Chapter 2

1. Discuss the tangible features that it is necessary for the state to put in place to foster
innovation.

The critical role that the state has played in fostering innovation and entrepreneurship,
even in places like the Silicon Valley. It is being recognized that both state-supported
research as well entrepreneurial capital is necessary (though not sufficient) conditions
for innovation. The efficacy of state initiatives not only depends on the extant
ecosystem but also on the nature of intervention.
Studies suggest that the financing of innovation is likely to be more successful in
situations where:

 the public sector spends large sums on education, research and those emerging
sectors where high capital intensity and technological or market risks
result in under- investment by the private sector;
 large companies reinvest their profits in human capital and R&D;
 the tax policy rewards long-run investments rather than short-run capital gains; and
 c on t e st a bl e m ar k et s a lo ng wi t h a r ig or ou s co m p et it io n po li cy d oe s
n ot al lo w successful incumbents to become lazy.

2.  How can the state encourage entrepreneurs and businesses to invest in longer time
horizons?
The state encourage the entrepreneurs and businesses to invest in a longer time horizon
through education and promotion that leads to them as an upgrade from one old established
technology to a newer technology in order to develop more successful new products. Thus,
expectations of low inflation, low interest rates and stable growth that will encourage firms to
invest in entrepreneurial activity at the same time to work together and share ideas and have
the scope of fairness to each and everyone whom in contact.

3. Explain Schumpeter’s view of entrepreneurial behavior and economic growth.

Schumpeter holds that the trend of economic growth shall be fixed by the exogenous
variable of population growth, yet according to him, the process of economic development is
synonymous with discontinuous technical change, i.e., innovations. ... Thus, entrepreneur
becomes the pivot of Schumpeter's model.

4. Explain how the success of companies like Apple and Google is due partly to the state.
Mariana Mazzucato (2011) argues that the state has played a central role in producing
game-changing breakthroughs, and that its contribution to the success of technology-based
businesses should not be underestimated. According to Mazzucato, Apple’s success would
have been impossible without the active role of the state, the unacknowledged enabler of
today’s consumer-electronics revolution. Consider the technologies that put the smart into
Apple’s smartphones. The armed forces pioneered the internet, GPS positioning and voice-
activated virtual assistants. They also provided much of the early funding for Silicon Valley.
Academic scientists in publicly funded universities and labs developed the touchscreen and
the HTML language. An obscure government body even lent Apple $500,000 before it went
public. Mazzucato considers it a travesty of justice that a company that owes so much to
public.

5. Discuss the evidence for the fifth Kondratieff wave of growth.

The fifth Kondratieff wave of growth is based on innovation technology which grew
substantially as technology started to form the center of the universe. Growth was
propelled by this as technological innovations helped speed up economic output and
increased efficiency with the help of communication and technology. Evidence is the
omnipresent use of technology without which countries are not able to survive in the
global chain.

6. What is meant by a ‘weak business system’?

A weak business system is characterized by low profit margins, low labour output and
productivity, lower revenue and sales growth, higher input costs and lower prices which do
not cover the costs of production, limited working capital availability, poor performance
and customer dissatisfaction.

7. Explain the role played by entrepreneurship in innovation.

Entrepreneurship plays a significant role in the country's development. According to
Harbison, entrepreneurs are prime movers of innovation. Indeed, an entrepreneur is the
person who perceives a business opportunity and converts it into a viable business plan
culminating into a business venture ultimately.
THE ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT.
1. EFFECTIVE UTILIZATION OF RESOURCES: Entrepreneurship is all about putting to
better use the resources which are considered to be of low value with an aim of earning
income. An entrepreneur comes up with ideas of how to use what others may consider
waste. This improves the economy of a country through taxes and creation of jobs which
improves the standard of living of the beneficiaries. The Kenyan sisal plant is, for example,
being used by small scale entrepreneurs to weave quality bags such as “ciondo”, table mats,
lamp shades etc. These items sell internationally.
2. INCREASE IN PER CAPITA INCOME: Economic growth is measured in terms of a
sustained increase in real income. It is the entrepreneurial communities who complement
and supplement the economic growth increase per capita income by identifying and
establishing profitable business ventures.
3. IMPROVEMENT IN PHYSICAL QUALITY OF LIFE: Entrepreneurs supplement the
economic growth by enhancing the physical quality of life. Establishment of enterprises leads
to increase in employment avenues both directly and indirectly. Consequently, poverty is
alleviated as per capita income grows. This results in improving the physical quality of life
which is an indicator of economic growth.
4. GROWTH OF INFRASTRUCTURAL FACILITIES: Entrepreneurs help in the growth of
infrastructural facilities such as roads, bridges, buildings, factories, etc. which are the
cornerstones of economic growth. Establishment of factories and industries in a particular
locality presupposes the growth of infrastructural facilities.
5. EXPORT OF HANDICRAFT ITEMS: Entrepreneurs play a significant role in producing and
exporting handicraft items. They generally use the local traditional skill, traditional technology,
local knowledge and experience for producing traditional art and craft and handicraft items.

8. How do universities help to deliver entrepreneurship?

At the same time, entrepreneurship education provides student entrepreneurs with the
information, knowledge, and other resources they need, thereby forming a strong
atmosphere of innovation and entrepreneurship, reducing environmental uncertainty, and
creating a good environment for innovation and development.
Universities play a crucial role in underpinning innovation and entrepreneurial activities. They
provide the conditions, facilities and talent that foster the emergence of breakthrough ideas.
Many have systems in place to support the development of new ideas so that they have
practical use. They play an important part in maintaining the deal flow that gives
opportunities for venture capital investment, which in turn mobilises the growth of
entrepreneurial ventures.