Importance Of Start-Up Companies For Economic Growth

Start-up enterprises are important for the economic growth of the country. A start-up is a newly formed company, the purpose of which is to develop new, usually innovative products or services in uncertain circumstances. If it satisfies a new need, present in a broader area or even globally, it also has great growth potential.

Start-up entrepreneurship is crucial because of innovations, new jobs, and bringing competitive dynamics into the business environment. Governments have also identified the potential of start-ups and have thus implemented various measures to nurture innovation and promote sustainable economic growth through start-ups.

How start-ups help the economy

A start-up is a young company that is beginning to develop and is in its early stages of development. Start-up enterprises play a key role in economic growth. As we know, business activities drive the creation of jobs and global data shows start-ups are creating more jobs compared to larger companies and enterprises.

Most of us would like to believe that start-ups can only grow in developed countries due to the availability of resources and the right environment to grow. Contrary to this belief, start-ups can begin anywhere and it is often the countries with the required demand that present opportunities for start-ups.

A start-up can easily prosper in underdeveloped countries, nations in conflict, and countries with new entrepreneurship. Countries with such environments offer challenges, which are opportunities for a start-up to make a profit and thus establish itself.

Role of start-ups in economic prosperity

Start-ups help the economy in several ways. Firstly it boosts the economic activities that help the economy to expand. It tries to maximize profits through technology and innovation thus leading the country towards future development. It also improves the GDP of the nation by creating jobs, thus transferring money in the hands of the consumer. Thus when there is increased consumption the GDP of the country grows. It also brings competitive dynamics in the economy encouraging the existing businesses to adopt newer technologies.

Start-up enterprises play an important role in the growth of a country’s economy.

Start-ups will create more jobs

Any kind of business activity helps to generate jobs. With more and more start-ups an economy will not only experience increased jobs but also the creation of a skilled workforce. Start-ups are a great way to enhance employment creation in the economy, especially for the skilled workforce.

Creation of wealth 

Since start-ups are in their growth phase they would attract investors by investing their resources. Thus, the expansion of the start-ups helps the citizens of the particular country benefit from it. Since money is being invested and spent within the country, wealth is created within the nation. In the future, when these start-ups go public they help the employees and shareholders make profits. 

Enhanced standard of living

One of the most important aspects of the start-up is that they incorporate technology and innovation and provide the best services to people. This, in turn, will allow improving the standard of living of the people. In India, there are a large number of start-ups working to promote local artisans and develop their communities.

Increase in Gross Domestic Product

Gross Domestic Product (GDP) plays a vital role in boosting economic growth. According to a World Bank report, India can become the fastest growing country due to its GDP growth. By encouraging more start-ups and promoting them, it is possible to generate more revenue in the domestic market. Thus, consumers’ capital will flow in abundance in the Indian economy.

The most dynamic changes are evident in handicrafts and weaving which was experiencing a slow death a few decades ago. However, with start-ups such as Flipkart, traditional craftsmen and artisans can sell their products to a larger audience.

Develop new technology

The start-ups are the centers of innovation and they can boost the economy through the adoption of new technology and creating new industries over time. Due to the bold decisions of the start-ups to work on newer technologies we can see how drastically the economy is changing. For example, the banking industry has experienced a massive change by the adoption of innovative technologies like digital banking, automated financial services, and blockchain technology.

Open new markets

The rapid growth of start-ups has also resulted in the creation of alternative markets which were hitherto unfathomable to many. The start-ups seek to regularize and develop the sectors that were previously considered unorganized. Some examples of start-ups that have created new markets are Ola, OYO, Byjus, Swiggy, Paytm, and Practo.

Direct impact on nearby localities

Start-ups have a direct impact on the localities in which they start operations. An example of this can be Bangalore, India itself. The city has changed significantly over the years after the establishment of companies like Wipro and Infosys. Today we can see promising employment patterns whereby job opportunities are available to both the organized and the unorganized sectors. This also led to a surge of skilled professionals and the relocation of experienced professionals from different cities.

How start-up enterprises boost entrepreneurship

The Global Entrepreneurship Monitor (GEM) research data show that worldwide, an entrepreneur with high potential creates on average as much as 3 times more jobs than an entrepreneur with average potential and as much as 15 times more jobs than an entrepreneur with low potential.

Therefore, growth is mostly generated by highly ambitious entrepreneurs who find and realize promising business opportunities. Their companies grow quickly and so increase the employment rate.

Key reasons for encouraging start-up entrepreneurship


They are the main driving force behind economic development and the increase of productivity in a knowledge-based society. Start-up companies are the most suitable form of implementing inventions and consequently the best mechanism for commercializing technological and other novelties.

Start-up companies contribute to the quick development of new technologies and the location where they operate. Large companies often buy start-up companies because of technology (fundamental ingredient) that they then integrate into their business and thus keep their competitive advantage.

At the same time, they provide knowledge as well as a spin-off and spin-out companies to the start-up environment, which would not be possible without a well-functioning start-up ecosystem.

New jobs and economic growth

In the long term, start-up companies create a large portion of new jobs and contribute to the countrys economic growth. Considering that start-up companies are based on innovations, the potential of start-up companies represents the healthy core of the economy. If the country wishes to encourage new employment in the long term, it must invest in the segment of companies that create the most jobs in the long run (in 10 years and more). Start-up companies are the ideal form and opportunity for employing and activating future generations.

Bringing new competitive dynamics into the economic system

Start-up companies are the most dynamic economic organizations on the market since they provide additional dynamics and competitiveness to the economic system. This means that the economy stays healthy, vital, and diligent, while individual companies find it harder to rest on their laurels.

Promoting the research-innovation system

High-tech as well as knowledge-based service start-up companies are very closely connected to knowledge institutions. An appropriate entrepreneurship ecosystem thus promotes the research and development as well as research and innovation approach of knowledge institutions, companies, and connecting institutions as well as contributes to the applicative orientation of research work at universities and research institutions. Meanwhile, it also works as a role model and encourages students and researchers to implement their ideas through a start-up company.

Infusing values of proactivity into society

Start-up entrepreneurship changes the values of the society and brings a new mindset, in line with the society based on knowledge and creativity. The population is starting to increasingly realize that they have a responsibility for their work and career development.

Also read: Five Ways To Improve Business Agility

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