What is the Relationship Between Entrepreneurship and Economic Growth?

By Greg Grzesiak Greg Grzesiak has been verified by Muck Rack's editorial team
Published on June 22, 2023

To shed light on the complex relationship between entrepreneurship and economic growth, we reached out to CEOs, founders, and a Ph.D. student in economics. From innovation and creative destruction to being a petri dish, explore the insights of these four experts on one specific aspect of this crucial relationship.

  • Innovation and Creative Destruction
  • A Direct and Positive Correlation
  • One Creative Ingredient
  • Petri Dish of the Economic Engine

Innovation and Creative Destruction

Entrepreneurship is the key driver of economic growth. Every entrepreneur desires to maximize profits through innovation (assuming no market imperfections exist). Economists classify innovation as either technological or improvements within existing means of production. Innovation is the main driver of economic growth (according to endogenous growth theorists).

The relationship between entrepreneurship/innovation and growth is not linear. Economist Schumpeter coined the term “creative destruction” to better explain this dynamic. Important technological innovations are often disruptive, and their introduction into the market often destroys older, less efficient firms (or at least those that are too slow to adapt). During the destruction phase, economic growth is hampered, but then renewed during the creative phase at higher levels than before.

Adrian Rodriguez Del Valle, Ph.D. Student in Economics and Blogger

A Direct and Positive Correlation

Entrepreneurship contributes to economic growth by creating jobs. By establishing new ventures, entrepreneurs generate employment opportunities and reduce unemployment, which ultimately drives long-term economic development. As the level of entrepreneurship increases, economic growth also increases, indicating a direct and positive correlation between the two factors.

Eran Mizrahi, CEO and Founder, Ingredient Brothers

One Creative Ingredient

There’s not really a major difference between them. Instead of looking at the relationship from this perspective, consider entrepreneurship as an “ingredient” to create economic growth. Entrepreneurship is the ability to start and run a business–and it’s also the foundation that’s critical for experiencing growth in terms of finances.

Through the right entrepreneurship skills, it’s possible to grow a business and make it a success. And this is where economic growth comes in—the ability of the business to continuously see improvements in how much revenue it is able to generate over a certain period of time.

Will Baker, Founder, Skirtings R Us

Petri Dish of the Economic Engine

I look at entrepreneurship as the Petri dish of the economic engine. Like evolution itself, entrepreneurship is relentless and unforgiving, yet when there is success, it’s a success for the entire economic ecosystem.

For example, employment. Entrepreneurs often give new grads their first jobs; they enable flexible work schedules which are appealing to people who need flexibility.

Nimble thinking is how great ideas are born; entrepreneurial organizations must be creative to stay alive. By taking risks that big businesses would reject, entrepreneurs keep the marketplace on its toes and create competitive growth.

So many of the conveniences and innovations we have today are born from entrepreneurship, from the medical field to technology, to sustainability, it’s very often entrepreneurs behind the idea and pushing it into reality.

Tara Coomans, CEO, Avaans Media

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By Greg Grzesiak Greg Grzesiak has been verified by Muck Rack's editorial team

Greg Grzesiak is an Entrepreneur-In-Residence and Columnist at Grit Daily. As CEO of Grzesiak Growth LLC, Greg dedicates his time to helping CEOs influencers and entrepreneurs make the appearances that will grow their following in their reach globally. Over the years he has built strong partnerships with high profile educators and influencers in Youtube and traditional finance space. Greg is a University of Florida graduate with years of experience in marketing and journalism.

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