5 Benefits of Entrepreneurship to the Economy

People get into entrepreneurship for many reasons – autonomy, control, creativity, and financial gain, to name a few. But entrepreneurs are also critical to the broader economy, benefiting countless people and the country. Without entrepreneurship, no economy could survive.

This guide examines five key benefits of entrepreneurship to the economy so that entrepreneurs, and future entrepreneurs, understand the potential impact of their business.  

1. Innovation

Innovation is vital for an economy to thrive. Entrepreneurs create innovative products and services that improve the lives of consumers and help make businesses more efficient and profitable. Innovation also helps companies compete in the global economy. 

Most companies use tech tools in a variety of ways to build products and improve their processes. Without these technologies, they would fall behind in a world where companies in other countries are creating new, innovative, processes to advance their businesses.

Facebook is an example of an innovation that changed social interaction and business communication.  Facebook essentially created a new market that became its own industry – social media. Billions of people now use social media every day to connect with others and share and collect information. 

It’s also arguably the most important channel for businesses looking to market their products and services, thus driving growth and boosting the broader economy. 

2. Job Creation

Clearly, one of the key benefits of entrepreneurship to the economy is job creation. When a new company forms, it creates a new job pool that grows as the company grows. This means that over time, more and more people are employed. 

Microsoft, for example, was started by college drop-out Bill Gates in a garage and now employs over 160,000 people. Startup companies created 3 million new jobs in 2021 alone, and as those companies grow, the number of jobs they create will grow as well. 

When people are employed, they also become more active consumers, spending more money, which benefits other businesses.

3. Economic Growth

A country’s economic growth is measured by its gross domestic product (GDP), which is the dollar value of all goods and services produced in the country in a given time period. Of course, when a successful new business is launched, GDP increases. 

The business sector contributes nearly three-fourths (72%) of GDP, while the rest comes from the government, non-profits, and real estate. Startup businesses add significantly to the overall GDP and that share has increased over time. 

4. Economic Opportunity

Not everyone can access higher education, which often leads to lucrative job opportunities, but anybody can become an entrepreneur, creating unlimited financial potential. Broader entrepreneurship means more upward mobility. 

When people have the ability to make more money, just like with job creation, they spend more money, benefiting other businesses.

5. Higher National Income

New businesses add to local, state, and federal tax revenues. They pay business-related taxes, while the people they employ also pay taxes, leading to significant revenue increases for the government.

While nobody likes paying taxes, they enable governments to operate and provide all the services we use every day. A well-funded government leads to a healthy nation.

In Closing

Entrepreneurship is often a rewarding pursuit that offers many personal benefits. It’s also rewarding in terms of benefiting others and even the entire country. Even if your successful business doesn’t grow into the next Microsoft or Facebook, you should still feel great pride. 

You and your business are likely boosting the lives of others and the broader economy.