In economics, many phenomena and events are beyond the reach of the vast majority, who do not know why a business is needed and how it is developing. But more importantly, most citizens do not want to know how the monetary system is regulated. In part, this can be understood by determining what the role of entrepreneurship is in the development of the economy. Firstly, it consists in the ability to provide some scarce services or goods. Secondly, it simplifies access to them, improving the living conditions of citizens. Thirdly, it directly participates in the regulation of the state economy, providing a contribution to GDP and balancing the inflation rate.
But when a crisis arises in the economy, it is entrepreneurship that tightens the loop on it, especially if the market economy in a particular country has not been fully built. It is definitely impossible to judge the role of entrepreneurship in the development of the economy, but we can say that it forms a balanced market. And it is precisely these extremes, when pricing is ruining the money system, that are a sign of an unformed market where entities can exploit these imperfections.
Enterprise Flexibility
Assessing the role of small business in the economy, we should consider its main characteristic. This is an opportunity to make up for a scarce service or offer a niche product at a specific time. This means that the entrepreneur monetizes his services at the moment when this becomes necessary. The entire commodity sphere of the state economy is unable to react so quickly to emerging market niches. Because they are quickly engaged in entrepreneurs. Of course, the state system is quite capable of competing with them. However, he will not do this, since he will not be able to respond faster than small business.
Often, the state can successfully delegate part of economic concerns to it. In addition, the economy cannot quickly respond to changing trends, as it requires careful analysis and presentation of leadership at different levels. Because of this, precious time is lost, which is usually effectively used by entrepreneurs. While receiving income in the form of tax, the state regulatory system also feels significant benefits. In monetary terms, it is approximately equal to the income that the state would receive from the independent implementation of any business idea. But in the case of delegation to its business, the economy receives profit regardless of whether it does anything.
Replenishment of the deficiency and assistance in cash circulation
Assistance in cash flow is the answer to the question of what role entrepreneurship plays in the development of the economy. This is achieved by filling in the shortage of goods or services that the state needs. If they were not available on the market, if these were not basic necessities, they would not have been acquired. Therefore, the money available on hand will not return to the economy, which will become a factor for a significant increase in inflation. Given the lack of goods and services on the market, it is very difficult to combat negative public opinion, which makes the government itself goof.
But entrepreneurship, finding the opportunity to offer niche in short supply of goods and services, partly solves this problem. It becomes a subject that helps the economy return money to the banking system.This means that national banks are less dependent on the lack of working capital of commercial financial institutions. This allows them to keep interest rates at stable levels.
The role of entrepreneurship in inflation
Reflecting on the role that entrepreneurship plays in the development of the economy, one should also consider its participation in GDP growth. The growth of the state economy and the stability of the exchange rate depend on this indicator. GDP growth in the absence of inflation is almost impossible, because the latter is a kind of driver of economic development. Of course, within reasonable limits, when this indicator does not exceed 3-5%. And entrepreneurship helps to maintain it at the achieved levels. And it does this, resorting to the tactics of least resistance, since in order to increase inflation, it is enough to increase the cost of services and goods.
With the latter, entrepreneurship is just fine. It is the services and goods of entrepreneurs that are growing in price faster than others. But since money is still returned to the state’s banking system, this is seen by the authorities as a factor stimulating the country's economy. The government practically cannot regulate the cost of services that are provided by entrepreneurs, since this is a place of collision between two fundamentally different areas of economic activity: a market and regulated planned economy.
The contribution of small business to GDP
Analyzing the role of entrepreneurship in the development of the economy, it should be said that it forms a market economy. Regulation of prices for services and goods of entrepreneurs is more susceptible to such phenomena as competition and the balance of supply and demand. These attributes characterize the market economic model, that is, more flexible, although it has an important drawback. It requires a logarithmic growth, which is impossible in constant conditions with limited resources and production forces. It is entrepreneurship that makes GDP growth possible, since this indicator can take into account repeated capital investments, adding them to the growth already achieved.
For example, the resale of one car 3 times in 1 year affects the GDP in exactly the same way as the sale of 3 cars for the same period of time. In the business environment, resales are very common. This means that this, albeit fictitious, is increasing GDP, in which the state every time deceives its population. Whether it is bad or positive in the short term is not so important. In the long-term, this constantly aggravates the future growth of the economy; therefore, the most successful and safest model of entrepreneurship for the economy is the production model.
But for the entrepreneur, it is the most difficult, unlike trade. The profitability of sales is always easy to raise, increasing the cost, which attracts many businessmen who do not want to burden themselves by building a production model of the business. And arguing about the role of entrepreneurship in the development of the economy, it cannot be said that it is extremely positive. It is twofold, but without it the population expects an inflationary crisis if the country's economy cannot provide goods and services for which there is a demand among the population.
Role in the commercialization of innovation
Small business can become a kind of fast bridge between science and its commercialization. It is this type of business organization that is the most efficient and least costly, and therefore, with economic inconsistencies, failure will entail small losses. But this will unequivocally prove the bankruptcy of the commercial idea itself or show the lack of its implementation.
For the economy, getting the lowest possible losses is the basis of development. The problem is only the fact that if the funds fail, the entrepreneur himself will lose, while the economy will not feel the harmful effects.The success of the undertaking will provide fruits for society, the entrepreneur himself and for the economy. These risks are not balanced, but such is the price of failure or success, and such is the role of entrepreneurship in a market economy.