Today entrepreneurship is most commonly viewed as undertaking Innovation and bearing risk. Entrepreneurship can also be seen as economic Development as a continuum of series of new processes, new markets, new sources, and new organizations all of which are a product of entrepreneurial activity. There is abundant evidence that the productivity of the new, entering businesses is higher than that of the older businesses that they replace.
Entrepreneurship is rare and unlearned because (a) it charts the unknown; and (b) experience may be a hindrance to change. Besides innovation, risk-bearing is an essential element of entrepreneurship. When a new firm, a new product or a new process is formed, prospects are uncertain. It is the entrepreneur who must bear the risks involved since; others lacking the vision may be unwilling to take the risk.
Entrepreneurship is the process of identifying, developing, and bringing a vision to life. The vision may be an innovative idea, an opportunity, or simply a better way to do something. The end result of this process is the creation of a new venture, formed under conditions of risk and considerable uncertainty.
Entrepreneurs are therefore, usually considered to bear risk while pursuing opportunities, and are often associated with creative and innovative ideas. Typically it is noted that entrepreneurs start small and with their own funding. Banks and financiers like to finance success not unknown. Venture capital industry arises in advanced countries to discover entrepreneurs but this industry requires substantial legal and financial development to take root. The institutional infrastructure of poor countries does not lend itself to the development of entrepreneurship. If the innovative idea must be implemented in a smaller set up and the evidence being that small firms account for only a negligible part of the R&D being actually undertaken [Scherer (1991)] then the question arises from where do the small firms get their innovative ideas? The answer lies in
Knowledge spillovers. Griliches (1992) suggests that knowledge spills over
From the firm or research institute producing knowledge to another firm that
Commercializes it. This view is supported by the theoretical models [Romer
(1986) and (1990); Krugman (1991)] that focus upon the role that knowledge
spillover plays in generating increasing returns and hence economic growth.
The role of geographical proximity has also been recognised in knowledge
spillovers. The theory of localisation suggests that since geographic
proximity is needed to transmit knowledge, especially tacit knowledge,
knowledge spillovers tend to be localised within a geographic region [Jaffe,
Trajtenberg and Henderson (1993)]. Although the telecom revolution has
reduced the cost of transmitting information, knowledge which is based on
structures and analysis is not easily acquired and requires specific investment.
It is not surprising that even in today's info-tech world, industries tend to cluster together.