IMPACT OF ENTREPRENEURIAL ORIENTATION ON SMES SURVIVAL POTENTIAL IN LAGOS STATE

Abstract

This study was on impact of Entrepreneurial Orientation on SMEs Survival Potential in Lagos State. Three objectives were raised which included: To evaluate strategies that can facilitate survival and growth of SME’s in Lagos state, to ascertain the extent to which managerial experience moderates the influence of entrepreneurial orientation on SMEs in Lagos state and to ascertain the contribution of entrepreneurial orientation  on the survival of SMEs in Lagos state. The total population for the study is 75 selected SMEs in Ikorodu local government of Lagos state. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. The data collected were presented in tables and analyzed using simple percentages and frequencies. Therefore, recommends that there is need for orientation and strong advocacy for entrepreneurs in SME‟s in Nigeria and Africa to change the mindset on how they are operating their businesses. They should inculcate the attitude of exploring modern scientific business practice and adapting to various survival strategies proposed to operate their businesses.

 

Chapter one

Introduction

1.1Background of the study

Small and medium Enterprises (SME) are the key routes for economic development in several developed and developing economies, and their relevance for local, regional, and national development has been growing (Ndabeni, 2008; Cooper & Park, 2008; Lalkaka & Abentti, 1999). In many nations, small and medium firms have also become a formidable common form of business organization and the primary source of employment and output (Nichter & Goldmark, 2009; Neumark, 2008). That is why small and medium-sized enterprises (SMEs) are commonly recognized as “effective instruments for income production and economic progress” (Dimirchi & Rahimi, 2011:Pg 855). “SMEs account for more than 95 percent of all enterprises in many industrialized countries, and they play a vital role in world economies,” according to the report (Chiao, Yang, & Yu, 2006: Pg 595)

As a result, the literature suggests that SME benefits to any economy are readily apparent, such as contribution to an economy in terms of productive employment opportunities, developing and adapting appropriate technological advancement, and establishing a platform for industrialization. Nigeria, Ghana, and Kenya, for example, have recognized the importance of SMEs and have developed policies to encourage, support, and fund them.

A blossoming and blooming SME sector is said to be one of the essential characteristics of a flourishing and developing economy. SMEs, as a result, play a critical part in a country’s growth by providing jobs for a growing rural and urban labor force, as well as ensuring the economy’s long-term viability and innovation. SME’s have a large potential to bring about social and economic transformation and development by contributing considerably to job creation, income production, and accelerating development and expansion in urban and rural regions, among other reasons (Hellberg, 2000; Olutunla: 2001:OCED, 2004: Williams, 2006).

In a similar vein, (Ligthelm, 2008) claims that small and medium enterprises benefit any economy by developing skilled and semi-skilled workers, developing lower income groups, attracting significance, and improving community living standards by implementing appropriate technological approaches to increase income growth. Recognizing the critical significance of SMEs and private sector businesses in overall economic development, many emerging economies, including Nigeria, have established enterprise support networks and institutions to help these businesses grow.

. According to Scarborough, Zimmere, and Wilson (2008), in addition to their role as agents of economic transformation in the Nigerian economy, the primary justification for SME survival strategies is that small and medium business failure rates are relatively high and are becoming endemic in the early years. Ndabeni (2008) agrees that many new ventures fail in both rich and developing countries, with only a few achieving the survival and sustainability grade. Many SMEs encounter numerous problems, particularly in developing nations, as they operate in an economically unfavorable environment for firm development, and the harsh conditions experienced by the owners of most SMEs in Africa make SME survival a difficult task. According to statistics, one-third of all new businesses fail by the end of the second year, and 50-60% of these SMEs collapse by the end of the seventh year (OECD, 2009). This situation is pertinent to Nigeria because the majority of Nigerian entrepreneurs are SME owners by necessity, and they are ultimately responsible for nurturing their businesses in order to stay in business.

Despite the efforts of successive Nigerian administrations, many SMEs continue to struggle to withstand the market economy’s instability, according to various researchers (Adeusi & Kolapo, 2006). The current vegetative state of SME survival in Nigeria, according to (Adejuwon (2011), is a sad reminder that there is a missing link between strategy and SME sustainability (World Bank, 2009). As a result, the critical techniques for SME survival and sustainability are underutilized. Other factors that contribute to the failure rate of small and medium businesses include a lack of strategy, a lack of knowledge, finance constraints, and a lack of capital management and skill sets (Rankhumise,2009). For decades, a number of factors, including a lack of organizational skills among entrepreneurs, have hampered the ability of SME and new venture establishments to survive (Aldrich & Fiol, 1994) This, in turn, necessitates that SME owners comprehend the nature of their company’s needs in terms of infrastructure, technology, and external demand. The third issue is the incapacity of Nigerian SMEs to be proactive about the external environment as a result of this shortcoming.

As a result of this bleak situation, the Nigerian government has responded by enacting a number of national policies, strategies, and programs aimed at assisting and ensuring the survival and viability of SMEs in the country. The first response of Nigerian policymakers was either insufficiently proactive or reactive in responding to the alarming rate of the depth of problems experienced by SMEs, or in comprehending the enormity of the challenging conditions faced by SME owners. In a similar vein, SME owners have implemented a variety of techniques to help current and newly founded businesses thrive. Most SME promoters were unprepared for the survival dilemma and assumed that the SME sub-sectors’ survival crisis was just another endless argument until they learned that most SME’s in Nigeria are unable to contend with economic reality to justify their survival and existence. Some of the hurdles that SMEs encounter in Nigeria have consumed the sector and created a slew of issues. It is crucial to identify and assess some of the significant issues that limit SME potential in Nigeria.

Statement of the problem

SMEs (Small and Medium Enterprises) are widely regarded as a crucial engine of economic development, and they play a critical role in the economies of many developing countries around the world. They have been the vehicle for achieving quick economic expansion and rapid modernization. Despite their contributions to income and job creation, the majority of small and medium-sized businesses fail to thrive and grow into larger corporations. In other words, despite their contribution to economic development, most SMEs continue to face numerous challenges that threaten their long-term survival and viability. A lot of studies have linked these high failure rates to the current economic climate and unfavorable business environment. These barriers to SME expansion and survival are divided into two categories: those inhibiting growth by administrative issues, operating problems, and strategic problems, and those impeding growth via administrative problems, operating problems, and strategic problems.

Objective of the study

The following research hypotheses will be investigated;

1. To evaluate strategies that can facilitate survival and growth of SME’s in Lagos state
2. To ascertain the extent to which managerial experience moderates the influence of entrepreneurial orientation on SMEs in Lagos state.
3. To ascertain the contribution of entrepreneurial orientation on the survival of SMEs in Lagos state

Research question

The following research question will be formulated

1. What are the strategies that can facilitate survival and growth of SME’s in Lagos state?
2. To what extent managerial experience moderates the influence of entrepreneurial orientation on SMEs in Lagos state?
3. Do entrepreneurial orientation contribute to the survival of SMEs in Lagos state?

Research hypotheses

The following research hypotheses will be formulated

H1: there are no strategies that can facilitate survival and growth of SME’s in Lagos state

H2: there is no extent managerial experience moderates the influence of entrepreneurial orientation on SMEs in Lagos state

H3: there is no contribution of entrepreneurial orientation on the survival of SMEs in Lagos state

 

Significance of the study

The study will be very significant to students and business owners in Nigeria. The study will give a clear insight on the impact of entrepreneurial orientation on SMEs survival potential. The result of study will educate business owners especially managers on how entrepreneurial orientation can help in growing SME. The study will serve as a reference to other researcher that will embark on the related topic

Scope of the study

The scope of the study covers impact of entrepreneurial orientation on SMEs survival potential. The study will be limited to SMEs in Lagos state

Limitation of the study

Therefore, it will be of more importance to highlight certain militating factors that tend to narrow or limit my scope of study. This project research would have been easier if not for these limitating factors:

1. Time factor:time was not on the researchers to consult various sectors of the economy to review employees or given out questionnaire to various institutions on the effect of government revenue policies.
   As we all know, time is never our friend. The time scheduled for the completion of this research thesis was too short. As a result, generating information/data was strenuous as it coincides with final year examination period, which needed attention.
2. Finance:this is another barrier that limited the researcher’s work.
3. Available resources:was unavailable for the research work.

 

Definition of terms

Entrepreneurial orientation: Entrepreneurial orientation (EO) is a firm-level strategic orientation which captures an organization’s strategy-making practices, managerial philosophies, and firm behaviors that are entrepreneurial in nature.

SME: Small and medium-sized enterprises or small and medium-sized businesses are businesses whose personnel numbers fall below certain limits

Survival: the state or fact of continuing to live or exist, typically in spite of an accident, ordeal, or difficult circumstances.

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