CHAPTER ONE
INTRODUCTION
1.1. BACKGROUND OF THE STUDY
Overtime, it has been proven that there is persistent rate of industrial growth in human consumption and innovation in the world and most especially in Nigeria. Nigeria’s economic situation demands ever pressing needs of finding out the performance level of her several businesses and enterprises. This will relate the entrepreneurial characteristics to indictors to measure business performance and profitability. Entrepreneurship characteristics dwells majorly on capacity building which stresses value creation by bringing together unique package of resources to exploit an opportunity thereby enhancing business performance and growth (Arowomole (2002), Oni(2006) and Oni and Maiwada (2009) Stevenson, 1989).
In the present day’s rapidly evolving and unpredictable competitive global economy, business both small and medium scale business and enterprises have increasingly become a powerful engine for economic growth and development (Islam, Khan, Obaidullah & Alam, 2011). Most governments in numerous emerging economies like Nigeria have realized the important contribution made by these business enterprises towards achievement of sustainable growth, employment, poverty reduction and development (Swerczek & Ha, 2003). In South Africa, a study by Abor & Quartey (2010) estimates that at least 90 percent of formal business entities in the country are either small or medium business enterprises; and such these countries contribute between 52 to 58 percent to the nation’s gross domestic product(GDP) and accounting for over 60 percent to employment (NCR, 2010). Given that research on performance of businesses has dominated the center stage in the arena of industrial development (Akhtar, 1999), the inevitability of business performance cannot be over emphasized; especially in such today’s global economy characterized by rising trends of industrialization. In an effort to enhance development of businesses, increasing numbers of public, private and academic institutions have extended considerable support to SMEs across various industrial sectors (Staddard, 2006).To make such support successful, the investigation of factors affecting performance of SMEs has broadened from largely focusing on institutional arrangements alone, but also on the effects entrepreneur and business characteristics have on performance of such business whether small or medium scale enterprises(Woldie, Leighton & Adesua, 2008). Survey literature indicates that entrepreneur characteristics that affect business performance include gender, age, education, work experience, and managerial competence (Mahmoud, 2011); while business characteristics include period business organisation has been in business, size of business, source of capital, sector and location (Khan, Obaidullah & Alam, 2011).
Overtime, researchers began linking business performance and entrepreneurial characteristics by examining personality characteristics that could determine who was more likely to run a successful business (Byers, Kist and Sutton, 2007). McClelland (1961) for example asserted that entrepreneurs possessed certain business characteristics than non-entrepreneurs thus improving the chances of a high business performance. While on the other hand, Carter, Gartner, Shaver and Gatewood (2003) opined that the only main difference between entrepreneurs and non-entrepreneurs is that entrepreneurs want to be in control of their own destiny thus possessing certain characteristics that guarantees business performance.
Following this line of discussion, Barringer, Jones and Neubaum (2005) also argued that although entrepreneurial characteristics are essential for the success of a business, other critical business practices when integrated with entrepreneurial characteristics will enhance business performance, success and survival. Pasanen (2006) is of the view that owner-managers think the long-term survival of SMEs is equal to success or constitutes a greater part of a firm’s success. In South Africa, the number of business failures in year 5 varies between 51 percent and 9percent (Willemse, 2010) and about 74percent of new business do not become established firms, which is one of the highest in the world; thus the need for the extensively study on the effect of certain business characteristics on business performance in Nigeria.
1.2. STATEMENT OF THE GENERAL PROBLEM
Businesses in the Business sector all over the world are more prone to failure due to the specific qualities needed for businesses to thrive and the ever evolving and competitive business world. In Nigeria, businesses have a low survival rate as entrepreneurs start businesses but are unable to turn them into sustainable businesses. Also, most new businesses in Nigeria do not move from the first stage (existence) to other stages such as survival, success, take off and resource maturity. All over the world as well as in Nigeria, several characteristics and factors have been identified to be key determinants of business survival, although with inadequate empirical results. With businesses survival rate generally low across the globe, it is necessary to establish an understanding of key entrepreneurial characteristics and business practices that can help in the understanding and promotion of businesses long-term survival. It is alleged that if business owners and managers are good at managing their businesses, then they will do extremely well in terms of ensuring the continuous survival of their businesses. Therefore, for businesses to survive and succeed in their business operations, it is pertinent that its owners or managers possess certain entrepreneurial characteristics and carry out specific business practices. In this regards, businesses deserve much more attention, especially with regards to the entrepreneurial characteristics and the business practices of the entrepreneur, which are often developed as part of the entrepreneur’s personal life strategies. These business practices and personal life strategies are used as a means of earning a living, which in turn is largely influenced by the entrepreneur’s personality characteristics. Furthermore, given that entrepreneurial characteristics can influence both the type of firms to be created and the manner in which they are managed, little has been established on which of these characteristics and business practices influence the long- term survival of businesses and the extent of its impact. Based on the gaps identified, this study seeks to determine which key entrepreneurial characteristics and business practices that entrepreneurs possess, that would influence the longterm survival and sustainability of businesses. This knowledge will enable entrepreneurs in the SME sector to understand and focus on implementing the key business practices and adopting the key entrepreneurial characteristics that can lead their businesses to long-term survival. Achieving this will contribute to the reduction of the high business failure rates and increase businesses long-term survival.
1.3. AIMS AND OBJECTIVES OF THE STUDY
The major aim of the study is to examine the effect of entrepreneurial characteristics on business performance. other specific objectives of the study include;
1. to examine the importance of business profyability on the economy.
2. To assess the relationship between entrepreneurial characteristics on business performance and profitability in Nigeria.
3. To examine the influence of skill acquisition on business performance in Nigeria.
4. To determine the influence of personal funding and finance on business viability and performance.
5. To determine the importance of business turnover on business survival in Nigeria
6. To assess the level of government support towards business performance.
7. To recommend ways of improving entrepreneurial characteristics that would influence business performance.
1.4. RESEARCH QUESTIONS
1. What is effect of entrepreneurial characteristics on business performance?
2. What is the importance of business profitability on the economy?
3. What is the relationship between entrepreneurial characteristics on business performance and profitability in Nigeria?
4. To examine the influence of skill acquisition on business performance in Nigeria.
5. What is the influence of personal funding and finance on business viability and performance?
6. What is the importance of business turnover on business survival in Nigeria?
7. What is the level of government support towards business performance?
8. What are the ways of improving entrepreneurial characteristics that would influence business performance?
1.5. RESEARCH HYPOTHESES
H01: There is no significant relationship between entrepreneurial characteristics and business performance in Nigeria.
H02: business profitability has no effect on the economy of Nigeria.
H03: Skill acquisition does not influence business performance in Nigeria.
H04: personal funding has no effect on business viability in Nigeria.
H05: Business turnover has no impact on business performance in Nigeria.
1.6. SIGNIFICANCE OF THE STUDY
The study would greatly benefit business organizations in Nigeria as it would reveal the effect of acquiring entrepreneurial characteristics on business performance in Nigeria. The study would also be beneficial to students, researchers and scholars who are interested in developing further research on entrepreneurial characteristics and business performance.
1.7. RESEARCH METHODOLOGY
The research methodology for this study is a recap of the literature on entrepreneurial characteristics and business performance in Nigeria. The reason for using this research method is to provide a theoretical foundation for the research followed by an empirical study and then conceptual clarifications.
1.8. SCOPE OF THE STUDY
The research is restricted to the effect of entrepreneurial characteristics on business performance in Nigeria.
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