**2. Entrepreneurship of the twenty-first century: Conceptual boundaries**

Generally, the field of entrepreneurship analyzes the conditions under which, why, when, and how changes to produce, identify, and employ resources might lead to development. As a result, the spectrum of opportunity identification and exploitation could be used to describe a wide understanding of entrepreneurship, although not all opportunities for exploitation will automatically serve the interests of society. The intention of an entrepreneur is to engage in profitable entrepreneurial activity, which includes identifying, seizing, and using opportunities inside alreadyexisting businesses (or by establishing new businesses) in order to foster innovation by providing innovative services or goods [1]. Before defining what is meant by this innovation, we must consider that three main conceptual approaches to entrepreneurship can be distinguished in the specialized literature. The first approach focuses on the entrepreneurial function, the second on firm performance, and the third on owner-operated firms. The functional perspective is concerned with the dynamic actors who make key decisions about investment, production, innovation, location, or research and development [2]. This definition of entrepreneurship encompasses more than just entrepreneurs running their own businesses. Additionally, it covers the various dynamic entrepreneurs operating within the organizations, whether they serve as managers of multinational corporations, state-owned firms, or non-profits.

According to this perspective, entrepreneurship relates to dynamism, innovation, and innovation as a behavioral attribute. Similar to the early Schumpeterian tradition, it is difficult to distinguish between creative activity and entrepreneurial activity since they are both forms of behavior.

The second line of research focuses on the firm as a key economic actor. These include owner-operated firms, joint-stock companies, state-owned firms, joint ventures, and subsidiaries of multinationals.

The third area of study focuses on owner-operated businesses, a significant subset of enterprises. A person who owns and actively manages his own company is referred to as an entrepreneur. Small and medium-sized enterprises (SMEs) and selfemployment are frequently the subjects of this discussion. At the same time, it aims to draw attention to the difference between high-potential creative organizations that endure and flourish and stagnant enterprises that barely make it through the market or dissolve. Start-ups are a subcategory of businesses that attract special attention, particularly in the context of Global Entrepreneurship Monitor (GEM) activities, which offers global estimates of Total Early-Stage Entrepreneurial Activity (TEA) indicators. We must not overlook that occasionally extremely large organizations are also managed by their entrepreneurial owners, even if the focus of this research direction is on SMEs [3].

## **3. Innovation and entrepreneurship: The importance and effects of association**

If one adheres to the Schumpeterian tradition of identifying the pursuit of new combinations as the primary attribute of entrepreneurship, it becomes challenging to distinguish between entrepreneurship and innovation because the entrepreneur is seen as the main protagonist of dynamic capitalism [4]. Entrepreneurs frequently combine new things, such as new markets, materials, goods, and organizational structures. These elements make the terms "entrepreneurship" and "innovation" nearly interchangeable. A difference between the two forms of competition—often referred to as Schumpeter Mark I and Schumpeter Mark II—must be established from the above standpoint, which is based on the later works of Joseph Schumpeter (1883–1950). Entrepreneurs and small enterprises are in charge of innovation in Mark I. The dominant players in the Schumpeterian Mark II competition are huge oligopolistic businesses. Innovation is a distinct component of entrepreneurship, therefore it develops in research and development facilities rather than in management bureaucracies where the entrepreneurial role is assigned [5].

The drawback of Mark's identification of innovation with entrepreneurship is that it prevents us from differentiating between inventive and non-creative entrepreneurship, stagnant and destructive entrepreneurship, high-growth entrepreneurship, and survival entrepreneurship. Additionally, it ignores the fact that many innovations take place in businesses that are supervised by managers as opposed to entrepreneurs. Therefore, it makes analytical sense from the standpoint of development to distinguish between entrepreneurship and innovation as separate important drivers in development. Entrepreneurial businesses are not the only sources of invention; some are significantly more inventive than others. An entrepreneurial spirit that is more noticeable in certain individuals than others can determine how inventive a nation is, which highlights the need of pinpointing the variables that influence innovative performance [6]. Some of the reasons may be attributed to aspects of the business or the owner, such as their background

and experience, the size and age of their company, or their organizational culture. However, there is also a concern regarding how market factors, government regulations, and the institutional setting may either encourage or inhibit creative behavior.

Schumpeter provided the essential justification for the concept that entrepreneurs are creative thinkers. However, Adam Smith also contributed with a crucial insight when he stated that, while acting in their own best interests, entrepreneurs may also help society as a whole. He considered that there was a correlation between the entrepreneur's level of technological innovation, specialization, market size, and performance. Thus, markets can be considered key development drivers as a result.

However, markets do not perform this function in the most underdeveloped emerging nations. As a result of inadequate infrastructure, low per capita income, defective policies, and institutional limitations, developing markets are frequently small, fragmented, and inefficient. Markets frequently operate without good governance, predictability, openness, as well as other institutional requirements. It is challenging for innovations to proliferate where markets are constrained by trade restrictions (natural obstacles like a lack of infrastructure or man-made barriers). Over time, new concepts and technology have been introduced to traders through international commerce. This is one of the factors that contribute to trade's effectiveness as a growth driver. There is almost no motivation for entrepreneurs to deliver breakthrough inventions to the company when markets are constrained by insufficient regulation or suffocated by oppressive monopolies and governments [7]. Entrepreneurs will not be motivated to invest in brand-new domestic or new global inventions if insufficient property rights and lax contractual enforcement impact the dangers of returning to inventive activities.

#### **3.1 The impact of innovation on development**

Modern growth and development theories are built around innovation. Innovations have replaced more conventional elements like costs, technological advancements in both products and processes, and other criteria in determining competitiveness and corporate success. The global economy has seen a rise in knowledge-based competition. Innovation and technical development are now essential components of growth, even in traditional economic sectors like the textile industry. The very same certainly applies to service industries including retail, distribution, finance, and information technology. The modernization of manufacturing processes through technology, the transition to higher value-added activities in global value chains, and changes in the structure of the economy are all linked to innovation. New generations of tools and machinery as well as younger, more educated labor generations are indicators of technological evolution [8]. As a result of formal and informal investments in research and development, as well as on-the-job learning abilities, there are also unaltered advancements in product and process technology. Consolidated technical change raises total factor productivity, explaining the variance in economic growth rates between nations. When combined with improvements in product quality and resource efficiency, this leads to a wider variety of goods and services.

Lipsey, Carlaw, and Bekar briefly summarize this significant effect of technological change as follows: "People living in the first decade of the 20th century did not know modern dental and medical equipment, penicillin, surgery, safe births, genetic disease control, personal computers, compact discs, television channels, automobiles, fast opportunities and cheap worldwide, travel, affordable universities, central heating, air conditioning … technological change has made all of these things possible" [9].

#### *Entrepreneurship in Emerging Economies: The Role of Innovation and Institutions DOI: http://dx.doi.org/10.5772/intechopen.109893*

Both the theory of endogenous growth and the theory of evolution emphasize that investments in knowledge have increasing returns because of favorable externalities and the dissemination of knowledge among economic actors, whereas traditional factors of production like labor or capital are subject to decreasing returns. According to endogenous growth theory, more developed economies gain from knowledge investment than less developed ones do due to their superior innovation processes. First, the most developed economies continue to have a significant concentration of research and development and scientific endeavors. Thus, the theory of endogenous growth aids in our understanding of the process through which rich and poor countries in the global economy experience a divergence in per capita income.

But in underdeveloped nations, creativity and technological advancements can drive fast growth. The fact that numerous poor nations have seen their economies revive at a quick pace amid an increasingly unequal global economy is something that endogenous growth theory overlooks. To accomplish fast growth, they were able to absorb in and inventively adapt foreign technological know-how. Growth and evolution theories claim that evolving economies can benefit from technological lag, gaining access to new technologies without having to face the full costs and risks of making an investment in new knowledge [10].

Clearly, the social and absorptive capacities of developing nations determine whether they can benefit from the technical delay. Therefore, innovation is vital for developing nations because it involves more than just creating new products or processes; it also involves having the ability to creatively use technology. When a nation's absorptive capacities are sufficiently advanced, extremely fast economic growth in a technologically backward nation is not exceptional.

The classic concept of macroeconomic growth is a black box that contains inputs and outputs, therefore now is the optimal time for the entrepreneur to intervene and cause change. By allowing the investigation of the traits and potentials of various business types and entrepreneurs who are in charge of capital accumulation, employee engagement, structural changes, and the creation or adoption of new technologies, the field of entrepreneurship research attempts to unlock this closed box. Entrepreneurs behave in the economic context in which they operate, responding to opportunities, challenges, uncertainties, restrictions, and incentives [11]. This quality places entrepreneurship at the core of societal advancement and economic progress.

Entrepreneurs in developing nations shape the pace of technological advancement and the structural transformation of the economy through developing, commercializing, and adopting new ideas. Technology is applied and disseminated by entrepreneurs in a way that raises the overall productivity of the components employed in the development processes, frequently through starting or growing businesses. Entrepreneurs' ingenuity, aptitude, dynamism, and inventiveness are critical elements of absorptive capacity, the defining characteristic of successful development experiences. The manner in which entrepreneurs execute this function will change depending on the stage of development a country is in [12].

The context of developing nations must be taken into consideration. Innovative entrepreneurs in less developed countries initially concentrate on making small adjustments to already-existing international projects rather than taking the risky step of developing brand-new goods and technologies. The difficulties faced by entrepreneurs will vary as the economy develops since they will gradually transition to fresh, worldwide innovations in the subsequent stages.

Even if a growing market is one of the conditions for innovation, this hypothesis will fall short given how intensely innovation is being pursued globally. Public policy is becoming more widely acknowledged to play a vital supporting role in encouraging entrepreneurial innovation because of the beneficial externalities associated with an investment in information, technological advancement, and human capital. Entrepreneurs with a wealth of knowledge, experience, and talent are necessary, but innovation also calls for specialized labor.

The discussion of economic growth in both developed and emerging economies now regularly includes innovation policy and national innovation systems [13]. In fact, the United States, which is regarded as having one of the most entrepreneurial economies in the world, is where the idea of an innovation policy first arose. Successful entrepreneurship has relied heavily on government, investment in the knowledge base, market, and intellectual protection, and state subsidies to support business investment strategies in all advanced economies of the past several decades, particularly in the United States, where the ideology of free-market entrepreneurship is most virulent. The benefits of entrepreneur innovation in developing nations depend on the features of the innovation system in which they are engaged. A developing nation will be more capable to utilize advanced technology as knowledge enters the domestic economy faster, accelerating the rate at which the process of technological modernization takes place [14].

A greater contribution of dynamic entrepreneurship to economic growth is observed in more developed economies than in developing countries, where low levels of human and financial capital, the absence of a robust firm size distribution, and weak institutional frameworks limit the contribution of entrepreneurs. On the other hand, the weaker the innovation system, the more the efforts of individual entrepreneurs will contribute to accelerated economic development and recovery.

#### **3.2 Innovation in the context of globalization**

Converting innovations into reality is what is meant by the concept of innovation. A strictly technological approach focuses solely on technological innovation, which is defined as the outcome of technologically knowledge-intensive entrepreneurship, as opposed to product and process advancements. A larger definition of innovation includes the creation of new goods, methods, and sources of supply, as well as the exploitation of emerging markets and the creation of new business models [15]. More gradual developments and extreme inventions can be distinguished from one another. It is essential to remember that innovation also relates to the dissemination of novelty toward other economic actors and does not exclusively refer to the addition of innovation to an existing concept.

The contrast between inventions that are innovative on a global scale, innovative on the domestic market, or innovative on the company level, is critical in the literature on innovation. Globally breakthrough innovations are mostly found in developed economies. It is based on research and development at the frontiers of global knowledge. Innovations will likely be novel to the market or to the enterprise in emerging economies that are slightly farther away from the global technical horizon.

Market innovations in emerging economies are connected to global diffusion and technological adoption. The domestic company introduces new products to the domestic market after they have previously been manufactured overseas. At the corporate level, new innovations correspond to knowledge transfers from the internal economy. Although the idea is already on the market, a specific company is now employing it. What is novel for the company might not always be innovative in the strictest sense. It implies that certain forms of inventions, which are novel to small businesses in emerging nations, can coexist with weak economies and expanding

technological disparities on the global frontier [16]. Similar to entrepreneurship, creative performance has been measured using a range of secondary metrics, including publications, citations, R&D inputs, patents, trademarks, and trademark applications.
