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Advantages and Disadvantages of Entrepreneurship

Entrepreneurship refers to the process of starting and managing a business venture in order to create value and achieve financial success. Entrepreneurs take on the risks of business ownership and are responsible for developing new products or services, identifying and reaching customers, managing employees, and handling all aspects of the business.

This article explores the advantages and disadvantages of entrepreneurship and why someone would want to become an entrepreneur.

What is entrepreneurship?

Entrepreneurship refers to the process of starting and running a new business venture. It involves taking on the risks and responsibilities of business ownership, such as developing a business plan, securing funding, managing cash flow, hiring employees, and marketing products or services. Entrepreneurs often bring innovative ideas and solutions to the marketplace, and are motivated by a desire to create something new or solve a problem in a unique way.

Entrepreneurship can take many different forms, from starting a small business, such as a private limited company, opening a franchise and becoming a franchisee, to launching a new product or service within an established business (as an employee). It requires a combination of creativity, passion, innovative ideas and business acumen, as well as the ability to adapt to changing market conditions and navigate the challenges of the business world.

Why would someone want to become an entrepreneur?

There are many reasons why someone might want to become an entrepreneur. For some, entrepreneurship offers the opportunity to pursue a passion or bring a new idea to life. Others are motivated by the potential financial rewards of business ownership, such as the ability to earn a higher income or build wealth over time. Still others are drawn to the independence and autonomy that comes with being their own boss, as well as the flexibility to set their own schedule and work from anywhere.

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Entrepreneurship can also offer a sense of personal fulfillment and growth. By taking on the challenges and responsibilities of business ownership, individuals can develop leadership skills, gain valuable experience in a variety of areas, and build confidence in their abilities. Many entrepreneurs find that the journey of building a business, and becoming a small business owner, is as rewarding as the end result, and that the lessons they learn along the way can be applied to other areas of their lives.

In addition to these personal motivations, entrepreneurship can also have a positive impact on society as a whole. By bringing new products and services to market, entrepreneurs can create jobs, stimulate economic growth, and contribute to the overall well-being of their communities. Many entrepreneurs are driven by a desire to make a difference in the world, and see business ownership as a way to do so.

Overall, entrepreneurship offers a wide range of potential benefits and rewards for those who are willing to take on the challenges and risks of business ownership. Whether motivated by passion, financial gain, or a desire for personal growth, individuals who choose to become entrepreneurs have the opportunity to create something new and make a lasting impact on the world around them.

It should be noted that starting your own business does not come without it's pros and cons, which we'll discuss in the next section.

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And if you're interested in pursuing entrepreneurship further, here at Nexford University , why not consider our excellent selection of BBA , MBA and MS degrees , including our BBA in Entrepreneurship and our MS in Entrepreneurship .

What are the advantages and disadvantages of entrepreneurship?

Entrepreneurship, and creating a startup can offer many benefits, but it also comes with significant challenges, risks and drawbacks.

Let's take a closer look at the advantages and disadvantages of entrepreneurship.

Advantages of entrepreneurship - Advantages of being an entrepreneur

Below are some of the key advantages of being an entrepreneur in 2024:

Financial rewards : One of the primary benefits of entrepreneurship is the potential for financial success. Entrepreneurs have the ability to create their own income streams and build a successful business that can generate significant profits.

Independence : Entrepreneurship offers the opportunity to be your own boss and work on your own terms. This freedom and flexibility can be incredibly appealing to individuals who are tired of the constraints of traditional employment.

Personal growth : Starting and running a business can be a significant personal growth opportunity. Entrepreneurs must develop leadership skills, problem-solving abilities, and the ability to adapt to changing circumstances.

Creativity : Entrepreneurs have the ability to pursue innovative ideas and create new products or services that can make a significant impact in the marketplace.

Job satisfaction : One of the key benefits of becoming an entrepreneur is the fact that you're the boss, and ultimately can decide exactly what you do, your working hours and other factors. You may also feel a highest sense of purpose and fulfillment working on your own business.

Disadvantages of entrepreneurship - Disadvantages of being an entrepreneur

Below are some of the key disadvantages of being an entrepreneur in 2024:

Risk : Starting a new business involves a significant amount of risk, in terms of both personal and financial risk. There is no guarantee of success, and entrepreneurs may face significant financial losses if their business venture fails. Entrepreneurs have to take risks, and knowing which risks to take relies on the experience, skills and knowledge of the entrepreneur.

Long hours : Starting and running a business requires a significant time commitment. Entrepreneurs often work long hours and may have to sacrifice their personal time in order to make their business venture successful, we refer to this as a poor work-life balance.

Cash flow : Cash flow can be a significant challenge for entrepreneurs, especially in the initial stages of starting a new business. It may take time for a business to generate consistent revenue streams, and entrepreneurs may need to rely on personal savings or loans to fund their business venture.

Adaptability : Entrepreneurship requires a good level of adaptability and proactiveness, since the business owner will need to create a business idea, business model and growth forecast. All of this then needs to be executed, despite the many challenges that will be faced along the way. Usually someone with a business administration degree has an advantage here, due to their skillset.

Stress : Although entrepreneurs have the freedom to work when they want, they are 100% responsible on the success of their business, and this ultimately causes stress. It is the role of an entrepreneur to deal with this stress, and find wats to negate it's impact. After-all, this is one of the largest disadvantages associated with entrepreneurship, as it can negatively affect a person's health. 

Importance of entrepreneurship for the economy

Entrepreneurship plays a crucial role in the economy for several reasons:

Job Creation : Entrepreneurs create new businesses, which in turn generate new jobs. This not only provides income for the entrepreneur but also for those they employ. This is particularly important in times of economic downturn or high unemployment.

Innovation : Entrepreneurs often bring new ideas, products, and services to the market. This innovation can lead to increased productivity and economic growth.

Competition : By entering the market with new products or services, entrepreneurs can challenge existing firms to become more competitive. This can lead to increased efficiency and productivity within the market.

Wealth Creation and Income Generation : Entrepreneurship contributes to the creation of wealth and increases national income. Successful entrepreneurs often become high-income earners who pay substantial taxes, contributing to national revenue.

Social Change : Entrepreneurs can contribute to social change by developing products or services that reduce people's dependence on outdated technologies. They can also improve the standard of living by creating affordable, safe, and valuable products and services.

Economic Independence : Entrepreneurship can lead to economic independence for both the country and the entrepreneur. It reduces a nation's dependence on imported goods and services and promotes self-reliance. Entrepreneurs also gain control over their financial future.

Resource Utilization : Entrepreneurship leads to the effective usage of a country's resources. As the number of entrepreneurs in a country increases, it becomes one of the most effective ways to use the resources of the country to the maximum.

Creation of New Markets : Entrepreneurs can create new markets, especially in response to changing trends and demands. This can lead to the development of new industries and sectors within the economy.

However, it's important to note that the impact of entrepreneurship can vary depending on the level of economic development of a country. In highly developed economies, entrepreneurs can accelerate growth, while in less-developed ones they may have less of a positive effect.

Entrepreneurship offers many potential benefits, but if one does decide to become an entrepreneur, you've got to realize that it comes with significant challenges and risks.

Starting and running a business requires hard work, dedication, and a willingness to take on the responsibilities of business ownership. From the initial stage, business owners must make key decisions which will either lead to success of failure of the business.

However, for individuals who are willing to take on these challenges, entrepreneurship can offer a path to financial success, personal growth, and creative fulfillment.

What are the major advantages of entrepreneurship? 

The major advantages of entrepreneurship include the potential for financial success, independence, personal growth, and the ability to pursue innovative ideas.

What are the major disadvantages of entrepreneurship?

The major disadvantages of entrepreneurship include risk, long hours, and cash flow challenges. It must be emphasised that risk is a disadvantage that can be minimised, with the help of a good business plan.

Who is an entrepreneur?

An entrepreneur is an individual who starts and manages a new business venture in order to create value and achieve financial success.

Is entrepreneurship a good idea?

Entrepreneurship can be a good idea for individuals who are willing to take on the challenges and risks associated with starting and running a business. It offers the opportunity to pursue a passion, achieve financial success, and experience personal growth.

What are some tips for aspiring entrepreneurs?

Some tips for aspiring entrepreneurs include developing a solid business plan, conducting market research, seeking out mentors and advisors, and focusing on building a strong brand and customer base.

Can entrepreneurship lead to business success?

Yes, entrepreneurship can lead to business success if the entrepreneur is willing to put in the hard work and dedication required to build a successful business. However, success is never guaranteed and there are always risks involved with starting a new business venture.

What are some examples of successful entrepreneurs? 

There are many examples of successful entrepreneurs, including Steve Jobs (co-founder of Apple), Bill Gates (co-founder of Microsoft), and Richard Branson (founder of Virgin Group).

What are some common business models for entrepreneurial ventures? 

Some common business models for entrepreneurial ventures include e-commerce, software as a service (SaaS), franchising, and brick-and-mortar retail.

How can entrepreneurs overcome the challenges of starting and running a business? 

Entrepreneurs can overcome the challenges of starting and running a business by seeking out support from mentors and advisors, developing a solid business plan, conducting thorough market research, and staying focused on building a strong brand and customer base.

What are some of the major advantages and disadvantages of small business ownership? 

Some of the major advantages of small business ownership include the ability to be your own boss, flexibility, and potential financial rewards. Some of the major disadvantages include risk, long hours, and cash flow challenges.

What are some of the competitive advantages of entrepreneurship? 

Some of the competitive advantages of entrepreneurship include the ability to pursue innovative ideas, adapt quickly to changing market conditions, and build strong relationships with customers.

What are some of the legal and regulatory requirements of starting a new business? 

Some of the legal and regulatory requirements of starting a new business may include obtaining business licenses and permits, registering with government agencies, and complying with tax laws and regulations.

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Home / Blog

Importance of Entrepreneurship: Types, Benefits, and Styles

February 12, 2021 

Economies are powered by innovation. Much of that innovation derives from forward-thinking individuals who possess the drive, skills, and background to turn a business vision into reality. The importance of entrepreneurs extends beyond the effect those individuals have on their own companies, however. They impact their broader communities, and, in some cases, even the world.

Entrepreneurs have played a pivotal role in the growth of the U.S. economy since the 19th century. They spur industry transformations, create entirely new markets, and help to build resilient communities. Investopedia describes four ways entrepreneurs benefit society:

• Economic growth : The success of the products and services created and sold by entrepreneurs cascades to other businesses and markets.
• Wealth generation : Entrepreneurs frequently target new markets and tap audiences outside the focus of established firms. This creates new sources of revenue and profits.
• Social change : The innovative goods and services entrepreneurs offer reduce dependence on outdated processes and technologies. One example is the way smartphones have affected how businesses communicate with customers, employees, and partners.
• Community development : Entrepreneurs foster a sense of community among people with common goals and interests, whether in a single neighborhood or across continents. Their products and services contribute to the communities’ social and economic well-being.

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The companies that entrepreneurs found tend to mirror their founders’ personalities. Entrepreneurs come from every economic and social background. To prepare for the challenges of translating innovation into rewarding business ventures, entrepreneurs rely on the training and experience they receive from programs such as the  Master of Arts in Management and Leadership  degree.

Successful entrepreneurs make their dreams and the dreams of others come true. They are able to match their personality, skills, and creativity with customer needs and market opportunities. This guide explains the importance of entrepreneurship, presents the various types and styles of entrepreneurship, and describes the skills that are most essential for reaching your entrepreneurial goals.

Types of Entrepreneurship

Most people think of an entrepreneur as someone with dreams of becoming a titan of industry. While many would-be entrepreneurs have lofty goals, most hope only to create a successful business, whether that success spans the globe or reaches no farther than their local community. Types of entrepreneurship range from hometown storefront businesses to technological innovations that can change the world.

These snapshot profiles of various entrepreneur types demonstrate the range of opportunities available to people who dream of starting their own business.

Small-Business Entrepreneurs

The U.S. Small Business Administration (SBA) reports that small businesses generate 44% of all business activity in the country. Small-business entrepreneurs differ from other small-business owners in their company’s legal status: Entrepreneurs generally incorporate their businesses, while owners operate as sole proprietors, partnerships, or other nonincorporated entities.

Small-business entrepreneurs take greater risks than the typical small-business owner, and they tend to rely on a broader set of skills that encompass high-level thinking, analytical reasoning, and complex interpersonal communication.

Investor Entrepreneurs

The roles of investors and entrepreneurs are typically seen as complementary but distinct: Entrepreneurs seek investors to bankroll their new companies. However, some entrepreneurs focus solely on providing financial backing to new business entities. Investor entrepreneurs may start their careers in one of the two roles and segue into a hybrid of both to tap the strengths of each.

For example, entrepreneurs may feel the need to continually tweak their operations, which can prevent business processes from being firmly established. By taking an investor role and purchasing an ownership share in a business, entrepreneurs are likely to address business opportunities more strategically to capitalize on short-term performance as well as long-term goals.

Technology Entrepreneurs

As new technologies permeate industries of all types, it could be said that all entrepreneurs are technology entrepreneurs in some regard. However, over the past 40 years the image of technology entrepreneurs has been dominated by billionaires such as Bill Gates, Jeff Bezos, and Mark Zuckerberg. What distinguishes this type of entrepreneur is their practical application of scientific innovations to solve business problems.

Technology entrepreneurs are characterized by their passion and unshakeable belief in the inherent value of the products or services they create. Becoming a tech entrepreneur typically entails working long hours and making financial sacrifices in the short term for the prospects of long-term gain. Tech entrepreneurs must also possess the ability to sell their ideas, persevere through hard times, and make others feel as enthusiastic about their ideas as they do.

Internal Entrepreneurs

Internal entrepreneurs, or “intrapreneurs,” apply the principles of entrepreneurship to projects within an existing company or organization. One important distinction between entrepreneurs and intrapreneurs is the latter’s lack of personal investment, which reduces the impact of potential failure on any individual.

Intrapreneurs tend to be self-motivated, proactive, and innovative employees who create an entrepreneurial spirit within their team. When companies give employees the freedom to experiment and grow within an organization, they can benefit from the success of their employees’ internal projects. However, firms that fail to personally recognize the work of intrapreneurs risk seeing them leave to become true independent entrepreneurs.

Online Entrepreneurs

Internet-based businesses offer many advantages to entrepreneurs, including low startup costs and the ability to establish an online presence quickly to take advantage of the fast pace of changing markets. However, the low barrier to entry can be a dangerous illusion for online entrepreneurs who fail to realize the hard work and perseverance required to achieve their business goals.

Online enterprises require the same time and effort commitment as other forms of entrepreneurship, and they are subject to their own challenges, many related to technology. For example, an online business will likely rely on partnerships with many different service providers, an outage at any of which could knock the business offline.

Entrepreneurship Styles

Just as no two companies are identical, each entrepreneurial endeavor is as unique as the person behind it. Entrepreneurship styles are as varied as the ideas that spur entrepreneurs to action. One key for entrepreneurial success is to create a company whose strengths match the prominent characteristics of its founder.

Matching Entrepreneurship Approach to Personality

An entrepreneur’s personality, background, and experience influence their approach to starting a business. These are among the most common entrepreneurship styles:

• Innovators  have the potential to transform entire industries with novel ideas. Inventor Thomas Edison was the prototype for the modern innovative entrepreneur. These entrepreneurs possess extensive knowledge of their industry, including its customers’ needs. They also know how to develop and market their innovative products.
• Managers  are often considered the antithesis of entrepreneurs, but management skills are paramount in bringing a great idea to fruition as a commercial product or service. Manager entrepreneurs understand the importance of choosing and nurturing a good team of workers, and ensuring that they have the tools and resources to succeed.
• Opportunists  identify an important business or technical problem, devise a winning solution to the problem, and plot a course to bring that solution to market in the form of a commercial product. Opportunity entrepreneurs tend to have a business background rather than a technical one, so they may focus too much on short-term goals and lose sight of the larger picture.
• Revolutionaries  are in many ways the antithesis of manager and opportunity entrepreneurs because they typically have technical backgrounds and may show disdain for established business practices. While revolutionary entrepreneurs such as Apple founder Steve Jobs leave a legacy that is both broad and deep, they often need the help of nontechnical business people to realize their world-changing vision.

Entrepreneurs Whose Businesses Match Their Personalities

Just as Steve Jobs’ larger-than-life personality was the perfect fit for his dream of making computers “for the rest of us,” as Apple’s marketing slogan proclaimed, other important entrepreneurs succeed by applying their unique, inimitable style to the task of devising brand-new solutions to real-world problems.

• John D. Rockefeller  was “the richest man in history,” according to Investopedia, after founding Standard Oil in the late 19th century. Rockefeller’s fortune was due in large part to his focus on running the company as efficiently as possible by creating vertical and horizontal integrations for its operations. However, Rockefeller’s ruthless quest for efficiency bordered on unethical business practices. The social backlash to the Standard Oil monopoly ultimately led to the company’s breakup.
• Walt Disney  is famous as a pioneering animator and entertainment mogul, but his greatest innovation may have been in recognizing the potential of merchandising his creations in the form of toys, clothing, and other items. The Disney Company remains one of the largest and most successful entertainment enterprises in the world.
• Jeff Bezos  founded Amazon out of a garage in Seattle in the 1990s. Less than 25 years later, the company is one of the most valuable in the world, and Bezos is a billionaire many times over. Since his school days, Bezos has had a vision that extends beyond our planet, but he also has a practical side that realized the potential of the internet long before the rest of the world did. As Amazon achieved record-breaking growth early this century, Bezos simultaneously invested in a variety of endeavors outside online retail, including the commercial space project Blue Origin.

Entrepreneurs Arise from Diverse Backgrounds

Any field can serve as a springboard for a successful new business enterprise. Entrepreneurs arise from a range of educational, technical, and business experiences that include management, technology, sales and marketing, and scientific research. In addition to an abiding passion to see their innovations realized, entrepreneurs share certain characteristics:

• They are independent thinkers.
• They are optimistic and confident about their chances for success.
• They are creative problem solvers.
• They are tenacious, visionary, and focused.
• They are more likely to act than to wait, and they attack challenges rather than avoid them.

Entrepreneurship Skills

Growing a business requires a diverse set of skills, but the one trait that ties them all together is leadership. Entrepreneurs transform an idea into a product or service that has value to customers. Each step in the process from creating the business plan to achieving profitability calls for a range of organizational and interpersonal skills, all of which depend on leadership.

Important entrepreneurship skills run the gamut from understanding the risks versus rewards of the business venture, to having a plan in place for responding as circumstances change. These are the capabilities that entrepreneurs need to make their businesses thrive:

• Leadership : Entrepreneurs demonstrate their zeal for the enterprise in all of their interactions with investors, employees, and outside parties. They are confident in themselves and in the business, and they are decisive yet adaptable. They listen to and respect the opinions of others, and are always taking advantage of opportunities to study and learn.
• Interpersonal communication : Entrepreneurs understand that the lines of communication in an organization must run both ways. Communication is particularly important to entrepreneurs because it makes all their other skills more effective. Communication skills are used to close sales, boost employee morale, resolve conflicts, and negotiate contracts.
• Organizational behavior : Technology is a vital part of any new business venture, but the ability to manage people will ultimately determine a company’s success. People management takes many forms, but the key is to match the organizational approach with the characteristics of the business and its employees.
• Business strategy : The importance of having a clear business focus and being optimistic and driven to achieve the company’s goals is balanced by the need to be adaptable and acknowledge when industries, markets, and customer preferences change. Entrepreneurs are decisive and passionate, but they are also ready and willing to make changes when necessary to keep the company on a path forward.
• Collaboration and project management : Entrepreneurs understand the importance of being a good team member as well as serving as a team leader. They establish relationships with managers, investors, partners, and stakeholders as peers who all have important roles to play rather than as a hierarchy.

Benefits of Entrepreneurship

The benefits of entrepreneurship extend beyond the businesses they establish. Entrepreneurs improve the lives of individuals and communities, as well as the overall economy. Entrepreneurs have been instrumental in spurring social change and improving the way people live and work. They help raise the standard of living for everyone by creating jobs and making products safer, less expensive, and more functional.

• Entrepreneurs ’ rewards for taking on the risks entailed in transforming an idea into a business include the earnings their investment generates, as well as the ability to set their own schedule. However, entrepreneurs also gain the satisfaction of seeing their idea transformed into a thriving enterprise, and of knowing their skills and leadership helped to make it happen.
• Communities  reap the benefit of entrepreneurship because businesses help to foster innovation, promote economic development, and create jobs. A successful company is likely to expand, which generates taxes, jobs, and other benefits for the area. Thriving businesses tend to attract other ventures in the same or related fields, and they often invest in community projects and support local charities.
• Entrepreneurs play an important role in growing and sustaining the  U.S. economy . The technologies pioneered by entrepreneurs have created entire industries, including smartphones, wireless products, online retail, social media, and streaming entertainment.

Despite the many benefits of entrepreneurship, it has inherent risks. Lack of appropriate government oversight can result in unfair labor practices, corruption, and criminal activity. Also, new business ventures have a high rate of failure: According to data from the U.S. Bureau of Labor Statistics (BLS) cited by Fundera, 20% of small businesses fail in the first year, 50% fail within five years, and 70% fail within 10 years of opening. The benefits of entrepreneurship are realized only after much preparation, planning, and hard work.

An Education Geared to the Needs of Entrepreneurs

Entrepreneurs need the right foundation in business and management. A program such as Maryville University’s  online Master of Arts in Management and Leadership  can offer the crucial training and skills innovators need to succeed. Courses such as Interpersonal Management Skills, Enterprise Planning and Control, Leadership, and Organizational Behavior and Development prepare tomorrow’s important entrepreneurs for the challenges they will face as they pursue their career goals.

Discover more about how the Master of Arts in Management and Leadership program helps people planning a career in business gain the entrepreneurial skills they’ll need.

Recommended Reading

Exploring Entrepreneurship: Starting and Operating a Small Business

Four Ways a Business Degree Can Prepare Entrepreneurs for Economic Volatility

Ethical Leadership in Business: Why It Matters

The Balance Careers, “Important Skills Entrepreneurs Need with Examples”

The Balance Small Business, “9 Essential Qualities of Entrepreneurial Leadership ”

The Balance Small Business, “What Is an Entrepreneur?”

Business News Daily, “Entrepreneur or Small Business Owner: Which One Are You?”

Entrepreneur, “The Hard Truth You Need to Know Before Becoming an Online Entrepreneur”

Entrepreneur, “This Tool-cum-Skill Is a Must if You Are Turning Entrepreneur This Year”

Entrepreneur, “The True Failure Rate of Small Businesses”

Entrepreneur, “Why Entrepreneurs Need to Be Good Managers and Great Leaders”

Fundera, “What Percentage of Small Businesses Fail (and Other Need-to-Know Stats)”

Influencive, “How to Transition from an Entrepreneur to an Investor, According to Jeremy Harbour”

Investopedia, “How Jeff Bezos Became the World’s Richest Man”

Investopedia, “The 10 Greatest Entrepreneurs”

Investopedia, “What Is Intrapreneurship?”

Investopedia, “Why Entrepreneurship Is Important to the Economy”

U.S. Small Business Administration, “Small Businesses Generate 44 Percent of U.S. Economic Activity”

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So You Want to Be an Entrepreneur?

• Emily Heyward

One founder’s advice on what you should know before you quit your day job.

Starting a business is not easy, and scaling it is even harder. You may think you’re sitting on a completely original idea, but chances are the same cultural forces that led you to your business plan are also influencing someone else. That doesn’t mean you should give up, or that you should rush to market before you’re ready. It’s not about who’s first, it’s about who does it best, and best these days is the business that delivers the most value to the consumer. Consumers have more power and choice than ever before, and they’re going to choose and stick with the companies who are clearly on their side. How will you make their lives easier, more pleasant, more meaningful? How will you go out of your way for them at every turn? When considering your competitive advantage, start with the needs of the people you’re ultimately there to serve. If you have a genuine connection to your idea, and you’re solving a real problem in a way that adds more value to people’s lives, you’re well on your way.

When I graduated from college in 2001, I didn’t have a single friend whose plan was to start his or her own business. Med school, law school, finance, consulting: these were the coveted jobs, the clear paths laid out before us. I took a job in advertising, which was seen as much more rebellious than the reality. I worked in advertising for a few years, and learned an incredible amount about how brands get built and communicated. But I grew restless and bored, tasked with coming up with new campaigns for old and broken products that lacked relevance, unable to influence the products themselves. During that time, I was lucky to have an amazing boss who explained a simple principle that fundamentally altered my path. What she told me was that stress is not about how much you have on your plate; it’s about how much control you have over the outcomes. Suddenly I realized why every Sunday night I was overcome with a feeling of dread. It wasn’t because I had too much going on at work. It was because I had too little power to effect change.

• EH Emily Heyward is the author of Obsessed: Building a Brand People Love from Day One (Portfolio; June 9, 2020). She is the co-founder and chief brand officer at Red Antler, a full-service brand company based in Brooklyn. Emily was named among the Most Important Entrepreneurs of the Decade by Inc.  magazine, and has also been recognized as a Top Female Founder by Inc. and one of Entrepreneur’s Most Powerful Women of 2019.

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What Is Entrepreneurship?

• Entrepreneurs & Economic Growth
• "Necessity" Entrepreneurs vs. "Opportunity" Entrepreneurs
• Where Entrepreneurship Aids Growth—and Where It Doesn't
• Entrepreneurs & Social Progress
• Entrepreneurship FAQs

The Bottom Line

• Business Leaders
• Entrepreneurs

Why Entrepreneurship Is Important to the Economy

Entrepreneurship can promote economic growth, even if its benefits are sometimes overhyped

Diane Costagliola is a researcher, librarian, instructor, and writer who has published articles on personal finance, home buying, and foreclosure.

Entrepreneurship is often cited as a major engine of economic growth, particularly in the United States. But the actual picture is more complicated. Here's what leading scholars have to say about the importance of entrepreneurship around the world.

Key Takeaways

• Entrepreneurship can fuel economic growth under the right conditions and when people become entrepreneurs for the right reasons.
• It is not, however, a magic bullet for growth, particularly in less-developed economies.
• Social entrepreneurship can attempt to deliver both profits and societal good, though often with mixed results.

Entrepreneurship is a general, blanket term related to starting a business. But its precise definition has long been a matter of debate among scholars and policymakers.

"Despite widespread interest in the topic and a broad recognition of its importance to the economy, there remains a lack of consensus about how to specifically define entrepreneurship," the nonpartisan Center for American Entrepreneurship notes. "'Entrepreneur' is an English derivation of the French word 'entreprendre' (to undertake), leaving wide latitude for interpretation and application."

Howard Stevenson, known as "the godfather of entrepreneurship studies" at Harvard Business School (HBS), has defined it as the "pursuit of opportunity beyond resources controlled." As fellow HBS professor Tom Eisenmann elaborates, "'beyond resources controlled' implies resource constraints. At a new venture's outset, its founders control only their own human, social, and financial capital. Many entrepreneurs bootstrap: they keep expenditures to a bare minimum while investing only their own time and, as necessary, their personal funds."

The Stanford Center for Professional Development at Stanford University offers a somewhat simpler definition: "At its most basic level, entrepreneurship refers to an individual or a small group of partners who strike out on an original path to create a new business. An aspiring entrepreneur actively seeks a particular business venture and it is the entrepreneur who assumes the greatest amount of risk associated with the project. As such, this person also stands to benefit most if the project is a success."

How Entrepreneurs Fuel Economic Growth

Innovation and entrepreneurship undeniably contribute to economic growth, making them a particular area of interest for economists and policymakers worldwide. However, some scholars say that the growth created by entrepreneurship can be exaggerated.

For one thing, growth from entrepreneurial activity doesn't occur evenly across an economy. Studies of economic growth have pointed toward an apparent paradox in which the growth in productivity overall in the U.S. has been only modest in recent years, despite the pervasiveness of entrepreneurship, innovation, and innovation ideology. According to studies by the National Bureau of Economic Research (NBER) , this is because innovation affects industries very differently, having a large impact in some sectors of the economy but little impact in others.  

While generally positive, the link between entrepreneurship and improving societal welfare is also complicated, influenced by factors such as regional population, entrepreneurship density, and the specific industry in which the entrepreneurial activity is taking place, according to the scholarly literature.

What's more, some studies have suggested that economic growth may be correlated to an increase in overall inequality in certain circumstances. Scholars say that in the U.S. income inequality and economic growth have been linked since the 1970s.

"Necessity" Entrepreneurs vs. "Opportunity" Entrepreneurs

One interesting way to look at entrepreneurship is to divide it into two broad categories. "Necessity entrepreneurship" is the launching of a business by people who lack other opportunities. "Opportunity entrepreneurship" is the creation of an enterprise in response to a new or previously overlooked opportunity.

In countries where entrepreneurial activity is largely in the form of necessity entrepreneurship, it can be a signal that the economy isn't creating enough jobs or wage opportunities for workers. It may be connected to slow economic growth or lagging economic development overall, scholars say.

Necessity entrepreneurship can be a side hustle for someone who is trying to make ends meet or a way to meet their non-economic needs and goals.

Where Entrepreneurship Aids Growth—and Where It Doesn't

The level of economic development of a country can also affect whether entrepreneurship will lead to greater economic growth there.

In the 20th century, driven by the decline in manufacturing and the shift toward service businesses, industrialized market economies in later stages of economic development—like the United States and parts of western Europe, such as Germany and Sweden—were able to benefit greatly from entrepreneurship, the economist and management professor Zoltan Acs has noted. Starting in the 1970s, those countries saw a rise in entrepreneurship, which reversed the previous trend in their economies, when workers favored high-paying jobs with big companies over self-employment.

Other factors may be relevant as well. Scholars point out that the U.S., in particular, has benefited from a large and competitive domestic market, a highly developed financial system, and a high level of long-term government support for basic science.

For developing countries, on the other hand, entrepreneurship isn't a panacea for growth. A study of 74 economies across a six-year period concluded that less developed countries should not base their economic policy on "generic entrepreneurship" if they desire to stimulate economic growth. The authors argue that focusing on programs that develop human capital, take advantage of economies of scale, and entice foreign capital are more effective in spurring economic growth.

Italy may provide an additional example of a country where high levels of self-employment have proved to be inefficient for economic development. Research has shown that Italy has experienced large negative impacts on the growth of its economy because of self-employment.

Social Entrepreneurship and Economic Progress

With concerns over sustainability, inequality, and other issues gaining attention, some entrepreneurs have become more interested in the social consequences of their economic activity. In particular, the rise of social awareness among certain entrepreneurs has led to many attempts to use the principles of entrepreneurship to create a more just and sustainable world.

Social entrepreneurship , which has been around as a concept since the 1950s, has become increasingly common. It describes a category of entrepreneurship that can, in some cases, attempt to both make a profit and solve societal problems. It differs from the typical nonprofit model when it pursues both of those ends simultaneously.

From the perspective of social justice, which prizes a world with equal rights and access to opportunity, the reliance of an economic system on entrepreneurship presents both upsides and downsides.

Theoretically, socially conscious entrepreneurship offers the opportunity to generate solutions for marginalized communities, and the motivations for social entrepreneurs around the world tend to come from a genuine desire to fix serious problems. However, it's important to note that sometimes attempts to solve the underlying structural problems lead to murky results. The dual motives of profit and social good can sometimes clash, as the example of microfinancing in India and Bangladesh revealed.

Once popular in international circles, microfinancing is now seen as having a more limited impact on eradicating poverty and sometimes even increasing indebtedness.  The practice may have also led to a series of suicides among farmers in Andhra Pradesh in the 2000s.

What Is the Difference Between a Small Business Owner and an Entrepreneur?

In general, small businesses focus on existing products and services, while entrepreneurs look to introduce new ones. However, small business owners can be entrepreneurial in their own way and entrepreneurs may end up as small business owners if their idea catches on.

What Is an Intrapreneur?

An intrapreneur is someone who works within a larger company, typically one they don't own, to foster entrepreneurial ideas and innovation. Intrapreneurship can be another source of economic growth, and intrapreneurs often have access to greater resources than independent entrepreneurs without a company behind them.

What Is a Social Entrepreneur?

A social entrepreneur is someone who launches an innovative enterprise to address a larger social issue. They may or may not also hope to turn a profit from their efforts.

The relationship between entrepreneurship and economic growth is complicated and can vary from one country to another based on their level of economic development. In highly developed economies, entrepreneurs can accelerate growth, while in less-developed ones they may have less of a positive effect.

Some entrepreneurial efforts, often referred to as social entrepreneurship, hold out the promise for new innovations that will address problems such as climate change and structural racism, possibly while making a profit at the same time.

Center for American Entrepreneurship. " What Is Entrepreneurship? "

Harvard Business Review. " Entrepreneurship: A Working Definition ."

Stanford Center for Professional Development. " What Is Entrepreneurship? "

Duke Sanford Center for International Development. " Top 5 Takeaways on the Importance of Entrepreneurship ."

Academy of Entrepreneurship Journal. " The Economic Impact of Entrepreneurship: Setting Realistic Expectations ."

National Bureau of Economic Research. " The Role of Innovation and Entrepreneurship in Economic Growth ."

Management Review Quarterly. " The Impact of Entrepreneurship on Economic, Social and Environmental Welfare and Its Determinants: A Systematic Review. "

AgEconSearch. " Impact of Economic Growth on Income Inequality: A Regional Perspective ."

Innovations: Technology, Governance, Globalization, Massachusetts Institute of Technology Press. " How Is Entrepreneurship Good for Economic Growth? "

Center for MIT Entrepreneurship. " Necessity Vs. Innovation-Based Entrepreneurs ."

European Research on Management and Business Economics. " Entrepreneurial Activity and Economic Growth. A Multi-Country Analysis ."

European Parliament. " The Social and Employment Situation in Italy ," Pages 10–12.

Deloitte. " The Rise of the Social Enterprise ."

Journal of Management, Southern Management Association. " Social Entrepreneurship Research: Past Achievements and Future Promises ."

The Tavistock Institute. " Microfinance and the Business of Poverty Reduction: Critical Perspectives From Rural Bangladesh ."

Economic and Political Weekly. " Microfinance: Lessons From a Crisis ."

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Essay Samples on Entrepreneurship

What is entrepreneurship in your own words.

What is entrepreneurship in your own words? To me, entrepreneurship is the art of turning imagination into reality, the courage to chart unexplored territories, and the commitment to leave a lasting mark on the world. It's a journey of boundless creativity, relentless innovation, and unwavering...

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What is Entrepreneurship: Unveiling the Essence

What is entrepreneurship? This seemingly straightforward question encapsulates a world of innovation, risk-taking, and enterprise. Entrepreneurship is not merely a business concept; it's a mindset, a journey, and a force that drives economic growth and societal progress. In this essay, we delve into the multifaceted...

Social Entrepreneurship: Harnessing Innovation

Social entrepreneurship is a transformative approach that merges business principles with social consciousness to address pressing societal challenges. This unique form of entrepreneurship goes beyond profit-seeking and focuses on generating innovative solutions that create positive change in communities. In this essay, we explore the concept...

Evolution of Entrepreneurship: Economic Progress

Evolution of entrepreneurship is a fascinating journey that mirrors the changes in society, economy, and technology throughout history. From humble beginnings as small-scale trade to the modern era of startups, innovation hubs, and global business networks, entrepreneurship has continuously adapted to the dynamic landscape. This...

Importance of Entrepreneurship: Economic Growth and Societal Transformation

Importance of entrepreneurship transcends its role as a mere business activity; it stands as a driving force behind innovation, economic growth, and societal transformation. Entrepreneurship fosters the creation of new products, services, and industries, while also generating employment opportunities and catalyzing economic development. This essay...

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Entrepreneurship as a Career: Navigating the Path of Innovation

Entrepreneurship as a career is a compelling journey that offers individuals the opportunity to create their own path, shape their destiny, and contribute to the economy through innovation. While the road to entrepreneurship is laden with challenges and uncertainties, it is also marked by the...

Corporate Entrepreneurship: Fostering Innovation

Corporate entrepreneurship represents a strategic approach that empowers established organizations to embrace innovation, take calculated risks, and explore new opportunities. In an ever-evolving business landscape, the concept of corporate entrepreneurship has gained prominence as companies seek to maintain their competitive edge and adapt to changing...

Challenges Faced by Entrepreneurs: Innovation and Success

Challenges faced by entrepreneurs are a testament to the intricate journey of turning visionary ideas into tangible realities. While entrepreneurship is often associated with innovation and opportunity, it's also characterized by a multitude of hurdles and obstacles that test an entrepreneur's resilience and determination. In...

300 Words About Entrepreneurship: Navigating Innovation and Opportunity

About entrepreneurship is a dynamic journey that involves the pursuit of innovation, creation, and the realization of opportunities. It is the process of identifying gaps in the market, envisioning solutions, and taking calculated risks to bring new products, services, or ventures to life. Entrepreneurs are...

Best topics on Entrepreneurship

1. What is Entrepreneurship in Your Own Words

2. What is Entrepreneurship: Unveiling the Essence

3. Social Entrepreneurship: Harnessing Innovation

4. Evolution of Entrepreneurship: Economic Progress

5. Importance of Entrepreneurship: Economic Growth and Societal Transformation

6. Entrepreneurship as a Career: Navigating the Path of Innovation

7. Corporate Entrepreneurship: Fostering Innovation

8. Challenges Faced by Entrepreneurs: Innovation and Success

9. 300 Words About Entrepreneurship: Navigating Innovation and Opportunity

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18 Advantages and Disadvantages of Entrepreneurship

Starting your own business as an entrepreneur can be one of the most rewarding experiences that life offers. It is also important to keep a certain level of perspective about this process. Although a rare few can experience immediate success with their efforts, it is more accurate to describe entrepreneurship as the planting of an acorn.

You must first place the acorn in the ground to get the journey started. You will need to invest time and money into the resources which are necessary to help that seed grow. There are no guarantees that you will get results, but nothing will come your way if you don’t pay attention to this tree that you want to grow one day.

If the tree begins to rise from the soil, then all of the hard work and patience you put into that process will feel like it was worthwhile.

Some acorns refuse to turn into trees. Squirrels might dig up your idea and steal it for themselves. Most entrepreneurs find themselves trying something new within 1-3 years because their business doesn’t turn into a successful enterprise.

The advantages and disadvantages of entrepreneurship attempt to balance the risk of a new idea with the rewards that happen if it takes off. “Starting a company extracts so much energy and conviction that not having a clear-cut goal and meaningful mission can hamper your success,” said Sami Inkinen, co-founder of Virta Health.

Do you have what it takes to become an entrepreneur?

List of the Advantages of Entrepreneurship

1. Being an entrepreneur means you get to be your own boss. When you decide to follow the life of an entrepreneur, then you are giving yourself permission to pursue what you are passionate about in life. You get to be the person who is making every decision, pulling all of the strings as you push forward with this opportunity. You get to use your strengths and skills to make a real difference in your life and those in your community.

Some people stay in a bad job because they need to “pay their bills.” Some might “work for the weekend” as a way to justify their decision to stay in a place where they are miserable. It isn’t always easy to be an entrepreneur, and you might not ever get rich, but there is a better chance that you will be happy.

2. Entrepreneurs get to discover who they really are. Most entrepreneurs break out of the 9-5 daily grind because they become dissatisfied with office politics, the barriers to promotion, or an uninspiring workplace environment. You might be encountering all three of those issues right now. When you decide to follow a path toward your own business, then the only obstacles that get in the way are the ones that you allow to remain.

“Don’t assume that borrowing lots of money can make your startup fly,” advises Barnaby Lashbrooke, founder of Time Etc. “There are many things to the business other than investors, and it’s possible to succeed with your startup without breaking the bank.

3. Entrepreneurs get to dictate their own schedule (to a certain extent). If you like the idea of putting in 40 hours per week and then coming home to relax nights, weekends, and holidays, then being an entrepreneur is probably not the best choice to make. You are going to be working 20-40 extra hours each week if your goal is to be successful with your startup venture. “If you’re starting something on your own,” said Sallie Krawcheck, co-founder of Ellevest, “you better have a passion for it, because this is hard work.”

Where you gain an advantage is in the flexibility of your time commitments. You are not stuck trying to manage a 9-5 schedule. If you need to take a day off, then you get to do so. Want to take a vacation? Then make the time to go. You don’t report through a chain of command any more.

4. Every day is different when you’re working as an entrepreneur. Embracing entrepreneurship means that you are going to have a schedule that is different every day. There are no consistent routines in this world. Some experts would even say that if you experience two similar days in a row, then you should re-evaluate your business model. You have to stay hungry for every opportunity that comes your way. If you become complacent for any reason, then someone will take your place. This advantage can ensure your creativity.

“Do not focus on the numbers,” advises Cassey Ho, who is the founder of Blogilates. “Focus on doing what you do best. It’s about building a community who wants to visit your site every day because you create value and offer expertise.”

5. There are fewer restrictions to worry about in the world of entrepreneurship. When you begin to work for yourself instead of for someone else, then the independence that this experience creates is something that cannot be duplicated by any other professional opportunity. You are in total control of your destiny. You might earn more than some entrepreneurs, but less than others. Some people might work more than you, but others could be working less.

There are numerous structural options to consider too. You might choose to work from a home office. A shared office space might be a better solution for you to use. Entrepreneurs can work from a coffee shop, at the beach, or while taking a road trip with their family. “If we tried to think of a good idea, we wouldn’t have been able to think of a good idea,” said Brian Chesky, co-founder of Airbnb. “You just have to find the solution for a problem in your own life.”

6. You can still earn what you are worth as an entrepreneur in your early days. Many entrepreneurs like to bootstrap their ideas to help get them off of the ground. You might struggle to find investors for your idea, so any profits you earn go back into the company instead of your checking account. The reality of entrepreneurship is that a rational salary is always possible if you are willing to structure your finances around your basic needs. Your discipline in selling will lead you closer to the Promised Land.

“Selling is not a pushy, winner-takes all, macho act,” advises Subroto Bagchi, co-founder of Mindtree. “It is an empathy-led, process-driven, knowledge-intensive discipline. Because, in the end, people buy from people.”

7. Entrepreneurs can choose to pursue any idea they want. The only thing that limits your pursuit of a dream as an entrepreneur is your imagination. If you think there is an idea that you can follow, then go after it with everything that you have. Build that app which you believe could change the world. Tell your story by writing an autobiography. Sell your artwork online, even if everyone tells you that artists don’t succeed. Follow your instincts, and there is an excellent chance that a good idea will seem like a great one to all of your future customers.

“In the age of transparency, honesty, and generosity, even in the form of an apology, generate goodwill,” advises Alexander Asseily, founder of Jawbone. It’s okay to be embarrassed by the first iteration of your product. Entrepreneurship succeeds more often if you’re willing to launch early instead of waiting until it is too late.

8. You get to be more involved with your community as an entrepreneur. The flexibility in your schedule that you can have as an entrepreneur is an excellent way to become more involved in your community in a variety of ways. You can serve at your local food back, coach youth sports, or find other ways to tie your volunteer work to your efforts with a new business. These opportunities will help you to network with others, promote your personality and brand, and build your business while you are helping others at the same time.

“My advice is to focus on the importance of forging a long-term relationship, whether with colleagues, partners, or customers,” said Sheila Lirio Marcelo, founder of Care.com. “It is often easy to get caught up in short-term decisions.”

9. Entrepreneurs get to be the innovators of their industry. Entrepreneurship succeeds when you get to put an idea out to your targeted demographics before anyone else. Bringing something first to the market is an exciting adventure. It may not always be a story that ends in wealth, but it is one of the absolute joys of this process. You get to be on the forefront of problem solving for your community. You’re turning your passions into revenues. It doesn’t take a lot of money to get started either. As long as you have the drive to be an entrepreneur, then you can innovate.

“If you tune it so that you have zero chance of failure, then you usually have zero chance of success,” advises Reid Hoffman, co-founder of LinkedIn. “The key is to look at ways for when you get to your failure checkpoint, you know to stop.”

10. Every day is exciting in the world of entrepreneurship. No one can say it enough times. You are going to be working your butt off when you decide to become an entrepreneur. There will be 18 hour days that you’ll need to endure. The work will be harder and longer than anything you can remember doing in your life. Holidays are just another working day. Want to have a weekend free? Then you’ll be working from 3am to 11am so that you can spend the afternoon with your family.

The amount of excitement that you will experience during these long days is fuel that keeps you going. You never really know what to expect when you wake up in the morning. There are new problems to solve, customers to meet, and ideas to pursue.

List of the Disadvantages of Entrepreneurship

1. The world of entrepreneurship is going to dominate your life. Your productivity as an entrepreneurs is what will direct you toward success or guarantee your failure. There are no off days when you embrace this journey. You might have had fun playing Farm Town or Mafia Wars back in the day on Facebook, but that option disappears here. If you’re not working, then you’re not earning. There are no paid lunches, no weekends off, no holiday pay, and no benefits. It is you vs. the rest of the world.

You don’t need to be engaged 24/7 to have a chance at success in the world of entrepreneurship, but you will be working a lot more often. “My day starts with a yoga class, then I typically work from 8am to 5pm,” said Antonia Townsend, founder of Enclosed. “Then I take a break to play with my pup outdoors. Somewhere between 6-10pm, I usually put in another hour or two.”

2. Entrepreneurs do not have a guaranteed paycheck waiting for them. If you want to earn money as an entrepreneur, then it is up to you to make that happen. You don’t have a guaranteed paycheck waiting for you after every pay period like you would with a traditional employer. It is up to you to chase your money. That means you need to send out the invoices, find the people who don’t want to pay, and avoid the clients who think you should work for free because they can give you “exposure.”

Don’t fall for the trap of “free marketing.” Exposure doesn’t pay for your groceries. It won’t make your car payment. If you went to your mortgage company or landlord and said, “I have exposure to pay you this month,” what do you think would happen? Find your perfect client, then find more of them to start bringing in some profits.

3. The world of entrepreneurship requires leaders if you want to be successful. There are entire books written by industry experts on this specific disadvantage of entrepreneurship. You can boil down all of their advice to one basic observation: if you don’t have an internal drive that can push you forward every day and inspire others to follow your lead, then this isn’t the project for you to pursue.

Procrastination cannot live in this world. You must staple your pants to the chair, knuckle down on your work, and stay there until it gets done. “Some days you’re smiling and thinking you’re going to make this thing rock,” advises Hamdi Ulukaya, founder and Chief Executive Officer of Chobani. “Then the next day, a pipe breaks, and your costs look too high. You have to learn to keep your eyes on an ultimate goal. If you lose sight of it, then you need to get out.”

4. You must be patient with the process when you become an entrepreneur. People can claim anything on the Internet and pretend that it is true. It won’t take you long to find bloggers claiming to make millions of dollars each year. How about those affiliate marketers who earn $60,000 per month? If it seems too good to be true, then it probably is when you’re looking at the potential return you could earn one day.

Most entrepreneurs fail to earn $10,000 in their first year of operations. Earning nothing is more common than earning more than $50,000 in your first twelve months. If you can stay in business for five years, then an average salary is in the $75,000 range if you’re working at things full time.

5. Stress levels are high in the world of entrepreneurship. Meditation is the most common habit that people have when they pursue an idea as an entrepreneur. They make time for it because the stress levels are so high when you are scratching and clawing for a successful opportunity with everything that you’ve got. 1 in 3 people say that they worry all of the time about something when they’re working for themselves instead of someone else. Loneliness is a problem for a similar number of people in this field.

Exercise is another great option to consider if you need to limit this disadvantage. If you burn calories every day with a workout routine, then you are less likely to take out your irritation on others or yourself. Then try to greet each new day with an extra helping of gratitude.

6. There are taxation consequences to consider as an entrepreneur. If you decide to become an entrepreneur in the United States, then there is a good chance that you’ll start as a sole proprietor. It’s the cheapest and easiest way to begin a business when you’re bootstrapping. That means you’ll be paying the employer share of Medicaid and Social Security withholdings out of your earnings because you serve as both. Although there are new pass-through rules for the 2019 tax season that can lower your income tax responsibilities, most entrepreneurs find a higher tax bill waiting for them if their idea is profitable.

“Most first-time business owners forget to make quarterly estimated tax payments the first time they have self-employment income,” says Mike Piper, a CPA who writes about investing on sites like Oblivious Investor. “They’re used to have taxes withheld from their paychecks.”

7. Funding can be a significant problem for entrepreneurs. There are investors who might be willing to take a chance on your idea, but that is not a guarantee. You might find angels or venture capitalists who want to take a risk, although the odds of that are usually slim-to-none. You might attempt to do some crowdfunding, even though you might not get any money from this work.

Most entrepreneurs are self-funded. If you don’t have any money in the bank right now, then start small. “Start as small as you can,” advises Gretta Rose van Riel, founder of Hey Influencers. “When I started SkinnyMe Tea, I had $24 in the bank and I was entirely self-funded.”

8. Entrepreneurs still have a boss that they must manage. You might be free of the 9-5 grind and the workplace politics when you start working as an entrepreneur, but that doesn’t mean you get rid of the boss. Your investors are going to expect regular reports about your progress – especially if you have angels or VCs in the picture. Your customers will give your consistent feedback about the quality of your goods and services that you will need to hear. If there are returns, service issues, or problems with your supply chain, then you get to manage those issues too. You still have more freedom than the traditional employment relationship, but you must continue operating within a specific set of guidelines.

Verdict on the Advantages and Disadvantages of Entrepreneurship

Entrepreneurship can put you on a rollercoaster of emotions every day. It is an exciting world where your imagination is free to run wild. Every idea becomes a potential opportunity to find success. For many people who decide to embrace this lifestyle, the promise of more independence is worth the extra financial risks that are possible.

You will be working more hours than ever before if you decide to take on this journey. There will be days when you need to drag yourself out of bed. Your family might wonder what happened to you since you’re always in the office doing something. It is a challenging lifestyle to balance when you have family responsibilities too.

The advantages and disadvantages of entrepreneurship create the potential for you to live the life that you want. Even if it takes several years to start earning the profits you want, it can be a very happy life waiting for you.

18 Major Advantages and Disadvantages of Entrepreneurship

An entrepreneur is defined as an individual who operates and organizes a business, or multiple opportunities, while taking on a more significant financial risk than normal to do so.

The issue that many of these people face, along with the average leader in today’s society, is also this: they don’t really have a “job.” There is a lot of media hype that you’ll find today about all the good stuff that happens when you decide to pursue what you are passionate about. You can fine memes everywhere today about how evil corporations are, or how awesome it is to be working on your own.

That has driven many people into a world where they are coming up with new definitions of being unemployed instead of creating an earning opportunity for themselves.

“It’s okay that I’m not earning money,” someone might say, “because I’m building my brand and platform presence.”

Being an entrepreneur is not a job, but you can turn it into one when you take smart risks, make real investments, and put sweat equity into your future. That’s not easy to do.

That’s why reviewing these critical pros and cons of being an entrepreneur must happen before you go down this rabbit hole for good.

List of the Pros of Entrepreneurship

1. You have an opportunity to grow in your career. When you decide to take the plunge to become an entrepreneur, then you are giving yourself the ability to fulfill your aspirations, goals, and passions as an individual. You get to be the boss of your environment. There is no one who interferes with your decisions, the place you wish to work, or how you want to approach situations. Your life gets to be your own, which means you take the risks that fall into your comfort zone. If there is a market demand for your services, then you have the chance to make some money.

2. There is a lot more independence as an entrepreneur. Because you get to be your own boss when working as an entrepreneur, there is no one there to peer over your shoulder to tell you what to do. You are free to make decisions in your professional or personal life based on the needs you have in that moment. You can decide to work whatever hours you want, whenever you wish to work them, and even change your office location if you wish. This independence extends to any employees you have as you all work together to earn money.

3. You can have flexible working hours as an entrepreneur. An entrepreneur will choose the working hours that suit their needs the best. Although Gary Vaynerchuk suggests that you must put in 18-hour days when you first get started, some entrepreneurs can get by with an 80-hour per week hustle. Some opportunities may only require a handful of hours at first because there isn’t much work coming in to complete. If you have access to resources and outsourcing, it is possible to find a place where you can sit back and start working as little as possible each day.

4. There is an immediate ability to earn as an entrepreneur. Although you are taking more risks with your income as an entrepreneur, there are more opportunities to build wealth when you pursue this lifestyle as well. Employees are constrained by a specific salary or hourly rate. It doesn’t matter if they work harder or not – they will still be paid the same. If you are an entrepreneur, then you own the company outright (even if you’re working as a sole proprietor). That means you should be receiving the largest share of the profits which start coming into the company. You can earn as much as you want based on the demand that is available for your products or services.

5. You have opportunities to change or explore. You are not stuck in a job that you hate when you are working as an entrepreneur. If you see a new opportunity that looks intriguing and there is the potential to earn more money, then you can start to pursue it. Even if that means re-training yourself or your employees or expanding your business, you hold the power to shift gears whenever you wish. That means you are always the creator of your destiny. If you want to start exploring a different horizon, then push forward and do it.

6. It is a chance to discover what makes you tick. Instead of worrying about what is going on at the office, the world of the entrepreneur looks at the quality of the idea that you’re pursuing. It is an opportunity to embrace your creative center, following wherever your imagination might lead. Instead of trying to build a reputation that can earn you a promotion one day, the focus of your daily tasks is to improve your life by helping others to improve their own in some way. The only obstacles that get in your way are the ones that you allow to be there. If you’ve always wondered what kind of person you were, spending time as an entrepreneur will show you everything you’ve ever wanted to know.

7. It is an opportunity to earn based on your full potential. There are no limitations to your income when you’re working as an entrepreneur. You will always earn based on the quality of your idea, your ability to market it, and how effective your selling techniques happen to be. The only caps on your wealth are the ones that you allow to be there in the first place. If you feel like you’re not earning enough to make ends meet, then even a side hustle as an entrepreneur can help you to find the supplemental cash that you need – and it could be enough to help you get free of the 9-5 grind every day to do your own thing.

8. You have new opportunities to get involved in your community. Because you can set your own hours as an entrepreneur, there can be more free time to help you be active in beneficial ways in your community. Your new business can become part of the chamber of commerce if you wish. There are places for you to volunteer, like being a Little League coach or a leader in the Girl Scouts of Scouts BSA. You will find food banks, non-profits, and others in your community who could use a helping hand. One of the best reasons to become an entrepreneur is that you can make a real difference in the lives of others, which allows you to do the same for your own.

9. It is an opportunity to get your ideas out quickly. If you are working for a traditional employer, then it can be a challenge to get your ideas out first to the market. There are multiple layers of hierarchy that you must navigate in the traditional employment environment. You may not even receive full credit for the results that your creativity generates when you earn a regular paycheck. When you operate as an entrepreneur, this issue goes away completely. You can start solving problems for people proactively, which gives you an opportunity to create products or services that can make you some extra cash.

List of the Cons of Entrepreneurship

1. The leave benefits of an entrepreneur are not the same. When you work as an employee under a traditional employment contract, then there are leave benefits and holidays for which you may qualify. These are specific times of the year where you can enjoy being paid while not actually being at work. You might receive discretionary sick time to use if you feel under the weather or need a mental health day. Vacation times are paid as well, often taken when you want to get away. Holidays are paid-time off. When you’re working as an entrepreneur, these options are not always available.

2. You do not have a guaranteed income as an entrepreneur. One of the biggest advantages that employees have when compared to those in the pursuit of entrepreneurism is a guaranteed paycheck. Although there is the threat of being fired or laid off, the income you receive for your work comes in on a regular schedule. That means entrepreneurs are working with lower levels of financial security for themselves and their families. The payment an employee receives often includes a range of financial benefits for their family as well, including health and life insurance.

3. There are no fixed working hours when you’re an entrepreneur. When you work in a traditional employment setting, then you are given fixed working hours with a guarantee of payment. It is a contract outlined between you and the company that offers compensation at a specific level. If you exceed those hours, then you can earn additional wages, benefits, or opportunities in the future. Some workers receive “hours in lieu” that work like vacation time.

If you are an entrepreneur, then you are working whenever a task must be completed. There are no holidays, vacations, or sick days unless you set your work aside for them – and then it waits for your return. You’re not getting paid (unless you have passive income) unless you work. Justin Zhu, CEO of Iterable, says he works from 11am to 5pm, and then 9pm to 3am, as a way to stay productive.

4. You are the one required to do all of your updates. If you’re working as an entrepreneur, then there is an excellent chance that you are using technology to make things happen. That’s a lovely tool to use when things are up-to-date. When your firmware needs to update to a different version or the software stops function, then you stop working until the process completes itself. You could find yourself losing 2+ hours out of a day trying to fix your tech problems. Unless you budget time for this on a regular basis, there will be times when you’ll struggle to meet deadlines because something isn’t working right.

5. There are more responsibilities as an entrepreneur. When you are active in the employment world, then you are given a specific role or assignment to complete. You are only responsible to perform the tasks given to you, which are usually related to the role in which you’ve been hired. There isn’t a need to worry about the work that others are doing. You get paid for that limited scope or tunnel vision. You even receive appraisals based on how well you perform in your role which can often lead to promotions. If you’re an entrepreneur, then you’re responsible for everything all of the time without exception.

6. You must have high levels of self-discipline as an entrepreneur. Entrepreneurs succeed only when they can create standards for themselves that they adhere to when fulfilling their roles and responsibilities. This trait must extend to their direct reports as well. There must be some level of natural leadership present within the atmosphere of the opportunity under pursuit for there to be any chance of success. If you decide to slack off when there is work to be done, you have that choice – but it could also limit the amount of progress you make on an idea.

7. There are higher levels of stress as an entrepreneur. You don’t have a guaranteed income as an entrepreneur. There isn’t a boss around that can offer you advice if you’re stuck on a problem. You might not have any colleagues to rely on for support. There are plenty of people in this position who are working solo every day, mired in their home office, struggling to make ends meet. Being your own CEO, managing your marketing, legal work, and accounting leads to high levels of stress. That’s why there are some people who like the idea of following this trend, but then discover that it isn’t right for them.

8. You might need some cash to get started on a new idea. There are some business opportunities that can be started for next to nothing. If you’re a sole proprietor who offers a standard service that can be sold online, then all you need to do is create a website or join a platform, put up your listing, and then start to market yourself. If you want to start an LLC or corporation, however, then you may need to have a few thousand dollars at-the-ready to begin the investment process. Most entrepreneurs start in debt because they need to cover their start-up costs. If you can’t turn a profit, then you could lose everything when pursuing a dream.

9. There are tax implications to consider. If you earn money as an entrepreneur, then you become your own employer in the eyes of the tax laws in the United States. That means you are responsible for the employer’s share of the Social Security and Medicare withholding in addition to your own. The 2018 tax year pegged this rate at 15.3%.

These pros and cons of being an entrepreneur will either encourage you to chase after an idea or stick with the life you know. There is no in-between status with this opportunity. You are either willing to take risks or you are not. It gives you a chance to build an independent lifestyle, but it can also cause you to work more hours than you can ever remember. How you define wealth will likely determine if this is a world that is right for you.

Entrepreneurship vs. Employment — the Complete List of Pros and Cons

Published: January 12, 2023

So you have a brand-new business idea and you’re considering venturing out on your own. Before you take the leap, it’s time to take a careful look at entrepreneurship versus employment. Then, you can decide which path works best for you.

This guide is designed to share the pros and cons of both lifestyles. From there, you can make the critical decision between entrepreneurship and standard employment.

Entrepreneurship vs. Employment

Entrepreneurship: the pros and cons, employment: the pros and cons.

Entrepreneurship and employment come with two very different lifestyles. Before we dive into the differences, let’s start with definitions.

• Entrepreneurship involves establishing and running your own business or service. Your earnings will be the business’s profits.
• Employment includes hourly-rate or salary jobs. Here you complete specific tasks and services assigned by an employer.

Entrepreneurs run their businesses and take on financial responsibilities. Meanwhile, employees work for a company and get a set pay rate.

Entrepreneurs handle expenses and business decisions, while employees focus on doing their best and helping the company succeed. Unless they work in accounting, employees rarely have to deal with any of the financial aspects of the business.

Now, let’s review the pros and cons of entrepreneurship and employment.

Becoming an entrepreneur has plenty of benefits that make it an appealing choice. Still, you should understand the drawbacks before taking the plunge. Review the pros and cons below to make an informed choice.

Pro: Managing Your Company’s Profit

If you run a business, you’ll receive the profits first. Once you've covered all your expenses — including employee wages — you can save, invest, or reinvest the money.

As you make more money, you can reinvest funds to grow your business.Pro: The Potential for Wealth.

If your business takes off, you could start making six figures a year and take home more as you grow. Profits can increase even if you spend more money to grow your business.

For example, you can build up your cash, create a retirement account, and prepare for the future.

Pro: Controlling Your Schedule

Since you run the business, you can choose your schedule.

You can stack your hours at the start of the week and focus on relaxing during the latter half. You can take breaks to pick up kids, choose to work from home, or work late in the evening if you’re a night owl.

Few positions offer as much flexibility as running your own business.

Pro: More flexible retirement.

As an entrepreneur, you may have the potential to retire earlier than others. Depending on how much your business grows, you can invest heavily and prioritize a comfortable retirement.

You could even pass the torch to someone else, earn passive income, and sell the business once you want to retire.

Con: The Initial Costs

Starting a business requires capital. You have to find employees, pay for the supplies, and secure funding for your venture.

You can cover these upfront costs yourself if you have significant savings. Other entrepreneurs take out loans to cover startup costs or work with venture capital investors.

As an entrepreneur, you’re responsible for securing capital to get your business off the ground. Longer term, you’ll need to pay off loans and maintain your investor relationships.

Con: Potential Financial Difficulties

Starting a business comes with large financial risk. For example, if sales drop, you may have to pull from your own savings to cover the difference. If your business idea doesn’t work out, you may even face bankruptcy.

Remember, entrepreneurship doesn’t have to be your only stream of income. If you're weighing the financial sacrifices of starting a business, consider keeping your full-time role. You can always dabble in entrepreneurship on the side. If profits skyrocket, you can make your side project a full-time job.

Con: Additional Stress and Responsibilities.

At a larger company, you can reach out to accounting, legal, and human resources with any questions. As an entrepreneur, you’re responsible for it all. If you’re not compliance or payroll savvy, you’ll have to learn. You can also hire a consultant or software tools to help you navigate more complex processes.

Wearing so many hats comes with additional stress. Be sure you’re prepared for the emotional investment before you start a business.

Con: Dealing With Taxes

Taxes become more complicated when you run a business. Instead of receiving a form from your employer, you are responsible for calculating your expenses and sending them to your employees.

Taxes can become so complicated that business owners hire accountants to take care of the details.

Before you start a business, choose a solution to help you navigate taxes. That could be an accountant, a software solution, or making a CFO your first hire.

Con: Covering Salaries, Insurance, and Other Expenses

Taxes are just one of the many administrative tasks entrepreneurs face. Until you create an HR department, you’re completely in charge of people operations.

You have to pay your employees their salaries and offer insurance benefits. You’ll also have to ensure that all of your contracts abide by state and local laws. That may include hiring a consultant or keeping a lawyer on retainer.

These costs are necessary for your business if you want to attract the best talent. For many, this laundry list of tasks is intimidating.

If you’re looking for greater stability and consistency, standard employment may check all your boxes.

However, every role has its challenges. To paint a broader picture, we’ve gathered a list of pros and cons.

Pro: Consistent Paychecks

Whether you’re hourly or salaried, you get consistent paychecks as an employee. You don’t have to worry about the business’ performance, but you need to focus on your work.

You’ll always get your bi-weekly or bi-monthly check to keep up with your bills. You also know exactly when your next paycheck will be and how much money to expect.

Pro: Set Hours

Entrepreneurs often struggle with work-life balance. Long hours and late nights are common, especially when a business has just started.

If you appreciate more structure and consistency, many standard jobs will offer you set shifts. Along with consistent pay, you can have consistent hours for your work. This lets you learn your schedule, stick with it, and build your routine.

Today, many companies are also offering more flexible schedules. If you work from home, you can still run out for a quick errand. Or perhaps you can pick which days to work from home to avoid traffic.

If you’re looking for the benefits of standard employment with increased flexibility, you can narrow your job search to meet that need.

Pro: Enjoying Full-time Benefits

If you live in the U.S., health insurance can be expensive. Entrepreneurs are responsible for finding plans for their employees can themselves.

Meanwhile, those with full-time roles often get benefits from their employers. This may go beyond basic health insurance. Dental, life, and vision are often included. Many companies also offer 401K and other retirement plans.

Company size also affects your benefits. Employees at larger companies often pay less out-of-pocket for their insurance plans. Some employees at smaller companies have limited options or must find healthcare plans on their own.

Pro: The Potential for Promotions

Over time, you can seek opportunities for promotions. Promotions give you more responsibilities while allowing you to make more money. You can also try your hand at people management, running projects, or working with senior stakeholders.

You’ll need the experience to receive promotions, but that’s worth the chance to boost your income and prepare for the future.

Pro: Building Your Career

On top of promotions, many companies offer professional development opportunities. That may include upskilling courses, mentorship programs, or employee resource groups to help you meet other professionals.

Working at an established company can also give you a resume boost. Experience at an impressive company can help you secure future roles. Further, the connections can lead to job opportunities as your colleagues change roles.

Con: Potentially Losing Your Job

At large companies, hiring and layoff decisions are completely out of your hands. If the economy or your revenue changes, you risk losing your job. Whether you fail to perform or the company eliminates positions, you could find yourself without a job when you least expect it. Changing jobs requires updating your resume and seeking new opportunities, which can be challenging.

Con: Working Under Management

Employees always have to report to someone, usually to a manager. Even if you climb the corporate ladder, you’ll need to report to senior leaders or your executive board.

Some people may dislike the ever-present authority and find it challenging to work in a structured environment. In these cases, entrepreneurship offers more flexibility.

Con: Having Less Control

Employees have little control over businesses. A company may make a decision you don’t like, which could lead to new procedures. Unfortunately, you have to follow specific ideas, techniques, and choices even if you dislike them.

While you can express frustrations and try to encourage change, you’ll need buy-in from more senior leaders to execute your ideas.

Con: Less Work Flexibility

Even as companies switch to more flexible modes of work, you’ll still need to stay true to your schedule and tackle your responsibilities.

If you’re planning a vacation, you’ll need to have your time off approved. You’ll need to take sick days if you can’t complete your work. You may even need to find someone to cover your shift.

It depends on where you work, you may also have a rigid schedule and requirements to be in person. Here, you’re responsible for clocking in and out on time.

Which Path is Right for You?

Reviewing the pros and cons of entrepreneurship and employment can help you find your ideal career path. Be sure to consider your personality, financial situation, and business savvy before making a decision.

Remember, you can switch between entrepreneurship and typical employment. You may start your career in an office and launch your business years later. Or you may work at a startup and decide a more traditional environment is a better fit.

No matter what you choose, be sure to check in with yourself and regularly review your chosen career path.

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The impact of entrepreneurship on economic, social and environmental welfare and its determinants: a systematic review

• Open access
• Published: 04 August 2020
• Volume 71 , pages 553–584, ( 2021 )

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• Thomas Neumann   ORCID: orcid.org/0000-0002-7189-8159 1  

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This paper presents a systematic review of (a) the impact of entrepreneurship on economic, social and environmental welfare and (b) the factors determining this impact. Research over the past 25 years shows that entrepreneurship is one cause of macroeconomic development, but that the relationship between entrepreneurship and welfare is very complex. The literature emphasizes that the generally positive impact of entrepreneurship depends on a variety of associated determinants which affect the degree of this impact. This paper seeks to contribute to the literature in three ways. First, it updates and extends existing literature reviews with the recently emerged research stream on developing countries, and incorporates studies analysing not only the impact of entrepreneurship on economic growth and welfare but also on social and environmental welfare. Second, it identifies and structures the current knowledge on the determinants of this impact. And third, it provides a roadmap for future research which targets the shortcomings of the existing empirical literature on this topic. The review of 102 publications reveals that the literature generally lacks research which (a) goes beyond the common measures of economic welfare, (b) examines the long-term impact of entrepreneurship and (c) focuses on emerging and developing countries. Regarding the determinants of the impact of entrepreneurship, the results highlight the need for empirical research which addresses both already investigated determinants which require more attention (e.g. survival, internationalisation, qualifications) and those which are currently only suspected of shaping the impact of entrepreneurship (e.g. firm performance, the entrepreneur’s socio-cultural background and motivations).

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1 Introduction

Entrepreneurship and its possible impact on the economy have been studied extensively during the past two decades but the research field still continues to develop and grow. The majority of studies from a variety of scientific disciplines have found empirical evidence for a significant positive macroeconomic impact of entrepreneurship (e.g. Atems and Shand 2018 ; Audretsch and Keilbach 2004a ; Fritsch and Mueller 2004 , 2008 ). However, several empirical studies show that the macroeconomic impact of entrepreneurship can also be negative under certain conditions (e.g. Carree and Thurik 2008 ; Andersson and Noseleit 2011 ; Fritsch and Mueller 2004 , 2008 ). Potential explanations for these contradictory results are to be found in the complex relationship between entrepreneurship and economic growth. Already some of the very first empirical studies on the macroeconomic impact of entrepreneurship showed that factors such as industrial affiliation (Fritsch 1996 ), the country’s level of development and the local density of business owners (Carree et al. 2002 ) significantly determine the impact of entrepreneurship. With more entrepreneurship datasets becoming available, researchers found evidence that only a small number of new firms such as particularly innovative new firms and firms with high-growth expectations create economic value and initiate Schumpeter’s process of ‘creative destruction’ (e.g. Szerb et al. 2018 ; Valliere and Peterson 2009 ; van Oort and Bosma 2013 ; Wong et al. 2005 ). However, over the past decade, researchers have identified a multitude of other relevant determinants (e.g. survival rates of new firms, institutional and cultural settings, motivations and qualifications of the entrepreneur), thereby drawing an increasingly complex web of interrelated determinants around the macroeconomic impact of entrepreneurship. This complexity combined with the fact that the research on determinants is scattered and mostly based on separate analyses of determinants leads to a number of hitherto unidentified research opportunities. In order to detect these opportunities and to exploit them in a targeted manner, a structured overview of the current knowledge on the determinants of the macroeconomic impact of entrepreneurship is required. In this context, a structured overview is not only essential for the scientific entrepreneurship community but also for politicians all over the world who need detailed information on the impact of entrepreneurship to promote the right types of entrepreneurship in the right situations.

To ensure that this information prepared for policy makers are truly comprehensive, it is essential that state-of-the-art research considers not only economic outcomes of entrepreneurship but also its social and environmental effects. This demand for a more holistic impact analyses is based on the call of economists who have been emphasizing since the 1970’s that economic development may is a significant part of welfare, but that social and environmental dimensions need to be considered as well (Daly et al. 1994 ; Meadows et al. 1972 ; Nordhaus and Tobin 1972 ). Tietenberg and Lewis ( 2012 , p. 553) summarised the economic, social and environmental effects in a holistic welfare definition and state that a “true measure of development would increase whenever we, as a nation or as a world, were better off and decrease whenever we were worse off”. This understatement is in line with many authors who recently highlighted the importance of entrepreneurship for social and environmental welfare (e.g. Alvarez and Barney 2014 ; Dhahri and Omri 2018 ; McMullen 2011 ). Entrepreneurship research has come to see entrepreneurs as a solution for social inequality and environmental degradation rather than a possible cause of them (Gast et al. 2017 ; Munoz and Cohen 2018 ; Terán-Yépez et al. 2020 ). This scientific consent of the past 50 years clearly illustrates how important it is that econometric research on entrepreneurship incorporates research on the economic as well as on the social and environmental impact of entrepreneurship. Footnote 1

Considering that the research on the macroeconomic impacts of entrepreneurship has been gaining increasing recognition over the last two decades and across a wide range of disciplines (Urbano et al. 2019a ), literature reviews must be conducted periodically to synthesize and reflect recent progress and to stimulate future research. Several high-quality reviews have already summarized the significant amount of research on the impact of entrepreneurship on the economy. Wennekers and Thurik ( 1999 ) were the first who discussed the link between entrepreneurship and economic growth in a narrative literature analysis. With their summary of the theoretical knowledge of that time and the first framework of the entrepreneurial impact the authors laid the groundwork for the following decade of empirical research on that matter. van Praag and Versloot ( 2007 ), extended that first review by systematically reviewing and evaluating the empirical findings of 57 articles published between 1995 and 2007. More precisely, the authors evaluated the various economic contributions of entrepreneurial firms, which have been defined by the authors as either employing fewer than 100 employees, being younger than 7 years or being new entrants into the market, relative to their counterparts. van Praag and Versloot ( 2007 ) thus made the first systematic attempt to distinguish the few new firms which are of economic relevance from the majority of meaningless new firms. Fritsch ( 2013 ), in a non-systematic monograph, exhaustively surveyed and assessed the then available knowledge on how new firms particularly effect regional development over time. Within this review, the author has established the term ‘determinants’ in the field of research on the impact of entrepreneurship and developed first suggestions on which factors may determine the impact of new firms. However, the author has not provided any empirical evidence for the effect of his proposed determinants. In contrast to these three literature reviews, the three most recent reviews also incorporated the latest findings from international studies and on developing countries. However, the three latest reviews all have a narrowly defined research focus. While Block et al. ( 2017 ; systematic literature review of 102 studies published between 2000 and 2015) analysed antecedents, behaviour and consequences of innovative entrepreneurship, Bjørnskov and Foss ( 2016 ; systematic literature review of 28 studies) and Urbano et al. ( 2019a ; systematic literature review of 104 studies published between 1992 and 2016) focused on the relationship between the institutional context, entrepreneurship and economic growth. Accordingly, all the existing reviews are either (1) already outdated, (2) mostly on highly developed countries or (3) focused on specific topics. Furthermore, none of these reviews provided (4) a structured overview on the empirical knowledge on the impact of entrepreneurship on the economy or (5) included research on the social and environmental impact of entrepreneurship.

This paper addresses these five shortcomings through a comprehensive and systematic review of empirical research into the impact of entrepreneurship on economic, Footnote 2 social and environmental welfare. The methodology of the review is based on the current knowledge of systematic reviews (e.g. Fayolle and Wright 2014 ; Fisch and Block 2018 ; Jones and Gatrell 2014 ; Tranfield et al. 2003 ), on narrative synthesis (e.g. Dixon-Woods et al. 2005 ; Jones and Gatrell 2014 ; Popay et al. 2006 ) and on recent examples of best practice (e.g. Jones et al. 2011 ; Urbano et al. 2019a ; van Praag and Versloot 2007 ). Using this approach, this paper aims to contribute to the literature on the impact of entrepreneurship on welfare in three ways. First, it updates and extends the existing literature reviews. More specifically, it follows recent research recommendations (e.g. Block et al. 2017 ; Fritsch 2013 ; Urbano et al. 2019a ) by incorporating the recent empirical stream of research on the impact of entrepreneurship in developing countries and research that goes beyond measures of common economic welfare. In practical terms, this means that this review not only considers measures of economic welfare (e.g. GDP, employment rates, innovative capacity), but also for social welfare (e.g. life expectancy, literacy rates, income inequality), for environmental welfare (e.g. CO 2 emissions, water pollution, soil quality) and for indicators which incorporate all three welfare dimensions (e.g. Index of Sustainable Economic Welfare, Genuine Progress Indicator). Second, this paper, as demanded in previous reviews (Fritsch 2013 ; Urbano et al. 2019a ), aims to provide a descriptive analysis of the factors determining the entrepreneurial impact by critically assessing (a) which determinants of the entrepreneurial impact have (b) what impact on (c) which measures of economic welfare. This paper thus represents the first comprehensive attempt to summarize and structure the empirical knowledge on the determinants of the impact of entrepreneurship. Finally, to encourage future research, this paper indicates shortcomings in the empirical research not only on the impact of entrepreneurship on economic, social and environmental welfare, but also on the described and structured determinants of this impact. It concludes with suggestions for future research avenues to close these research gaps.

To achieve these objectives, this paper is structured as follows. Section  2 describes the methodological approach of the review. Sections  3.1 and 3.2 report the available empirical research into the impact of entrepreneurship on economic, social and environmental welfare. Section  3.3 summarizes the determinants of this impact and Sect.  4 presents a roadmap for future research. Section  5 discusses the limitations of this paper and provides a conclusion.

2 Methodology

In order to clarify not only the macroeconomic impact of entrepreneurship on economic welfare but also the determinants of this impact, this paper provides a broad-ranging systematic, evidence-based literature review including a narrative synthesis. According to Mulrow ( 1994 ), systematic reviews are particularly useful in identifying and evaluating a large volume of evidence published over a long period of time and have been frequently applied in recent state-of-the-art literature reviews (e.g. Li et al. 2020 ; Mochkabadi and Volkmann 2020 ; Urbano et al. 2019a ). The systematic literature review conducted in this paper employs a rather broad empirical definition of entrepreneurship which covers both the entrepreneur, who creates or discovers new businesses (Kirzner 1973 ; Schumpeter 1942 ) and the entrepreneurial firm itself. Entrepreneurship is understood here as new business activity, which includes entrepreneurs in the process of new firm creation as well as recently founded firms. Furthermore, although not necessarily associated with the formation of new firms, self-employed individuals and owner-managers are defined here as entrepreneurs as well. This general definition is consistent with the majority of empirical studies (e.g. Bosma et al. 2011 ; Fritsch and Schindele 2011 ; Mueller et al. 2008 ). The review process comprises three major steps, namely (1) data collection, (2) the selection of relevant studies and (3) data synthesis.

2.1 Data collection

As a first step, to reduce bias and maintain objectivity in all stages of the review, a review panel was set up. The panel consists of the author, a professor and two doctoral students knowledgeable in this field of research. In order to obtain the most relevant terms for the systematic search, the suggestions of Tranfield et al. ( 2003 ) were followed and a number of scoping studies based on combinations of keywords related to the topic were performed. The insights from this initial search phase were used to further develop relevant search terms resulting in the Boolean search string presented in the online appendix. The number of selected search terms was intentionally rather broad to avoid overlooking potentially valuable studies. It included the most common terms and measures of entrepreneurship and of economic, social and environmental welfare. This search string was subsequently used to scan titles, abstracts, and enclosed keywords of studies in the electronic databases EBSCO Business Source Complete, ProQuest ABI/INFORM Global and Web of Science. These databases were selected, because they allow the application of complex search strings and cover an extensive range of scientific journals from a variety of different disciplines. In order to provide a quality threshold, only peer-reviewed journal articles were scanned, since they are considered as validated knowledge (Podsakoff et al. 2005 ; Ordanini et al. 2008 ). Unpublished papers, books, book chapters, conference papers and dissertations were omitted in the initial search. Furthermore, the search was restricted to studies written in English. The main search was conducted in May 2019 and updated once in December 2019. It yielded, after the removal of duplicates, an initial data set of n = 7533 studies.

In addition to the main search, three more steps were conducted to create an exhaustive sample. First, five journals of particular relevance for the discussion were manually searched. Footnote 3 Second, meta-studies and literature reviews on related topics were screened for additional studies. Footnote 4 And finally, based on the guidelines of Wohlin ( 2014 ), an iterative back- and forward snowballing approach was conducted. The whole process of data collection and selection and its results are summarized in Fig.  1 .

Systematic process of data collection and selection

2.2 Data selection and quality assessment

The studies collected during the main search were carefully reviewed to determine whether they were suitable for the objective of this paper. Titles, abstracts and, in doubtful cases, whole studies were checked against the following set of selection criteria.

Studies must analyse the macroeconomic impact of entrepreneurship by applying at least one economic, social or environmental welfare measure on an aggregated regional, national or global level.

Studies must employ definitions of entrepreneurship as discussed in the introduction of Sect.  2 . Studies that solely analysed the impact of small firms, intrapreneurship, corporate-entrepreneurship, institutional entrepreneurship, or entrepreneurial capital were excluded.

Studies must apply adequate quantitative methods to measure the impact of entrepreneurship. Studies that only discuss this matter theoretically, that follow a qualitative approach or that do not go beyond simple correlation techniques were excluded.

Studies must analyse spatial units, as they seem to be considerably better suited to analysing the impact of entrepreneurship (Fritsch 2013 ). Studies that are based on the analysis of industry units were excluded.

Studies must analyse long-term panel data or data on an adequately aggregated level to account for demographic, political and economic events. Studies that analysed single spatial units over a short period of time were excluded.

Due to the broadness of the search string, the main search yielded many studies which solely dealt with the microeconomic performance of new firms or which analyse how the local level of development determines the number of new firms. Studies which were not related to the research questions or did not meet all five selection criteria, were manually removed. This process of selection in the main search led to a total of n = 92 studies. The three additional search steps increased this number by n = 10, resulting in a final data set of n = 102 studies, including two high-quality book chapters which present empirical results of particular relevance to the paper’s objective (namely Stam et al. 2011 ; Verheul and van Stel 2010 ). When comparing the sample size with that of related literature reviews, it appears to be appropriate. Hence, even if the selected sample is not exhaustive, it is very likely to be representative of the relevant literature.

2.3 Data analysis

Given that research in this area employs a variety of measures of entrepreneurship and of economic welfare and is methodologically diverse, it was unfeasible to perform a meta-analysis. Instead, an integrative and evidence-driven narrative synthesis based on the guidelines established by Popay et al. ( 2006 ) was chosen to aggregate, combine and summarise the diverse set of studies. Narrative synthesis is considered particularly useful when, as in this case, research area is characterised by heterogeneous methods, samples, theories, etc. (Fayolle and Wright 2014 ).

Once the final set of studies had been identified, the characteristics and study findings were extracted by carefully reading the methods and results sections. To reduce research bias, a review-specific data-extraction form was employed. The extraction-form is based on the suggestions of Tranfield et al. ( 2003 ) and Higgins and Green ( 2008 ) and contains general information, details about the analysed samples, the applied measures of entrepreneurship and economic welfare, the applied econometric techniques as well as short summaries of the relevant findings and the identified microeconomic impact factors.

3 Results of the literature review

The main results of the literature review regarding the impact of entrepreneurship on economic, social and environmental welfare and the determinants of this impact are presented in Table 5 (see online appendix). The large number of gathered studies on impact of entrepreneurship (n = 102) as well as on its determinants (n = 51) attest to the fact that this field of research has already been studied in great detail. Most of the identified studies were published in high-quality management, economics, social science and environmental science journals. Table  1 illustrates that the main part of the cross-disciplinary scientific discussion, however, took place in the Journals Small Business Economics (24%) and Regional Studies (7%). The number of empirical studies published per year has increased over the last decade, indicating the topicality of the research field and the need for an updated review of the new knowledge.

Figure  2 summarizes the statistics of the large amount of data gathered in Table 5 (see appendix) and illustrates the complexity of the research field. The left-hand-side lists the measures of entrepreneurship used in the analysed studies and shows how often they were applied. The most frequently applied measure of entrepreneurship is new firm formations either (a) per work force (labour market approach), (b) per number of existing firms (ecological approach) or (c) per capita. Another frequently applied measure of entrepreneurship is total early-stage entrepreneurial activity (TEA) based on data from the Global Entrepreneurship Monitor (Reynolds et al. 2003 ) or its subgroups: necessity-driven entrepreneurial activity (NEA), opportunity-driven entrepreneurial activity (OEA), innovative entrepreneurial activity (IEA) and high-growth expectation entrepreneurial activity (HEA). Other authors estimated regional entrepreneurship using self-employment or business ownership rates. The Kauffman Foundation Index for entrepreneurial activity is used less frequently, as it is a specific measure of entrepreneurship for US regions.

Overview of applied measures of entrepreneurship and welfare, and analysed determinants. Note : the numbers in brackets represent the numbers of associated empirical studies

Regarding the right-hand-side of Fig.  2 , it is noticeable that the majority of authors analysed the impact of entrepreneurship on economic welfare, primarily on GDP, growth and employment-related measures. Far fewer studies analysed the impact on the economic measures of national competitiveness or innovativeness, e.g. the number of patent applications. In contrast to the clear research focus on economic welfare, only five studies were found which analysed the impact of entrepreneurship on environmental or social welfare. Although many common measures of social and environmental welfare (e.g. crime rates or ecological footprint) were explicitly included in the search string (see online Appendix), no studies could be found that analyse the impact of entrepreneurship on them.

Independent of the measures of entrepreneurship and welfare used, the reviewed studies test their relationship by applying a very heterogenous set of methods. With the availability of more and more cross-sectional data covering longer and high-frequency time-series, authors started to apply new econometric approaches such as pooled and panel data regressions, fixed effect models, and subsequently, dynamic panel data models. Most authors based their analyses on rather straightforward regression techniques.

Sections  3.1 and 3.2 discuss empirical knowledge relating to the impact of entrepreneurship on economic welfare as well as on social and environmental welfare. Section  3.3 deals with the empirical evidence on the factors which determine this impact of entrepreneurship (see the lower part of Fig.  2 ).

3.1 Impact of entrepreneurship on economic welfare

The analysed literature predominantly confirms the results of previous literature reviews and gives empirical evidence that new firm formations have a generally positive effect on regional development and economic performance. The relationship holds for all tested measures of entrepreneurship and is robust across a broad range of spatial and cultural contexts.

The impact does, however, differ over time. Fritsch and Mueller ( 2004 ) studied the time-lag structure of the impact of entrepreneurship by applying an Almon lag model of different polynomial orders in their study of 326 West German regions. Their results revealed that the impact of entrepreneurship follows a typical time-sequence: an S- or wave-shaped pattern which can be structured into three phases. Phase I is defined by a positive immediate increase of employment (direct effects of new capacities). After approximately 1 year, in phase II, this positive short-term impact becomes smaller, insignificant or even negative (displacement effects and market selection). Around year five, this medium-term impact becomes positive again and reaches a peak in year eight (supply-side and spill-over effects). This positive long-term effect of entrepreneurship on employment, which defines phase III, diminishes after a period of 10 years.

Table  2 presents the findings of all reviewed studies which analysed the impact of new firm formations on employment and GDP in one, two or all three phases. It shows that the findings regarding the impact of entrepreneurship on employment are largely consistent with the wave-pattern theory. The existence of the wave-pattern could be confirmed on different regional levels for Great Britain (Mueller et al. 2008 ), for the United States (Acs and Mueller 2008 ; Henderson and Weiler 2009 ), for Portugal (Baptista et al. 2008 ; Baptista and Preto 2010 , 2011 ), for West Germany (Fritsch and Mueller 2008 ; Fritsch and Noseleit 2013a ), for the Netherlands (van Stel and Suddle 2008 ; Koster 2011 ; Delfmann and Koster 2016 ), for Sweden (Andersson and Noseleit 2011 ), for China (Rho and Gao 2012 ) for Canada (Matejovsky et al. 2014 ) as well as in several cross-country studies on OECD countries (Audretsch et al. 2015 ; Carree and Thurik 2008 ; Koellinger and Thurik 2012 ; Thurik et al. 2008 ). Furthermore, the reviewed studies reveal that this relationship not only holds for new firm formations as a measure of entrepreneurship but also for self-employment (e.g. Matejovsky et al. 2014 ; Rho and Gao 2012 ; Thurik et al. 2008 ) and business ownership (e.g. Carree and Thurik 2008 ; Henderson and Weiler 2009 ; Koellinger and Thurik 2012 ). The latter two measures of entrepreneurship, however, seem to have a less pronounced impact (Acs and Armington 2004 ; Rho and Gao 2012 ; Dvouletý 2017 ). Empirical evidence suggests a similar wave-pattern for the impact of entrepreneurship on GDP. Studies on GDP analysing all three phases confirm the positive short- and long-term peaks. However, in contrast to the results on employment, they find the medium-term impact to be less pronounced and positive (Audretsch et al. 2015 ; Carree and Thurik 2008 ; Koellinger and Thurik 2012 ; Matejovsky et al. 2014 ). The few empirical results displayed in Table  2 , which contradict the wave-pattern theory (e.g. findings of a negative short-term impact of entrepreneurship on GDP), can largely be explained by certain determining factors such as a differing impact in developing countries (see Sect.  3.3.4 ) or of necessity-driven entrepreneurship (see Sect.  3.3.9 ).

The results for other measures of economic welfare are scarce and contradictory. Ferreira et al. ( 2017 ) analysed the short-term impact of entrepreneurship on different measures of competitiveness and found that TEA and IEA positively related to competitiveness. However, they found no significant relationship between OEA and competitiveness. On the contrary, a study by Mrozewski and Kratzer ( 2017 ) found a positive relationship between OEA and competitiveness, but not between TEA and competitiveness.

The empirical results regarding the impact of entrepreneurship on innovativeness are also inconclusive. Acs and Varga ( 2005 ) and Draghici and Albulescu ( 2014 ) found that OEA has a positive impact on patent applications and innovation indices, but that TEA and NEA do not have any significant impact on them. Anokhin and Wincent ( 2012 ) found a positive impact of TEA on innovativeness but a more recent study from Albulescu and Draghici ( 2016 ) found that neither TEA nor OEA have a significant relationship to innovativeness. Similarly, Cumming et al. ( 2014 ) found new firm formations based on the labour market approach have a positive short-term impact on patent applications, but new firm formations based on the ecological approach and business ownership rates do not.

3.2 The impact of entrepreneurship on social and environmental welfare

Contrary to the well-researched impact of entrepreneurship on employment and GDP, little is known about the impact on social and environmental welfare. Three independent studies recently found empirical evidence that entrepreneurship positively affects measures of social welfare. Rupasingha and Goetz ( 2013 ) found that in the short-term self-employment reduces poverty in rural and urban U.S. counties, Atems and Shand ( 2018 ) found that in the medium-term self-employment decreases income inequality in U.S. states and, finally, Dhahri and Omri ( 2018 ) found new firm formations to increase the national modified Human Development Index (MHDI) in developing countries.

The empirical research on the impact of new firm formations on environmental welfare, however, illustrates that entrepreneurship may also come with major drawbacks. Omri ( 2017 ) as well as Dhahri and Omri ( 2018 ) and Ben Youssef et al. ( 2018 ) found that new firms significantly increase the amount of national CO 2 -emissions. According to Ben Youssef et al. ( 2018 ), this unfortunate impact on CO 2 -emissions is in fact so great that, despite the positive impact on GDP, new firms decrease Genuine Savings (also known as adjusted net saving) in African countries. They also found that the impact is more pronounced for informal new firm formations. This finding matches the results of Omri ( 2017 ), who detected the impact on CO 2 -emissions to be lower in developed countries which generally have lower rates of informal entrepreneurship (Williams and Lansky 2013 ). Furthermore, Omri ( 2017 ) discovered that the relationship between new firm formations and CO 2 -emissions is not linear but can be described as exhibiting an inverted U-shape. Thus, at an already high level of entrepreneurship, new firm formations may result in a decrease in CO 2 -emissions.

3.3 Determinants of the impact of entrepreneurship

So far, the empirical results suggest, in many cases, a clear causal macroeconomic impact of new firm formations on economic measures of welfare. However, this topic is reasonably complex, and the complexity increases further when determining factors of this impact are considered. The lower part of Fig.  2 presents an overview of the empirical knowledge on these determinants. A key finding of this review, namely that all of the found analyses of determinants focus exclusively on the economic effects of entrepreneurship, is, however, not illustrated in Fig.  2 . The review revealed that, although they are strongly interdependent, the determinants of the impact of entrepreneurship can generally be categorized into external environmental conditions, firm level characteristics and individual characteristics of the entrepreneurs themselves. Figure  2 illustrates that most empirical research has been conducted on the determining environmental conditions and on the firm level characteristic innovativeness and on the individual level characteristic motivations . In fact, some of the determinants presented have already been thoroughly investigated in highly recommendable earlier literature reviews, namely: industry affiliation (Fritsch 2013 ), regional population - and entrepreneurship density (Fritsch 2013 ), institutions and culture (Bjørnskov and Foss 2016 ; Urbano et al. 2019a ), innovativeness (Block et al. 2017 ). The review for this paper confirms these findings and briefly summarizes the key learnings in the Sects. 3.3.1 to 3.3.3 and 3.3.5 . However, except for a recently emerged empirical research stream on innovativeness , no new insights could be gained on the already reviewed determinants. Therefore, the focus of this section is primarily on the empirical evidence which has not yet been systematically investigated.

3.3.1 Industry affiliation

Fritsch ( 1996 ) was one of the first to analyse how entrepreneurial impact differs between industries. He focused on the impact of new firm formations on employment in West Germany and found it to be significantly higher in the manufacturing sector than in the service sector. Several authors confirmed this finding for the Netherlands (van Stel and Suddle 2008 ), for West-Germany (Fritsch and Mueller 2004 ) and for Sweden (Andersson and Noseleit 2011 ). Other studies, however, found the impact of new firms on economic welfare measures to be higher in the service sector (Bosma et al. 2011 ; Koster and van Stel 2014 ). Fritsch ( 2013 ) reasoned that these contradicting results may be due to considerable differences between the industries in different regions or countries and thus an analysis at the industry level might be not appropriate at all. For more information on the industrial perspective of the entrepreneurial impact on the economy, Fritsch ( 2013 ) provides a comprehensive overview including policy implications and avenues for further research.

3.3.2 Regional population- and entrepreneurship density

In a second wave of literature, researchers analysed how the impact of entrepreneurship differs between regions. They found clear evidence that the magnitude of the entrepreneurial impact is positively related to the population density (Baptista and Preto 2011 ; Fritsch and Mueller 2004 , 2008 ; Fritsch and Schroeter 2011 ; Henderson and Weiler 2009 ; Lee 2017 ; Li et al. 2011 ; van Stel and Suddle 2008 ). In urban regions and agglomerations, new firms have a more pronounced and more positive impact on employment (Baptista and Preto 2011 ; Henderson and Weiler 2009 ; van Stel and Suddle 2008 ) and GDP (Audretsch et al. 2015 ; Belitski and Desai 2016 ) throughout all three previously described phases (see Sect.  3.1 ). On the contrary, in rural and less agglomerated regions, the entrepreneurial impact is weak and often negative (Fritsch and Mueller 2004 , 2008 ).

While the economic relevance of new firm formations seems to increase with the population density, empirical evidence suggests that this is not the case for the relation between firm formations and regional entrepreneurship density. On the contrary, several authors found that the economic effect of another new firm becomes lower the more entrepreneurs are already on the market and even zero for regions with high entrepreneurship rates close to equilibrium rate (e.g. Carree et al. 2002 , 2007 ; Mueller et al. 2008 ). These empirical insights identify entrepreneurship as a regional phenomenon and illustrate that macroeconomic effects of new firms are shaped by local conditions. An in-depth discussion of regional differences in the macroeconomic impact of new firms can be found in the monograph by Fritsch ( 2013 ).

3.3.3 Institutions and culture

To shed light on the complex interactions between institutions, entrepreneurship and economic growth, Urbano et al. ( 2019a ) and Bjørnskov and Foss ( 2016 ) recently conducted thorough literature reviews. The empirical evidence identified in the present paper (Aparicio et al. 2016 ; Audretsch and Keilbach 2004a , b , c ; Bjørnskov and Foss 2016 ) is in line with the findings of these two reviews which suggest that institutions affect the economy indirectly through endogenous factors like entrepreneurship. This holds true for formal institutions like (academic) support systems for new firms, procedures and costs to create a business, property rights or political structures as well as for informal institutions like social norms, cultures or belief systems (Urbano et al. 2019a ). However, in contrast to Bjørnskov and Foss ( 2016 ), Urbano et al. ( 2019a ) suggest that formal and informal institutions are not of equal importance, but that social norms and cultures have higher and more positive effects on the relation between entrepreneurship and economic growth.

3.3.4 Local level of development

While Sect.  3.1 illustrates that the impact of entrepreneurship in developed countries follows a typical wave-pattern, until now, no studies have analysed this time-pattern in developing countries. In general, the empirical evidence on the impact in developing countries is contradictory: some studies found a positive impact of entrepreneurship (Ben Youssef et al. 2018 ; Dhahri and Omri 2018 ; Feki and Mnif 2016 ; Stam et al. 2011 ), others found no or even a negative impact (Anokhin and Wincent, 2012 ; Ferreira et al. 2017 ; Verheul and van Stel 2010 ). However, studies which compared countries in different development stages found that the magnitude of the impact of entrepreneurship depends on the national welfare level and is generally higher in more developed countries (Anokhin and Wincent 2012 ; Carree et al. 2002 , 2007 ; Crnogaj et al. 2015 ; Hessels and van Stel 2011 ; Urbano and Aparicio 2016 ; Valliere and Peterson 2009 ; van Stel et al. 2005 ; Verheul and van Stel 2010 ). Furthermore, little is known on the mechanisms behind the impact of entrepreneurship in developing countries. Most of the few studies which specifically deal with developing countries (n = 19) analysed the impact on a national level (n = 16) based on GEM data (n = 12), focused on the impact on GDP related measures (n = 17), or solely analysed the short- or medium-term impact (n = 16).

3.3.5 Innovativeness

According to the knowledge spillover theory of entrepreneurship, new knowledge results in business opportunities and entrepreneurs exploit these opportunities by turning the new knowledge into innovative products (Acs et al. 2009 , 2013 ; Audretsch and Keilbach 2005 ). Recent studies confirm this theory and provide empirical evidence that entrepreneurship moderates the transformation of new knowledge into innovations (Block et al. 2013 ) and that innovative regions with higher levels of entrepreneurship perform economically better (González-Pernía et al. 2012 ). Accordingly, it is reasonable to assume that particularly innovative new firms are more important to economic welfare than their non-innovative counterparts. These considerations coincide with those presented in the literature review on innovative entrepreneurship by Block et al. ( 2017 ). However, the present systematic literature review extends the review of Block et al. ( 2017 ) by including previously unconsidered as well as recently emerged empirical evidence on the macroeconomic impact of innovative entrepreneurship. The identified empirical studies do indeed confirm the presumed positive impact of innovativeness. Crnogaj et al. ( 2015 ) as well as Du and O’Connor ( 2017 ) and Szerb et al. ( 2018 ) used GEM data to compare the impact of founders who stated their products or services to be new or at least unfamiliar to their customers. All of the previously mentioned authors found that innovative founders have a higher impact on GDP, economic efficiency, gross value added (GVA) and employment than less innovative founders. Furthermore, earlier studies attest to new firms which are in innovative, knowledge- or technology-intensive industries a higher than average impact on both GDP (Audretsch and Keilbach 2004a , b , 2005 , Mueller 2007 ) and employment (Baptista and Preto 2010 , 2011 ).

3.3.6 Firm survival

Empirical evidence suggests that a particularly important determinant of the impact of entrepreneurship is whether new firms are able to survive the first years. Falck ( 2007 ) was the first to find empirical evidence of a positive relationship between new firms which survive for at least 5 years and efficiency of the industry in which they are in. On the contrary, he could not find any significant relationship to industry level efficiency growth for firms which did not survive the first 5 years. Brixy ( 2014 ), Fritsch and Noseleit ( 2013b ) and Fritsch and Schindele ( 2011 ) have confirmed that Falck’s ( 2007 ) findings not only hold for the relationship between entrepreneurship and GDP but also for the relationship between entrepreneurship and employment.

3.3.7 Firm size

Baptista and Preto ( 2010 ) found that new firms of a larger than average initial size have a strong impact on employment and that this impact follows a pronounced wave-shaped time-lag structure (see Sect.  3.1 ). New firm formations which are smaller than average, on the other hand, only have a small impact. Acs and Mueller ( 2008 ) confirmed this finding and show that small new firms have a positive but declining direct impact on employment. The impact of medium and large new firms, however, is much higher and increases till it peaks in year five. Very large new firms (> 499 employees), however, decrease employment in the short- and medium-term, probably due to restructuring processes of incumbents. This empirical evidence suggests that up to a threshold, large new firms have a larger impact on employment.

3.3.8 Degree of internationalization

A less studied but yet empirically significant determinant is a firm’s degree of internationalization. Baptista and Preto ( 2010 ) analyzed 30 Portuguese regions and found that new firms which were, at least, partially owned by foreign investors had a much higher and more pronounced medium- and long-term impact on employment. A second measure of the positive impact of internationally active new firms is the export-orientation of new firms. Hessels and van Stel ( 2011 ) compared the impact of total-entrepreneurial activity and export-driven entrepreneurial activity on GDP per capita in 34 developed and developing countries. They found evidence that new firms for which the share of customers living abroad is above 26% have a more positive impact on GDP—but only in developed countries. González-Pernía and Peña-Legazkue ( 2015 ) confirmed their finding on a regional level by comparing OEA and export-oriented OEA in 17 Spanish regions. Besides a generally higher impact of export-oriented new firms, González-Pernía and Peña-Legazkue ( 2015 ) found that the impact increases with higher shares of foreign customers up to a threshold level. An earlier study by Fryges and Wagner ( 2008 ), who found a positive relationship between firm-level productivity and export-sales ratio, supports the evidence for a more positive impact of internationally active new firms.

3.3.9 Motivation

The literature review conducted for this paper provided eleven studies which empirically tested the macroeconomic importance of the entrepreneur’s motivations. All of these studies applied GEM-based data and definitions for opportunity-driven entrepreneurial activity (OEA) and necessity-driven entrepreneurial activity (NEA). Although four of these studies could not find a significant economic impact of OEA or NEA (Albulescu and Draghici 2016 ; Ferreira et al. 2017 ; Valliere and Peterson 2009 ; Wong et al. 2005 ), the other seven studies found evidence that OEA significantly increases national innovativeness (Acs and Varga 2005 ; Draghici and Albulescu 2014 ), competitiveness (Mrozewski and Kratzer 2017 ) and productivity (Du and O’Connor 2017 ; González-Pernía and Peña-Legazkue 2015 ; Ivanovic-Ðukic et al. 2018 ; Urbano and Aparicio 2016 ). Moreover, six of these seven studies confirmed that the impact of OEA is higher compared to NEA and TEA. Mrozewski and Kratzer ( 2017 ) even found NEA to decrease the national competitiveness.

3.3.10 Growth-ambitions

There are some entrepreneurs who not only seek to exploit a business-opportunity but also have high growth - ambitions for their new firms. All five empirical studies selected for this paper take GEM data on high-growth expectation entrepreneurship (HEA) as a measure of the entrepreneur’s growth - ambitions and found that it has a significantly positive impact on GDP-related measures of welfare. Furthermore, the impact of HEA seems to be more positive compared to TEA, to NEA and even to OEA (Ivanović-Đukić et al. 2018 ; Stam et al. 2011 ; Valliere and Peterson 2009 ; Wong et al. 2005 ). Generally, this macroeconomic impact of HEA seems to increase with the level of growth-aspiration (van Oort and Bosma 2013 ). The positive impact of HEA on economic welfare could be confirmed on the regional- and national-level as well as for developed countries. For less-developed countries, however, the empirical evidence is contradicting. On the one hand, Valliere and Peterson ( 2009 ) only found a significant impact of HEA on GDP for 25 developed countries, but not for the 18 emerging countries. On the other hand, Stam et al. ( 2011 ) found the impact of HEA on GDP in eight analysed lower-income to upper-middle-income economies (World Bank 2002 classification) even higher compared to the impact in the 22 analysed high-income economies.

3.3.11 Qualification

While many microeconomic studies have highlighted that an entrepreneur’s qualifications in terms of education (e.g. Kangasharju and Pekkala 2002 ), skills and experience (e.g. Brüderl et al. 1992 ; Baum et al. 2001 ; Unger et al. 2011 ) play a significant part in the success of new firms, only one of the studies empirically investigated the macroeconomic impact of education. This is an analysis of 3702 German firms conducted by Engel and Metzger ( 2006 ). It suggests that new firms founded by people with an academic degree may have a more positive direct employment effect, than firms founded by people without an academic degree. This finding is, however, based on an old dataset (1990–1993) and a simple descriptive comparison and the authors did not apply control variables such as the regional density of more educated people.

3.3.12 Gender and age

Only one study could be found which empirically analysed the economic impact of the entrepreneur’s gender and age . This study was conducted by Verheul and van Stel ( 2010 ) and was based on a dataset of 36 developed and developing countries. Their results show that there is a positive relationship between young opportunity-driven entrepreneurs between the ages of 18 and 24 and national GDP growth in developed countries, while in developing countries there is only a significant positive relationship between entrepreneurs aged between 45 and 64 and GDP growth (Verheul and van Stel 2010 ). Contrary to the microeconomic literature (e.g. Cliff 1998 ; Kalleberg and Leicht 1991 ; Rosa et al. 1996 ), Verheul and van Stel ( 2010 ) could not find any significant gender differences on the macroscale.

4 Roadmap for further research

The major scientific value and contribution of this paper lies in the groundwork for future research. Despite the extant of the reviewed existing research, many questions still remain unanswered. The following two sections therefore highlight the shortcomings of current research and make suggestions on how to address them. Section  4.1 discusses how remaining gaps in empirical research into the impact of entrepreneurship can be addressed and Sect.  4.2 presents fruitful research avenues on the determinants of the impact of entrepreneurship.

4.1 Implications for future research on the impact of entrepreneurship

4.1.1 more variety in the measures of entrepreneurship.

A high variety of measures of entrepreneurship is required to test the robustness of results but international comparative studies, in particular, are mainly based on just two entrepreneurship datasets: Comparative Entrepreneurship Data for International Analysis (COMPENDIA) based on OECD statistics and data from the GEM research project. The use of a high variety of entrepreneurship definitions and measures of entrepreneurship across studies makes it difficult to compare the results of these studies. While some studies simply estimate entrepreneurship based on self-employment rates or business-ownership rates, others measure entrepreneurship by counting new firm formations and firm exits or use holistic measures based on, e.g., Schumpeter’s understanding of entrepreneurship.

In order to test the robustness of the results and, at the same time, to allow for comparability between different studies, researchers should employ not one but multiple common measures of entrepreneurship in future studies. To make this possible, policy makers need to encourage the creation of internationally harmonized entrepreneurship databases. Furthermore, due to the limited availability of entrepreneurship data, only a few empirical studies have made a distinction between different types of entrepreneurship. That is why, as recommended by many researchers before (e.g. Baptista and Preto 2011 ; Fritsch and Schroeter 2011 ; Urbano et al. 2019a ), this study calls for more diversity in the application of measures of entrepreneurship.

4.1.2 Implementation of measures of social and environmental welfare

Section  3.1 revealed that 95.1% of the examined empirical studies only analysed the impact of entrepreneurship on economic welfare. Politicians who have no information on the impact of entrepreneurship on social and environmental welfare and thus solely rely on this economic information, however, may implement unsustainable development strategies (Tietenberg and Lewis 2012 ). Indeed, the few empirical studies (n = 5) which go beyond a traditional economic analysis indicate that entrepreneurship also has a significant contribution to measures of social and environmental welfare such as HDI, CO 2 emissions or poverty, which must not be neglected by politicians and researchers alike. To fill the immense gap in research on the impact of entrepreneurship on social and environmental welfare, two simultaneous approaches are proposed. First, as mentioned before, future research should generally include a variety of dependent welfare variables—social and environmental as well as economic ones. Second, future research should adopt research designs that have already proved effective in the macroeconomic impact analysis to answer novel research questions that address the impact of entrepreneurship on social and environmental welfare. The required methods for such analyses have been tested many times and, at least at national level, data availability poses no problem. Most countries have not only been collecting specific social and environmental welfare data for many years, but also established more holistic measures of welfare such as the Index of Sustainable Economic Welfare. Accordingly, it is up to the research community to break with traditions and expand the field of research by analysing social and environmental welfare rather than just economic welfare.

4.1.3 More research on developing countries

Section  3.3.4 illustrated that the local level of development is a relevant determinant of the impact of entrepreneurship. Nevertheless, most of the research reviewed for this paper focused solely on developed countries. This can partly be explained by the fact that most of the authors of these studies are based in Europe and the US, as well as by the lack of adequate long-term data for developing countries. However, this has begun to change. In the past 5 years, the number of empirical studies on developing countries has more than doubled to n = 30. Nevertheless, regional-level studies as well as long-term studies for developing countries remain scarce. Because of the growing importance of developing and particularly BRICS countries, it is important to increase the knowledge on how the impact of entrepreneurship manifests in these countries.

4.1.4 More studies on the lag-structure of the impact of entrepreneurship

Section  3.1 illustrates that although the important indirect impact of entrepreneurship requires 5 or more years to unfold, most empirical research focuses on the direct short-term impact. Neglecting the long-term effects of entrepreneurship therefore results in an incomplete picture. Furthermore, the analysis of longitudinal data is required to conduct relevant causality tests. So far, the bottleneck for national-level long-term studies has been the lack of longitudinal data. But, due to more than 20 years of worldwide data collection for the GEM, there is now at least one sufficiently large entrepreneurship database. In line with other authors who have recognised this issue (e.g. Baptista et al. 2008 ; Carree and Thurik 2008 ; Fritsch 2013 ), this paper recommends that all future research should analyse not only the short-term but also the medium- and long-term impact of entrepreneurship.

4.2 Implications for future research on determinants

Table  3 summarizes key statistics for the determinants in the research reviewed for this paper. Comparing the last two rows, it seems that the studies analysing the determinants of the impact of entrepreneurship are a representative share of all reviewed studies. For this reason, the previously presented suggestions for future research also apply to literature on the determinants. On closer examination, however, Table  3 reveals further and more precise research gaps. These include, inter alia, the need to study particularly the environmental and firm level determinants in developing countries, and the analysis of individual level determinants in combination with the lag-structure of the impact of entrepreneurship. The requirement for more long-term studies is further highlighted here. This finding further specifies the previous call for more long-term studies. The following subsections present further research and research implications.

4.2.1 More variety in measures of entrepreneurship

Table  3 shows that research on environmental and firm level determinants are mainly based on new firm formations as a measure of entrepreneurship, and research on individual level determinants almost solely measures entrepreneurship using GEM data.

The only exceptions are studies on the determinants local level of development —which are comparing the entrepreneurial impact across countries and thus are also mostly based on GEM data—and on innovativeness . None of the studies on the determinants apply self-employment (for the sake of clarity not presented in Table  3 ) to estimate entrepreneurship. This illustrates that the research on all individual determinants, except for innovativeness , considerably lacks variety when it comes to the applied measures of entrepreneurship.

4.2.2 More variety in measures of welfare

In addition to the fact that there are no studies examining the determinants of the impact of entrepreneurship on social or environmental welfare, there is also a lack of variety in the studies of measures of economic welfare. Studies on all individual level determinants and particularly on the determinant local level of development almost exclusively analyse the impact of entrepreneurship on GDP-related measures of welfare. Studies on the determinants industry affiliation , population density , firm survival and firm size mainly analyse employment effects of entrepreneurship. Other common measures of economic welfare, such as innovativeness or competitiveness, are rarely studied and need further investigation.

4.2.3 Further research on determinants

Table  3 illustrates that the existing research is imbalanced and that it pays varying degrees of attention to individual determinants. Determinants such as innovativeness , motivations and most environmental level determinants have so far received a great deal of attention, while others have only been analysed in very few studies. However, some of these poorly researched factors promise to be relevant determinants. More specific, the few existing empirical results analysing firm survival , degree of internationalisation and growth - ambitions suggest that these determinants have a comparatively high effect on the relationship between entrepreneurship and economic welfare. Furthermore, these determinants as well as the largely unexplored determinant qualifications are of considerable practical and political relevance. More empirical research on these determinants and their moderating role is required to improve incentives and support programs for entrepreneurs.

4.2.4 New research focus on determinants not yet empirically investigated

Table  4 provides a short overview of determinants which are likely to shape the entrepreneurial macroeconomic impact, but which have not yet been empirically investigated. They are a selection of indicators which are believed to determine the impact of entrepreneurship on economic welfare or which are empirically related to the success and survival of new firms and thus are also likely to be of macroeconomic importance. The overview is based on a non-systematic scan of the microeconomic literature and makes no claim to completeness. Due to their particularly high microeconomic relevance highlighted by the authors listed in Table  4 , this paper specifically proposes additional research on how firm performance, organisational structure and strategies, networking activities and motivations (beyond necessity and opportunity entrepreneurship) determine the impact of entrepreneurship.

4.2.5 Methodological recommendations

Many of the determinants discussed here are highly interdependent, which makes it very difficult to extract and examine their separate effects. Individual level characteristics and environmental conditions are especially likely to affect the impact of entrepreneurship mainly indirectly through firm performance. The complexity is increased further as determinants may be indicators for other macroeconomically relevant effects. For instance, the numbers of highly innovative new firms and of highly qualified entrepreneurs may be positively correlated with the excellence of the regional educational infrastructure. This in turn could mean that the excellence of educational infrastructure is the true reason for economic growth and innovative new firms and highly qualified entrepreneurs have little or no economic impact but are merely indicators for the educational infrastructure. However, little is currently known about such interdependencies and research is required which particularly studies the path dependencies behind the impact of entrepreneurship. This is why future empirical research should examine determinants which are supposed to be interdependent as well as external effects which may be related to the determinants of interest.

5 Limitations and conclusion

This paper has shed light on the impact of entrepreneurship on economic welfare and the determinants of this impact, but it is not without limitations. First, this paper seeks to give a comprehensive overview of the empirical research, but the search was limited by a variety of in- and exclusion criteria as well as by the terms used in the search string. Although the exclusive focus on peer-reviewed articles is common practice in systematic literature reviews, this may have led to the systematic exclusion of potentially relevant research outcomes, e.g. from dissertation, book chapters, conference contributions or working papers. Furthermore, it is possible that individual studies were not identified by the automated search for the search string in keywords, titles and abstracts. These limitations were necessary to reduce the search results to a manageable level and to ensure a certain quality of the results. The additional screening of key journals, meta-studies and reviews as well as the applied back- and forward snowballing approach, however, weaken the effects of these limitations. Second, this paper only deals with empirical studies. The inclusion of qualitative studies might have revealed further studies dealing with the impact of entrepreneurship on environmental and social welfare. Additionally, the exclusion of qualitative studies limits the analytical depth within the discussion of the determinants. Third, the paper focused on research on a few selected measures of entrepreneurship. In doing so, intrapreneurship, entrepreneurship culture or diverse composed entrepreneurial activity measures of entrepreneurship were excluded. Fourth, it needs to be stated that large parts of the data selection and synthesis were only conducted by the author. Although the chosen procedure and the frequent consultation with the research panel reduced the likelihood of biases, the chance remains that the review is burdened with subjectivity and selection biases. Finally, the scope of this paper was to provide a first descriptive summary of the determinants analysed in the empirical literature and to derive research recommendation. Due to this clear focus this paper does not comprise extensive bibliometric- or meta-analyses that describe in detail the general literature on the impact of entrepreneurship.

The systematic review presented in this paper was conducted for three main reasons. First, to summarize the current state of empirical research on the impact of entrepreneurship on economic, social and environmental welfare. Second, to identify the determinants of this impact and third, to develop a roadmap for future research. Due to the application of a broad entrepreneurship definition and due to the incorporation of economic, social and environmental welfare, this paper presents the most comprehensive overview, summary and synthesis of empirical research on this topic to date. The results confirm the findings and theories of previous literature reviews on the impact of entrepreneurship, provide an update and extension to the current knowledge and finally, represent a first attempt to structure the determinants of the impact of entrepreneurship. The new determinants-driven perspective on the research field reveals several shortcomings that would otherwise have gone unnoticed. The developed roadmap for future research—combined with a higher variety of applied measures of entrepreneurship and with an increased awareness of causality and interdependency issues—will allow future researchers to unravel the complex relationship between entrepreneurship and welfare and therewith to provide politicians the comprehensive information they need to promote the right types of entrepreneurship in the right situations.

For purposes of this study, the three welfare dimensions refer to the widely used definition of the three pillars of sustainable development (economic growth, social equality protection, environmental protection) of the Brundtland Report (World Development Commission on Environment and Development 1987 ). However, the reader should note that later sustainability models like the ‘prism model’ or the ‘concentric circles model’ illustrate that the three pillars of sustainable development (resp. the three welfare dimensions) are interlinked and not always clearly separable from one another.

Although the author is fully aware of their different meanings, for simplicity, the more general term ‘economic welfare’ is used throughout this paper as synonymous with the terms ‘economic growth’ and ‘economic development’.

Namely: Regional Studies , Entrepreneurship & Regional Development , The Annals of Regional Science , Economic Development Quarterly , Technological Forecasting and Social Change .

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Acknowledgements

Open Access funding provided by Projekt DEAL. I like to thank Dirk Ludewig, of the Flensburg University of Applied Sciences and Olav Hohmeyer, of the Europa-Universität Flensburg, for their useful and valuable feedback on previous versions of this paper. Furthermore, I would like to express my appreciation to the participants of the G-Forum conference in Wien, Austria (September, 2019) and of the paper development workshop of the FGF e.V. working group on sustainable entrepreneurship in Flensburg, Germany (March, 2020), where earlier versions of the paper were discussed.

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Starting a Business: Advantages and Disadvantages Essay

Introduction.

Currently, the development of market relations implies a free and equal coexistence of various forms of entrepreneurship and sectors within each type of ownership. A special place in the international economy at this stage belongs to start-up businesses. These are small enterprises that do not require large initial investments and guarantee a high rate of turnover of resources that can quickly and economically solve the problems of economic restructuring.

The formation and saturation of the consumer markets are the key elements in the current destabilization of the economy. It should be noted that for a highly monopolized economy, the small business acquires paramount importance since it makes a significant contribution to the development of a competitive environment. However, there are both rewarding advantages and serious disadvantages of starting a business, which need consideration.

If a person plans to open a business, it is important to consider the upcoming possible gains and losses. People who have already passed this way advise to divide the estimated income by two and the cost multiplied by the same amount. After all, one can never foresee all the risks that await any entrepreneur. An important factor is the personal qualities necessary for starting and running a business. If positive prospects do not seem attractive compared with the possible difficulties, it is likely that it is better to concentrate on employment. In addition, in the case of successful career advancement, an individual is able to also achieve a high professional and financial level.

Starting a business is always accompanied by risk factors; therefore, a starting entrepreneur will need a lot of enthusiasm, the ability to make non-standard decisions, and the willingness to take responsibility. However, the possible rewards for hard work can be significant. Any business requires constant attention and development; otherwise, it will not be victorious in the competitive market.

By analyzing international and domestic experience in the development of entrepreneurship, the following benefits of starting a business can be pointed out: faster adaptation to local business conditions, greater independence of actions, and flexibility in decision making. In addition, it allows people to have relatively low costs in the implementation of activities, especially management cost, and a great opportunity for an individual to realize his/her ideas (Jackson, 2015). Starting a business enables one to show one’s abilities with lower initial capital requirements and the capability to quickly introduce changes in the product.

The entrepreneurs are more inclined to savings and investment, which has a beneficial effect on the whole enterprise. New businesses are more informed and adapted to the level of demand in local markets, often produce goods by order of specific consumers, and provide a livelihood to a substantial number of employees (Amankwah-Amoah, Boso, & Antwi-Agyei, 2018). In addition, small start-up businesses contribute to greater growth in employment compared with large companies, thereby influencing the spread of practical knowledge and the training of professionals (Jackson, 2015). Small and medium-sized enterprises, as compared with large ones, in certain countries dominate both in the number and proportion in the production of goods.

There are several advantages to starting a business, and the biggest benefit is money. An employee working for someone is confident that he/she will receive a salary. A person can get paid only within the limits that have been established beforehand. However, if an entrepreneur starts a business, then with proper management of his/her business, he/she can hope to increase profits and income.

Another significant benefit of starting a business is the ability to manage time without one’s approval personally. It is among the main reasons that make a company attractive for many. It is also plausible to state that a businessman has the opportunity to do what he/she desires. In addition, when an individual starts a business, his/her interests in work are always pursued. There is excitement associated with an increase in personal profits. Moreover, it is not at all interesting for the majority of employees to increase profits for employer organization. The advantage of starting a business is that it’s not mandatory to be held accountable to anyone because a person is independent and takes responsibility for his/her actions. Establishing an individual schedule is also a distinct advantage.

Starting a business gives an entrepreneur freedom from the desires and whims of superiors. A person will not be worried by thoughts of whether he/she will be fired tomorrow or not. An entrepreneur will not be delayed wages, not pulled out of the weekend or vacation, and will not worsen working conditions. If a businessperson sees potential in IT, such as 3D technologies, virtual reality, or in new markets, such as trading in electronic cars, he/she can make a managerial decision to pursue these markets. The next positive side of the business is personal growth. Creating and starting a business is an opportunity to check what an individual is worth.

Overcoming difficulties, solving problems, and achieving a goal is an invaluable experience that will remain forever. In any hired job, a person will not be as satisfied with success as in his/her business. In addition, the social status of an entrepreneur is higher than that of a full-time employee.

Furthermore, the job search is often tied to one’s specialty and not to the area in which an individual would like to develop. When starting a business, an entrepreneur can choose any direction in which he/she wants to shape a firm. In addition, he/she can select and select the team with whom to work. Thus, there are a lot of advantages to starting a business. The scope of benefits may also include psychological comfort in communication.

A business owner can choose his partners and communicate with them freely. However, an entrepreneur possesses the full managerial right to enter into contracts and agreements only with those people who are pleasant to him/her and whom he/she trusts. A businessperson does not need to tolerate incompetent and inefficient employees because he/she can fire them.

Disadvantages

The practice of start-up businesses has specific problems, among which the most significant ones can be identified as higher levels of risk, therefore a high degree of instability in the market, and dependence on large companies. In addition, there are shortcomings in managing a business accompanied by poor managerial competence and heightened vulnerability to shifts in the economy. Difficulties in obtaining loans and borrowing additional funds and uncertainty of business partners when concluding agreements are among the disadvantages of starting a business.

Deficiencies and failures in the operation of businesses are determined by both internal and external causes, including the operating conditions of start-up enterprises. Studies show that the majority of failures of starting firms are associated with professional incompetence or managerial inexperience of small and medium business entrepreneurs (Nikolaev, Boudreaux, & Wood, 2019). There is also a low survival rate among new companies due to market competitiveness.

The most common reasons for failure are incompetence, unbalanced experience, and the lack of experience in commerce, finance, supply, production, management, and partnerships. Common causes of bankruptcy for small firms are business neglect, poor health or bad habits of the head of the company, and disasters, such as fires, theft, and fraud (Chadwick & Raver, 2018). Small businesses’ chances of success increase as they grow older. Firms that do not change their owners for a long time bring in a higher and more stable income. American statistics show that women-owners of small firms are more successful in business than men (Chadwick & Raver, 2018). In the course of the research, it is noted that entrepreneurs who work for prolonged periods succeed.

Moreover, if not one person is involved in the management, but an entrepreneurial team that consists of multiple people, the chances of success are higher due to collective decision making is more professional (Abd-Hamid, Azizan, & Sorooshian, 2015). The size of financing at the first stage of their existence also affects the viability of small firms. The greater the initial capital invested in a small firm, the greater is its ability to maintain activity during crisis periods.

A constant search for emerging and disappearing social needs and continuous adaptation to them form the basis of the small business strategy. Some Western experts tend to consider small business as a school of new personal relationships, a testing ground for testing methods and principles of organizing entrepreneurship in the future. However, due to the objective availability of less favorable economic conditions than that of large enterprises, small businesses are less stable and competitive and therefore need government support by federal and regional programs to support and develop small businesses.

The major disadvantage of starting a business is an increased level of responsibility. Unlike hired work, a businessperson has to be responsible for everything. At first, he/she may be a salesman, an accountant, a janitor, and a lawyer in his/her company. In addition, any key problem or error cannot be resolved by a colleague or leader. An entrepreneur has to continually make decisions on which the further development of a business depends or which can lead to its complete collapse.

Another big drawback of starting a business is complexity; therefore, an entrepreneur has to go through numerous mistakes to succeed, often without knowing if he/she is going in the right direction. The search for start-up capital, networking with partners, the struggle for a place in the market are among the frequent challenges for a firm. Meanwhile, a quick payback for a businessperson is not guaranteed. He/she needs to understand in advance what difficulties he/she will have to go through. The next disadvantage is the instability, and it another frightening barrier for starting entrepreneurs. No matter how much money he/she invests, there is always a chance that it will not be sufficient. However, even if everything does not end in failure, then instead of huge profits, a person can barely make ends meet.

To sum up, it is highly relevant to realize that numerous and sometimes unidentifiable factors influence the failure or success of a business. There are certain risks of business going bankrupt, insufficient income, and stress from increased amounts of responsibility. Nevertheless, starting a business also offers an opportunity to earn an unlimited number of rewards, both financially and emotionally. An entrepreneur can adequately regulate and manage a firm, and he/she is able to freely implement the important managerial decision.

Abd-Hamid, Z., Azizan, N. A., & Sorooshian, S. (2015). Predictors for the success and survival of entrepreneurs in the construction industry. International Journal of Engineering Business Management, 1 (1), 2-5.

Amankwah-Amoah, J., Boso, N., & Antwi-Agyei, I. (2018). The effects of business failure experience on successive entrepreneurial engagements: An evolutionary phase model. Group & Organization Management, 43 (4), 648–682.

Chadwick, I. C., & Raver, J. L. (2018). Psychological resilience and its downstream effects for business survival in nascent entrepreneurship. Entrepreneurship Theory and Practice, 1 (2), 1-6.

Jackson, T. (2015). Entrepreneurship training in tertiary education: Its development and transfer. Local Economy, 30 (5), 484–502.

Nikolaev, B., Boudreaux, C. J., & Wood, M. (2019). Entrepreneurship and subjective well-being: The mediating role of psychological functioning. Entrepreneurship Theory and Practice, 1 (1), 1-7.

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Top 5 Advantages and Disadvantages of Being an Entrepreneur

Unlike other goals, there is not a clear “start” or “finish.” There is not a set path. You have to find one as you go along. This brings a lot of surprises and challenges on the way. In this post, I discuss the advantages of being an entrepreneur as well as the disadvantages.

Top Five Advantages of Being an Entrepreneur

Advantage #1: a flexible schedule – both in terms of when and where you work..

One of the best things and biggest advantages of being an entrepreneur is you can work from home, work from the office (if you have one), and work from virtually any destination with a great view and a glass of wine in your hand!

In the past year, I’ve been to Santorini, Greece, Venice + Rome + Florence in Italy, Quito in Ecuador, the Galapagos Islands, Charleston S.C.,  Marco Island (a few times), and quite a few places in Michigan!  This would likely not occur if I had a “regular” job.

You can also choose when you work. If you want to stay up late, stay up late. If you want to get up early, get up early.  The flexibility of having your own business cannot be beat! It remains, in my opinion, as one of the best advantages of being an entrepreneur. It is hard to come by this amount of flexibility in any other job!

Advantage #2: You learn a lot!

Not just about your field, but about accounting, marketing, public speaking, website design, search engine optimization, how to delegate, how to take risks, how to be more creative and think about problems in other ways. And, importantly, how to fail, how to be rejected, and how to get back up on your feet anyway.

I have always been attracted to business because it seems like such a unique and diversified set of skills that are required to truly succeed. Meaning, there are things like . . . setting up a website, marketing, getting appointments with clients, and delegation.

This is one of the advantages of being an entrepreneur that I overlooked in the beginning. I figured I knew what I was doing and that even if I didn’t, I could figure it out without falling down too many times. But I was wrong. And very grateful for it.

Advantage #3: It’s exciting and fulfilling.

It is exciting to build something from the ground up. Especially when you love what you do. It is such a cool feeling to make something out of nothing. And it is so fun to hire awesome people to work for the company. And to have amazing clients, many of whom are not only paying customers, but also friends!

The ups and downs are neverending. It is never boring. It is my third year and I still have a rollercoasterish feeling when I start a new project or when we fulfill a new idea.

This is another one of the advantages of being an entrepreneur that I thought would disappear over time. So far, it hasn’t. It is just as exciting to own a business on Day 1000 that it was on Day 1.

Advantage #4: The salary makes sense.

When you make money, you get paid more. It is not an arbitrary number that you are being paid each year. And you don’t have to wait for someone to give you a raise.

You get to keep the profits. You pay the expenses. And if you are doing it right, this will end up being a good deal.

Advantage #5: You are viewed as a leader.

This increases confidence. People say “you have a brilliant business model” and all sorts of other compliments that are very nice. And to be honest, ones I am not sure I have truly earned. But it is a very nice side benefit!

For every advantage, there is a disadvantage. . .

Top Five Disadvantages of Being an Entrepreneur

Disadvantage #1: you wear a lot of hats. .

You are not just the owner of the company. You are the CEO, secretary, website designer, accountant, head of marketing, and janitor. That is, until you can afford to delegate this to contractors and employees. And then you take on the title of “employer” which, true, replaces some of these other titles, but also brings a whole new set of benefits and challenges to the table.

So true, while you learn a lot as an entrepreneur, it is because you do a lot. There is a lot to juggle at once. Which brings me to my next point  . . .

Disadvantage #2: You are always at work.

 It is true you can work from anywhere and at any time. But really that is because you are working everywhere at all times! I have heard it said that entrepreneurs “beat 9-5 to work 9-9.” There some truth to that. You are always on call and always doing something for the company. Even now, I am writing this from a lovely suite in bay city overlooking the water. . . . at 6:00 AM in my hotel-bathroom-counter-converted-into-makeshift-desk so that I do not awake my spouse! If you love what you do, then it does not seem so bad! (And in the end I think that is how entrepreneurs truly survive – believing in their vision and loving their work!)

But still, it is one of the exhausting parts of entrepreneurship that others may not readily see.

And this, of course, leads to the next disadvantage . . .

Disadvantage #3: Work-life balance becomes tricky and is sometimes non-existent.

Work-life balance becomes tricky. It is hard to draw a line between “work” and “life” when you work from home. When your office is not that-place-a-few-miles-away but is instead your bedroom, your living room, your room, your home office.

Your personal phone is your work phone (even if you have a work phone). Same with personal email. And personal time (remember, you are always on-call….).

 This doesn’t mean you can’t place limits on work-life balance. Or draw a line. Or not check your emails after 7:00. Or not work on Sunday mornings. And it is not to say it is not a challenge for other professions. (I distinctly remember having the same problem when I was a lawyer full time.) However, it does seem to be exaggerated for entrepreneurs.

Disadvantage #4: A non-regular paycheck can be scary. 

If your company doesn’t make money, you don’t make money. So in some ways while the salary is “rationale” – you get what you bring in – in other ways, it is not. Because you can work 50 hours a week and make nothing. This is both liberating and terrifying.

Entrepreneurial ventures can bring about a new kind of stress. Instead of an employee, you are responsible for all decisions. If you fail or succeed, customers, vendors, employees, and others are looking at you . So just as you can be looked at as a “leader” (Advantage 5 above), you can also be looked as a fool.

Stress can be heightened if you do not make a consistent income. Or if you don’t have health insurance. Or if you don’t feel your self-employment is especially “secure.”

In the end, like with any other job, there are advantages of being an entrepreneur and disadvantages. For me, the advantages of being an entrepreneur soundly outweigh the disadvantages. But not everyone agrees!!

It is wise to consider both if you are considering starting your own business!

New for 2022 – my Favorite Books to Scale Your Business!

If you are an entrepreneur looking to grow your business, please check out some of my favorite books!

(Note that the below are all affiliate links and we earn a small commission if products are purchased) 

• Scale or Fail – Allison Maslan – This is a very detailed and helpful book on scaling your business. I keep coming back to it and I highly recommend it!
• The Miracle Morning – Hal Elrod – This inspiring book discusses the advantages to getting up early, building good habits that can transform your business and your personal spiritual life. Short and sweet. One of my favorites.
• Atomic Habits – James Clear – Not a business book, per se. But it helps you build good habits, which is key for your personal life and business life. This is one of my recent favorites.
• The 4-Hour Workweek – Tim Ferriss – A classic book now over a decade old, but has still stood the test of time well. A great read.
• The 10X Rule – Grant Cardone – This book has a very unique outlook and challenges readers to think bigger and set bigger goals using a simple method.
• The Abundance Project – Derek Rydall – I really like the idea behind this book–creating more abundance by changing the way you think.

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