One of the characteristics of anentrepreneur is that they are risk takers. This often involves uncertainty.However, uncertainty and risk-taking are not the same. Uncertainty is asituation where the entrepreneur is unaware of the outcomes while risk-takingis a situation where there is a chance of damage or loss.
An entrepreneur can be enriched withknowledge and thus can judge the outcome to be less uncertain. Entrepreneursget used to uncertainty because they see no other alternative. Entrepreneursovercome uncertainty because they are certain about their idea. So knowledge isthe key factor here. However, uncertainty can be determined by the type ofinnovation. Incremental innovations have less uncertainty and less likely tomake a significant impact on the industry whilst radical innovations ofteninvolve a high level of uncertainty and it is likely to make a huge impact onthe market if it is successful.
All entrepreneurs are uncertain at one pointbut the uncertainty drives an entrepreneur as it has great incentives thansomething that is certain. Hence Radical innovation has greater uncertainty asit involves transforming a certain industry completely and could make a lot ofmoney in the meanwhile as competitors take time to get into the new market.Such as Amazon transformed the shopping market totally and the competitors tooka while to get into the market while they made the brand name and reputations. Israel Kirzner (1973) believes anentrepreneur finds an opportunity when the economy is in disequilibrium. If aneconomy is out of equilibrium there are exploitable gains to be made fromtrade.
Entrepreneur is someone who notices some of these opportunities forprofitable trade and takes advantage of them. This economic theory is referredas Equilibration. They find a way to bring the economy to the equilibrium fromdisequilibrium. This brings the state into a better position as more varietiesof a product, more jobs are created, develops the infrastructure, thus increasesthe country’s GDP which leads to high living standards of the people. However,an entrepreneur needs enough knowledge to realize when the economy is indis-equilibrium and make a move at the right time. An entrepreneur alsorequires good management skills to combine the factors of productioneffectively.
Therefore alertness is one of the characteristics of anentrepreneur and it is required at this point. Mohammed Dewji is a Tanzanianentrepreneur who realized there were poor people in Africa who were not gettingquality products and thus he decided to intervene and produce quality productsat a cheap price. And today he is the youngest billionaire of Africa. Thereforea real entrepreneur does have a positive impact on the citizens and the nationof the country. The modern economic theory used nowadays toexplain entrepreneurship is innovation. Some entrepreneurs believe this gives thema sense of direction. Joseph Schumpeter (1934) argued that the act ofinnovation creates opportunities to do something new or to do something alreadybeing done in a new and more valuable way. He believed radical innovations leadto creative destruction.
This causes disequilibrium as the previous market hasbeen demolished and a new market has been created with a modern product.However, this also creates an opportunity for other people who can contributeto the new market such as by providing resources to produce the new product.However radical innovations happen very rarely and therefore there are very fewpeople with radical innovative ideas in this world. However, there could beplenty of ideas but an entrepreneur will make it happen and that’s whatseparates them from the rest. When Steve Jobs introduced the first iPhone, ittotally killed Nokia’s business while allowing other competitors such asSamsung and HTC to contribute to the market. After the launch of a smartphone,the mobile industry has changed dramatically while also improving the life ofan ordinary person.
In contrast, Entrepreneurship has evolvedthe modern world and has brought significant changes to the world. Bothincremental and radical innovations are required for businesses to besuccessful nowadays. The modern technology allows the world to innovate andadapt to new products and services which leads to the creation of jobs,development, and improvement of other products and services and also thedevelopment of infrastructure improving the living standards of the peoplesignificantly. Hence entrepreneurship has contributed quite a lot towards economicdevelopment.
However economic development results from both types of innovationbut radical innovation has contributed much more than incremental innovations.Entrepreneurs are often uncertain about their decision and they are likely tofail a lot before they become successful. It is argued that radical innovationslead to creative destruction but an opportunity in a disequilibrium economycould lead the economy to equilibrium and benefit the state as well. The rewardfor entrepreneurship is profit and successful entrepreneurs are wealthy enoughto appear on Forbes.