Decoding Innovation and Entreperenuership

As the world economy undergoes radical transformation with the stagnation of developed economies and the
rise of new economies, innovation and entrepreneurship has gained significant importance. From survival and
revival of established firms of the advanced economies, to the creation and sustenance of new firms in the
growing economies, innovation and entrepreneurship is being viewed as the cornerstone of success. So, what
exactly are innovation and entrepreneurship?

In its simplest form, innovation may be defined as a new way of doing something. It may be incremental or
radical changes to the way of thinking, products, processes or management. Thus, innovation is not limited to
new invention or new products only. It can also mean doing the same thing differently. However, innovation is
expected to create value to the business and society at large. One example is Mc Donald’s: hamburgers, French
fries and soda existed well before Ray Kroc established Mc Donald’s but it was his new way of developing,
standardizing and branding them, creating value for his customers that encapsulated his innovation that
changed the fast food landscape.

The definition of entrepreneurs coined by the French economist J.B. Say over two hundred years ago still holds
true, “The entrepreneur shifts economic resources out of an area of lower and into an area of higher productivity
and greater yield.” It is generally perceived that an entrepreneur is usually someone who starts his own, new
and small business. But in reality, not every new small business is entrepreneurial nor is every entrepreneurial
business innovative. In fact, the term enterprise is not limited to economic institutions or even a capitalist. The
growth and success of social entrepreneurs and restructuring of public institutions of health and education are
a case in point. In view of Peter Drucker, entrepreneurs are people who see “change” as standard and regard it
essential and welcome it as beneficial to big and small corporations alike. As the world economy transforms and
continues its roller-coaster ride, entrepreneurs seeking opportunities in change will be essential for survival and
growth of economies.

There is no denying that innovation and entrepreneurship are essential for economic prosperity and sustainable
economic growth, but can it be learned? This is a question that has been asked innumerable times with varied
answers. Peter Drucker believed that it could be learned, “Innovation is the specific tool of entrepreneurship,
the means by which they exploit change as an opportunity for different business or a different service. It is
capable of being presented as a discipline, capable of being learned, capable of being practiced.” Successful
entrepreneurship depends on certain skill sets of the entrepreneurs. Although, not all the skills can be taught
and need real world experience to enhance, entrepreneurship can be learned as a discipline. However,
successful application of the learnings depends on many other external factors too. This realization has
significant bearings on conditioning of a national economy.
Another burning question is, can innovation be measured? Although it’s hard to answer it in definitive terms,
there have been efforts to quantify it. The best known is “The Global Innovative Index”, (GII) developed by
Cornell University, INSEAD, and the World Intellectual Property Organization (WIPO) that quantifies innovation
in an economy based on data on seven broad categories (institutions, human capital and research,
infrastructure, market sophistication, business sophistication, knowledge and technology outputs, creative
outputs) with multiple sub-categories. The countries that score highly on the GII are usually the ones with strong
institutions that guarantee favorable political, regulatory and business environments. Focus on human capital
and research is also equally important ensuring quality education and effective R&D. Adequate infrastructure
that include general infrastructure, information and communication technologies (ICTs), and ecological
sustainability is another important factor. Unsurprisingly, developed countries like Switzerland, Sweden, United
Kingdom, United States top the rankings with Singapore, the only Asian country in the top ten. Although the
Asian countries are the fastest growing economies in the world there are only four Asian countries in the top
25. However, it is surprising that only one of the top ten countries with highest GDP per capita has made it to
the top ten in GII rankings. Also, only three of the world’s largest economies feature in the top 10 in GII rankings.
United States of America, the largest economy in the world is ranked 4th in GII rankings below United Kingdom
(3rd), the world’s fifth largest economy and Switzerland (1st), world’s 20th largest economy. China, the world’s
2nd largest economy in ranked 25th and India, the world’s 4th largest economy is ranked 66th in GII rankings.
Nepal, the world’s 105th largest economy is ranked a lowly 115th in GII ranking. So, it’s not only the size of the
economy that impacts innovation but there are various other factors at play, crucial of which are incorporated
in GII study.

It can thus be argued then that innovation and entrepreneurship can be fostered by ensuring strong institutions,
and proper investments in human capital, infrastructure and research.

-Swagat Raj Pyakurel

(MSc. Innovation and Entrepreneurship)

(References: Drucker, P.F. 1985: Innovation and Entrepreneurship, Harper Collins Publishers, 1985,
The Global Innovation Index 2016, indexmundi.com, World Development Indicators: World Bank)