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Entrepreneurship

Macroeconomics Entrepreneurship and job growth

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 Macroeconomics  Entrepreneurship and job growth

Abstract

The topic of the research is “Entrepreneurship and job growth.” The purpose of the research paper is to identify the exact link and therefore focus has been given upon identifying ways in which entrepreneurship contributes to job creation, various approaches and arguments by scholars and lastly, the extent to which poverty has been reduced due to entrepreneurial activities. It is found that government can be a major motivator of entrepreneurship, internal processes matter, chances of sustainable jobs due to entrepreneurship is low, and women entrepreneurs have been consistently underrepresented in the economy.

Introduction

Entrepreneurs are a group of people who drive innovation, however, the percentage of people who care to be entrepreneurs or start a business is merely 1-2%. Nevertheless, entrepreneurs play a vital role in the economy. The group of individuals are responsible for creating new and innovative jobs. They make a valuable contribution in the economy and this leads to economic progress. The entrepreneurs are likely to adopt new ideas and their motto is to commercialize those ideas. Innovators do not want to miss out on opportunities. They set up businesses and focus on establishing products in the market that will garner the attention of customers. Interestingly, entrepreneurs do not receive the attention of policy makers as received by traditional industrial companies. There is a link between entrepreneurship, innovation and growth. Across nations and the labour market, the impact of entrepreneurship has been noticeable. It has generated the growth of jobs and has created urbanized settings. Businesses can thrive in those settings. In this paper, the significance of conducting the research on the chosen topic would be outlined and thereafter, the key questions would be stated as well. Following that, under the competing perspective section, various approaches, arguments and assumptions of researchers and scholars would be stated as well. Thereafter, these information sources would be evaluated. The existing strengths, limitations and lastly the authenticity of the information would be tested as well. Based on the evaluation of the information sources, the main themes would be discussed and analyzed in the paper.

Importance of research project

A thorough research on the chosen topic will be incredibly important because it will allow readers to understand ways in which entrepreneurship leads to job creation. The contribution of innovative ideas on nation’s economy would be identified and ways in which it can develop the economy would be identified by understanding different perspectives of other scholars.

Key research questions

  • How entrepreneurship contributes to job creation and economic growth?
  • What are the different approaches and arguments posed by scholars regarding entrepreneurship?
  • What is the extent to which entrepreneurship has led to poverty reduction?

Competing perspectives

Different approaches

According to (Conroy & Weiler, 2017), a relationship exists between economic growth and formation of new businesses. However, the relationship has been consistently neglected in the field of economics. Yet it is one of the intriguing topics and creates further possibilities for research and study. The authors have considered regional data and other frameworks in order to understand the surprising link between economic growth and entrepreneurship. Moreover, the authors have considered the criteria of gender to understand the growth structure or entrepreneurial activities. Secondary research has been conducted and the study shows that women have been consistently underrepresented in the entrepreneurial activities irrespective of the type of economy. For example, women in the most advanced economies such as U.S or U.K has been equally underrepresented as in emerging economies. Nevertheless, they are the new entrants in the labour force. Hence, the author concluded that women posses one of the greatest potential to add economic value of the nation and this in turn shall lead to job creation.

As per (Saberi & Hamdan, 2019), government plays a moderating role in building a relationship between job growth and entrepreneurship. This in turn leads to economic growth of nations. The researchers have considered the GCC countries such as Kuwait, Saudi Arabia, Qatar, Oman, Bahrain and the United Arab Emirates. These countries have formed economic as well as political alliance and therefore collectively known as GCC or the Gulf Cooperation Council. The paper has been written to identify the moderating role of the government. It is a ten-year long study (2006-2015) on GCC countries. Additionally, secondary data from the World Bank has also been collected and the researchers have also considered recent GCC statistics. Other sources include Global Entrepreneurship Monitor database (GEM) and the Global Entrepreneurship Development Institute (GEDI). Finally, after the 10-year long study on GCC countries, findings indicate that government has played a significant role in enhancing entrepreneurial activities. In the Gulf region, the strongest investments were related to risk capital. On the other hand, the researchers have found that adoption to technology as well as the innovation process was the lowest indicators.

Åstebro & Tåg, (2017) has conducted a study on the role of entrepreneurs in job creation. The author has considered only one economy and they have analyzed the net, gross and new job creation within the economy. The contribution of entrepreneurs has been highlighted in the paper. The focus was to identify the contribution of entrepreneurs in employing the unemployed people and including them in the labour force. The time period after six years of start-up has been considered in this study. Interestingly, it has been found that the average entrepreneur is less likely to create sustainable jobs for the unemployed or formerly employed individuals. Findings also highlights that around 20% to 60% of jobs originated due to unemployment. Again, it is interesting to note that the “new jobs” are not entirely new and most of these are the newer version of older jobs. In other words, entrepreneurs have reshuffled the jobs and presented it in a new way. Nevertheless, the study concludes that the contribution of entrepreneurship is worth noting because they act as vehicles or catalysts in the economy. They have moved people out of unemployment and poverty.

 

Arguments

As opined by Wu & Si (2018), sustainability, incentives, social networks and similar other activities leads to poverty reduction. Research has been conducted on the degree to which poverty has been reduced due to entrepreneurship. The authors claimed that poverty reduction has often been associated with external help received from charitable institutions and the government institutions. However, the author argued the assumption and showed evidence from China that suggests that poverty reduction has been possible due to an internal process. The process has influenced underprivileged people to take positive actions. On the other hand, conventional analysis suggests that the determinants of success are social networks, sustainability and endogeneity. The topic of poverty reduction and entrepreneurial activities has gained significant attention in the scholarly community. Despite gaining attention, the process of poverty reduction through entrepreneurial activities has still remained unexplored. The Western scholars argued that development and emergence of enterprise culture has been the sole contributor behind poverty reduction across all economies. However, the study also shows that poor areas are in a slightly disadvantageous position because the population quality is low and people lack awareness as well as resources as Western countries. Hence, people will be benefitted from entrepreneurship only in the presence of an institutional framework.

As per (Rey-Marti, Ribeiro-Soriano & Sánchez-García, 2016), the concept of social entrepreneurship has been gaining popularity and it has contributed in the society positively. As per the study, entrepreneurs have been making efforts to create value in the society by focussing on creating new jobs. The concept of social entrepreneurship has also gained prominence as it has been yielding profitable returns. The purpose of the study was to identify the contingent factors that affect the creation of jobs. The common factors include educational attainment, family history, training, experience and lastly financial support. A combination of these factors leads to the growth of the business size. Altogether, 51 types of social enterprises have been considered in order to analyze the impact of social entrepreneurship.

Another study by Edoho, (2016) highlights the role of public policy and ways in which it has a positive impact on entrepreneurship. The researchers mentioned about opportunity entrepreneurship and its potential in the society. The case of Nigeria has been considered in this study and the current entrepreneurship policy of the nation has been analysed. Economic growth in Nigeria is the outcome of employment generation and opportunity entrepreneurship has played a vital role. Ways in which opportunity entrepreneurship led to poverty alleviation has been considered in the study. The researcher argued that opportunity entrepreneurship has been the sole contributor behind promoting growth and alleviating poverty. In Nigeria, a targeted form of entrepreneurship policy led to the creation of jobs and promotion of economic growth. The entrepreneurship policy has made significant contribution to the economy and the society at large.

Arguments regarding the real contributor behind job creation also exist. Jobs might be created by small businesses, start-ups or big corporations. However, each of these endeavours does not play an equal role. Research shows that small businesses can be regarded as the “backbone of the economy” and several politicians have cited that the private sector workforce constitute of majority of small businesses. Businesses with less than 500 employees can be considered as ‘small” and almost 99% of businesses can be considered as small in the U.S economy. Despite small number of workers, it can be suggested that a small business might be able to provide huge opportunities to workers. Interestingly, the large corporations might employee large number of workers; however, it does not necessarily mean that it has contributed towards the growth of “new jobs”.

Assumptions

As per Åstebro (2017), individuals should be discouraged to become “entrepreneurs” because secondary research shows that almost in every country, entrepreneurs are the ones who earn less than the wage-earning individuals or employees. However, the chances of truthful reporting by entrepreneurs are low and it can be suggested that discouraging people from becoming entrepreneurs for their own good is merely an assumption. Underreporting also prevails and it has negatively contributed towards the findings. Often the findings are false because it shows that entrepreneurs tend to earn much more than the average wage-earner.

According to Conroy, Deller & Kures (2019), the time required for non-metropolitan countries to recover jobs during the Great Recession of 2007-2009 was less in comparison to the metropolitan countries. It has been assumed that the reason behind such a difference is the industrial composition of such areas. In rural areas, the agricultural and the manufacturing sectors are huge, therefore, the gap exists. The two mentioned sectors are the leading sectors that have been focussing on output as well as productivity and interestingly, the sectors require less labour. In the non-metropolitan countries, employer businesses have been lost and it implies that the number of businesses that might generate new jobs is low as well. It also implies that in the non-metropolitan countries, there is untapped potential and this in turn has made the growth of new jobs more challenging. In these areas, the proprietorship rate is high in comparison to metropolitan regions. The study ultimately suggests that potential for job growth is high in non-metropolitan areas.

According to Dean et al (2019), there are underlying assumptions that economic growth reduces due to female entrepreneurship. Female entrepreneurship creates more problems in the economy in comparison to their male counterparts. The researchers mentioned about the “underperformance hypothesis” and suggested that the overall economic performance of a nation tend to be affected due to the involvement of females. The underperformance hypothesis has gained popularity in the society despite its invisibility. This in turn has created more differences between the female and male entrepreneurs. This in turn, has led to the subordination of women in the area of entrepreneurship. Society has associated females with “underperformance” and it has created a meta-narrative. This approach has also influenced the economy and it has created problematic situations as well. As a result, female entrepreneurs are now considered inferior to their male counterparts. There is a need for heterogeneous understanding of the contribution of both male and females in the area of entrepreneurship.  It sets the platform for future research as well and researchers now have strong agenda. It would be interesting to challenge the assumption associated with female entrepreneurship.

According to Sutter, Bruton & Chen (2019), a review of nearly 200 articles suggests that entrepreneurship positively contributes towards poverty reduction or poverty alleviation. A critical study has been conducted and the researchers have considered three main perspectives that led to poverty reduction. These are remediation perspective, reform perspective and the revolution perspective. In case of remediation perspective, poverty is regarded as an issue related to resource scarcity. Similarly, reform perspective considers poverty as a contextual or social problem. Lastly, the revolution perspective considers poverty is the result of capitalist market. The review has been done after examining around 200 articles related to poverty alleviation and entrepreneurship. The researchers mentioned about the role of remediation in poverty alleviation. It mainly involves actions that immediately resolve resource related concerns. Similarly, reform is another way of poverty reduction through which necessary institutional changes or modifications can be made. Lastly, revolution involves taking actions that would change the capitalist-centric assumptions and bring new revolution to businesses. Hence, the researchers have made extensive contributions by looking at these opportunities and focussing on gaining new insights related to the entrepreneurship. It is worth mentioning that the three perspectives mentioned here are assumptions related to entrepreneurship and poverty.

Information sources

Strengths

A detailed study and analysis has been done regarding the relationship between entrepreneurship and job creation. All the selected articles and academic journals are relevant and authentic because it has been peer-reviewed by notable scholars and experts in the respective fields (Bryman, 2016). Data collected and presented to the readers are authentic because long-scale research was involved. The quality of data from the selected journals and articles is high because cross-country data has been analyzed and the purpose has of research has been fulfilled by using in-depth interviews and case studies. The collected sources of information are in sync with the research questions. The extent to which entrepreneurship has positively contributed towards job creation has been explored by consulting academic articles as well as books. Google Scholar, one of the most authentic sites in the academic community has been considered and therefore, it is one of the strengths of the study. Again, the scholars have used the descriptive method in order to enhance the understanding of the student community. Hence, the selected information sources are reliable as well.

Limitations

The selected scholarly materials also have a certain number of limitations because every research has gaps and limitations. Despite selecting authentic and credible sources, limitations in of the research exist because in most of these selected journal articles, researchers have focussed on long-term based studies. On one hand, it can be regarded as strength because the scope of study is wide and collected information has been tested several times. Contrarily, it can be regarded as a limitation because huge amount of time and financial resources has been spent on data collection and data analysis (Patten & Newhart, 2017). Again, the usage of old data by researchers to prove the relationship between job growth and entrepreneurship is quite questionable and can be regarded as the limitation of the source of information. Again, few studies are based on assumptions and in the research community, claiming a point based on assumption can be regarded as the limitation of the study. Additionally, few journal articles are based on secondary research only. In that case, the interpretation of researchers might lack depth and might not be as authentic and data collected from primary sources.

Credibility of information

Before downloading the information sources and using the materials for analysis and evaluation, the credibility of sources has been judged. Firstly, all the journal articles are peer-reviewed and authentic because at the end of the papers, the presence of bibliographies, credits, footnotes and quotations shows the information credibility (Sekaran & Bougie, 2016). Abstract is one of the most important elements of a research paper and it has been read carefully before selecting the sources. The purpose of the chosen research articles has been considered as well before selecting those articles for the review. Based on the degree of alignment with the research questions, books and articles have been selected. The scholars are reputed alumni across international universities and it clearly shows the information credibility.

Discussion and analysis

Discussion

The role of entrepreneurs in emerging economies is noteworthy as it somehow leads to job creation and growth of the economy. After noticing the findings of the peer-reviewed journals and books, it can be suggested that it is not enough to encourage entrepreneurship. The need of the hour is to commercialize the ideas related to entrepreneurship. Gaining customer attention is not a challenge. The focus should be on retaining their attention by commercializing the ideas. Under the competing perspectives section of the research paper, various approaches used by researchers have been outlined. Following that, the general assumptions about entrepreneurship and job growth has been challenged. The arguments posed by experts in the field of economics and business have been presented as well. The first research material suggests the state of women entrepreneurs in developed economies. The second study focuses on GCC countries and it has been found that government plays the role of a moderator in enhancing the economy of the GCC countries. Similarly, the third paper shows that it is irrelevant to emphasize the fact that entrepreneurs are sole creator of “new jobs”. Rather, it would be right to claim that entrepreneurs present old jobs into new forms and act as a vehicle in the economy. Under the arguments section, opinions of scholars have been presented again.

The first study shows that poverty reduction and entrepreneurship has a direct link. Evidence has been gathered from Chinese economy and it is a sufficient proof of the third research question. Entrepreneurship has acted as a catalyst in improving the condition of underprivileged section of the society. The researchers in this study has also emphasized on the importance of creating an “enterprise culture” in the economy. Second argument has been brought up by another group of researchers and they have focussed upon the social entrepreneurship concept. They have argued that social entrepreneurship is the only feasible method of entrepreneurship. Arguments are valid because the study has been done by considering 51 different social enterprises. Similarly, another argument by notable scholars suggests that start-ups, big corporations and small businesses are not equal contributors of the economy. Despite popular belief, it has been argued that 99% of businesses in developed nations fall under the category of small business. Hence, the small businesses are the primary contributors. Various assumptions regarding job creation and entrepreneurship also exists and has been a crucial part of the research paper. Contrarily to popular belief, it has been found that entrepreneurs do not earn more than an average wage-earner in an emerging economy. The common belief regarding the infinite possibilities available to entrepreneurs has been challenged in this study. Similarly, female entrepreneurship can have a negative effect on the economy is another assumption.

Analysis

The analysis from the research findings has been listed below-

  • Women entrepreneurs has been underrepresented even in the most advanced economies
  • Government acts as a mediator in job growth and the government institutions play an important role in encouraging the spirit of entrepreneurship
  • Interestingly, despite creating jobs for the economy, entrepreneurs fail to create sustainable jobs
  • Poverty in the economy reduces only due to internal processes within a country such as enhancing social networks and taking sustainable initiatives
  • Public policies is a major determinant behind the growth of entrepreneurship
  • Apart from social entrepreneurship, it is noteworthy to consider the role of opportunity entrepreneurship in an economy
  • Instead of big corporations and start-ups, analysis shows that small businesses create around 99% of jobs
  • It is a false assumption that average wage-earners are more likely to earn less than the rising entrepreneurs
  • Analysis also shows that an entrepreneur has greater scope of creating a sustainable business in a rural economy rather than in metropolitan cities
  • The assumption that female entrepreneurs does not contribute to the growth of the economy might be false due to lack of evidence and this area requires further investigation
  • Female entrepreneurs cannot be regarded as “underperformers” without sufficient evidence from emerging economies
  • Poverty alleviation due to entrepreneurship can become a reality only after considering three perspectives – remediation, reform and revolution.

Explanation of research

After discussing and analyzing the facts, figures, assumptions and arguments of various scholars, it can be suggested that the entire study stands upon credible primary and secondary sources. The purpose of the research was to identify the value of entrepreneurship in job creation, arguments as well as opinions of researchers and the role of different types of entrepreneurship in poverty reduction. All these queries have been answered to some extent and the highly noteworthy ones has been already cited in the discussion and analysis section. The strengths, limitations and source’s credibility have been considered as well.

Conclusion

The research paper has been written to understand the relationship between creation of new jobs and entrepreneurial initiatives. At the time of research, both emerging and developed economies has been considered. Data from various sources were gathered for enhancing the credibility of the study. At the beginning, an introduction has been given and the key research questions along with significance of research have been cited. Thereafter, competing perspectives consisting of different approaches, arguments and assumptions has been given. The sources of information have been analyzed by understanding its strength, limitations as well as credibility of the study. Lastly, the key information has been discussed and analysed in the paper.

 

 

Bibliography

Åstebro, T. (2017). The private financial gains to entrepreneurship: Is it a good use of public money to encourage individuals to become entrepreneurs?. Small Business Economics48(2), 323-329.

Åstebro, T., & Tåg, J. (2017). Gross, net, and new job creation by entrepreneurs. Journal of Business Venturing Insights8, 64-70.

Bryman, A. (2016). Social research methods. Oxford university press.

Conroy, T., & Weiler, S. (2017). Entrepreneurship, growth, and gender. In Regional Research Frontiers-Vol. 1 (pp. 85-94). Springer, Cham.

Conroy, T., Deller, S., & Kures, M. (2019). Entrepreneurship in Rural Employment in the US. b3522 Rural Policies and Employment: Transatlantic Experiences 6” x9” FA.

Dean, H., Larsen, G., Ford, J., & Akram, M. (2019). Female entrepreneurship and the metanarrative of economic growth: A critical review of underlying assumptions. International Journal of Management Reviews21(1), 24-49.

Edoho, F. M. (2016). Entrepreneurship paradigm in the new millennium. Journal of Entrepreneurship in Emerging Economies.

Patten, M. L., & Newhart, M. (2017). Understanding research methods: An overview of the essentials. Taylor & Francis.

Rey-Marti, A., Ribeiro-Soriano, D., & Sánchez-García, J. L. (2016). Giving back to society: Job creation through social entrepreneurship. Journal of Business Research69(6), 2067-2072.

Saberi, M., & Hamdan, A. (2019). The moderating role of governmental support in the relationship between entrepreneurship and economic growth. Journal of Entrepreneurship in Emerging Economies.

Sekaran, U., & Bougie, R. (2016). Research methods for business: A skill building approach. John Wiley & Sons.

Sutter, C., Bruton, G. D., & Chen, J. (2019). Entrepreneurship as a solution to extreme poverty: A review and future research directions. Journal of Business Venturing34(1), 197-214.

Wu, J., & Si, S. (2018). Poverty reduction through entrepreneurship: incentives, social networks, and sustainability. Asian Business & Management17(4), 243-259.

 

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