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Skip to 0 minutes and 10 seconds In this lecture, we’re going to talk about why entrepreneurship is important. We already saw in our earlier lecture that the traditional economists already thought entrepreneurship had a crucial role in the economy by matching demands in different places and in different times. But after the ’70s of the last century, the role of entrepreneurship has been changing fundamentally, and there are several causes behind that change. First, we have seen the trend of globalisation. There was much more international communication, international competition has been growing, and international markets were developing. We also saw a large growth in IT. There were many more IT applications available for large firms and for small firms.

Skip to 1 minute and 5 seconds And we saw that in the Western countries, we became a knowledge economy. Firms started competing on knowledge and not on materials, location, or other production factors. This transition is also called a transition from a managerial economy to an entrepreneurial economy because in such an economy with knowledge as a central competitive advantage, you need to have an entrepreneur. As we have discussed before, entrepreneurship occurs in situations of uncertainty and complexity. So in a modern society, which is becoming more uncertain and more complex, the importance of entrepreneurship is still growing. We see this, for example, in the high numbers of SME’s in modern societies.

Skip to 1 minute and 59 seconds Small firms are more flexible and more creative than larger firms, so the advantage of large scale production is replaced by the advantage of small scale entrepreneurship. Did you know that about 99% of private companies in modern economies are small and medium sized firms?

Skip to 2 minutes and 21 seconds As a result, we see large firms trying to copy these advantages. They try to downsize, to outsource, or they are even setting up new small companies themselves, so-called spin-offs.

Skip to 2 minutes and 40 seconds There are several important outcomes of this entrepreneurial economy. What we see is that it leads to more innovation, to more employment, to opportunities for self actualisation and independence for the entrepreneur, and especially to be able to reach her own work and life balance is deemed very important. And we also see social benefits. For example, entrepreneurships give the opportunity for less privileged to have and earn some money. We also see social entrepreneurship. So we may conclude that entrepreneurship is important. So what have you learned during this lecture? First, entrepreneurship is a phenomenon that’s inherent to old and new economies. Entrepreneurship has already been studied by economies for centuries, and by organisational theorists for about one.

Skip to 3 minutes and 40 seconds Entrepreneurship is about identifying and exploiting opportunities, especially in a complex and uncertain world. Entrepreneurship is deemed a major driver of present and future welfare.

The importance of entrepreneurship

This lecture discusses why entrepreneurship is important. What are the underlying developments that create this entrepreneurial economy and what are its effects?

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Decision Making in a Complex and Uncertain World

University of Groningen

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