneurship for our societies and their contribution to economic growth (Kuratko, 2008).

       I.            Google of Economics of Entrepreneurship

Google LLC Corporation was started as an enterprise in America by Larry Page and Sergey Brin. They started this enterprise when they were students of the Ph.D. program at Stanford University in California. Google enterprise was established in 1998. The main products and services of Google were related to software, hardware, and information technologies. Nowadays, Google LLC is famous as the world's most revenue-generating company. Google contributes to strengthening the global economy by generating revenue of 66, 001, 000, 000 US$ in fiscal. However, 114,096 people are working at Google. Thus, the overall capacity of Google to reduce unemployment is limited to 114,096 people.    

    II.            Dell of Economics of Entrepreneurship

The entrepreneur behind the well-known company Dell is Michael Dell who established this company many years back in the 1980s. Dell has involved in IT services as well as the manufacturing of hardware. Dell is also known as a pure hardware vendor because of its focus on hardware manufacturing and sales. Important hardware products offered by Dell Company are the camera, network switches, servers, HDTV, and personal computers. Dell contributes to the overall economic development by generating revenue of $78.7 billion in a fiscal year. Additionally, the contribution to the reduction of the unemployment rate is limited to 145,000 employees.       

 III.            Microsoft of Economics of Entrepreneurship

Microsoft is a big name in IT. It was started by Bill Gates in 1975 about 44 years ago. In the beginning, it was established to sell out personal computers and Basic interpreters for Altair 8800. Nowadays, Microsoft works in soft development, cloud computing, the internet, computer hardware, and video games industries. However, business operations are spread over the globe. Successful execution of business operations and globally built equity of Microsoft has made Bill Gates the richest person around the world. According to an estimation, Microsoft contributes to economic development with US$125.8 billion in revenue. Although, it has contributed to reducing the unemployment rate in the world by providing employment opportunities to 148,465 employees.

 IV.            FedEx of Economics of Entrepreneurship

FedEx is famous for its services in the United States. FedEx Company was started as entrepreneurship in 1971 to provide overnight shipping services. FedEx Corporation is working all around the world with the capability to generate revenue of billions of dollars per year. According to current findings, the average contribution of FedEx in economic growth is 66.450 billion dollars in income. Moreover, the workforce of 425,000 is evident to FedEx's contribution to the reduction of the increasing unemployment rate in the world (Wikipedia.org, 2019).      

    V.            Facebook of Economics of Entrepreneurship

Facebook was launched in 2004 by Mark Zuckerberg an entrepreneur of the UK. Facebook was introduced as social networking services in the targeted market of the UK and then over the globe. Facebook is currently turned into a public company that is running its business operations with the support of investment collected from the sales of shares at the stock market. According to the economic analysis, Facebook generates millions of dollar revenue each month with a total of 2.45 billion active users (each month). The current analysis presents that Facebook is providing full-time job opportunity to 35,587 employees. While Facebook also provides job opportunities for people seeking a part-time job or an internship.     

            The presented above examples also present the role and contribution of enterprises in economic growth and development. Furthermore, all these enterprises converted in large scale corporation has a direct impact on the reduction of unemployment rate which presents its relationship with economics. Economists and government of a country understand such contribution of entrepreneurship in the country therefore they develop supportive strategies at the macro-economic level for entrepreneurship for economic benefit.     

3)      Economics of Entrepreneurship

The historical analysis presents the development and growth of economic theories and branches of economics from the last 20 years. Following the finding of a research article written by Minniti and Lévesque in 2008, it can be concluded that now a fertile ground for modern economic theories is provided regarding the behavior of entrepreneurs with a combination of traditional economic theories, behavioral economics, new institutional economics, and evolutionary economics. Recent research studies relate economics and entrepreneurship with each other as economics is a supportive study for entrepreneurship and its development. Researchers also present entrepreneurship as an alternative to employment.

According to the research findings, employment and unemployment are the key topics of economics. Economists develop policies to control the unemployment rate in the country to ensure strength and stability. Considering entrepreneurship as an alternative to employment it is clear that economics directly relates to entrepreneurship. Parker and Robson (2004) have presented in the research study that entrepreneurship in a country influences the aggregate economy as unemployment and self-employment have direct relation (Parker & Robson, 2004). Here some important aspects regarding the economics of entrepreneurship are discussed below:

v  Issues of firm size of Economics of Entrepreneurship

According to the modern theories, intangible and tangible assets both are heterogeneous. Firm sizes influence resource utilization, transaction cost, and property rights related theories in economics. Following the research findings of Hitt, Ireland, Sirmon, and Trahms, (2011) and   Minniti and Lévesque (in 2008) it is clear that issues of the firm have an impact on its contribution in economic growth and value creation for society. Recently, scholars and economists are working deliberately to identify and study the concepts of capital heterogeneity in terms of capital assets utilization, functions, perceived attributes, and characteristics of capital assets. New insights about internal organization, boundaries, and emergence are presented for the organizations working as enterprises in the market. Excluding this, small size firms working as enterprises face challenging situations in case competitiveness and volatility increases in the market. However, researchers present that volatile environment and dynamic markets can be made suitable for entrepreneurship by making complex and effective decisions taken for uncertainties (Minniti & Lévesque, 2008).               

v  Innovation of Economics of Entrepreneurship

Entrepreneurship is supportive of the promotion of innovation in the market. According to the researcher, economists take interest in entrepreneurship to study issues and enhance knowledge about innovation. According to scholars, entrepreneurship plays a significantly important role in determining the process of innovation and the creation of diversity. Following research findings, entrepreneurship and innovation get influence from a business model that shows how a business organization or enterprise allocates rights for property and tangible assets (Parker & Robson, 2004).

 Researchers Glaeser, Rosenthal, and Strange, (2009) claim that a major reason behind the promotion of business is the rigid business model of large scale corporations who reject their profitable opportunities that do not relate to their fixed core activities. The areas not covered by these organization encourage their employee to start their business as an entrepreneur and fill up these gaps. Innovation is basically one of the five facets of entrepreneurship. Excluding innovation, rest are entry, ownership, self-employment, and small firms. Entrepreneurship specifically pays attention to innovation to reduce competition and the risk of failure in the targeted market. However, that innovation encourages consumers to buy a new and innovative product even sometimes when they do not need it. Such business transactions bring change in the overall economy and its money circulation. One big idea can bring change to the fortune of the entrepreneur as well as the economy of the overall country. For instance, innovative products and services proposed by Dell are now supporting to enhance international trade in the hardware and software industry. However, net profit is added in the income of the US as Dell is headquartered in the US (Glaeser, Rosenthal, & Strange, 2009).            

v  Issue of Capital of Economics of Entrepreneurship

In the economics of entrepreneurship, issues of capital constraints have key value. In accordance with the research findings, individually given with capital take the independent decision whether to work as an entrepreneur or as the capital lender to lend money for private and public corporations for the execution of business operations.  To represent this situation in business terms a bilateral oligopoly model is developed and used in many research studies. While they prefer to lend money if they do not have any innovative ideas or proposed solutions for an identified need in the market. However, when they decide to be an entrepreneur in a particular business industry then they invest capital by lending or using currently available funds in that particular business industry. Although, researchers agree that wealthier capital owners prefer to invest in entrepreneurship. Previously conducted research studies have concluded that subsequent business entry and initial wealth has a positive relationship. While on the other hand, people having insufficient funds and capital face a challenging situation in starting-up a new business. Low wealthier potential entrepreneurs consider it difficult to manage all expenses and costs regarding marketing, purchase of assets, machinery, equipment, purchase of raw materials, inventory, salaries expense payment, and registration of a business to execute business operation as an entrepreneur (Wikipedia.org, 2019).          

v  Skills development in Youth of Economics of Entrepreneurship

Economics of entrepreneurship also discusses youth issues and unemployment. A major reason for unemployment is poor capabilities and limited skills in the labor forces. Economists, highlight the need for reducing the unemployment rate (Baum, Frese, & Baron, 2014). For this purpose, they develop policies and strategies to encourage youth to learn skills and knowledge with attention to become successful and independent in the future. Entrepreneurship provides the opportunity for youth to show their talent and actively participate in national development rather than increasing the unemployment rate only. Entrepreneurship promotes economic activity and its aggregate level. Wealth does not exist naturally in this world. In fact, it’s a measure or determinant of the value of economic goods.

v  Entrepreneurship in Creating Value of Economics of Entrepreneurship

Entrepreneurship contributes actively to economic value creation. Wealth cannot be created with economic activities and transactions. Entrepreneurs create, pack, harvest, and produced goods that are demanded by the consumers. Thus, by satisfying the needs of the consumer market entrepreneurship create value. However, researchers Hitt, Ireland, Sirmon, and Trahms, (2011) claim that individuals involved in the entrepreneurship create values for themselves by paying attention to value creation for customers and society. Economic freedom supports fast economic growth in a country by assisting entrepreneurs in producing and delivering innovative products for the solution of need and wants to be identified in a society (Hitt, Ireland, Sirmon, & Trahms, 2011; Minniti & Lévesque, 2008). 

4)      Use of Economics For better Decision 200 of Economics of Entrepreneurship

Economics not only get influence from entrepreneurship, in fact, it also generates an impact on entrepreneurship. Entrepreneurs use economics for better decision making. Economic analysis and policies draw impact on business outcomes and profitability of entrepreneurship. An individual working in the enterprises take decisions with limited available resources such as inflation rate, employment rate, spending behavior, and economic growth of the country which all relates to macro-economic analysis (Estrin, Korosteleva, & Mickiewicz, 2013; Mehta, Yoon, Kulkarni, & Finch, 2016). Here some concepts are discussed which relate to the economics of entrepreneurship.

v  Opportunity Cost of Economics of Entrepreneurship

Opportunity Cost is an important economic concept. According to economists, the opportunity cost is the benefit we give up to get an alternative option by using the same resources. For instance, an entrepreneur decided to establish his/her own business rather than getting a job in such a situation opportunity cost is the expected salary that could be earned by the entrepreneur by selecting a job opportunity. Entrepreneurs consider such opportunity cost each time when he/she take the decision about introducing a new product or investing more capital on business operations (KENNON, 2018).

v  Scarcity and Tradeoffs of Economics of Entrepreneurship

According to the modern concept of economics, scarcity is a problem that represents unlimited wants in the world of limited resources. In the world, available resources are less than their requirements and demands of the consumer market. Entrepreneurs understand these economic concepts and introduce solutions for consumer needs most effectively and efficiently with limited utilization of resources. Entrepreneurs come up with solutions that can have better opportunity value for consumers as compared to the expected opportunity value of offered products and services by existing corporations. For instance, green production, energy-efficient bulbs, and alternative products are mostly introduced by entrepreneurs.           

v  Market Price Emerge of Economics of Entrepreneurship

Entrepreneur’s works freely without getting influence from monopoly and competitive powers. Entrepreneurs can set their prices for their offered products rather than the following trend in the market. However, other competitor companies working in the market set their prices according to the market trends. According to the theories and concepts presented by the scholars in the research papers, market price emerges is a possible outcome if prices set out by the entrepreneurs are extremely high in the target market for their offering. Considering the economic concept of market price emerge entrepreneurs develop appropriate pricing strategies for their products and services (Glaeser, Rosenthal, & Strange, 2009).     

5)      Institutional factors encourage Entrepreneurship of Economics of Entrepreneurship

Institutional factors motivate or demotivate individuals to start-up their own business as entrepreneurs. According to the research study of Estrin, Korosteleva, and Mickiewicz (2013), institutes of various types of encourages entrepreneurship by projecting gaps for improvement in the overall functionality of institutes. Particularly, social institutions working for the welfare of society highlight the areas to be addressed for the betterment of society. Entrepreneurs follow up on the paths presented by these institutions to contribute to the economic development and social development of their country in an effective way. Researchers studied 42 countries around the world to analyze what type of institutional factors encourages entrepreneurship. Estrin, Korosteleva, and Mickiewicz presented contributing and influencing factors in their research findings as they highlighted corruption as the factor which encourages auditing and social deficiencies which encourages social welfare-related entrepreneurship.  (Estrin, Korosteleva, & Mickiewicz, 2013)    

6)      Recommendations for Entrepreneurs of Economics of Entrepreneurship

Here in this section, some recommendations are presented for entrepreneurs which can be followed by entrepreneurs to be successful entrepreneurs in the selected industry. Moreover, the recommendation is also related to concepts of economics to align these recommendations with the economics of entrepreneurship (Baum, Frese, & Baron, 2014).

1)      Risk Determinant of Economics of Entrepreneurship

Entrepreneurs should determine the risk factor in the relevant industry and area before developing a policy or making a decision about the business. Entrepreneur's success highly depends upon their efficiency to manage risk factors and uncertainties in the volatile and dynamic markets. Considering the economic concept of risk minimization and diversity, entrepreneurs should pay attention to risk factors about the expansion of business or start-up of the business.     

2)      Opportunity Cost of Economics of Entrepreneurship

Entrepreneurs should calculate opportunity costs while taking a decision about business operations. Entrepreneurs should count the value or cost of an opportunity to ensure maximum benefit from their decision. For instance, if they can earn more by working on rented machinery rather than purchasing own machinery then they should prefer to rent.   

3)      Innovation and scarcity of Resources of Economics of Entrepreneurship

Entrepreneurs should ever give importance to innovation as it is key to create differentiation in the market. However, while working on innovation they should not ignore the economic concept of scarcity of resources. Innovation should not decrease the efficiency level for resource utilization as it would be against the social responsibility of entrepreneurs.   

4)      Consumer Behavior     of Economics of Entrepreneurship

Entrepreneurs should pay attention to this economic concept as it can have an impact on the profitability of running a business. The answer to what is required by the consumers is not enough and sufficient for Entrepreneurs. In fact, they must be familiar with the consumer buying and spending behaviors to take an appropriate decision regarding products and services portfolio.

5)      Value Creation and Wealth Maximization of Economics of Entrepreneurship

The economic concept of value creation should be taken into consideration by the Entrepreneurs at the time of decision making as it can align their goals with the requirements of society. Moreover, key attention should be on wealth maximization rather than profit maximization (Economictimes.indiatimes.com, 2013).    

7)      Conclusion of Economics of Entrepreneurship

       The whole discussion concludes that economics of entrepreneurship is an important study that refers to the analysis and study of various factors, concepts, and theories that can have an impact on economics and businesses of entrepreneurs. Economics of entrepreneurship study macro-economic and micro-economics related factors influencing and motivating entrepreneurship. Summarizing research findings, many successful companies of the present time were started as enterprises in the past. Entrepreneurship draw impact on the economic condition of the country and overall world as an enterprise provides employment opportunities, reduces the unemployment rate, and generates revenue from the execution of business operations. At the end of the whole discussion, some recommendations are presented for the entrepreneurs in the light of economic concepts. Summarizing recommendations, entrepreneurs should consider opportunity cost, risk factor, innovativeness, requirements of society, scarcity of resources, and consumer behaviors while making the decision regarding business. Moreover, entrepreneurs should pay attention to their wealth maximization goal rather than profit maximization.