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Economicdevelopment is ushered by the culmination of a number of closely bound factorsthat allow the achievement of the industry success, and hence economicdevelopment. Although entrepreneurship is the key driving force behind the relationshipthat lead to this feat, it relies heavily on underlying factors to manifest it.Innovation is a vital tool in that it is used to effectively identify a marketopportunity, which is brought about by creative impulses initially originatedfrom the issue of problems being in place.

The combination of this creates thebasis of the discussion.  Problemsolving is defined as ‘the ability to analyze information related to a givensituation and generate appropriate response options’ (www.brainrehab.org),meaning it acts as the basis for other factors to develop from, the foreground ofanalyzing information. The realization and utilization of this important skillwill result in long term improvements in economic development, as from a businesspoint of view, if a ‘product or service fully meets the needs of the customer,you can guide or lead the direction of technological development and innovationto gain increased productivity and a favorable competitive position in theglobal marketplace’ (Lumsdaine and Binks, 2007, Page 6).  Innovationis of close related to problem solving, as in suggested by the Austrian Schoolof Economics.

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They propose a need to be alert to the opportunities and vary ofchanges in conditions and while promoting novel ideas and concepts throughinnovation in economic activity (Lumsdaine and Binks, 2007, Page 16). This canlead to greater effectiveness in competing with rival firms as the alertness tothe innovation leaves one is prime positon to exploit greater market sharethrough adaptation to changes in market conditions.  The actual founding principles of creativityand innovation are also closely related. Creativity is defined by Ned Hermannas ‘a dynamic, whole brain activity that involves conscious and subconsciousmental processing in both generating an idea and making something happen as aresult’ (Lumsdaine and Binks, 2007, page 21).

An effective way of thinkingcreatively and critically is to adopt a lateral approach, whereby one divertsthemselves away from the regular linear approach, and ‘thinks outside of thebox’, and only then will inspiration will arrive. Creative thinking is oftenderived from the need to solve problems, and furthermore proceeds to lead on toanother key factor, innovation, which builds on this process as it is seen as’the practical application of creativity in an organization’ (Lumsdaine andBinks, 2007, page 20). Thisis demonstrated in the phone industry for instance whereby existing means oftechnology are now being incorporated onto handsets. Keyboards which werepreviously just associated with computers are now becoming a regular addition,proving to be a great time saver against the traditional old methods and veryinnovative for the market in its nature.  Thegeneral thinking behind this suggestion is that the process of creativethinking does not truly lead to product development and as these are simplythoughts brought about by the need to solve a lingering problem, therefore therisk for failure is significantly high. Yet innovation involves creativethinkers to progress on what is deemed to be a ‘safe’ idea, and to build on it.

This is backed by Sir George Cox as his theory states that ‘While creativity isthe generation of new ideas, innovation is the successful exploitation ofthem’.  In relation to this, Schumpeterdiscusses a strand of entrepreneurship that was somewhat compelling in nature.Defined as ‘a fundamental step in a product or process that could not be tracedback to the original version’, he then describes it as ‘creative destruction’, attemptingto demonstrate the theory of a creative idea that is completely original and whichcould not be traced to any contemporary ideas, terming it as  ‘Catalytic Entrepreneurship’  (Lumsdaine and Binks, 2007, Page 15), A very evident example of this isTim Berners Lee, who ‘invented the world wide web, an internet-based hypermediainitiative for global information sharing while at CERN, the European ParticlePhysics Laboratory, in 1989. He wrote the first web client and server in 1990′(www.w3.org.

/People). Such an initiative was simply astounding and nothing likethis had ever been seen before, resulting in a change in the way information isdisplayed to this very day. The development of such a theory has strong linkswith the skill of creativity as both display an emphasis on composing somethingcompletely new which is previously unseen or unrelated to something in thecurrent market.

  Of stark contrast to this, the Austrian Schoolof Economics proposed a differing perspective of the view of an entrepreneur,more associated with innovation, called ‘allocating entrepreneurs’. They see itas a term to people ‘observe the changes in conditions and are alert to theopportunities they present – because they realise new ideas and concept throughinnovation in economic activity’ (Lumsdaine and Binks, 2007, Page 16). Thisapproach means that rather than look to use creativity to develop a new serviceor product, they rely on spotting potential market gaps, and exploiting them bybeing the first to attack a new market, using innovative strategies of productdevelopment, maximimising profit acquired.  Despitethe obvious distinctions being in place between the two types ofentrepreneurship presented, a relationship is still present in how the productwould be made a strong market force. The Catalytic side would be responsiblefor creating the new idea as a result of creative thinking, which would then beput into practice by those who are allocators, as they will have seen thepotential in it and been innovative in bringing about economic development viasuccessful marketing and product development, similar to that of therelationship between creativity and innovation.  Innovationcan further be related to achieving economic development in that when appliedto a business model, the resultant effect on the direction of the business isthat it can greatly enhance performance. For example, the idea from Dell tosell computers straight to the consumer without the need for other retailerssuch as Currys to do it for them, thus lowering costs for themselves andmaximising economic development of the company.

In order to be able to selectthe most efficient business model to develop upon, the Pugh Method could beused to make a suitable comparison. In basics terms, it is ‘a creative concepttechnique that uses criteria in an advantage-disadvantage matrix’; effectivelymeaning the model is chosen based on the greatest score attained (Lumsdaine andBinks, 2007, Page 71). So in this instance it may have weighed up that thepotential increased revenue by not paying suppliers would stand them in a moreadvantageous position then the possibility of having a greater ease ofavailability to the consumer, as an example of some of the factors that couldbe used.  Anotherprocess that is particularly useful in developing, entrepreneurial typethinking is Kirk’s Space, focusing on the pre concept stage of innovation. Itis a graph whereby the vertical axis represents the extent to which we know ourproblem or need, whereas the horizontal axis represents the extent of ourability to address the actual problem.

When applied to the music industry forinstance, the CD would be located in the top right of the graph as a superiorsolution already exists, and so this area would be known as the ‘red ocean’.Whereas the Mp3 would be located in the bottom left as the capabilities are notyet truly known, meaning it is the area of greatest opportunity and so has amore calming name attributed to it of the ‘blue ocean’. This process is notonly particularly useful as it focuses our mindsets on directing towardsentrepreneurial behaviour, but also as it shows a link from the problem solvingfactors as it involves selecting the most profitable areas to work with.(Lecture Notes)  Aboveall, a fundamental observation of these factors is when entrepreneurship isaccomplished successfully, it leads to economic development. This is not mere opinion either,as studies under taken at the University of Arizona have found some quiteconclusive evidence. Among their findings it was shown that those who undertookentrepreneurial study had Annual Incomes that are 27% higher and owning 62%more assets, in addition to being in large firms, earning about $23000 per yearmore than their counterparts (Lumsdaine and Binks 2007, Page 6).

Thisshows a direct link between entrepreneurship leading to economic development asthe facts show those in the knowledge are earning a greater salary as a result.However, when Schumpeter’s belief’s on what makes an entrepreneur apply, thisrelationship is actually altered. According to him, ‘everyone is an entrepreneurwhen he actually carries out new combinations, and loses that character as soonas he has built up his business’ (Lumsdaine and Binks, 2007, Page 13).

Ineffect, this suggests that rather than entrepreneurship and economicdevelopment be seen as having a continual positive link, instead it is aprogression from which once economic status is achieved, you lose anyentrepreneurial association to yourself and the link is terminated.  Inconclusion, the relationship between entrepreneurship, innovation and economicdevelopment on the whole shows a positive correlation throughout, whereby anincrease in one factor, does usually constitute resultant positive impacts onthe other two. The normal method of procedure for this would be how increasinglevels of innovation leading to a greater opportunity with less competition forentrepreneurship business to develop, which ultimately mean the value of suchan idea would be greater as the potential returns would be more thansufficient. That said, I believe creativity and problem solving, rather thancomplementing the other factors, do add equal weight into this equation.Creativity is the basis of innovative development in that it takes what itdeems to be ‘safe’ creative ideas forward, and works from there. Problemsolving is too almost a divine inspiration from which creativity blossoms, andwithout such a factor the means at which creative energy is able to work wouldbe the whole process would be considerably slowed due to the close knit natureof all the factors.