Many people try to separate entrepreneurship from financial concerns, stating that it is essentially a passion and that entrepreneurs start enterprises out of love. Nonetheless, one of the essential characteristics of economic analysis is that cost fluctuations play a significant role in accounting for human conduct. However, it is far from clear which governmental policies truly encourage entrepreneurship and lower the cost of starting a business.
Government and business are intricately intertwined, with one’s actions frequently having an impact on the other. It is in the government’s best interests to maintain the economy strong by, among other things, providing a welcoming climate for small and large firms. As a result, the government has a variety of measures at its disposal to support economic activity across the economy or in individual industries.
Lower Interest Rates
The Federal Reserve can alter the Federal Funds Target Rate – the figure that directly influences the prime interest rate – to stimulate lending to businesses and consumers. When the prime rate dips, borrowing becomes more profitable. This encourages businesses to expand and allows consumers to experience temporary increases in discretionary income.
Give Tax Incentives
Aside from the age-old argument that lower corporate income taxes encourage business activity, the government has other techniques in its tax toolkit that can stimulate specific industries. Tax incentives to certain types of businesses, or incentives for consumers who patronize certain industries, can give fledgling markets a powerful boost.
A prime example of this is the business and residential solar power industry. Tax incentives encourage entrepreneurs to start new solar power businesses, and incentives to purchasers encourage small businesses and families to purchase solar equipment.
Friendly Trade Policies
Foreign trade policies, such as tariffs and import quotas, can be lowered or eliminated to encourage foreign trade. Relaxed trade restrictions and free-trade zones can allow local businesses to realize significant cost savings, allowing them to increase their bottom lines. The ability to outsource labor and manufacturing to lower-cost markets in addition to sourcing cheaper materials helps to increase profit margins, encouraging business expansion.
Providing Contract Work to Private Companies
Government entities directly encourage business activity when they contract with private companies to perform government responsibilities. Counties, for example, can contract with third-party road pavers, snow plowers and towing services rather than creating internal departments for these activities. At the federal level, contractors are used for war-zone logistics and intelligence processing, among other things.
Grants, Loans and Disbursements
The government has access to an entire population’s worth of individual and business tax money and has the ability to distribute that money to affect change throughout the economy.
Loans and grant programs offered directly to entrepreneurs are one way to use tax revenue to stimulate business activity. Another way, according to America.gov, is to fund agencies and programs such as the Small Business Administration, which provide assistance to startup entrepreneurs. Unemployment and other federal assistance benefits ensure that a large number of people have enough money to pay their bills, leaving them with extra discretionary income that generally falls into the hands of businesses.
The government’s job is to encourage entrepreneurs, entrepreneurial activity, and entrepreneurial organizations by providing opportunities and favorable policies. Creating favorable conditions for new businesses to start and thrive, allowing existing businesses to expand by developing new products and services in new markets through appropriate tax policies, supportive physical infrastructure, training and information provision, promoting incubation facilities, research and development facilities, and entrepreneurship education are just a few of the ways governments can encourage entrepreneurship in a country and its regions.
The government must structure its policies in such a way that it nurtures an entrepreneurial environment and allows effective opportunities for entrepreneurial firms to grow and make an impact on national economic development. ”By focusing on existing, new and nascent entrepreneurs, entrepreneurship policy focuses on the change of process acknowledging the need to respect antecedents and consider future opportunities”.
The entrepreneurial policy must also deliver protection to the existing entrepreneurial firms in order to sustain their durability. “Entrepreneurship policy has a greater sensitivity to the framework or contextual conditions that shapes the decision-making process of potential entrepreneurs”
The push for innovation in unpleasant economic times, rising levels of unemployment, globalization and dispersed modes of production and service provision, the domination of information and communication technologies, and the rise of the new industrial economies have called for various pronouncements on policy that matter- policies that are shaped and formed by and for entrepreneurial people, entrepreneurial organizations and entrepreneurial environments.”.
Read Also: How to be Innovative in Business
Sometimes, stable economies are often observed to experience variations in the trends, it is important to save small and medium-sized firms. Large companies and firms are no longer the only economic value creators. These small and medium-sized firms are on the principal vehicle for job creation, they account for the major part of entrepreneurial activities and employment ability.
Innovation is defined as the process of seeking new goods, markets, sources, or business models. Without more innovation, growth and development cannot be sustained. “Invention differs from innovation in that invention is concerned with new ideas and developments of a mechanical or technical nature, whereas innovation is concerned with the commercial application of new ideas.” Innovation gives the company a competitive advantage while also attracting potential investors who are interested in investing in the product.
The entrepreneurial organization needs to be created or maintained as an innovative organization. The process and routines of the organizations should endeavor an innovative environment within the organization. Tidd and Bessant et al. (2009) argue that the innovative organization is characterized by an ‘integrated set of components that work together to create and reinforce the kind of environment which enables innovation to flourish, the components of innovative organizations such as:
– Shared vision, leadership: clearly articulated and shared sense of purpose
– Appropriate Structure: Organizational design that enables creativity, learning and interaction
– Key Individuals: Promoters, supporters, believers Effective team working
– Innovative and Creative Environment: Positive approach to creative ideas
How Can We Encourage Entrepreneurship?
Entrepreneurship is more than a catchphrase. It entails driving and ingenuity that results in positive transformation. Recognizing that employees have goals and dreams, and encouraging them to pursue those dreams, benefits both the person and the organization. Employees feel seen and heard, and hence more fulfilled, while employers benefit from increased employee satisfaction and retention.
Companies require entrepreneurial brains at all levels of the organization to continue to progress. To accomplish this, employees must believe they work in an environment that encourages entrepreneurship.
Below, ten company executives discuss how they encourage entrepreneurship in their organizations.
1. Develop a statement to encourage entrepreneurship
“Our staff created an ‘It’s OK To…’ statement to help remind employees who are already here, and to show new employees that they can be entrepreneurial at our company. The ‘It’s OK To…’ statement encourages entrepreneurship with statements such as ‘It’s OK to fix things that are broken without permission’ and ‘It’s OK to walk over to someone and learn something.’ The statement supports our values—and helps express our culture in a simple and concrete way.” — Kimberly Kriewald, AVANA Capital
2. Create a bond between employees and the company
“Entrepreneurship is oftentimes synonymous with Ownership. Whether that individual financially owns that function of the business or not, there needs to be a personal connection to the overall success of that business or department. Trust plays a big part in entrepreneurship actually happening in the business.” — Jon Schneider, Recruiterie
3. Celebrate mistakes
“An organization can encourage entrepreneurship within employees by fostering an environment where new ideas and (gasp) mistakes are celebrated. Many organizations don’t create an environment where true entrepreneurship can foster. It can also be argued whether true entrepreneurs can foster in any environment they don’t create.” — Gresham W. Harkless Jr., Blue 16 Media
4. Promote ‘intrapreneurship’
“The idea of ‘intrapreneurship’ has received a lot of attention in recent years. We remain on the edge by promoting innovative, impactful, and data-driven work in every area of our business. Each person has to fully believe in this value in order to move new ideas forward, and also take personal responsibility to see projects through to completion.” — Cameron Robb, GPEC
5. Pursue passions in and out of the company
“We encourage our team to explore their passions both in and out of our organization. Many of my colleagues have side hustles that sometimes collaborate with our own work. It’s a win-win for everyone to keep their interests piqued.” — Sharon Delaney McCloud, Walk West
6. Entrepreneurship is a mindset
“Entrepreneurship is the creation of value in creative ways or building solutions in a way that hasn’t been done before. Company leaders can encourage this type of thinking by simply allowing their people the space to try new ideas, and providing resources to see them through. ‘The way it’s always been don’ is not a permanent (or intelligent) answer to anything anymore, and the less that sentence gets used the better.” — Zack McCarty, Qwick
7. Recognize and reward
“An organization should recognize and reward employees whose ideas benefit the company. Employees should understand that the company is supportive of new ideas and that it is OK to fail. Great ideas that need further development should get financial support from experts within the company to help develop and nurture the project so that it may become a success.” — Peter Babichenko, Sahara Case
8. Build personal brands
“Encourage side projects. Not only does this give employees an outlet and testing ground for their creative juices, but it also shows you care about their personal brand enough to want more for them outside of what you can offer in the workplace.” — Michael Norris, Youtech
9. Avoid micromanaging
“Micromanaging is a surefire way to kill creativity and lead to burnout for both parties. Managing from a distance is super important to encourage leadership inside your business. It gives employees the freedom to explore their entrepreneurial sides within a business.” — Vanessa Molica, The Lash Professional
10. Space, time, and stability
“I’m a firm believer that employees need space, time, and stability in order to even think about entrepreneurship while maintaining work responsibilities. I’ve always felt the best way to encourage entrepreneurship in my organization was to 1) avoid micromanaging employees, 2) offer sufficient time off, and 3) support and reward outside interests.” — Will Daniel, Business Insider
The benefits of entrepreneurship extend beyond the businesses they establish. Entrepreneurs improve the lives of individuals and communities, as well as the overall economy. Entrepreneurs have been instrumental in spurring social change and improving the way people live and work. They help raise the standard of living for everyone by creating jobs and making products safer, less expensive, and more functional.
- Entrepreneurs’ rewards for taking on the risks entailed in transforming an idea into a business include the earnings their investment generates, as well as the ability to set their own schedule. However, entrepreneurs also gain the satisfaction of seeing their idea transformed into a thriving enterprise, and of knowing their skills and leadership helped to make it happen.
- Communities reap the benefit of entrepreneurship because businesses help to foster innovation, promote economic development, and create jobs. A successful company is likely to expand, which generates taxes, jobs, and other benefits for the area. Thriving businesses tend to attract other ventures in the same or related fields, and they often invest in community projects and support local charities.
- Entrepreneurs play an important role in growing and sustaining the U.S. economy. The technologies pioneered by entrepreneurs have created entire industries, including smartphones, wireless products, online retail, social media, and streaming entertainment.
Despite the many benefits of entrepreneurship, it has inherent risks. Lack of appropriate government oversight can result in unfair labor practices, corruption, and criminal activity. Also, new business ventures have a high rate of failure: According to data from the U.S. Bureau of Labor Statistics (BLS) cited by Fundera, 20% of small businesses fail in the first year, 50% fail within five years, and 70% fail within 10 years of opening. The benefits of entrepreneurship are realized only after much preparation, planning, and hard work.