ENTREPRENEURIAL ORIENTATION AND SMALL SCALE BUSINESS PERFORMANCE (A CASE STUDY OF SELECTED SMEs IN LAGOS STATE)

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Small and Medium Enterprises (SMEs) play a pivotal role in the economic growth and development of emerging, developing and developed economies of the world. The development of the small and medium scale Enterprises sector is one approach that could help the government to attain the objective of promoting entrepreneurship as a vehicle for driving rapid industrialization, solving the problem of unemployment and overall economic growth. The contribution of the SMEs sector to the Nigerian economy shows that it is a strategic engine for economic growth and development. Small businesses play a key role in creating jobs, contributing to tax, export and import revenues, facilitating the distribution of goods, as well as contributing to human resource development. SMEs are the cradle of innovations (INNs) and entrepreneurship (Agyapong, 2010; Schlögl, 2009). In addition, SMEs are very important in the fight against poverty. They also employ poor and low income workers and are sometimes the only source of employment in the rural area; their contribution cannot be overlooked (Ackah, 2011). The major obstacles threatening the performance of small and medium scale Enterprises in Nigeria are obsolete technology, multiple taxations, access to the market, poor support (business development services), and inconsistency in government policies, poor infrastructure and access to finance [SMEDAN, 2013]. African Development Bank Group (2013) opined that the business environment in Nigeria is bedeviled by market failures and this has led to the under-provision of financing for the small and medium scale Enterprises sector which is crucial to employment and economic diversification and this underlines the necessity for provision of financial assistance to SMEs through reputable local banks.  An Entrepreneurial oriented (EO) firm for the purpose of this study is defined as a firm that involves in technological innovation (innovativeness), undertakes risky ventures (risk taking), and pursue opportunities proactively (pro-activeness). On the other hand Entrepreneurial management (EM) assumes that entrepreneurial firms are driven and motivated by the opportunity, seize it regardless of the resources they have and if necessary, prefer to rent these resources (Guulruh and Sinem, 2009).  The birth, growth, and sustainability of small and medium scale Enterprises are critical to the attainment of economic growth and development of countries. Despite this, the truth is that the activities of SMEs are bedeviled by problems such as access to finance, poor infrastructure, inconsistency in government policies, poor support (business development services), and access to the market, multiple taxation and obsolete technology, leading to high failure rate. The epileptic growth of small and medium scale Enterprises in Nigeria cannot just be attributed to the problems already stated only but to mainly inadequate EO. Given the scenarios painted above, there have been many efforts in the last twelve years to boost the small and medium scale Enterprises sector of the Nigerian economy. First, the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) was created as the agency solely responsible for the promotion and development of this sector. In addition, the National Enterprise Development Program (NEDEP) was implemented. Others were the creation of the MSME National and State Councils, Youth Enterprise with Innovation in Nigeria (YouWiN), the revised National small and medium scale Enterprises Policy and other funding access of the Central bank of Nigeria and other development banks [SMEDAN, 2013]. In order to achieve these, firms develop supporting mechanisms like structure, culture and people. The dimensions of EM include strategic orientation, commitment to opportunity and resources, control of resources, management structure, reward philosophy, growth orientation and entrepreneurial culture (Guulruh and Sinem, 2009). The relationship between entrepreneurship orientation (EO) and firm performance has become the main subject of interest in past literatures which are concerned with the positive implications that entrepreneurial processes have on firm growth and performance (Lumpkin and Dess, 1996; Wiklund, 1999; Zahra, Jennings, and Kuratko, 1999). In developing countries like Nigeria, most of the researches on entrepreneurship are based on small firms or individual entrepreneurships (Miller and Breton-Miller, 2011). Consequently, the role of EO has not been fully exploited, and there is limited research dedicated to the field of business enterprises regarding the development of enthusiasm of EO among SMEs in developing economies like Nigeria. Therefore, the study seeks to investigate the effect of entrepreneurial orientation on the performance of selected small and medium scale enterprises in Nigeria.

1.2 STATEMENT OF PROBLEM

SMEs in Nigeria face enormous pressures as the nation integrates more into the world economy. Influences, impacting as both external and internal factors, can be found in the business environment, such as globalization, technological innovation and demographic and social change, as well as the level of technology deployed, innovative ability, financial support and entrepreneurship. In Nigeria entrepreneurial ventures have a low survival rate as entrepreneurs start businesses but are unable to turn them into sustainable businesses. Also, most new SMEs in Nigeria do not move from the first stage of existence to other stages such as survival success, take off and resource maturity (Fatoki, 2012). All over the world as well as in Nigeria in particular, several characteristics, factors and problems stated above have been identified to be key determinants of lack of SMEs performance and macroeconomic consequences of such problems include poverty, unemployment, increase in inflation and other macroeconomic challenges and low performance (Prijadi, et.al 2017), therefore, it is necessary to establish an understanding of key entrepreneurial orientation and business practices that can help in the understanding and promotion of SMEs for better performance. Ideally, Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service. It is capable of being presented as a discipline, capable of being learned, capable of being practiced. Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. And they need to know and to apply the principles of successful innovation. Many reviews and assessments of the entrepreneurship research field have concluded that the development of a cumulative body of knowledge has been limited and slow because there is lack of agreement on many key issues regarding what constitutes entrepreneurship (Shane & Venkataraman, 2000), because researchers fail to build upon each other’s’ results (Davidsson & Wiklund, 2001), and because measurements of key variables are typically weak.

1. AIMS AND OBJECTIVES OF THE STUDY

The major aim of the study is to examine entrepreneurial orientation and small scale business performance in Nigeria. Other specific objectives of the study are;

1. To assess the role of entrepreneurial orientation in business performance.
2. To determine the effect of entrepreneurial orientation on small scale business performance in Nigeria.
3. To examine the problems faced by small and medium scale enterprises.
4. To examine the factors influencing entrepreneurial orientation of small and medium scale enterprises in Nigeria.
5. To examine the relationship between entrepreneurial orientation and small scale business performance in Nigeria
6. To recommend measures that can be adopted for effective entrepreneurial orientation and ways of improving small business performance in Nigeria.
   1. RESEARCH QUESTIONS

1. What are the roles of entrepreneurial orientation in business performance?
2. What are the effects of entrepreneurial orientation on small scale business performance in Nigeria?
3. What are the problems faced by small and medium scale enterprises?
4. What are the factors influencing entrepreneurial orientation of small and medium scale enterprises in Nigeria?
5. What is the relationship between entrepreneurial orientation and small scale business performance in Nigeria?
6. What are the measures that can be adopted for effective entrepreneurial orientation and ways of improving small business performance in Nigeria?
   1. RESEARCH HYPOTHESES

Hypothesis 1

H0: There is no significant effect of entrepreneurial orientation on small scale business performance in Nigeria.

H1: There is a significant effect of entrepreneurial orientation on small scale business performance in Nigeria.

Hypothesis 2

H0: There is no significant relationship between entrepreneurial orientation and small scale business performance in Nigeria.

H1: There is a significant relationship between entrepreneurial orientation and small scale business performance in Nigeria.

1.6 SIGNIFICANCE OF THE STUDY

The findings of this study were significant to entrepreneurs in establishing the relationship that exists between entrepreneurship orientation and performance of small and medium enterprises. Specifically, the findings of this study shed light on the influence of pro-activeness, innovation, and risk taking on performance of small and medium enterprises. The findings of the study were significant to the Ministry of Industrialization and planning mandated with economic planning by highlighting the need to assess the influence of key pillars to the success of entrepreneurial activities. Besides, adding to the pool of knowledge in entrepreneurship, this study formed a basis for further research in the field of entrepreneurship.

1. SCOPE OF THE STUDY

The study is restricted to entrepreneurial orientation and small scale business performance in Nigeria, a case study of selected small scale businesses in Lagos state.

1.8 LIMITATION OF 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.

1. DEFINITION OF TERMS

Entrepreneurial Orientation:  Is a firm-level strategic orientation which captures an organization's strategy-making practices, managerial philosophies, and firm behaviors that are entrepreneurial in nature.

Small Scale Enterprise: An enterprise with a labor size of 11-1000 workers or a total cost of not more than 50 million including working capital but excluding cost of land (Sule, 1986:207).

Medium Scale Enterprise: An industry with a labor size of between 10-300 workers or a total cost of over 50 million but not more than 200 million including working capital but excluding cost of land (Clifford, 1972:85).

Business performance: Business performance is a set of performance management and analytic processes that enables the management of an organization's performance to achieve one or more pre-selected goals.