ABSTRACT
This study investigates the effect of entrepreneurial skills on the performance of small and medium scale enterprises in Lagos state. The survey research design was employed in the study which is cross sectional in nature. Primary data was collected through questionnaire administration. The data was collected from a sample of 174 drawn from a population of 201 SMEs. The study employed stratified and simple random sampling technique in selecting the samples and the unit of analysis was the owner-managers representing each SME. Inferential statistics was used to analyze the data collected from the field with the aid of Statistical Package for Social Sciences (SPSS) version 20. Multiple regression analysis was used to test the hypotheses formulated for the study. The findings revealed that organizing and controlling skills have significant positive effect on the performance of SMEs in the state, while planning skills has insignificant but positive effect on the performance of SMEs in the state. The outcome of the study provided an important insight to both academics and managers with findings for further understanding on the effect of entrepreneurial skills on performance of SMEs. The study recommended that a combined effort by governments at all levels and Non-Governmental Organizations(NGOs) are required towards capacity building for the entrepreneurs on the acquisition of the planning, organizing and controlling skills for better business management and higher business performance.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Small and Medium Enterprises (SMEs) are important to economic growth and significantly essential to generate profit, increase sales and provide return on investment to the owners of SMEs. In developing countries, the primary barrier to economic growth is often not so much with a scarcity of capital, labor or land, but it is the scarcity of the dynamic entrepreneurs that can bring the markets and mechanisms that can facilitate the economic growth (United Nations Development Program, 1999). Entrepreneurial activity is the key to growth and prosperity in many countries. Entrepreneurship development is the key factor in economic development (Harper, 2003).
Entrepreneurship has been considered as the backbone of economic development. It has been well established that the level of economic growth of a region to a large extent, depends on the level of entrepreneurial activities in the region. The myth that entrepreneurs are born, no more holds good, rather it is well recognized now that the entrepreneurs can be created and nurtured through appropriate interventions in the form of entrepreneurship development programs (India Entrepreneurship Movement 2008).
Operational efficiency and business excellence of owners of small and medium enterprises (SMEs) are very important for the growth and sustenance of such firm (Jaeger, Matyas & Sihn, 2014). Islam, Khan, Obaidullah & Alam (2011) contended that entrepreneur characteristics are a significant factor that determines SMEs success in Nigeria. Small and medium scale enterprises in all economies are very important to national economic growth and considerably contribute to industrial development hence researches are being carried out on how to improve their performance. In a developing economy like Nigeria, what account for largest share of employment and output are the SMEs (UNECE, 2003). According to SMEDAN (2009), SMEs play tremendous role in reengineering the socio economic landscape in Nigeria and they largely represent a stage in industrial transition from traditional to modern technology. SMEs are vital in developing the Nigerian economy for social and political role in local employment generation, balanced resources utilization, income generation, utilization of local technology. (Babatope & Akintunde, 2010).
Entrepreneurship is not an easy vocation, and it does not always guarantee a 100% success. There are several critical factors that must be in place to enable entrepreneurs achieve a measure of success. The kind of economic policies that have been followed in many African countries especially in Nigeria in the two to three decades after political independence have not always been conducive to small scale enterprise in Nigeria.
A firm’s competitive advantage stems from its entrepreneurial capabilities, management abilities and technical know-how and its adaptability to the internal and external business environment. Basic education and continuing investment in on-the-job, for developing entrepreneurial skills is therefore important. Entrepreneurship skills are very important to the survival and growth of SMEs. Entrepreneurial development has been conceived by successive governments as a program of activities to enhance the knowledge, skill, behavior and attitudes of individual and groups to assume the role of entrepreneurs.
Skill is knowledge demonstrated by actions or the ability to perform in a certain way. Skills are acquired through training and education (Perks & Smith, 2006). Education and training create circumstances in which a person can acquire and apply the skill that will help him/her achieve the objective of the business. Skills development can be achieved through training and education (Erasmus, 2005). The difference between education and training is that education prepares the individual for life while training prepares him or her to perform specific tasks. In this study, the focus was on skills development through training. Landzani (2004) argues that changing circumstances require that small business managers/owners receive regular training in order to reduce failure rates, increase profits and achieve growth. This is necessary because most small business owners start their businesses without appropriate training.
Many SMEs in Nigeria suffer from lack of technical and business skills. SMEs themselves identify a variety of skills gaps in areas including ICT, technical and industrial knowledge, finance, accounting and management. There is also limited innovation and competitiveness in the SME sector caused by a lack of technical and managerial skill. The unstructured environment in which SMEs operate and their inability to be open to new or innovative ideas presents a major challenge to the development of the SME sector (Ministry of Finance and Economic Planning, 2010).
1.2 STATEMENT OF THE PROBLEM
In spite of the significant contribution of SMEs to the national economy, many problems and constraints still exists in promoting their development and growth. For instance, an International Labour Organization (1994) study shows that inadequate technical entrepreneurial talent particularly affects the development of small scale manufacturing and processing industries. While a large scale business can be established with expatriate capital, small scale businesses need to have a domestic entrepreneurial and industrial base. Another obstacle affecting the performance of small scale businesses in Nigeria is the persistent low level of technical and technological expertise of the owners, the shortage and inadequate entrepreneurial skills of operators and the absence of an effective management technique.
Their low product quality makes it difficult for them to compete in a technologically driven, knowledge based and export oriented globalized economy. The level of education of most entrepreneurs are mostly limited to primary education and this affect how they will be to handle their businesses in terms of account recording and balancing, record keeping using a computer and other facilities which they could use to improve their business but are not able to use them due to their level of education In developing countries especially in Nigeria, the primary barrier to economic growth is often not so much with the scarcity of capital, labour or land but it is the scarcity of the dynamic entrepreneurs that can bring the markets and mechanisms that can facilitate the economic growth.
Entrepreneurial activity is the key to growth and prosperity in many countries. Most of these entrepreneurial activities require a very good entrepreneurial characteristics and skills since entrepreneurship development is the key factor in economic development (Harper, 2003).
According to Global Entrepreneurial Monitor (2012), Nigeria is a world leader in entrepreneurial spirit, and they believe they have necessary skills and knowledge. However, despite this report, the amount of failed SME has not reduced in recent years. The focus of research in entrepreneurship over the years is on building theory without the consideration or attention on what it takes for a venture to survive. The empirical studies of Bosire and Nzaramba (2013) in their findings, concluded that development of entrepreneurial skills could serve as a measure for improving the self-reliant of startups and established entrepreneurs. Similarly, (Coric, Katavic, and Kopecki,) claims that entrepreneur’s success depends on the connection of crucial entrepreneurial skills for starting businesses, as well as the survival and development in their early years. However, such study is still missing in Nigeria context to the best of the researcher knowledge. Additionally, the research of Undiayaundeye (2015) identified lack of entrepreneurial skills among graduates and thus, degenerate to failed entrepreneurial journey of business owners. As a result of the above discussions, this study, therefore, intends to examine the Effects of entrepreneurship skills on the performance of small and medium enterprises in Lagos Nigeria.
1.3 OBJECTIVES OF THE STUDY
The general objective of this study is to examine the effects of entrepreneurship skills on the performance of small and medium enterprises in Lagos Nigeria. The specific objectives include the following:
1. To find out if entrepreneurial skills have any significant relationship with SMEs performance.
2. To assess the impact of planning skills on SMEs growth in Lagos Nigeria.
3. To evaluate the effect of organizing skills on SMEs growth in Lagos Nigeria.
4. To examine the effect of leading skills by SMEs owners on their firms’ performance.
5. To evaluate the effect of controlling skills on SMEs growth in Lagos Nigeria.
1.3 RESEARCH QUESTIONS
The following research questions will guide the study
1. What is the relationship between entrepreneurial skills and SMEs performance?
2. What is the impact of planning skills on SMEs growth in Lagos Nigeria?
3. What is the effect of organizing skills on SMEs growth in Lagos Nigeria?
4. What is the effect of leading skills by SMEs owners on their firms’ performance?
5. What is the effect of controlling skills on SMEs growth in Lagos Nigeria?
1.4 Scope of the study
The scope of this study will be limited to Lagos State, Nigeria and it will focus on SMEs entrepreneurship skills.
1.5 Significance of the study
The growth and development of small and medium enterprises (SMEs) has been a focus for policy makers and researchers in the developed and developing countries. This study will be key in giving direction to how business owners can improve their entrepreneurial skills for better performance.