The Role of Creativity and Problem Solving in Entrepreneurship, Innovation, and Economic Development

Nowadays, with the developing of economic development is facing a new challenge. The notions of entrepreneurship, innovation and creativity become more widely used in business world and Naude (2010) notes that these fields are converging increasingly in recent years. Entrepreneurship has been regarded as the engine of dynamic economic development and growth (Ylinenpaa, 2009). Moreover, Minniti (1999) states that entrepreneurship scholars are catalysts for economic development because of the generation of a network for innovation that promotes the creation of new commercial formations and new ideas. In addition, the importance of creativity is highlighted within the context of economic development dynamics in Schumpeter’s work (1934, 1942) and problem solving is a process which encourages entrepreneurial thinking.

Meanwhile, creativity and problem solving are interrelated and interacted on each other. This essay will illustrate the relationship between these significant elements within the market in a particular way. Firstly, definitions of key notions will be given. Secondly, the relationship between entrepreneurship, innovation and economic development will be contributed for a better understanding. In the next part, what role creativity and problem solving plays in that relationship will be introduced with the group project. Further examples will be provided for readers when necessary in the following part of this essay.

Simple definitions of the key issue about entrepreneurship, innovation and creativity will be given in this part and one example related to the notion of creative will be connected. Firstly, start from entrepreneurship with an explanation provided accordingly. The view of entrepreneurship refers to methodologies for business trade that takes the form of new combinations in an attempt to usurp market share. It is the dynamic process of assembling necessary factors of production consisting of human, physical and information resources and doing so in an efficient way (Lazear, 2005). However, entrepreneur is an individual with innovative ideas, utilizing new combinations of means of production (Schumpeter, 1934).Concerning with the second key notion, Rickhards (1985) pointed out that innovation is a process whereby new ideas are put into practice. Hence, it can be defined as a revealing and new variation on the old process.

In a broad sense, innovation could be divided into sustaining innovation and disruptive. Sustaining innovation emphasizes on gradual and incremental improvements whereas disruptive innovation is more a discrete and discontinuous transformation. Creativity, put it simply, it is the ability to look differently and stand out the answers to the problem. Bruner (1968) defined it as ‘effective surprise’. Keil(1987) argued that it is more than a process or approach and also be a mind power. A well-known example related to creative destruction is the shift from vacuum tubes to semiconductors that eliminated the advantage of firms such as RCA and Sylvania (Tushman & O’Reilly, 1996). These three sections are balanced in business activities and both have significant effects on economic development and growth.

Following the root of definitions, the illustration of the interlaced relationship between entrepreneurship, innovation and economic development will be presented. Starting with the relationship between innovation and entrepreneurship, these two points have an internal link and mutual influence on each other. Entrepreneurs generate innovative ideas to reinforce discontinuous innovation, or disruptive innovation (Dannels, 2005), which alters the bases of competition through ‘utilizing new combinations of means of production (Schumpeter, 1934). It means that entrepreneurs make economic profit for themselves and to the society by innovative activities to the market and innovation is the essential function of entrepreneurship. Moving to the relationship between entrepreneurship and economic development, the former has positive effects on economic development..

One report shows that the high entrepreneurship areas in the United States had 125 precent higher employment growth, 58 precent higher salaries rise and 109 percent higher productivity (Camp, 2005). There is no doubt that entrepreneurship has been the driving force of economic development and regarded as a strategy to successfully boom economic development in many regions. Moreover, with new business formation and the growth of existing ones, the most contribution of entrepreneurship to increased welfare in society is the creation of new jobs and additional income because of multiplier effects (Robinson et al. 2004). It is clearly indicating that establish new companies or develop from existing firms is a kind of major method for entrepreneurship that creates economic development.

In addition, entrepreneurship is a vehicle that link innovation with regional economic growth. Tapsell and Woods (2010) pointed out that economic development is the result of innovation taken by entrepreneurship scholars. Innovation has been regard as the most crucial component in long-term economic development. For instance, according to Rosenberg (2004), one professor from the University of Stanford managed to do a survey about the growth in the output and the input of capital and labor of the Unite States economy from 1870 to 1950. Before that, he made a number of reasonable assumptions about how much the growth in a unit of labor and capital should be added to the output of the economy.

The result was that the presented growth of inputs could only perform less than 15 percents of the growth in the output of the economy, which means that technology innovation contributes more than 85 percents to the unexplained growth. This study shows that the view of economic growth is the result of innovation and innovative actions have been regarded as a specific major force for economic development. In one word, these three aspects interact and connect with each other and the two notions of entrepreneurship and innovation are indispensible in economic growth and development.

Having dealt with the relationship between entrepreneurship, innovation and economic development, then move in the next part of what role creativity and problem solving plays in this relationship and the group project would be tied to illustrate the function of creativity and problem solving. First of all, creativity system precedes innovation implementation. Gurteen (1998:7) summarized that creativity is about the process that generate new ideas, and innovation is about putting these ideas into action. Therefore, for innovation to occur, creative ideas that have potential value (Williams & Mcguire, 2010). Cortright (2001) claims that economic process is about the generation of new ideas and innovations, which is the force of sustain economic. In other word, creativity and innovation play important roles in economic development and as the driving force of economic growth. Economic creativity has already been conceptualized as codified knowledge with potential economic value to a nation (Williams&McGuire, 2010). In entrepreneurship terms, creativity is one unique characteristic of entrepreneurs.

As mentioned before, entrepreneur is an individual with new ideas and they have the skills required to engage in creative activity. Secondly, there are mainly 5 steps within problem solving –problem discovery, fact finding, definition of problem, solution finding and decision implementation. In these steps, creative ideas and innovation will be needed by teams or individuals to generate ideas and put them into action. To a certain extent, problem solving provides a ‘performance platform’ for innovation. Taken the group project as an example, in the first mentoring session, every group were asked to find one problem that bother many people on the basis of fact and define this problem. In the following two sessions, solution finding and decision making were connected to group project.

Students need to have a creative thinking by generate innovation ideas as many as possible. Innovation as a great skill is demonstrated within these steps of creative problem solving. In addition, creative problem solving is also a process which encourages entrepreneurial thinking. Decision implementation is a process to produce the product into market and make economic profit. In reality, economic development is all about problem solving for each other, creativity and problem solving is a prerequisite for economic development (Bekker, 2011). To sum up, creativity and problem solving accelerate economic development through innovation and entrepreneurship, like a thread to string these three elements together and have a close relation with each other.

In conclusion, this essay begins with definitions of key notions of entrepreneurship, innovation and creativity with an example accordingly for better understanding. Entrepreneurship is special characteristic of entrepreneurs who can create new values efficiently in an innovative way. Innovation refers to the act of inventing something new (Chen, 2005) and can be divided into sustaining innovation and disruptive innovation.

Creativity is a process of generation unconventional ideas. Then, the relationship of entrepreneurship, innovation and economic development is organized in detail with each other. Entrepreneurship is the major force of economic growth and meanwhile as medium that link innovation and economic development. Innovation plays a specific role in entrepreneurship. There is no doubt that innovation also has an important influence on economic booming.

In the final part, the significant function of creativity and problem solving is illustrated. Group project as a living example is addressed to emphasize the crucial function in this relationship. Creativity, as a unique ability of entrepreneurship, precedes innovation implementation and is the major force of economic growth as well as problem solving. These elements have become increasing important in business world in recent years and more research should be made to prove the importance in other specific ways.

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