CAPACITY TRAINING AND CAPITAL STRUCTURE INFLUENCE ON SMALL AND MEDIUM SCALE ENTERPRISES SURVIVAL IN THE ECONOMY (A CASE STUDY OF SELECTED SMALL AND MEDIUM ENTERPRISES IN LAGOS STATE)

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

Small and Medium Scale Enterprises (SMEs) are recognized as the driving force for developed and developing countries across the globe for playing an important role in economic growth and sustainable development (Ariyo, 2005). SMEs occupy or contain a place of pride in virtually every country or state. Because of their significant roles in the growth and development of various economies, they have aptly been regarded as “the engine of growth” and “catalysts for the socioeconomic transformation of any country”. SMEs serve as a veritable vehicle for the achievement of national economic objectives for poverty reduction at low investment cost and employment generation as well as the development of entrepreneurial capabilities, which include indigenous technology. In same vein intrinsic benefits of vibrant and healthy SMEs include access to infrastructural facilities occasioned by the present or existence of such SMEs in their surroundings, and the stimulation of economic activities which include suppliers of several items and distributive trades for items produced or required by SMEs, stemming from rural-urban migration, and also enhancement or strengthening of standard of living of employees or workers of the SMEs and their dependents as well as those that are directly or indirectly related to them (Onugu, 2005). SMEs worldwide can boast of being the major employers of labour and the likes mentioned above if it is compared to the major industries including the multinationals. Cook and Nixson (2000) argues that the interest in the growth and development of SMEs and their contribution to the development process continue to move at the forefronts of the policy debates in developing countries. The advantages claimed for SMEs are many, which includes greater likelihood that SMEs will utilize labour intensive technologies; encouragement of entrepreneurship and thus have an immediate impact on employment generation; there can quickly be established rapidly and put into operation to produce quick returns; their development can encourage the process of both inter and intra-regional decentralization; and there may become a countervailing force against the economic power of Larger Scale Enterprises (LSE). However, the growth and development of SMEs is seen as accelerating factors for the achievement of wider economic and socio-economic objectives or goals, including poverty alleviation (Hallberg, 2000).

Ekwem (2011) SMEs is of types and sizes, and the measures used to classify SMEs are employment, assets, and revenue. He further, states that the definitions of SMEs does not remain constant it’s changes or varies from one organization/association to another, country to country, industry to industry, and from one financial institution to another. The variation on the concept of SMEs depends on the level of development of the country, industry, and the rest in question, and at the same time with the level of its economic activity and industrial growth. NCI (2003) opined that Small Scale Industries are those industry that have a total cost (including working capital but without cost of land) above one million five hundred thousand naira but not exceeding fifty million, with a number of employees between eleven to one hundred workers, while the Medium Scale Industry are those industries that have a total cost (excluding cost of land but including working capital) above fifty million naira exceeding two hundred million employing employees between one hundred and one and three hundred workers. The major characteristic attributed to SMEs is flexibility (Levy & Powell, 2005). Storey and Cressy (1996) opined that SMEs are more flexible than large firms hence they bring about innovation in terms of their goods and service. SMEs usually operate on a flat management structure and are associated with small management teams and in most cases, SMEs managers work closely together on a day to day basis (Onugu, 2005), and also the characteristics of SMEs can be seen as an enterprise that is relatively small, with the owner be in control of all its affairs, this makes him take faster decisions and actions, he can be known by all the employees and can change line of business at any time unlike large companies. But they face the problem of inadequate accountability, weak record-keeping and difficulty in accessing funds (Mohammed & Nzelibe, 2014).

STATEMENT OF THE PROBLEM

It is in agreement with certain experiences that the inability of the management of the small scale businesses to determine causes of failure may have led to poor productivity and the high level of unemployment in the land which has severely affected the economy. Also it is perceived that the inability of the government and management of these small and medium scale enterprises to develop policies for solving the problem of small scale businesses may have reduced the profitability of such enterprises. Indeed, nothing weakens organization more than when government at all levels develops poor attitude to capacity training. Experiences show that the poor attitude of the government to creation of conducive environments for business may have reduced the chances of survival of small scale enterprises in Nigeria. The inability of business owners to implement management policies just as experiences have shown as a resu;t of poor capacity training and capital structure, may have led to unproductivity. Again poor financial management strategies may have aggravated the situation just as the perceived inability of management to employ competent personnel may have led to unproductivity.

AIMS AND OBJECTIVES OF THE STUDY

The major aim of this study is to examine the influence of capacity training and capital structure on small and medium scale enterprise survival in the economy. Other general objectives of the study are;

1. To examine if capacity training and capital structure has a significant influence on small business survival in the economy
2. To examine the level of capacity training for small business owners in Nigeria.
3. To determine the prospects of ensuring a robust and effective small business industry in Nigeria.
4. To highlight the role of government in ensuring adequate capacity training for small business owners.
5. To recommend ways of improving capacity training and capital structure of small and medium scale enterprises in Nigeria.

RESEARCH QUESTIONS

1. Do capacity training and capital structure has a significant influence on small business survival in the economy?
2. What is the level of capacity training for small business owners in Nigeria?
3. What are the prospects of ensuring a robust and effective small business industry in Nigeria?
4. What is the role of government in ensuring adequate capacity training for small business owners?
5. What are the ways of improving capacity training and capital structure of small and mdioum scale enterprises in Nigeria?

RESEARCH HYPOTHESIS

H0: capacity training and capital structure does not influence survival of small and medium enterprises in Nigeria.

H1: capacity training and capital structure have significant influence survival of small and medium enterprises in Nigeria.

SIGNIFICANCE OF THE STUDY

Information gathered from this research could be used by both government at all levels and Managers of Small and medium Scale Enterprises for planning appropriate measures for business growth and survival as well as the effective allocation of resources. To students, researchers and scholars in every higher institution of learning, it will provide them with some vital information concerning strategies for small scale business survival. Also, it will provide basis for which further research could be conducted. Finally, it is believed that this research study will be of great use to general public by expanding their knowledge on small scale business.

SCOPE AND LIMITATION OF THE STUDY

This study is on capacity training and capital structure influence on small and medium scale enterprise survival in the economy using small businesses in Lagos state as a case study.

LIMITATION OF THE STUDY

Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview)

Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.