Great times for Entrepreneurs? Yes! But what are the reasons and how long will it last?

While one can read it very often that we live in a “Great Times for Entrepreneurs” both the underlying reasons as well as the sustainability of this trend towards entrepreneurship remain often unclear. Therefore I thought about some reasons why entrepreneurship is so attractive in our time and how long this development will last. Without any approach for completeness I believe that the following 5 factors have a strong impact on the growing importance of entrepreneurship for our society:

1. More change!

2. Lower information costs!

3. Lower transaction costs between companies compared to hierarchy costs!

4. More options to generate international efficiency!

5. Lower costs to get started!

To figure out why entrepreneurship is becoming more and more important one should first have a look on the role which entrepreneurship serves for our society. In my opinion Entrepreneurs are mainly change agents with superior market knowledge and better abilities to predict the future of markets, technologies and peoples needs. While they use this knowledge (as well as their abilities to execute) in order to build and expand companies they create value for the society by enabling change and reducing inefficiency.

One of the largest trends of our time is the increasing amount of change in shorter becoming time periods. Thanks to new information and communication technologies markets change much faster than 50 years ago. Therefore we clearly have a larger need for Entrepreneurs to deliver an appropriate amount of change enabling (brain) capacity.

Also as a consequence of the Internet and the increasingly networked world there is much more information about markets available. As the consumers are not able to interpret all the information there is a strong need for entrepreneurs who are able to use the information to increase the market efficiency. Furthermore the better information availability enables entrepreneurs to spot interesting opportunities without having long work experiences in the specific field. This may be one reason for the increasing number of Serial Entrepreneurs that start companies in shorter becoming cycles and differing sectors and regions.

Thanks to new technologies (E-Mail, Internet, Cell Phones…) there is also a shift in transaction costs which lowers the costs of coordination between different companies in relation to those transaction costs that occur within companies. Therefore outsourcing becomes more favorable and provides new chances for entrepreneurs.

Furthermore the increasing connections between markets and people around the world offer various interesting entrepreneurial options to lower inefficiencies through idea- or labor arbitrage.

Another factor to support entrepreneurship is the decrease in costs to start a (Internet)-Business. There was no time in economic history when starting a (potential) global business was possible with a (comparatively) low investment. While this makes the market entry definitely easier one could also argue that this leads to decreasing industry profits through growing competition and therefore is not a positive development at all. This may be right and established companies (and their “entrepreneurs”) may in fact loose profits while new entrants can easier gain market share. But as established companies tend to focus rather on Business Administration then on (technology or market) innovation and “real” Entrepreneurship this is not an argument at all.

Given the named reasons we have a Great Time for Entrepreneurs, one can think about how long-lasting this period will be. As the underlying reasons are sustainable long-term developments, I’m pretty sure that we will see these great opportunities for a very long while.

Enjoy and be sure that you use our great time!

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