The Role of the Entrepreneur in Market Economy
At the very centre of the economic process in a market economy Opens in new window is the entrepreneur, the person at the very top of a business.
An entrepreneur is someone who operates a business, bringing together the factors of production—labor, capital and natural resources—to produce goods and services.
Entrepreneurs in a market economy Opens in new window are a self-selected group who earn their living by running businesses. No government appoints or chooses them. They are people who rise up the hierarchy of large businesses or often simply start their own small businesses.
Whichever route to the top they have followed, the entrepreneur in each firm is the final authority in deciding:
- what to produce,
- how to produce,
- who to hire,
- how much to borrow,
- which capital to use,
- which innovations to attempt.
Entrepreneurs must first determine what goods and services they believe consumers want, and then decide how those goods and services might be produced most profitably.
Entrepreneurs bear risks while bringing together the factors of production Opens in new window to produce goods and services. They put their own funds at risk Opens in new window when they start business. If they are wrong about what consumers want or about the best way to produce goods and services, they can lose those funds.
In fact, it is not unusual for entrepreneurs who eventually achieve great success to fail at first.
For instance, early in their careers both Henry Ford of the Ford Motor Company and Sakichi Toyoda, whose company eventually became the Toyota Motor Corporation, started earlier companies that quickly failed.
Most economic theory seems to assume there are impersonal forces that cause whatever it is that happens.
The reality is that there are actual people who make the decisions that set the entire process in motion.A market economy operates through entrepreneurs making specific decisions.
It is these decisions that determine the direction in which an economy will travel and the more successful entrepreneurs are in the decisions they make, the more successful an economy will be.