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GDP's Role in Entrepreneurship Growth

Economic growth refers to the increase in goods and services produced by an economy over a period of time. It is measured as a percentage increase in real gross domestic product. Understanding economic growth helps developing countries like the Philippines develop strategies to achieve prosperity. Economic growth leads to rising output but does not necessarily improve living standards, while economic development considers quality of life factors like health, education, and poverty reduction. Entrepreneurship drives economic growth by creating jobs, boosting economic activity through innovation, and improving standards of living. The earliest accounts of entrepreneurship date back to Marco Polo and the Middle Ages, while Richard Cantillon in the 17th century is considered the father of entrepreneurship for introducing the term and viewing entrepreneurs as

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35 views5 pages

GDP's Role in Entrepreneurship Growth

Economic growth refers to the increase in goods and services produced by an economy over a period of time. It is measured as a percentage increase in real gross domestic product. Understanding economic growth helps developing countries like the Philippines develop strategies to achieve prosperity. Economic growth leads to rising output but does not necessarily improve living standards, while economic development considers quality of life factors like health, education, and poverty reduction. Entrepreneurship drives economic growth by creating jobs, boosting economic activity through innovation, and improving standards of living. The earliest accounts of entrepreneurship date back to Marco Polo and the Middle Ages, while Richard Cantillon in the 17th century is considered the father of entrepreneurship for introducing the term and viewing entrepreneurs as

Uploaded by

Sylvia Danis
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Why do we need to understand economic growth?

A developing country, like the Philippines, would need such an understanding to help in its efforts to
develop workable ways or strategies to achieve economic prosperity.
Economic Growth
▪ It is the increase in goods & Services produced by an economy or nation, considered for a specific period
of time.
▪ The rise in the country’s output of goods and services is steady and constant and may be caused by an
improvement in the quality of education, improvements in technology or in any way if there is a value
addition in goods and services which is produced by every sector of the economy.
▪ It can be measured as a percentage increase in real gross domestic product.
Economic Growth
▪ It is the increase in goods & Services produced by an economy or nation, considered for a specific period
of time.
▪ The rise in the country’s output of goods and services is steady and constant and may be caused by an
improvement in the quality of education, improvements in technology or in any way if there is a value
addition in goods and services which is produced by every sector of the economy.
▪ It can be measured as a percentage increase in real gross domestic product.
Key Differences
Economic Growth
• Increase in the real output of the country.
• Does not consider income from informal economy.
• Does not reflect the depletion of natural resources- pollution, congestion, and disease.
• Subset of economic development.
• Indicates expansion of the gross domestic product of the country.
• Applicable to developed countries.
• Automatic process.
• refers to the rise in the value of all the products produced in the economy. % GDP, GNP
• Necessary but not enough to achieve economic development.
• Measured through GDP
• Quantitative
• It is a uni-dimensional approach that deals with the economic growth of a nation.
Economic Development
• Increase in the level of production in an economy along with enrichment of living standards and the
advancement of technology.
• Takes consideration of all activities, whether informal or formal, and eases people with low standards of
living to a suitable shelter and proper employment.
• Concerned with sustainability-meeting the needs of the present without compromising.
• Increase of Real National Income of the economic and socio-economic structure over a long period of
time.
• Applicable to underdeveloped or developing countries.
• It is the outcome of planned and resulted-oriented activities.
• Measured through improvement in life expectancy rate, literacy rate, and poverty rates., and industrial
development.
• Qualitative
• It is a multi-dimensional approach that looks into the income as well as the quality of life of a nation.
Theories that Explain How Economies Growth
1. General Theories - economic growth as a natural and inevitable process.
2. Economic Theories -development is a rational process brought about when men respond to opportunities
in the environment to promote their own self-interest or materials.
3. Socio-psychological theories -economic development as result of seemingly economically irrational yet
psychologically and sociologically satisfying activities of enterprising men.
ex. Session groceries
General Explanations of Economic Development
1. Economic development proceeds according to a master plan or “Law of nature”
• Spengler (1932) – explained economic development as a natural thing that happens to an existing
culture: it is a part of life and is something to be expected.
• Herbert Spencer – Viewed society as an organism constantly in the process of evolution. As it
evolved, it increased in complexity since new institutions developed and the roles and functions of
social institutions became increasingly specialized. The result is economic development.

2. Economic development is brought about by an “Invisible hand”


• Adam Smith (18th century) –while individuals seek to work for their own personal goals, they
unknowingly promote what is best for all. It is as if these individuals were led to such actions by an
“Invisible hand” to the interest of the community or society as a whole.
• Any society can be made to prosper with little or no intervention from the government because
economic development is brought about as a natural course of think.
Ex: e-banking, development and creation of businesses (e.g., online customer service, tele
pharmacy, online medical consultation),

3. Economic development is brought about by “Cultural Diffusion”


• As one culture that has begun to use new techniques interacts with another that has not been
exposed to the technique, the former is able to influence the latter to discard old ways and adopt
new ones. Ex: Digital Agriculture

4. Racial heritage determines the economic development of a People.


• Racial characteristics make some people more energetic, thus, allowing their countries to be far
more developed than others do. China vs. Africa
5. Climatic conditions determine the energy levels of people and in turn, its rate of development.
• Ellsworth Huntington (1915) wrote that most of the great civilizations flourished in the tropics or the
far north. His observation and studies led him to conclude that extremes of temperature as well as
high functions of climatic conditions would have a detrimental effect on the energy levels of people
in the countries experiencing such climatic extremes.
The lack of sunlight during the winter months can contribute to depression, along with other mental
disorders. Reduced sunlight can cause a drop in serotonin- a brain chemical (neurotransmitter) that
affects mood, might play a role od SAD. (National Library of Medicine)

6. Challenge of the Natural Environment is responsible for rise of Civilization.


• A.J. Tonybee, a study of history (1947) – traces economic and cultural changes to a combination
of natural (geographic) phenome and sociopsychological pressure of stimuli such as new soil to
exploit; living in a frontier position; and prejudice of society towards a minority group.
Examples: Mesopotamia Civilization
Egyptian Civilization
India

CHAPTER 2: NATURE OF ENTREPRENEURSHIP


Entrepreneurship Defined
 It is the ability to determine and come up with the proper combination of resources available in the
environment and transform this into the output of either goods or services and obtain a fair profit at
the price the entrepreneur sets.
 It is the capacity for innovation, investment, and expansion in new markets, products, or techniques.
 In economics, entrepreneurship connected with land, labor, natural resources, and capital can
generate a profit.
 The entrepreneurial vision is defined by discovery and risk-taking and is an indispensable part of a
nation’s capacity to succeed in an ever-changing and more competitive global marketplace.
Societal and Economic Benefits of Entrepreneurship
1. “Job Opportunities”
It creates and produces jobs that are adequate to an increase in national income.
2. “Boost Economic Activities”
What is an economic activity?
▪ The economic activity takes place when resources such as capital goods, labor, manufacturing
techniques, or intermediary products are combined to produce specific goods or services. ▪ It is the
production of goods and services to satisfy needs and wants.
3. Introduction of new and innovative products and services.
Why innovate?
▪ To fulfill the ever-changing needs and wants of the market.
▪ Key value for the longevity of a business.
▪ To keep up with the current trend and demand
4. Improves people’s living standards.
“What if there are no cars or airplanes?” ‘How will you look like if there are no salons or
barbershops?” “What will be life without gadgets?
5. Disperse the economic power and creates equality.
▪ It balances the economy by distributing national income to more businesses rather than to only
few monopolies.
Ex: An example of this is Rising Sun who serves as the supplier of many sari-sari store in nearby
municipalities instead of them putting up Rising Sun branches
6. Controls local wealth and balances development.
It makes sure local resources are used properly and that every area has an appropriate allocation or
resources.
7. Reduces social conflicts and political unrest.
How? - Distribution of resources.
8. Obtain economic independence and capital formation.
▪ A country with more entrepreneurs is highly likely to become financially independent and will be
less likely to need the help off other countries.
▪ Entrepreneurship creates wealth instead of borrowing health.
9. Backbone of the economy
It's the force that drives innovation, product development, and creativity. Entrepreneurs also
create jobs for people who want to work in their businesses, which helps improve productivity and
keep unemployment numbers down.
What can be the risk?
Earliest Historical Accounts
▪ Earliest accounts of entrepreneurs and entrepreneurial activity can be traced to Marco Polo- who made
the practice of selling his goods to a moneyed person with both of them signing contracts.
▪ In the Middle Ages entrepreneurs were described as either actors or managers of large production
projects using resources. Those people are called clerics- people in charge of building castles and
fortifications, public buildings, cathedrals, etc.
17th Century
1. Richard Cantillon- Economist and author
▪ Introduced the term “entrepreneur”
▪ Considers him the Father of Entrepreneurship
▪ Viewed entrepreneurs as risk-bearer
▪ Entrepreneurs are agent who buys means of production at certain prices in order to combine them
into a new product.
2. Jean Baptiste Say- the French Economist
▪ Entrepreneurs should be leaders
▪ Claimed that an entrepreneur is one who brings other people together in order to build a single
productive organism
Evolution of Term Entrepreneurship (18th century- present)
1. Jean Baptiste Say (1800) -Entrepreneurship refers to the shifting of economic resources out of an
area of lower and into higher productivity and greater yield.
2. Carl Menger (1971) -Entrepreneurship involves obtaining information, calculation, an act of will and
supervision.
3. Joseph Schumpeter (1910)- Entrepreneurship is, in its essence, the finding and promoting new
contributions of productive factors.
4. Harvey Liebenstein (1970)- Entrepreneurship is the reduction of organizational inefficiency
5. Israel Kirzner (1975)- Entrepreneurship is the identification of market arbitrage opportunities.
6. Albert Shapiro (1975) -Entrepreneurship involves a kind of behavior that includes initiative taking,
organizing and recognizing social mechanism to turn resources and situations to practical account,
and the acceptance of risks and failures.
7. Karl Vesper (1980) -Entrepreneurship is the dynamic process of creating incremental wealth.
8. W. Ed Mc Mullan and Wayne A. Long (1990)- Entrepreneurship is the building of new growth
organization
9. Howard Stevenson (1992) -Entrepreneurship is the pursuit of opportunity beyond the resources
currently under one’s control.
10. Jeffrey Timmons (1994)- Entrepreneurship is the ability to create and build a vision from practical
nothing.
11. Peter Drucker (1998)-Entrepreneurship is the process of starting one’s own, new and small
business. It is also the process of innovation and new venture creation through four major
dimensions – individual, organizational, environmental, process – aided by collaborative networks in
government, education and institutions.
12. Robert Hisrich (2001)-Entrepreneurship involves the creation process, requires devotion of the
necessary time and effort, assumes the accompanying financial, psychic and social risks, and
receives the resulting rewards of monetary and personal satisfaction and independence.
CATEGORIES OF ENTREPRENUER
The MANUFACTURER- One who produces useful goods.
1. Handicraft producers-produces goods without much use of machinery.
2. Cooked food producers-produces goods in coked state already and ready to be consumed.
3. Processor or subcontractor
-Ex. Production of components, parts and supplies
The TRADER –Transfer goods from manufacturer who produces the goods to the consumer who buys the
goods.
 Trading- process of buying and selling of goods and services involving transfer or exchange of
goods and services for money.
• Wholesaling
• Retailing
• Repacking
SOLO ENTREPRENEUR-Independent and has autonomy from authority structure.
• Event organizer
• Online consultation
• Online teacher
• Show host, clown, magicians, fire works specialist
SPECIALTY SERVICE ENTREPRENEUR-Professional services firms sell knowledge and expertise, while
other types of organizations tend to sell tangible products.
 This business specialty represent their area of expertise.
• Lawyer
• Accountant
• Management and marketing consultant
STREET ENTREPRENEUR- “Streetpreneur”- refers to the micro entrepreneurs selling various home
articles and food items to motorist stuck in traffic or business riders at terminals and stations.
The FRANCHISEE- Form of business by which the owner of a product , service or method obtains
distribution through affiliated dealers.
The SERIAL ENTREPRENEUR- Is an entrepreneur who continuously comes up with new ideas and starts
new businesses.
 A person who is working on multiple start-ups simultaneously to convert all of them into big
ventures.
The SOCIAL ENTREPRENUER- Those who provide products and services with the overall desire of
creating social good, operating from the perspective of benefitting the people while earning profit.
“Social Enterprises”- Innovators who focus on creating products and services that sole social needs and
problems. The goal is to make the world better place and not to take market share nor create wealth
from the enterprise.
The INTRAPRENEURS- The terms refers to someone within an organization who has the entrepreneurial
spirit. They spend their time coming up with innovative new ideas for business as well as putting in the
effort to bring those new ideas to life.

Common questions

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Environmental challenges, as posited by A.J. Toynbee, can be significant catalysts for economic and cultural transformations. Such challenges stimulate societies to adapt and innovate, fostering economic growth and cultural evolution. For example, geographic phenomena like the need to exploit new soil types or adapting to frontier living conditions have historically driven civilizations to develop new technologies and social structures, as seen in the Mesopotamian and Egyptian developments . These adaptations not only address immediate environmental challenges but also lead to lasting changes in economic practices and societal organization .

Entrepreneurship facilitates wealth distribution and economic equality through the creation of numerous micro and small enterprises, leading to income generation across different societal strata. This dispersion of economic power ensures that national income is more evenly spread, reducing the dominance of a few large monopolies. Entrepreneurs often tap into underutilized local resources, creating opportunities for employment and investments that can uplift marginalized communities . By promoting small businesses, entrepreneurship disrupts monopolistic holds and fosters an inclusive economic environment, leading to a more equitable distribution of resources .

Entrepreneurship is often considered the backbone of the economy due to its role in driving innovation, business development, and job creation. Entrepreneurs introduce new products and services, which stimulate demand and encourage economic activities. As a result, they create employment opportunities, directly reducing unemployment levels and improving productivity. In developing countries, entrepreneurship can be especially impactful by providing diverse job opportunities, reducing dependency on a limited number of industries, and promoting economic diversification . The entrepreneurial ecosystem facilitates skill development and offers income opportunities for various population segments, countering unemployment .

Entrepreneurial ventures can reduce social conflicts and political unrest by creating jobs and enhancing economic stability. By generating employment, entrepreneurship addresses one of the root causes of social discontent—economic disparity and lack of opportunity—thereby promoting social harmony. As businesses provide livelihoods, they foster a sense of purpose and reduce the desperation that often leads to social conflict . Furthermore, entrepreneurship encourages the equitable distribution of resources, which plays a crucial role in mitigating tensions by addressing the economic grievances that can fuel unrest . By improving living standards and offering new possibilities, entrepreneurial activities contribute to social cohesion and political stability .

The cultural diffusion theory of economic development posits that when a culture that has adopted new techniques interacts with another that has not been exposed to those techniques, it can influence the latter to embrace new methods and discard old ones. This exchange leads to the advancement of the less developed society through the assimilation of innovative practices and technologies from the more advanced culture. An example of such diffusion can be seen in the spread of digital agriculture practices from one region to another, which enhances the productivity and economic well-being of societies previously unfamiliar with these innovations .

Economic growth refers to the increase in the production of goods and services in an economy, typically measured by the percentage increase in real GDP. It is a quantitative increase in a nation's economic output, often seen as a straightforward, automatic process and is primarily applicable to developed countries . Economic development, on the other hand, is a broader concept, encompassing improvements in living standards, poverty reduction, and enhancement of the socio-economic structure over a long period, making it a qualitative measure. It includes considerations of sustainability and is more relevant to underdeveloped or developing countries. While economic growth can occur without development, development typically implies growth along with betterment in the quality of life .

The theory that "racial heritage" influences economic development suggests that inherent characteristics attributed to different races may impact their economic dynamism. Some theorists argue that certain racial traits can make people more energetic and enterprising, potentially leading to more developed economies . However, this theory is complex and controversial, as it may perpetuate stereotypes and overlook socio-economic factors that significantly influence development. It is crucial to consider that cultural, historical, and institutional factors often play a more decisive role than genetic heritage in economic outcomes .

Socio-psychological theories assert that economic development can result from activities that appear economically irrational but fulfill sociological and psychological needs. For instance, enterprising individuals might engage in ventures not purely for economic gain but for personal satisfaction or cultural factors. These actions, though irrational from a traditional economic viewpoint, can spur innovation, motivate others, and stimulate economic activity, ultimately contributing to broader economic development. The example of session groceries demonstrates how community-driven enterprises can fulfill both social and economic functions .

The "invisible hand" is a concept introduced by Adam Smith, which suggests that individuals seeking to fulfill their personal goals inadvertently contribute to the overall economic good of society. As people pursue their self-interest in economic activities, such as starting businesses or innovating, they unintentionally foster economic development by creating value and opportunities, thus benefitting the community as a whole. This process requires minimal or no government intervention, as the natural course of individual actions leads to societal prosperity .

Entrepreneurship contributes to economic independence by creating wealth domestically instead of relying on foreign aid. Entrepreneurs enhance national income through job creation and the development of innovative products that stimulate economic activities. This not only strengthens the local economy but also disperses economic power, creating more equitable economic conditions . Furthermore, entrepreneurship ensures efficient use of local resources, balancing development across regions and reducing the need for external assistance . As more entrepreneurs thrive, they build a robust economic base that reduces dependence on other countries .

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