ENTREPRENEURSHIP: A PANACEA FOR FINANCIAL STABILITY
Financial stability is a state everyone, government and even firms wish to be, but the difficulty faced at most times is the right and best approach towards this stability. In recent times, different writers has come up with views and opinions on the topic 'WAYS OF BEING FINANCIALLY STABLE '. Because of man's nature of desiring to know, the purpose of this write-ups is fulfilled as people sacrifice much time to assimilate it's content, and is obvious that emphasis is placed on entrepreneurship being the panacea for financial stability.
Historically, the first entrepreneurs can be traced back to nearly 20,000 years ago. The first known trading between humans took place in New Guinea around 17,000 BCE, where locals would exchange obsidian ( a volcanic glass prized for it's use in hunting tools) for other needed goods, like tools, skins, and food. Therefore, entrepreneurship is not a newly introduced career as it has existed many years back.
The key terms used in this topic are ; entrepreneurship, panacea, and financial stability. It is important at this point to understand this terms as they would be used repeatedly in subsequent paragraph.
Before the concept of entrepreneurship is explored, it is of essence to, first, understand the meaning of 'entrepreneur '. An entrepreneur is someone who exercises initiative by or organizing a venture to take benefit of an opportunity and, as a decision maker, decides what, how, and how much of a good or service will be produced. In a simple term, Oxford Dictionary defines an entrepreneur as a person who sets up a business or businesses, taking on financial risks in the hope of profit. Therefore, from the above definition, entrepreneurship is the dynamic process of creating incremental wealth. This wealth is created by individuals who assume the major risks in terms of equity, time, and/or career commitment of providing value for some product or services. Also, entrepreneurship is the manifest ability and willingness of individuals, on their own, in teams, within and outside existing organizations to perceive and create new economic opportunities and to introduce their ideas in the market, in the face of uncertainty and other obstacles, by making decisions on location, form and the use of resources and institutions.
The word PANACEA, comes from a Greek word meaning 'all-healing'. History tells us that panacea was the goddess of healing. Therefore, in a simple term, panacea means a solution or remedy for all difficulties.
Financial stability is a condition in which an economy's mechanisms for pricing, allocating, and managing financial risks (credit, liquidity, counter party, market, etc.) are functioning well enough to contribute to the performance of the economy (as defined above). In depth, a stable financial system is capable of efficiently allocating resources, assessing and managing financial risks, maintaining employment levels close to the economy's natural rate, and eliminating relative price movements of real or financial asset that would affect monetary stability or employment levels.
This essay is aimed at presenting entrepreneurship as a panacea for financial stability.
Our society is fully endowed with human and material resources. This human and material resources have the right playing ground for business and investment purposes. Entrepreneurs create economic opportunities using the material resources we have in our environment. Government and firms also create revenue, businesses as well as economic opportunities from our naturally endowed resources. Therefore, the role of entrepreneurship in gaining financial stability can not be de-emphasized.
Entrepreneurship constitutes immensely to the social, economic, financial, and otherwise development of any society. Due to this, successive governments have put in their best to revive this sector while current government seem more serious ; and that is the reason they saddled some agencies with the responsibility of achieving this.
However, the truth remains that for a country to grow in all ramifications, it must have strong private partners who involve in wealth creation, backed with great skills.
Furthermore, entrepreneurship is important in promoting and sustaining financial stability. The benefits to society would be greater good in economics where entrepreneurs can operate flexibly, develop their ideas, and reap the rewards. Entrepreneurs respond to high regulatory barriers by moving to more innovation-friendly countries or by turning from productive activities to non-wealth-creating activities.
Entrepreneurship serve as a panacea towards achieving financial stability in the following ways;
First, entrepreneurship serve as a way of introducing innovations and inducing economic growth. Entrepreneurs tends to boost economic growth by creating new technologies, processing innovations, opening up new markets, and developing new products. There are many examples of radical innovations introduced by entrepreneurs such as Bill Gates (Microsoft), Steve Jobs (apple), and Larry Page and Sergey Bring (Google), to name just a few. This innovations often lead to economic growth. Second, entrepreneurship serve as a way of increasing competition. By establishing new businesses, entrepreneurs intensify competition for existing businesses. Consumers benefit from the resulting lower prices and greater product variety. Researchers have developed a measure of market mobility, which identifies the effects of new business formation on existing firms. A change in the ranking of established firms by number of employees indicates a transfer of market share and higher market mobility. This effect is particularly strong when considering entrepreneurial activity five years prior to the start-up, which points to a substantial time lag in the effect of startups on market mobility. More so, new business formation has an indirect competition-enhancing effect by pushing established firms to improve their performance.
Moreover, entrepreneurship serve as a means of providing new job opportunities in the short and long term. Entrepreneurs stimulate employment growth by generating new jobs when they enter the market. After disentangling all the potential effect, research has shown that beyond this immediate effect over time. There is a direct employment effect from new businesses that arises from the new jobs being created. Following this initial phase, there is usually a stagnation phase or even a downturn as new businesses gain market share from existing firms that are unable to complete and as some new entrants fail. After this interim phase of potential failure and displacement of existing firms, the increased competitiveness of suppliers leads to positive gains in employment once again. About ten years after start-up, the impact of new business formation on employment has finally faded away. This type of wave pattern has been found for the US and for a number of European Countries, as wel aw for a sample of twenty three (23) Organization for Economic Co-operation and Development (OECD) countries.
Furthermore, entrepreneurial activity raises the productivity of firms and economies. Competition between new and existing firms ideally leads to survival of the fittest. Even though overall employment may decline, new firms can foster productivity. The productivity-enhancing effect of business formation occurs in the medium term, when the employment effects is dominated by the displacement of existing firms. This happens for two reasons, first, new firms increase competition in the market and thus diminish the market power of incumbent firms forcing them to become more efficient or go out of business. Second, only firms with a competitive advantage or firms that are more efficient than incumbents will enter the market. The subsequent selection process forces less efficient firms (both entrants and incumbents) to drop out of the market.
Entrances, exists and 'turbulence ' (the sum of entries and exits of firms in a given year) have been shown a positive overall effect on productivity in several European Countries, and in single country studies for Germany, the Netherlands, and Sweden.
In the initial years following entry, the productivity effect cam sometimes be negative, probably as a result of adjustments to routines and strategies in respond to the new entrants. The overall positive relationship is particularly strong for entrepreneurs with high-growth ambitions and a high degree of innovation ; the effect on productivity is weaker for entrepreneurs with low-growth ambitions. This pattern indicates that entrepreneurs generally increase the productive use of scarce resources in an economy, with the strongest impact coming from innovative entrepreneurs.
In addition, entrepreneurship encourages structural change. Existing firms often struggle to adjust to new market conditions and permanent changes, getting locked into their old positions. They fail to make the necessary internal adjustments and lack the ability for 'creative destruction '. The entry of new businesses and the exit of worn out firms can help to free firms from a locked-in position. Moreover, entree may create entirely new market s and industries that become the engines of future growth processes.
In conclusion, entrepreneurship is considered crucial to a dynamic economy and it is a panacea for financial stability. It is important to note that entrepreneurs do not create employment opportunities for themselves, but for others as well.
Entrepreneurial activities may influence a country's economic performance by bringing new products, methods and production processes to the market and by the boosting of productivity and competition more broadly. Realizing these advantages requires governments to cut red tape, streamline regulations and prepare for the negative effects of layoffs in incumbent firms that fail because of the new competition, this would aid to attract productive entrepreneurs.
On the whole, the public need to be well Informed that gone are the days when Nigerians sit and wait for the government to create jobs; now is the time for private individuals to create jobs in other to enhance economic growth as this will sustain financial stability in the country.
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