PLACE OF ACCOUNTING EDUCATION IN ENTREPRENEURIAL SUCCESS IN NIGERIA

ABSTRACT

This study examined the contribution of accounting education to entrepreneurial success in Nigeria. The research identified business success factors as well as business obstacles, and ascertained the impact of accounting knowledge/skills on the competitive ability of the entrepreneurs in the South-east of Nigeria. Ex-post facto, and survey design were used for the study. The population was drawn from members of the National Association of Small Scale Industries (NASSI) in the South-east of Nigeria that registered with Corporate Affairs Commission (CAC). The sample size was obtained using Bill Godden’s method of sample size determination. Data were collected by means of questionnaire. Three hundred and ninety (390) questionnaire were administered to the two groups of the respondents, thereby making it a total of 780 questionnaire. Personal interview was equally used for data collection. Data were also extracted from the financial records of the organisations. Tables, charts, and percentages were used in data presentation and analysis.   Z – test statistic was used to test hypothesis 1, hypotheses 2 and 4 were tested using analysis of variance (ANOVA), while hypothesis 3 was tested using multiple regression model. The result showed z-value of 8.659 (p = 0.000 < 0.05) for average annual turnover and z-value of 3.936 (p = 0.000 < 0.05) for average annual profit, both results indicating that there is a significant difference between business success level of entrepreneurs that acquired accounting knowledge/skills and those that do not acquire accounting knowledge/skills. The result also showed F – value of 0.008 < Fcritical  of 4.35 and p(0.931) > 0.05 revealing that there is no significant difference in perceived business success factors between entrepreneurs with accounting background and their counterparts that do not have accounting background. The study equally revealed (F(2,777) = 30.005, p < 0.05, with an R2  of .67 showing that there is a positive significant relationship between competitive ability and accounting knowledge/skills. Moreover, the result of the study showed (F(1,20) = 17.569, p < 0.05 indicating a significant difference in perceived business obstacles between entrepreneurs with accounting background and their counterparts that  do  not  have accounting  background.  The study  provides  an  insight  into  accounting  education indispensable role/value in entrepreneurial success and sustainability in Nigeria. It has shown that competitive ability of an entrepreneur significantly depends on the effective application of accounting knowledge/skills  which ultimately results in business success. The study therefore recommends that organisations should deliberately imbibe the culture of maintaining adequate financial information. Also, clear accounting rules and steps in data recording should be established and adequate monitoring of the implementation and adherence to the policies should be ensured.

CHAPTER ONE

INTRODUCTION

1.1  Background to the Study

An entrepreneur is one who undertakes to organize, coordinate, manage, and assume all the associated risks of a business. The 18th  – century economist, Richard Cantillon, first used the word “entrepreneur” as an economic term (Davis & Gibb, 2007). The term meant an employer who assumes the risk and management of business, in contrast to a capitalist, who merely owns an enterprise and may choose to take no part in its day-to-day operations.

Over time, scholars have defined an entrepreneur in different ways. Kennedy (2009) defines entrepreneur as an economic agent who unites all means of production:  land, labour, and capital and thus, produces a product. By selling the product in the market, he pays rent for land, wages to labour, interest on capital and what remains is his profit. He shifts economic resources out of the area of lower use into an area of higher productivity and greater yield. Myra, Patricia, and Candida (2010) indicated that entrepreneurs are innovators who use a process of shattering the status quo of the existing products and services to set up new products and services.  Charney and Libecap (2012) define an entrepreneur as a person who searches for change, responds to it and exploits change as an opportunity. For instance, a quick look at changes in communication medium from typewriter to personal computer, to the internet illustrates this idea. Innovation is no doubt a specific tool of an entrepreneur. Hence, an effective entrepreneur converts a source into a resource.

The economic importance of the entrepreneur to nations has been recognized for several decades. Many authors from different perspectives have discussed the importance of entrepreneurship to different countries. Bhattasali (1981) observes that India owes a lot of credit to her entrepreneurs in the realization of their self-reliant strategy of industrialization which resulted to development and utilization of local raw  materials, development of new business ideas, and creation of employment. Owoalah (1989) points out that entrepreneurs play many roles in the economy such as contribution to gross domestic product, value added function, and linkage for big companies. Also,  entrepreneurs  are  very  important  in  areas  such  as  ultimate  utilization  of  unused raw materials and human resources, meeting of local needs, promotion of initiative, stimulating competition and encouraging good human relationship (Wadhwa & Vivek, 2010). Recently, some economists such as Nicoli and Robert argued that education as well as expansion of high- grade personnel (such as entrepreneurs), rather than the increase of physical capital, is the major means and determinant of economic development (Kayode, 2006). Jones and English (2004) observed that the entrepreneurs play crucial role in the economy through the application of creative ideas in the production of various goods and services which empower the process of economic development. Furthermore, Gibb (2007) stated that entrepreneurs that passed through accounting education apply acquired accounting knowledge to the management of enterprises to achieve business progress and success. Gibb postulates that, to be successful, the entrepreneur should be able to estimate future demand, determine the appropriate quantity and timing of inputs, calculate production costs and determine selling prices, ensure proper documentation of business activities, and also possess the arts of superintending and administration. These are ways of application of accounting knowledge to the entrepreneurial venture.

Nigeria like her counterparts all over the world provides university education to its citizens. The primary challenge of a university is to develop quality human capital for every sector of the national economy (Okafor, 2012).  Accounting education is one of the courses being provided in the university. University accounting education was started by the University of Nigeria in 1961 when it opened its door to the very first batch of university undergraduate accounting students in Nigeria (Okafor, 2012). One of the areas of dire need is the production of graduate accountants who are adequately prepared to meet the accounting challenges of modern businesses as well as other economic needs of government. Accounting education incorporates a package of instructional programmes designed to educate prospective accountants to make them efficient and effective in the discharge of accounting duties in any field of endeavour they may find themselves after graduation.

Accounting education was introduced with the aim of achieving numerous goals. One of the goals was to inculcate in the trainees the ability to identify and solve problems using critical and creative  thinking  (McMullan  &  Long,  2003).  Critical  thinking  involves  logical  thinking, reasoning skills such as comparison, sorting, classification, patterning, deductive and inductive reasoning, forecasting, planning, hypothesizing, and critiquing, while creative thinking involves creating something new or original (Busch, 2011). This critical and creative thinking will help to stimulate curiosity and promote divergence in the students.

Another goal of the accounting education was to train the students on how to work effectively and cultivate the ability to resolve conflicts and also structure solution to accounting problems. This is because an effective team member goes beyond self and personal desires and goals. He or she recognizes that the immediate challenge is to proffer solution first, thereby, recognizing the benefits of working efficiently, learning to resolve differences as well as maximizing his/her contributions to help the team/group accomplish its purpose (Samovia, 2012). Furthermore, it is equally aimed at educating the students on how to organise and manage their activities. This goal consists of helping students to identify their main activity, break them down into tasks, prioritize them effectively, relate tasks to time and make plan of action (Vesper, 2012). This will go a long way in educating trainees on effective time management, accounting and business planning.

The  programme  was  targeted  at  equipping  students  with  the  skills  required  for  efficient collection, analysis, organisation and critical evaluation of accounting and non-accounting information for effective decision making purposes. Accounting information that is widely used in the business community for decision making includes financial information, management information, and tax information (Deakins & Freel, 2009). The non-accounting information that may be required includes information on employee skills, suppliers, stock out, and equipment failures which equally assist in business decision making.

Moreover, other goals of the accounting education includes to instill in the students the skills and ability to interpret and communicate accounting information effectively, to reflect on experiences and explore strategies for effectiveness and efficiency in any field of endeavour, to become more curious which can lead to readiness to co-ordinate and evaluate financial information, and to consider adequate employment as an accountant as a viable option upon graduation from their institutions (Ulrich & Cole, 2007).

The expectations were that accounting education in Nigeria will adequately produce accountants that will meet the accounting challenges of businesses for entrepreneurial success.

1.2   Statement of the Research Problem

Accounting education seeks to provide students with the knowledge and skills needed to be effective accountants for the benefit of the enterprise they may find themselves upon graduation and for economic growth (Scott, 2012). Given the prevailing business failure rate in Nigeria which currently stands at 52% (Nigerian National Bureau of Statistics, 2012) accounting education has become crucial to enable business sustainability and entrepreneurial success to be achieved since business survival highly depends on effective accountability.

One area of expectation from accounting education is the production of knowledgeable and skilled accountants who will effectively meet the accounting challenges of various businesses as well as economic needs of government. Whereas this is general expectation, there is insignificant basis (if any) to believe that accounting education in Nigeria has impacted significantly on the ability of accountants to structure and provide proper financial management techniques/ information for entrepreneurial success in Nigeria (Olajumoke, 2012). There is no basis also to believe that such education has impacted on the performance/success of businesses, hence the rate of business failures in Nigeria (Sola & Gregory, 2009). But, the question is why, inspite of accounting education, companies in Nigeria are still experiencing ineffectiveness in their accounting and financial management activities, as experienced by the former Lever Brothers Nig. Plc. (now Unilever Plc.), the confectionary giant, Cadbury Nigeria Plc., some commercial banks, many small and medium scale businesses (Okafor and Onwumere, 2012). The results obtained by previous researchers on impact of education on business performance are either reporting positive or negative results, thereby showing a contradictory situation. For instance, Bates (1990) research work that  was carried out  in United State of America revealed that education level is a key determinant of firms’ success, specifying that highly educated entrepreneurs are most likely to create firms that will remain in operation for a longer period of time.  On the other hand, Nafziger and Terrell (1996) in their study in India reported that firms founded by first set of entrepreneurs in higher castes are most likely to survive, but that increased education of the founding entrepreneurs reduces survival of the firms. They went further to say that this research finding was supported by the Indio-American Foundation, the National Science Foundation, and Andhra University’s Department of Economics. Moreover, findings from earlier studies  do  not  show  the  impact  of  accounting  education on  entrepreneurial success  using turnover and profit as business success determinants. The situation aroused the researcher’s interest in ascertaining if accounting education has any impact on entrepreneurial success in Nigeria.

1.3  Objectives of the Study

The main objective of this research was to ascertain the impact of accounting education on entrepreneurial success, while the specific objectives were to:

1.  Determine business success level of entrepreneurs that acquired accounting education and their counterparts that did not receive accounting education over the 5year period (2008 – 2012).

2.  Determine if there is significant difference in perceived business success factors between the entrepreneurs that  acquired accounting education and  those that  did  not  acquire accounting education.

3.  Examine  the  competitive  ability  of  the  two  groups  of  entrepreneurs  (those  with accounting background and those without accounting background), whether it has any significant relationship with accounting education.

4.  Determine if there is significant difference in perceived business obstacles experienced by the entrepreneurs that acquired accounting education and those that did not have accounting education.

1.4  Research Questions

The following research questions are raised for the study:

1.  To  what  extent  is  the  success  level  of  entrepreneurs  influenced  by  acquisition  of accounting education and non- acquisition of accounting education?

2.  What business success factors do entrepreneurs that acquired accounting education and those  that  did  not  acquire  accounting  education perceive  as  necessary  for  business excellence?

3.  Is there any significant relationship between the competitive ability of the two groups (entrepreneurs who have accounting background and those that do not have accounting background) and accounting education?

4.  What business obstacles do entrepreneurs that acquired accounting education and those that did not acquire accounting education perceive as setbacks for business excellence?

1.5   Research Hypotheses

To achieve the above objectives and also  to provide answers to the research question, the following null hypotheses were formulated:

1.  There is no significant difference between business success level of entrepreneurs that acquired accounting education and those that do not acquire accounting education.

2. There is no significant difference in perceived business success factors between entrepreneurs  that  acquired  accounting  education  and  those  that  did  not  acquire accounting education.

3.  There is no significant relationship between the competitive ability of the two groups (entrepreneurs who have accounting background and those that do not have accounting background) and accounting education.

4.  There is no significant difference in perceived business obstacles between entrepreneurs that acquired accounting education and their counterparts that do not acquire accounting education.

1.6  Scope and Limitations of the Study

This study focused on the impact of accounting education on entrepreneurial success in Nigeria, particularly in the South-east. It determined business success level of entrepreneurs that have acquired accounting education and their counterparts that did not acquire accounting education over 5 year period (2008 – 2012). It also determined business success factors, business obstacles, as well as competitive ability of the two groups of entrepreneurs being studied. In doing that, some variables such as turnover level,  management report, budgeting and profit  level were examined.

The choice of the enterprises (small scale industries) was because of the value added function(s) entrepreneurs play in the economy and the need to ensure entrepreneurial success in the South- east of Nigeria. The sample of this study was restricted to entrepreneurs who are members of National  Association of Small  Scale  Industries  (NASSI)  in  the  South-east  of Nigeria  that registered with Corporate Affairs Commission (CAC).

Also, the result of the study could not be generalized for all entrepreneurs in Nigeria due to the fact that data collected represents the effect of accounting education on entrepreneurial success only for entrepreneurs who are members of NASSI and have registered with Corporate Affairs Commission (CAC). Entrepreneurs who are not members of NASSI are not represented and members of NASSI who are not registered with Corporate Affairs Commission (CAC) are equally not represented. Furthermore, the probability sampling design was used because the total population may not be reached within the time limit of the study.

1.7   Significance of the Study

Amongst the significance of this study is that the policy makers (government) will understand the usefulness of accounting education for entrepreneurial success. It will also help government to know the problems that hinders effective entrepreneurship development/success in Nigeria and the need to address the issue for efficient reduction in business failure, and ensure business friendly environment and economic growth.

It will help educators to have an insight into business success determinants/variables and their relationship with accounting education. Thus, bringing to light the need to evaluate and enhance accounting education for more effective inculcation of accounting skills on the trainees so as to achieve business sustainability and success.

Furthermore, this study will make it possible for the entrepreneurs /business community to assess accounting and financial management skills need, thereby, reducing pre-mature death of businesses and promoting business survival rate for the benefit of the economy.

It will also add to the body of literature in relation to the impact of accounting education on business survival, thus serving as a reference material and basis for further research on the related field. Moreover, students as well as researchers will find this work very useful in their quest  to  know the  importance of accounting education for  entrepreneurial success/business sustainability.

1.8  Operational Definition of Terms

Accounting Education

Anao (2009) as cited in Okafor (2012) defined accounting education as a field of study that incorporates a package of instructional programmes designed to educate “would be” accountants, to make them versatile and capable to handle effectively any accounting roles they may be called upon to play after graduation. It is also a professional discipline that fortifies the trainees with the basic knowledge and skills to be able to prepare and communicate financial information about the performance of business organisation to  information users. This accounting information when properly prepared has specific characteristics which includes reliability, objectivity, understandability, consistency and comparability.

Entrepreneurship

This is an undertaken that involves the task of creating and managing an enterprise for a purpose which may be personal or developmental (Garavan & O’Cinneide, 2004). This task entails planning,  organizing,  and  coordinating  activities  and  resources  necessary  to  manage  an enterprise.

Entrepreneurship Education

Entrepreneurship education is a specialized field of study that seeks to prepare the trainees to be responsible  enterprising  individuals  who  become  entrepreneurial thinkers  or  entrepreneurs, thereby contribute to business sustenance and economic development. The education does not only base on a textbooks/courses, but students are also immersed in real – life learning experiences where they have an opportunity to take risks, manage the results, and learn from the outcomes (Olajumoke, 2012).

Skill

Klandt (2003) defined skill as an ability and capacity acquired through deliberate, systematic, and sustained effort to smoothly and adaptively carry out functions or complex activities which involve ideas (cognitive skills), things (technical skills), and/or people (interpersonal skills). In the field of accounting, skills required are recording and analytical skills which help finance or accounting professional to record and review financial data, and also detect trends in a business setting. With the accounting skills, one will be able to prepare and review an organisation’s income/financial statement, analyze revenue, and trends of various business activities. Also, accounting skill helps a professional to synthesize large volumes of accounting data into concise reports (Henry, Hill, & Leitch, 2003).

Competitive Advantage/Ability

This can be defined as an advantage gained by an organisation when it can provide the same value as its competitors but at a lower price, or can charge higher price by providing greater product  value  through differentiation (Greenley,  2004).  The  differentiation-based advantage tends to be associated with the most innovative enterprises, and the advantage may be in a form of reduced price, product size, product effectiveness, customer satisfaction, and user friendliness. According to Greenley, effective competitive advantage is the one that results from matching core competencies to the opportunities. For this study, competitive advantage/ability consists of ability to budget business activities effectively, apply financial management techniques strategically, and to prepare useful management reports for effective business decision making.

Business Transaction

Business transaction is any activity that involves exchange of goods and services for value (Okafor, 2010).  Money comes  in  and  goes  out  of enterprise  through business  transaction. Enterprises mainly receive money by selling goods or services, and incur expenses by paying for goods, raw materials, labour, utilities, such as water and electricity.

Management Report

This is  a  report prepared by an organisation showing financial  information about  business activities. It is mainly meant for in-house business decisions (Adeniji, 2011).

Entrepreneurial Success

This is defined as the accomplishment of business set goals. Success means different things to different people. For some people, it’s about controlling time, innovation, or press hits. For others, it’s about money. But, entrepreneurial success is mostly determined by the achievement of objectives and goals being set by an organisation. In a business setting, accomplishment of revenue and profit targets are obvious indicators of entrepreneurial success (Davis & Gibb, 2007).

Business Success

Business success is an excellence achieved by an organisation in its business endeavour. It is mainly defined with financial or economic measures, and can be associated with profit, sales volume, return on assets, and business sustainability (Masuo, Fong, Yanagida, & Cabal, 2001). For the purpose of this study, business success is determined using annual turnover and annual profit levels of an organisation that is higher than the annual turnover and profit made by other organisations in the same line of business.

Business Success Factors

Business success factors are essential things that should be observed if an organisation wants to achieve the mission, objectives or goals of the business (Yusuf, 1995). In this study, business success factors refer to the important ingredients that are very necessary for achievement of business   success/excellence.   In   other   words,   success   factors   are   variables   (such   as innovativeness, hardwork, charisma, good customer service, problem solving, flexibility, and honesty) that have direct impact on effectiveness of a business.

Innovation

This is the process by which the entrepreneur creates new wealth-producing product or enhance existing product with potential for creating wealth. Innovation involves deliberate application of imagination and initiative in creating product(s) with a greater value from available resources. It also  includes  all  processes  by  which  new  ideas  are  generated  and  converted  into  useful product(s) for customer satisfaction (Jim, 2012). In business, innovation often results when new ideas are applied by a company in order to further satisfy the needs and expectations of its customers.

Business Obstacle

This is defined as those things/factors that impede, stand in the way of, or hold up business progress. This obstacle can be in the form of lack of managerial skill, insufficient capital, lack of accounting knowledge and skills, and lack of good financial management (Hughes, 2009).

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