Running head: BUILDING AN ECONOMY 1

University of the Cumberlands

Week 5 Research Paper - Building an economy: Government planning vs. entrepreneurial

innovation

ITS 832 – Info Tech in a Global Economy

Market trends have changed in the recent past with international companies such as Coca-

Cola and Unilever able to access different countries other than their primary market. This

factor has not been natural because different countries have mixed economies, and that has

different effects on small scale businesses and international business. Some countries believe

in state-controlled economies because they want to develop their local companies and
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products. At the same time, other nations such as the United States have a Free State market

that allows entrepreneurs from different parts of the world to invest in their country. This,

too, has positive effects and adverse effects.

Free State economy is seen as the better option for entrepreneurs because the government, in

most cases, does not have the experience and skills of making the right decision on the type

of business to invest in. The government has a lot of things to deal with that are of significant

concern, for instance, construction of facilities and infrastructure that are necessary to the

public. These responsibilities cannot be compared to entrepreneurship, which involves a lot

of risks, and that is why a Free State market is good. A good example is the case of India,

where other nations such as the USA and UK noticed the potential that existed in the software

industry. That is why global enterprises from different regions came in and set up IT and

R&D centres to harness this potential. And from that, there have been more than 7000 tech

start-ups that have been created, which have been valued to be more than the US $1 Billion.

There are still more starting ups expected in the coming years because of the technological

advancement in the country. It is also important to note that the country has also played a

vital role in this by putting up policies that are favourable and allows foreign investors to

come into the country and invest in their country (Victor, 2011). Just as seen in the Free

State market system in the United States, the government still has some say in the

investments made in the country, and things are not as free as they would seem.

The government regulated economy is beneficial to the local companies and is good in

promoting local inventions. Local products and businesses are suitable for the economy of the

country because the revenues earned from those entrepreneurial inventions circulate within

the country’s economy, which is not the same with international companies. But that type of

economy has some disadvantages because, after some time, the businesses will owe the

government for the favour that the government is doing for them. The company will be at the
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mercy of the government, and whenever the government wants anything, it would be hard to

turn them down. The government regulated economy also does not give room for healthy

competition. International companies have reached that level because of the efforts they put

in place to ensure that they offer excellent services and products, and that is needed for

individuals to be more creative. Individuals such as those in India learned from big

companies on what is required in the industry, and that is why their software industry has

evolved to what it is today.

There is a need for a balance of cooperation between entrepreneurs and governments for their

economies to grow. The government must take some initiative to support their entrepreneurs,

and that involves acknowledging that international companies can come in hand in such

scenarios. It is because of the intervention of foreign countries such as the USA and UK that

the software industry in India has grown to what it is now and can now compete with other

developed countries in that sector. Their economy has also increased due to the companies

that have been set up. China is also in the same boat because the Free State economy has

enabled them to export a lot of goods to the United States and offer cheaper products for

individuals who cannot afford the expensive locally made products.

Another good example is the energy sector, where clean energy has proven to be a gold mine

for private companies. But for this to be possible, there has to be an agreement between the

private sector and the government, which will allow the private sector to harness this

opportunity. That is because clean energy will help nations to reduce the emission of

greenhouse gases, which then leads to pollution of the environment. The government could

not have all the resources to invest in this sector, and that where the private sector comes in.

In the US, for instance, there was a decline in private funding directed to energy-related

R&D. The drop was experienced between 1991 and 2005, and the government came in and

injected $5.4 billion. In return, this encouraged private investors to have more faith in the
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venture, and they started investing substantial amounts (Jackson & Victor, 2011). In addition

to that, the Congress came in and passed an initiative to reduce the country’s reliance on oil.

It is proof enough that even in a free state economy, the government has some role to play to

make the conditions favourable for private investors. That is why cooperation between the

two is needed for the success and growth.

References

Jackson T, Victor P (2011). Productivity and work in the ‘green economy’: some theoretical

reflections and empirical tests. Environmental innovation and societal transitions 1: 101-108

Victor. P (2011). Questioning economic growth. Nature 468: 370-371