CHAPTER ONE

INTRODUCTION

1. BACKGROUND OF STUDY

Entrepreneurship is globally recognized to play a vital role in the economic development of any country which results to economic growth, employment generation, wealth creation, income redistribution, poverty reduction and sustainable development (CBN, 2004; NISER, 2004). Research studies on entrepreneurship have shifted focus on small and medium scale enterprises because of the critical role they play in local, national and global economies. Entrepreneurship is a dynamic, developing part of any economy and many experts have predicted substantial growth in entrepreneurial businesses in the twenty-first century. Small and medium scale enterprises are engines of growth and, they have impact in both developed and developing countries. In developed countries such as USA, Australia, China, small businesses have contributed tremendously to the growth and development of their economies, especially regarding employment, contribution to GDP and export. In the United States of America (USA) for instance, small business is a seen as a means for the enhanced economic opportunity, innovation, and growth. For developing economies, small businesses have become the bedrock of development, for instance, in the Middle East and Asian regions. In Iran, the small and medium scale businesses sector contributes more than 62% of industrial output and more than 75% of total employment. Similarly, in Israel, small and medium businesses accounted for 97% of Israel’s enterprises in 1996, employing some 50% of the country’s workforce (United Nations, 2011).

 In Nigeria, SMEs are believed to be the engine of growth because they form a bulk of business activities (Kpelai, 2009). The performance of SMEs is appraise by their contribution to Gross Domestic Product (GDP), employment generation, enhanced rural development, better utilization of indigenous resources, industrial outputs and exports. The considerable low capital outlay required for setting up small businesses compel them to convert minimal resources into productive ventures. It is a common knowledge that Nigeria has abundant natural resources and if private initiatives are encouraged to harness these resources, Nigeria stands the chance of becoming Africa’s largest economy and one among the twenty industrialized countries by the year 2020. SMEs primarily carry the entrepreneurial thrust by reforming or revolutionizing the pattern of production, by exploiting an invention, or more generally, an untried technological possibility for manufacture of a new commodity or producing an old one in a new way. The dynamic competition among these entrepreneurial businesses, primarily regarding industrial innovation, forms the basis for sustained economic growth (Kpelai, 2009). The vibrancy of this small business sub-sector is a vital part of any economy because small businesses bring about new ideas, opportunities, wealth creation and new job opportunities that propel sustained growth.

However, for many decades, the postindependence Nigeria languished in a captive economic system surreptitiously designed to feed the economies of industrialized western nations. The dependence on petroleum for over decades with little or no improvements in the socio-economic position of the country indicates that it failed to discover its ultimate catalyst for development which is the entrepreneurship magic (Ottih, 2014). Greater emphasis is thus placed on entrepreneurship today to enhance national development and expand employment opportunities. Unlike the developed countries of the world, many developing countries in Africa see the development of entrepreneurship as the only way of achieving industrialization and economic growth. Many of these countries are therefore making serious efforts to ensure the development of indigenous entrepreneurs. While such hurdles such as shortage of capital, low technology base, poor entrepreneurship culture, pitiable infrastructural facilities, and the lack of supportive political and legal institutions and the absence of a strong agricultural support are delaying quicker economic improvement, small and medium scale entrepreneurships are being successfully developed in varying degrees (Ottih, 2014).

 Entrepreneurship refers to the process of starting; owning and managing a new venture or improving on an existing product(s) or service(s) that creates value. To create value involves recognition of viable venture opportunities, coordinating human, financial and material resources necessary to bring a business venture to fruition (Kpelai, 2009). Entrepreneurship refers in this study as the process of identifying gaps in the market or recognizing viable venture opportunities by mobilizing financial resources and human resources such as skills, initiatives, and competencies to create a new venture or improve on an existing one to derive personal satisfaction, financial rewards and independence. Entrepreneurship is associates with risk-taking and innovation which results to wealth creation. The need to acquire appropriate skills and competencies in identifying business opportunities and effectively managing new or existing ventures is deemed necessary for entrepreneurs.

Tellingly, the government alone cannot provide the means of production and labor for the teeming youths which necessitates the need for entrepreneurship education which will enable unemployed youths to acquire relevant skills for establishing or managing small businesses. Acquisition of competencies and dexterity enables entrepreneurs to develop capabilities in effectively managing their enterprises and identify business opportunities to reduce the rate of unemployment. Etuk, Etuk, and Baghebo (2014) indicate that the success of SMEs depends essentially on entrepreneurial skills. SME operators must possess the capacity to manage and acquire indispensable talent of planning, organizing, coordinating, leadership and communication. Creative and innovative abilities are gotten through work experience in other enterprises or technical and managerial training schemes. This study considers entrepreneurial competencies and entrepreneurial mindset as indispensable to the success of SMEs in Nigeria. Entrepreneurial competencies are skills, values, and attitudes that are well-thought-out necessary for the success of small and medium scale businesses. Entrepreneurial mindset refers to a specific state of mind which orientates human conduct towards entrepreneurial activities and outcomes.

Entrepreneurial mindset enables entrepreneurs to perceive opportunities and use existing resources in new ways by organizing and implementing the exploitation of these opportunities. Entrepreneurship education seeks to prepare people to be responsible, enterprising individuals who have the attitudes, skills, and knowledge necessary to achieve the goals they set for themselves to live a fulfilled life. The entrepreneurship key competence is a composition of an entrepreneurial attitude, entrepreneurial skills and knowledge of entrepreneurship. Nwachukwu (1990) states that entrepreneurship harnesses the interests and innate potential of individuals, prevents wastes of human resources and serves as an alternative in the absence of job opportunities. Steinhoff and Burgess (1993) pointed out that it takes special skills and attitudes to succeed as an entrepreneur hence the need for competencies in entrepreneurship. Competency is needed to sharpen the ideas, thoughts, and capabilities of entrepreneurs who facilitate efficient and effective management and improved services.

According to Section 1 of the Nigerian Policy on Education (FGN, 2004), for education to be relevant, practical acquisition of appropriate skills and development of competencies are required for the individual to live and contribute to the development of his society. Admittedly, graduates need competencies to exercise their talents and be able to transform their education into entrepreneurship ventures. In support of this, Man, Lau, and Snape (2008) averred that mere possession of individual resources might not guarantee performance, but the use of assets as well as being competent to perform one’s job is crucial for entrepreneurs. According to Adegbite and Abereijo (2014), SMEs operate in an environment where owners are also the managers of the ventures and the performance of the firm lie heavily on the owners’ capital and their competencies. They added that entrepreneurs must be equipped with the relevant abilities to carry out various entrepreneurial roles. These abilities, or proficiencies, are needed to help entrepreneurs overcome business challenges. Despite the availability of external support, for entrepreneurial ventures to perform, entrepreneurs need to be equipped with abilities and resources first, and any assistance sought would serve as a secondary help to enhance performance.

All known human societies have always created the veritable conditions for the existence of entrepreneurs. The entrepreneurs in turn exploit the available opportunities in the society or their environmental domain, to create or develop new products or services, thus adding value to society while equally maximizing benefits or profits. The impact of the activities of the entrepreneurs or small and medium enterprises (SME) on the socio-politico-economic life of Nigeria is quite obvious. In Nigeria, the small and medium enterprises sub-sector has been expanding, especially since the mid-1980s, following the prolonged recession in the economy which forced many large enterprises to lay off large proportion of their work-force. The sector accounts for 70 percent of industrial employment (World Bank, 1995). Also the agricultural sector, which largely consists of SMEs, employs over 60 percent of the nation work-force (Salami, 2003). It is in recognition of the strategic role of the entrepreneurs in national development, that the federal, states, local governments, and even some corporate institutions are continuously creating the enabling environment to enhance entrepreneurship.

The small and medium enterprises (SME) division has a significant role in the economic development of most countries of the world and notably vital for-profit generation to owners (Ebiringa, 2011). It is, therefore, a known fact that SMEs contribute meaningfully to achieving general economy development. This contribution can bring about a surge of GDP, improvement in the way of living, and reduce the rate of unemployment (Perks and Smith, 2006). As a result of these facts, any economy should maximize the benefit provided by such venture. However, Nigeria has not been able to identify the full importance of this sector despite the country position as the world leader in entrepreneurial spirit (Global Entrepreneurial Monitor, 2012) Entrepreneurship skills are vital to the growth and survival of Small and medium scale enterprise (Amatori, 2006). Therefore, skills are the knowledge demonstrated through actions or a unique performance in certain situations. Skills are attained and developed through training (Zehra, 2016). Nevertheless, reaching maintainable business growth is a task that requires special skills (Perks and Smith, 2006). With the above scenario, it is most likely for a business to succeed more if business owners could have sufficient entrepreneurial skills. These skills provide benefit for start-ups and it is as well useful throughout the lifecycle of a business.

 The purpose of this study is to develop an understanding of entrepreneurship competence of operators of small and medium industries the essentiality of entrepreneurial skills and how these skills can impact SMEs growth.

This study aims to examine the influence of entrepreneurial skills for achieving a successful business and identified the most valuable skills that can contribute to business growth.

1. STATEMENT OF THE PROBLEM

In most developing countries including Nigeria, due to the high rate of unemployment, the level of poverty has increased resulting to a poor standard of living. Most unemployed graduates depend on the government for ‘white collar’ jobs and this results to cases of youth restiveness and crimes. It is therefore clear that government alone cannot provide the needed jobs for the increasing population of unemployed youths hence the need for self-employment (entrepreneurship). The increased interests in entrepreneurship education by the government, non-governmental organizations and corporate bodies substantiate the germaneness of entrepreneurship in not only creating wealth for entrepreneurs but sustained socio-economic development. The flexible nature of small businesses allows them to move quickly, develop and adopt new products, services, and technologies, create and enter new markets. Entrepreneurship education focuses on the development of skills or attributes that enable the realization of business opportunities.

Several entrepreneurship development programmes like Industrial Development Centres, National Directorate of Employment, Work for Yourself, YOUWIN, among others have been carried out to increase the supply of entrepreneurs and equip them with the entrepreneurial skills in Nigeria; regrettably, the number of business start-ups and venture performance is in abysmal which necessitates this study. Previous studies have indicated that why some businesses in Nigeria stagnate or perform below expectation, others are remarkably doing well because of entrepreneurship training and programmes (Etuk et al., 2014; Adegbite & Abereijo, 2014). In spite of the lack of robust statistics, studies of business failure in Nigeria have indicated that more new businesses in Nigeria fail than succeed (Nwachukwu, 1983:39; Kpelai, 2009).

Small and medium enterprise (SMEs) generate major growth, wealth and well-being in many countries and this increase came about by the establishment of an environment which provides urge for both start-up and growth-oriented businesspersons. Thus,  reducing the obstacles forced to existing firms, and providing opportunities to learn from mistakes (Pyysiäinen; Anderson; Mcelwee; and Vesala, 2006). According to the studies of (Henry; Hill; and Leitch. 2003; Undiayaundeye, 2015) entrepreneurs are identified as the engine of economic progression and the creation of wealth, and they are important the quality of life by providing employment opportunities for both the educated and less educated. However, despite the rigorous contribution of this sector, the problems of unemployment are not total resolved globally. 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. 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 influence of these skills on SMEs growth. A case study of sak West Local Government Area Oyo State will be considered, for the reason of exploring the most efficient skills used in selected rural communities of Oyo State Nigeria.

1. AIMS AND OBJECTIVES

The main aim and objective of the study is to examine the entrepreneurship competence of operators of small and medium industries in selected rural communities (case study of sak west LGA Oyo State) specifically, the study seeks to:

1. to examine the entrepreneurial competencies of small and medium industries especially in sak west LGA Oyo State.
2. To examine the effect of entrepreneurial competencies on the performance of SMEs in Oyo State.
3.  To determine the role of entrepreneurial mindset on the growth of in sak west LGA.
   1. RESEARCH QUESTION

1. What is the effect of entrepreneurial competencies on the performance of small and medium industries in sak west LGA Oyo State?
2. What is the relationship between entrepreneurial mindset and the growth of SMEs in Nigeria?
3. What is the role of entrepreneurial mindset on the growth of small and medium industries in sak west LGA?
   1. STATEMENT OF RESEARCH HYPOTHESIS

1. HO: entrepreneurship competence has no significance on the operators of small and medium industries in Sak West LGA Oyo State.
2. H1: entrepreneurship competence has a significant on the operators of small and medium industries in Sak West LGA Oyo State.
   1. SIGNIFICANCE OF STUDY

The reason this study is carried out is to enhance the knowledge about the entrepreneurial perspectives of the minority entrepreneurs in the Oyo State economy. The study will be beneficiary to policy makers, business communities, and other researchers that want more knowledge on entrepreneurship skills and SMEs development. Business communities will be informed on the essentiality of abilities for their general business management. Also, the entrepreneurs in Nigeria will have an understanding of skills perception of business owners in developed country. To policymakers, this study might be informative in building a strategy for improving citizen’s entrepreneurship skills for SMEs efficiency.

1. SCOPE OF STUDY

This study will cover the entrepreneurship competence of operators of small and medium industries in selected rural communities using sak west LGA as a case study.

1. LIMITATION OF STUDY

1. 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).
2. 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

Entrepreneur

An entrepreneur according to Kpelai (2009) is an investor group of investors that identify opportunity, gather the necessary resources, create a new or improve on an existing business venture to satisfy some needs in an economy. Entrepreneurs perceive opportunities and use existing resources in new ways by organizing, implementing the exploitation of these opportunities. The entrepreneur is one who is naturally innovative. He is not satisfied with mediocrity or with muddling through tasks and activities. He has desire for achievement. He is bold, venturesome and risks-taking, and not conforming, conservative or routine. Since innovation is of utmost importance to the entrepreneur and his venture, it is necessary to provide him with strategies for advancing the cause of creativity.

Competence

As the dictionary definitions make clear, the concept of competence centres on ability or capability, which in turn focuses attention on the attributes that comprise this ability or capability. The implication of this is that attributes are a necessary part of any satisfactory conception of competence. This means, for example, that a major feature of a plausible set of occupational competency standards would be some specification of the abilities or capabilities required for competent performance of the occupation. Forgetting about attributes and concentrating on tasks is the prime reason why so many people lapse into a narrow view of competency standards. Since abilities or capabilities are central to the concept of competence, occupational competency standards that omit attributes are akin to a zoo without animals.

Operator

An operator is a character that represents an action, as for example x is an arithmetic operator that represents multiplication. In computer programs, one of the most familiar sets of operators, the Boolean operators, is used to work with true/false values.

Industries

Many people think of industry as the collective large-scale manufacturing of goods in well-organized plants with a high degree of automation and specialization. Although this is a common example of industry, it can also include other commercial activities that provide goods and services such as agriculture, transportation, hospitality, and many others.

An industry is a sector that produces goods or related services within an economy. The major source of revenue of a group or company is an indicator of what industry it should be classified in. When a large corporate group has multiple sources of revenue generation, it is considered to be working in different industries. The manufacturing industry became a key sector of production and labour in European and North American countries during the Industrial Revolution, upsetting previous mercantile and feudal economies. This came through many successive rapid advances in technology, such as the development of steam power and the production of steel and coal.

Rural Community