Class #47

2. Origin and Nature of Entrepreneurship

2.1 Evolution of Entrepreneurship

The Beginnings of Entrepreneurship and Trade

Believe it or not, the first entrepreneurs can be traced back to nearly 20,000 years ago. The first known trading between
humans took place in New Guinea around 17,000 BCE, where locals would exchange obsidian (a volcanic glass prized
for its use in hunting tools) for other needed goods – like tools, skins, and food.

This early type of entrepreneurship continued for millennia. Hunter-gatherer tribes would trade goods from different
parts of their respective regions to provide an overall benefit for their tribe.

Entrepreneurship and the Agricultural Revolution a fundamental shift in human history that occurred around 12,000
years ago.
 humans started to domesticate plants and animals. Instead of having to roam, forage, and hunt for their food in
different regions throughout the year, human populations could remain stationary in one location and farm the
land.
 Villages and towns started developing close to fertile lands.
 By specializing in different professions, members of the community could trade valuable goods for food. These
were the earliest entrepreneurs in human civilization.

Some common areas of specialization included: Hunting and gathering, Fishing, Cooking, Tool-making, Shelter-
building and Clothes-making.

As time went on, new areas of specialization began to emerge. Early entrepreneurs would work in areas like: Pottery,
Carpentry, Wool-making, and Masonry.

Standards of living continued to increase. Entrepreneurs were constantly at the forefront of innovation. If a problem
needed to be solved, these early entrepreneurs recognized that they could profit by solving that problem.

The Expansion of Trade Routes from 2000 BCE Onward - Weapons trading was particularly important in these early
times.
Nile, the Tigris, Euphrates, the Indus, Yellow and Yangtze – early areas of civilization

As cities sprang up around the world, entrepreneurship took an important turn. Entrepreneurs were still specializing in
all of the areas listed above (pottery, carpentry, tool-making, etc.). But they began to realize that profits could be made
by trading between cities and cultures.

The right international trade route could make an entrepreneur very wealthy. Some of the popular trade routes at the
time included:

 Trading salt from Africa across the Roman Empire

 Trading technologies like Chinese paper-making around the world
 Trading rice from China across Asia
 Trading coffee, lemons, and oranges from Arabia into Europe
 Trading complex ideas like the Arabic number system into Europe (this occurred in the year 1200 thanks to an Italian
trader named Leonardo Fibonacci).
 Trading gunpowder (a combination of carbon, sulphur, and potassium nitrate) from China to other parts of the world
 2000 BCE – discovery of iron which led to iron trading and emergence of dominant traders of iron; and
 World’s first empires were established - Alexander the Great’s Empire, the Han Chinese Empire, the Roman
Empire, and the Persian Empire.

Entrepreneurs that were able to trade military goods that created empires were justifiably rewarded for their work. Thus,
some of the most successful early entrepreneurs traded the means of warfare around the world.

Entrepreneurship and the Invention of Money - one of the key developments in the history of entrepreneurship (and in
human history).
Prior to the invention of money, all entrepreneurship and trade took place through the barter system.
The limits of the barter system were known as a “coincidence of wants.” Understandably, this vastly limited trade and
entrepreneurship in early history.

Silver rings and silver bars - earliest forms of currency found in ancient Iraq
 Starting in 2000 BCE, early forms of money have been discovered. These forms of money were called specie and
changed widely throughout the world: some cultures used seashells, for example, while others used tobacco leaves,
beads, or large round rocks.

Over time, paper money and coinage would be developed. Currency gave entrepreneurs several important things:

 It facilitated long-distance trade

 It acted as a medium of exchange
 It provided a way for entrepreneurs to store value
Obviously, currency changed the fate of entrepreneurship forever.

Entrepreneurship and the Beginnings of the Marketplace in the Medieval Period - markets became more and more
popular. Larger populations required larger marketplaces where they could purchase food, clothing, services, and other
important things.
Important developments that took place in entrepreneurship during this period:

 Banking grew to new heights and complexities as small business owners had greater financing needs.
 The guild system expanded, giving skilled craftsmen and other entrepreneurs a way to organize their business
together, regulate the quality of the goods produced, and develop reputations for certain goods in towns across
medieval Europe.
 Entrepreneurs were able to purchase goods from abroad, turn those goods into finished products, and then sell those
goods for a profit at a wider scale than ever before.
The Unexpected Stifling of Innovation - Many entrepreneurs had their inventions and innovations stifled. Nevertheless,
this period still gave rise to some of the world’s most influential technologies, including the windmill, paper mill,
mechanical clock, the map, and the printing press, among many others.

Accumulation of capital - innovation was often – perplexingly – blocked around the world. There are even examples
were visionary entrepreneurs had their inventions stifled because they weren’t seen as beneficial for society.

“Early on in the history of capitalism, the idea of monetary gain was shunned and shamed by many. The practice of
usury, charging interest on loans, was banned by the Christian Church. Jobs were assigned by tradition and caste.
Innovation was stifled and efficiency was forcefully put down, sometimes punishable by death. In sixteenth-century
England, when mass production in the weaving industry first came about, the guildsmen protested. An efficient
workshop containing two hundred looms and butchers and bakers for the workers was outlawed by the King under the
pretense that such efficiency reduced the number of available jobs. - StartupGuide.com

It paved the way for future entrepreneurs to use innovation to capitalize on growing trends.

Mercantilism, Explorers, and the New World from 1550 to 1800 - gave rise to the philosophy of mercantilism.
Followers of this philosophy believed that there was only a finite amount of wealth in the world. A country’s wealth and
value was solely based on how much treasure and gold it could obtain, and how many more exports it could sell
compared to imports.
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 Columbus’s “discovery” of the New World in 1492 - permanently changed entrepreneurship.

 Mercantilist ideals combined with a vast New World to discover made early explorers some of the wealthiest
entrepreneurs.
 Entrepreneurs were known more as merchants and explorers than as entrepreneurs. These individuals would raise
capital, take risks, and stimulate economic growth (much like the entrepreneurs of today). Many see this period as
the beginnings of capitalism.
 Some of the key advances of this period were related to the goods and materials brought back from the new world.
Silver imports from the New World, for example, fuelled expanded trade across the Atlantic Ocean. Later on, gold
would provide similar motivation.
 Luca Pacioli’s accounting advances. Pacioli created standardized principles for keeping track of a firm’s accounts.
These principles would later be used by the era’s explorers and merchants.

Entrepreneurship in the 1800s Onward: Machines and Markets - many people see the last 200 years of
entrepreneurship as being fuelled by “machines and markets”.
 Capitalism became more entrenched in societies around the world. The theories of capitalism were solidified in
An Inquiry into the Nature and Causes of the Wealth of Nations - Adam Smith’s 1776 work where he
destroyed the idea of mercantilism. Instead, he argued that self-interested was the driving force in societies
around the world.
Thus, entrepreneurs of this period were able to act in self-interest while still improving society as a whole.
Robert L. Heilbroner - the competition of the marketplace regulates self-interest and leads to a type of
entrepreneurship that fuels innovation, improves the standard of living, and increases the wealth of nations.
The Industrial Age and Entrepreneurship - marked yet another profound shift in the history of entrepreneurship.
18th century - entrepreneurship moved from small-scale production in small towns to large-scale production in big
cities.
Two things fuelled this fundamental change in entrepreneurship, including:
 Availability of Energy Production: Businesses were no longer restricted by small-scale energy powered by wind
(which was weather-dependent) or falling water (which was location-dependent). Instead, they could rely on
technologies like electricity, steam, the internal combustion engine, the locomotive, the automobile, and oil.
This gave them the means to make large-scale factories.
 Availability of Labor: Huge populations began moving to Industrial Revolution cities starting in the 1700s. This
gave entrepreneurs a large pool of cheap labor with which to work.
Eventually, these powerful market forces would give rise to some of the world’s greatest entrepreneurs and innovators.
America played a particularly prominent role during this period, giving rise to entrepreneurs like Andrew Carnegie, J.
Morgan, John D. Rockefeller, Frank Kenan and Henry Ford.

Post World War II Entrepreneurship

 The economy was increasingly global and becoming more global every decade. Better means of shipping
and communication made it easy for entrepreneurs to sell products and services to a global audience. Massive
economies like America could no longer afford to concentrate solely on selling products to American
marketplaces.
 There were also microeconomic factors like the number of people owning cars. Especially in America, car
ownership made it more important to have highways between major cities. As highways became more
important, restaurants were needed where people could eat while traveling.
Other companies that prospered during this period included General Electric, aircraft companies like Lockheed, IBM,
and Holiday Inns.
Other countries around the world experienced similar boosts in growth following World War II. Japan, for example,
became one of the world’s largest economies by exploiting a large population available for cheap wages. Germany
experienced a similar trajectory.

Modern Entrepreneurship
The global economy – combined with modern infrastructure and communications – has introduced a new age of
competition to the world of entrepreneurship. No longer are you competing with entrepreneurs in your tribe, town,
village, or city: you’re competing with entrepreneurs all over the world.
Many of these entrepreneurs can access cheaper means of production than you. They may have better access to raw
resources of cheap labor, for example. This has made modern entrepreneurship more challenging – and arguably more
rewarding – than ever before.

Conclusion: Where Does Entrepreneurship Go from Here?

Supply and Demand – market forces that ruled entrepreneurship
As years went by, the means of entrepreneurship changed dramatically but the core reasons for entrepreneurship
remained the same. Everywhere in the world, entrepreneurs arose to address demand by providing supply. They
innovated and invented new technologies to solve problems that nobody had ever solved before.
At the same time, competition has ensured that the entrepreneur’s self-interest doesn’t cause an overall negative impact
on society.
These foundational structures of entrepreneurship aren’t going to change anytime soon. For that reason, entrepreneurs
will continue to have a special place in society and will continue to be found at the forefront of innovation.

2.2 Contemporary Views on Entrepreneurship

Prof. Harvey Leibenstein - was an American economist and economic demographer. Born in Russia, educated in
Canada and the United States (Ph.D. from Princeton University, 1951), he served on the faculties of the University of
California, Berkeley (1951–1967) and Harvard University (1967–1992).

 X-efficiency is the degree of inefficiency in the use of resources within the firm: it measures the extent to
which the firm fails to realize its productive potential. X-efficiency arises either because the firm’s resources
are used in the wrong way or because they are wasted, that is not used at all.

Two main roles for the entrepreneur:

 Gap filler. If not all factors of production are marketed or if there are imperfections in markets, the
entrepreneur has to fill the gaps in the market. To put the enterprise in motion, the entrepreneur should fill
enough of gaps.
 Input completion, which involves making available inputs that improve the efficiency of existing production
methods or facilitate the introduction of new ones .The role of the entrepreneur is to improve the flow of
information in the market.
 Critical Minimum Effort Theory - According to Prof. Leibenstein, the overpopulated and underdeveloped
countries are characterized by the vicious circle of poverty. • “In order to achieve the transition from the state
of backwardness to the more developed state, where we can expect steady secular growth, it is necessary,
 though not always sufficient condition, that at the same point or during the same period, the economy should
receive a stimulus to growth that is necessary than a certain critical minimum size”.

Every economy is under the influence of two forces:

 Shocks - refer to those forces which reduce the level of output, income, employment and investment etc.
Stocks depress development forces which reverse the wheel of development.
 Stimulants refer to those forces which raise the level of income, output, employment and investment etc.
In other words, Stimulants impress and encourage development forces. They are called ‘Income
Generating forces’ which lubricate the wheel of development. Stimulants have the capacity to raise per
capita income above equilibrium level.

Growth Agents. The generation of stimulants depends on attitudes and motivation of the people and the incentives
given to them. However, the motivation and incentives are useless without the main factors of economic development.

According to Leibenstein, there are two types of incentives that are found in the underdeveloped countries:

 Zero-sum Incentives - Those incentives which do not increase national income, but they bring a change in the
distribution of income.
 Positive Sum Incentives- Those incentives which result in expansion of national income.

2.3 Entrepreneurship is a Process and Approach

2.4 The Filipino Entrepreneurs

 Good Human Relations and concern for other People (Hospitable)

 Filipino entrepreneurs are open to feel for others. Regards others with dignity and respect.
 Demonstrates ability to emphatize with others in helpfullness and generosity in times of need.
 Posses sensitivity to people's feeling (pakikiramdam) and sense of gratitude (utang na loob).
 Filipinos are very sensitive to the quality of interpersonal relationships and very dependent on them.
 Results to camaraderie and feeling of closeness to one another which helps promote unity and sense of social
justice.
 Filipinos have the capacity for hardwork given proper conditions.
 The desire to raise one's standard of living, to possess essentials of a decent life for one's family, combined with
the right opportunities and incentives, stimulate the Filipino to work very hard..
 Self-discipline
 Show Concern how to Adjust or Adapt to People (Pakikibagay)
 Cooperative in Spirit (Bayanihan)
 Endurance
 Achievement Orientedness
 Willingness to go another Mile (Pasensiya)
 Flexibility, Adaptability and Creativity
 Very Strong Hearted (Malakas ang Loob)

Weaknesses of Filipino Entrepreneur

 Profit Oriented - prefers not to sell their products than sell at lower price. Filipino entrepreneur have been taught
that the pursuit of market-share is a direct route to business success.
 Mañana Habit or Come what May (Bahala na!) - Filipino trait that resigns a person to luck as he believes the
end-result depends ultimately on fate.

Observed Traits of a Filipino Entrepreneur

 "Makatao" o "Pakikipagkapwa-tao" or Attention to People's Concern - this value can be singled out as "the
balancing factor of a Filipino Entrepreneuer which makes this style not just task or goal oriented but people
oriented as well. Filipinos who benefit from fruits of the entrepreneur will give him back his share. Customers
pay, competitors play fair, and workers demonstrate "malasakit" over the business.
 "Malakas ang Loob" or Strong Hearted - by nature, Filipinos are not timid not fearful. Undertakes projects
which should perhaps frighten him if he is less courageous to take the risks involved. Many pursue plans even if
not sure of future developments or events that may affect their accomplishment.
 "Pakikipagsapalaran" or "Risk Takers" - the saying "A coward runs away from the fight even before he is
wounded", shows that we as people do not consider it honorable to surrender before an uncertainty or challenge.
In many situations, specifically in the field of making a living, Filipino confidence justifies. Filipinos are very
quick to adjust to new and strange situations
 "Pagtitipid" or Thrift - assign a high value on thriftiness. It is hard to unwisely spend your hard-earned money.
Individuals who save eventually have enough to set their own form; and as entrepreneurs, they do not
drastically spend on things that do not pay back in terms of profit.
 "Kasipagan" or Hardwork - filipinos are naturally hardworking, a value that is essential to an entrepreneur.
  Strong Religiosity - there is heritage for strong religiosity which demands for honesty in dealing with others.
The trait is very useful in business because exploitative ways are always self-defeating in the long run.
 "Pagtitiis" or Persevering
 Profit Conscious
 Value Conscious - the vigorous pursuit of market share and rise in consumer power have driven profit from
most businesses and industries and now is the time for sophisticated entrepreneurs to shift ideology towards
value creation and growth. This can be achieved by identifying highly innovative and effective ways of creating
profitability through developing profit model business designs; and ability to create sustainable performance
across business cycles.
 "Bahala na" or Leaving it to God Values
 Faith and Religiosity - Filipinos innate religiosity enables us to comprehend and genuinely accept reality in the
context of God's will and plan.
- The faith of the Filipino is related to "bahala na", which, instead of being viewed as defeatist
resignation, may be considered positively as a reservoir of psychic energy, an important psychological
support on which we can lean during difficult times.
Filipino's faith results to courage, dare, optimism, inner peace, as well as the capacity to genuinely
accept tragedy and death. Therefore as every Filipinos say, "Bahala na", the decision is only left to God
"After He does his Best with what He Has".
 Colonial Mentality
 Sense of Patriotism and National Pride - a genuine love, appreciation and commitment to the Philippines and
things Filipino.
- supporting the "Buy Filipino" movement and promote "Sariling Atin" by encouraging every Filipino to
wear and use Filipino clothes and products which results to development of Trade and Industry.
 Crab Mentality - a sense of the common good. Every Filipino will be able to look beyond selfish interests, a
sense of justice and sense of outrage at its violation. Support someone else’s dream or help them to reach their
goal, you may just find that you have actually helped yourself to get closer to your own.
 Manana Habit and Lack of Discipline
 Time Management - the opportunities are endless and only require an additional 30 minutes to an hour a day to
master over time.
 Creative and resourceful, adept at learning and able to improvise and make use of whatever is at hand. Make
new things out of scrap and make old machines running.
 Filipinos have the tendency to overdo the positive traits so that they turn negative. Just as they see things
positively, they show so much confidence and take things for granted.
 Filipinos are considered as persistent, persevering people and do not easily give-up in the face of difficulty.

2.5 The Challenge to Entrepreneurs

1. Cash flow management

The challenge: Cash flow is essential to small business survival, yet many entrepreneurs struggle to pay the bills (let
alone themselves) while they’re waiting for checks to arrive. Part of the problem stems from delayed invoicing, which is
common in the entrepreneurial world. You perform a job, send an invoice, then get paid (hopefully) 30 days later. In the
meantime, you have to pay everything from your employees or contractors to your mortgage to your grocery bill.
Waiting to get paid can make it difficult to get by — and when a customer doesn’t pay, you can risk everything.

The solution: Proper budgeting and planning are critical to maintaining cash flow, but even these won’t always save
you from stressing over bills. One way to improve cash flow is to require a down payment for your products and
services. Your down payment should cover all expenses associated with a given project or sale as well as some profit for
you. By requiring a down payment, you can at least rest assured you won’t be left paying others’ bills; by padding the
down payment with some profit, you can pay your own.

2. Hiring employees

The challenge: Do you know who dreads job interviews the most? It’s not prospective candidates — it’s entrepreneurs.
The hiring process can take several days of your time: reviewing resumes, sitting through interviews, sifting through so
many unqualified candidates to find the diamonds in the rough. Then, you only hope you can offer an attractive package
to get the best people on board and retain them.

The solution: Be exclusive. Far too many help wanted ads are incredibly vague in terms of what qualifications
candidates must have, what the job duties are, what days and hours will be worked, and what wages and benefits will be
paid. You can save yourself a ton of time by pre-qualifying candidates through exclusive help wanted ads that are ultra-
specific in what it takes to be hired at your firm, as well as what the day-to-day work entails. Approach your employee
hunt the same way you would approach a customer-centric marketing campaign: through excellent targeting.

3. Time management
The challenge: Time management might be the biggest problem faced by entrepreneurs, who wear many (and all) hats.
If you only had more time, you could accomplish so much more!

The solution: Make time. Like money, it doesn’t grow on trees, of course, so you have to be smart about how you’re
spending it. Here’s how:

 Create goal lists: You should have a list of lifetime goals, broken down into annual goals, broken down into
monthly goals, then broken down into weekly goals. Your weekly goals, then will be broken down into specific
tasks by day. In this manner, what is on your task list in any given day is all you need to do to stay on track with
your lifetime goals
 If any tasks do not mesh with your goals, eliminate them
 If any tasks do not absolutely have to be completed by you, delegate them
 Consistently ask yourself: “Is what I’m doing right now the absolute best use of my time?”

4. Delegating tasks

The challenge: You know you need to delegate or outsource tasks, but it seems every time you do something gets
messed up and you have to redo it anyway.

The solution: Find good employees (see above) and good outsourced contract help, for starters. You might have to pay
a little more for it, but the savings in time (and the resulting earning potential) more than make up for it.

Next, be ultra-specific as to what you want done. It will take a little more time at first, but write down detailed steps
listing exactly what you want your help to do. Don’t make assumptions, and don’t assume your help will be able to
think for themselves (they can, but they will complete the job verbatim because that’s what they’re trained to do). So,
don’t say “list stats in a spreadsheet” when you can say “alphabetically list XYZ in the right spreadsheet column, then
list statistic A in the next column.” It might seem like overkill, but take the time to be specific once, and your help will
get it right every time thereafter.

5. Choosing what to sell

The challenge: You know you could make a mint if you just knew what products and services to sell. You’re just
unsure how to pick a niche.

The solution: Admit that you’re weak in identifying prosperous niches, and delegate the task to someone who is strong
in this area. You don’t have to hire a huge, expensive marketing firm; rather, recruit a freelance researcher who has
experience in whatever type of field you’re considering entering (retail e-commerce, service industry, publishing, etc.).
Have them conduct market research and create a report with suggested niches, backed by potential profit margins and a
complete SWOT analysis: Strengths, Weaknesses, Opportunities and Threats.

This isn’t to say you should have someone else decide for you; however, if you’re not good at identifying niches it’s a
good idea to have someone who is make suggestions. You can then analyze the suggestions for yourself to determine if
you agree. Taking this step now can save you a lot of time, money and hassles later — and it can save your entire
business and livelihood.

6. Marketing strategy

The challenge: You don’t know the best way to market your products and services: print, online, mobile, advertising,
etc. You want to maximize your return on investment with efficient, targeted marketing that gets results.

The solution: Again, if you’re not adept at creating marketing plans and placing ads, it’s a good idea to outsource your
marketing strategy to someone who is. At this point, all you need is a core marketing plan: what marketing activities
will you undertake to motivate purchases? Give your planner a budget and tell them to craft a plan that efficiently uses
that budget to produce profits.

This is not the time for experimentation. You can do that later, on your own or with the advice of your marketing
strategist, after you’ve established a baseline that works.

7. Capital

The challenge: You want to start or grow your business, but you have little capital to do it with.

The solution: There are many ways to earn funding, from traditional bank loans to family and friends to Kickstarter
campaigns. You can choose these routes, certainly, but I prefer the self-fueled growth model in which you fund your
own business endeavors.
Instead of trying to launch a multi-million dollar corporation overnight, focus on your initial core customers.
Continually work to find new customers, of course, but consistently strive to be remarkable to those customers you
already serve. Word-of-mouth will spread, and more customers will come looking for you. As they do, develop systems
and business processes that allow you to delegate tasks without sacrificing quality. Your business will grow slow and
steady, and you’ll be able to solve problems while they’re small.

Think about where you want to be five years from now. Can you get there without help, even if you have to delay
growth a bit while you’re doing it? This is the best strategy to adopt for small business entrepreneurs. If you do feel you
need funding, however, be sure to consult an attorney to make sure you’re not giving up too much of your business to
get it.

8. Strapped budget

The challenge: Even though cash flow is fine, it seems you never have enough in your budget to market your company
to its full potential.

The solution: Unless you’re one of the Fortune 500 (and even if you are), every entrepreneur struggles with their
budget. The key is to prioritize your marketing efforts with efficiency in mind — spend your money where it works —
and reserve the rest for operating expenses and experimenting with other marketing methods.

Keep a close eye on your money, too: chances are, there are areas you can skim to free up more funds. Unless an
expense is absolutely critical to your business and/or represents an investment with an expected return, cut it. In fact, do
this exercise: See how lean you can run your business. You don’t have to actually do it, but cut everything you can and
see if you still feel you can run your business (save for what you have to delegate and market with). Somewhere in
between your leanest figure and your current budget is a sweet spot that will allow you to be just as effective and leave
funds leftover to fuel growth.

9. Business growth

The challenge: We’re assuming you are growing, not that you can’t grow, and you’ve come to the point at which you
can’t take on any more work in your current structure.

The solution: Create new processes that focus on task delegation. Many entrepreneurs, used to wearing all the hats, find
themselves in this position once they’ve achieved a modicum of success. Because you’re doing everything, your growth
halts to a stop when it hits a self-imposed ceiling. The only way to break through is to delegate tasks to others to take
yourself out of the production end, and segue into management and, finally, pure ownership.

10. Self-doubt

The challenge: An entrepreneur’s life is not enviable, at least in the beginning. It’s extremely easy to get discouraged
when something goes wrong or when you’re not growing as fast as you’d like. Self-doubt creeps in, and you feel like
giving up.

The solution: Being able to overcome self-doubt is a necessary trait for entrepreneurs. Having a good support system
will help: family and friends who know your goals and support your plight, as well as an advisory board of other
entrepreneurs who can objectively opine as to the direction of your business.

One of the best ways to deal with self-doubt is to work on your goals and tasks lists. When you’re down and lack
motivation, look at your lists and know that the tasks you do today are contributing to your lifetime goals. By doing
them, you’re one step closer, and you can rest assured that you are, indeed, on the path to business success.

Entrepreneurs face many challenges, and volumes have been written about how to overcome them. Perseverance and
intelligence are your allies; use them to your advantage to keep working toward your goals. Understand that you’re not
the first to struggle. Because of that, there are many resources available to help you get through your darkest days as an
entrepreneur, so you can reap the immeasurable rewards that come with building your own successful business.

2.6 Entrepreneurship and Philippine Education

What is entrepreneurship-oriented education like?

First, it drives students to be creators, not mere replicators. One gets the sense that too many of our teachers
think of education simply as a process of transferring information, which is good for turning out trivia quiz contest
champions, but will not produce problem-solvers. Others see it a level higher—i.e., as imparting knowledge, which is of
a higher order than information. Information pertains to facts, while knowledge pertains to concepts. But this is not
enough. True education imparts not merely knowledge but wisdom, or the ability to organize and make good use of
knowledge toward improving people’s lives.
I believe that the emphasis on teaching science and mathematics in our schools can be carried too far, particularly if it’s
at the expense of teaching the liberal arts, humanities and social studies including history. It is these latter disciplines
that impart deeper wisdom to students, and must not be neglected in the pursuit of competitiveness in science and
mathematics. As we pursue the K to 12 curriculum, our education planners would do well to keep this in mind.
One may even argue that in this age of information and communication technology, teachers should be less concerned
about providing information, which students can readily access by themselves from books and electronic media
including the Internet. But effective education stimulates in students the hunger for information and knowledge, and
provokes them to seek these on their own. More importantly, it trains them to make good use of information and
knowledge toward solving everyday problems and meeting society’s challenges.
Second, entrepreneurship-oriented education trains students for effective social interaction, which is key to
successful entrepreneurship. This will not be achieved in a teacher-centered classroom where communication proceeds
largely one-way from the teacher to some 40-60 students preoccupied with taking notes. More advanced educational
systems promote student-centered classrooms where they are encouraged to interact and work as teams. The
effectiveness of the educational system hinges not only on the content but, equally important, on the manner and process
by which education takes place, whether in or out of the classroom.
Teacher training, then, involves far more than equipping them with technical competence (i.e., more information and
knowledge). More importantly, it should also train them to be effective facilitators of gaining wisdom.
Third, entrepreneurship-oriented education encourages students to discover, experiment and take risks. Risk-
taking is second nature to good entrepreneurs. A nation of seguristas cannot be a progressive nation. Many of us like to
lament how too many Filipino businessmen seem content with imitating and copying others’ successful businesses,
rather than creating and pursuing new business ideas. Our history of an import-substituting industrial policy derives
from this attitude, and has led us to a tradition of protectionism whose continuing vestiges still slow us down today in
the face of the impending Asean Economic Community. Risk-taking and innovation are not something one learns from
books, but are fostered through the approach and manner by which education is delivered by our schools and teachers.
Most of us now recognize that our educational system is the first place we should look in seeking the key to inclusive
economic development. As we constantly strive to improve the way we educate our children, it is well worth
remembering that our objective is to create a new generation of Filipinos who will not merely be earners of incomes, but
creators of wealth.

3.1 The Philippine Economy: How Does an Economy grow

Harrod-Domar Theory - laissez-faire theory
 Offer faster method of distributing goods and services
 Income, jobs, goods and services
 Improves the quality of life

Innovation theory - government as the key role in the economic development

Keynesian theory - the government should not interfere in economic activity

Kaldor theory - entrepreneurial role in the economy

 Contributes more equitable distribution of income,

 Utilizes and mobilizes resources to make the country productive

 Brings social benefits through the government

 Agriculture plays a major role in the economic development

 Technology is the key factor in the production of goods and services

 Development and growth theories

 More products can be produced though machines

 Stresses the role of innovators or entrepreneurs in the economic development

Ricardian theory

3.2 The Role of Entrepreneurship in Economic Development

7 ROLES OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT OF A COUNTRY

1. Wealth Creation and Sharing: By establishing the business entity, entrepreneurs invest their own resources and
attract capital (in the form of debt, equity, etc.) from investors, lenders and the public. This mobilizes public wealth and
allows people to benefit from the success of entrepreneurs and growing businesses. This kind of pooled capital that
results in wealth creation and distribution is one of the basic imperatives and goals of economic development.
2. Create Jobs: Entrepreneurs are by nature and definition job creators, as opposed to job seekers. The simple
translation is that when you become an entrepreneur, there is one less job seeker in the economy, and then you provide
employment for multiple other job seekers. This kind of job creation by new and existing businesses is again is one of
the basic goals of economic development. This is why the Govt. of India has launched initiatives such as StartupIndia to
promote and support new startups, and also others like the Make in India initiative to attract foreign companies and their
FDI into the Indian economy. All this in turn creates a lot of job opportunities, and is helping in augmenting our
standards to a global level.
3. Balanced Regional Development: Entrepreneurs setting up new businesses and industrial units help with regional
development by locating in less developed and backward areas. The growth of industries and business in these areas
leads to infrastructure improvements like better roads and rail links, airports, stable electricity and water supply,
schools, hospitals, shopping malls and other public and private services that would not otherwise be available.
Every new business that locates in a less developed area will create both direct and indirect jobs, helping lift regional
economies in many different ways. The combined spending by all the new employees of the new businesses and the
supporting jobs in other businesses adds to the local and regional economic output. Both central and state governments
promote this kind of regional development by providing registered MSME businesses various benefits and concessions.
4. GDP and Per Capita Income: India’s MSME sector, comprised of 36 million units that provide employment for
more than 80 million people, now accounts for over 37% of the country’s GDP. Each new addition to these 36 million
units makes use of even more resources like land, labor and capital to develop products and services that add to the
national income, national product and per capita income of the country. This growth in GDP and per capita income is
again one of the essential goals of economic development.
5. Standard of Living: Increase in the standard of living of people in a community is yet another key goal of economic
development. Entrepreneurs again play a key role in increasing the standard of living in a community. They do this not
just by creating jobs, but also by developing and adopting innovations that lead to improvements in the quality of life of
their employees, customers, and other stakeholders in the community. For example, automation that reduces production
costs and enables faster production will make a business unit more productive, while also providing its customers with
the same goods at lower prices.
6. Exports: Any growing business will eventually want to get started with exports to expand their business to foreign
markets. This is an important ingredient of economic development since it provides access to bigger markets, and leads
to currency inflows and access to the latest cutting-edge technologies and processes being used in more developed
foreign markets. Another key benefit is that this expansion that leads to more stable business revenue during economic
downturns in the local economy.
7. Community Development: Economic development doesn’t always translate into community development.
Community development requires infrastructure for education and training, healthcare, and other public services. For
example, you need highly educated and skilled workers in a community to attract new businesses. If there are
educational institutions, technical training schools and internship opportunities, that will help build the pool of educated
and skilled workers.