THE ROLE OF ENTREPRENEURIAL COMPETENCIES ON THE SUCCESS OF SME IN NIGERIA
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Small and medium-sized enterprises (SMEs) are the backbone of modern economic development because of the critical role they play in the sustainability of global economic development (Carter and Tamayo, 2017; Wattana pruttipaisan, 2002). SMEs account for more than 90 percent of businesses, more than 50 percent of global employment, and more than 50 percent of global GDP (Kessey, 2014). SMEs are the most common type of business in Africa. The enterprises make significant contributions to, among other things, job creation, capital formation, economic viability, and poverty alleviation (Ganyaupfu, 2013). Today, Africa’s expanding economy views SMEs as a means of achieving growth and excellence (Roldan, 2015). The sector generates significant employment and stimulates economic growth. In Ghana, for example, The sector employs 92 percent of all businesses in the country (Steel and Webster, 1991). In South Africa, Ganyaupfu (2013) confirmed that SMEs account for 91 percent of all registered business entities, accounting for 52 to 57 percent of the country’s GDP. However, in Nigeria, a number of challenges have overwhelmed the country’s business milieu, making the environment not only difficult for business but also resulting in the country’s SMEs failing at an increasing rate. According to studies, 85 percent of businesses in the country fail within the first five years of operation (Ogboru, 2005; Olu and Haynes, 2006; Ariyo, 2008). Furthermore, even the small percentage of those who survive beyond five years die between the sixth and tenth years of their lives, indicating that
Only about 5 to 10% of SMEs remain in operation (Onugu, 2005). Despite the Nigerian government’s efforts and contributions to the development of SMEs, the contribution of enterprises, including micro businesses, to the country’s exportation is as low as 7.27 percent (SMEDAN, 2013). The country’s leading cause of business failure has been identified as a lack of entrepreneurial competencies (Inyang and Enuoh, 2009). As a result, entrepreneurial competency is required because it provides practical solutions to the mystery of business failure (Sánchez, 2013).
Entrepreneurial competence is one of the most important determinants of business success, performance, and growth or failure (Kiggundu, 2002; Brinckmann, 2008; Mitchelmore and Rowley, 2013). Furthermore, female entrepreneurs are the majority.
operate small-scale businesses that rely heavily on the owner’s skills. As a result, comprehending the nature of such competencies in the context of female entrepreneurs is critical (Mitchelmore and Rowley, 2010; Mitchelmore et al. 2008).
Competencies are a collection of knowledge, behaviors, skills, and abilities that distinguish excellent entrepreneurial performance from average or poor entrepreneurial performance (Wu, 2011; Athey and Orth, 1999). Similarly, Man, Lau, and Chan (2002) consider entrepreneurial competencies to be a collection of high-level characteristics such as knowledge, skills, and personality traits. Entrepreneurial skills enable businesses to gain a sustainable competitive advantage, which eventually leads to business success and growth (Man et al., 2002). Tehseen and Ramayah (2015) emphasized
the importance of understanding the significance of entrepreneurial competencies, particularly in developing economies, because entrepreneurial competencies are critical for business survival, performance, and success. The measurement of entrepreneurial competencies, on the other hand, varies depending on the context, prediction, and assumption (Mitchelmore and Rowley, 2010). As a result, numerous scholars have established that the leading competencies-related obstacles that result in poor performance and failure of businesses in Nigeria are: a lack or ineffective innovation, unfavorable marketing strategies, and a lack of distinctive entrepreneurial traits (Duru, 2011; Eneh, 2010; Onugu, 2005; Adeoti, and Adeoti, 2005; Siyanbola et al., 2012).
The primary goal of the study is thus to investigate the relationship between entrepreneurial competencies and business success in SME’s in various settings.
1.2 STATEMENT OF THE PROBLEM
Despite the fact that SMEs are present in all sectors of the economy, they are most prevalent in trade (54%), followed by services (34%). Micro and small businesses are critical for sustaining livelihoods and advancing overall prosperity and progress. They create jobs with relatively low levels of investment per job; they use and add value to local resources; they promote equitable income distribution; and they are better positioned to meet local needs in small markets. They use technologies that are simpler to acquire, transfer, and adopt, even for people with limited education and training. Through partnerships and subcontracting relationships, they have the potential to supplement large enterprises. Micro and small businesses also serve as a breeding ground for entrepreneurial and managerial development (Olomi, 2006).
There are numerous issues that make it difficult. It is difficult for SMEs to capitalize on existing opportunities for additional employment and wealth creation. One of the most significant impediments is the entrepreneur’s competency in terms of attitudes, motivation, exposure, skills, and experiences. This capacity limitation is exacerbated by the effects of other issues such as a complex regulatory framework, limited access to finance, and limited working space. Simultaneously, entrepreneurship development is underdeveloped and not easily accessible or affordable to SMEs.
1.3 OBJECTIVES OF THE STUDY
The primary goal of this study is to determine the impact of entrepreneurial competencies on the success of SMEs in Nigeria. More specifically, the study intends to;
1. Determine the level of expertise of entrepreneurs in terms of skills and experience.
2. Examine the impact of entrepreneurial skills on the success of SMEs in Nigeria.
3. Investigate the challenges that SMEs face in Nigeria.
1.4 RESEARCH QUESTION
1. How competent are Nigerian entrepreneurs in terms of skills and experience?
2. Is there a significant impact of entrepreneurial skills on the success of Nigerian SMEs?
3. What are the challenges that SMEs face in Nigeria?
1.5 RESEARCH HYPOTHESIS
Ho: entrepreneurial competencies have no significant effect on the success of SMEs in Nigeria.
Hello, there is a significant impact of entrepreneurial skills on the success of SMEs in Nigeria.
1.6 SIGNIFICANCE OF THE STUDY
The study’s goal is to determine the extent to which entrepreneurial characteristics lead to business success. The study aims to identify the challenges and prevailing factors impeding the success of SMEs, analyze them, and then make appropriate recommendations to address them.
The study’s findings are useful to SME entrepreneurs because they highlight the importance of adequate training to improve effectiveness in managing SME activities and policy implications. The study’s findings serve as a starting point for future researchers.