Advances
In
Management
Journal
of
Department of Business Administration
University of Ilorin, Ilorin, Nigeria.
A Publication of the
Department of Business Administration
University- of Ilorin, Ilorin, Nigeria.
ISSN: 0795-6967
Editor-in-Chief:
Dr. Jackson O. Olujide
Deputy Editor-in-Chief:
Dr. (Mrs.) S. L. Adeyemi
Associate Editors:
Prof. I. O. Taiwo, Dr. .1. A. Adeoti.
Prof. P. E. Oribabor, Dr. K. S. Adeyemi.
Dr. R. A. Olowe. Dr. M. L. Nassar,
Dr. P. Adeleke
Business Manager:
Mr. J. A. Bamiduro
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Advances in Management
iii
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Hostage, O. M., (1975) "Quality Control in a Service Business" HBR, July-August
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Green, P. E. & Carmone, F 1.: Multidimensional Scaling and related Techniques.
Boston: A. Ally & Bacon 1970.
Liechty, M B & Churchill. 0. A., (1979) "Conceptual insights into consumer satis
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Advances In Management of
Department of Business Administration University of llorin.
P.M.B. 1515. llorin. Nigeria
For advertisement rate please contact: The Business Manager of the above address
Advances in Management
iv
TABLE OF CONTENTS
PAGE
1. An Analysis of the willingness to pay for medical care in llorin
metropolis: Implication for health care planning
Raheem U. A..………..................................................................…...
1
2. An examination of self-esteem on performance: An analytical approach to
Nigeria Manufacturing Industry
Akindele, Richard lyiola………………………………………….….
8
3. Internal Efficiency in Health care budget
A. A. Owolabi.....................................................................…………..
16
4. Detecting communication deficiencies in business operation
Dr. (Mrs.) Sidikat L. Adeyemi..................................................……...
24
5. Management problems in government parastatals: The Kwara
State experience
Isiaka Sulu Babaita.....………............................................................
32
6. The effective manager as a time conscious manager: A theoretical treatise
Dr. Olujide Jackson.............................................................………...
42
7. Determinants of investment decisions of Nigeria's individual private investors
Dr. Bamidele Adeboye Adepoju................................................……..
55
8. Budgeting for health in poor countries: The Nigerian case
Dr. J.A. Adeoti...........................................................……….............
71
9. Factors influencing small business start-ups: A comparison with previous
research
J. A. Bamiduro...……….....................................................................
85
10. International trade and economic development: The Nigerian experience
Dr. (Mrs.) Olafemi M. Yusuf.......................................................……
92
11. Welfare package as a source of motivational strategy for higher productivity
in organisations: A case study of Federal Ministry of Industry
Dr. Ekhator Victor Eghe......................................................…………
102
12. Indigenous entrepreneurship development in Nigeria: Characteristics.
problem and prospects
Gbolagade Adejumo.................................................................……
112
Advances in Management
iii
FACTORS INFLUENCING SMALL BUSINESS START
UPS: A COMPARISON WITH PREVIOUS RESEARCH
BY
J. A. BAMIDURO
Department of Business Administration University of Ilorin
INTRODUCTION
The driving force in the modern
economy for the past few years and the
foreseeable future, is entrepreneurship.
Entrepreneurs are meeting our economic
needs through the creation of thousands of
new business each year.
A great deal is known about the
characteristic of entrepreneurs and the
motives that have urged them to set up a
business venture.
Previous research has examined
the importance of various demographic
variables such as personality human
capital and ethnic origin. Education
levels, family size, employment status and
experience, age. socioeconomic status,
religion and personality traits have all
been considered to varying degrees.
However, virtually all previous studies
focused on entrepreneurs actually
working in a new business and has
ignored persons who still are in the
process of starting a new business.
This study brings forth a new
approach by focusing on those who are in
the process of starting a new business in
order to gain a comprehensive picture of
entrepreneurship and of the barriers and
triggers affecting start-ups. The objective
of this research was to identity the
demographic characteristics of selected
demographic variables likely to affect
small ventures formation.
Review of the Literature
Hodgetts and Kuratko (1995)
suggest that small businesses not only
create employment but are the economic
engine driving the global quality of life
(Hills 1995). Indeed. Storey (1994)
specifically notes that small firms
however they are defined constitute the
bulk of enterprises in all economics in the
world. Undoubtedly small firms and
entrepreneurship do play a major role in
the world economy. Bygrave (1994).
Not surprisingly, most of the
literature on start-up relates to
entrepreneurship defined by Low and
McMillan (1988) as the "creation of new
enterprise". This definition reflects a
growing awareness that entrepreneurship
is a "process of becoming rather than state
of being" Bygrave (1994). Starting a
business is not an event, but a process
which may take many years to evolve and
come to fruition. Entrepreneurial research
has developed along two main lines:
(i)
The personal characteristics or
traits
of
the
entrepreneur
ADVANCES IN MANAGEMENT
Vol. 2 No. I (2001)
(A journal of Department of Business Administration. University of Ilorin. Ilorin, Nigeria.
Factors influencing small business Startups:_____________________________86
(ii)
The influence of social cultural,
political and economic contextual factors.
Early research in entrepreneurship
focused-on the entrepreneur. It sought to
determine what personality characteristics
distinguished entrepreneurs from nonentrepreneurs and examined the influence
of these characteristics on organisation
formation rates. For example, such factors
as the need for achievement (McClelland,
1961), risk taking propensity (Brock-haus.
1980), tolerance of ambiguity (Schere,
1982), family background, (Mathews and
Moser,
1995).
Numerous
other
background factors related to individual
personality, such as education, (Storey,
1982) gender (Buttner and Ross, 1989)
and ethnic membership (Aldrich, 1980)
have been enumerated. Altogether, the
combination of psychological traits
interacting with background factors
makes some individuals more likely
entrepreneurial candidates than others.
Theory development and research
into relationship between the environment
and organisation formation is a more
recent event. The study of the role of the
environment, the so-called rates or
demand perspective (Peterson, 1980), is
seen as a more viable approach. Before
detailing the environmental approach, it
should be acknowledged that this
approach certainly has a link with
economics. According to economic
theory, perfect and imperfect competitive
markets have substantial numbers of
potential producers patiently waiting for
prices in that industry to exceed long run
average costs. Once this happens new
firms will enter the market and produce
output as efficiently as existing firms.
Baumol (1968), for example, noticed that
the firm is assumed to perform a
mathematical calculation which yields
optimal, that is, (profit maximising)
values for all its decision variables.
Beyond
this
theoretical
perspective, most of the models and
studies
rely
on
environmental
characteristics to explain start-ups. Based
on dependence theory, this approach
proposed that the new firm needs some
external resources and information to
emerge. Specht (1993) in her literature
review,
distinguishes
five
main
environmental
factors
affecting
organisation formation:
(i)
Social
(ii)
Economic
(iii)
Political
(iv)
Infrastructure development
(v)
Market emergence factors
Within the social environment,
the impact of networks and the support of
sociopolitical elites along with cultural
acceptance are of particular importance.
The economic environment studies focus
on
capital
availability,
aggregate
economic indicators, economic recessions
and unemployment. The political
environment concerns mainly the support
of public or semi-public agencies.
(Walker and Green street 1990).
Infrastructure
development
encompasses numerous variables such as
the education system. information
accessibility and availability of premises.
Finally market
emergence
theory
integrates both concepts of niche
emergence and technological innovation.
METHODOLOGY
In order to examine the factors
likely to motivate an individual to
establish a small business, a study was
undertaken
J.A. Bamiduro
with entrepreneurs in Oyo and Kwara
States. The purpose of this study was to
identify the factors important in serving as
either barriers or triggers to small
business start-up.
The study drew a sample of (94)
respondents sixty eight of these
entrepreneurs had successfully established
a smalt business within the previous five
years prior to interview. The remaining
(26) individuals had given serious
consideration to establishing a business.
DATA COLLECTION PROCEDURE
The sample was drawn from a
range of sources including the National
Directorate of Employment (NDE).
Poverty Alleviation Programme (PAP)
databases and business enterprises
centres. All respondents were interviewed
face-to-face with an initial semistructured approach using open-ended
questions which focused on reasons
motivating their intentions to start a
business. Questions were also asked
which explored potential barriers and
triggers for small business establishment
drawn from the literature. Of the
respondents. 54 were male and 38 female.
The average age of the respondents was
3K years.
ANALYSIS AND DISCUSSION
To determine the influence of
demographic variables on the decision to
establish a small business, a logistic
regression analysis was undertaken.
Logistic regression is suitable when a
categorical is regressed against any
combination of discrete and continuous
87
variable. The sample was clearly divided
into two groups.
(1)
Those respondents who had
established their business and
(2)
Those
who
had
not
proceeded to foundation
RESULT
OF
THE
LOGISTIC
REGRESSION
Sixteen independent variables
relating to demographic issues were
regressed on the dependent •. as sables.
These
variables
measured
such
characteristics as:
1. Age
2. Education level
3. Ethnicity
4. Gender
5. Previous employment experience?
6. Rural versus urban location and
7.
Family experience with small
business.
The equation used to estimate the
model was the following where:
Z=o+1X1=2x2+……..............+nxm
Xn = a set of independent variables
o = an intercept term
n= a set of parameters for the
independent variables
e = the quantity 2.71828 +. the base of
natural logarithm
y= the dependent variable, business
success.
P(y=l) " the probability of a firm being
classified as a high performer. The
logistic regression procedure was used to
develop the model.
A chi-square analysis of the
relationship between gender and business
start-up confirmed the positive coefficient
that 75 percent of male respondents had
established small businesses and only 25
percent of females did. In line with one of
Factors influencing small business Startups:_____________________________88
the objectives of the study, information
was obtained with respect to certain
characteristics
of
small
business
formation including the educational
background, their training and experience
before embarking on the project.
Information was also obtained on
characteristics trait.
EDUCATIONAL BACKGROUND
All respondents were asked
questions related to their educational
background (table 1) and previous
experience (Table 2).
why most Nigerian enterprises are failing
is that the\ have less education'". The
distribution of responses obtained was:
Table 2:
Direct
consequence
Y Education
Yes, certainly
Yes, with
qualification
No. certainlyOther
Total
Source:
Table 1: Educational background of
operators
Level of
Frequency
%
Education
Primary
46
49
Secondary
33
35
Tertiary
Polytechnic
4
04
University
11
12
Total
94
100
Source: Researcher's survey
The results show that few of the
respondents had tertiary education (16
percent) while majority had primary and
secondary education (84 percent).
Nevertheless when the question
was put more directly as "do you agree
that one of the most important reasons
No. of
Entrepreneur
&
53
56.5
16
22
3
94
17.5
23.8
2.2
100
Researcher's findings
Thus when we considered
education as an independent influence the
vast majority of respondents (over 70
percent) find it to pose problems for good
business start-up.
ii.
PREVIOUS
EMPLOYMENT
EXPERIENCE
The study further sought to
establish the level of experience of the
operators of the enterprises prior to
commencing the current business. Table 3
shows that many of the respondents had
no previous experience in business before
embarking on their current business
activity. Most of them had a maximum of
five years experience with only five
percent having over ten years" experience
J. A. Bamiduro___________________________________________________
Table 3 Experience prior to commencing
business
Years of
Experience
Frequency
0
26
1 -5 years
50
6- 1 0 years
13
Over 1 0 years 5
TOTAL
94
Source: Researcher" finding.
%
28
53
14
5
100
iii. CHARACTERISTIC TRAIT
People who are capable of
entrepreneurial ventures have special
profiles which non-entrepreneurs do not
possess.
Table
4
shows
distribution
of
characteristic traits as obtained from the
respondents.
Table 4 Characteristic Traits Distribution
Trait
Frequency
Self
confidence
46
Task- Result
oriented
14
Risk-Taker
8
Leadership
6
Originality
6
Future oriented 14
Total
94
Source: Researcher's Surrey
%
49.0
15.1
8.8
6.5
6.5
15.1
100
Table 4 provides detailed
information on the various characteristics
and traits of entrepreneurs. About half of
the respondents (49%) believed that they
89
are self confident while originality and
leadership scored the lowest rating (6.5%)
respectively.
MANAGERIAL AND RESEARCH
IMPLICATIONS
The findings suggest that there
are three key demographic variables
distinguishing small business start-up
which are
1. Gender
2. Education
3. Experience/previous employment
Each of these three variables is
essentially a measure of the barriers to
small business establishment rather than a
trigger or incentive. Each is strongly
linked to the groups who did not form a
business. Females, little or no education
and previous employees were all less
likely to form businesses than those other
respondents. There are a number of
possible reasons for this. It is-worth
nothing that other studies have previously
found a similar barrier among their
sample respondents. For example. Oswald
(1990) and Blanch flower and Meyer
(1991) have examined the personality
characteristics of those who established
small businesses. According to this view
the level of "entrepreneurial vision"
possessed by the founder of the firm was
a critical factor in their decision process
According to Kazumi (1995). the
entrepreneur is characterised by a
combination of abilities and personal
characteristics. Among the key abilities
are
Factors influencing small business Startups:_______________________________90
such things as imagination, the ability to
create and execute plans, negotiation,
leadership and managerial skills. The
personal characteristics are determination,
optimism, independence and a willingness
to take risks and rise to challenges.
The issue of gender is becoming a
topic of strong interest in recent years. A
major problem has been a relatively low
participation rate among women in small
business as owner-managers, although
this gap is rapidly closing. Other issues
facing women in the establishment and
operation of small business are their
responsibilities of household and family
versus employment. Women tend to
spend fewer hours working in their
businesses than men due to home and
family commitments (Allen and Truman,
1991).
More research is required to
identify-how female entrepreneurs differ
from males and what specific difficulties
(if any) they may face.
Among the findings of this study
is that previous employment especially in
the government sector and recent
redundancy may serve as negative
influences on small business formation is
of great interest. Keeble (1992) found that
individuals
who
had
previous
employment experience within large
organisations were significantly more
likely to establish their own businesses.
However, the opposite was found by
earlier research undertaken within the
manufacturing industries. Other research
suggests
the
previous managerial
experience may be the key to whether an
individual establishes a small business
(Bates, 1990).
Many of those interviewed for
this study who did not start their own
business were employed and were
reluctant to leave the "security of their
current job". Some of the younger
respondents felt that they had to first build
a career before venturing out on their
own.
An
examination
of
the
relationship
between
previous
government employment and education
did find that higher education levels were
significantly associated with type of
employment.
CONCLUSION
This
research
study
has
highlighted the potential importance of
three demographic variables:
1. Gender
2. Education
3.
Experienced/Previous government
employment, as potential negative
influences on small business formation.
The findings suggest that women, the
retrenched and the public sector
employees may require special attention
by public policy makers and academic
researchers in the future if high rates of
small business formation are to be
achieved.
There are however, two main
policy implications out stemmed from this
research. First, there is a need for
government authorities to consider
specialist
placement
services
for
numerous graduants and retrenched
workers. Such services need to devote
attention to the mental preparation of
retrenched employees and countless
students turnover from our tertiary
institutions to orient them towards selfemployment. Second, women also may
need special assistance, more specifically
in the development of role models and
specific business advisors.
J. A. Bamiduro
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in
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