Keywords: Entrepreneurs in the marketplace
By The Federal Reserve Bank of Dallas
By The Federal Reserve Bank of Dallas
When any good or service is produced, resources are necessary. All of the world’s productive resources can be grouped into four broad categories: land, capital, labor and entrepreneurship. Land represents more than just the lot where a business is built. It includes a wide range of natural resources—the fertile soil, various minerals, fossil fuels, food crops and water, just to name a few. Capital is made up of manufactured resources such as the buildings, equipment, hardware and tools needed for production. Labor is also called a human resource because it includes all the people involved in the production process—for example, the farmers, accountants, cab drivers, barbers, assemblyline workers, computer programmers, etc., who provide skills and expertise to build products or offer services in exchange for wages and salaries. The fourth type of productive resource is entrepreneurship. An entrepreneur is the person who assumes the risk of acquiring the other resources necessary to begin production of a good or service.
Usually, it is easy to identify the labor, the land and the capital resources that are used in production. When friends go to dinner at their favorite restaurant, the meals are prepared by a chef and served by a waiter. The vegetables were grown on a farm and cooked on a stove. But how did all those resources come together to allow the restaurant to operate? It was the entrepreneur who conceived the idea for the restaurant, procured the building, hired the staff, bought the stove, purchased the ingredients and assumed the risk of its success.
[...] Entrepreneurs in the Marketplace
Entrepreneurs and the innovation they often bring to the marketplace are the driving forces in a market economy. The market might be as narrow as a neighborhood or a city or as broad as a nation or even the entire world, but the entrepreneur sees the opportunity to launch a new idea and assumes the risk of its success. Profits are the way the market signals to entrepreneurs that they are on the right track. Profits reward the entrepreneur for doing things that customers value. Likewise, financial losses are the way the market signals that a product or idea may not provide enough value to the customer. This is the risk of entrepreneurship. If the entrepreneur pays for the resources required to produce a product or service but fails to sell it for a profit, the business will eventually shut down. The market can be a harsh critic and a sound judge.
[...] Globalization
It appears that entrepreneurs will face both opportunities and challenges throughout the 21st century. Globalization—which is the increasing integration of the world’s economies through the flow of goods, services, financial capital and people across national borders—will play a significant role. This phenomenon has presented entrepreneurs with opportunities by opening new markets where resources are available and goods and services can be sold. Small firms can access new technologies and methods of production, allowing them to compete with more established firms. Through globalization, information and knowledge are widely available and easy to share. Download the full article (24 pages)
