created that contribute some
THE ROLE OF ENTREPRENEURSHIP
IN ECONOMIC DEVELOPMENT
Nature and Importance of
Entrepreneurship
1. Economic activity
- Entrepreneurship is primarily an
economic activity because it
involves the creation and
operation of an enterprise.
- It is basically concerned with the
production and distribution of
goods and services and optimally
utilizes the resource towards use.
2. Entrepreneurship involves innovation
- Entrepreneurship is an innovative
function as it involves doing
things in a new and better way.
- Entrepreneurship involves
changing, revolutionizing,
transforming, and introducing
new approaches.
3. Goal-oriented activity
- Entrepreneurs seek to earn
profits through satisfaction of the
needs of consumers.
- Entrepreneurship emphasizes
results, achievements, and
targets achieved.
4. Value creation
- Through entrepreneurship, new
products, services, transactions,
approaches, resources,
technologies, and markets are
value to a community or
marketplace.
5. A function of risk bearing
- Risk is an inherent and
inseparable element of
entrepreneurship.
- An entrepreneur works under
uncertainties and assumes the
uncertainty of the future.
- In pursuit of profit, there is a
possibility of loss also.
6. Entrepreneurship implies growth
- Entrepreneurship is about
growing a business and pursuing
opportunities as they arise.
- It is not about standing still or
being content to stay in one
market or with one product.
Economic Development and Growth
Concept and Theories
Early Theories
- They focused on understanding
economic growth and attempted
to find the general determinants
of growth that could be applied to
any instances under
consideration.
Development Theories
- Attempts to explain the conditions
that are necessary for
development to occur, and weigh
up the relative importance of
particular conditions.
Early Theories
a) Mercantilism
- It was popular at the start of the
industrial revolution.
- It argued that a country could be
made better off by seeking to
accumulate gold and increasing
exports.
- Precious metals such as gold and
silver, were deemed
indispensable to a nation’s
wealth.
b) Classical Growth Theory
- It was developed by (mostly
British) economists during the
industrial revolution.
- Two important theorists include
Adam Smith and David Ricardo.
- It explains economic growth as a
result of capital accumulation and
the reinvestment of profits
derived from specialization, the
division of labor, and the pursuit
of comparative advantage.
The Classical Economists
Adam Smith (1723-1790)
● 18th century Scottish economist,
philosopher, and author
● He is considered the father of
modern economics
● He advocated for laissez-faire
policies
● He was most famous for his 1776
book, “The Wealth of Nations.”
● He wrote that the division of labor
among workers into more
specialized tasks was the driver
of growth in the transition to an
industrial, capitalist economy.
David Ricardo (1772-1723)
● David Ricardo was a classical
economist who developed
several key theories that remain
influential in economics.
● He is best known for his theories
of comparative advantage,
economic rents, and the labor
theory of value and his 1817
book, “Principles of Political
Economy and Taxation.”
Classical Economists’ Emphasis on
Classical Growth Theory
Laissez-faire Economic Theory
- Laissez-faire economic theory is
an economic philosophy of
free-market capitalism that
opposes government
intervention.
- The phrase “laissez-faire” comes
from French and means “leave us
alone” or “let do.”
Capital Accumulation
- Capital accumulation refers to an
increase in assets from
investments of profits and is one
of the building blocks of a
capitalist economy.
 - It means to grow wealth can
include appreciation, rent, capital
gains, and interest.
Profits
- Profit describes the financial
benefit when revenue generated
from a business activity exceeds
the expenses, costs, and taxes
involved in sustaining the activity
in question.
- It has been recognized at least by
Adam Smith that profits are the
driving force in a capitalist
economy.
Decline in Profits
- When profit tends to reach a
certain height, there is a
tendency that profits will decline.
Stationary State
- A stationary state is a condition of
economic stagnation whereby a
society, having reached the
physical limits of economic
growth, would simply reproduce
wealth by replacing worn-out
goods, maintaining capital stocks,
and carefully husbanding
nonrenewable resources.
c) Neoclassical Growth Theory
- Neoclassical growth theory is an
economic theory that outlines
how a steady economic growth
rate results form a combination of
three driving forces:
1. Labor
2. Capital
3. Technology
- It was first introduced by Robert
Solow and Trevor Swan in 1956.
Development Theories
d) New Growth Theory
- It was developed by Paul Romer
and Robert Lucas.
- This theory presumes the desire
and wants of the populace will
drive ongoing productivity and
economic growth
- This theory emphasizes the
importance of entrepreneurship,
knowledge, innovation, and
technology, rejecting the popular
view that economic growth is
determined by uncontrollable
forces (exogenous growth.)
e) Unified Growth Theory
- It was founded and developed by
Oded Galor.
- By unified, it means that this
theory explains the economic
history including Malthusian
growth, modern growth, and the
transition from one to the other.
- This theory aims to give a better
understanding and the driving
forces that have conducted to
escape the Malthusian trap and
allow a transition to a state of
sustained growth.
Three Regimes Contributions of Entrepreneurship

STAGNATION: MALTHUSIAN REGIME Entrepreneurs have big contributions in

society and the economy aside from
- This regime describes a world in having the goal to gain profit from their
a low level equilibrium in terms of businesses.
income per capita.
- Technological progress takes 1. Wealth creation and sharing
place, but very slowly.
- The growth of total output - By establishing the business
resulting from technological entity, entrepreneurs invest their
progress is matched by own resources and attract capital
population growth that per capita from investors, lenders, and the
income fluctuates around a low public.
stable level, with no significant - This mobilizes public wealth and
progress in allows people to benefit from the
success of entrepreneurship and
TAKE OFF: POST-MALTHUSIAN growing business.
REGIME
2. Create jobs
- This regime marks the initial
take-off from the Malthusian - Entrepreneurs are by nature and
regime. definition job creators. When you
- This is an era when technological become an entrepreneur, there is
progress accelerates and one less job seeker in the
consequently we observe the economy.
beginning of economic growth in
3. Balance regional development
per capita income terms even
though population growth is still - Entrepreneurship setting up new
positively linked to rising business and industrial units help
incomes. kids with regional development
by being located in less
SUSTAINED GROWTH: MODERN
developed areas.
GROWTH REGIME
- The growth of industries and
- This regime is triggered by a rise businesses in these areas might
in the demand for human capital lead to infrastructure
and a demographic transition. development.
- This is the era of rapid
technological progress, sustained
economic growth and rising per
capita incomes.
4. Gross National Product and Per 7. Community Development
Capita Income
- Community development requires
- As entrepreneurs are always on infrastructure for education and
the lookout for opportunities, they training, healthcare and other
encourage effective resource public services.
mobilization of capital and skill, - If there are educational
and bring in new products and institutions, technical training
services and develop markets for schools and internships
growth and economy. opportunities, that will help build
- In this way, entrepreneurship will the pool of educated and skilled
help in the increase of Gross workers.
National Income and Per Capita
Income.

5. Standard of living ENTREPRENEURSHIP AND

GOVERNMENT
- Increase in the standard of living
of people in a community is yet The Role of Government in
another key of economic Entrepreneurial Development
development.
● Strong economies encourage
- Entrepreneurs create businesses
entrepreneurs. Governments
not just to create jobs, but also in
need to put in place policies that
developing and adopting
will foster entrepreneurial
innovations for the improvement
activities.
in the quality of lives of their
● Government policies could be
employees, customers and other
passive or active.
stakeholders in the community.
ACTIVE POLICIES like tax
6. Exports
incentives could be of help to
- Any growing businesses or some specific businesses.
enterprises will eventually want to
PASSIVE POLICIES help in
get started with exports and
creating a conducive environment
expand their business to foreign
that is friendly enough for
markets.
entrepreneurs with no regard to a
- This is an important ingredient of
specific business type.
economic development since it
provides access to bigger
markets, and leads to currency
inflows and access to the latest
cutting technologies.
THE MOST SUCCESSFUL
STRATEGIES GOVERNMENTS USE
TO ENCOURAGE ENTREPRENEURS:
1. Easy access to capital
- An entrepreneur is someone who
puts his money at risk to make
money.
- For the government to encourage
entrepreneurs, they must put in
place policies that will reduce the
risk common in entrepreneurship.
2. Celebrate and push forward small
business
- Many governments foster the
growth of entrepreneurship by
promoting existing entrepreneurs
to encourage others to start small
businesses.
- The government could also offer
an “Entrepreneur of the Year”
award to promising
entrepreneurs.
3. Conductive tax and regulatory
environment
- Every country’s tax code is one of
the best tools a government can
use to promote growth of small
businesses.
- For an economy to be conducive
for entrepreneurs, the
government needs to do things
such as:
a. Reduce the corporate tax
rate
b. Offer tax incentives for
investments in training and
education
c. Offer tax deductions for
investments
4. Protect Intellectual Property Rights
- Governments that want to
encourage entrepreneurship will
have to make laws that protect
the innovations of entrepreneurs.
- Policies that protect copyrights,
trademarks and patents will build
a very conducive environment for
entrepreneurs to flourish.
Government and Assistance Program
There are a variety of
government-backed loans and grants
available for businesses needing
financial assistance. Most of these
financial supports are for Micro, Small
and Medium Enterprises (MSMEs):
MICRO
● Asset is 3 million below
● Employees 9 or less
SMALL
● Asset is 3 to 25 million
● Employees 9 to 99
MEDIUM
● Asset is 15 to 100 million
● Employees 100 to 199
LARGE ● Social security and
healthcare benefits
● Asset is 100 million above ● Priority for a special credit
● Employees 200 above window
● Assistance programs and
GOVERNMENT PROGRAMS FOR
training
MSMEs IN THE PHILIPPINES:
d) Kapatid Mentor Me
a) Small and Medium Enterprise
Roving Academy - It provides MSMEs free
education and training and then
- DTI has the Small and Medium
assists them by linking them to
Enterprise Roving Academy
bigger companies.
(SMERA), a continuous learning
program for the development of e) Go Lokal!
MSMEs in the Philippines.
- Is a market access platform for
b) Pondo sa Pagbabago at Pag-asenso MSMEs introduced by the
(P3) Department of Trade and Industry
in collaboration with select retail
- One big problem for new MSME
partners for brand management
is quick access to capital, but the
and market acceleration realized
government solves this with the
through the Go Lokal! Concept
Pondo sa Pagbabago at
Store.
Pag-asenso (P3) program.
- MSME owners can borrow from Government Programs and
P5,000 up to P200,000. Entrepreneurs

Types of Government Programs:

c) Republic Act. 9178 a. Micro Financing Programs

- Also called the Barangay Micro b. Small and Medium Enterprise
Business Enterprises (BMBEs) Financing Program
Act of 2012.

BENEFITS:

● Exemption of coverage
from the minimum wage
law
● Income tax exemption
MICRO FINANCING PROGRAMS ● To support government efforts to
alleviate property by empowering
1. Foundation for a Sustainable Society the marginalized sector towards
Inc. (FSSI) economic growth.
● To expand the bank’s outreach to
Program Title: Microfinance
the poor who do not have access
Eco-Enterprise Program (MEEP)
to the formal financial system.
Objective:
4. Opportunity Microfinance Bank
● To facilitate the entry and
Program Title: Individual Micro
effective participation of the
Business Loans
marginalized poor and micro
enterprise. Objective:
● To contribute to the financial
sustainability of FSSI through ● To help enterprising individuals
investing and developing improve their business through
proactive products for access to additional working
microfinance institutions. capital.

2. GSIS Family Bank (GFB) 5. Philippine Enterprise Development

Foundation (PEDF)
Program Title: GSIS Family Bank
Microfinance Lending Program Program Title: Balikatan sa Kaunlaran
(Partnership for Progress)
Objective:
Objective:
● To introduce an alternative credit
system for the urban and rural in ● To provide opportunities for the
order to ensure them access to Filipino families particularly
credit. women to achieve self-reliance
● To reduce dependency on through self-help, training,
grants/dole-outs given by some mentoring, and provision of
private and government sustainable financial services
agencies. including collateral-free loans.

3. Land Bank of the Philippines (LBP) SMALL AND MEDIUM ENTERPRISE

FINANCING PROGRAMS
Program Title: Microfinance Program
1. Asiatrust Development Bank
Objective:
Program Title: Bank Carry Loan
Objective:
● To bridge the gap of payables
and receivables of small and
medium enterprises.
2. Department of Science and
Technology (DOST)
Program Title: Small Enterprises
Technology-Upgrading Program
(SET-UP)
Objective:
● To improve viability of small and
medium enterprises by providing
financial assistance in the form of
cash advances from DOST.
● To facilitate technology adoption
and improve the productivity and
competitiveness of SMEs all over
the country.
3. Development Bank of the Philippines
(DBP)
Program Title: Credit Line for Micro,
Small and Medium Enterprises
(CLMSME)
Objective:
● To provide assistance to sectors
considered to be the backbone of
the economy — the micro, small
and medium enterprises.
4. Foundation for Sustainable Society
Inc. (FSSI)
Program Title: Coconut Business
Objective:
● To develop and deliver financial
and technical services that will
help consolidate the coco coir
sub-sector and make coco
coir-based enterprises more
viable and globally competitive.
5. Land Bank of the Philippines (LBP)
Program Title: Easy Pondong
Pang-asenso (EPPA)
Objective:
● To provide financing to small
businessmen to set-up, sustain,
expand or improve their business
with easier collateral
requirements and simpler
documentation procedures.
6. Philippine Business for Social
Progress (PBSP)
Program Title: Small and Medium
Enterprise Credit (SMEC) Procedure
Objective:
● To provide loans to SMEs
through Intermediary Financial
Institutions (IFIs) such as Thrift
Banks as conduit for lending.
● To provide business support to
IFIs and enhance their lending
capabilities to improve SMEs
competitiveness.
7. Quedan Corporation (Quedancor)

Program Title: Urban and Rural Poor

Program

Objective:

● To provide for agri-fishery,

food-related projects, and other
livelihood projects of urban and
rural poor.