Entrepreneurship as the missing factor in sustainable economic development of poor nations: a systematic analysis of factors of production

Entrepreneurship has been viewed and cited by researchers as an important and key contributor to a nation's industrial development as well as a significant driving force in the nation's economic development (Steward and Boyd, 1988). Economists in the study of factors of production (Exhibit 1) identify entrepreneurship and knowledge as the two most critical of the five factors. In the same trend of argument, a management expert and business consultant, Peter Drucker (1999) declares knowledge as the most important factor giving examples of how the young workers on the high-tech industries of Silicon Valley area of California are often referred to as knowledge workers. It will be argued in this paper that entrepreneurial skills/characteristics include knowledge and the ability to recognize analyze and seize opportunities. Additionally, an analysis (Nickels etal, 2004) of the rich and poor countries to determine what causes the difference in the levels of wealth show that entrepreneurship and knowledge are the most dominant cause of wealth. The analysis indicates that most poor countries have abundance of land, labor, and natural resources (China and Russia as command economies) but lack knowledge and entrepreneurship. In contrast, Japan and Hong Kong for example, are relatively rich countries but are poor in land and Natural resources. It will be argued in this paper that capital could not be the missing ingredient since capital (tools, machinery, etc) could be made available by International Monetary Fund (IMF), World Bank and other funding agencies including the national gorvernments. This paper examines the relationships among the factors of production( land, labor, capital, knowledge and entrepreneurship) and the potential of a country to develop and sustain its economy. The paper argues that entrepreneurship is the most critical and necessary factor for effective economic development. The current globalization process appear to be forcing industrialized nations to find ways to revive entrepreneurial activities in their efforts to reactivate and sustain the economic growth and to compete effectively in the global society.