The Role Of Entrepreneurial Competencies On The Success Of Small And Medium Scale Enterprise (SME) In Nigeria

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The Role Of Entrepreneurial Competencies On The Success Of Small And Medium Scale Enterprise (SME) In Nigeria


Abstract


The research aimed at examining the factors that may impact upon business success in the two municipals of Yenagoa SME’s. The study examined the extent to which entrepreneurial competence influenced business success in SME’s. The study was conducted at Yenagoa Municipals. Although it has been difficult to ascertain why in similar situations some entrepreneurs fail while others succeed, it is through that the focus on “entrepreneurial competencies” offers a practical means of addressing the phenomenon. SME’s are still faced by lack of appropriate knowledge and skills, limited skills, limited access to information technology, dependency on poor and obsolete technology.

The study comprised 60 SME’s, 30 from each municipality. The study used random sampling since SME’s are many and scattered in wide geographical area. One of the most serious impediments is limited capacity of people who start and operate the businesses, in terms of the attitudes, motivation, exposure, skills and experiences. Education and training programs could provide owners with opportunities to explore their motives of firm ownership and a better understanding of the consequences of not seeking success.

The findings of the study showed that business or entrepreneurial failures are mostly attributed to inadequacy of financial resources. The conclusion of the study indicates that one of the other serious impediments is the limited capacity of people who start and operate the businesses, in terms of the attitudes, motivation, exposure, skills and experiences. The study that recommends there is substantial need to study on the role of entrepreneurial competencies. Also the study recommends that education and training are crucial to SME’s since they play a big role in the success of the business. Moreover, SME’s require organization’s mission, vision, values and strategic plans. At every level of the organization competency is required in order to successfully perform duties required, skills gained from education or training will increase the abilities of SME’s to achieve success.


Table Of Contents


Preliminary Page(s)

  • Title Page
  • Declaration
  • Approval
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of Content

Chapter One

Introduction

  • 1.1 Background Of The Study
  • 1.2 Problem Statement
  • 1.3 Study Objectives
  • 1.4 Significance Of The Study
  • 1.5 Study Questions/Hypotheses
  • 1.6 Scope And Limitation Of The Study
  • 1.7 Definition Of Terms

Chapter Two

Review Of Related And Relevant Literature

  • 2.1 Introduction
  • 2.2 Conceptual Clarifications
  • 2.3 Theoretical Studies
  • 2.4 Empirical Studies
  • 2.5 Related Literatures

Chapter Three

Research Methodology

  • 3.1 Research Design
  • 3.2 Study Area
  • 3.3 Sources Of Data
  • 3.4 Population Of The Study
  • 3.5 Sample Size Determination
  • 3.6 Instrumentation
  • 3.7 Reliability And Validity Of Instrument
  • 3.8 Method Of Data Analysis

Chapter Four

Data Presentation, Analysis And Interpretation

  • 4.1 Data Presentation
  • 4.2 Data Analysis
  • 4.3 Data Interpretation

Chapter Five

Summary, Conclusion And Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendation
  • References
  • Appendix
  • Questionnaire

Chapter One


Introduction

1.1 Background Of The Study

Small and Medium Enterprises (SMEs) are the backbone of the contemporary economic development due to the significant role they play in the sustainability of the world economic development (Carter and Tamayo, 2017; Wattana pruttipaisan, 2002). SMEs account for more than 90 percent of businesses, contribute to more than 50 percent of employment and over 50 percent of gross domestic products (GDP) in the world (Kessey, 2014). In Africa, the commonest business entities are SMEs. The enterprises contribute significantly to the provision of employment, the formation of capital, economic viability and poverty alleviation among others (Ganyaupfu, 2013). Today, Africa’s growing economy sees SMEs as the mechanism for achieving growth and excellence (Roldan, 2015). The sector provides substantial employment and stimulates economic growth. For example, in Ghana, the sector constitutes 92 percent of businesses in the country (Steel and Webster, 1991). In South Africa, Ganyaupfu, (2013) confirmed that 91 percent of all the registered business entities fall under SMEs and constituting about 52 to 57 percent of the country‟s GDP. However, in Nigeria, a number challenges overwhelmed the country‟s business milieu, which renders the environment not only difficult for business but resulting to the increasing failure of SMEs in the country. Studies established that 85 percent of businesses in the country do not survive beyond the first five years of their establishment (Ogboru, 2005; Olu and Haynes, 2006; Ariyo, 2008). Moreover, even the little percentage that manages to sustain beyond five years, collapse between sixth to tenth years of their existence which leaves only around 5 to 10 percent of the SMEs in business (Onugu, 2005). Despite the effort and contribution of the Nigerian government to the development of SMEs, yet the input of the enterprises including micro businesses to the country‟s exportation is as low as 7.27 percent (SMEDAN, 2013). The lack of entrepreneurial competencies has been identified as the leading cause of business failure in the country (Inyang and Enuoh, 2009). Therefore, the need for entrepreneurial competency become necessary as it provides practical solutions to the mystery of business downfall (Sánchez, 2013).

Competency of the entrepreneurs is one of the significant determining factors for success, performance and growth or failure of business operation (Kiggundu, 2002; Brinckmann, 2008; Mitchelmore and Rowley, 2013). Furthermore, female Entrepreneurs mostly operate small-scaled type of businesses which requires the businesses to depend mainly on the competencies of the owner. Thus, understanding the nature of such competencies in the context of female Entrepreneurs is very important (Mitchelmore and Rowley, 2010; Mitchelmore et al. 2008).

Competencies as the characteristics of entrepreneurs that differentiate excellent from average or poor entrepreneurial performance are a cluster of knowledge, behaviours, skills and abilities (Wu, 2011; Athey and Orth, 1999). Similarly, Man, Lau, and Chan, (2002) view entrepreneurial competencies as nothing but a bunch of high-level characteristics which includes knowledge, skills and personality traits. Entrepreneurial competencies lead enterprises to achieve sustainable competitive advantage and eventually result in the achievement of business success and growth (Man et al., 2002). Tehseen and Ramayah, (2015) stressed the need for the understanding of the significance of entrepreneurial competencies more especially in the developing economies because entrepreneurs‟ competencies are vital for business survival, performance and success. However, the measurement of entrepreneurial competencies varies depending on the context, prediction and assumption (Mitchelmore and Rowley, 2010). Therefore, in the Nigerian business milieu, as established by numerous scholars, the leading competencies related obstacles that result in poor performance and failure of businesses in the country are; lack or ineffective innovation, unfavourable marketing strategies, lack of distinctive entrepreneurial traits (Duru, 2011; Eneh, 2010; Onugu, 2005; Adeoti, and Adeoti, 2005; Siyanbola et al., 2012).

The principal aim of the study is therefore to examine the relationship between the entrepreneurial competencies and business success in SME’s in different settings within the same country.


1.2 Statement Of The Problem

Even with the fact that SME’s in all sectors of the economy; they are dominant in trade (54%) followed by services (34%). Micro and small enterprises are critical for supporting livelihoods as well as overall prosperity and progress. They create employment at relatively low levels of investment per job; utilize and add value to local resources; foster equitable income distribution; and are better positioned to meet local needs in small markets. The technologies used by them are easier to acquire, transfer and adopt even for people with little education and training. They have the potential to compliment large enterprises through partnerships and subcontracting relationships. Micro and small enterprises also serve as training ground for entrepreneurship managerial development (Olomi, 2006).

Lots of problems makes it very difficult for SME’s to exploit the existing potentials for further employment and wealth creation. One of the most serious impediments is the competency of the entrepreneur, in terms of the attitudes, motivation, exposure, skills and experiences. This capacity limitation is exacerbated by the effects of other problems including a cumbersome regulatory framework, limited access to finance and working premises. At the same time, entrepreneurship development are underdeveloped and not readily available or affordable to SME’s.


1.3 Objectives Of The Study

The main objective of this study is to find out the role of entrepreneurial competencies on the success of SME in Nigeria, specifically the study intends to;

  1. Find out how competence entrepreneurs are in terms of skills and experience
  2. Analyze the effect of entrepreneurial competencies on the success of SMEs in Nigeria
  3. Examine the challenges of SMEs in Nigeria

1.4 Research Question

  1. How competence are entrepreneurs in Nigeria in terms of skills and experience?
  2. Is there any significant effect of entrepreneurial competencies on the success of SMEs in Nigeria?
  3. What are the challenges of SMEs in Nigeria?

1.5 Research Hypothesis

  • Ho: there is no significant effect of entrepreneurial competencies on the success of SMEs in Nigeria
  • Hi: there is a significant effect of entrepreneurial competencies on the success of SMEs in Nigeria

1.6 Significance Of The Study

The study aims to address the extent to which entrepreneurial attributes lead to business success. The study attempts to identify the challenges and prevailing factors against the success of SMEs, analyze them and then proceed to make appropriate recommendations towards alleviating them. The findings of the study are useful to entrepreneurs in SME’s since they highlight the focus on training that is adequate to improve effectiveness in managing SME’s activities and implication to policy matters. The findings of the study serve as departing point for further researchers.


1.6 Scope / Limitations Of The Study

The study examined the role of entrepreneurial competencies on the success of SME in Nigeria. This study was carried out on two municipals of Yenagoa SME’s.

The following limitations were anticipated in this study:

  1. Since the study was only carried out in only one province, the results may not be generalisable to the whole country. The researcher collected data on his own without research assistants.
  2. Financial constraints were also anticipated in the current study. Although the researcher received assistance from the bursary, it was not possible to carry out the study at national level.
  3. The researcher is a full time employee so time to carry out the study was limited.

1.7 Organization Of The Study

Chapter one consists a general overview of the problem area of the study and presents the context of the study and the research problem. The chapter also presents the objectives of the study the research questions and justification of the research. A literature review is given in chapter two. The chapter covers the most relevant theories and concepts of the study. Chapter three covers the overview of the research design and methodology research strategies, survey of the population and areas of the research. It also presents the sampling design and procedures, the variables and measurement procedures. The chapter also presents the methods of data collection the way data were processed and the way the analysis was executed and the expected results of the study. Chapter four presents the data and findings of the study. It also analyses data. The results of the study are also presented. Chapter five presents the conclusion and recommendations followed by bibliography and appendices.


1.8 Operational Definition Of Terms

Entrepreneurial Competencies:

Entrepreneurial competencies are defined as underlying characteristics possessed by a person, which result in new venture creation. These characteristics include generic and specific knowledge, motives, traits, self-images, social roles, and skills that may or may not be known to the person.

Entrepreneurship:

Entrepreneurship is the process of designing, launching and running a new business, which is often initially a small business.

Entrepreneur:

The people who create these businesses are called entrepreneurs.

Competence:

Competence is the set of demonstrable characteristics and skills that enable, and improve the efficiency of, performance of a job.


Chapter Five


5.0 Conclusion And Recommendations

5.1 Introduction

The SME’s of Yenagoa work or operate in different business environments settings of potential markets. The findings indicate mean and standard deviation concerning the personal skills important for business success of the SME’s for production and service business. However, there is significance difference in the personal skills such as standard deviation (SD) .429 numeracy and literacy skills compared to other personal skills.

Basing on the study, the SME’s comprising the personal skills considered important for the business success are shown table 5.1 below.

Personal skills important for the business

Source: Research, 2010


5.2 Conclusion

The findings are based on SME’s in Yenagoa. Basing on the research questions addressed in this study, a conclusion can be drawn. SME’s work at their best knowledge and ability but were constrained by fundamental issues such as regulatory frame work, legal, economical and social environment. Moreover, SME’s lack resources, money and technology. The competitive market environment is turbulent which makes a number of obstacles as have revealed in this study.

Workers shortcomings in knowledge and education were also found to be significant. Most of the SME’s lack management skills not only in change management but also in new skills such as limited capacity in marketing, strategy, acquisition of the new knowledge and external pressures.

The study has also found that owners of the business although they were faced with the problem of low education in most cases they have strived hard to make sure that they succeed by discovering the opportunity available to build strong personal relationship with employees, risk taking and to evaluate market opportunities, secure resources required although meager to produce and service the market. The ability to assimilate experience has been the key factor for the success of the SME’s.

The findings show that SME’s in Yenagoa were working and operating at a small scale interms of firm/structure characteristics (eg. Size, area of activity or organizational aspects). Owner’s characteristics (e.g. ability to create a sustainable and wealth creating venture, notion of risk taking, the ability to innovate, and other psychological dispositions (e.g. persistence, action, orientation and self confidence) were prevalent in the SME’s for that reason they have managed to survive and compete with large firms in their locality.

Basing on the research question to what extent does entrepreneurial attributes lead to business success of the SME’s, the findings of the study indicate that it evident that the success of the business was achieved because of the appropriate management decisions (e.g. flexibility and ability to adapt quickly to changes, strategic planning, ability to seize opportunities (e.g. in new markets or products and a proactive approach to drive the business forward).


5.3 Recommendations

From the findings, a number of recommendations can be made. The owners of the SME’s should strive hard to make use of the policies concerning the SME’s development by collaborating with the government and other stake holders whenever possible especially in education and training which are essential for success of any business.

Special incentives (financial and regulatory) are needed to support SME’s development and encourage businesses to become formal in the long run. SME’s support groups including the government should focus in enhancing awareness of the SME’s policies, financial assistance, training and entrepreneurial orientation. SME’s should strive to gain ability to gather and control resources, increase motivation to the staff so that the SME’s can work productively and efficiently.
Priority should be to train staff so that they can be able to cope with the challenges which hinder business success.

It is crucial to promote entrepreneurship and business culture for a more conducive business environment. Special financial services aimed at small businesses should be promoted or introduced. These services should be easy to obtain and maintain financial support needs to be targeted according to businesses’ needs and potential.

From this study, it is evident that managerial competencies will have a major impact to SME’s in Nigeria. Therefore, it is crucial for the government of Nigeria and SIDO to take note of the challenges hampering SME’s since it has been depicted that SME’s are unable to realize their full potential, awareness of the impacts arising from incompetent personnel, and the effects to the business environment. Thus, SME’s face various impediments to success ranging from unavailability various forms of support, lack of financial and managerial capabilities. This calls for a need to enhance education and training for SME’s as a result Nigeria will experience an increase in its economic growth, social stability and job creation for the country as a whole.

Staff members of the SME’s should participate consistently as active team players. They open to others’ on ideas and suggestions willing to share ideas and information and not to retain knowledge. They should be able to motivate others. Also members of SME’s should respond appropriately and recognize that they represent the business of the SME’s and not their personal views. They should be willing to change; adapt in terms of behaviour or work methods in response to new information, conditions or unexpected obstacles.


5.4 Areas for future research

In this study, the analysis and conclusion would serve as a departing point for further researchers. There is substantial need to study on the role of entrepreneurial competencies. Therefore, suggested areas for future research can include the following aspect:

The study covered Yenagoa only. A similar study can be carried out in other parts of the country to verify whether what was observed in Yenagoa were futures of all SME’s in Nigeria in general.


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