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Lesson 11:Entrepreneurship Development

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1 ENTREPRENEURSHIP SKILLS o 1.1 INTRODUCTION o 1.2 Content 1.2.1 What is entrepreneurship? 1.2.2 Who is an entrepreneur? 1.2.2.1 Initiative 1.2.2.2 Opportunity seeking 1.2.2.3 Persistence 1.2.2.4 Information seeking 1.2.2.5 Demand for quality and efficiency 1.2.2.6 Risk taking 1.2.2.7 Goal setting 1.2.2.8 Commitment to work 1.2.2.9 Systematic planning and monitoring 1.2.2.10 Persuasion and networking 1.2.2.11 Independence and self confidence 1.2.3 Types of employment 1.2.4 Motives for self-employment 1.2.5 Advantages of self-employment

ENTREPRENEURSHIP SKILLS
INTRODUCTION
Dear learner, you are welcome to Lesson 10 of your course. This unit introduces you to entrepreneurship skills. Many factors have contributed to the high unemployment rate while formal wage employment is shrinking very fast. Self employment also called entrepreneurship is increasing and offering more job opportunities for you and your friends. Thus you, as an individual, should endeavour to learn the basic skills involved in entrepreneurship to help you set up your own business or enterprise. I hope you will enjoy this unit. The concept of

entrepreneurship has developed over the years. An exposure to entrepreneurship skills will stimulate you and others towards different opportunities beside wage employment. I hope you will transfer to your peers the skills you will acquire in entrepreneurship. Besides, the skills you will acquire should guide your everyday work and experiences develop your entrepreneurial traitsmotivate you to establish your own enterprise and subsequently create jobs for others and improve upon your own quality of life and that of your families through better job opportunities. This unit is interesting and practical. You can use the ideas and skills in your everyday life. You will surely enjoy it!

Objectives
By the end of the unit you will be able to; 1. acquire basic knowledge and skills for creating and identifying business opportunities 2. explain why there is the need for self employment 3. identify the vocations or enterprises in catering and factors to consider in setting up a catering enterprise 4. set up a catering enterprise 5. explain the importance of good customer relations for an enterprise 6. write a simple business plan

Content
Hello learner, you are welcome to the very first section of the unit on entrepreneurship skills. As you will expect, this section introduces you to :1. 2. 3. 4. 5. 6. the concept of entrepreneurship. what we mean by entrepreneurship, who an entrepreneur is, characteristics of an entrepreneur, the difference between an entrepreneur and a business person sources of information for new entrepreneurs.

What is entrepreneurship? Who is an entrepreneur?


An entrepreneur is a person who develops a new idea and takes the risk of setting up an enterprise to produce a product or service which satisfies customer needs. All entrepreneurs are business persons, but not all business persons are entrepreneurs. Let us now think of why all business persons are not entrepreneurs. Think of a woman who sits by the roadside leading to your home and who has been selling the same type of food, from the same size of saucepan or pot, from the same table top, and may not have been able to change her standard of living to any appreciable extent. Such a woman may be a business person but not an entrepreneur. The entrepreneur, on the other hand is the business person who is not satisfied with his/her performance and therefore always finds ways to improve and grow. Now let us consider the characteristics or some special qualities and strengths which make an entrepreneur different from a business person. It is important for us to note that a successful entrepreneur possesses the following characteristics.

Initiative An entrepreneur takes actions that goes beyond job requirements or the demand of the situation Opportunity seeking An entrepreneur is quick to see and seize opportunities. He/she does things before he/she is asked to work by people or forced by situation. Persistence An entrepreneur is not discouraged by difficulties and problems that come up in the business or his/her personal life. Once she sets a goal she is committed to the goal and will become completely absorbed in it. Information seeking An entrepreneur undertakes personal research on how to satisfy customers and solve problems. He/she knows that different people have different capabilities that can be of help to them. He/she seeks relevant information from his/her clients, suppliers, competitors and others. He/she always wants to learn things which will help the business to grow. Demand for quality and efficiency An entrepreneur is always competing with others to do things better, faster, and at less cost he/she strives to achieve excellence.

Risk taking Are you afraid of uncertainties? Then you cannot be an entrepreneur. Entrepreneurs are not high risk takers. They are also not gamblers; they calculate their risks before taking action. They place themselves in situations involving moderate risk so they are moderate risk takers. Goal setting An entrepreneur sets meaningful and challenging goals for him/herself. An entrepreneur does not just dream. Him/she thinks and plans what he/she does. He/she is certain or has hope about the future. Commitment to work An entrepreneur will work long hours after into the night just to be able to keep his/her promise to his/her client. He/she does the work together with his/her workers to get a job done. He/she knows how to make people happy to work for him/her due his/her dynamic leadership. Systematic planning and monitoring An entrepreneur plans for whatever he/she expects in the business. He/she does not leave things to luck. He/she plans by breaking large tasks down into small once and puts time limits against them. Since and entrepreneur knows what to expect at anytime he/she is able to change plans and strategies to achieve what he/she aims at. Persuasion and networking An entrepreneur acts to develop and maintain business contacts by establishing good working relationship. Uses deliberate strategies to influence others. Independence and self confidence Most entrepreneurs start business because they like to be their own boss. They are responsible for their own decisions.

Summary
We have so far discussed the concept of entrepreneurship, special qualities and strengths which

make an entrepreneur different from a business person. With this as the main focus, we deem it necessary that you identify your strongest traits as you prepare to start your own business.

I am going to introduce you now to types of employment and the need to go into self-employment. This will help you to take decisions when you are going into employment

Are you ready? Let us start by brain-storming with the following activity.

Activity
10.1 1. who is responsible for your school fees? 2. what kind of jobs do people do for the government, companies and other individuals and get paid for regularly? 3. mention some of the activities by which people earn their own living

In your responses you may have mentioned wage employment and self employment. Let us now proceed with a discussion.

What is employment? Employment is working to earn a living. Payment could be in the form of wages or salaries depending on the nature of the work.

Types of employment

There are two types of employment:

1. Self-employment: Self-employment is owning your own business alone or in partnership with others or with members of your family. It is the alternative to wage employment 2. Wage employment: Working for someone, an organisation or a company and getting for the work done.

Motives for self-employment


Self employment has some motives which you need to know. You may contact somebody or people who are already in self-employment to learn about them. However, here are a few suggested motives for self-employment. 1. A person chooses to be self-employed if he/she:has a particular interest in the trade or business 2. follows a family tradition: my grandmother was a renowned caterer. My mother and elder sisters also are and therefore, I also want to be a caterer 3. has no other option of earning a living 4. is meeting the present and future needs Dear learner, the knowledge of the background to employment situation in Ghana will enhance your decision on your employment

Activity
Read this carefully. The Ghanaian economy has been growing, however unemployment has become a social and economic problem as a lot of our youth are on the streets of urban towns selling chewing gum, card dusters, apples etc. wage employment in the formal sector of the economy is facing decreasing prospects even though it used to be generally responsible for the employment of graduates from our educational institutions. As a result many people who are preparing for wage employment will end up unemployed, creating serious social problems for the country.

My dear learner, I do not think you want to be one of those who will be trained and end up on streets selling dog chains.

Advantages of self-employment
Self-employment has several advantages. Can you think of some of them? Your list may include any of the following. Being self-employed enables a person to: 1. 2. 3. 4. 5. 6. 7. lead rather than follow be creative and implement ideas have the potential for increased income with hardwork be independent take initiative, make own decision at own pace control his/her own workplace and the work that needs to be done continue to learn more about business each day and this could provide an opportunity for self-fulfillment 8. be in business beyond retiring age. If Ghana is to achieve the millennium goals, then my dear learner you and I need to consider going into self-employment

Entrepreneurship
From Wikipedia, the free encyclopedia

Jump to: navigation, search This article may have too long an introduction for its overall length. Please help by moving some material from it into the body of the article. For more information please read the layout guide and Wikipedia's lead section guidelines. (August 2011) Entrepreneurship is the act of being an entrepreneur, which can be defined as "one who undertakes innovations, finance and business acumen in an effort to transform innovations into economic goods". This may result in new organizations or may be part of revitalizing mature organizations in response to a perceived opportunity. The most obvious form of entrepreneurship is that of starting new businesses (referred as Startup Company); however, in recent years, the term has been extended to include social and political forms of entrepreneurial activity. When entrepreneurship is describing activities within a firm or large organization it is referred to as intra-preneurship and may include corporate venturing, when large entities spin-off organizations.[1] According to Paul Reynolds, entrepreneurship scholar and creator of the Global

Entrepreneurship Monitor, "by the time they reach their retirement years, half of all working men in the United States probably have a period of self-employment of one or more years; one in four may have engaged in self-employment for six or more years. Participating in a new business creation is a common activity among U.S. workers over the course of their careers." [2] And in recent years has been documented by scholars such as David Audretsch to be a major driver of economic growth in both the United States and Western Europe. Entrepreneurial activities are substantially different depending on the type of organization and creativity involved. Entrepreneurship ranges in scale from solo projects (even involving the entrepreneur only part-time) to major undertakings creating many job opportunities. Many "high value" entrepreneurial ventures seek venture capital or angel funding (seed money) in order to raise capital to build the business. Angel investors generally seek annualized returns of 20-30% and more, as well as extensive involvement in the business.[3] Many kinds of organizations now exist to support would-be entrepreneurs including specialized government agencies, business incubators, science parks, and some NGOs. In more recent times, the term entrepreneurship has been extended to include elements not related necessarily to business formation activity such as conceptualizations of entrepreneurship as a specific mindset (see also entrepreneurial mindset) resulting in entrepreneurial initiatives e.g. in the form of social entrepreneurship, political entrepreneurship, or knowledge entrepreneurship have emerged. The entrepreneur is a factor in microeconomics, and the study of entrepreneurship reaches back to the work of Richard Cantillon and Adam Smith in the late 17th and early 18th centuries, but was largely ignored theoretically until the late 19th and early 20th centuries and empirically until a profound resurgence in business and economics in the last 40 years. In the 20th century, the understanding of entrepreneurship owes much to the work of economist Joseph Schumpeter in the 1930s and other Austrian economists such as Carl Menger, Ludwig von Mises and Friedrich von Hayek. In Schumpeter, an entrepreneur is a person who is willing and able to convert a new idea or invention into a successful innovation.[4] Entrepreneurship employs what Schumpeter called "the gale of creative destruction" to replace in whole or in part inferior innovations across markets and industries, simultaneously creating new products including new business models. In this way, creative destruction is largely responsible for the dynamism of industries and long-run economic growth. The supposition that entrepreneurship leads to economic growth is an interpretation of the residual in endogenous growth theory and as such is hotly debated in academic economics. An alternate description posited by Israel Kirzner suggests that the majority of innovations may be much more incremental improvements such as the replacement of paper with plastic in the construction of a drinking straw. For Schumpeter, entrepreneurship resulted in new industries but also in new combinations of currently existing inputs. Schumpeter's initial example of this was the combination of a steam engine and then current wagon making technologies to produce the horseless carriage. In this case the innovation, the car, was transformational but did not require the development of a new technology, merely the application of existing technologies in a novel manner. It did not immediately replace the horsedrawn carriage, but in time, incremental improvements which reduced the cost and improved the technology led to the complete practical replacement of beast drawn vehicles in modern transportation. Despite Schumpeter's early 20th-century contributions,

traditional microeconomic theory did not formally consider the entrepreneur in its theoretical frameworks (instead assuming that resources would find each other through a price system). In this treatment the entrepreneur was an implied but unspecified actor, but it is consistent with the concept of the entrepreneur being the agent of x-efficiency. Different scholars have described entrepreneurs as, among other things, bearing risk. For Schumpeter, the entrepreneur did not bear risk: the capitalist did.

Some notable persons and their works in entrepreneurship history. For Frank H. Knight [5] (1921) and Peter Drucker (1970) entrepreneurship is about taking risk. The behavior of the entrepreneur reflects a kind of person willing to put his or her career and financial security on the line and take risks in the name of an idea, spending much time as well as capital on an uncertain venture. Knight classified three types of uncertainty.

Risk, which is measurable statistically (such as the probability of drawing a red color ball from a jar containing 5 red balls and 5 white balls). Ambiguity, which is hard to measure statistically (such as the probability of drawing a red ball from a jar containing 5 red balls but with an unknown number of white balls). True Uncertainty or Knightian Uncertainty, which is impossible to estimate or predict statistically (such as the probability of drawing a red ball from a jar whose number of red balls is unknown as well as the number of other colored balls).

The acts of entrepreneurship are often associated with true uncertainty, particularly when it involves bringing something really novel to the world, whose market never exists. However, even if a market already exists, there is no guarantee that a market exists for a particular new player in the cola category. The place of the disharmony-creating and idiosyncratic entrepreneur in traditional economic theory (which describes many efficiency-based ratios assuming uniform outputs) presents theoretic quandaries. William Baumol has added greatly to this area of economic theory and was recently honored for it at the 2006 annual meeting of the American Economic Association.[6] The entrepreneur is widely regarded as an integral player in the business culture of American life, and particularly as an engine for job creation and economic growth. Robert Sobel published The Entrepreneurs: Explorations Within the American Business Tradition in 1974. Zoltan Acs and David Audretsch have produced an edited volume surveying Entrepreneurship as an

academic field of research,[7] and more than a hundred scholars around the world track entrepreneurial activity, policy and social influences as part of the Global Entrepreneurship Monitor (GEM)[8] and its associated reports. Though Entrepreneurs are thought to have many of the same character traits as leaders,[clarification needed] , involve particular psychological dispositions, or operate in purely business spheres of life, recent European theorising on the subject has suggested that, come the era of neo-liberalism and 'big society' politics that promote conceptualising humans as economic agents per se, normal, everyday people usually marginalised from the term 'entrepreneur' are too involved in the very same kind of processes that 'big business', proper entrepreneurs are involved with. Entrepreneurs, and entrepreneurship, as such, might be enacted by anybody, encountering as they do economic uncertainty on an everyday basis.

Contents
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1 Concept 2 Promotion 3 Financial Bootstrapping 4 External financing 5 See also 6 References 7 Further reading 8 External links

[edit] Concept
It has assumed super importance for accelerating economic growth both in developed and developing countries. It promotes capital formation and creates wealth in country. It is hope and dreams of millions of individuals around the world. It reduces unemployment and poverty and it is a pathway to prosper. Entrepreneurship is the process of exploring the opportunities in the market place and arranging resources required to exploit these opportunities for long term gain. It is the process of planning, organising, opportunities and assuming. Thus it is a risk of business enterprise. It may be distinguished as an ability to take risk independently to make utmost earnings in the market. It is a creative and innovative skill and adapting response to environment of what is real.

[edit] Promotion
Given entrepreneurship's potential to support economic growth, it is the policy goal of many governments to develop a culture of entrepreneurial thinking. This can be done in a number of ways: by integrating entrepreneurship into education systems, legislating to encourage risk-

taking, and national campaigns. An example of the latter is the United Kingdom's Enterprise Week, which launched in 2004. Outside of the political world, research has been conducted on the presence of entrepreneurial theories in doctoral economics programs. Dan Johansson, fellow at the Ratio Institute in Sweden, finds such content to be sparse. He fears this will dilute doctoral programs and fail to train young economists to analyze problems in a relevant way.[9] Many of these initiatives have been brought together under the umbrella of Global Entrepreneurship Week, a worldwide celebration and promotion of youth entrepreneurship, which started in 2008.

[edit] Financial Bootstrapping


Financial bootstrapping is a term used to cover different methods for avoiding using the financial resources of external investors. Bootstrapping can be defined as a collection of methods used to minimize the amount of outside debt and equity financing needed from banks and investors.[10] The use of private credit card debt is the most known form of bootstrapping, but a wide variety of methods are available for entrepreneurs. While bootstrapping involves a risk for the founders, the absence of any other stakeholder gives the founders more freedom to develop the company. Many successful companies including Dell Computers and Facebook were founded this way. There are different types of bootstrapping:

Owner financing Sweat equity Minimization of the accounts receivable Joint utilization Delaying payment Minimizing inventory Subsidy finance Personal Debt

[edit] External financing


Many businesses need more capital than can be provided by the owners themselves, and in this case a range of options are available including:

Angel Investors Venture capital investors. Crowd funding Hedge Funds Alternative Asset Management

Some of these source provide not only funds, but also financial oversight, accountability for carrying out tasks and meeting milestones, and in some cases business contacts and experience in many cases in return for an equity stake.

Entrepreneurship - Wikipedia definition


Entrepreneurship is the practice of starting new organizations or revitalizing mature organizations, particularly new businesses generally in response to identified opportunities. Entrepreneurship is often a difficult undertaking, as a vast majority of new businesses fail. Entrepreneurial activities are substantially different depending on the type of organization that is being started. Entrepreneurship ranges in scale from solo projects (even involving the entrepreneur only part-time) to major undertakings creating many job opportunities. Many "high-profile" entrepreneurial ventures seek venture capital or angel funding in order to raise capital to build the business. Angel investors generally seek returns of 20-30% and more extensive involvement in the business.[1] Many kinds of organizations now exist to support would-be entrepreneurs, including specialized government agencies, business incubators, science parks, and some NGOs.
Contents
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1 History of Entrepreneurship 2 The Entrepreneur 3 Characteristics of entrepreneurship 4 Contributions of Entrepreneurs 5 Advantages of Entrepreneurship 6 Notes 7 See also 8 References and external articles 9 External links

History of Entrepreneurship
The understanding of entrepreneurship owes much to the work of economist Joseph Schumpeter and the Austrian school such as Ludwig von Mises and von Hayek. In Schumpeter (1950), an entrepreneur is a person who is willing and able to convert a new idea or invention into a successful innovation. Entrepreneurship forces "creative

destruction" across markets and industries, simultaneously creating new products and business models. In this way, creative destruction is largely responsible for the dynamism of industries and long-run economic growth. Despite Schumpeter's early 20th-century contributions, the traditional microeconomic theory of economics has had little room for entrepreneurs in its theoretical frameworks (instead assuming that resources would find each other through a price system).[2] For Frank H. Knight (1967) and Peter Drucker (1970) entrepreneurship is about taking risk. The behavior of the entrepreneur reflects a kind of person willing to put his or her career and financial security on the line and take risks in the name of an idea, spending much time as well as capital on an uncertain venture. Knight classified three types of uncertainty. Risk, which is measurable statistically (such as the probability of drawing a red colour ball from a jar containing 5 red balls and 5 white balls). Ambiguity, which is hard to measure statistically (such as the probablity of drawing a red ball from a jar containing 5 red balls but with an unknown number of white balls). True Uncertainty or Knightian Uncertainty, which is impossible to estimate or predict statistically (such as the probability of drawing a red ball from a jar whose number of red balls is unknown as well as the number of other coloured balls). The acts of entrepreneurship is often associated with true uncertainty, particularly when it involves bringing something really novel to the world, whose market never exists. Before Internet, nobody knew the market for Internet related businesses such as Amazon, Google, YouTube, Yahoo etc. Only after the Internet emerged did people begin to see opportunities and market in that technology. However, even if a market already exists, let's say the market for cola drinks (which has been created by Coca Cola), there is no guarantee that a market exists for a particular new player in the cola category. The question is: whether a market exists and if it exists for you. The place of the disharmony-creating and idiosyncratic entrepreneur in traditional economic theory (which describes many efficiency-based ratios assuming uniform outputs) presents theoretic quandaries. William Baumol has added greatly to this area of economic theory and was recently honored for it at the 2006 annual meeting of the American Economic Association.[2] Entrepreneurship is widely regarded as an integral player in the business culture of American life, and particularly as an engine for job creation and economic growth. Robert Sobel published The Entrepreneurs: Explorations Within the American Business Tradition in 1974.

The Entrepreneur
Entrepreneurs have many of the same character traits as leaders. Similarly to the early great man theories of leadership; however trait-based theories of entrepreneurship are increasingly being called into question. Entrepreneurs are often contrasted with managers and administrators who are said to be more methodical and less prone to risk-taking. Such person-centric models of entrepreneurship have shown to be of questionable validity, not least as many reallife entrepreneurs operate in teams rather than as single individuals. Still, a vast but now clearly dated literature studying the entrepreneurial personality found that certain traits seem to be associated with entrepreneurs: David McClelland (1961) described the entrepreneur as primarily motivated by an overwhelming need for achievement and strong urge to build. Collins and Moore (1970) studied 150 entrepreneurs and concluded that they are tough, pragmatic people driven by needs of independence and achievement. They seldom are willing to submit to authority. Bird (1992) sees entrepreneurs as mercurial, that is, prone to insights, brainstorms, deceptions, ingeniousness and resourcefulness. they are cunning, opportunistic, creative, and unsentimental. Cooper, Woo, & Dunkelberg (1988) argue that entrepreneurs exhibit extreme optimism in their decision-making processes. In a study of 2994 entrepreneurs they report that 81% indicate their personal odds of success as greater than 70% and a remarkable 33% seeing odds of success of 10 out of 10. Busenitz and Barney (1997) claim entrepreneurs are prone to overconfidence and over generalisations. Cole (1959) found there are four types of entrepreneur: the innovator, the calculating inventor, the over-optimistic promoter, and the organization builder. These types are not related to the personality but to the type of opportunity the entrepreneur faces.

Characteristics of entrepreneurship
The entrepreneur has an enthusiastic vision, the driving force of an enterprise. The entrepreneur's vision is usually supported by an interlocked collection of specific ideas not available to the marketplace. The overall blueprint to realize the vision is clear, however details may be incomplete, flexible, and evolving.

The entrepreneur promotes the vision with enthusiastic passion. With persistence and determination, the entrepreneur develops strategies to change the vision into reality. The entrepreneur takes the initial responsibility to cause a vision to become a success. Entrepreneurs take prudent risks. They assess costs, market/customer needs and persuade others to join and help. An entrepreneur is usually a positive thinker and a decision maker.

Contributions of Entrepreneurs
Template:Refimprove 1. Develop new markets. Under the modern concept of marketing, markets are people who are willing and able to satisfy their needs. In Economics, this is called effective demand. Entrepreneurs are resourceful and creative. They can create customers or buyers. This makes entrepreneurs different from ordinary businessmen who only perform traditional functions of management like planning, organization, and coordination. 2. Discover new sources of materials. Entrepreneurs are never satisfied with traditional or existing sources of materials. Due to their innovative nature, they persist on discovering new sources of materials to improve their enterprises. In business, those who can develop new sources of materials enjoy a comparative advantage in terms of supply, cost and quality. 3. Mobilize capital resources. Entrepreneurs are the organizers and coordinators of the major factors of production, such as land labor and capital. They properly mix these factors of production to create goods and service. Capital resources, from a layman's view, refer to money. However, in economics, capital resources represent machines, buildings, and other physical productive resources. Entrepreneurs have initiative and self-confidence in accumulating and mobilizing capital resources for new business or business expansion. 4. Introduce new technologies, new industries and new products. Aside from being innovators and reasonable risk-takers, entrepreneurs take advantage of business opportunities, and transform these into profits. So, they introduce something new or something different. Such entrepreneurial spirit has greatly

contributed to the modernization of our economy. Every year, there are new technologies and new products. All of these are intended to satisfy human needs in more convenient and pleasant way. 5. Create employment. The biggest employer is the private business sector. Millions of jobs are provided by the factories, service industries, agricultural enterprises, and the numerous small-scale businesses. For instance, the super department stores like SM, Uniwide, Robinson and others employ thousands of workers. Likewise giant corporations like SMC, Ayala and Soriano group of companies are great job creators. Such massive employment has multiplier and accelerator effects in the whole economy. More jobs mean more incomes. This increases demand for goods and services. This stimulates production. Again, more production requires more employment.

Advantages of Entrepreneurship
Every successful entrepreneur brings about benefits not only for himself/ herself but for the municipality, region or country as a whole. The benefits that can be derived from entrepreneurial activities are as follows: 1. Enormous personal financial gain 2. Self-employment, offering more job satisfaction and flexibility of the work force 3. Employment for others, often in better jobs 4. Development of more industries, especially in rural areas or regions disadvantaged by economic changes, for example due to globalisation effects 5. Encouragement of the processing of local materials into finished goods for domestic consumption as well as for export 6. Income generation and increased economic growth 7. Healthy competition thus encourages higher quality products 8. More goods and services available 9. Development of new markets 10. Promotion of the use of modern technology in small-scale manufacturing to enhance higher productivity 11. Encouragement of more researches/ studies and development of modern machines and equipment for domestic consumption

12. Development of entrepreneurial qualities and attitudes among potential entrepreneurs to bring about significancant changes in the rural areas 13. Freedom from the dependency on the jobs offered by others 14. The ability to have great accomplishments 15. Reduction of the informal economy 16. Emigration of talent may be stopped by a better domestic entrepreneurship climate