ENVIRONMENTAL FACTORS
AND ENTREPRENEURSHIP
DEVELOPMENT
Edited by:
Joshua Adewale Adejuwon
Godwin Emmanuel Oyedokun
Environmental Factors and Entrepreneurship Development
Environmental Factors
and Entrepreneurship
Development
Edited By
Joshua Adewale Adejuwon
Godwin Emmanuel Oyedokun
2023
ii
Environmental Factors and Entrepreneurship Development
Environmental Factors and Entrepreneurship Development
Reviewers
Joshua Adewale ADEJUWON
Godwin Emmanuel OYEDOKUN
Olawale Samson DOPEMU
Oluwatobi Abodunrin KUJORE
Oladapo Abdullateef FAMUYIWA
iii
Environmental Factors and Entrepreneurship Development
Environmental Factors and Entrepreneurship Development
NATIONAL LIBRARY OF NIGERIA
CATALOGUING - IN- PUBLICATION DATA
ENVIRONMENTAL factors and Entrepreneurship development
Entrepreneurship - Nigeria
Economic Development - Study and teaching
I. Adejuwon, Joshua Adewale II. Oyedokun, Godwin Emmanuel
HB 615.E465 338.042022
ISBN: 978-978-59453-4-8 (Pbk)
AACR2
iv
Environmental Factors and Entrepreneurship Development
Environmental Factors and Entrepreneurship Development
ISBN: 978-978-59453-4-8
Copyright © 2023 – OGE Business School Publisher
All rights reserved. No part of this publication may be reproduced, stored in a retrieval
system, or transmi ed in any form or by any means, electronic, mechanical, photocopying,
recording, or otherwise without the prior joint permission of the Author.
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Environmental Factors and Entrepreneurship Development
Environmental Factors and Entrepreneurship Development in Nigeria
For more information about the book, and order, please contact:
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vi
Environmental Factors and Entrepreneurship Development
PREFACE
Entrepreneurship supports economic growth and development through market
innovations and there is a bi-directional relationship between entrepreneurship and
economic growth and development. Key constraints include the cost of starting a
business and minimum paid-in capital requirements, with women entrepreneurs facing
additional hurdles. Moreover, most of Africa’s entrepreneurs are “necessity driven”
rather than “opportunity-driven”. Environmental factors in business are the conditions
that exist in a business environment. The major environmental factors in business are
technological factors, economic factors, social factors, political factors, and cultural
factors.
This book brings together, the ideas of different Scholars, Practitioners, and Authorities
concerning the subject ma er, Environmental Factors and Entrepreneurship
Development. There are 13 chapters which were jointly contributed by 25 scholars in the
field with the range of title such as Corporate Social Responsibility and Organizational
Survival; Environmental Factors and Performance of Small-Scale Businesses in Shomolu
Local Government, Lagos; Government Policies and Entrepreneurial Development in
Nigeria; Organizational Culture and Business Performance in the Nigerian Service
Sector; Sustainability of Small and Medium Scale Enterprises in Nigeria: The Role of
Government Policies; Role of Entrepreneurship in Achieving Economic Growth in
Nigeria; Impact of Macroeconomics Fluctuation on the Growth of Small and Medium
Scale Businesses in Nigeria; Workforce Diversity and Organisational Productivity in
Unilever; Entrepreneurship and Small Business Development in Nigeria; Green
Marketing and Environmental Degradation in Lagos State, Nigeria; Environmental
Factors and Entrepreneurship Development in Nigeria; Significance of Interest Rate in
Bolstering Business Development in Nigeria; and Corporate Social Responsibility on
Business Growth in Business Environment. This edited book is an addition to the
frontiers of knowledge in business and entrepreneurship. Scholars, Practitioners, and
Authorities will find the contents useful, and it is also recommended for all postgraduate
students in the field of business and entrepreneurship.
Associate Professor Joshua Adewale Adejuwon
Professor Godwin Emmanuel Oyedokun
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Environmental Factors and Entrepreneurship Development
ACKNOWLEDGMENTS
We thank all our reviewers (Olawale Samson DOPEMU, Oluwatobi Abodunrin
KUJORE, Oladapo Abdullateef FAMUYIWA) for their time, dedication and
diligence in ensuring the book is a success.
Without the contributions from all our 25 contributors, this book would not have
been published. We appreciate all our contributors for their time.
Activities of the staff of OGE Business School Publishers and Staff of Taolak
Nigeria Enterprise are appreciated in ensuring the quality of the output.
Associate Professor Joshua Adewale Adejuwon
Professor Godwin Emmanuel Oyedokun
viii
Environmental Factors and Entrepreneurship Development
NOTE ON CONTRIBUTORS
Adejuwon, Joshua Adewale is an Associate Professor, Management and
Accounting, Lead City University, Ibadan. Nigeria
Adejuwon, Oluwakemi Adefisayo is a Lecturer at the Department of
Management and Accounting, Lead City University, Ibadan. Nigeria
Adekunle, Ebenezer Adewunmi is a Business Development Manager at Access
Bank Plc. Nigeria
Adeolu-Akande, Modupeola Atoke, is the Director of Academic Planning, OGE
Business School, Lagos, Nigeria
Adewumi, Moyosore Akingbade is a Lecturer at the Department of Management
and Accounting, Lead City University, Ibadan. Nigeria
Ajani, Abiola Joshua is of the Department of Management and Accounting, Lead
City University, Ibadan. Nigeria
Ajayi, Olawale Azeez is the Engineering Lead and Business Development
Manager, MRS Oil Nigeria Plc. Lagos Nigeria
Amoo, Olatunji Shina is the Chief Executive of Mania ventures Ltd Nigeria.
Ayedogbon, Adeleye Olorunleke is the Chief Executive Director of Teenadex
Nigeria Enterprise, Ogba, Lagos, Nigeria
ix
Environmental Factors and Entrepreneurship Development
Azeez, Sherifat Abiodun is a Lecturer at the Federal College of Education
(Technical), Akoka, Lagos, Nigeria
Dopemu, Olawale Samson is a Senior Manager Tax, Large Tax Audit Ibadan,
Federal Inland Revenue Service, Nigeria
Famuyiwa, Oladapo Abdullateef is a Manager Tax, Value Added Tax Technical
and Monitoring Unit, Lagos, Federal Inland Revenue Service, Nigeria
Hassan, Olatunji Alaba, is a Pastor with the Redeemed Christian Church of God,
Nigeria
Kujore, Oluwatobi Abodunrin is a Manager Tax, Tax Investigation
Department, Lagos Island Federal Inland Revenue Service, Nigeria
Oladeji, Adesola Alaba is a Lecturer at Department of Business Administration,
The Polytechnic, Ibadan, Nigeria.
Oladejo, James Olusola is a Lecturer at the Department of Management and
Accounting, Lead City University, Ibadan. Nigeria
Olaleye, John Olatunde is an Associate Professor, Management and Accounting,
Lead City University, Ibadan. Nigeria
Olatoyan, Segun Anthony is a Chief Accountant with a Federal Government
Agency in Maritime Sector, Nigeria.
Olatunji, Olanrewaju Patrick is a Lecturer at the Department of Business
Administration, Osun State College of Technology, Esa-Oke. Nigeria
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Environmental Factors and Entrepreneurship Development
Oloni, Olu Daniel is a Lecturer at Department of Business Administration, Lagos
State University of Science and Technology, Lagos Nigeria
Olukoya, Sakirat Adetutu is a Lecturer (Adjunct) Lagos State University of
Science and Technology, Lagos Nigeria
Oyedokun, Godwin Emmanuel is a Professor of Accounting and Financial
Development at the Lead City University Ibadan, Nigeria
Oyeku, Oyedele Ma hew is a Director in charge of Extension and Linkage
Department, Federal Institute of Industrial Research, Oshodi, Lagos, Nigeria
Oyekunle Oyesola Rasheed is the Director of Finance and Accounts, at the
Nigeria Export Processing Zone Authority, FCT, Nigeria
Oyewo Victoria Adebola is of the Department of Management and Accounting,
Lead City University, Ibadan. Nigeria
xi
Environmental Factors and Entrepreneurship Development
TABLE OF CONTENTS
CHAPTER 1
1
Corporate Social Responsibility and Organizational Survival
OLONI Olu Daniel & OLADEJO James Olusola
CHAPTER 2
Environmental Factors and Performance of Small-Scale Businesses in
17
Shomolu Local Government, Lagos
OYEDOKUN Godwin Emmanuel & AZEEZ Sherifat Abiodun
CHAPTER 3
41
Government Policies and Entrepreneurial Development in Nigeria
HASSAN Olatunji Alaba & OYEKUNLE Oyesola Rasheed
CHAPTER 4
69
Organizational Culture and Business Performance in the Nigerian
Service Sector
OLUKOYA Sakirat Adetutu & ADEOLU-AKANDE Modupeola Atoke
CHAPTER 5
86
Sustainability of Small and Medium Scale Enterprises in Nigeria:
The Role of Government Policies
ADEJUWON Joshua Adewale & OYEWO Victoria Adebola
xii
Environmental Factors and Entrepreneurship Development
CHAPTER 6
109
Role of Entrepreneurship in Achieving Economic Growth in Nigeria
AJAYI Olawale Azeez & OLALEYE John Olatunde
CHAPTER 7
Impact of Macroeconomics Fluctuation on the Growth of Small and
Medium Scale Businesses in Nigeria
ADEKUNLE Ebenezer Adewunmi & ADEWUMI Moyosore
Akingbade
CHAPTER 8
Workforce Diversity and Organisational Productivity in Unilever
OLADEJI Adesola Alaba & ADEJUWON Oluwakemi Adefisayo
CHAPTER 9
Entrepreneurship and Small Business Development in Nigeria
OYEKU Oyedele Ma hew & ADEJUWON Joshua Adewale
137
162
180
CHAPTER 10
Green Marketing and Environmental Degradation in Lagos State,
Nigeria
AYEDOGBON Adeleye Olorunleke & DOPEMU Olawale Samson
202
CHAPTER 11
Environmental Factors and Entrepreneurship Development in
Nigeria
AJANI Abiola Joshua & FAMUYIWA Oladapo Abdullateef
225
CHAPTER 12
Significance of Interest Rate in Bolstering Business Development in
Nigeria
OLATUNJI, Olanrewaju Patrick & OLALEYE John Olatunde
253
xiii
Environmental Factors and Entrepreneurship Development
CHAPTER 13
Corporate Social Responsibility on Business Growth in Business
Environment
AMOO Olatunji Shina & KUJORE Oluwatobi Abodunrin
xiv
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Environmental Factors and Entrepreneurship Development
CHAPTER
1
CORPORATE SOCIAL RESPONSIBILITY
AND ORGANIZATIONAL
SURVIVAL
OLONI Olu Daniel & OLADEJO James Olusola
Abstract
The study examined the impact of Corporate Social Responsibility (CSR) on
organizational survival a study of Nigeria Bo ling Company (NBC) Limited. The
research was descriptive in nature, hence the adoption of survey research design.
Primary and Secondary data were used in the study. Extant literature was
reviewed. 4800 employees' of NBC Limited constituted the population of the
study. A sample size of 370 was determined from the total population with Taro
Yamane formula. The respondents' were selected using simple random sampling
technique. Primary data was collected from the respondents' with the use of
questionnaire. The research instrument recorded a response rate of 40.54 per cent
(150 responses). Pearsons Correlation co-efficient analyses was conducted on the
suggested hypotheses using Statistical Package for the Social Sciences (SPSS). The
study found that a relationship existed between CSR and organizational survival.
Therefore, it was concluded that CSR helped to increase an organizational chance
of survival hence, business sustainability. It was recommended that the
management of NBC Limited should ensure effective community engagement in
order to determine those CSR activities that will add values to the community and
its people. Also, corporate bodies and the government should collaborate to
improve the performance of CSR activities in the country.
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Environmental Factors and Entrepreneurship Development
Word Count:203
Keywords: CSR, Economic responsibility, Ethical responsibility, Nigeria,
Organization, & Survival
Introduction
Across the globe, considerable a ention has been drawn to Corporate Social
Responsibility in recent times. CSR basically implies the supportive roles and
responsiveness of businesses to the needs of the society. The fundamental idea of
corporate social responsibility often referred to as charitable giving and
philanthropic contributions is that business and society are intertwined rather
than separate. This based on the fact that successful corporate social responsibility
initiative is posited to improve companies' reputation, increase customers loyalty
and strengthened the brand which can ultimately boost the shares price and raise
investment.
CSR is when organization or institutions undertake activities that are beneficial to
both the business and the society in which it operates (Khanifar, Nazari, Emami, &
Soltani, 2012). CSR has also been proven to affect directly on the competitive
advantage of an organization as well as receiving an indirect impact via the public
image and goodwill of the organization (Mujahid & Abdullah, 2014). Increase
awareness of the impact of their performance along the corporate reputation and
goodwill of an organization viewed by customers and stakeholders can create a
competitive advantage for a business system.
In general, companies rank higher in the CSR investment index in a highly
competitive commercial environment (Elizaveta, 2010 as cited in Mujahid &
Abdullah, 2014). It is also well indicated that firm coordinate their social aims with
their corporate target where CSR act as way of marketing through the highest
bidder. And a strategic mechanism to increase the overall value of all stakeholders
to increase their firm performance (Akinleye & Adebayo, 2017).
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Environmental Factors and Entrepreneurship Development
Survival is a natural instinct; therefore, it is natural for businesses to work against
imminent collapse or failure in a challenging and competitive environment. This
leads to the use of various tactics and strategies to gain competitive advantage.
This is because there is no single best practice that guarantees business survival, or
success, and businesses adaptation and performance are contingent upon
organizational factors such as resources available, and external influences,
including product, labour and capital market conditions (Smallbone, Kitching &
Xheneti, 2009 as cited in Micheal, Adekunle & Adeboye, 2019).
Statement of the Problem
The COVID-19 pandemic has resulted in unprecedented loss to the global
economy, leading to production shutdowns and supply chain disruptions that
have snowballed into worrisome levels across all sectors of the global economy
sectors in an unprecedented manner (Gabriel et al., 2020, p. 153). This led to
negative effects on the cash flow, supplies, revenue, demand contraction and close
down of business operation by a number of corporate organizations across the
world including Nigeria (Enesi, 2021).
These has been a growing concern for the non-performance of social
responsibility by organizations in Nigeria and different researches have been
carried out in the area of Corporate Social Responsibility and how it affects
organizational performance vis-à-vis organizational survival.
A number of organizations conduct business activities in Nigeria; hence these
organizations are expected to be socially responsible. But this is not the case as
they rely so much on the government to provide all the needs of the society. Since
the government alone cannot satisfy all the needs of the society, it is expected that
the business sector should be socially responsible in the society. However, some
critics argue that some corporations start social responsibility programs for the
commercial benefit they enjoy through raising their reputation with the public or
with government. They suggest that corporations which exist solely to maximize
3
Environmental Factors and Entrepreneurship Development
profits are unable to advance the interests of society as a whole. Others argue that
CSR distracts from the fundamental economic role of businesses; others argue
that it is nothing more than superficial window-dressing. In view of this, the study
shall investigate the effect of CSR on organizational survival.
Objectives of the Study
i.
To investigate the influence of economic responsibility on product quality.
ii.
To investigate the influence of legal responsibility on competitive
advantage.
iii.
To investigate the influence of ethical responsibility on customers'
satisfaction.
iv.
To investigate the influence of philanthropic responsibility on
management effectiveness.
Research Questions
i.
What is the influence of economic responsibility on product quality?
ii.
What is the influence of legal responsibility on competitive advantage?
iii.
What is the influence of ethical responsibility on customers' satisfaction?
iv.
What is the influence of philanthropic responsibility on management
effectiveness?
Research Hypotheses
H01: There is no significant relationship between economic responsibility and
product quality.
H02: There is no significant relationship between legal responsibility and
competitive advantage.
4
Environmental Factors and Entrepreneurship Development
Literature Review
Figure 1: Conceptual Model
Corporate Social
Responsibility
Organizational
Survival
Economic
Responsibility
Quality Products
Competitive Advantage
Legal Responsibility
Customers’ Satisfaction
Ethical Responsibility
Management
Effectiveness
Philanthropic
Responsibility
Source: Author’s construct
Corporate Social Responsibility
The concept of CSR is complex and contentious issue among academics,
researchers and practitioners. This has led to the existence of a plurality of
definition of the concept. According to Nasieku, Togun, and Olubunmi, (2014),
CSR is a commitment to improve the well-being of a community through
discretionary business practices and contributions of corporate resources. Carroll
(1979) as cited in Abugre and Anelesinya (2019) stated that the social
responsibility of business encompasses the economic, legal, ethical, and
discretionary philanthropic, expectation that society has of the organization at a
given point in time. Also, it is necessary to note that in the literature, a number of
terminologies have been used to denote CSR by different scholars and
practitioner's, these variation in nomenclature among these practitioner's and
5
Environmental Factors and Entrepreneurship Development
researcher's include the term, corporate performance, corporate social
responsiveness, corporate citizenship, ethnical business practices, stakeholder
management and corporate sustainable business practices.
According to Kreitner (2007) as cited in Irabora (2019), has become a very vital
organization function that has been given serious consideration by corporate
organization due to its importance in linking business to the society and creating
cordial relationship with the government. The European Union classified CSR
initiative into two different categories- the internal dimension (Human resources
management, health and safety at work, adaptation to change, management of
environment impact and natural resources) and the external dimension (Local
communities, business partners, suppliers and customers, human right of all the
environment concerns). Strategic CSR mean that, apart from be ering the
society, the business should be strategic by aiming at achieving strategic business
goals while also promoting societal development (Jamai et al., as cited in Abugre
& Anelesinya, 2019). There is evidence suggesting that significant CSR effort
enhances corporate image leading to customer loyalty (Argenti Druckenmiller.,
as cited in Sokro & Agbola 2016).
Organizational Survival
Survival is therefore fundamental to the success of any business provided a right
strategy is employed. Consequently, businesses are facing growing expectation
and pressure from varied stakeholders (Arvidsson, as cited in Abugre &
Anlesinya, 2019). Organization survival therefore, is an indication of how well a
business is meeting the needs of its customers' and achieving its objectives. It is a
measure of the effectiveness of the businesses in meeting the demands of its
various stakeholders.
An understanding of sources, causes and nature of business failure is a significant
determinant of the choice of strategy to adopt for organization survival. A
number of factors are responsible for premature death or failure of business
6
Environmental Factors and Entrepreneurship Development
organizations. These factors include unethical practices, lack of information,
economic recession, soliciting or offering kickbacks, incompetence, poor
infrastructure, lack of quality education, ineffective credit and financial system,
corruption and political instability (Adebisi & Bakare, 2019).
The business value of a firm can either be expressed as negative or positive.
However, the primary motive of corporate managers is to have a positive business
growth or outlook (Smart, as cited in Abugre & Anlesinya, 2019), these is assessed
by how well the company experiences growth in relation to the goals and
objective of the business. It is expected that an organization's policy should be
strategic and aligned to their business value.
Therefore, organizations around the world have come to the realization that
survival can be achieved when they are perceived by their stakeholders as being
socially responsible. These stakeholders want to understand what the
organization does or stand for, which accordingly make a big difference in terms
of achieving or not achieving their strategic objective (Aras & Crowther, as cited
in Sokro & Agbola 2016). Six components of business model, competitors,
customers, economy, management, products and suppliers.
CSR and Organizational Survival
CSR is becoming more strategic for business organizations operating in different
social and environmental se ings. Consequently, businesses are facing growing
expectation and pressure from varied stakeholders to undertake CSR initiatives
that lead to be er level of global sustainability as well as higher value creation for
the business (Abugre & Anelesinya, 2019).
The business value of a firm can either be expressed as negative or positive.
However, the primary motive of corporate managers is to have a positive business
growth or outlook (Smart, as cited in Abugre & Anelesinya, 2019), these is
assessed by how well the company experiences growth in relation to the goals and
objective of the business. It is expected that MNCs policy should be strategic and
7
Environmental Factors and Entrepreneurship Development
aligned to their business value. Strategic CSR mean that, apart from be ering the
society should make business or strategic sense by aiming at achieving strategic
business goals while also promoting societal development (Jamai et al., as cited in
Abugre & Anlesinya, 2019).
Theoretical Review
A number of theories and models exist in the literature, these models and theories
have been propounded by various scholars' at different times to provide
clarification to the concept of CSR. One of the prominent models of corporate
social responsibility CSR is Carroll's pyramid model (Carroll, 1991 as cited in
Akinyele & Adebayo, 2017). This model indicated that corporate social
responsibility is made up of four kinds of social responsibilities, thus; economic,
legal, ethical and philanthropic.
Figure 2: Carroll’s CSR Pyramid
Philanthropic
Ethical
Legal
Economic
Source: Carroll, 1991
8
Environmental Factors and Entrepreneurship Development
According to Carroll (1991) as cited in Akinyele and Adebayo (2017), CSR operate
under four responsibility levels, hence organizations are expected to fulfill
responsibilities at these four levels which are the economic, legal, ethical and
philanthropic which must all be accomplished in order of priority. Economic
responsibility serves as the base of Carroll's pyramid, it holds the notion that
businesses are expected to be profitable, creating good and safe working
condition and providing quality products; legal responsibilities by complying
with laws and regulations; Ethical responsibilities by doing what is right beyond
the requirement of law by conducting their businesses in just, accountable and
transparent manner and philanthropic responsibilities by supporting the society
by contributing resources to be er their well-being, it covers those actions that are
expected from a business as a good corporate citizen (Carroll, 1991 as cited in
Abugre & Anelesinya, 2019).
Triple Bo om Line Approach
Eikington, as cited in Kingsley, Ndubuisi and Edugwu (2019), reiterated his triple
bo om line approach theory, that capitalism must satisfy legitimate demands for
economic performance. This is a reinforcement of Adam Smith's theory of the
firm- which maintained that the firm has one and only one goal – to satisfy the
desires of shareholders by making profits.
However, profit may not be a ainable if the environment in the business operates
in neglected (Olaniyan, Eyitope, Babajide, & Kabasinguzi, 2021). A corporation
which embraces the triple bo om line approach (social, economic and
environmental performance) is invariably contributing to sustainable
development.
Empirical Review
Kingsley et al. (2019) conducted a study on CSR and financial performance in
developing economies. This study therefore examined the impact between (CSR)
9
Environmental Factors and Entrepreneurship Development
strategy and business value of (MNCs) strategy orientation will mediate the
relationship between (CSR) strategy and business value in Ghana. The study
adopted quantitative research Methodology, employee of selected (MNCs) in
Ghana were sampled a total 267 valid and usable questionnaires were used for the
analysis.
Akinleye and Adebayo (2017) investigated the impact of CSR on profitability of
multinational companies in Nigeria, specifically the study analyzed the
relationship and impact of corporate social responsibility spending on profit after
tax, five multinational companies were randomly selected in the study and data
were collected from their respective financial reports for a period of five years
covering 2010-2014. From the correlation statistics presented in table1, it can be
observed that there is weak negative correlation between corporate social
responsibility and profit after tax (-0.0648) which suggested that corporate social
spending of selected multinational companies move in opposite direction
through with weak degree.
Adu, Lamptey-Puddicombe and Opawole (2020) examined survival strategies for
Small and Medium Construction Firms (SMCFs) at infancy stage as well as the
factors affecting the adoption of these strategies. The study area is Uyo Metropolis
in Akwa Ibom State, Nigeria. The study employed stratified random sampling
technique to select a sample for the study. Primary data obtained from 103
validated questionnaires, administered to professionals in the built environment
are analyzed using percentage, mean score and Kruskal Wallis test. Results reveal
that all the strategies examined in this study are significant for the survival of
SMCFs at infancy stage; dominant among the factors are: innovativeness,
required skills, willingness to take risk, entrepreneurial a itudes and behaviours,
entrepreneurial organization structure and strategies, and financial resource
management. The results further reveal that the dominant factors affecting the
adoption of survival strategies for SMCFs at infancy stage are: availability and
10
Environmental Factors and Entrepreneurship Development
access to finance, the poor state of the country's infrastructure, poor
managerial/executive capacity of the implementing agencies, characteristics of
entrepreneurs and failure to adapt to the changing business environment. The
study recommends that in addition to regular training to acquire required skills
for effective management of the firms, SMCFs should also adopt any or a
combination of the strategies highlighted, to survive in the current dynamic and
competitive construction environment.
Methodology
Survey research design was adopted in the study. Extant literature was reviewed
while a sample size of 370 was determined through Taro Yamane formula from a
total population of 4,800 employees' of NBC Limited. Random sampling
technique was used to select the participants in the study. The research
instrument recorded a response rate of 40.54 per cent (150 responses). A Pearsons
Correlation coefficient analysis was conducted on the suggested hypotheses
using Statistical Package for the Social Sciences (SPSS).
Results and Discussion
H01: There is no significant relationship between economic responsibility and
product quality.
11
Environmental Factors and Entrepreneurship Development
Correlations
Economic
Product Quality
Responsibility
Economic Responsibility
1
Pearson Correlation
Sig(tailed 2)
.353**
.000
150
150
.353**
1
N
Product Quality Pearson
Correlation
Sig. (2 tailed)
.000
150
150
N
Source: Correlation is significant at the 0.05 level (2-tailed)
H02: There is no significant relationship between legal responsibility and
competitive advantage.
12
Environmental Factors and Entrepreneurship Development
Correlations
Legal
Competitive
Responsibility Advantage
Legal Responsibility
Pearson
1
Correlation 1
.457**
.000
Sig. (2 tailed)
150
150
.457**
1
N
Comparative Advantage
Pearson Correlation
.000
Sig. (2 tailed)
150
150
N
Source: Correlation is significant at the 0.05 level (2-tailed).
In the test of hypothesis one, the null hypothesis (H0) was rejected, while the
alternative hypothesis (H1) was accepted, this implies that there is a significant
relationship between economic responsibility and product quality. Also, in the
test of hypothesis one, the null hypothesis (H02) was rejected, while the alternative
hypothesis (H2) was accepted, this implies that there is a significant relationship
between legal responsibility and competitive advantage.
13
Environmental Factors and Entrepreneurship Development
Conclusion and Recommendations
The study investigated the impact of CSR on organizational survival a study of
Nigeria Bo ling Company (NBC) Limited. The study found that a relationship
existed between CSR and organizational survival. The primary data showed that
there is relationship between economic responsibility and product quality in
Nigeria Bo ling Company Limited and there is significant relationship between
legal responsibility and competitive advantage in NBC Limited. Therefore it was
concluded that CSR helped to increase an organizational chances of survival
hence, business sustainability. This indicated that CSR has a significant effect on
organizational Survival.
Based on the conclusion drawn from the study, the following recommendations
were made:
i.
The management of NBC Limited should ensure effective community
engagement in order to determine those CSR activities that will add values
to the community and its people.
ii.
Corporate bodies and the government should collaborate to improve the
performance of CSR activities in the country.
iii.
Also, CSR activities should be improved further in the context of
developing countries.
14
Environmental Factors and Entrepreneurship Development
References
Abugre, J. B. & Anelesinya, A. (2019). Corporate social responsibility and business
value of multinational companies. Journal of Africa Business.
Adebisi, S. A. & Bakare, N. A. (2019). Survival Strategies and Sustainability of
Small and Medium Enterprises in a Volatile Environment, Management Dynamics
in the Knowledge Economy, 7(4), 553-569.
Adu, E. T., Lamptey-Puddicombe, A. D. & Opawole, A. (2020). Consultants`
perspectives of survival strategies for small and medium construction firms at
infancy stage. Journal of Construction Business and Management, 4(1). 34-47.
Akinleye, G. T. & Adebayo, T. F. (2017). Impact of corporate social responsibility
on the profitability of multinational companies in Nigeria. Global Journal of
Management and Business Research, 17(3).
Enesi, O. E. (2021). Effect of covid-19 pandemic on the performance of small and
medium business enterprise in Abuja - FCT, Nigeria. Open Journal of Business and
Management, 9(5), 1 22.
Gabriel, J. M., Chika- Anyanwu, H., Georgewell, I. A., Georgewill, O. S. Tende, I.
N. & Nsirimovu, E. A. (2020). An examination of the impact of Covid-19 and
response strategies adopted by businesses. Insights into Economics and
Management, 1, 151- 169.
Irabora, I. E. (2019). Corporate social responsibility and organizational
performance in Guinness Nigeria plc., Benin City. An International Scientific
Journal, 1-10.
Khanifar, H., Nazari, K., Emami, M. & Soltani, H. A. (2012). Impacts corporate
social responsibility activities on company financial performance.
Interdisciplinary Journal of Contemporary Research in Business, 3(9).
Kingsley, O. O., Ndubuisi, O. S. & Edugwu, U. E. (2019). Impact of corporate social
responsibility on organizational performance of quoted firm's the brewery sector:
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Environmental Factors and Entrepreneurship Development
Evidence of Nigeria Breweries. World Journal of Innovation Research, 7(4), 23-31.
Micheal, M. E., Adekunle, M. K. & Adeboye, A. (2019). Survival strategies and the
growth of small and medium scale enterprises (SMEs) in federal capital territory
(FCT), Abuja. European Journal of Business and Management. 11(30), 106-110.
Mujahid, M. & Abdullah, A. (2014). Impact of corporate social responsibility on
firm's financial performance and shareholders wealth. European Journal of Business
and Management, 6(31), 181-187.
Nasieku, T., Togun, O. R. & Olubunmi, E. M. (2014). Corporate social
responsibility and organization performance: A theoretical review. International
Journal of Humanities, Social Sciences and Education, 1(2), 106-114.
Olaniyan, N. O., Eyitope, A., Babajide, O. & Kabasinguzi, C. (2021). The effect of
corporate social responsibility on the competitive performance of multinational
companies in Nigeria. Africa Multidisciplinary Journal of Development, 10(1), 96-112.
Sokro, E. & Agbola, R. M. (2016). The impact of corporate social responsibility
performance on customer loyalty. Global Journal of Business Research, 10(4), 67-82.
16
Environmental Factors and Entrepreneurship Development
CHAPTER
2
ENVIRONMENTAL FACTORS AND
PERFORMANCE OF SMALL-SCALE
BUSINESSES IN SHOMOLU
LOCAL GOVERNMENT, LAGOS
OYEDOKUN Godwin Emmanuel & AZEEZ Sherifat Abiodun
Abstract
The purpose of this paper is to examine the effect of environmental factors on
performance of small-scale businesses in Lagos. This study is to identify the
influence of environmental factors in small scale businesses (SSBs) performance
in Shomolu area of Lagos State. SSBs have been the means through which
accelerated economic growth and rapid industrialization have been envisaged by
creating opportunities for upward social and economic development.
Environmental factors are those variables that contribute to either failure or
success of small scale businesses. These are factors that affect businesses and their
performances measured financially and non-financially. Management
competence, capital investment, competitors, government, suppliers, financial
institutions, investors, wholesalers and trade unions.as well as economic,
technological legal/political, socio-cultural have major influence on the survival
and growth of small business; thus, undermining its potentials in contributing
economic growth and development of the nation. The study concluded that
environmental factors, both organizational (internal factors) and government
related (external factors) impact the sustainability and survival of SSBs in the
Shomolu Metropolitan area of Lagos State, Nigeria and the remedial measures
should be put in place to ensure favourable economic indicators, government
17
Environmental Factors and Entrepreneurship Development
policies, credit facilities, functioning infrastructural facilities and good market
networking. It is hoped that these proactive actions will lead to increased and
sustainable performance of small scale businesses in Nigeria in general.
Word Count:218
Keywords: Environmental factors; Small-scale businesses (SSBs); &
Performance.
Introduction
Small Scale Businesses (SSBs) are no doubt the engine room for economic growth,
poverty alleviation, job creation and by extension crime rate reduction in
developing countries. Most of the existing SSBs employ less than twenty (20)
workers which comprise mainly of family members at management level and
sometimes employing few outsiders where expertise or technical duties are
involved. SSBs have been the means through which accelerated economic growth
and rapid industrialization have been envisaged since they render consumables
to large businesses1. Small businesses open up new jobs, create opportunities for
upward social mobility, enable economic flexibility, and contribute to
competition as well as economic efficiency and effectiveness. Small scales
enterprises provide goods and services, good standard of living and thus
contribute immensely in the growth of Gross Domestic Product (GDP) of any
Nation.
While the contributions of small businesses to economic development are
generally recognized, entrepreneurs in this sector go through series of obstacles
that inhibit their long-term survival and growth. Researchers have indicated that
starting a business is a risky venture and predict that the probability of smallbusiness owners surviving the first five years of running the business is almost
nil2. Some studies into small-business development have also shown that the rate
of failure of small-scale businesses in developing countries is higher than in the
developed world.
18
Environmental Factors and Entrepreneurship Development
Regre ably, in most developing nations, the SSBs have been unable to propel
economic growth and development which are capable of alleviating the impact of
poverty, crime, hunger, unemployment, and low standard of living on the
economy. The challenge of addressing the problem of hunger, poverty and
unemployment is even more worrisome when considering the fact that
actualization of the millennium development goals which Nigeria is still
struggling to fulfill has surpassing the deadline of 20153. Significant issues
identified by the millennium development goal such as hunger, poverty, literacy,
maternal and mortality rate were not achieved because the problems of SSBs were
ineffectively handled.
Businesses around the world operate within environments which is an aggregate
of all conditions, events, circumstances and influences that surround and affect
the operations of the business. The environment does not necessarily mean visible
and physical surroundings but, it connotes total forces, factors and influences that
surround and have effect on business organizations as a separate entity4.
This means that business organizations must envision, analyze, understand and
interact with those forces that influence its objectives, goals and operations in
order to succeed. The neoclassical environment is fast ge ing prone to changes
and competition and since business organizations are open systems, they affect
and are affected by environmental issues. Therefore, business organizations
regardless of their goals must take into consideration, these environmental
opportunities and threats. One important thing to note at this juncture is that, the
ability of managers to identify, analyze and respond appropriately to emerging
environmental issues will considerably impact organizational performances in
terms of survival and growth.
The need to study business environments is very crucial considering the fact that
business organizations are not islands, an effective management in complex and
dynamic society requires the assessment of strengths and weaknesses of the
19
Environmental Factors and Entrepreneurship Development
organization and the opportunities and threats provided by the challenges of the
external environment, hence for survival and growth, organizations must cope
and adapt to these challenges posed by the ever changing environment (internal &
external) in which the business operate means that managers must not only be
aware of what constitutes the elements of their business environment but also
should be able to respond to the forces of the environment which inevitably
impinges on the operations of the business organization5.
The relationship between a business organization and its host environment can be
viewed from three strategic angles6, firstly, the organization can be viewed as
importing various kinds of inputs (resources), such as human resources, capital,
managerial and technical inputs. These inputs are then transformed to provoke
output which takes the form of goods and services. The second view is the study
of the relationship between the organization and the society. It focuses on the
demands and legitimate rights of various stakeholders such as consumers,
suppliers, stakeholders, employees, government and the host community itself.
The third view is to see the organization as operating in an external environment
of opportunities and constraints. All these approaches are equally important and
complement each other.
Factors that affect businesses and their performances are many, ranging from
internal to external factors and those internal factors are predictable and
controllable while external factors are unpredictable and uncontrollable. SSBs
have not performed to standard and consequently contributed miniscule efforts
towards economic growth and development in Nigeria. The low standard of SSBs
towards vibrant and robust economic health could be a ributed to internal and
external environmental factors that need a holistic approach to manipulate.
Business performance is usually measured financially and non-financially.
Although many studies have been done on environmental factors and
performance of small scale businesses in Nigeria, only a few focused on SSBs
20
Environmental Factors and Entrepreneurship Development
located in Shomolu axis of Shomolu local government area of Lagos State. This
area serves as commercial hub with printing as the residents major business. The
impact of printing and paper business cannot be undermined in this part of the
country particular when the country has not fully embrace paperless economy.
Hence, there is a need to study, identify and explain the impact of environmental
factors that affect printing business performance of small scale businesses in order
to forestall the challenges and focus on how to boost the business contribution to
national growth of the country.
Literature Review
Small Scale Businesses (SSBs)
Generally accepted definition of Small Scale Business (SSEs) does not exist
because the categorization of businesses into either small or large is not objective
and quantitative is in terms of judgment. Although many people have an idea of
what small scale business is, but defining it poses a challenge and its definition
depends on who is defining it and the purpose. The parameter employed in
describing and defining SSBs is borne out of capital investment, financial power
and number of workers. The yardsticks that have been utilized in the definition of
small-scale business include, capital investment, sales turnover, accessibility,
employment, output and in some cases, a synthesis of some or all of these
parameters.
Small and Medium Development Agency of Nigeria (SMEDAN) definition
adopts a classification based on dual criteria, employment and assets (excluding
land and buildings)7. Small Enterprises are those enterprises whose total assets
(excluding land and building) are above Five Million Naira but not exceeding
Fifty Million Naira with a total workforce of above ten, but not exceeding fortynine employees. Medium Enterprises are those enterprises with total assets
(excluding land and building) are above Fifty Million Naira, but not exceeding
Five Hundred Million Naira with a total work force of between 50 and 199
21
Environmental Factors and Entrepreneurship Development
employees. For this study, SMEDAN definition of SMEs was adopted. If there
exists a conflict on classification between employment and assets criteria (for
example, if an enterprise has assets worth seven million naira (N7M) but employs
7 persons), the employment-based classification will take precedence and the
enterprise be regarded as micro.
Generally, SSBs produce light consumer goods like food and beverages, electrical
parts, automotive parts, clothing manufacture, soap and detergents, leather
products, woodworks and also render services like barbing, tailoring, cleaning,
printing, electrical, plumping works etc. A small-scale enterprise operates in
informal and semi-formal sectors. Small scale business in Nigeria comprises of
three sectors: (1) Trading sector (2) Production sector (3) Service sector.
Business Environmental Factors (Internal and External)
Business environment is described as the combination of both internal and
external factors of the business outfit influencing the continued and successful
organizational existence. The environment and its components undoubtedly
have effects on the performance of SSBs. Business environment, according to9 is
best understood based on the extent of controllable and uncontrollable
environment. Internal environmental factors consist of variables that are easily
controllable by the business while external factors on the other hand, consists of
those variables that are uncontrollable factors that greatly determine the success
or otherwise of a business firm.
The controllable environment requires managers to deploy their managerial skills
and experiences in the control of forces within the confines of business
organization while the uncontrollable environment are the forces that is beyond
the control of business organization irrespective of the quality of managerial skills
and experiences. However, the uncontrollable environment may be strategically
and proactively managed to achieve predetermined organizational objectives.
Equally, business environment may be categorized into task and macro
22
Environmental Factors and Entrepreneurship Development
environment. The task environment has direct impact on the operation of
organizations since it comprises persons with long-existing relationship that have
great influence on organizations decisions; and the variables with respect to task
environment includes competitors, government, suppliers, financial institutions,
investors, wholesalers and trade unions. The task environment are however
controllable to certain extent as the firm can take bold step to maneuver over any
of the factors. For instance, the firm can adapt marketing strategies to outwit the
competitors and it can also employ backward integration to overcome suppliers'
monopoly.
The macro environment on the other hand is the general environment that has
unique and profound effects on the fortune of business organization irrespective
of the industry where it operates. These variables include political, economic,
social-cultural, technological, legal, natural and international environment10.
Key Factors in the Business Environment
Macro environment are major factors undermining the performance of smallscale business particularly in developing countries like Nigeria11, these factors
include:
Economic Environment: This covers the price level, productivity level, interest
rate, inflation, foreign exchange earnings, employment rate, real income level etc.
The amount saved and invested in an economy will have an effect on the spending
pa ern of economy. The economic environment goes a long way to determine
and define the opportunities for an organization; this is because an expanding
economy provides operational scope for the organizational existence as well as for
the establishment of new ones. However, a period of recession can bring about
failures and probably liquidation of the organization. It is of paramount
importance that the management should be able to distinguish between short-run
phenomena and more fundamental changes in its assessment of the overall
economy.
23
Environmental Factors and Entrepreneurship Development
Legal/Political Environment: The political system covers the forms of institutions
and the structure in which a nation is governed. The political environment
changes in response to new social pressure such as from military to democracy.
Political/legal environment are those factors which results from legal and
governing issues in which the business enterprises may want to operate;
restrictions are imposed on enterprise through fair trade decisions, tax
programme, minimum wage level etc. The political environment is the laws and
regulations that guide the operations of the business in question. The political
stability of the environment is also a necessity for effective and efficient operation
of the business. Political factors also hinged on the politics being played by the
government to assist SSBs and all forms of business in one way or the other.
Infrastructure facilities like power, steady water supply, good road network,
market and sound communication system are regarded as flavor to be provided
by government to enhance SSBs performance. The management of the
organization must take cognizance of these constraints, actual and potential, and
seek out the implications for the business organisation from legal advisers.
Technological Environment: These are related to knowledge applied in the
production process, innovations, machines and materials used for producing
goods and services. Technology is the way things are done; technological change
influences the way an organization carries out its operations.
Technology improves customer service and demand. This is especially true of
modern communication technology, because online databases enable vast
quantities of information to be shared easily and quickly between businesses and
their customers. Technology positively impacts the production and distribution
of goods and services, therefore improving the speed and efficiency with which
goods and services are accessed or delivered to the consumers, also help minimise
cost. Technology is having a significant impact on the operation of SSBs and it is
essential for the survival and growth of economies in general.
24
Environmental Factors and Entrepreneurship Development
Socio-cultural Factors: The social environment consists of factors related to
human relationships on business. The factors relevant in the social environment
includes; demographic characteristics such as population density and
distribution, age group etc., family structure such as changes in family structure,
a itude of the family, social a itudes as well as cultural belief will affect the
performance of business situated in a particular location. Changes in social
trends can impact on the demand for a firm's product and the availability and
willingness of individuals to work. These environmentally relevant pa erns of
behaviour lead to the creation of different cultural values in different societies,
some of which influence the decision to create new businesses.
Competitors: Competition is a major issue that affects the performance of SSBs.
Competition significantly affects SSBs market share and subsequently their
inability to grow.
Nature of Business Environment
The following are the major characteristics of a basic business environment that
business owners and managers must be abreast of for the survival and growth of
their businesses.
Totality of External Forces: Business environment is the sum totals of all those
factors/forces which are available outside the business and over which the
business has no control. It is the group of many such forces that is why, its nature is
of totality.
Specific and General Forces: The forces present outside the business can be
divided into two parts – specific and general. (i) Specific: These forces affect the
firms of an industry separately, e.g., customers, suppliers, competitive firms,
investors, etc. (ii) General: These forces affect all the firms of an industry equally,
e.g., social, political, legal and technical situations.
25
Environmental Factors and Entrepreneurship Development
Interrelatedness: The different factors of business environment are co-related.
For example, let us suppose that there is a change in the import-export policy with
the coming of a new government. In this case, the coming of new government to
power and change in the import-export policy are political and economic changes
respectively. Thus, a change in one factor affects the other factor.
Dynamic Nature: As is clear that environment is a mixture of many factors and
changes in some or the other factors continue to take place. Therefore, it is said that
business environment is dynamic.
Uncertainty: Nothing can be said with any amount of certainty about the factors
of the business environment because they continue to change quickly. The
professional people who determine the business strategy take into consideration
the likely changes beforehand. But this is a risky job. For example, technical
changes are very rapid. Nobody can anticipate the possibility of these swift
technical changes. Anything can happen, anytime. The same is the situation of
fashion.
Complexity: Environment comprises of many factors. All these factors are related
to each other. Therefore, their individual effect on the business cannot be
recognized. This is perhaps the reason which makes it difficult for the business to
face them.
Relativity: Business environment is related to the local conditions and this is the
reason as to why the business environment happens to be different in different
countries and different even in the same country at different places.
Performance (Financial and non-Financial)
Performance simply means the willingness and ability to be commi ed to
specified goals and objectives and vigorously and genuinely pursue these goals
and objectives and bringing them to fulfillment. From the view of 12performance
is the act of performing; doing something in a successful manner and utilizing
26
Environmental Factors and Entrepreneurship Development
knowledge as distinguished from ordinarily possessing it. Meanwhile,
performance is likely to be conceptualized, measured and operationalized
differently thus making comparison an enormous task. Past researches as noted
by13 indicated that the determinants of small business performance are
subdivided into three categories namely: individual, firm, and environmental
characteristics. Individual characteristics like education, experience,
entrepreneurial competence, age leadership practices, race, managers'
personality, gender, industry experience and affect the performance of SSBs.
Firm characteristics examined top management team, family control, and
operations management, stage of development, structure, strategy /planning,
competitive orientation and how all of these characteristics affect performance.
The lastly, environmental characteristics in form of stockholders, financial
institutions, suppliers, customers, regulatory agencies, consultants and
competitors will boost the performance of any business concern.
Performance means different things to different organizations and should be
measured both financially and non-financially. Before the 1980s, financial criteria
(profit, ROI, sales and productivity) were used to measure performance but after
1980s till the present moment, non-financial criteria have received considerable
a ention from scholars, researchers and industrialists. These non-financial
criteria include: communication, stakeholder satisfaction, competitive position,
just-in-time delivery, total quality management and trust14. He opines that small
business performance can be measured in terms of size, profitability, capital base,
turnover and employment. These criteria are both financial and non-financial in
nature.
In the literature, business performance has been widely measured basically in
three parameters namely growth (turnover, number of workers and market
share); survival and profitability (profit and return on investment)15. Some
scholars have argued that growth is the best criterion for measuring performance
and is an important precursor to achieving other financial goals. Be it growth,
27
Environmental Factors and Entrepreneurship Development
profitability or survival, the criteria for performance measurements are expected
to be holistic in nature that is both financial and non-financial, thus profit, revenue
and employment (number of employed workers) should be major criteria for
measurement the performance of business enterprises be it small, medium or
large.
Problems of SSBs in Nigeria
The fact that SMEs have not made the desired impact on the Nigerian economy in
spite of all the efforts and support of succeeding administrations and
governments gives a cause for concern. It underscores the belief that there exists
fundamental issues or problems, which confront SMEs but which hitherto have
either not been addressed at all or have not been wholesomely tackled by the
appropriate authority. A review of literature reveals the following plethora of
problems, which are enormous, fundamental and far-reaching:
i.
Inadequate, inefficient, and at times, non-functional infrastructural
facilities, which tend to escalate costs of operation as SMEs are forced to
resort to private provisioning of utilities such as road, water, electricity,
transportation, communication, etc.
ii.
Bureaucratic bo lenecks and inefficiency in the administration of
incentives and support facilities provided by the government. These
discourage would-be entrepreneurs of SMEs while stifling existing ones.
iii.
Lack of easy access to funding/credits, which can be traceable to the
reluctance of banks to extend credit to them owing, among others, to poor
and inadequate documentation of business proposals, lack of appropriate
and adequate collateral, high cost of administration and management of
small loans as well as high interest rates.
iv.
High dependence on imported raw materials with the a endant high
foreign exchange, cost and scarcity at times. This account for the high cost
of production in most manufacturing companies as the imported raw
materials are obtained at exorbitant foreign currency thus contributing to
high inflation rate in the country.
28
Environmental Factors and Entrepreneurship Development
v.
vi.
vii.
viii.
ix.
x.
Weak demand for products, arising from low and dwindling consumer
purchasing power aggravated by lack of patronage of locally produced
goods by the general-public as well as those in authority due to preferences
given to imported goods.
Unfair trade practices characterized by the dumping and importation of
substandard goods by unscrupulous businessmen. This situation is
currently being aggravated by the effect of globalization and trade
liberalization, which make it difficult for SMEs to compete even in
local/home markets.
Weakness in organization, marketing, information-usage, processing and
retrieval, personnel management, accounting records and processing, etc.
arising from the dearth of such skills in most SMEs due to inadequate
educational and technical background on the part of the SME promoters
and their staff.
Improper succession plan as small scale business owners most times insist
on their children taking over the administration from them, if when these
children do not have interest or experience in such plan.
Lack of appropriate and adequate managerial and entrepreneurial skills
with the a endant lack of strategic plan, business plan, succession plan,
adequate organizational set-up, transparent operational system, etc. on the
part of many founders and managers of SMEs in Nigeria.
Lack of scientific and technological knowledge and know-how, i.e., the
prevalence of poor intellectual capital resources, which manifest as: i. Lack
of equipment, which have to be imported most times at great cost (capital
flight) and which would require expatriate skills to purchase, maintain and
even to repair.
Theoretical Framework
In a broader sense, theories are needed as aids to understanding events and
problems of a research work. Two of the theories underpinning this study is
System Approach and Contingency Theory.
29
Environmental Factors and Entrepreneurship Development
The System Approach: The origin of this theory is a ached to Austrian Biologist,
Ludwing Von Bertalanffy (1956) as reported by 16. The system postulates the need
for organization to interact and operates in an open system rather than a close
system. Therefore, a system is seen as an organized whole comprising of several
subsystems for effective functioning. It can also be construed an interdependent
part which together forms a unitary whole to carry out a task. From the foregoing,
System approach enable managers to perceive organization as a subset of the
general society where the activity of one segment affect in varying degree the
activity of other while a good system shows some reasonable qualities such as
dynamism, adaptation, supportive and interaction. System dynamism will give
room for free interactions and as well overlap with other system to exchange
information with the environment.
Meanwhile, a good system is self-regulating, bounded in time and space and
ensures adequate process of transmi ing input to an output without any
impediments (Stoner, Freeman & Gilbert, 2008)17. Emphatically, the application
and utility of system approach to this study is predicated on the understanding
that no business organization can operate in isolation but rather interact with
other elements in the environment to achieve desired goals and objectives because
organizations usually obtained human and material resources (man, money,
machine, material) from the environment, transformed them into finished good
and invariably sent back to the environment for human consumption and
economic development. Therefore, for micro, small and medium enterprise to
operate successfully in any given economy, cognizance must be given to the
elements of economic, political, socio-cultural and technological factors that have
been considered to have profound effect on their immediate and future survival.
Contingency Theory: Contingency theory is a theory developed by Lawrence
and Lorsch (1967) as cited by18. Contingency theory postulates that there is no
single best way for business enterprises to perform. Situations will create different
environmental requirement for owners/managers of an enterprise. The solution
30
Environmental Factors and Entrepreneurship Development
to a managerial situation is depending on the environmental factors that influence
on the situation. Fiedler claims that if performance is to be improved, we must
cope not only with the environment but also with the situational factors which
influence performance. Performance can be improved either by the environments
fit to the situation or the situations fit to the environment19. For example, the theory
relates to the independent variables in the logic economic environmental factor,
socio-cultural environmental factor and technology environmental factor which
the management of any SMEs can adopt for the business while the dependent
variable relates to performance which is the result of the business environment
adopted.
Economic, socio-cultural and technology environment which are the
independent variables consider for the study can be best appropriate depending
on the environment and the situation the organization discover itself. Though,
there is need for the owner/manager to identify and comprehend the situation
before choosing the suitable business environment. The adoption of economic,
socio-cultural and technology environment has the capacity to enhance or
decrease the performance of the SMEs and their result shall define the level of
performance of the business. However, if the right environmental factors are
adopted, SMEs performance will improve, if otherwise performance of the
organization will decrease. This study a empted to study the impact of external
business environment (economic, socio-cultural, technology) on SMEs
performance. External business environment stand as the independent variables
of the study while SMEs performance as the dependent variable.
The relationship between the independent and dependent variables
31
Environmental Factors and Entrepreneurship Development
Independent Variables
Dependent Variables
Economic Environment
Legal/Political Environment
Performance of SSBs
Technological Environment
Socio-Cultural Environment
The model above depicts a relationship between the independent and dependent
variables. The model shows how the external business environment (economic,
socio-cultural and technology) impact SMEs performance.
Review of Previous Empirical Studies
Several studies conducted over time has shown that the ever changing and
dynamic business environment in which many business outfits operate has
contributed to the significant impact business environment has on organizational
20
survival and performance.
assessed impact of the Nigerian business
environment on company performance: a case of 20 most capitalized companies
in Nigeria. The study shows the empirical standing of theoretical convergence
with respect to the 20 most capitalized companies in Nigeria. Collectively, the
variables of the environment have significant and positive impact on the
companies performance. Government expenditure and inflation have positive
impact while exchange rate and interest rate have negative impact but overall,
there was a positive and significant impact. The study recommended that
Government should pay more a ention to capital expenditure on vital sectors like
32
Environmental Factors and Entrepreneurship Development
infrastructures and education while maintaining fiscal stability. The study failed
to study small scale businesses which have the major contribution to Nigeria
economy. This study will fill the gap by studying the small scale businesses.
21
examine economic environment of small and medium scale enterprises:
implications of economic growth in Nigeria. The study explored the implications
of economic environment of small and medium scale enterprises on economic
development using a quantitative design with secondary data on SMEs
performance, government tax revenue, exchange rate, interest rate and inflation
rate respectively. The study found that exchange rate, inflation rate, interest rate
and government tax revenue have negative relationship with SMEs performance.
Thus, the study recommended that the government should come up with
economic policy and regulatory framework that will maintain fixed exchange
rate, interest rate and low inflation in order to drive the operations of small and
medium enterprises. However, the study uses secondary data to measure the
performance of SMEs which may not relate to the reality on ground.
Finally, 22 in his study on the influence of business environmental factors on micro,
small and medium enterprise survival in Ondo City Metropolis, Nigeria. The
findings indicated a significant relationship between business environmental
factors and MSMEs survival, it therefore recommended adequate provision of
infrastructural facilities for MSMEs survival in Nigeria; as well as strengthening
of regulatory framework and concluded that organizations should recognize and
respond swiftly to the dictates of emerging trends and challenges in their
environment in order to remain relevant in the competitive market. The study
however, only focused on Ondo city, a small segment of the nation, and therefore,
the finding cannot be generalised to other part of Nigeria.
Summary of Gap in Literature
Following the above reviews, it was discovered that there were divergent findings
concerning the relationships between environmental factors as independent
33
Environmental Factors and Entrepreneurship Development
variables comprising economic environment, technological environment,
legal/political environment, competitors and the dependent variable which is
small scale business performance.
A study conducted by 23 on the influence of environmental challenges on small
scale businesses in Bauchi Central. Market discovered that lack of easy access to
credit facilities, poor market competitive advantage and low volume of sales
affects performance of small-scale business in Bauchi Central Market. However,
this study is inconsonant with the study of other researchers which revealed that
inconsistency of government policy and political instability have strong
relationship with small scale business performance and growth in developing
countries.
Another area of gap or discrepancy in research studies on environmental factors
and small-scale business performance is shown in the case of 24 were observed that
environmental factors such as inadequate finance, inadequate infrastructure and
poor managerial skills have a significant and negative relationship with MSEs
performance (using profit, revenue and employees as performance indicators). A
study by 25 revealed that small scale business survival and growth are undermined
by the firms' internal factors in terms lack of requisite managerial skills,
indiscipline and improper secession plan by the management. The finding
implies that majority of MSEs are wound up prematurely as a result of ignorance
of managerial training and its significant effect on the performance of small-scale
businesses in most developing countries.
Results obtained from the various research studies review show that
environmental factors affect the productivity of SMEs. However, the results of the
individual test suggest that the implications of economic, technological and
political environmental factors are severely felt by SMEs rather than the sociocultural factors and internal factors.
34
Environmental Factors and Entrepreneurship Development
Methodology
This research work is an opinion paper that relied solely on review of existing
literature. Secondary data and information are analysed to prepare the paper
extensively. The data are collected from different scholars and researcher,
published e-books, articles published in different journals, periodicals,
conference papers etc. The methodology used was that of a critical literature
review.
Summary
Despite the important role played by small scale businesses in the
industrialization process, the growth and development of the sub-sector has
remained retarded and this is due to numerous problems facing the industry
ranging from unfavourable economic indicators, inconsistent government
policies, poor credit facilities, lack of basic infrastructure, lack of management
skill, and lack of good market networking. It is hoped that the concern
government agencies will take prompt and positive actions to boost the
performance of small scale businesses in the economy as a means of generating
employment opportunities for large number of people and sustain the economic
growth.
Conclusion and Recommendations
The purpose of this paper was to assess the relationship between environmental
factors and performance of SSBs in Nigeria, focusing small businesses in Shomolu
local government areas as the study areas. The environmental factors considered
include micro, task and macro environment and the performance measures
focuses on are profit, revenue and employee of SSBs. From the findings of the
study, significant and negative relationships were revealed between
environmental factors and performance.
This study concludes that inadequate finance and government support, illogical
competition strategies posed the greatest threats to SSBs performance because of
35
Environmental Factors and Entrepreneurship Development
the "smallness" nature of SSBs, as well as inability to provide collateral for loan. In
addition, managers and owners of SSBs do not possess adequate managerial skills
for good performance, simply because of ignorance and lack of motivation from
government. Lastly, inadequate infrastructural activities like power supply,
good road and communication network also greatly hinder the performance of
small-scale businesses and hence their contribution to economic growth of the
nation.
Based on the above literature review on the environmental constraints
undermining the performance of small business enterprises, the following
suggestions are made:
i. On the part of government in order to turn around the dwindling fortunes of
the micro enterprises sector, there is a need for a coherent policy package for
promoting micro enterprises through the different measures to encourage the
creation of industrial estates and clusters of businesses so that could foster the
growth of SMEs. (Mutual relationship), undertake studies aimed at a racting
foreign investors, scanning, and overseas markets and also government
should make SSBs friendly policies in terms of loan access and zero interest
rate. It should strengthen the legal and institutional framework for the
operation of micro-finance institutions including tax incentives for micro
enterprises, and special incentives targeted at investors who would specialize
in exporting to foreign markets.
ii. The appropriate government organs should enhance the performance of
small-scale businesses by organizing training, seminars and workshops on
effective practices of managing business firms to business owners and
entrepreneurs, disciplinary measures against government official
iii. Financial institutions should grant loans to small business owners or even
support them with machines and equipment as their corporate social
responsibilities. Bank can also go into partnership agreement of sharing profit
together.
iv. Agencies in charge of support to SSBs should also put in place strict
36
Environmental Factors and Entrepreneurship Development
disciplinary measures against government official who may want to corruptly
allocate funds meant for SSBs growth. Borrowing alone would not change the
face of poor roads, bad railway system, non-existing water system, but
constant maintenance to enhance the life span of such facilities will boost the
performance of small-scale businesses.
v. Government, non-governmental organizations and other well-meaning
individuals should regularly organize seminars, workshops and conferences
for SSBs owners and managers to develop their management skills and
competencies. SSBs owners/managers should also avail themselves of the
training opportunities.
37
Environmental Factors and Entrepreneurship Development
Endnotes
1.
Olakunle Jayeola, Timothy Ihinmoyan and Yusau Kunle Kazeem,
Environmental Factors and the Performance of Micro and Small-Scale Enterprises
(SSBs) in Nigeria: Lessons from Some Selected SSBs in Ondo State Nigeria. in
Journal of Economics, Management and Trade 21(6): 2, 2018.
2.
S. Marlow, Labour management in small firms. London: Routledge; 2009.
3.
Idris A. Adamu and Farrah M. Muharram, The influence of environmental
challenges on small scale businesses in Bauchi central market. International Journal
of Research and Review. International Journal of Research & Review
(www.ijrrjournal.com) 2019; 6(8):550-559. 2019
4.
S. Abubakar, Effect of environmental factors on small scale business
performance in Kano and Sokoto States. Available: h p://docplayer.net/60425119Effect-of-environmental-factors-on-small-scale-businesses-performance-inkano-and-sokoto-states.html 2015.
5.
F. A. Adidu & G. Olannye, Basic Small Business Entrepreneurship: A
modern approach. Agbor, Delta State: Royal Pace Publishers; 2006.
6.
G. C. Chikwe, A. Joel and E. A. Achiole, The Impact of Regulatory
Environment on the Effectiveness of Small and Medium Scale Enterprises: A
Study of Selected Small and Medium Scale Enterprise in Owerri. Journal of
Investment and Management 4 (6): 315. 2015.
7.
Jeremiah Ayodele Ogundare. Effects of External Business Environment on
Performance of Small and Medium Enterprises in Oyo State, 2019. International
centre of excellence for rural finance and entreprenuership (ICERFE), 16
8.
Amarachi Ngozi Amaugo, Oyedele M. Ogundana, Odafe Martin Egere
and Juliana Amarachi Anigbo. Factors Affecting the Investment Climate, SMEs
Productivity and Entrepreneurship in Nigeria. European Journal of Sustainable
Development (2018), Doi: 10.14207/ejsd.2018.v7n1p182
9.
Rotimi Adeyoriju and Joseph Agbadudu. Influence of Business
Environmental Factors on Micro, Small and Medium Enterprise Survival in Ondo
38
Environmental Factors and Entrepreneurship Development
City Metropolis. International Journal of Economics, Commerce and Management
United Kingdom h p://ijecm.co.uk/ ISSN 2348 0386. 442-464, 2018.
10.
C. Obisi and A. Gbadamosi, Nigeria business environment daunting:
Challenges and suggested solution. International Journal of Scientific Research in
Education, 9(3), 144-150 2016.
11.
N. Ifekwem and O. Adedamola, Survival Strategies and Sustainability of
Small and Medium Enterprises in the Oshodi-Isolo Local Government Area of
Lagos State. Acta Univ. Sapientiae, Economics and Business, 103- 118. 2016.
12.
Amarachi N. Amaugo, Oyedele M. Ogundana, Odafe M. Egere and Juliana
A. Anigbo 182
13.
Abubakar S. 119
14.
Jonah C. Tambari, Chioma Aginah and Martins C. Ononogbo, Implications
of Environmental Factors on the Productivity of Selected Small and Medium Scale
Enterprises In Rivers-State. Archives of Business Research, 6(3), 1-8. 2018.
15.
M. M. Rosli, Determinants of small and medium enterprises performance
in the Malaysian auto part industry. African Journal of Enterprises Management.
2017; 5(20):8235-8241.
16.
Adeyoriju and Agbadudu. 458
17.
Stoner, A. F. James, R. E. Freeman and D. R. Gilbert Jr., Management, sixth
edition. New Delhi: PHI Learning Private Limited. (2008).
18.
P. Lawrence and J. Lorsch Differentiation and integration in complex
organizations. Administrative science quarterly 12, 1-30. (1967).
19.
Jeremiah A. Ogundare. Effects of External Business Environment on
Performance of Small and Medium Enterprises in Oyo State. M.Sc. thesis
submi ed to Department of Business Management, A.B.U. Business School. p55.
2019.
20.
G. Dogara, Impact of the Nigerian business environment on company
performance: A case of 20 most capitalised companies in Nigeria. International
Journal of Business and Management Review Vol. 3(4), pp.36-48. (2015).
39
Environmental Factors and Entrepreneurship Development
21.
L. Orogbu, C. U. Onyeizugbe, and F. Chukwuma, Economic environment
of small and medium scale enterprises: Implications on economic growth in
Nigeria. British Journal of Economics, Management and Trade 19(4) 1-12 ISSN: 24569216. 2017.
22.
Adeyoriju and Agbadudu. 460
23.
A. A. Idris and M. M. Farrah 556
24.
J. A. Ogundare 34
25.
O. Jayeola, T. Ihinmoyan and Y. Kunle 11
40
Environmental Factors and Entrepreneurship Development
CHAPTER
3
GOVERNMENT POLICIES AND
ENTREPRENEURIAL DEVELOPMENT
IN NIGERIA
HASSAN Olatunji Alaba & OYEKUNLE Oyesola Rasheed
Abstract
This study investigated the influence of government policies on entrepreneurial
development in ten selected Local Government Areas (LGAs) in Oyo State,
Nigeria. The study adopted the survey research design of the ex post facto type.
The population of the study was 500 entrepreneurs in Ogbomosho South, Oyo
East, Ibadan North West, Ibadan South East, Ibadan South West, Oluyole, Ido,
Ona Ara, Lagelu, and Saki East LGAs in Oyo State. The study used frequency and
simple percentage to analyse the demographic characteristics of the respondents
and the research questions. The hypotheses were tested using chi-square method
at 5% significance level. The study concluded that the influence of cost of running
business on gross domestic product (GDP) contribution within the study areas
was not high-yielding and impressive. The impact of taxation on business growth
had not yielded a substantial result. Also, the impact of interest rates on capital
investment in the study areas was not effective. Government should support
entrepreneurship development through adequate and functioning physical
infrastructures; cultural norms; access to professional services good and corruptfree democratic governance; and market dynamics. The paper recommended that
government at all levels should provide possible solutions to the challenges
hindering entrepreneurial development in the country especially because of the
41
Environmental Factors and Entrepreneurship Development
numerous opportunities that exist in the sector which, if properly utilised will
benefit the state. The Government and the organised private sector should
increase their support for entrepreneurial/vocational training programme in
tertiary education system.
Word Count: 238
Keywords: Entrepreneur, Entrepreneurial development, Government policies,
Market catalyst, Taxation, & Political stability
Introduction
A government is an institution, or a system made of a group of people that takes
care or manages a country or a state¹. Every government has its own constitution
or a set of fundamental principles that it follows to ensure effective governance.
The government is responsible for the social welfare, law and order, defence, and
financial affairs of the country. A government must ensure the security of its
people through the means of an effective legislation. A government must form
and manage an efficient police force, a fair court justice system, and a robust
defense force. A government must provide civic amenities and build
infrastructure for the social welfare, health, and development of its people. In
addition to providing amenities and infrastructure, a government must
effectively manage the country's economy. And this involves managing inflation,
maintaining sufficient foreign reserves, and stimulating foreign investments. A
government must also take steps to protect the environment from further neglect.
It should take steps to protect and clean its local and international waters, set up
wildlife sanctuaries, and invest in renewable sources of energy and power.
A policy is a deliberate system of principles to guide decisions and achieve
rational outcomes. A policy is a statement of intent, and is implemented as a
procedure or protocol. Policies are generally adopted by a governance body
within an organisation ². Policies can assist in both subjective and objective
decision making. Policies to assist in subjective decision making usually assist
senior management with decisions that must be based on the relative merits of a
42
Environmental Factors and Entrepreneurship Development
number of factors, and as a result are often hard to test objectively, e.g., work-life
balance policy. In contrast policies to assist in objective decision making are
usually operational in nature and can be objectively tested, e.g., password policy.
Presidential executive orders, corporate privacy policies, and parliamentary rules
of order are all examples of policy. Policy differs from rules or law. While law can
compel or prohibit behaviors (e.g., a law requiring the payment of taxes on
income), policy merely guides actions toward those that are most likely to achieve
a desired outcome.
Policy may also refer to the process of making important organisational decisions,
including the identification of different alternatives such as programs or spending
priorities, and choosing among them on the basis of the impact they will have.
Policies can be understood as political, managerial, financial, and administrative
mechanisms arranged to reach explicit goals. In public corporate finance, a critical
accounting policy is a policy for a firm/company or an industry that is considered
to have a notably high subjective element, and that has a material impact on the
financial statements². A policy is a principle or course of action proposed or
implemented by a governing body. Governing bodies are groups of people that
act in unison to guide and support a community, unit, business, institution, etc.
Policies can take many forms depending on whether you're looking at an
institution, organisation, government, or other body. Overall, policies do share
some common features which include (a) policies are authoritative declarations
promoted by a person or body given the power to do so, (b) policies shape
principles and laws and (c) policies state and influence ways to perform actions
and sometimes by whom³.
Entrepreneurship is the process of identifying opportunities in the market place,
and arranging resources required to exploit the opportunities for long term gains.
It is creating wealth by bringing together resources in new ways to start and
operate an enterprise. It is the process of planning, organising, operating and
assuming the risk of a business venture. It is the ability to take risk independently
43
Environmental Factors and Entrepreneurship Development
to make more earnings in market-oriented economy. Entrepreneurship also refers
to a process of action an entrepreneur undertakes to establish an enterprise. It is a
creative and innovative skill and adapting response to environment\⁴.
An entrepreneur is an individual who is willing to and has ability to seek
investment opportunities in an environment and be able to establish and run a
business outfit successfully based on identified opportunities⁵. Similarly,
entrepreneurship as the ability to create something (usually a business entity)
from practically nothing; 'it is initiating, building and watching an enterprise
rather than watching one'⁶,⁷. Though, these definitions see entrepreneurs as
founders of a business organisation but entrepreneurs include not just the
founders of business firms but also second-generation operators of family-owned
firms, franchisees, and owner managers who have bought out the founders of
existing firms⁸. Currently, most African entrepreneurs manage small-scale
enterprise⁹ ¹⁰; hence entrepreneur in this paper is referred to as both small-scale
businesspersons and large scale entrepreneurs. The earliest definition of
entrepreneurship, dating from the eighteenth century, used it as an economic
term describing the process of bearing the risk of buying at certain prices and
selling at uncertain prices¹¹, unlike salary employees, entrepreneurs assume
ownership risks.
Government policies usually have a substantial impact on the number of
entrepreneurs in a country. While there are many governments that say they do
support entrepreneurial businesses, they usually do not have many specific
policies and programmes that effectively support entrepreneurial development¹².
Statement of the Problem
Nigeria is naturally gifted with entrepreneurship opportunities; however, the
achievement of the full potential of these opportunities has been reduced by the
espousal of inappropriate industrialisation policies at different times. The
different administrations in Nigeria, at various times, have geared their efforts
44
Environmental Factors and Entrepreneurship Development
towards developing its entrepreneurship. Several developmental and financial
assistance mechanisms were employed. However, such government ingenuities
were terribly unproductive as a result of overbearing bureaucratic procedures,
corruption, insufficient and ineffectual infrastructural amenities. The inconsistent
government policies as one of the challenges faced by entrepreneurs in Nigeria.
There is need for political clout as well as massive resources to be able to influence
government laws, before entrepreneurs could succeed in Nigeria. Nigerians are
possibly one of the most entrepreneurial people globally, government is not doing
enough to encourage entrepreneurs through policies. Several policy interventions
that were aimed at stimulating entrepreneurship development via small and
medium scale enterprises promotion, based on technology transfer strategy, have
failed to achieve the desired goals as it led to the most indigenous entrepreneurs
becoming distribution agents of imported products as opposed to building incountry entrepreneurial capacity for manufacturing, mechanised agriculture and
expert services.
Aim and Objectives of the Study
The aim of this study is to investigate government policies and entrepreneurial
development in ten selected Local Government Areas (LGAs) in Oyo State. This
research therefore looks at the specific objectives which were to:
i.
Examine the influence of market catalyst on gross domestic product (GDP)
contribution within the study areas.
ii.
Determine the impact of taxation on business growth in the study areas.
iii.
Investigate the impact of interest rates on capital investment in the study
areas.
45
Environmental Factors and Entrepreneurship Development
Research Questions
The under listed questions were raised so that the study could be anchored upon
it.
i.
How does market catalyst influence the gross domestic product (GDP)
contribution in the study areas?
ii.
How does taxation influence business growth in the study areas?
iii.
How do interest rates influence the capital investment in the study areas?
Hypotheses
Based on the variables of this study, these null hypotheses were formulated for the
research work.
H₀₁: There is no significant relationship between market catalyst and gross
domestic product (GDP) contribution of selected Local Government Areas in Oyo
State.
H₀₂: There is no significant relationship between taxation and business growth of
selected Local Government Areas in Oyo State.
H₀₃: There is no significant relationship between interest rates and capital
investment of selected Local Government Areas in Oyo State.
Significance of the Study
This study examined government policies and entrepreneurial development in
the study areas. The researcher is of the opinion that the findings of this study will
be of use to the government, entrepreneurs, relevant stakeholders and the public
in general in enhancing their understanding of the government policies and
entrepreneurial development. This study will further add to knowledge on how
policy-makers can grow the economy through their support on entrepreneurial
development in Oyo State which has been identified as the driver for economic
growth. The study will help the academic and the policy makers to work together
for evidence-based policy making and to understand specific needs of the
entrepreneurs and to how make all-encompassing policies for the
46
Environmental Factors and Entrepreneurship Development
entrepreneurship development within state. The State Government will benefit
from the study because it will provide a veritable base for the effective
government policies to the development of entrepreneurial activities.
Scope of the Study
This study investigated the impact of government policies on entrepreneurial
development within Ogbomosho South, Oyo East, Ibadan North West, Ibadan
South East, Ibadan South West, Oluyole, Ido, Ona Ara, Lagelu, and Saki East
LGAs in Oyo State.
Limitations of the Study
The researcher encountered the following constraints in the course of this work,
data constraint, financial constraint, limited information due to the type of
research work, time constraint and retrieval of questionnaire from the business
owners likewise uncooperative a itudes of some of them due to fear of divulged
information been used against their businesses. This research work is also limited
to the use of secondary data go en from secondary sources, as such if there are
any errors made by those who generated these data; this research work
incorporates such errors.
Literature Review
Concept of Government Policies
Government is a system governing an organized community and government
usually consists of legislature, executive and judiciary. Government policy is a
declaration of government political activities, plans and intentions relating to a
particular cause¹³. Government policies contain the reasons things that are to be
done in a certain way and the reason for doing in that direction. Public problems
can originate in endless ways, and they require different policy responses.
Governments establish many policies that guide businesses. The government can
make changes in fiscal policy which leads to changes in taxes, trade, subsidies,
47
Environmental Factors and Entrepreneurship Development
regulations, interest rates, licensing and more. Businesses should be flexible
enough to respond to changing rules and policies. The government policies are
applicable at all the levels from the national level to local levels such as states and
municipalities, and these local authorities have their own sets of rules. There are
few international treaties which can influence the way companies to do business
¹³.
Governments get revenue to spend from taxation. Increased spending requires
increases in taxes or borrowing. Any tax increase will discourage investment,
especially among entrepreneurs, who take the risks of starting and managing
businesses. Increased spending also eats into the limited pool of savings, leaving
less money for private investment. The government policy can influence how
much tax the community pays, pensions, immigration status and laws, penalties
for violation of rules, education system, commerce and trade in an economy. The
government implements a policy that changes social behaviour in the business
environment. The government can enter into agreements to develop new
technology that will bring the necessary change. Reduction in private investments
shrinks production of goods and services. That, in turn, may lead to the
elimination of jobs. Government policy can influence interest rates, a rise in which
increases the borrowing cost. Higher rates will lead to decreased consumer
spending, but Lower interest rates a ract investment as businesses increase
production. Businesses cannot thrive when there is a high level of inflation¹³.
Monetary policy refers to the use of monetary instruments to regulate magnitudes
such as interest rates, money supply, and availability of credit, under the control
of the central bank, to achieve the ultimate objective of economic policy. Fiscal
policy is a policy via which a government makes adjustments in its tax rates and
spending levels to influence and monitor a nation's economy. The government
makes policies to take action against the current complications. The government
policies make sure to fulfil the future obligations/requirements of the economy¹³.
48
Environmental Factors and Entrepreneurship Development
Concept of Entrepreneurship Development
Entrepreneurship development means creating entrepreneurship a itude in
individuals through searching for prospective entrepreneur and promoting that
a itude to make an individual a real entrepreneur. It motivates to identify new
business ideas and investment opportunities under changing economic
environment. It helps to transform the idea or opportunity into enterprise.
Ultimately, it leads to the development of industrial sector of the economy¹⁴.
Economic Theory
The demand for entrepreneurship arises from the need to change and the supply
of entrepreneurship is limited¹⁵. Entrepreneurship complete depends on
economic conditions and it takes growth when economic conditions are
favourable. The main motivators are economic incentives like taxation policy,
industrial policy, sources of finance and raw material, infrastructure availability,
etc. He described four qualities of an entrepreneur in his theory, that is, good
decision making (judgmental decisions); co-ordination of insufficient resources;
self-motivation and natural imagination¹⁵.
Empirical Review on Implementation of Entrepreneurship Policies
The factors related to the implementation of entrepreneurship policies of the
Ministry of Health was examined and provided an optimal model¹⁶. The
economic growth and development of entrepreneurial communities is due to
their entrepreneurial activities and entrepreneurial activities¹⁶. Therefore,
entrepreneurship education is essential for achieving economic development in
countries. For example, studies by the Global Entrepreneurship Watch showed
that there is a correlation between the rates of entrepreneurial activity and Gross
Domestic Product (GDP) in some countries. In other words, the increase in
entrepreneurial activities is accompanied by an increase in GDP and thus
increases in national income, welfare and comfort in society. Entrepreneurial
education in Iran, which is the most practical and effective strategy to overcome
the economic and social impasse and problems of the country, requires policies
49
Environmental Factors and Entrepreneurship Development
based on the experiences of advanced and third world countries on one hand and
the native conditions of the country on the other. The main purpose of the study is
to present a desirable model of policymaking in entrepreneurship education in
the Ministry of Health and Medical Education according to the indigenous
conditions of the country.
The results of data analysis using Delphi technique showed that the most
important components and indicators of entrepreneurship education policy
model were identified in the Ministry of Health with 3 general components and 14
indicators. The study showed that the following are to be taken into account - one
of the areas of study in government management is policy making. In the existing
literature, there have been many pure studies in this field, but studies in a practical
and practical field are less concerned with policy. The establishment of a national
foundation for entrepreneurship education in the country is necessary and
recommended. Considering the importance of entrepreneurship in the country
and national production as the mo o and strategy of the Islamic Republic, it is
recommended to develop a national document on entrepreneurship education in
Iran¹⁶.
Due to the precise educational planning in the education levels, higher education,
organisational education, it is necessary to train entrepreneurship education
trainers and to determine different educational materials with regards to
audience separation of educational programmes. It is important to provide a
standard model of Iranian entrepreneurship education tailored to Iranian culture
and indigenous contexts, develop the entrepreneurship model and award in Iran,
acknowledge and support successful entrepreneurs, and course learners in line
with its results. The specialised entrepreneurship courses in the organisation and
university is key. It is essential to establish and develop Entrepreneurship and
Entrepreneurship Management at university level at different stages of
entrepreneurship culture and specialise in discussing entrepreneurship and
education based on the needs of audiences of courses and learners, business
processes, skills and knowledge needed¹⁶.
50
Environmental Factors and Entrepreneurship Development
The development of short-term vocational training and vocational training
tailored to the needs of the labour market to return to the modified labour force
and provision for financial support for the purchase of equipment, and se ing up
new entrepreneurship training centres are vital. There should be provision for tax
exemptions, special discounts on customs tariffs and commercial profits for
entrepreneurship training centers and part of the entrepreneurial education costs
of course learners or their employers. It is crucial to stabilise rules and regulations
- modify the laws and regulations for entrepreneurship training courses
(especially non-formal education) and designing the mechanisms for the
implementation of laws and regulations¹⁶.
Synthesis of Gap Identified
Despite the increasing effects of government policies, there is still limited
literature on its effect in developing countries. It was observed that policies have
strong positive effects on the promotion of entrepreneurship and Small &
Medium Scale Enterprises (SMEs). But there are still some negative points when
implementing policies, such as uneven filter criteria and supervision system
between new and established firms. Also, related studies in developing countries
have failed to consider the entrepreneurship development in a region. Although
policies are designed to support the entrepreneurship development, the effects
are region and industry-dependent. This study, while validating some empirical
works has bridged the gap between existing literatures by providing evidence on
the effects of government policies on entrepreneurship development in a region.
Conceptual Framework for the Study
The conceptual framework for this study is built on the theory and literatures
reviewed. The model is broadly divided into two parts: independent and
dependent variables. The independent variable as depicted below which is
government policies is proxied with market catalyst, taxation, interest rates,
regulations and permits, and political stability. Also, the dependent variable
which is entrepreneurial development is measured with the GDP contribution,
51
Environmental Factors and Entrepreneurship Development
business growth, capital investment, new business ventures and boosting
productivity.
Government
Entrepreneurial
Policies
Development
Market catalyst
GDP contribution
Taxation
Business growth
Interest rates
Capital investment
Regulations and permits
New business ventures
Political stability
Boosting productivity
and growth
Source: Field Work by Researcher, 2022
Methodology
This study adopted survey design. The study population focused on 65
entrepreneurs from Ogbomosho South Local Government Area (LGA), 50
entrepreneurs from Oyo East LGA, 50 entrepreneurs from Ibadan North West
LGA, 50 entrepreneurs from Ibadan South East LGA, 50 entrepreneurs from
Ibadan South West LGA, 70 entrepreneurs from Oluyole LGA, 30 entrepreneurs
from Ido LGA, 35 entrepreneurs from Ona Ara LGA, 50 entrepreneurs from
Lagelu LGA, and 50 entrepreneurs from Saki East LGA making a total of 500
52
Environmental Factors and Entrepreneurship Development
entrepreneurs from ten LGAs in Oyo State. The entrepreneurs consist of male and
female entrepreneurs who have established business ventures in the areas of
study; 340 male which is 68% and 160 female which amounts to 32% of the total
entrepreneurs.
The sample size of this research is determined by the use of formula below ¹⁷. The
formula is concerned with the use of normal approximation with 95% confidence
level and 5% error tolerance.
The formula is represented mathematically as:
2
Where: n = Sample size, N = Population and α = level of significance/error
tolerance
Therefore, to determine the sample size, the researchers used the estimated
population of 500 entrepreneurs within Ogbomosho South, Oyo East, Ibadan
North West, Ibadan South East, Ibadan South West, Oluyole, Ido, Ona Ara,
Lagelu, and Saki East LGAs
in Oyo State.
Where: n =?
2
N = 500, α = 5% =0.05
2
n= 500 / 1 + (0.05) 500 = 500 / 1 + 0.0025 × 500
n= 500 / 1 + 1.25 = 500 / 2.25 = 222.2 = 222 respondents
Source of Data Collection
To obtain reliable information that will help the researcher to ensure the
effectiveness of the study in question, data were collected from primary source
through structured questionnaire. The questionnaire was designed in a
structured form to be answered according to the hypotheses and was restricted
with the responses made of strongly agree (SA), agree (A), neither (N), strongly
disagree (SD) and disagreed (D).
53
Environmental Factors and Entrepreneurship Development
Description of Research Instrument
The data required to test the hypotheses were collected with the aid of research
instrument. Data were collected mainly through the primary method and the
instrument used for data collection was the questionnaire. The questionnaire was
a structured questionnaire administered by hand to the respondents. A five point
Likert scale was employed to extract the data. The respondents were made to
indicate in the questionnaire the extent they agree or disagree to the stated
problems.
Validity and Reliability of the Research Instrument
In this research, the research has chosen to adopt the probability sampling. All the
individuals have the chances of being selected. For this research work, every
individual ma er. Simple random sampling method because it ensures that the
selection process is completely randomised.
The reliability of the instrument was estimated ¹⁸, the instrument yielded 0.725
reliability coefficient. This implies that instrument is both valid and reliable and it
was used in this study.
Method of Data Analysis
Data collected for the study were analysed by the researcher using frequency
counts, mean score. The three research questions were answered in line with the
hypothesis. The data collected were analysed by using percentage and inferential
statistics. The descriptive statistics of frequency count and percentages was
adopted for the analysis of the research questions while chi-square (χ2)
distribution was the statistical tool used in testing the acceptability or otherwise of
the hypothesis posed for this study.
Analysis, Data Presentation and Discussion of Findings
A total of one hundred and four (222) copies of the questionnaire were
administered out of which one hundred and two (218) copies representing
54
Environmental Factors and Entrepreneurship Development
(98.1%) of the questionnaire were properly completed and retrieved while (4)
copies representing 1.9% were not retrieved.
Table 1: Analysis of Response Rate
Administered questionnaire
Frequency
Returned
218
Unreturned
4
Total
Percentage
98.1
1.9
222
100
Source: Field Survey, 2022
Table 1 above showed that one hundred and fifty-one (151) respondents
representing 68% of the sample size were male while seventy-one (71)
respondents representing 32% of the sample size were female. Thus, majority of
the respondents were male.
Demographic Data Analysis
Table 2: Demographic Characteristics of Respondents
Demographic Characteristic
Frequency
Percentage
Analysis of Gender
Male
151
68
71
32
222
100
18-21
8
3.6
22-25
16
7.2
Female
Total
Analysis of Age
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Environmental Factors and Entrepreneurship Development
26-30
21
9.5
31-35
57
25.7
36-39
53
23.9
40 and above
67
30.2
222
100
Ph.D.
3
1.4
M.Sc.
17
7.7
B.Sc.
34
15.3
Total
Analysis of Educational Qualification
HND
32
14.4
OND
65
29.3
SSCE
71
32.0
Total
222
100
Analysis of Religion
Christianity
106
Islam
87
39.2
Others
29
13.1
222
100
Total
Source: Field Survey, 2022
56
47.7
Environmental Factors and Entrepreneurship Development
Table 2 above showed that one hundred and six (106) respondents representing
47.7% of the sample size were Christians while eighty-seven (87) respondents
representing 39.2% of the sample size were Muslims, while twenty-nine (29)
respondents representing 13.1 % were other religious followers. Thus, majority of
the respondents were Christians. The age shows that eight (8) respondents
representing 3.6% of the sample size were within 18-21 age group, sixteen (16)
respondents representing 7.2% of the sample size were within 22-25 age group,
twenty-one (21) respondents representing 9.5% of the sample size were within 2630 age group, fifty-seven (57) respondents representing 25.7% of the sample size
were within 31-35 age group, fifty-three (53) respondents representing 23.9% of
the sample size were within 36-39 age group, while sixty-seven (67) respondents
representing 30.2% of the sample size were 40 and above age group. Thus,
majority of the respondents were 40 and above age group.
The academic qualification shows that three (3) respondent representing 1.4% of
the sample size was Ph.D. holder, seventeen (17) respondents representing 7.7%
of the sample size were M.Sc. holders, thirty-four (34) respondents representing
15.3% of the sample size were B.Sc. holders, thirty-two (32) respondents
representing 14.4% of the sample size were HND holders, sixty-five (65)
respondents representing 29.3% of the sample size were OND holders, while
seventy-one (71) respondents representing 32.0% of the sample size were SSCE
holders. Thus, majority of the respondents were SSCE holders.
Presentation of Data
The following results presented were based on the research questions and
hypotheses raised, which the study has sought to answer as follows:
Research Questions
1.
How does market catalyst influence the gross domestic product (GDP)
contribution in the study areas?
2.
How does taxation influence business growth in the study areas?
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Environmental Factors and Entrepreneurship Development
3.
How does interest rate influence the capital investment in the study areas?
Hypotheses
H₁: There is significant relationship between market catalyst and gross domestic
product (GDP) contribution of selected Local Government Areas in Oyo State.
H₂: There is no significant relationship between market catalyst and gross
domestic product (GDP) contribution of selected Local Government Areas in Oyo
State.
To test this hypothesis, statement used for table 3 was used.
Table 3: Analysis of the influence of market catalyst on gross domestic product
(GDP) contribution within the study areas
Description
Frequency
Percentage
Strongly Agree
7
3.15
Agree
18
8.10
Disagree
59
26.57
Strongly Disagree
121
54.50
Neither (Undecided)
17
7.65
Total
222
100
Source: Field Survey, 2022
Table 3 above, it showed that the influence of cost of running business on gross
domestic product (GDP) contribution within the study areas was not highyielding and impressive.
The influence of market catalyst on gross domestic product (GDP) contribution
within the study areas is not high-yielding and impressive
58
Environmental Factors and Entrepreneurship Development
Contingency Table
CELL
O
E
O-E
(O-E)2
(O-E)2
E
C1
7
44.4
-37.4
1398.76
31.50
C2
18
44.4
-26.4
696.96
15.70
C3
59
44.4
14.6
213.16
4.80
C4
121
44.4
76.6
5867.56
132.15
C5
17
44.4
-27.4
750.76
16.91
TOTAL
222
χ2 = 201.06
Source: Field Survey, 2022
2
Where: χ is Chi-squared, O is each observed (actual) value, E is each expected
value and ∑ stands for summation. Expected value of classes of response level of
significance (α), the degrees of freedom (df) = (number of rows - 1) × (number of
columns - 1) = (r-1) (c -1)
Where: df is the degree of freedom, r is the number of rows, c is the number of
2
2
columns and α is the level of significance. χ calculated = 201.06. χ tab value at 5%
level of significance
α = 5% = 0.05
The degrees of freedom (df) = (number of rows - 1) × (number of columns - 1)
df = (5−1) × (2−1) = 4×1 = 4
2
χ tab value at 5% level of significance df 4 = 9.49
59
Environmental Factors and Entrepreneurship Development
Interpretation
From the analysis above, χ2 calculated value is 201.06 while χ2 tabulated value is
9.49. This shows that χ2 calculated of 201.06 is greater than χ2 tabulated of 9.49 i.e.
χ2 calculated (201.06) > χ2 tabulated of 9.49. Therefore, we accept H1 which states
that there is no significant relationship between market catalyst and gross
domestic product (GDP) contribution of selected Local Government Areas in Oyo
State.
Research Question 2: How does taxation influence business growth in the study
areas?
Hypothesis II
H₁: There is significant relationship between taxation and business growth of
selected Local Government Areas in Oyo State.
H₂: There is no significant relationship between taxation and business growth of
selected Local Government Areas in Oyo State.
To test this hypothesis, statement used for table 5 was used.
Table 4: Analysis of the impact of taxation on business growth in the study areas
Description
Frequency
Percentage
Strongly Agree
9
4.10
Agree
33
14.86
Disagree
61
27.47
Strongly Disagree
111
50.00
Neither (Undecided)
8
Total
3.60
222
100
Source: Field Survey, 2022
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Environmental Factors and Entrepreneurship Development
Table 4 above, it showed that the impact of taxation on business growth in the
study areas had not yielded a substantial result.
The impact of taxation on business growth in the study areas had not yielded a
substantial result
Contingency Table
CELL
O
E
O-E
(O-E)2
(O-E)2
E
C1
9
44.4
-35.4
1253.16
28.22
C2
33
44.4
-11.4
129.96
2.93
C3
61
44.4
16.6
275.56
6.21
C4
111
44.4
66.6
4435.56
99.90
C5
8
44.4
-36.4
1324.96
29.84
TOTAL
222
χ2 = 167.10
Source: Field Survey, 2022
χ2 calculated = 167.10
χ2 tab value at 5% level of significance, α = 5% = 0.05
The degrees of freedom (df) = (number of rows - 1) × (number of columns - 1)
df = (5−1) × (2−1) = 4×1 = 4
χ2 tab value at 5% level of significance df 4 = 9.49
Interpretation
From the analysis above, χ2 calculated value is 167.10while χ2 tabulated value is
9.49. This shows that χ2 calculated of 167.10 is greater than χ2 tabulated of 9.49 i.e.
χ2 calculated (167.10) > χ2 tabulated of 9.49. Therefore, we accept H1 which states
that there is no significant relationship between taxation and business growth of
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Environmental Factors and Entrepreneurship Development
selected Local Government Areas in Oyo State.
Research Question 3: How do interest rates influence the capital investment in
the study areas?
Hypothesis III
H₁: There is significant relationship between interest rates and capital investment
of selected Local Government Areas in Oyo State.
H₂: There is no significant relationship between interest rates and capital
investment of selected Local Government Areas in Oyo State.
To test this hypothesis, statement used for table 7 was used.
Table 5: Analysis of the impact of interest rates on capital investment in the study areas
Description
Frequency
Percentage
Strongly Agree
17
7.65
Agree
36
16.20
Disagree
55
24.77
Strongly Disagree
107
48.19
Neither (Undecided)
Total
7
3.15
222
100
Source: Field Survey, 2022
Table 5 above, it showed that the impact of interest rates on capital investment in
the study areas was not effective.
The impact of interest rates on capital investment in the study areas was not
effective
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Environmental Factors and Entrepreneurship Development
Contingency table
CELL
O
E
O-E
(O-E)2
(O-E)2
E
C1
17
44.4
-27.4
750.76
16.91
C2
36
44.4
-8.4
70.56
1.59
C3
55
44.4
10.6
112.36
2.53
C4
107
44.4
62.6
3918.76
88.26
C5
7
44.4
-37.4
1398.76
31.50
TOTAL
222
χ2 = 140.79
Source: Field Survey, 2022
2
χ calculated = 140.79
2
χ tab value at 5% level of significance, α = 5% = 0.05
The degrees of freedom (df) = (number of rows - 1) × (number of columns - 1)
df = (5−1) × (2−1) = 4×1 = 4
2
χ tab value at 5% level of significance df 4 = 9.49
Interpretation
2
2
From the analysis above, χ calculated value is 140.79 while χ tabulated value is
2
2
9.49. This shows that χ calculated of 140.79 is greater than χ tabulated of 9.49 i.e.
2
2
χ calculated (140.79) > χ tabulated of 9.49. Therefore, we accept H1 which states
that there is no significant relationship between interest rates and capital
investment of selected Local Government Areas in Oyo State.
Summary of Findings
The below is the summary represented in this study. The result of the findings
investigated the socio-demographic characteristics of the respondents in
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Environmental Factors and Entrepreneurship Development
Ogbomosho South, Oyo East, Ibadan North West, Ibadan South East, Ibadan
South West, Oluyole, Ido, Ona Ara, Lagelu, and Saki East LGAs in Oyo State. It
was revealed that: age range 40 and above years were more represented in the
study; that SSCE holders were more represented in the study; that Christians were
more represented than the other religions in the study.
The result of the findings in the first research question examined the influence of
cost of running business on gross domestic product (GDP) contribution within the
study areas. Table 4.3, it showed that the influence of cost of running business on
gross domestic product (GDP) contribution within the study areas was not highyielding and impressive.
The result of the findings in the second research question determined the impact
of taxation on business growth in the study areas. Table 4.4, it showed that the
impact of taxation on business growth in the study areas had not yielded a
substantial result.
The result of the findings in the third research question investigated the impact of
interest rates on capital investment in the study areas. Table 4.5, it showed that the
impact of interest rates on capital investment in the study areas was not effective.
Conclusion and Recommendations
This study has been an a empt to examine the impact of government policies on
entrepreneurship development: a study of Ogbomosho South, Oyo East, Ibadan
North West, Ibadan South East, Ibadan South West, Oluyole, Ido, Ona Ara,
Lagelu, and Saki East LGAs in Oyo State, having gone through the whole length of
data analysis, hypothesis, testing and discussions. The following conclusions are
hereby drawn that financial problems, poor management practices or expertise,
poor accounting system, lack of materials, government unfavourable fiscal policy
and lack of infrastructural facilities were the major constraints to the development
of small and medium scale enterprises in the study areas. There were barriers
64
Environmental Factors and Entrepreneurship Development
hindering the potential entrepreneurs to start a business in the study areas.
However, the impact of taxation on business growth in the study areas had not
yielded a substantial result. The influence of interest rates on capital investment in
the study areas was not effective.
The following recommendations are made based on the findings of the study:
i.
The following conditions are key in order to enhance viable
entrepreneurial development in Oyo State and in Nigeria as a whole; good
and corrupt-free democratic governance; adequate and functioning
infrastructures; stable market-oriented economy; good micro/macroeconomic policies; supportive government policies; efficient funding of
policies; policy implementation; open and growing economy and
adequate satisfaction of the people's basic needs and virile export strategy.
ii.
Entrepreneurs in Nigeria require central government assistance in the
form of loan guaranty, direct loan, and training and counseling on how to
effectively manage a small business. Access to bank loans with lesser
interest rates and direct government financial support are reported in
surveys of entrepreneurs as a serious problem for small businesses in
Nigeria.
iii.
Finally, this study recommended that more studies should be carried out
on other factors that could contribute to entrepreneurship development in
other states or geopolitical zones.
Contributions to Knowledge
Despite the increasing effects of government policies, there is still limited
literature on its effect in developing countries. This is because while a lot has been
documented about the concept of government policies in advanced nations, most
works related to government policies in areas concerning entrepreneurship
development in less industrialised nations are hardly found. The study will
contribute to literature and offer some relevant recommendations to policy
65
Environmental Factors and Entrepreneurship Development
makers, entrepreneurs and government officers in charge of enterprise
development or related duties. In addition, this study will be useful to
academicians to carry out a robust field work.
Suggested Areas of Further Research
The study established the impact of government policies on entrepreneurship
development: a study of Ogbomosho South, Oyo East, Ibadan North West, Ibadan
South East, Ibadan South West, Oluyole, Ido, Ona Ara, Lagelu, and Saki East
LGAs in Oyo State. Nevertheless, to further broaden the frontier of knowledge,
the following were the main limitations of this research work, are outlined below:
1.
The study can be replicated in other states or geopolitical zones other than
Oyo State, Nigeria where the study was carried out.
2.
Also, this study suggested that future studies should include larger
population study in order to increase the generalisability of the findings.
3.
In addition, this study suggested that researchers should apply for grants
and enough time in order to carry out an excellent field work in future
studies.
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Environmental Factors and Entrepreneurship Development
Endnotes
¹ Toppr, “What is Government?” toppr.com,
h ps://www.toppr.com/guides/civics/what-is-government/meaning-of-government/
(accessed 5 September, 2021).
² Wikipedia, “Policy,” wikipedia.org, h ps://en.wikipedia.org/wiki/Policy
(accessed 5 September, 2021).
³ Live Career, “What Is Government Policy?”
h ps://www.livecareer.com/resources/careers/planning/government-policy (accessed 5
September, 2021).
⁴ Slideshare, “Entrepreneurship Development,” slideshare.net.
h ps://www.slideshare.net/rohit25786/entrepreneurship-development-57671307 (accessed
6 September, 2021).
⁵ B. D. Sarkin-Daji, “Foundations and Framework of Entrepreneurship,” In
Abdulkadir, D.S ed. Contemporary Approach to Entrepreneurial Development
published by the Department of Business Administration, Lapai, Niger State,
(2009).
⁶ F. Okpara, “The Practice of Entrepreneurship,” (Enugu: Precision Publishers
Limited, Nigeria, 2005).
⁷ M. O. Falabi, and A. G. Olatunji, “Considering Entrepreneurship in
Tourism for Sustainable Development in Nigeria,” Journal of the Business of
Education (2)1: Published by the Department of Business Education, Kwara State
University, Malete, Kwara State, (2014), 176-194.
⁸ J. G. Longenecker, W. M. Carlos and J. P. William, “Small business
management: An Entrepreneurial Emphasis,” (Ohio: Thomson South-Western, 2003).
⁹ E. Ikechi and B. D. Edward, “Challenges and Opportunities Facing African
Entrepreneurs and their Small Firms,” International Journal of Business Research,
(2009), (9)3.
¹⁰ A. Olatunji, “The Relevance of Guidance and Counseling in
Entrepreneurial Empowerment,” Sokoto, Journal of Social Sciences, (2012), 65-78.
¹¹ M. H. Morris and P. S. Lewis, “Entrepreneurship as a Significant Factor in
Social Quality of Life,” Journal of Business Research, (1991), 23(1), 21-36.
67
Environmental Factors and Entrepreneurship Development
¹² Early to Rise, “Entrepreneurship Development,” earlytorise.com, Early to
Rise Publishing, LLC, h ps://www.earlytorise.com/entrepreneurship-development
(accessed 8 September, 2020).
¹³ “cleartax”, Defmacro Software Pvt. Ltd,
h ps://cleartax.in/g/terms/government-and-policy (accessed 15 January, 2022)
¹ ⁴ “ U n i v e r s a l A c a d e m y ” , a c c e s s e d 2 1 Au g u s t , 2 0 2 1 ,
h p s : / / e d u r e v. i n / s t u d y t u b e / c o n c e p t - o f - e n t r e p r e n e u r s h i p - d e v e l o p m e n t entreprene/dedd d8-e29e-4e4c-8375-0968debc7bb3_t
¹⁵ K. Devika, The Entrepreneur - An Economic Theory by Mark Casson,
h ps://cutevamp.com/top-5-theories-of-entrepreneurship/ (accessed 1 February, 2022).
¹⁶ Reza Alinejad, Mohammad Jalal Kamali and Sanjar Salajeghah,
“Identifying the Components and Indicators of Entrepreneurship Policies of the
Ministry of Health with Delphi Approach,” International Research Association for
Talent Development & Excellence, (2020), Volume 12, Number 3s, 1043-1057.
¹⁷ Taro Yamane, Statistics: An Introductory Analysis, 2nd ed., (New York:
Harper and Row, 1967).
¹⁸ L. J. Cronbach, “Citation classics,” Current Contents, (1978), 13, 263.
68
Environmental Factors and Entrepreneurship Development
CHAPTER
4
ORGANIZATIONAL CULTURE AND
BUSINESS PERFORMANCE IN THE
NIGERIAN SERVICE SECTOR
OLUKOYA Sakirat Adetutu & ADEOLU-AKANDE
Modupeola Atoke
Abstract
This paper investigated the relationship between organizational culture and
business performance in the Nigerian service sector. Survey research design was
used in the study. The population of this study was made up of 12,000 employees'
of Guaranty Trust Bank Plc. A sample size of 387 was determined through Taro
Yamane formula. The respondents were drawn from the total population through
purposive sampling technique. Primary data was obtained with the aid of
questionnaire while secondary data from relevant journals and textbooks were
reviewed. The research achieved a response rate of 50.39 per cent (195).
Correlation analysis on Statistical Package for the Social Sciences (SPSS) was used
to test the hypotheses raised in the study. The findings indicated that there is
significant statistical relationship between organizational culture and business
performance. It was concluded that organizational culture is a very significant
aspect of maintaining organizational discipline and it leads to the achievement of
corporate objectives. It was recommended that the management of Guaranty
Trust Bank Plc should ensure that more a ention is dedicated to the various
aspects of organizational culture that helps the organisation to stand out among
its various competitors. Also, the management need to take greater steps towards
making sure that a itudes and behavior of its employees' are in line with the
69
Environmental Factors and Entrepreneurship Development
cultural tenets of the organisation.
Word Count:216
Keywords: Business performance, Nigerian, Organizational culture, & Service
sector
Introduction
Organizational culture has been an interesting aspect of every business activity,
“Organizational culture is the set of norms, values and beliefs according to which
the employee should behave in a company” (Mohsen, Neyazi & Ebtekar, 2020, p.
880). It is actually how things are practiced in a corporation and is the important
factor for organizational success and growth (Mohammed, 2017). For this reason,
Organizational culture cannot be under estimated because it plays an important
role in the success of an organisation. Organization culture is focused on
achieving both employee satisfaction and boost the productivity of the business
(Robbins & Coulter, 2013). “As organizational culture affects many other variables
either positively or negatively in a firm, therefore organizational culture
influences some specific variables such as productivity, absenteeism, turnover,
organization citizenship and job satisfaction” (Mohsen et al., 2020, p. 880).
Organizational or corporate culture is the pa ern of values, norms, belief, a itude
and assumptions that may not have been articulated but shape the ways in which
people in organization behave and things get done. “Values” refers to what is
believed to be important about how people and organizations behave. 'Norms are
the unwri en rules of behavior (Armstrong, 2011 as cited in Mohammed, 2017).
The definition emphasizes that organizational culture is concerned with the
subjective aspect of what goes on in organization. According to Yildirim and
Birinci (2013) culture is the values and custom that guides the behavior of
members' of a particular society. Also, organizational culture is defined as
“shared values, principles, traditions, and ways of doing things that influence the
way organisation members' act” (Robbins & Coulter, 2013, p. 80).
70
Environmental Factors and Entrepreneurship Development
“Business performance is considered to be the sum of accomplishments that has
been achieved by all departments” (Kamau & Wanyoke, 2019, p.9). The
organizational goals that have been set in a given period of time to outline its
accomplishments that are involved in each stage. The idea of organizational
performance is affiliated to the survival and success of an organization.
Organizational performance is a multidimensional construct that consist of four
elements” (Kamau & Wanyoke, 2019, p.9). Business performance is an indication
of how and organisation meets the needs of its customers (Mabai & Hove, 2020).
“Customer focused performance, including customer satisfaction, product or
service performance, financial and market performance, including revenue,
profits, market position cash to cash cycle time, and earnings per share human
resources performance, including employee organizational effectiveness,
including time to market, level of innovation, production and supply chain
flexibility” (Kamau & Wanyoke, 2019, p.9).
Statement of the problem
The challenge of understanding the role culture in the work environment is one
which continues to affect organizational performance. This is because culture has
a significant influence on employees' a itude and behavior in the workplace. Due
to li le or no understanding of the role of culture in the organisation, a number of
employees' do not seem to appreciate the vision, mission and strategic goals of the
organisation which often results in poor performance and loss of productivity in
the organization. Hence, the management are saddled with the task of molding
the organisation by ensuring that the employees understand the organizations
culture.
A number of studies in the western countries have focused on organizational
culture. However, in developing countries like Nigeria, few studies have been
conducted on this topic. To address the identified gap, the major objective of this
study is to investigate effect of organizational culture on business performance in
the service sector.
71
Environmental Factors and Entrepreneurship Development
Objectives of the Study
i.
To investigate the influence of observable artifact on customer focused
performance in Guaranty Trust Bank plc?
ii.
To investigate the influence of espoused value on profitability in Guaranty
Trust Bank plc?
iii.
To investigate the influence of basic assumptions on market performance
in Guaranty Trust Bank plc?
Research Questions
The following research questions shall be addressed in the study:
i.
What is the influence of observable artifact on customer focused
performance in Guaranty Trust Bank plc?
ii.
What is the influence of espoused value on profitability in Guaranty Trust
Bank plc?
iii.
What is the influence of basic assumptions on market performance in
Guaranty Trust Bank plc?
Research Hypotheses
Based on the foregoing the following hypotheses are suggested for testing:
H01: There is no significant relationship between observable artifact and customer
focused performance in Guaranty Trust Bank plc.
H02: There is no significant relationship between espoused value and profitability
in Guaranty Trust Bank plc.
H03: There is no significant relationship between basic assumptions and market
performance in Guaranty Trust Bank plc.
Following this introduction, the remaining sections of the paper is structured as
follows: Section two reviews existing literature, section three presents the
methodology of the paper, in section four the result and discussions are
presented, in section five the conclusion is presented and in section six the
recommendations for policy makers is presented.
72
Environmental Factors and Entrepreneurship Development
Literature review
Figure 1: Conceptual model
Business performance
Organizational Culture
§
Observable artifact
§
Espoused value
§
§
Customer focused
performance
§
Profitability
§
Market performance
Basic assumptions
Source: Authors construct
Organizational Culture
Various definitions have been given for organizational culture by a number of
scholars, based on their field such as Sociology, Anthropology, Organizational
Behavior, Business Communication and Management Sciences (Moshen et al.,
2020). “Culture is the result of a complex group learning process that is only
partially influenced by leader behavior” (Schein, 2004, p.11). Bass and Avolio
(1993) suggested that organizational culture is usually originates from
entrepreneurial founders.
“Culture forms the basis of group identity and shared thought, belief, and feeling,
one of the most decisive and important functions of leaders particularly the
founders of a company is the creation and management of its culture”
(Christensen, 2006 as cited in Yildirim & Birinci, 2013, p.72). Furthermore,
“Organization culture is the set of norms, values and beliefs according to
which the employee should behave in a company” (Moshen et al., 2020, p. 880).
Another prominent scholar Schein (2004, p.17) defined culture “as a pa ern of
shared basic assumptions that was learned by a group as it solved its problems of
external adaptation and internal integration, that has worked well enough to be
considered valid and, therefore, to be taught to new members as the correct way to
perceive, think, and feel in relation to those problems”.
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Environmental Factors and Entrepreneurship Development
According to Schein (1995) as cited in Moshen et al., (2020, p. 881), “organization
culture comes from the set of assumptions that employees have achieved during
the learning process of managing problems” Furthermore, Schein (2006) as cited
in Moshen et al., (2020), stated that one of the critical factors which provides the
impetus for a firm to address its constraints, fine tune its managerial processes and
achieve its objective is the establishment of corporate culture. However, Bass
(1991) provides a unique definition of organizational culture, “culture is the glue
that holds the organization together as a source of identity and distinctive
competence”. Usually, the firm's founder's and successor's leadership style aids
the formation of a culture of shared values and assumptions within the limits of
the founder's personal beliefs (Bass & Avolio, 1993). Indiya, Mise, Obura, and
Ojera (2021) found that organizational culture had a moderating effect on
adoption of quality management system and organizational performance.
Business Performance
The idea of business performance is related to the survival and success of an
organization. Business performance is considered to be the sum of
accomplishments that has been achieved by an organization (Kamau & Wanyoke,
2019). The organizational goal that have been set in a given period of time, to
outline its accomplishment in each stage. Business performance is a
multidimensional construct, hence, a number of measures have been used to
express it, such measures include customer-focused measures, financial and
market measures, product or service measure and human resources measure.
More so, business performance measures include effectiveness, efficiency,
productivity, quality and innovation (Kamau & Wanyoke, 2019, p.9). Also,
Sanders and Linderman (2014) identified efficiency and innovation as measures of
performance. However, this study focuses on three of the identified measures of
business, which are customer focused performance, financial performance
(profitability) and market performance.
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Environmental Factors and Entrepreneurship Development
Customer-Focused Measures
Customer measures of performance relate to customer a raction, satisfaction, and
retention. These might include the number of new customers and the percentage
of repeat customers. These measures provide insight to the key questions “How
do customers see us?
Financial and Market Measures
Financial measures of performance relate to business profitability. Examples
include financial ratios such as return on asset, return on equity, return on
investment, other common financial measures include, stock price. Such
measures help answer the key question “How do we look to shareholders?” such
measures have long been of interest to senior management and investors.
Financial measures are usually expressed in and firm's annual report to
shareholders. To provide context, such measures should be objective and
meaningful to articulate the firm's past performance.
According to Amah (2014) profitability has been identified as one of the measures
of business performance by a number of writers. Profitability reflects the overall
performance of an organization. It is therefore an important parameter for
business managers as it can show them how well they are performing. Companies
are evaluated by their level of profitability. Increasing profitability therefore is one
of the most important tasks for business managers. It is for this reason that they are
constantly looking for ways to change their businesses and consequently increase
profitability and hence the adoption of policies such as the use of strategies such as
organizational culture which have the ultimate goal of increasing bank
profitability by reducing losses through loan default.
Product or Service Measures
Product or service performance measure includes effectiveness, level of
innovation as well as production and supply chain flexibility. These measures
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Environmental Factors and Entrepreneurship Development
help answer the key question “what must we excel at? Examples include the time
it takes to manufacture the organization good or deliver a service, the time it takes
to create a new product and bring it to market etc.
Human Resources Measures
Human resources measures relate to the future, such measures provide insight to
tell the organization, “Can we continue to improve and create value? Human
resource measures focus on innovation and proceed with an understanding that
strategies change overtime. Consequently, developing new ways to add value
will be needed as the organization continues to adapt to an evolving environment.
Organizational Culture and Organizational Performance
There exists a consensus among scholars that organizational culture and
organizational performance are related (Moshen et al., 2020). Kamau and
Wanyoke (2019) opined that innovative culture has a significant and beneficial
effect on the employee performance. This is because culture helps to build the
organisation (Schein, 2004).
The performance literature emphasizes that the performance management
system has to fit the organization's culture and users' priorities; performance
measurement represents an analysis process of evaluating how well
organizations are managed and how well the value of customers and other
stakeholders is delivered (He, Zhenggang, Chen, Iru & Guo, 2017 as cited in
Striteska & Sein, 2021). Organizational culture moderates performance by
espousing an organizational climate where employees' cultivate relationships
and use resources to enhance the objectives of the organization, it also helps
management to mobilize resources and assess organizational performance
through cost-effective service delivery (Chatman & O'Relly, 2016 as cited in
Striteska & Sein, 2021, p.4). The performance of employees' in every organisation
is evaluated periodically based on standards which are set by the management
(Moshen et al., 2020). “Leaders who are concerned about organizational renewal
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Environmental Factors and Entrepreneurship Development
will seek to foster organizational cultures that are hospitable and conducive to
creativity, problem solving, risk taking, and experimentation” (Bass & Avilo,
1993, p. 115). According to Mohammed (2017), organizational culture is an active
mechanism for regulating employee behavior. Also, “Scientific research claims
that cultural characteristics are not prone to copy and consequently, it can be the
foundation of organization sustainability” (Moshen et al., 2020, p. 882).
Edgar Schein Model of Organizational Culture
Edgar Schein discussed the direct and indirect mechanism within the
organizations. The organizational culture model is directly influenced by direct
mechanism that includes the behavior, status of the staffs, opinions among others.
Indirect mechanism indirectly influences the organizational culture: this includes
the mission and vision of a company, rules and regulations, corporate identity,
rituals and design. Edgar Schein divided organizational culture into three
different levels, these levels indicate the extent of visibility of these levels of
culture (Schein, 2004).
Artifact
This is the first level of culture discussed here and they are detectable features in
the organization such as logos, corporate clothing, structures, processes, and
architecture. This marks the surface of the organization and is visible to all
stakeholders. It includes all the phenomena that one sees, hears, and feels when
one encounters a new group with an unfamiliar culture (Schein, 2004).
Espoused values
These concerns set standards, value and code of conduct. This guides how the
organization expresses strategies, objectives and philosophies and how the same
are made public. “If the manager convinces the group to act on her belief, and if
the solution works, and if the group has a shared perception of that success, then
the perceived value that advertising is good gradually becomes transformed: first
into a shared value or belief, and ultimately into a shared assumption (if actions
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Environmental Factors and Entrepreneurship Development
based on it continue to be successful). If this transformation process occurs, group
members will tend to forget that originally, they were not sure and that the
proposed course of action was at an earlier time just a proposal to be debated and
confronted” (Schein, 2004, p.28).
Basic Assumptions
This is the last level of culture discussed by Edgar; these are the assumptions that
are rooted in the organizational culture and are experienced as self-evident and
unconscious behavior. “The power of culture comes about through the fact that
the assumptions are shared and, therefore, mutually reinforced (Schein, 2004,
p.35).
Empirical review
Adebayo, Worlu, Moses and Ogunnaike (2020) conducted a study on integrated
organizational cultures for sustainable environmental performance in the
Nigeria. The study adopted survey design. The population of the study is
consisted of 2045 employees from which a sample size of 480 employees were
selected. Primary data was collected with the aid of questionnaire, while
secondary data was collected from extant literature. A total number of 358 copies
were retrieved which accounted for 74.6 per cent response rate. The empirical
analysis was carried out using variance-based structural equation modelling with
partial least squares. The findings indicated that there is a significant level of
influence of organizational culture on environmental performance.
Paschal and Nizam (2016) examined the effect of organizational culture on
employees' performance. The study was descriptive in nature. Survey research
method was adopted in the study. 150 employees' selected through convenience
sample participated in the study. The study found that organizational culture
such as ritual, value and heroes has a huge and significant impact on employees'
performance.
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Environmental Factors and Entrepreneurship Development
Kamau and Wanyoke (2019) investigated the effect of corporate cultures on
organizational performance of Mayfair casino in Nairobi City County in Kenya.
Descriptive survey was adopted in the study, the population of the study was 360
while stratified random sampling method was used to select a sample of 108
employees' that represented 30% of the population. Primary data was collected
through questionnaire and interviews. The result indicated that satisfaction,
productiveness and effectiveness are vital to the organizational performance and
had a strong positive correlation with corporate culture. It was recommended that
for organizational performance to improve, corporate cultures should be
supportive and compatible with intended strategies and day to day running of
activities of employees'.
From the empirical review, it could be deduced that there is consensus among the
authors that organizational culture is an important factor that influence
performance in the corporate world.
Methodology
The population of this study was made up of 12, 000 employees of Guaranty Trust
Bank Plc. A sample size of 387 was determined with the use of Taro Yamane
formula. Hence, 387 respondents were drawn from the total population through
purposive sampling technique. Primary data was obtained with the aid of
questionnaire while secondary data from relevant journals and textbooks were
reviewed. The research instrument recorded a 50.39 per cent response rate 195
Correlation test on Statistical Package for the Social Sciences (SPSS) was used to
test the hypotheses raised in the study.
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Environmental Factors and Entrepreneurship Development
Results and Discussion
Hypothesis one
H01: There is no significant relationship between observable artifact and customer
focused performance in Guaranty Trust Bank plc.
Correlation
Market risk Pearson
Market risk
New venture creation
1
.885
Correlation 1 .885**
.000
Sig. (2 tailed) N
195
195
New venture creation
885
1
Pearson Correlation 1
.000
195
Sig. (2 tailed) N
195
Source: Correlation is significant at the 0.05 level (2-tailed)
The table above indicate a value of 0.885 which is greater than 0.05 (r = .885, p = 0)
between observable artifact and customer focused performance. This indicated
that there is significant relationship between observable artifact and customer
focused performance in Guaranty Trust Bank plc.
Hypothesis Two
H02: There is no significant relationship between espoused value and profitability
in Guaranty Trust Bank plc.
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Environmental Factors and Entrepreneurship Development
Correlations
Espoused value
Espoused value
Profitability
1
.972**
Pearson Correlation 1
.000
Sig(tailed 2) N
195
195
Profitability Pearson
972**
1
Correlation Sig. (2
.000
195
tailed) N
195
Source: Correlation is significant at the 0.05 level (2-tailed).
The table above indicate a value of 0.972 which is greater than 0.05 (r = .972, p = 0)
between espoused value and profitability. This indicated that there is significant
relationship between espoused value and profitability in Guaranty Trust Bank
plc.
Hypothesis Three
H03: There is no significant relationship between basic assumptions and market
performance in Guaranty Trust Bank plc.
Correlations
Basic assumptions
Market performance
basic assumptions
1
.812**
Pearson Correlation
195
000
Sig (2 tailed) N
195
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Environmental Factors and Entrepreneurship Development
market performance
812**
1
Pearson Correlation.
.000
195
Sig. (2 tailed)
195
Source: Correlation is significant at the 0.05 level (2-tailed).
The table above indicate a value of 0.812 which is greater than 0.05 (r = .812, p = 0)
between basic assumptions and market performance. There is significant
relationship between basic assumptions and market performance in Guaranty
Trust Bank plc.
Discussion of Findings
The result of the correlation test for hypothesis one (r = .885, p = 0) implies that
observable artifact had an 88.5 per cent effect on customer focused performance;
for hypothesis two (r = .972, p = 0) implies that espoused value had a 97.2 per cent
effect on profitability; while for hypothesis three (r = .812, p = 0) implies that basic
assumption has an 81.2 per cent effect on market performance. From the
hypotheses tested, the study revealed a strong positive relationship between the
tested measures of organizational culture- observable artifact, espoused value,
and basic assumptions and business performance statistically significant at 0.05
level of significance. And as such it is evident that organizational culture has a
significant effect on business performance. The findings are in agreement with
other studies (Adebayo et al., 2020; Kamau & Wanyoke, 2016; Paschal & Nizam,
2016).
Conclusion and Recommendations
The result indicated that there is significant relationship between the identified
measures of organizational culture (observable artifact, espoused value and basic
assumptions) and the identified measures of business performance (customer
focused performance, profitability and market performance) in Guaranty trust
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Environmental Factors and Entrepreneurship Development
bank. Hence, the findings indicated that there is significant statistical relationship
between organizational culture and business performance in Guaranty Trust
Bank Plc.
It was concluded that organizational culture is a very significant aspect of
maintaining organizational discipline and it leads to the achievement of corporate
objectives.
It was recommended that the management of Guaranty Trust Bank plc. should
ensure that more a ention is dedicated to the various aspects of organizational
culture that helps the organisation to stand out among its various competitors.
Also, the management need to take greater steps towards making sure that
a itudes and behavior of its employees are in line with the cultural tenets of the
organisation as this would help to foster and organizational climate of teamwork
for achieving competitive advantage.
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Environmental Factors and Entrepreneurship Development
References
Adebayo, O. P., Worlu, R. E., Mojes, C. L., & Ogunnaike, O. O. (2020). An
integrated organizational culture for sustainable environmental
performance in Nigeria context. Sustainability, 12 (8323), 1-15.
Amah, E. (2014). Corporate culture and organizational effectiveness. Ibadan, Nigeria:
Ibadan University Press.
Bass, B. M. (1991). Stogdill and Bass handbook of leadership. New York, NY: Free
Press.
Bass, B. M., & Avolio, B. J. (1993). Transformational leadership and organizational
culture. Public Administration Quarterly, 17(1), 112 -117.
Indiya, G. D., Mise, J., Obura, J., & Ojera, P. (2021). Moderating effect of
organisational culture on the relationship between quality management
system adoption and performance of public universities in Kenya. African
Journal of Business Management, 15(2), 70-78.
Kamau, P. M., & Wanyoke, R. W. (2019). Corporate culture and Organizational
performance: A case of Mayfair Casino, Nairobi City Country, Kenya.
Global Journal Commerce and management perspective, 8(1), 8-17.
Mabai, Z., & Hove, G. (2020). Factors affecting organisational performance: A case
of human se lement department in South Africa. Open Journal of Business
and Management, 8, 2671-2686.
Mohammed, J. I. (2017). An assessment of the impact of organizational culture on
employee performance. International journal of Development and
Management Review, 12(1), 178-183.
Mohson, A., Neyazi, N., & Ebtekar, S., (2020). The impact of organizational
culture on employee performance. An overview. International Journal of
management, 11(8), 879-888.
Paschal, A., O., & Nizam, I., (2016). Effect of organizational culture on employee
performance: case of Singapore Telecommunication. International Journal of
Accounting & business Management, 4(1), 19-26.
Robbins, S. P., & Coulter, M. (2013). Management (11th ed.). Boston, MA: Pearson.
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Environmental Factors and Entrepreneurship Development
Sanders, J. L., & Linderman, K. (2014). Process management, innovation and
efficiency performance: The moderating effect of competitive intensity.
Business Process Management Journal, 20(2), 335-358.
Schein, E. H. (2004). Organisational culture and leadership (3rd ed.). San Francisco,
CA: Jossey-Bass.
Striteska, M. K., & Sein, Y. Y., (2021). Performance Driven Culture in the public
sector. The case of Nordic Countries. Administrative science, 11(4), 1-12.
Yildirim, N., & Birinci, S. (2013). Impact of organisational culture and leadership
on business performance. Procedi – Social and Behavior Sciences, 75, 71-82.
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SUSTAINABILITY OF SMALL AND
MEDIUM SCALE ENTERPRISES IN
NIGERIA: THE ROLE OF GOVERNMENT
POLICIES
CHAPTER
5
ADEJUWON Joshua Adewale & OYEWO Victoria Adebola
Abstract
The emergence of small and medium scale enterprises (SMEs) is a major catalyst
and a key success factor for the development, growth and sustenance of the
Nigerian economy, especially in the creation of employment opportunities and
contribution to GDP. Ninety nine percent of businesses in Nigeria are said to be
SMEs. Their sustainability is however highly dependent on several factors, such
as the existence and workability of government policy. The study reviews the
relationship between government policies and the sustainability of small and
medium enterprises (SMEs) in Nigeria. The study shows that government policy
has a major impact on the establishment, operations, survival and sustainability of
SMEs. The study offers some relevant recommendations to policy makers,
entrepreneurs, and SME managers to ensure the appropriate scheme to improve
the SME sector in Nigeria.
Word Count:132
Keywords: Government policy, SMEs, & Sustainability
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Environmental Factors and Entrepreneurship Development
Introduction
Small and medium enterprises (SMEs) are key economic sector in both developed
and developing nations. Most firms globally are SMES which contributes
significantly to the economy1 and are viable drivers of sustainable development.2
Historically, SMEs as tools of economic growth were evident in the 19th century in
Europe, when the economy was driven by co age industries.3 While there was an
evolution to mass production of goods and services during the industrial
revolution, this was destabilized by the twin oil shocks, which later led to a reappraisal of the importance of the SMEs in global economy.3
SMEs have been stressed as capable of helping in bringing about positive
economic turn around and complementing the effort of the existing medium and
large scales industries.4 They are invaluable in generating both skilled and semiskilled employment opportunities. SMEs are the chief provider of job
opportunities for the legal age of the Nigerian population.5 The recognition of the
importance of the roles of SMEs as catalyst and engine of growth has prompted
the increased a ention and specific education on the method and approach to
build and sustain a viable enterprise.6 The author noted that such economic
contributions are obvious in the mobilization of idle financial resources, the
conservation of foreign exchange, utilization of local raw materials, specialist
suppliers to large companies, adding varieties and choice for the consumers,
checking the monopolistic tendency power, providing a source or innovation,
breeding ground for new industries and above all employment creation.
SMEs promote industrial employment through the utilization of local resources
production of intermediate goods and the transfer/transformation of rural
technology. In most major economies, the critical role of SMEs is recognized and
special agencies of government are created to provide support for SMEs. The
funding requirement of SMEs is also given special consideration by the formal
funding institutions, Banks, micro-credits agencies, venture capital and the nonformal funding agencies like the donors and specialized NGOs.6
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Environmental Factors and Entrepreneurship Development
Further, the performance and importance of SMEs going forward are bound to be
even bigger and more immanent with measurable impacts on the rising world
commercialism order.7 Hence, there is a need for their sustainability. According to
Sevrani & Bahiti8, SMEs cannot compete ephemerally but rather, they need to
compete on the basis of cognition and the value added. Therefore, the
development of sound good government policy and appropriation of existing
ones for SMEs is an indispensable component of the growth strategy of most
economies and holds particular significance.
The Nigerian government has shown some interest in the development and
promotion of SMEs. The factors that have triggered this include rising concern
over low employment elasticity of modern large-scale production which has
failed to accommodate a considerable proportion of the labour force; widespread
recognition of the unequal distribution of economic growths which is blamed on
the use of large scale, capital-intensive techniques; and the fact that
unemployment is not solely responsible for the poverty as many poor individuals
are already employed in various small-scale low productivity activities, thus a
need for increased productivity of SMEs9which can ensure their sustainability.
Statement of Problem
Nigeria has continually ba led with issues of poverty and unemployment.
According to Onwuke and Ifenacho10, these issues are partly caused by the
country's failure to ensure proper implementation of sustainable development
programmes. The lack of recognition for such sustainable development
programmes, especially those that are capable of enhancing SMEs' growth, is
responsible for the current economic state of our country. SMEs face many
challenges such as inadequate or unfavourable government policy, which affect
their performance in Nigeia.5 Thus, SMEs which lacked government support
policies have restricted access to improving their performance.7 Rasak6 noted that
SMEs have been neglected for so long with the brunt of past policy bias in favour
of their large-scale industries counterparts in Nigeria.
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Environmental Factors and Entrepreneurship Development
Of much relevance is the aspect of funding opportunities. The various funding
opportunities available such as from commercial banks, microfinance banks and
informal se ings like cooperative societies and credit unions, are not only limited
in scope but hardly provides the needed fund. Carpenter11 noted that commercial
banks do not really support SMEs due to the perceived risk in lending to SMEs.
Also, interest rates are high and payment duration is usually small. Oduntan12
also affirmed that banks which are supposed to provide adequate credit facilities
in compliance to government policies, usually place exorbitant interest rate
alongside huge collateral securities that scare away investors. Borrowers are
vulnerable to remain perpetually indepted to lenders upon securing the credit
facilities. Therefore, it will be absolutely impossible for SMEs to contribute
meaningfully to economic development in Nigeria due to absence of a businessfriendly environment.
Several efforts have been made by successive governments to promote SMEs
amidst the vast availability of human and materials resources.12 Despite these
efforts, SMEs have not contributed significantly to the development of the
Nigerian economy. This is because the potentials of SMEs have not been fully
harnessed due to poor implementation of the seemingly promising policies and
inadequate financing of the SME sub-sector.
Objective
i.
This study explores the role of government policy on the sustainability of
SMEs in Nigeria.
Literature Review
What are small and medium enterprises (SMEs)?
There is no universal definition of SMEs as the definition(s) rather depends on the
nature of industry/industrial capacity, level of development of the country and
12
this varies overtime. The difference amongst industries could be ascribed to
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Environmental Factors and Entrepreneurship Development
different capital requirements of each business. However, the basic definitional
parameters remain the same. They include number of employees, asset base,
turnover and financial strength among others. In most developed market
economies such as the United States of America (USA), U.K. and Canada the
definition criterion adopted a mixture of annual turnover and employment
levels.12
The European States have their own definition of what are SMEs. For instance, the
traditional definition in Germany puts Small and Medium Scale Enterprises to
two hundred and fifty (250) employees while in Belgium it is one hundred (100)
employees. Recently, the European Union standardized the concept by
categorizing enterprises with less than ten (10) employees as 'micro', those with
fewer than fifty (50) employees as 'small' while those with fewer than two
hundred and fifty (250) employees as 'medium.12 In the USA, any business with
fewer than one hundred (100) employees is classified as 'small' while medium
scale business refers to a business with fewer than five hundred (500) employees.
In Nigeria, the Small and Medium Industries Enterprises Investment Scheme
defines SME as any enterprises with a maximum asset base of ₦200 million
excluding land and working capital and with a number of staff employed not less
than 10 or more than 300. The Centre for Industrial Research and Development
(CIRD) of the Obafemi Awolowo University, Ile-Ife according to Obitayo13
defined a small-scale enterprise as an enterprise with working capital base not
exceeding ₦250,000 and employing on full time basis, 50 workers or less. The
Nigerian Bank for Commerce and Industry (NBCI) defines small-scale business as
one with total capital not exceeding ₦750,000 (excluding cost of land but
including working capital). The Federal Ministry of Industry's guidelines to NBCI
defined a small scale enterprise as one with a total cost not exceeding ₦500,000
(exceeding cost of land but including working capital), according to Oduntan12
The 1992 Review by the National Council on Industrial Standards have defined
Small and Medium Scale Enterprises (SMEs) as enterprises with total cost of
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Environmental Factors and Entrepreneurship Development
(including working capital but excluding cost of land) above 31 million but not
exceeding 50 million with a labour size of between 11 and 100 employees.6 From
the foregoing, it can be said that SMEs are enterprises that have the capacity to
employ at the least 10 employees and has at most ₦750,000 working capital.
It is clear that SMEs are usually small individual or family managed business with
its goods and services being basic. SMEs also tend to lack the organization and
management structure, which characterize large-scale entrepreneur (LSE). Urban
SMEs tend to be more structured than their rural counterpart.6 The brain however
behind every successful SME is entrepreneurship which is an undertaken where
one is involved in the task of creating and managing an enterprise for a purpose
Olagunju (2004). The purpose may be personal, social or developmental.
The Importance of SMEs in Economic Development of a Nation
The role of SMEs in developing countries including Nigeria has been established.
Such industries contribute immensely to economic development of a country in
the following areas: 12
a.
Employment Generation
SMEs have the capacity to generate employment as their mode of
operations is more labour intensive. Their labour-intensive nature is much
higher than that of large enterprises. It has also been observed that more
jobs per unit of investment capital and per unit energy consumed are
created worldwide by SMEs than large scale enterprises. They have
therefore helped in solving the problem of unemployment in many
countries.
b.
Capacity Building
SMEs provide a platform for training of indigenous entrepreneurs, which
drives the wealth creation process at all levels. It has even been established
that SMEs is a nursery of entrepreneurship where individual creativity
and innovation are the driving force.
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Environmental Factors and Entrepreneurship Development
c.
Poverty Alleviation
SMEs play a vital role in reducing poverty and inequality among citizenry.
This is not unconnected to the affordable and relatively low capital
requirement for its establishment. It also engages both skilled and
unskilled workforce thereby creating a means of livelihood. This is an
important role in any economic development process.
d.
Promoting Growth
SMEs by its nature are such that they are involved in primary and
secondary economic activities that depend heavily on locally sourced
materials. As such they achieve high value-added operations which is a key
role in the growth and development of any economy.
e.
Industrial Dispersal
SMEs could easily be located in rural or semi-urban areas because they can
survive on rudimentary industrial infrastructure consequently, they serve
as major facilitators for industrial dispersal and rural development and
thus have the capacity to stem rural-urban conjuration.
f.
Backward and Forward Linkages
Most SMEs output serves as intermediate or semi-processed goods of
large-scale firms. By this, they generate mutual industrial linkages
between local producers of raw materials and large industrial concerns.
g.
Technological/Industrial Development
SMEs have short-term gestation period and high potentials for quick yield
on investment. They provide promising alternatives for countries that
desire the fast option of industrial development. This is possible in most
cases because the technology in use is less complex and can be handled and
manipulated by the entrepreneurs.
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Environmental Factors and Entrepreneurship Development
h.
Technological Acquisition
Small-scale industries provide opportunities for the development of local
skills and technology acquisition through adaptation. The “Aba made
good syndrome” a concept adopted by the part of Nigeria is a clear
manifestation of such technological acquisition and this gives impetus to
rapid development in the economy.
Challenges of SMES in Nigeria
There are various challenges facing SMEs in Nigeria. These include:
a.
Finance
Finance is one of the most important factors needed for the successful
establishment and operations of any enterprise. Without it, no business can
function. Access to financial resources for SMEs is typically hard in
Nigeria. Funding is mostly from personal savings of the entrepreneur
and/or loans from family and friends. Access to financial support from
commercial banks is difficult according to Rasak6 and Oduntan12. The
authors noted that because of high-risk nature common with small
businesses, the banks are reluctant to give the SMEs loans for which they
are not sure of recovering. Where the banks cannot refuse; they give
prohibitive terms that eventually scare away the businessmen. Further,
because majority of SMEs are predominantly sole proprietorship, banks
view them with lots of caution and as such these policies have not been
implemented to the le er. Furthermore, the death of the owner results in
discontinuity of their operations as there are usually no succession plans in
place. This raises the risk of financing such establishments.12
15
Aigboje noted that the financial problems of SMEs in Nigeria may soon
become history if all policies embarked upon by the federal government
yield desired results. The government said that the financial needs of the
small-scale industries shall be met through the following charged with
such responsibilities: five commercial banks; three merchant banks;
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Environmental Factors and Entrepreneurship Development
Nigerian Bank for Commerce and Industry; The Nigeria Agriculture and
Cooperative Bank. However, the mode of establishment of most of these
SMEs hinders the flow of finance. Rasak6 found out that businessmen and
women still prefer other source of finance for their business, rather
depending on government and other government institutions saddled
with such responsibility
This has adversely affected SMEs scale of operations and many countries
have adopted policies aimed at ameliorating their financial conditions
such as liberalization of the financial markets, the establishment of lending
institutions and at times the formulation of policy measures that compel
financial institutions to allocate a certain percentage of their lending
portfolio to SMEs.12
b.
Infrastructure
A very significant problem the SMEs have to contend with is the nature of
infrastructure, particularly in the rural areas where most of SMEs are easily
located. This includes epileptic power supply, lack of adequate water
supply, poor state of road network and unreliable telecommunication
facilities among others. Rasak6 dramatically observed that there are still no
good roads, no pipe borne water in some parts of the state and the country
in general and no adequate electricity. In fact, almost all facilities, which
a ract people to the cities from the rural areas, are lacking. The telephones,
educational facilities, the banks, restaurants, and hotels, recreational
facilities are either not there or grossly inadequate.
c.
Markets
6
SMEs frequently have no knowledge of its market outlets. Not only can the
design and quality of their products be below standard, but also in many
cases they depend almost entirely on a party which places the orders, and
controls the supply of raw materials which are needed for the orders. The
SMEs hardly make use of elementary marketing techniques and many at
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Environmental Factors and Entrepreneurship Development
times they face serious competition from large enterprises or imported
consumer goods from either Western and Eastern Europe or America,
Japan or even China and India. 16
d.
Production
The SMEs usually lack the technically skilled manpower to handle issues of
the business Rasak 2012. In fact, it is unfortunate that the characteristics of
SMEs mostly constitute their problems as they do need specialized
management because of their size. Yet the modern SMEs need skilled
personnel for good organization or production, efficient plan layout,
quality control, e.t.c. if the output of the business must meet the desired
needs of the market.
e.
Raw materials
Many at times raw materials prove a real problem for the SMEs. Shortage
in foreign exchange or import restrictions may constitute the major
constraint. A large enterprise or parastatal may be the root cause of the raw
material shortage. 15
f.
The problem of organization
SMEs are faced with the problem of size and the inherent nature of most the
entrepreneurs to be independent even when they require skilled and
capable hands. With the small size, which mostly results from low level of
capital, their ability to employ be er skills to manage the affairs of the
enterprise becomes a problem. Thus, the routine administrative size of
management, which consumes so much of the small businessman's time, is
6
not properly systematized and delegated.
g.
Technology problem
Most of the small businesses are labour intensive. Some use antiquated
machines and equipment. Some are traditional handicrafts, which depend
mostly on the number of people involved for increase production. While
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Environmental Factors and Entrepreneurship Development
some seem to cherish their size and mode of operation or could it be that
they, the entrepreneurs, were afraid of increase in size, which modern
technology can bring along, and this would call for management expertise
thereby leading to the demise of his independence. 11
h.
Inadequate Information Base
SMEs are characterized with poor record keeping thus they lack necessary
information required for planning and management purposes. This
usually affects the realization of the objectives of the sector. 12
i.
Low Entrepreneurial Skills
The success of SMEs is usually in jeopardy as most entrepreneurs lack the
required entrepreneurial skills and management expertise to survive.
They lack good exposure to management theories/training/practices.
Worst still, they do not keep abreast with modern day techniques. 12
j.
Poor Policy Implementation
The federal government has formulated good policies in the past but
implementation and control has always been the problem. As such SMEs
12
hardly thrives in Nigeria.
Past Initiatives aimed at Promoting SMEs in Nigeria
Previous governments have adopted numerous initiatives to promote the
17
development of SMEs in Nigeria. These programmes according to Olumide and
18
Oni and Daniya include:
Youth Empowerment Scheme (YES): The Youth Employment Scheme popularly
tagged project YES is a registered non-governmental organization initiated by
Hajiya Zainab Kure, the former first lady of Niger State in Nigeria. The scheme
was exclusively designed to empower youths economically. YES is targeted at
19
training youths by way of empowering them economically and socially. It
consists of three programmes namely:
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Environmental Factors and Entrepreneurship Development
i.
Capacity acquisition programme (CAP) which is to enable participants
acquire skills and vocational capabilities
ii.
Mandatory a achment programme (MAP): is to assist graduates who have
completed their mandatory National Youth Service Corps (NYSC) and
who are yet to secure full-time employment to have something doing.
iii.
Credit Delivery Programme (CDP): designed to provide micro-credit
empowerment scheme
YES operated with the objectives of pu ing national employment rate at 3%;
Graduate self-employment rate 50%; non-graduate self-employment rate 60%;
Skill acquisition rate for school leavers 60%; establishment of local resourcesbased college industries per local government area, five (5) units per year; annual
growth rate replacement of traditional methods of production with improved
technology in agricultural sector 15%; and Annual growth rate of development of
relevant technologies 15%.
Operation Feed the Nation (OFN)
This programme was introduced by General Olusegun Obasanjo in 1976
following the chronic inability of the agricultural sector of the economy to satisfy
the food need of the nation. The programme was able to create awareness on self18
reliance in food production among the Nigerian people.
National Directorate of Employment (NDE)
The directorate was established on the 24th October, 1986 and it commenced full
operation in January 1987 with the primary aim of promoting skill acquisition,
self-employment and labour-intensive work scheme. The scheme was targeted at
school leavers, apprentice, graduates etc. The programme was to address four (4)
major areas: small scale enterprises programme, vocational skill development
programme, rural employment promotion programme, and special public work
programme.
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Environmental Factors and Entrepreneurship Development
Funding of the directive between 1987-1989 rose from N70million to
N193.31million. It was reported also to have declined to N176.82 million and to
N100million in 1994 and to N132.90 million in 1995. The NDE operated, among
others, two credit schemes with concessionary interest rates, to assist SMEs. The
Graduate Job Creation Loan Scheme (GJLS) and the mature people scheme (MPS)
projects covered included soap-making, food processing and flour milling.
The National Poverty Eradication Programme (NAPEP)
The regime of President Olusegun Obasanjo in Nigeria (1999-2007) initiated this
programme to eradicate poverty. The first a empt was the Poverty Alleviation
Program (PAP) in the year 2000 and it was immediately replaced the following
year by National Poverty Eradication Program (NAPEP). Before the introduction
of National Poverty Eradication Programme (NAPEP), a temporary Poverty
Alleviation Programme (PAP) in year 2000 was put in place to cushion the effect of
terrible economic hardship faced by large number of unemployed people in the
country. The intent was to provide monthly stipends to 200,000 unemployed
Nigerians across the country so that they could start small businesses and be selfreliant. The programme was structured to benefit three categories of people
namely: unemployed skilled person, unemployed unskilled and semi-skilled
persons, and unskilled and uneducated persons.
The skilled unemployed people were provided with a micro-credit to enable them
established any viable venture. The second category were trained for a period of 312 months or a ached to a relevant core structure and manufacturing companies
for a period of 2 years to enable them acquire additional skills after which they will
be provided with micro credit to enable them start a business of their own. The
third and final category were to either acquire formal education through
Universal Basic Education (UBE) or be provided with permanent menial jobs in
the area of agriculture, road maintenance, tree planting etc.
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Environmental Factors and Entrepreneurship Development
National Economic Reconstruction Fund (NERFUND)
Sequel to the introduction of structural Adjustment programme (SAP) in 1986 and
the subsequent devaluation of currency, coupled with sharp rise in interest rate,
many SMEs found it difficult to obtain loan to finance their investment. To bridge
the gap, the federal government in 1990 set up the National Economic
Reconstruction Fund to provide relatively long-term loans (5-10 years) to small
and medium scale Enterprises at a very low interest rate.
Small and Medium Scale Enterprises Development Agency of Nigeria
(SMEDAN)
The Small and Medium s Enterprises Development Agency of Nigeria was
established by the SMEDAN Act of 2003 to promote the development of Micro,
Small and Medium Scale Enterprises (MSMEs) sector of the Nigerian economy.
The agency position itself as a one-stop shop for MSMEs and Development.
According to SMEDAN news billeting of 15, September, 2011 which was powered
by crafty Syntax, the Agency has industrial development centers in twenty-two
(22) states of the federation which include, Bauchi, Ogun, Lagos, Sokoto, Niger,
Edo, Ondo, Kano, Abuja, Katsina, Enugu, Oyo, Yola, Jos, Ogoja, Port- Harcourt,
Kwara, Kaduna, Osun, Borno, Benue and Imo states respectively.
Small and Medium Industries Equity Investment Scheme (SMIEIS)
SMIEIS is the latest of the schemes designed to tackle the problems of financing
Small and Medium Industries in Nigeria which requires all banks to reserve 10
percent of their pre-tax profit for equity investment in SMEs. SMIEIS which is the
recent development in SMEs financing was initiated by bankers commi ee of
Nigerian Banks and was approved on the 21st December, 1999. According to the
bankers commi ee, SMIEIS was a response to the then president Obasanjo's
concern and policy measure for promoting Small and Medium Scale Enterprises
as a vehicle for rapid industrialization. In ensuring strict compliance with the
objectives of SMIES, it was reported in this Day newspaper that the central Bank of
Nigeria has thrown a debt of about N4.5 billion into accounts of Banks that have
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Environmental Factors and Entrepreneurship Development
failed to invest their funds set aside for SMIEIS. Despite this stringent measure by
the Central Bank, it was also argued that financial institutions have not been able
to address the gap in terms of credit, savings and other financial services required
by Small and Medium Scale Enterprises in Nigeria.
Government Policies on SMEs in Nigeria
The Nigerian government has exhibited great interest in the facilitation of the
development of SMEs, which it has always been recognized as being essential in
the quest to minimize poverty and unemployment in the country.12 Consequently,
the country has established a number of specialized financial institutions, whose
primary objective is to take charge of policy instruments and micro credit,
necessary for enhancing the development of small-scale enterprises. Examples of
such financial institutions include: National Economic and Reconstruction Fund
(NERFUND), Nigeria Agricultural Co-operative and Rural Development Bank
(NACRDB), National Economic and Reconstruction Fund (NERFUND), and the
Microfinance Institutions (MFIs). Furthermore, the government also introduced
some policy-oriented institutions that are tasked with the provision of technical
and financial support for SMEs. Some of these include: Small and Medium
Enterprise Equity Investment Scheme (SMEEIS), National Association of SmallScale Industries (NASSI), Entrepreneurship Development Policy (EDP) and Small
and Medium Enterprise Development Agency (SMEDA). Also, entrepreneurship
is being taken as a course or introduced in secondary schools and at tertiary
institutions; the incorporation of skills acquisition and training programs in the
one-year national youth service is a step of encouraging SMEs.
Thus, throughout its existence as a sovereign country, Nigeria has formulated a
number of policies and frameworks for the facilitation of the performance and
subsequent growth of SMEs. Unfortunately, these policies and frameworks
appear to have been largely implemented poorly. Without sound policy
formulation and implementation, Nigeria will find it extremely difficult to
compete at international level and consequently a ain the enviable level of
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Environmental Factors and Entrepreneurship Development
leading global economies. This is probably one of the major reasons, why SMEs in
the country have failed to have any substantial positive impacts on the sustainable
development of the country.2
Oji20 observed that Nigeria has no explicit policy for the SMEs sector, the closest
been the Small and medium Enterprises development Agency (SMEDAN),
established in 2003 to facilitate the growth of the small and medium enterprises
sector in the country. Also, it was argued that the poor implementation of
government policies concerning SMEs had resulted in confusion and quandary in
business decisions as well as enervates the credence in the government's capacity
to execute conscientiously its programmes.21 The inability of government to
execute favourable fiscal policies and policy inconsistencies has undermined the
development of SMEs in Nigeria.
Akinbogun22 in his study examine the impact of infrastructure and Government
policies on survival of small-scale ceramic industries in South- West of Nigeria,
and found that infrastructural facilities and Government policies have not
encouraged viable small-scale ceramic industries in Nigeria. He noted that while
Nigerian physical environment and people's culture have been favourable
towards the business enterprises, infrastructural facilities and Government
policies have not. This can also be found in the study of Alabi2.
Methodology
In writing this paper, existing literatures relevant to the subject ma er was
reviewed. Using deductive approach, analysis and conclusion were drawn. In all,
twenty-eight articles were reviewed. This gave a deep insight to the study and
enabled to draw reasonable conclusion.
Analysis and Discussion
The Role of Government Policy in the Sustainability of SMEs in Nigeria
In every country, the existing governmental policies have the potential to affect
23
the operation, performance as well as the sustainability of every business. Sathe
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Environmental Factors and Entrepreneurship Development
in particular argues that government regulations and their bureaucratic
procedures can hinder as well as facilitate entrepreneurship activity such as new
business origination. The government can come up with policies that can boost
and support the growth of novel technologies, products, and solutions. On the
other hand, government can hinder SME firm performance when it introduces
policy which can restrict the autonomy, as well as the entrepreneurial freedom of
some variety. Zahra 24 strongly claimed that firm operating in hostile
environments may be reluctant to invest heavily in developing new technologies
because hostility erodes profit margins and reduces the resources available for
innovation. The point, therefore, is that the environment in which the SMEs
operate is as critical to a survival and utmost sustainability.
According to Alabi2 and Eniola7, such impacts can be explained from the technical
point of view. Base on this perspective, the specific governmental policies that can
have direct or indirect effects on businesses include taxation, subsidies, interest
rates and exchange rates. The government taxation policy has been widely
recognized as one factor that can affect the performance of every business. For
instance, the imposition of high taxes on specific imported products will
ultimately encourage local businesses to produce more of such goods. But if the
taxation on raw materials required for local production is high, then the local
entrepreneurs may be discouraging to commence or continue production. Any
increase on corporation tax will have the same impact as rising production cost. In
order to cover such costs, business owners may be forced to increase the price of
their finished products. Other taxes that can have the same effects include: value
added tax (VAT) and environmental taxes. Even though VATs are specifically for
the final consumers, the business may incur considerable costs when
administering the VAT system.
The government's financial policy and banks' interest rates can also have
considerable effects on economy as well as the business environment.25 For
instance, if the bank's lending rate is high, then businesses will be discouraged to
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Environmental Factors and Entrepreneurship Development
borrow from the financial institution. Unfortunately, such trend will result to a
considerable fall in the rate of investments, as companies will not have enough
money for more investments. It is important to note that the government is
primarily responsible for the creation of frameworks and rules that guide
business operations in the country. Such rules are not always constant, and may
change from time to time, thereby forcing entrepreneurs to change how they
operate their businesses. Thus, government policy can have huge effects on the
operations, performance and sustainability of business establishments.
In every country, the government's contribution to the nation's economy remains
the most essential aspect of its economic policy. After the Second World War,
several governments of the world became increasingly involved in the economy,
through the establishment of state-run industries. Many of these industries exist
in form of public corporations. But the 1999 saw an era of massive privatization, as
many private investors took over the government owned corporations. Nigeria is
not left out in this trend. However, these private acquisitions make the business
environment to become even more competitive.25
The interest rate is another prominent aspect of economic policy that depends
largely on the government's specifications. 26 In Nigeria, this responsibility is
overseen by the Monetary Policy Commi ee, which has monthly meeting with
the primary objective of determining the exact level of interest to adopt in the
country's economy. Unarguably, whatever decision they take will be felt instantly
by entrepreneurs that operate in the country. For example, any increment of
interest rates will result to a complementary rise in the costs of doing business. It
can also have considerable negative impacts on the consumers' purchasing
power, thereby triggering massive fall in the volume of business sales.
The government's spending policy is another factor that can have significant
27
impact on business operations. Generally, increased governmental spending on
a specific sector will ultimately trigger more business activities in such sector, as
enterprises that supply inputs in such sector will experience a substantial increase
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Environmental Factors and Entrepreneurship Development
in their income. Furthermore, the provision of subsidies for some business activity
can also trigger more economic activity in a given sector. Typical examples
include introduction of tax holiday, provision of petroleum subsidy, removal of
excise duties etc.
According to Dandago and Usman28, numerous propositions have come out of the
literature and conscious a empts are still needed on the role of governments,
through its series of economic policies poignant competition within the market to
sustain a climate that is conducive to successful and profitable operations of SMEs
These propositions embody the government decision to consider concrete actions
to bridle predatory pricing, bootlegging and importation of low-cost foreign
products; corruption reduction practices; providing social justice; providing
market information; infrastructure enhancements; providing training for SMEs
and inspiring personal investment. 2 Government can behave an entrepreneurial
role to have an effect on the cosmos of a maintainable market component.
Conclusion and Recommendations
Sequel to reviewed literatures with suspect to the subject ma er of this discourse,
SMEs is recognized as a tool of socio-economic growth development in Nigeria.
They create employment, enhance capacity building for manpower and skills
development, promote growth, reduce poverty, and facilitate industrial
development among others. It is also evident that government policies play vital
role in the establishment, operations, performance and utmost sustainability of
SMEs through the creation of friendly business environment, provision of
enabling infrastructure such as electricity and roads, and enacting favourable
policies.
It is recommendable for Nigerian government to enact and implement laws,
regulations and policies that will link institutional development to
entrepreneurial growth and survival. Furthermore, the government should also
create a business environment that is highly conducive to owners of SMEs. Such
approach will help to boost their rate of survival. Also, the various levels of
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Environmental Factors and Entrepreneurship Development
government in the country should embark on the massive infrastructural
development. Such projects should concentrate on power generation, power
distribution, security and good transport network. All these strategies will not
only help to enhance the economic development of Nigeria but also ensures the
sustainability of SMEs.
SME development does not take place in a void. According to the Organization for
Economic Co-operation and Development, if the culture of Government,
education, regulatory authorities, banks, the professions and the large corporate
sector lacks empathy with SMEs, then it will be unmanageable for the sector to
survive and develop. The stakeholder environment must, therefore, be as
entrepreneurial as the SME sector itself.
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Environmental Factors and Entrepreneurship Development
Endnotes
1. J. Wiklund and D. Shepherd, “Entrepreneurial orientation and small
business performance: a configurational approach.” Journal of Business Venturing,
20(1), (2005), 71–91. doi: 10.1016/j.jbusvent.2004.01.001
2. F. A. Alabi, J. O. David and O. C. Aderinto, “The impact of government
policies on business growth of SMEs in southwestern Nigeria”, International
Journal of Management Studies and Social Science Research, 1: (2019) 1-14
3. V.C. Onwukwe, The Socio-psychological effects of poverty on rural families in
Orodo town. Research dissertation submi ed to Department of Sociology, Imo
State University Owerri. (2002)
4. L. Osuagwu, Small Business and Entrepreneurship Management: Surulere,
Lagos: Grey Resources Limited, (2001).
5. Bobou in Oduntan, Kemi Olalekan, “The role of small and medium
enterprises in economic development: The Nigerian experience” International
Conference on Arts, Economics and Manageemnt March 22-23, Dubai (UAE) (2014) 75
– 78
6. Bamidele Rasak, Small and Medium Scale Enterprises (SMEs): A Panacea
for Economic Growth in Nigeria. Journal of Management and Corporate Governance.
4:6, (2012), 83-98.
7. Anthony Abiodun Eniola and Harry Entebang, “Government policy and
performance of small and medium business management”, International Journal of
Academic Research in Business and Social Sciences, 5(2): (2015) 237 - 248
8. K. Sevrani and R. Bahiti (2008). ICT in Small and Medium Enterprises.
9. D. B. Ekpenyong and M. O. Nyong, “Small and Medium scale Enterprise in
Nigeria”. AERC research paper 16. Africa economic research consortium, Nairobi.
(1992).
10. Onwuke and Ifeanacho in Alabi, F. A., David, J. O. & Aderinto, O. C., “The
impact of government policies on business growth of SMEs in southwestern
Nigeria”, International Journal of Management Studies and Social Science Research, 1:
(2011) 1-14
11. C. Carpenter, Small and Medium Scale Enterprises (SMEs) finance in Nigeria:
106
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on “Making Small Business Finance Profitable in Nigeria” A paper presented on
SMEs, held at Institute of Bankers, Lagos. (2006).
12. Kemi Olalekan Oduntan, “The role of small and medium enterprises in
economic development: The Nigerian experience” International Conference on Arts,
Economics and Management, Dubai (UAE), (2014), 75-78.
13. Obitayo 1991 in Bamidele Rasak, Small and Medium Scale Enterprises
(SMEs): A Panacea for Economic Growth in Nigeria. Journal of Management and
Corporate Governance, 4:6 (2012), 83-98.
14. Olagunju in Oduntan, Kemi Olalekan, “The role of small and medium
enterprises in economic development: The Nigerian experience” International
Conference on Arts, Economics and Management March 22-23, Dubai (UAE), (2004) 75
– 78
15. I. Aigboje, Success Digest Extra, Tues, June 6, (2006) 10.
16. L. Osuagwu, Small Business and Entrepreneurship Management: Surulere,
Lagos: Grey Resources Limited, (2001).
17. O. A. Olumide, “SMEs and Critical Examination of the SMEs. Small and
Medium Enterprises Development and SMIEs: Effective Implementation
Strategies.” The CIBN Press Limited, Yaba, Lagos. 2004.
18. Emmanuel O. Oni & A. A. Daniya, 'Development of small and medium
scale enterprises: the role of government and other financial institutions' Arabian
Journal of Business and Mangement Review (OMAN Chapter),1.7: (2012) 16 - 29
19. J. E. Ohize and J. M. Adamu, “A case study of youth empowerment scheme
of Niger State.” 2009.
20. K. O. Oji, “Transformation of Micro Finance Schemes from Subsistence
Living to Small Scale Enterprises in Nigeria: Analyses of Policies and Integration
of Science and Technology into the Client activities.” Nairobi: United Nations
Educational, Scientific and cultural Organizations (UNESCO), (2006).
21. O. O. Omoruyi, and B. A. Okonofua, “Co age Industries: A Tool for Rural
Development and Poverty Reduction in Nigeria.” Benin Journal of Social Sciences,
13(1), (2005), 13-26.
22. T. L. Akinbogun, “The Impact of Nigerian Business Environment on the
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Survival of Small- Scale Ceramic Industries: Case Study,” South-Western Nigeria.
Journal of Asian and African Studies, 43(6), (2008), 663–679. doi:
10.1177/0021909608096659
23. V. Sathe, Corporate entrepreneurship: Top manageers and new business creation.
Cambridge: Cambridge university press, (2006).
24. S. A. Zahra, “Technology strategy and financial performance: Examining
the moderating role of the firm's competitive environment.” Journal of Business
Venturing, 11(3), (1996), 189-219. doi: 10.1016/0883-9026(96)00001-8
25. C. E. E. Okojie, “Policy Space for Capital Control and Macroeconomic
Stability: Lessons from Emerging Economies.” Economic and Financial Review,
51(4), (2013).
26. J. A. Ocampo and R. Vos, “Policy Space and the changing paradigm in
conducting macroeconomic policies in developing countries‖,” BIS Paper 136,
Initiative for Policy Dialogue at Columbia University, (2008).
27. J. Wallace, Small Enterprise Development in Africa: Lessons from Success.
Marshall University, (2000).
28. I. K. Dandago and Y. A. Usman, Assessment of Government Industrialisation
Policies on Promoting the Growth of Small-Scale Industries in Nigeria. Paper presented
at the Ben- Africa Conference Zanzibar, Tanzania, (2011).
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CHAPTER
6
ROLE OF ENTREPRENEURSHIP IN
ACHIEVING ECONOMIC
GROWTH IN NIGERIA
AJAYI Olawale Azeez & OLALEYE John Olatunde
Abstract
This study investigated the role of entrepreneurship in achieving economic
growth in Nigeria, in five selected Local Government Areas (LGAs) in Lagos State,
Nigeria. The study adopted the survey research design of the ex post facto type.
The population of the study was 250 entrepreneurs in Ikeja, Shomolu, Mushin,
Surulere and Oshodi-Isolo LGAs in Lagos State. The sample size was 152 using
Krejcie and Morgan sampling method. The study used frequency and simple
percentage to analyse the demographic characteristics of the respondents and the
research questions. The hypotheses were tested with chi-square method at 5%
significance level. A self-designed questionnaire was used to gather additional
information analyzed in simple percentages. The study found entrepreneurship
can play a significant role in achieving economic growth for the country to
overcome her economic crisis. Entrepreneurship can generate employment,
innovation, increase production, and diversify the economy source of revenue
while fostering the development of small and medium enterprises in Nigeria. This
study proposed there should be proper policy coordination and stability,
provision of necessary infrastructure, and reforms in the educational curriculum
to orientate people to be self-reliant. The federal government should provide
enabling environment conducive for the smooth operation of both indigenous
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Environmental Factors and Entrepreneurship Development
entrepreneurs and foreign investors in order to boost the economy, reduced
unemployment and ravaging level of poverty in Nigeria.
Key Words: Development, economy, entrepreneurship, government,
innovation, employment
Word Count: 217
1. Introduction
1.1
Background of the Study
Entrepreneurship is an activity that concerns the exploration, assessment, and
usage of opportunities to present new commodities, methods, process, and
resources via unestablished endeavour 1,2,3. Entrepreneurship is defined as the act
of beginning new organisations or renewing developed organisations, especially
new businesses generally in response to unique opportunities 4. The business
dictionary characterised it as the capability and eagerness to advance, coordinate
and deal with a business operation alongside any of its danger keeping in mind
the end goal to make a benefit. The definition of entrepreneurship should have six
main components: innovation, opportunity recognition, risk management,
action, use of resources and added value 5. He defines an entrepreneur as an
instinctive, clever, industrious performing artist who can perceive and create
dangerous operation opportunities with potential for development, and who
increases the value of what as of now exists by se ing up exercises that include a
rare utilisation of assets 5.
Entrepreneurship is an act of identifying and exploiting opportunities. A
perspective viewed as a compelling means not just of ba ling unemployment,
poverty and under-employment in the developing countries, but also as a
technique for fast economic advancement in both developed and developing
countries 6. Entrepreneurs is characterized as an individual misuse advertise
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Environmental Factors and Entrepreneurship Development
opportunity through specialised as well as hierarchical development. These
illustrations present an entrepreneur as somebody who exhibits initiative and
innovative reasoning, can coordinate social and monetary components to turn
assets and situations to beneficial use and acknowledges risk and
disappointment. Entrepreneurs search for a way to create value, by creating,
identifying and exploiting innovative ideas, procedures or markets.
Entrepreneurial activity is an essential indicator and a key component in
economic growth. Hence, it has a significant role to play in employment
generation, innovation, increasing sales, and diversification of the economy and
reduction of unemployment 7.
Nigeria has the sizeable human capacity with an estimated population of 195
million. Seventy percent of this population are in youth demography. This
growing youth population urgently needs empowerment system to engage the
abundant human resource. There is a wide-spread opinion that micro, small and
medium enterprises (MSMEs) also known as small business or start-ups have the
propensity to drive the Nigeria economy, while data revealed that there is more
than seventeen million macro-SMEs engaging up to thirty million Nigerians.
MSMEs account for over eighty percent of enterprises that employ about seventyfive percent of Nigeria's total workforce. Therefore, it is necessary to formulate an
efficient implementation of SMEs support policies that will increase
entrepreneurial activities and create more job opportunities 8. Furthermore, the
2012 Global Entrepreneurship Monitor (GEM) has empirically identified Nigeria
as one of the most entrepreneurial countries in the world.
The investigation demonstrated that thirty-five out of each hundred Nigerians
(over a third) is into entrepreneurial activities. Therefore, it is imperative not to
evaluate the principles of entrepreneurship alone but also to assess the practice
and its role in fostering economic growth and development during the economic
crisis.
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Environmental Factors and Entrepreneurship Development
1.2
Statement of the Problem
Although there are quite a lot of researchers and studies on the link between
entrepreneurship and economic growth, there is still the need to assess the case of
the Nigerian economy. Notably, at a period the country is seeking alternative
sources of economic revenue to come out of an economic recession. The country's
GDP indicated a negative 1.7 percent and 2.06 percent in the first and second
quarter of 2016. This economic crisis was analysed to have been caused mainly by
dependence on crude oil for revenue, so when the global crude oil price fell it
affected the country's income 9. These statements prompt the question of what the
contributions and challenges of business start-ups in the nation are and can focus
on entrepreneurship lead to economic growth. Against this background, the
primary objective of this study is to examine the role of entrepreneurship as the
driver of economic growth through employment generation, the creation of
added value, increasing gross domestic products, more export activities, and so
on.
1.3
Aim and Objectives of the Study
The aim of this study is to investigate the role of entrepreneurship in achieving
economic growth in five selected Local Government Areas (LGAs) in Lagos State.
This research therefore looks at the specific objectives which were to:
i.
examine the influence of access to finance on job creation within the study
areas.
ii.
determine the impact of labour market regulation on unemployment in the
study areas.
iii.
investigate the impact of SME tax rates on gross domestic product (GDP) in
the study areas.
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Environmental Factors and Entrepreneurship Development
1.4
Research Questions
The under listed questions were raised so that the study could be anchored upon
it.
i.
How does access to finance influence job creation in the study areas?
ii.
How does labour market regulation influence unemployment in the study
areas?
iii.
How does SME tax rates influence gross domestic product (GDP) in the
study areas?
1.5
Hypotheses
Based on the variables of this study, these null hypotheses were formulated for the
research work.
H₀₁: There is no significant relationship between access to finance and job creation
of selected Local Government Areas in Lagos State.
H₀₂: There is no significant relationship between labour market regulation and
unemployment of selected Local Government Areas in Lagos State.
H₀₃: There is no significant relationship between SME tax rates and GDP of
selected Local Government Areas in Lagos State.
1.6
Significance of the Study
This study examined the role of entrepreneurship in achieving economic growth
in the study areas. The researcher is of the opinion that the findings of this study
will be of use to the government, entrepreneurs, relevant stakeholders and the
public in general in enhancing their understanding of the role of entrepreneurship
in achieving economic growth. This study will further add to knowledge on how
policy-makers can grow the economy through their support on entrepreneurial
development in Lagos State.
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Environmental Factors and Entrepreneurship Development
1.7
Scope of the Study
This study investigated the role of entrepreneurship in achieving economic
growth within Ikeja, Shomolu, Mushin, Surulere and Oshodi-Isolo LGAs in Lagos
State.
1.8 Limitations of the Study
The researcher encountered the following constraints in the course of this work,
data constraint, financial constraint, limited information due to the type of
research work, time constraint and retrieval of questionnaire from the business
owners likewise uncooperative a itudes of some of them due to fear of divulged
information been used against their businesses. This research work is also limited
to the use of secondary data go en from secondary sources, as such if there are
any errors made by those who generated these data; this research work
incorporates such errors.
2. Literature Review
2.1 Conceptual Studies
2.1.1 Concept of Entrepreneurship
Entrepreneurship is a process which involves the effort of an individual or
individuals in identifying viable business opportunities in an environment and
obtaining and managing the resources needed to exploit those opportunities 10.
Entrepreneurship is a focus on the processes involved in the initiation of a new
organization, the behavior of such organization and its performance in terms of
profit made. Entrepreneurship is defined as a catalyst to increase the rate of
economic growth, creating job opportunities as well as reducing the dependence
on the import of manufactured products 11.
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Environmental Factors and Entrepreneurship Development
2.1.2 The Relationship between Entrepreneurship and Economic Growth
Many scholars over the years have a empted to understand the role of
entrepreneurship in economic growth, and many believe that entrepreneurship is
beneficial for economic growth. A rise in the number of entrepreneurs leads to an
increase in economic growth. This impact is a consequence of the robust
articulation of their skills, and even more unequivocally their ability to innovate 12.
There are diverse thoughts and debates on entrepreneurship link to economic
growth, but it is necessary to understand that entrepreneurship brings about
economic growth by combining existing resources with innovative ideas. Adding
value to the commercialisation of inventions create wealthy, new jobs, and
industries. The entrepreneur plays both roles in creating innovations and
encouraging market competition to expand the economy. The concept of
entrepreneurship is multidimensional and mostly ill-defined.
Understanding the role of entrepreneurship in the process of economic growth
will, therefore, require a structure because of the type of intermediate variables
and connections which exist. The best cases of these intermediate variables
include innovation, competition mainly characterised by exit and entry of firms, a
variety of supply and energy and efforts invested by entrepreneurs 12. The three
essential databases that describe the entrepreneurial activity of countries as the
International Labor Organization (ILO) which measures self-employment, the
Global Entrepreneurship Monitor (GEM) which measures start-up rates of new
firms, and the World Bank which measures the registration of new firms revealed
two sets of the result. The first is that there is a lack of clear empirical evidence of
whether entrepreneurship drives economic growth, productivity, or
employment. The second is that there seems to be a U-shaped relationship
between entrepreneurship and a country's stage of economic development, as
measured by GDP per capita 13.
The U-shaped relationship indicates a higher rate of entrepreneurial activity in
low-income countries than in middle-income countries. This result may reflect
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that entrepreneurship is less innovative but rather more necessity motivated in
developing countries. Therefore, higher levels of GDP may associate with more
innovative forms of entrepreneurship 13. Another meaning is that rather than
causality running from entrepreneurship to development, the causality may also
run from development to entrepreneurship. Hence, one can conclude that not all
entrepreneurs drive development as not all entrepreneurs are innovative for it is
the innovative ability of entrepreneurship that ma ers most for development 13.
2.2 Theoretical Framework
There are numerous theories that are relevant to the discourse on the role played
by SMEs to the development of developing countries. To this end, the present
study focuses on the classical and the modern theories. The classical theories are
built on the works of some scholars14,15,16,17,18. The 'classical' theories point to the
advantages of SMEs and argue that SMEs will diminish over time and large
enterprises will eventually predominate in the course of economic development
marked by the increase in income 19. The modern theories are further subdivided
into Schumpeter's theory, Schul theory and Kirzner theory. They advocate that
SMEs have two crucial roles to play: The first is to accelerate economic growth
through the growth of their output contributions to gross domestic product
(GDP), and the second is to reduce poverty through the creation of employment
and diversifying income generation activities which will have effects of their
generated output growth 20.
SMEs also have indirect effects on economic growth and poverty reduction
through their growth linkage effects 19. Output and employment increase in SMEs
to the rest of the economy through three main linkages; production (forward and
backward), investment, and consumption. It is believed that when these linkages
are synergized, the SME sector will contribute grossly to economic growth and
development. SMEs in less developed countries are able to enhance competition
and entrepreneurship and hence have external benefits on economy-wide
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Environmental Factors and Entrepreneurship Development
efficiency, innovation, and aggregate productivity growth 21. They are generally
more productive than large enterprises as they can easily adapt to smaller
business sphere but restricted financial market access, institutional failures and
hostile macroeconomic environment impede SME development. Their operations
are majorly labour intensive and hence the capacity to generate employment
opportunities than large enterprises 22.
2.3 Review of Empirical Studies
Studies have established positive relationship between entrepreneurship
characteristics such as reactiveness, innovativeness, risk-taking and economic
development 12. The thought that business entrepreneurship and economic
growth are quite firmly and positively linked together has indeed advanced since
the early works of historical authors like Schumpeter. A rise in the number of
entrepreneurs leads to an increase in economic growth. This impact is a
consequence of the robust articulation of their skills, and even more
unequivocally their ability to innovate. Schumpeter has previously characterised
this innovative activity, "the application of new solution", by differentiating five
cases. The case of new commodity introduction, a method of production, trading
platform, the source of raw material supply, and industry operation formation
like the creation of monopoly position. Through innovative activity, the
Schumpeterian business person looks to make new profit opportunities. These
opportunities can come about because of efficiency increments, in which case,
their relationship to economic growth shows up unmistakably 12.
However, there are diverse thoughts and debates on entrepreneurship link to
economic growth, but it is necessary to understand that entrepreneurship brings
about economic growth by combining existing resources with innovative ideas.
Adding value to the commercialisation of inventions create wealthy, new jobs,
and industries. The entrepreneur plays both roles in creating innovations and
encouraging market competition to expand the economy. The concept of
entrepreneurship is multidimensional and mostly ill-defined 12. Understanding
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Environmental Factors and Entrepreneurship Development
the role of entrepreneurship in the process of economic growth will, therefore,
require a structure because of the type of intermediate variables and connections
which exist. The best cases of these intermediate variables include innovation,
competition mainly characterised by exit and entry of firms, a variety of supply
and energy and efforts invested by entrepreneurs 12.
Entrepreneurship is the manifest ability and eagerness of an individual or group
to make new economic opportunities and sell them in the market, even with
vulnerability and other obstacles, by making decisions on location and the use of
resources and institutions 23. The three essential databases that describe the
entrepreneurial activity of countries as the International Labor Organization
(ILO) which measures self-employment, the Global Entrepreneurship Monitor
(GEM) which measures start-up rates of new firms, and the World Bank which
measures the registration of new firms revealed two sets of the result. The first is
that there is a lack of clear empirical evidence of whether entrepreneurship drives
economic growth, productivity, or employment. The second is that there seems to
be a U-shaped relationship between entrepreneurship and a country's stage of
economic development, as measured by GDP per capita 13.
The U-shaped relationship indicates a higher rate of entrepreneurial activity in
low-income countries than in middle-income countries. This result may reflect
that entrepreneurship is less innovative but rather more necessity motivated in
developing countries. Therefore, higher levels of GDP may associate with more
innovative forms of entrepreneurship. Another meaning is that rather than
causality running from entrepreneurship to development, the causality may also
run from development to entrepreneurship. Hence, one can conclude that not all
entrepreneurs drive development as not all entrepreneurs are innovative for it is
the innovative ability of entrepreneurship that ma ers most for development 13.
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Environmental Factors and Entrepreneurship Development
2.4
Conceptual Framework
The conceptual framework for this study is built on the theory and literatures
reviewed. The model is broadly divided into two parts: independent and
dependent variables. The independent variable as depicted below which is
entrepreneurship is proxied with access to finance, labour market regulation and
SME tax rates. Also, the dependent variable which is poverty alleviation is
measured with job creation, unemployment, and gross domestic product (GDP).
Conceptual Framework for the Study
Entrepreneurship
Economic Development
Access to finance
Job creation
Labour market
regulation
Unemployment
Gross domestic
product (GDP)
SME tax rates
Source: Field Work by Researcher, 2022
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Environmental Factors and Entrepreneurship Development
3. Methodology
This study adopted survey design. The study focused on 50 respondents from
Ikeja Local Government Area (LGA), 50 respondents from Shomolu LGA, 50
respondents from Mushin LGA, 50 respondents from Surulere LGA, and 50
respondents from Oshodi-Isolo LGA making a total of 250 respondents from five
LGAs in Lagos State. The respondents consist of male and female respondents
who have established business ventures in the areas of study; 165 male which is
66% and 85 female which amounts to 34% of the total respondents.
Sample Size Determination Using Krejcie and Morgan Table
The Table is constructed using the following formula for determining sample
There is no need of using the formula since the table of determining sample size
has all the provisions.
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Environmental Factors and Entrepreneurship Development
Table 1: Table for Determining Sample Size for a Finite Population
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Environmental Factors and Entrepreneurship Development
Using Krejcie and Morgan Table:
Population size is 250
Sample size is 152
3.1
Source of Data Collection
To obtain reliable information that will help the researcher to ensure the
effectiveness of the study in question, data were collected from primary
source through structured questionnaire. The questionnaire was designed
in a structured form to be answered according to the hypotheses and was
restricted with the responses made of strongly agree (SA), agree (A),
strongly disagree (SD) and disagreed (D).
3.2
Description of Research Instrument
The data required to test the hypotheses were collected with the aid of
research instrument. Data were collected mainly through the primary
method and the instrument used for data collection was the questionnaire.
The questionnaire was a structured questionnaire administered by hand to
the respondents. A four-point Likert scale was employed to extract the
data. The respondents were made to indicate in the questionnaire the
extent they agree or disagree to the stated problems.
3.3
Validity and Reliability of the Research Instrument
In this research, the research has chosen to adopt the probability sampling.
All the individuals have the chances of being selected. For this research
work, every individual ma er. Simple random sampling method because
it ensures that the selection process is completely randomised.
The reliability of the instrument was estimated ¹⁰, the instrument yielded
0.725 reliability coefficient. This implies that instrument is both valid and
reliable and it was used in this study.
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Environmental Factors and Entrepreneurship Development
3.4
Method of Data Analysis
Data collected for the study were analysed by the researcher using
frequency counts, mean score. The three research questions were
answered in line with the hypothesis. The data collected were analysed by
using percentage and inferential statistics. The descriptive statistics of
frequency count and percentages was adopted for the analysis of the
research questions while chi-square (χ2) distribution was the statistical tool
used in testing the acceptability or otherwise of the hypothesis posed for
this study.
4.
Results and Discussion of Findings
4.1
Demographic Data Analysis
Table 4.1: Demographic Characteristics of Respondents
Demographic Characteristic
Frequency
Percentage
Analysis of Gender
Male
Female
Total
165
66
85
34
250
100
Analysis of Age
18-21
5
2.0
22-25
13
5.2
26-30
21
8.4
31-35
48
19.2
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Environmental Factors and Entrepreneurship Development
36-39
76
40 and above
30.4
87
34.8
250
100
Ph.D.
1
0.4
M.Sc.
14
5.6
B.Sc.
26
10.4
Total
Analysis of Educational Qualification
HND
47
18.8
OND
77
30.8
SSCE
85
34.0
Total
250
100
Analysis of Religion
Christianity
107
Islam
94
37.6
Others
49
19.6
250
100
Total
42.8
Source: Field Survey, 2022
4.2
Presentation of Data
The following results presented were based on the research questions and
hypotheses raised, which the study has sought to answer as follows:
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Environmental Factors and Entrepreneurship Development
4.2.1
Research Questions
i.
ii.
How does access to finance influence job creation in the study areas?
How does labour market regulation influence unemployment in the study
areas?
How does SME tax rates influence gross domestic product (GDP) in the
study areas?
iii.
4.2.2
Hypotheses
Hypothesis I
H₁: There is significant relationship between access to finance and job creation of
selected Local Government Areas in Lagos State.
H₂: There is no significant relationship between access to finance and job creation
of selected Local Government Areas in Lagos State.
To test this hypothesis, statement used for table 4.2 was used.
Table 4.2: Analysis of the impact of access to finance on job creation within the
study areas.
Description
Strongly Agree
Frequency
Percentage
21
8.4
Agree
103
41.2
Disagree
73
29.2
Strongly Disagree
53
21.2
Total
250
Source: Field Survey, 2022
125
100
Environmental Factors and Entrepreneurship Development
The influence of access to finance on job creation within the study areas was not
effective.
Contingency Table
CELL
O
E
O-E
(O-E)2
(O-E)2
E
C1
21
62.5
-41.5
1722.25
27.56
C2
103
62.5
40.5
1640.25
26.24
C3
73
62.5
10.5
110.25
1.76
C4
53
62.5
-9.5
90.25
1.44
TOTAL
250
χ 2 = 57
Source: Field Survey, 2022
2
Where: χ is Chi-squared, O is each observed (actual) value, E is each expected
value and ∑ stands for summation. Expected value of classes of response level of
significance (α), the degrees of freedom (df) = (number of rows - 1) × (number of
columns - 1) = (r-1) (c -1)
Where: df is the degree of freedom, r is the number of rows, c is the number of
2
2
columns and α is the level of significance. χ calculated = 57. χ tab value at 5% level
of significance
α = 5% = 0.05
The degrees of freedom (df) = (number of rows - 1) × (number of columns - 1)
df = (4−1) × (2−1) = 3×1 = 3
2
χ tab value at 5% level of significance df 3 = 7.82
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Environmental Factors and Entrepreneurship Development
Interpretation
From the analysis above, χ2 calculated value is 57 while χ2 tabulated value is 7.82.
This shows that χ2 calculated of 57 is greater than χ2 tabulated of 7.82 i.e., χ2
calculated (57) > χ2 tabulated of 7.82. Therefore, we accept H1 which states that
there is no significant relationship between access to finance and job creation of
selected Local Government Areas in Lagos State.
Research Question 2: How does labour market regulation influence
unemployment in the study areas?
Hypothesis II
H₁: There is significant relationship between labour market regulation and
unemployment of selected Local Government Areas in Lagos State.
H₂: There is no significant relationship between labour market regulation and
unemployment of selected Local Government Areas in Lagos State.
To test this hypothesis, statement used for table 4.3 was used.
4.3: Analysis of the impact of labour market regulation on unemployment.
Description
Frequency
Percentage
Strongly Agree
13
5.2
Agree
39
15.6
Disagree
127
50.8
71
28.4
Strongly Disagree
Total
250
Source: Field Survey, 2022
127
100
Environmental Factors and Entrepreneurship Development
The impact of labour market regulation on unemployment in the study areas
was not significant.
Contingency Table
CELL
O
E
O-E
(O-E)2
(O-E)2
E
C1
13
62.5
-49.5
2450.25
39.20
C2
39
62.5
-23.5
552.25
8.84
C3
127
62.5
64.5
4160.25
66.56
C4
71
62.5
8.5
72.25
1.16
TOTAL
250
χ 2 = 115.76
Source: Field Survey, 2022
2
χ calculated = 115.76
2
χ tab value at 5% level of significance, α = 5% = 0.05
The degrees of freedom (df) = (number of rows - 1) × (number of columns - 1)
df = (4−1) × (2−1) = 3×1 = 3
2
χ tab value at 5% level of significance df 3 = 7.82
Interpretation
2
2
From the analysis above, χ calculated value is 115.76 while χ tabulated value is
2
2
7.82. This shows that χ calculated of 115.76 is greater than χ tabulated of 7.82 i.e.,
2
2
χ calculated (115.76) > χ tabulated of 7.82. Therefore, we accept H1 which states
that there is no significant relationship between labour market regulation and
unemployment of selected Local Government Areas in Lagos State.
Research Question 3: How does SME tax rates influence gross domestic product
(GDP) in the study areas?
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Environmental Factors and Entrepreneurship Development
Hypothesis III
H₁: There is significant relationship between SME tax rates and GDP of selected
Local Government Areas in Lagos State.
H₂: There is no significant relationship between SME tax rates and GDP of selected
Local Government Areas in Lagos State.
To test this hypothesis, statement used for table 4.4 was used.
Table 4.4: Analysis of the impact of SME tax rates on GDP in the study areas.
Description
Strongly Agree
Frequency
Percentage
37
14.8
114
45.6
Disagree
68
27.2
Strongly Disagree
31
12.4
Agree
Total
250
100
Source: Field Survey, 2022
The impact of SME tax rates on GDP in the study areas was not impressive.
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Environmental Factors and Entrepreneurship Development
Contingency Table
CELL
O
E
O-E
(O-E)2
(O-E)2
E
C1
37
62.5
-25.5
650.25
10.40
C2
114
62.5
51.5
2652.25
42.44
C3
68
62.5
5.5
30.25
0.48
C4
31
62.5
12.4
153.76
2.46
TOTAL
250
χ 2 = 55.78
Source: Field Survey, 2022
2
χ calculated = 55.78
2
χ tab value at 5% level of significance, α = 5% = 0.05
The degrees of freedom (df) = (number of rows - 1) × (number of columns - 1)
df = (4−1) × (2−1) = 3×1 = 3
2
χ tab value at 5% level of significance df 3 = 7.82
Interpretation
2
2
From the analysis above, χ calculated value is 55.78 while χ tabulated value is
2
2
2
7.82. This shows that χ calculated of 55.78 is greater than χ tabulated of 7.82 i.e., χ
2
calculated (55.78) > χ tabulated of 7.82. Therefore, we accept H1 which states that
there is no significant relationship between SME tax rates and GDP of selected
Local Government Areas in Lagos State.
4.3 Discussion of Findings
Table 4.1 shows that one hundred and sixty-five (165) respondents representing
66% of the sample size were male while eighty-five (85) respondents representing
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Environmental Factors and Entrepreneurship Development
34% of the sample size were female. Thus, majority of the respondents were male.
The religion shows that one hundred and seven (107) respondents representing
42.8% of the sample size were Christians while ninety-four (94) respondents
representing 37.6% of the sample size were Muslims, while forty-nine (49)
respondents representing 19.6% were other religious followers. Thus, majority of
the respondents were Christians. The age shows that five (5) respondents
representing 2% of the sample size were within 18-21 age group, thirteen (13)
respondents representing 5.2% of the sample size were within 22-25 age group,
twenty one (21) respondents representing 8.4% of the sample size were within 2630 age group, forty eight (48) respondents representing 19.2% of the sample size
were within 31-35 age group, seventy-six (76) respondents representing 30.4% of
the sample size were within 36-39 age group, while eighty seven (87) respondents
representing 34.8% of the sample size were 40 and above age group. Thus,
majority of the respondents were 40 and above age group.
The academic qualification shows that two (1) respondent representing 0.4% of
the sample size was Ph.D. holder, fourteen (14) respondents representing 5.6% of
the sample size were M.Sc. holders, twenty-six (26) respondents representing
10.4% of the sample size were B.Sc. holders, forty-seven (47) respondents
representing 18.8% of the sample size were HND holders, seventy seven (77)
respondents representing 30.8% of the sample size were OND holders, while
eighty-five (85) respondents representing 34% of the sample size were SSCE
holders. Thus, majority of the respondents were SSCE holders.
Table 4.2, it showed that the influence of access to finance on job creation within
the study areas was not effective.
Table 4.3, it showed that the impact of labour market regulation on
unemployment in the study areas was not significant.
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Environmental Factors and Entrepreneurship Development
Table 4.4, it showed that the impact of SME tax rates on GDP in the study areas was
not impressive.
5.
Conclusion
5.1
Summary of Findings
The below is the summary represented in this study. The result of the findings
investigated the socio-demographic characteristics of the respondents in Ikeja,
Shomolu, Mushin, Surulere and Oshodi-Isolo LGAs in Lagos State. It was
revealed that: age range 40 and above years were more represented in the study;
that SSCE holders were more represented in the study; that Christians were more
represented than the other religions in the study. The result of the findings in the
first research question examined the influence of access to finance on job creation
within the study areas. Table 4.2, it showed that the influence of access to finance
on job creation within the study areas was not effective. The result of the findings
in the second research question determined the impact of labour market
regulation on unemployment in the study areas. Table 4.3, it showed that the
impact of labour market regulation on unemployment in the study areas was not
significant.
The result of the findings in the third research question investigated the impact of
SME tax rates on gross domestic product (GDP) in the study areas. Table 4.4, it
showed that the impact of SME tax rates on GDP in the study areas was not
impressive.
5.2
Conclusion
This study has been an a empt to investigate the role of entrepreneurship in
achieving economic growth: a study of Ikeja, Shomolu, Mushin, Surulere and
Oshodi-Isolo LGAs in Lagos State, having gone through the whole length of data
analysis, hypothesis, testing and discussions. Entrepreneurship development in
Nigeria is perceived as a catalyst to increase the rate of economic growth and
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Environmental Factors and Entrepreneurship Development
create job opportunities. However, if Nigeria wants to reach its full potential in
terms of economic and social development, it cannot afford to ignore the
importance of its indigenous entrepreneurs and their contributions that they
make to the country's economy.
5.3 Recommendations
The following recommendations are made based on the findings of the study:
1.
This paper recommended that the entrepreneurs, governments, investors,
and all relevant stakeholders must determine to make concerted efforts in
order to sustain, promote, and improve on the role of entrepreneurship in
promoting the economic growth of the nation.
2.
The governments in Nigeria should make strenuous effort towards
increasing the funds for financing SMEs in order to enhance economic
growth.
3.
The governments should offer a drastic reduction in tax and lending
interest rate for SMEs to encourage large-scale industrial investor's
interest.
4.
The federal government should provide enabling environment conducive
for the smooth operation of both indigenous entrepreneurs and foreign
investors in order to boost the economy, reduced unemployment and
ravaging level of poverty in Nigeria.
5.
Government should create awareness on the benefits and role of
entrepreneurship development to individual towards poverty alleviation,
economic growth and development.
6.
There should be sound national economic policy in recognition of the vital
contribution of entrepreneurship to national economic development.
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Environmental Factors and Entrepreneurship Development
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World Bank, (2002, 2004).
23
S. Wennekers and R. Thurik, “Linking Entrepreneurship and Economic
Growth,” Small Business Economics 13, (1999): 27–55.
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Environmental Factors and Entrepreneurship Development
CHAPTER
7
IMPACT OF MACROECONOMICS
FLUCTUATION ON THE GROWTH OF SMALL
AND MEDIUM SCALE BUSINESSES IN
NIGERIA
ADEKUNLE Ebenezer Adewunmi & ADEWUMI
Moyosore Akingbade
Abstract
This paper aim at investigating the impact of macroeconomic fluctuation on the
growth of small and medium businesses in Nigeria. Secondary data obtained
from various issues of Central Bank Statistical Bulletin and World Bank data were
used for the analyzing the subject ma er. The data spans from 1990 to 2020. The
dependent variable of this study is growth of SMEs which is proxy by micro credit
divided by GDP. The independent variables are interest rate, exchange rate,
import rate and export rate. Johansen approach to co-integration and Ordinary
Least Square estimation techniques were employed for the study. The results of
this study reveal that in the long run the impact of interest rate, import rate and
exchange rate on growth of SMEs is negative and significant except for interest
rate that is not significantly influencing growth of SMEs. Again, it was found out
that export rate has negative but significant effect on growth of SMEs. Thus, the
researcher recommends that central bank of Nigeria should intervene by selling
foreign exchange to the market to boost supply. This will bring down the price of
the foreign exchange and increase SMEs growth rate.
Word Count:191
Keywords: Co-integration, Growth of SMEs, & Macroeconomic
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Environmental Factors and Entrepreneurship Development
Introduction
It is believed that small and medium businesses have great influence on economic
growth and development especially here in Nigeria, where most of the
manufacturing companies are SMES. This sector of the economy is seen as the
machinery for growth through their contribution to the growth and development
of the economic, creation of employment and so on. As declared by the World
Bank, about 90 percent of businesses in the world are MSMEs. In developing
countries SMEs had contributed to the GDP of the economy about 40 percent in
the past. More recently, SMEDAN/NBS MSME Survey reveals that SMEs in
Nigeria contribute roughly 50 percent to the country's GDP. The survey report
also shows that SMEs provide approximately 80 percent of employment in the
country. However, there exists a fundamental issue or problems, which confront
SMEs in Nigeria. Some of these problems have either been addressed
inadequately or not be addressed at all. Dominantly, persistence of unstable
macroeconomic factors, arising mainly from fiscal, monetary policy excesses and
corruptions of various forms have often suffocated many SMEs in Nigeria.
Macroeconomic fluctuation may hinder so many foreign and local investors
participating in investments opportunity in Nigeria. For instance, fluctuating
interest rate will discourage borrowing thus affecting investment. In like manner,
mutable exchange rate and inflation rate have a negative impact on the growth of
SMEs and on the whole economy at large. Therefore, the effect of macroeconomic
variables fluctuation on the wellbeing of SMEs in Nigeria cannot be
overemphasized. According to Kousar, Rehman and Khaliq (2018) emerging
countries find it difficult to absorb the negative effect of both internal and external
shocks. Furthermore, the developing economy is open to more external shocks
since they are mainly depending on foreign aid, foreign direct investment and
trade integration. Thus, the economic activities are disrupted when there are
sudden shocks from the external environment. Considering all the negative effect
of macroeconomic fluctuation on the performance of SMEs various forms of
research has been conducted relating to SMEs.
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Environmental Factors and Entrepreneurship Development
Ogundele, Awoniyi and Okeya (2020) claim that the effect of macroeconomic
variables on the growth of small and medium scale enterprises in Nigeria is
heterogeneous. They assert that money supply and inflation have positive but
insignificant impact on SMEs growth. Meanwhile, interest rate, exchange rate,
and degree of openness drive the growth of SMEs insignificantly and negatively
in Nigeria. Sanjo and Ibrahim (2017) maintain that exchange rate and interest rate
are insignificant negative determinants of growth of SMEs. Similarly, Okoye and
Nwakoby (2015) confirm that trade openness; exchange rate and interest rate have
negative influence on manufacturing capacity utilization in Nigeria. The prove of
Okoye and Nwakoby (2015) that exchange rate, interest rate have a significant
impact on SMEs performance in Nigeria is disproved by the findings of Ogundele,
Awoniyi and Okeya (2020) who discover that these variables have insignificant
influence on SMEs performance.
In the studies of Loto (2012) and Packer, (2017) inflation has an indirect but
significant effect on SMEs growth. Owolabi (2017) and Okeke et. al (2020) confirm
that interest rate is negatively but significantly related to the growth of SMEs.
Also, the relationship between exchange rate and SMEs growth is inverse but
significant as stated in the findings of Agyei-Ampomaha, Mazouzb and Yin,
(2013), Osoro and Ogeto, (2014), and Zakaria (2013).
However, the results of the findings of Sanjo and Ibrahim (2017) and Ogundele,
Awoniyi and Okeya (2020) reveal that interest rate, inflation rate and exchange
rate have no significant impact on the growth of SMEs. There still exists a
disagreement in previous literature as to the significant nature of macroeconomic
variables on the growth of SMEs particularly in Nigeria. In the light of this, the
researcher is motivated to examine empirically the impact of macroeconomic
fluctuation on the growth of small and medium businesses in Nigeria, with
a ention given to the rate of import and export. This is missing in previous
studies; therefore, this study will contribute to existing studies by adding
variables like rate of import and export to other macroeconomic variables which
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Environmental Factors and Entrepreneurship Development
are exchange rate and interest rate. Also, the duration of this study will include the
pre and post Covid 19 period.
Objective of the Study
The broad objective of this study is to examine the impact of macroeconomic
fluctuation on the growth of small and medium businesses in Nigeria. Thus, the
specify objectives are stated below:
1.
To investigate the influence of export rate on the growth of SMEs in
Nigeria.
2.
To explore the effect of import on the growth of SMEs in Nigeria.
3.
To examine the nature of the relationship between exchange rate and
growth of SMEs in Nigeria.
4.
To analysis the impact of interest rate on the growth of SMEs in Nigeria.
Hypotheses of the Study
The hypotheses of this study are cast in the null form as state below:
1.
H01 – export rate has negative influence on growth of SMEs in Nigeria.
2.
H02 – import rate and growth of SMEs are negatively related in Nigeria.
3.
H03 – exchange rate has negative impact on growth of SMEs in Nigeria.
4.
H04 – interest rate has an inverse relationship with growth of SMEs in
Nigeria.
Literature Review
Defining the phrase small and medium size businesses depend on some criteria.
The definition of small and medium scale businesses different from country to
country. According to Onugu and Uzondu (2015) most countries define small and
medium size businesses using three major characteristics which are number of
employees, net worth of the business and the total turnover or volume of
production of the business.
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Environmental Factors and Entrepreneurship Development
According to SMEDAN National Policy defines MSMEs in term of number of
employees and total asset. For number of employees, micro businesses have less
than 10 employees, small businesses have 10 to 49 employees and medium size
businesses have 50 to 199 employees. Also, the bank of industry defines MSMEs in
terms of number of employees, total assets and yearly/annual turnover. Hallberg
(2011) states that small and medium size enterprises are referred to as developing
private sector majorly in underdeveloped countries. This sector forms the basis
for private sector drives growth phenomenon. Aremu and Adeyemi (2011) see
SMEs businesses that as capable of solving socio-economic problems in a country.
A lot of countries believe that SMEs businesses are tool that can be used to achieve
economic growth.
Macroeconomic
Macroeconomics studies the behavior of economic aggregates. Macroeconomic
variables are variables that are concerned with economic aggregates for example a
region, a country, the total population of a country, all firms in a country. Also, the
total output in term of production of a country is formed with the production of all
its individuals, families, businesses and its public sectors. Macroeconomic
variables include Gross Domestic Product, interest rate, inflation rate, exchange
rate, unemployment and so on, macroeconomic variables can also be seen as the
indicators of the overall state of a country's economy. Studying the impact of
macroeconomics is relevant in governing a country since it is the responsibility of
the government to keep the economy stable, subsequently the economic activities
at micro level can take place appropriately.
Government formulates macroeconomic policies to promote the macro growth in
area of full employment, stability and economic growth and development. The
common macroeconomic policies are fiscal and monetary policy. Fiscal policy is
seen as a policy where the government makes changes in taxes or expenditure in
order to enhance economic growth and development. Meanwhile, monetary
policy is policy that concerns changes in money supply or changes with the factors
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Environmental Factors and Entrepreneurship Development
that affects the supply of money in an economy. Thus, the purpose of these
policies is to achieve steady price, full employment and a sustainable economic
growth and development. In the work of Ullah and Rauf (2013), they affirmed that
in order to achieve a sound macroeconomic policy there should be frequent
management of short-term policy instruments. They further claim that structural
reform, exchange rate policies, monetary and fiscal policy have major effect on the
warfare of the citizens of the country. Macroeconomic fluctuation has either
positive or negative effect on the economy this effect affects both the private and
public sector of the country.
Theoretical Review
Cause and effect theory as a framework is adopted in this seminar paper. This
theory states that there is a cause to any event, that is, no single event happens by
chance but because of a cause. Cause and effect are also referred to as causality or
causation. It is either one event, process, state or object which is a cause that
contributes or brings about the production of another event, process, state or
object that is an effect. Thus, the cause is partly or wholly responsible for the effect,
as well as the effect is partly or wholly dependent on the cause. This theory is
applied in this study as the growth of small and medium businesses depend on
some macroeconomic variables. If these variables are fluctuating constantly, it
will either have a positive or negative impact on the growth of small and medium
scale businesses. Kebede and Simesh (2015) adopted the theory of cause and effect
and state that in order to sustain the benefits derived from small and medium
scale enterprise, macroeconomic variables must be stable. In the same vein,
Anghelache, Manole, Anghel and Diaconu (2016), used cause and effect
framework to links between macroeconomics variables and growth. They stated
that the responsibility of the government is to ensure that macroeconomics
policies are implemented to manage and control macroeconomic variables to
enhance growth in all sectors of the economy.
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Empirical Review
Literatures on this subject area are very scanty even in recent time however, some
of the few studies that are already established in the literature are reviewed as
follows. Bahmani-Oskooee and Gelan (2018) examine the effects of exchange rate
risk on trade flows in the short-run and long-run for twelve African countries
during the period 1971Q1–2015Q4. They adopted Autoregressive Distributed Lag
(ARDL) model and discovered that exchange rate volatility affects trade flows of
many of the countries in the short run, but in the long-run the effects were
constrained only on the exports of five countries and on the imports of only one
country. They further claimed that major determinants of exports and imports is
the level of economic activity in the world and at home country. In the study of
Alper (2017) the impact of exchange rate volatility on Turkey's trade to the 15
European countries was examined. The study period was from 2002 to 2013 and
the technique employed was Generalized Autoregressive Conditional
Heteroscedasticity (GARCH). He asserted that in the short run exchange rate
volatility reduces export flows. However, the effect volatility of exchange rate has
both positive and negative impact on import sectors in the long run.
Senadza and Diaba (2017) employed pooled mean-group estimator of dynamic
heterogeneous panels technique to investigate the effect of exchange rate
volatility on trade in Sub-Saharan Africa. They used data of eleven Sub-Saharan
African countries from 1993 to 2014. They reveal that there is no significant effect
of exchange rate volatility on imports; export and exchange rate volatility are
negatively related in the short-run but a positive impact in the long-run.
Bostan and Firtescu (2018) carried out research on the influence of the exchange
rate on international commercial trade competitiveness of Romania. The study
employed secondary data from 2007 to 2014 and Ordinary Least Squares
estimator was used. Exchange rate, inflation, investments and interest rate,
exports and imports were the variables employed. They found out that exchange
rate can be used to determine competitiveness. Their results indicate that
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exchange rate depreciation is not a sufficient stimulus for higher exports' volume,
whereas imports decrease. Finally, their results show that the raise with one unit
of the exchange rate, interest rate and harmonized index decreases imports.
Similarly, Zakaria (2013) also studied the impact of exchange rate volatility on
trade. His findings suggest that Malaysian exports to the US and Japan are
significantly related to exchange rates volatility.
Owolabi (2017) conducted a study on the impact of economic characteristics and
financial performance of selected small and medium scale enterprises in Nigeria.
In this study, four economic characteristics were considered which are inflation
rate, interest rate, exchange rate fluctuations and government expenditure. The
study design was an ex-post facto research design. About thirty-one (31) small
and medium scale enterprises in Nigeria were selected. The results of the analysis
show that interest rate, rate of inflation, exchange rate and Government
expenditure all have an inverse and significant influence on the performance of
small and medium scale enterprise. Abubakar (2015) explore on the impact of
economic factors on SMEs performance in Kano and Sokoto states. The study
employed primary data and the findings from this research work suggest that
SMEs record low performance during the study period.
In the study of Rahman (2017) the impact of selected macroeconomic variables on
export performance of Bangladesh was investigated. The study duration is
between 2011 to 2016, and used multivariate Johansen co-integration technique,
error correction mechanism and vector auto regression techniques for analyzing
the study models. The data for the study was time series data and were sourced
from Central Bank of Bangladesh and publication of Bangladesh Bureau of
Statistics. Export performance was the explained variable whereas the
explanatory variables were money supply, inflation rate, interest rate, exchange
rate and industrial production. The outcome of the analysis revealed that, the
variables are related in the long run. Also, there is no short run relationship
existing among the variables as seen from the results of the error correction
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Environmental Factors and Entrepreneurship Development
mechanism. The variance decomposition error revealed that there is a significant
proportion of the variability in the export performance. It was also revealed that
only inflation has a negative influence on export performance. However, interest
rate, exchange rate, money supply and industrial production index have positive
impact on the explained variable.
Sanjo and Ibrahim (2017) analyzed the effect of international business on small
and medium scale enterprises growth in Nigeria. They employed two estimation
techniques which are Ordinary Least Squares (OLS) and Granger causality
estimation technique. The data used was secondary data that were sourced from
CBN annual reports and Nigeria annual abstract of statistics from 2005 to 2014.
The explanatory variables were foreign direct investment, exchange rate, interest
rate and trade openness. The explained variable was SMEs growth. Their findings
showed that trade openness and SMEs growth are insignificantly but positively
related. On the other hand, foreign direct investment, interest rate and exchange
rate have negative and insignificant impact on growth of SMEs in Nigeria.
Okeke et. al (2020) examined the effect of economic indicators on the performance
of small and medium scale enterprise in Nigeria. The population of the study is
the south-eastern geographical area, and cross-sectional survey design was
employed in this study. Also, this study was based on resource-based theory. The
total sample size of the study was 296. The variables they employed were SMEs
performance, inflation rate, interest rate and exchange rate. The statistical
package for social sciences (SPSS) version 25 was employed to analyze the
formulated hypotheses of the study. The results of their analysis revealed that
inflation, Interest rate and exchange rate have a negative and significant influence
on SMEs performance in the South-East region of Nigeria.
Oladimeji, Edodaghe and Shobayo (2017) investigated on the Effect of
globalization on small scale enterprises performance in Nigeria. They used
annual time series data for about 23 years from 1992 to 2014. The data were
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Environmental Factors and Entrepreneurship Development
sourced from CBN statistical Bulletin. The independent variables used were
interest rate, bank credit to SMEs and trade openness, while the dependent
variable is the ratio of SMEs output to GDP a proxy for performance of small-scale
enterprises. They discovered that the independent variables do not have
significant impact on the dependent variable. Thus, the performance of SMEs is
not improved by the explanatory variables.
In the study of Noreen (2018) the effect of macroeconomic variables on economic
growth in Pakistan was analyzed. Secondary data were used, and the study
sample period was from 1968 to 2017. The data were sourced from World Bank
and State Bank Pakistan. Exchange rate, interest rate, export, inflation, and gross
domestic product (GDP) were the variables employed for this study. Noreen
(2018) discovered that inflation has negative and insignificant effect on economic
growth. Exchange rate and interest rate have negative and significant impact on
economic growth. Export is a positive and significant determinant of economic
growth.
Ali Qalati, et al (2021) examined the factors affecting SME performance: The
mediating role of social media adoption. This study used a closed-ended
questionnaire that is a quantitative method with observed 423 responses through
structural equation modeling. Their findings show that technology, organization,
and the environment play effective roles for SME performance. Also, social media
adoption positively influenced the relationship between technology,
organization and SME performance environment.
Cahyadin (2017) investigated the relationship between macroeconomic variables
and small-and-medium-enterprises in Indonesia. This study analyses the
interaction between macroeconomic variables and indicators of small and
medium enterprises (SME) in Indonesia. The data employed were GDP,
unemployment, inflation, poverty level, the number of SME business units, total
SME employment, and SME investment. The study adopted Granger Causality
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Environmental Factors and Entrepreneurship Development
Test and VECM techniques of estimation. The study found that macroeconomic
variables and SME indicators have one causal direction. Furthermore, there are
short run and long run relationships between macroeconomic variables and
indicators of SME. The response of macroeconomic variables for indicators of
SME takes 4.5-5 years to come to equilibrium. It was also discovered that the
contribution of SME to GDP indicator is possibly to increase from quarter 1 to 64.
Rusu and Roman (2017) researched on economic performance of the SME sector in
CEE Countries. This research work evaluated the evolution of the SMEs
performance between 2008 and 2014 and to determine the factors that influenced
the growth of the value added of SMEs in the Central and Eastern European
countries. The study employed methods of comparing the indicators and multiple
linear regression models. The results obtained from this finding indicate that total
tax rate, exports of goods and services and private final consumption are
statistically significant and have a strong effect on the performance of SMEs. The
results also showed important differences according to the size of the firm.
Method and Data
The research design of this seminar work is built on relationship that is
relationally inclined. The blueprint of this study is structured in a way that the
researcher is able to empirically investigate the nexus between macroeconomic
variables and growth of small and medium businesses in Nigeria. Some sets of
variables are used to capture the title of this study. These variables are exchange
rate, interest rate, export rate and import rate, these are the independent variables.
Normalized SMEs growth rate that was proxy by micro credit divided by GDP is
used as the dependent variable. The changes of these variables were taken in order
to show the level of fluctuation of the series of the variables. Therefore, the
variables connectivity were quoted and estimated to analyze the formulated
hypotheses of the study using Johansen approach to Co-integration and Ordinary
Least Square estimators. The data used for the analysis of this study were sourced
in their raw form for about 30 years, from 1991 to 2020.
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Model Specification
The model adopted for this study is specified as shown below:
3.1
Sme/gdp is the dependent variable and it is proxy by micro credit divided by
GDP. This variable represents growth of SMEs. All the variables on the right-hand
side are the explanatory variables in the model while the variable on the left hand
side is the explained variable. exc represents exchange rate, int is interest rate,
export is export rate and import represent import rate. a1 to a4 are the parameters
of the model. And e is the disturbance term.
Data Analysis and Presentation
In this study the researcher has tested four hypotheses which are one export rate
has negative influence on growth of SMEs in Nigeria. Two, import rate and
growth of SMEs are negatively related in Nigeria. Three, exchange rate has
negative impact on growth of SMEs in Nigeria. And four, interest rate has an
inverse relationship with growth of SMEs in Nigeria. The results obtained on the
test of these four hypotheses are reported in table 4 and 5. Nevertheless, the results
of the descriptive statistics, unit root test and co-integration test results are
reported first in table 1, 2 and 3. figure 4.1 shows the line graphs of the variables
employed in this study.
Figure 4.1: Line Graph
.6
.4
.2
.0
-.2
-.4
-.6
-.8
1 9 9 0
1 9 9 5
2 0 0 0
2 0 0 5
2 0 1 0
2 0 1 5
2 0 2 0
Source: Author 2022
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In the figure above the line graph of growth of SMEs, interest rate, exchange rate,
import rate and export rate are plo ed using E-view Statistical tool version 10.
These graphs show how these variables fluctuate over the study period.
Table 1: Descriptive Statistics
_SME_GD
P
_EXC
_INT
_EXPORT _IMPORT
Mean
-0.027459
0.199084
-0.011881
0.286283
0.315989
Median
0.038859
0.023672
-0.011310
0.085004
0.149529
Maximum
0.489390
3.234354
0.278357
3.613535
3.638696
Minimum
-0.693318
-0.057697
-0.352817
-0.415861
-0.254925
Std. Dev.
0.242472
0.595298
0.130442
0.716375
0.681347
Skewness
-0.803294
4.651958
0.127310
3.435205
4.024804
Kurtosis
4.227934
24.14288
3.974643
16.73856
20.25329
Jarque-Bera
5.111186
666.9802
1.268451
294.9382
453.0903
Probability
0.077646
0.000000
0.530346
0.000000
0.000000
30
30
30
30
Observations 30
Source: Author 2022
The average value of exchange rate, export rate and import rate are positive
meaning that these variables have tendency to increase in future, but the average
value of SMEs growth rate and interest rate are negative. The standard deviation
of SMEs growth rate, exchange rate, interest rate, export rate and import rate are
approximately 0.24, 0.60, 0.13, 0.72 and 0.68 respectively. The standard deviation
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Environmental Factors and Entrepreneurship Development
value of export rate is the highest among the other variables, this suggests that
export rate is the most volatile variable. The skewness value for SMEs growth rate,
exchange rate, interest rate, export rate and import rate are approximately -0.80,
4.65, 0.13, 3.44 and 4.02 respectively. These variables are all positively skewed
except for SMEs growth rate, indicating that majority of the variables values are
less than their mean values. All the variables have kurtosis value greater than
three. This suggests that they are leptokurtic, that is, there are more values in the
distribution tails and more values close to the mean (i.e. sharply peaked with
heavy tails). The Jarque-Bera statistic which is test for goodness fit is used to
determine whether the null hypothesis of the series follows a normally
distribution. This can be seen from the probability values of the Jarque-Bera
statistics. It is observed that the series of SMEs growth rate and interest rate follow
a normal distribution pa ern. However, the series of exchange rate, export rate
and import rate do not follow a normal distribution.
Unit Root Test Results
Unit root is a stochastic trend in a time series. It is sometimes called a “random
walk with drift”. The pa ern of a variable series can be said to be unpredictable if
the series has a unit root. So, unit root tests are tests for stationarity in a time series
or panel series. A time series is stationary if a shift in time doesn't cause an
alteration in the pa ern of the distribution.
Table 2: Unit Root Test
Variable
Order
of Integration
ADF
5% Critical
Stat
PV
Value
D (_SME_GDP)
I (1)
-4.714156
-2.986225
0.0010
D (_EXC)
I (1)
-5.901405
-2.976263
0.0000
D (_INT)
I (1)
-9.558443
-2.976263
0.0000
D (_EXPORT)
I (1)
-8.578955
-2.986225
0.0000
D (_IMPORT)
I (1)
-6.778405
-2.986225
0.0000
Source: Author 2022
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This study applied the Augmented Dickey-Fuller approach to test the null
hypothesis of unit root test for the series of SMEs growth rate, exchange rate,
interest rate, export rate and import rate. The variables are all integrated at order
one. The result of the unit root test shows that the series of all these variables are
stationary at first difference since their probability values are less than 5 percent
alpha value. Also, the absolute values of the ADF statistics are greater than the 5%
critical value.
Co-Integration Test
A co-integration test is a statistical method used to establish if there is a correlation
between several time series variables in the long run. Therefore, co-integration
tests ascertain situations where the time series of more than two or two variables
are integrated together in a way that they cannot diverge from equilibrium in the
long run.
Table 3: Johansen Approach to Co-Integration Test Results
Unrestricted Cointegration Rank Test (Trace)
Hypothesize
d
Trace
0.05
No. of CE(s) Eigenvalue
Statistic
Critical Value Prob.**
None *
0.746785
101.4616
69.81889
0.0000
At most 1 *
0.670463
64.37665
47.85613
0.0007
At most 2 *
0.566004
34.40483
29.79707
0.0137
At most 3
0.285180
11.86737
15.49471
0.1634
At most 4
0.098601
2.802796
3.841466
0.0941
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Trace test indicates 3 cointegrating eqn(s) at the 0.05 level * Denotes rejection of
the hypothesis at the 0.05 level **MacKinnon-Haug-Michelis (1999) p-values
Unrestricted Cointegration Rank Test (Maximum Eigenvalue)
Hypothesized
Max-Eigen
0.05
No. of CE(s) Eigenvalue
Statistic
Critical Value Prob.**
None *
0.746785
37.08497
33.87687
0.0200
At most 1 *
0.670463
29.97183
27.58434
0.0242
At most 2 *
0.566004
22.53745
21.13162
0.0315
At most 3
0.285180
9.064574
14.26460
0.2808
At most 4
0.098601
2.802796
3.841466
0.0941
Max-eigenvalue test indicates 3 cointegrating eqn(s) at the 0.05 level
* Denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values
Source: Author 2022
The table above shows the result of the co-integration test. The coefficient of the
Trace statistic and Max-Eigen statistic for none, at most 1, at most 2 and at most 3
are greater than the coefficient of 5% critical value. Also, the probability value of
Trace statistic and Max-Eigen statistic for none, at most 1, at most 2 and at most 3
are less than 5% alpha value. This result reveals that there are three co-integrating
equations. The null hypothesis of no co-integration is rejected. Therefore, there is
co-integration.
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Table 4: Test of Long Run Impact of Macroeconomic Fluctuation on the Growth of SMEs
Cointegrating Eq:
CointEq1
_SME_GDP(-1)
1.000000
_INT(-1)
-0.452991
(0.89010)
[-0.50892]
_IMPORT(-1)
-0.613591
(0.22710)
[-2.70180]
_EXPORT(-1)
0.615424
(0.24820)
[ 2.47952]
_EXC(-1)
-0.399711
(0.10370)
[-3.85440]
C
0.098075
Source: Author 2022
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As shown in the table above the long run relationship results. The first value is the
coefficient value, the value in bracket is the standard error value and the value in
parenthesis is the t- value. As seen from the table the coefficient of interest rate,
import rate, export rate and exchange rate are approximately -0.45, -0.61, 0.62 and
-0.40 respectively. This suggest that interest rate, import rate and exchange have
negative long run multiplier effect on the growth of SMEs. However, the long run
elasticity of export rate maintains a positive and strong multiplier effect on
growth of SMEs. The t-value of import rate, export rate and exchange rate is
greater than two, so by rule of thumb the parameters of these variables are
significant. The null hypothesis that exports rate has negative influence on growth
of SMEs in Nigeria is rejected. The result in the table above shows that export rate
has positive effect in the long run-on growth of SMEs in Nigeria. the null
hypotheses that import rate and growth of SMEs are negatively related in Nigeria
and exchange rate has negative impact on growth of SMEs in Nigeria cannot be
rejected. Thus, both import rate and exchange rate have negative but significant
impact on growth of SMEs in the long run. Lastly, the null hypothesis that interest
rate has an inverse relationship with growth of SMEs in Nigeria cannot be rejected
in the long run.
Table 5: Test of Short Run Impact of Macroeconomic
Fluctuation on the Growth of SMEs
Coefficien
Std.
t-
Variable
t
Error
Statistic
ECM (-1)
-0.737897
0.351303
-2.100457
0.0391
D (_SME_GDP (-1)) -0.545578 0.347300
-1.570910
0.1204
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Prob.
Environmental Factors and Entrepreneurship Development
D (_SME_GDP (-2)) -0.091311 0.278541
-0.327818
0.7440
D (_INT (-1))
0.406977
-0.204605
0.8384
-0.083269
D (_INT (-2))
-0.012853
0.494785
-0.025977
0.9793
D (_IMPORT (-1))
-0.153619 0.255941
-0.600213
0.5502
D (_IMPORT (-2)) 0.041287
0.160051
0.257964
0.7971
D (_EXPORT (-1)) 0.114246
0.224464
0.508972
0.6123
D (_EXPORT (-2)) -0.029635
0.161171
-0.183874 0.8546
D (_EXC (-1))
-0.208821
0.133669
-1.562222 0.1224
D (_EXC (-2))
-0.124380
C
-0.004882
R-squared
0.792077
0.100013
0.050662
Adjusted R-squared 0.639600
Durbin-Watson stat 2.105648
Source: Author 2022
155
-1.243642 0.2175
-0.096367 0.9235
Environmental Factors and Entrepreneurship Development
In the above table the outputs of the analysis conducted in this study on the
hypotheses formulated in the first section of this study are reported. The results
displayed above show the parameters of ECM and the parameters of the other
variables up to lag 2. The coefficient of ECM is approximately -0.74 with
probability value of approximately 0.04. This shows that the ECM parameter is
strong and significant at 5 percent alpha value. The coefficient of the ECM is closer
to one and this implies that the speed of adjustment is high. That is in the long run
the state of disequilibrium can easily be corrected. Interest rate and exchange rate
have both negative and insignificant influence on growth of SMEs in the short run.
Import rate and export rate have insignificant impact on growth of SMEs at lag
one and lag two. Nonetheless, the direction of relationship between import rate
and growth of SMEs at lag one is negative but at lag two it is positive. For export
rate the direction of the relationship is positive at lag one but negative at lag two.
At lag one, the null hypothesis relating to interest rate, import rate and exchange
rate cannot be rejected. Meaning interest rate, import rate and exchange rate have
negative impact on the growth of SMEs. As these variables are decreasing the
growth of SMEs will be increasing in the short run. However, this impact is
insignificant. Lastly, export rate has positive effect on growth of SMEs, any
increase in exporting rate will enhance growth of SMEs. The value of the RSquare, Adjusted R-Squared and Durbin-Watson Statistics are approximately
0.79, 0.64 and 2.11 respectively. R-Squared and Adjusted R-Squared are the
explanatory power of the model, they show the extent to which the explanatory
variables influence the explained variable. The value of the Adjusted R-Squared
indicates that the explanatory variables jointly exert about 64 percent influence on
the explained variable. By rule of thumb, the Durbin-Watson Statistics is
significant since its value is approximately 2. Therefore, there is no serial
correlation that is the independent variables are not correlating with the error
term.
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Discussion and Implication of Findings
In this study it is discovered that interest rate has a negative and insignificant
impact on growth of SMEs in Nigeria in the long run. This implies that as interest
rate is decreasing the growth of SMEs will be increasing. When the rate of
borrowing by SMEs is reduced, this sector will be able to get sufficient funds for
investments. This result is in support to the findings of Ogundele, Awoniyi and
Okeya (2020) who found out interest rate has negative and insignificant effect on
growth of SMEs. Also, the finding of Okoye and Nwakoby (2015) is in line with the
results of this work. They likewise claimed that interest rate has a negative and
insignificant impact on growth of SMEs.
According to the findings of this study, import rate has a negative but significant
influence on growth of SMEs. This means that the more import of both goods and
services is increasing there will be decrease in SMEs growth rate. Good and
services available in the country will be neglected for imported goods and
services, this action will reduce the overall performance of SMEs. In the same vein,
export rate has significant impact on growth of SMEs. But export and growth of
SMEs are positively related. This is an indication that SMEs businesses will thrive
positively in the face of increase in exportation.
Finally, it is discovered that exchange rate has an inverse but significant effect on
growth of SMEs. This implies that increase in exchange rate will reduce the
growth of SMEs. This result is in accordance with the results of AgyeiAmpomaha, Mazouzb and Yin (2013), Osoro and Ogeto (2014) who also found out
that exchange rate has an inverse but significant effect on growth of SMEs.
Conclusion and Recommendations
The researcher draws the following conclusions relating to the major findings of
this study. It is concluded that interest rate, exchange rate and import rate have
negative influence on growth of SMEs in the long run. The influence of exchange
rate and import rate on growth of SMEs is significant except for interest rate that
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Environmental Factors and Entrepreneurship Development
has insignificant effect on growth of SMEs. Export rate has negative but significant
impact on SMEs growth. Based on the finding that exchange rate has negative but
significant effect on growth of SMEs, the researcher recommends that the central
bank of Nigeria should intervenes by selling foreign exchange to the market to
boost supply. This will bring down the price of the foreign exchange. The federal
government should ease the mode of exportation and place stringent rules or
policies on importation.
Contribution to Knowledge
The researcher has contributed to existing literatures on the relationship between
macroeconomic fluctuation and growth of SMEs in Nigeria by adding variables
like changes in import rate and export rate to some already used macroeconomic
variables. To the best of my knowledge no research work has used fluctuation in
export and import rate to analyze the growth of SMEs in Nigeria.
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Environmental Factors and Entrepreneurship Development
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WORKFORCE DIVERSITY AND
ORGANISATIONAL PRODUCTIVITY IN
UNILEVER
CHAPTER
8
OLADEJI Adesola Alaba & ADEJUWON Oluwakemi
Adefisayo
Abstract
Workforce diversity simply means similarities and differences among employees
or workers in terms of age, cultural background, capability, moral, physical
abilities and disabilities, race, religion, gender, and sexual orientation. Human
beings are different from each other and one and other. People are different in not
only gender, culture, race, social and psychological characteristics but also in their
perspectives and prejudices. Society had discriminated on these aspects for
centuries. Diversity makes the work force heterogeneous. In current scenario,
employing diversified workforce is a necessity for every organization but to
manage such diversified workforce is also a big challenge for management. This
paper critically analyses the workforce diversity and its impact on productivity of
an organization. The researcher after examining the literature and various
research papers concluded that workforce diversity is strength for any
organization but people still stick to their views related to ethnicity, religion, caste
etc and so consider diversity as a problem but if managed properly, can increase
the productivity in an organization effectively and efficiently.
Word Count:168
Keywords: Diversity, Workforce, Interpersonal relations, & Productivity
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Environmental Factors and Entrepreneurship Development
Introduction
The workforce is defined as the total number of people who work in a company
(Hornby 2019). Workforce diversity is defined by Kreitner and Kinichi (2018) as
the multitude of individual differences and similarities that exist among people
working in an organization. This definition was chosen because it emphasizes
three important issues about managing workforce diversity, namely that there are
many different dimensions or components of workforce diversity.
This implies that workforce diversity affects everyone in the organization. It is not
a ma er of age, race, or gender (Thomas, 2020). In other words, it refers to the
plethora of individual differences and similarities that distinguish all employees
in the organization as unique and distinct from one another. In other words, it
refers to the plethora of individual differences and similarities that distinguish all
employees in the organization as unique and distinct from one another. In other
words, workforce diversity is not synonymous with worker differences. Rather, it
encompasses both distinctions and parallels. This means that managing
workforce diversity necessitates dealing with both at the same time. Thus,
workforce diversity refers to the workers' collective mix of differences and
similarities. Dealing with workforce diversity necessitates managers integrating
the group's differences and similarities. Both must be thoroughly examined,
determined, and established. Workforce diversity refers to the significant
differences and similarities that exist between employees within a company.
According to Nwinami (2019), it represents an individual's personality, age,
gender, ethnicity/race, religion, marital status, income, work experience, and all
those views that assume and sustain an organization's core values. It also refers to
organizations that are becoming more diverse in terms of workforce composition,
such as age, ethnicity, expertise, and so on.
According to Harold and Kumar (2012), in an organizational performance index,
diversity should capture practices such as understanding and appreciating
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Environmental Factors and Entrepreneurship Development
humanity's, culture's, and the natural environment's interdependence; practicing
mutual respect for qualities and experiences that differ from our own;
understanding that diversity includes not only ways of being but also ways of
knowing; and recognizing that personal, cultural, and institutionalized
discrimination exist.
Human resources are an important asset for any organization, and as such, having
a diverse workforce is a top priority for most. Although it has become necessary
for organizations to employ a diverse workforce, it has also become quite difficult
for organizations with an increasingly diverse workforce to reap the benefits of
diversity while managing its potentially disruptive effects. Organizations have
recognized that monetary resources are harnessed to achieve organizational goals
through the collective effort of its diverse workforce.
Workforce diversity refers to employees' similarities and differences in terms of
age, cultural background, physical abilities and disabilities, race, religion, gender.
No two people are alike. People differ not only in terms of gender, culture, race,
social and psychological characteristics, but also in their perspectives and
prejudices. For centuries, society has discriminated on these grounds. The work
force is heterogeneous as a result of diversity. Employing a diverse workforce is
now a requirement for every organization, but managing such a diverse
workforce is also a significant challenge for management.
Statement of the Problem
Diversified workforce is the latest and current trend in every organization today.
Moreover, the major concerned for every organization is to improve its
productivity because organizations are economic activity and can only survive by
competing in this cu hroat competitive world by increasing their profits. Due to
the diversified workforce in some or the other way, people are facing lot many
problems at the workplace. As if the diversified workforce may experience less
cooperation from some of their colleagues but to achieve the organizational goals,
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each member must be effective in terms of its functioning in the particular
department. However, firing is not the solution. . The main consent of this
research is to examine critically the impact of workforce diversity on the
productivity of the organization from previous researches. A second contribution
of this chapter is to suggest the ways to manage the diversified workforce in such a
way that people can easily work with the diversified workforce and can bring
quality results altogether.
Because of globalization and competition, the work environment is becoming
more complex, necessitating the need for a workforce comprised of people of
varying ages, experience, knowledge, and backgrounds in order to maximize
competitive advantage (Ragins & Gonzalez, 2018). Organizations seeking a
competitive advantage must broaden their perspective on workforce diversity
and diversity management, and management must commit to making diversity
management a part of their daily operations.
In recent years, there has been a significant increase in workforce diversity, which
has compelled businesses to embrace this concept in order to increase
productivity and profit. Because management is not skilled enough to control the
concept of diversity management and its ethics, managers are finding it difficult to
effectively practice diversity management, which has become a threat around
their neck.
Employee diversity, if left unmanaged, is more likely to harm morale, increase
turnover, and cause significant communication issues.
Literature Review
Diversity
According to Samuel and Roberts (2019), diversity is defined as a mix of
employees from various sociocultural backgrounds working together in an
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organization. It could be defined as the characteristics of a social group that reveal
the degree of objective or subjective differences that exist between groups.
Workforce diversity, according to Sco and Sims (2020), is "a strategy that
promotes and supports the integration of human diversity at all levels and uses
focused diversity and inclusion policies and practices to guide this approach in
the work environment." All of these definitions simply demonstrate that diversity
is all about the characteristics that distinguish us from one another. A diverse
workforce in an organizational se ing is made up of employees of various
genders, ages, races, ethnic backgrounds, religious beliefs, and so on.
Dimensions of Diversity
Often diversity is distinguished along the primary, secondary and tertiary or
organizational dimensions. Differences among employees can be can be
categorized into two aspects; primary differences such as; age, etc. and the
secondary differences such as; educational background, communication style,
etc.
Primary Dimension
This aspect reveals the key differences between different people as well as the
greatest impact on first encounters, it can be quickly detected, and it also serves as
a filter through which people view the world. Gender, age, sexual orientation,
physical abilities, ethnicity, race, and other visible identity characteristics are
included. (Sayers, 2019) According to Powell (2018), they are those essential
unchangeable personal characteristics that have long-term consequences and
shape our basic self-image and sense of identity. (Saumya Goyal, 2009) In this
article the author has depicted four models to understand the dimension of
diversity they are diversity wheel in this model the author has classified the model
into two dimensions first is primary which includes age, gender, mental/ physical
abilities, race, ethnic heritage, sexual orientation and the secondary dimension
includes geographic location, work experience, income, religion, first language,
organizational role and level, communication style, family status, work style,
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Environmental Factors and Entrepreneurship Development
education, military experience. Next model is four layers of diversity in this the
author adds on two more layers with the diversity wheel they are personality at
the core and external dimension includes work field, division, seniority, work
location, union affiliation, management status, organizational dimensions. Third
model is diversity iceberg in this the author adds one more dimension in diversity
wheel which is tertiary dimensions like beliefs, assumptions, perceptions,
a itude, values, group norms. And the last model is kaleidoscope perspective of
the individual in this the author has described various a ributes like age, region,
gender, qualification, caste, family status. (K. Mallikarjunan, 2007) in this the
author is saying that each and every individual is different, everybody is having
their own perception, a itude and thoughts and to manage such type of different
individuals require a specific skill because of the complexities involved in this
process. (Radha Mohan Chebolu, 2007) in this article the author says that the
culturally diversified workforce is really competent but to manage such a talent is
not an easy task it requires such a leader that have an organizational vision and an
a itude that are line in culture.
The Secondary Dimension
Secondary differences include educational background, communication style,
marital status, organizational role and position, religion, geographic location,
income, work experience, and work style, which are not apparent in the first
encounter and can even change over time. These dimensions appear to be less
visible, have a more variable influence on individuals, and contribute a more
subtle richness to the primary dimension of diversity (Sayers, 2019). People are
usually less sensitive about these aspects because they are elements that we have
chosen and have the ability to change. Organizational researchers refer to the
secondary dimensions of diversity as experience-based diversity. This type of
diversity includes a wide range of differences that are acquired, discarded, and/or
modified over the course of one's life and, as a result, are less relevant to one's core
identity. Powell (2020) said the secondary dimensions are our personal
changeable characteristics. Characteristics that over the years we have acquired,
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Environmental Factors and Entrepreneurship Development
we may decide to modify or even abandon throughout our life time. (Jeffery
Sanchez-Burks & Michal E. Mor Barak, 2005) the researcher has discussed one's
perceptions, values, and behavior in such situations reflect deep-seated beliefs
about the nature of interpersonal work relationships. He further emphasized that
to understand and manage these differences requires understanding the nature of
workforce diversity and how it influences relational and communication styles.
(Ashok Chanda, 2006). In this article the author says that workforce diversity is a
hot and burning issue in every organization of current scenario. Every human
resource manager has to take care in managing this diversity and finally he
concluded that there is a lack of awareness towards diversity management
approach, the manager doesn't have sufficient knowledge and competency to
manage diversified workforce. (Sharbari Saha, Dewpha Mukherjee Patra, 2008) in
this the authors have focused over the requirements due to globalized market and
benefits of workforce diversity further they said that if the organization is not
employing the diversified workforce, then that organization is not competitive
enough and the sales managers can make their diversified workforce effective and
competent by providing them training. (Asmita Jha, 2009) in this article the author
said that the most important asset of any organization is diversified workforce
because the diversified workforce is good at problem solving as they provide
different and creative ideas and gives competitive advantage to the organization.
Further the author focused over making the workforce happier by proper
understanding of the expectations and needs of each individual. (Kulin Patel &
Anuradha Sriram, 2010) in this article the author explores the role of managing
diversified workforce in the case of mergers and acquisitions. The author said that
the merger and acquisitions among the organization is just like a marriage which
means that the compatibility among the employees of both the organizations
having different cultures is most important for this the culture assessment of both
the organizations is necessary.
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Organizational Dimension
This dimension deal with characteristics within the organization, such as; word
location, organizational structure, part time or full time, organizational climate or
culture, status, etc. (Sayers, 2019).
The basis for secondary and organizational dimensions of diversity is information
processing and decision-making theory. This perspective suggests that diversity
when managed will have positive implications on work group outcomes since
such groups will have a wide array of views, skills, and information. Educational
background, functional and industrial experience are part of the competencies
that one employs when undertaking a task. The ability to productively discuss
and examine task related content issues grounded in a diverse set of perspectives
can enhance performance.
Factors Contributing to Increased Diversity within the Workplace
Griffin and Van Fleet (2019) outlined three factors that contributed to
organizations becoming more diverse.
Globalization
Globalization is that process whereby organizations start operating in an
international scale. Globalization has resulted in the removal of barriers between
markets thereby, allowing a free flow of goods and services, skills and ideas. As
these barriers were eliminated, organizations saw an opportunity to enlarge their
operations worldwide and increase their market share in order to gain more
competitive advantage over their competitors (Nwinami, 2019). Also, when
organizations open offices and branches abroad, it must learn to deal with the
different customs and social norms of the country where is it opening branches.
As the managers and employees move from one job assignment to another across
the national boundaries, organizations and their subsidiaries become more
diverse.
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Environmental Factors and Entrepreneurship Development
Government Legislation and Judicial Regulations
The government legislation and judicial decisions have forced a lot of
organizations to explain its recruitment strategy and hire more broadly. Unlike
like before where organizations were allow to hire as the deemed fit, women
could hardly even be seen in office jobs not to mention being among executives.
There were issues of stereotype and prejudice that resulted in discrimination
against women and other minorities. Today, organizations by regulations and
law must employ people based on their qualifications.
Composition of the Labour Force
The composition of the labour force is becoming more and more diverse.
Organizations are recognizing that by hiring a diverse workforce, they promote
the most talented people available which will improve their overall quality of
their workforce and increase effectiveness. By spreading a wider net in recruiting
and looking beyond the traditional sources for new employees, organizations are
discovery more largely qualified and be er qualified employees from different
segment of the society.
Advantages/Benefits of Workplace Diversity
An organization's success and competitiveness depend upon its ability to
embrace diversity and realize the benefits. When organizations actively assess
their handling of workplace diversity issues, develop and implement diversity
plans, multiple benefits are reported such as:
i.
Diversity stimulates innovation and productivity and creates a world class
culture that can outperform the competition.
ii.
A multicultural organization is be er suited to serve a diverse external
clientele in a more increasingly global market. Such organizations have a
be er understanding of the requirements of the legal, political, social,
economic and cultural environments of foreign nations (Adler, 1991).
iii.
In research-oriented and hi-tech industries, the broad base of talents
generated by a gender-and ethnic diverse organization becomes a priceless
advantage. “Creativity thrives on diversity” (Morgan, 1989).
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Environmental Factors and Entrepreneurship Development
iv.
v.
vi.
vii.
viii.
Multicultural organizations are found to be be er at problem solving,
possess be er ability to extract expanded meanings, and are more likely to
display multiple perspectives and interpretations in dealing with complex
issues.
Organizations employing a diverse workforce can supply a greater variety
of solutions to problems in service, sourcing, and allocation of resources.
Employees from diverse backgrounds bring individual talents and
experiences in suggesting ideas that are flexible in adapting to fluctuating
markets and customer demands.
A diverse collection of skills and experiences (e.g., languages, cultural
understanding) allows a company to provide service to customers on a
global basis.
A diverse workforce that feels comfortable communicating varying points
of view provides a larger pool of ideas and experiences.
Furthermore, the ability of an organization to embrace and reap the benefits of
diversity is critical to its success and competitiveness. Multiple benefits are
reported when organizations actively assess their handling of workplace
diversity issues, develop, and implement diversity plans, such as:
1.
Work Team: In organizations, employees are sometimes group into teams.
These teams are made up of people from different background. When
people from different background come together in a team, it gives room
for creativity, effective problem-solving techniques and quick decision
making.
2.
Business Organization: Diversity is an important bo om line business
strategy organizations use to improve employees' relationship and
increase their productivity. Organizations that create time and put aside
resources to cultivate, harness and take advantage of diversity will
experience less discrimination law suits, less union conflict and fewer
government regulatory actions
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Environmental Factors and Entrepreneurship Development
3.
4.
5.
6.
7.
Business Organization: Diversity is a critical bo om-line business
strategy that organizations use to improve employee relationships and
productivity. Organizations that set aside time and resources to cultivate,
harness, and capitalize on diversity will face fewer discrimination
lawsuits, less union conflict, and fewer government regulatory actions.
Customers' preferences are constantly changing Consumers expect
businesses to have specialized products and services that will always meet
their needs. Organizations that have teams made up of people from
various backgrounds and experiences are be er able to create products
that consumers want. Having employees from various backgrounds
provides the organization with a diverse set of skills and experiences for
recommending ideas that are adaptable to changing customer demands
(Saxena, 2020). Consumers want to do business with companies that share
their values and are self-reflective. Organizations with a large pool of
employees with diverse skills and experience can also provide global
service to customers. A diversified workforce can bring helpful ideas into
marketing goods to a highly diverse customer base. Diverse workforce
may be more creative and innovative than homogenous employees.
According to Griffin (2017) other benefits of diversity management
includes;
Increased productivity: when employees feel respected, included, and
valued in the organization, they become commi ed to the organization's
goals and work to achieve them.
Fewer lawsuits: There will be fewer lawsuits because both management
and employees have been trained to respect and value differences and to
treat everyone equally and without discrimination.
Business retention: Organizations are now paying close a ention to the
other organizations with which they do business. Seeking businesses that
believe in inclusion.
Improved market marketing capabilities: a diverse workforce can
provide an organization with insight into the thoughts of a diverse range of
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Environmental Factors and Entrepreneurship Development
customers. As markets are segmented, even the smallest market gains
importance. As a result, a racting prospective customers can mean the
difference between the organization surviving or dying.
8.
The organization can become a preferred employer: as word spreads
about how well the company accepts and manages diversity, the
company's image improves. People want to be a part of such a group.
9.
Improved morale or be er morale: When there is a mix of employees, the
work environment can become more fun and lively.
10.
Be er decision making: A diverse workforce has the potential to make
high-quality decisions because they must deal with opposing viewpoints
before moving forward.
Although the benefits of diversity are numerous, Areola (2018) argued that a
diverse workforce may be less cohesive and have communication issues. In a
diverse workforce, there may be instances of mistrust and tension. Uncertainty,
low employee morale, frustration, confusion, communication problems, tensions,
and conflict are some of the consequences of not dealing with diversity.
Similarity-A raction Paradigm
This theory was put forward by Bryne (2017) and it is used to explain group
formation. This theory focuses on people's preference to interact with other
individuals who share common life values, beliefs and experiences with them.
One reason for this preference is that having knowledge of this shared a itude
could help them to predict the future behaviour of the other person or people.
Similarity a raction theory assumes that people like to associate themselves with
those whom they perceive to be like them based on demographic characteristics
such as age, ethnicity, etc. It is believed that this a raction helps to promote
cohesion, communication and cooperation among team members (Kin , Fred &
Brim, 2020). For instance, it is possible to find younger employees in an
organization pursuing common social activities with fellow colleagues within
their age group and even going for lunch breaks with their colleagues who are of
the same age group. This kind of a raction and personal ties tends to promote
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Environmental Factors and Entrepreneurship Development
communication and cooperation among them because they are able to share
similar life and work experiences with one another and as such develop their
similar life a itudes and beliefs. However, employees who are either older,
middle aged or younger than such unified group, may conclude that the reason
why they are not invited or accepted in such group is due to their age and as a
result may start generating and exhibiting age prejudiced a itudes in the
organization (Kin , Fred &Brim,2020). This paradigm also assumes that people
tend to apply negative assumptions and a itude to their colleagues who are
different from them. Thus, stereotypes and prejudice, based on gender,
ethnicity/race, and age often reflect the categorization process of distinguishing
between similarity and difference, and often lead to miscommunication. The
theory helps to explain how variables such as educational background, cultural
background can be a motivation which a set of needs hold for a particular
employee. Such needs could be satisfied by meaningful social and interpersonal
relationships with other employees.
This theory deals with employees' need to be accepted by others, achieve mutual
understanding on ma ers that are important to them and exercise some influence
over those with whom they interact with on daily basis in the organization.
Social Identity Theory
This theory predicts that people tend to group themselves into specific groups
based on certain areas which are of personal importance to them such as
demographic characteristics like ethnicity, gender, etc. the result of this is that
they tend to favour colleagues of their in-group at the expense of the out-groups.
This theory was initially formulated by Tajfel (2018) to explain exclusion in the
workplace. Tajfel (2018) said social identity theory is “that part of an individual's
self-concept which originates in his/ her membership in a social group(s), along
with the importance and the emotional importance a ached to that group
membership”. Korte (2017) citing Hogg (2015) said that social identity theory tries
to explain group membership and behaviour. It is a theory that explains the
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conditions under which a person perceives the collection of people (plus
themselves) as a group as well as the consequences of perceiving people in group
terms. This theory puts forward a negative effect between workforce diversity and
productivity.
Turner (2017) said when individuals engage in the process of classifying
themselves and others into social categories using most important a ributes; it
allows them to define themselves in terms of the social identity that links to a
particular social group. Therefore, when individuals assign themselves to a
particular group, it raises the perceived similarity between their social identity
and the identity of the group and the perceived differences between their group
and other groups is increased. As a result, such individual does not see him or
herself as a unique person any more but now sees himself or herself as a
representative member of the group where he or she belongs and that their
behaviour symbolizes the group's model social identity.
Summary of the Findings
The study explains the effects of workforce diversity on organizational
productivity in Nigeria. It was deduced from the study that there is a significant
relationship between workforce diversity (gender, age and educational diversity)
and organizational productivity. This means that workforce diversity is an
influence of organizational productivity. For instance, in terms of educational
diversity, the way an employee carries out his/her job can have as a result of the
competences he/ she has gained through education, experience, training. Also age
diversity has an effect on employee performance which results in organizational
productivity; an employee can be more productive because is he young and still
has the strength and skills to carry out task. On the other hand, an older employee
can perform his task well because he has the experience and skills to perform.
In summary, the study shows that gender, age and educational diversity have a
significant positive relationship with employee performance.
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Conclusion and Recommendations
Based on the study, it is evident that workplace diversity has a significant
relationship with organizational productivity. The study confirms that diversity
is an important factor that cannot be ignored in organizations. Diversity from the
study has been seen to be growing rapidly over the years. Organizations are now
realizing that it is essential for it success. This is so because the study has shown
that having a diverse workforce and creating an inclusive workplace can improve
employees' effectiveness and this in turn enhances the organizational
performance or productivity.
Thus, it is recommended that organizations should create diversity managers in
their companies, who are saddled with the responsibility of ensuring that
organizational effectiveness is enhanced which will lead to organizational
productivity. Organizational leaders/managers should formulate policies that
guide against gender discrimination in their organizations in other to encourage
innovative. Organizational leaders should formulate laws and policies on equal
employment, that ensure the most qualified employees are recruited, irrespective
of their cultural background, ethnic group, and gender in other to encourage
creativity and innovation in the organization.
After considering all the findings in the research it becomes a compulsion for the
researchers to suggest, the ways to handle the shortcomings found during the
survey. It is really a big ma er of concern for all HR professionals as one side we
say that we should include new trends in HR policies and on the other hand, the
latest trend like workforce diversity is treated as a problem. However, this
problem can be solved by adopting various policies like:
i.
Encouraging the use of common language in the organization among the
employees
ii.
By conducting various motivational and mentorship programs
iii.
By keeping the channels of communication open among the employees
and employers
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Environmental Factors and Entrepreneurship Development
By encouraging employee participation
v.
Furthermore, one should accept the fact it is not the ma er of culture in fact
it is the ma er of quality. Therefore, for improving productivity, quality
has to be maintained and not thrown out.
The study also recommends a comprehensive system of recruiting personnel in
the organization based on the age inclusivity. Recruitment should be done to cut
across the age groups so as to admit various personnel with a wide range of
talents, skills and education level.
iv.
Lastly, there should be an effective diversity management program that
appreciates education diversity. The ultimate goal of the management strategy
program should be to create a stimulating environment that maximizes on
advantages of diversity as well as minimizing the negative effects of diversity.
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Environmental Factors and Entrepreneurship Development
References
Areola (2012). Armstrong's Handbook of Reward Management Practice:
Improving Performance through reward (4th ed.). London: KoganPage.
Arpita, S. (2007). “Nurturing Cultural Diversities A Leadership Challenge” HRM
R e v i e w E t h i o p i a S . C . R e t r i e ve d F e b r u a r y 2 0 , 2 0 1 1 , f r o m
h p://repository.smuc.edu.et/bitstream/123456789/731/1/ASSEFA%20ADMASU.pdf
Evans & Henry (2019). Managing Diverse Employees at Starbucks: Focusing on
Ethnic and Inclusion. International Journal of Learning and Development, 4(3),
35-50.
Gasper, S. & Areola (2018). Diversity Management: Paradigms, Rationale, and
Key Elements. In Managing Diversity: Toward a Globally Inclusive Workplace
(pp. 234-251). Clifornia: Sage Publications, Inc.
Griffin & Van F. (2019). Fostering Effective Workforce Diversity Management.
International Review of Management and Marketing in Nigerian
Organizations: The Challenge of Human Resource Management, 7(2), 108116. Andrew, D. P.,
Griffin (2015). The Relationship of Age to Ten Dimensions of Job Performance.
Journal of Applied Psyvhology, 93, 392-423.
Harold & Kumar (2012). Literature Review on Workforce Diversity, Employee
Performance and Organizational Goals: A Concept Paper. International
Refereed Research Journal, 4(4), 58 63.
Hornby (2015). The Effect of Diversity Management on Job Satisfaction and
Individual Performance of Teachers. Educational Research and Reviews,
11(3), 105-112.
Kin , F. & Brim (2020). The Multigenerational Workforce: Communicate,
Collaborate and Create Community. London: Sage Publication Ltd.
Korte. (2017). Organizational Behaviour: Concepts, Realities, Applications and
Challenges. New Delhi: Excel Books.
Kreitner & Kinichi (2018). The Relationship Between Workforce Diversity and
Performance of Jinja Regional Referral Hospital, Uganda (Master's Thesis).
Retrieved October 20, 2016, from h p://www.academia.edu/7825258/
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Powell (2011). Searching for Common Threads: Understanding the Multiple
Effects of Diversity on Occupational Groups. Academy of Management
Review, 21, 403-433.
Samuel & Roberts (2013). Succesful Diversity Management Initiatives: A
Blueprint for Planning and Implementation. California: Sage Publications
Inc.
Saxena (2020). Management and Organisational Behaviour (9th ed.). England:
Pearson Education Ltd.
Sayers (2019). Workforce Diversity Management and Corporate Performance of
Firms in Nigeria. International Journal of Business and Management Review,
2(4), 36-46.
Strans (2019). National Integration Working Group for Worplace. Retrieved March 17,
2017, from Managing Workforce Diversity: A Toolkits for Organisations:
h p://www.mom.gov.sg/~/media/mom/documents/employment-prac ces/wdm/w
Tajfel (2018). Effects of Managing Gender of Employees in Enhancing
Organizational Performance. A Case Study of Kenya Ports Authority.
European Journal of Business and Management, 5(21), 1-8.
Thomas (2020). Human Resource and Personnel Management: Text an Cases (4th
ed.). New Delhi: Tata McGraw-Hill Publishing Company Limited.
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ENTREPRENEURSHIP AND SMALL
BUSINESS DEVELOPMENT IN NIGERIA
CHAPTER
9
OYEKU Oyedele Ma hew & ADEJUWON Joshua Adewale
Abstract
This paper was premised on empirical literature analysis on entrepreneurship
and small business development. The paper reveals that small and medium
enterprises (SMEs) development is influenced by entrepreneurship. It a empts to
identify similarities and differences between entrepreneurship and small
business though they are often used interchangeably in various studies. The
paper identifies entrepreneurship and small business development as engine of
economic growth and social-economic development including job and wealth
creation. While highlighting the characteristics of SMEs, the paper identifies
support institutions for SMEs development in Nigeria as well as various types of
business environments and their effects on business performance. Some strategic
approaches to SMEs management including marketing strategies,
entrepreneurial orientation were identified and discussed. Also, some challenges
such as inadequate finance, low level of survival, inappropriate technology
deployment/utilization, lack of collaboration, low level of incentives, hostile
business environment including multiple taxation, energy challenges were
identified and discussed. This paper concludes with a call for more action towards
entrepreneurship to build functional SMEs where the entrepreneurs/owners of
SMEs will fully manifest entrepreneurial orientation in the dimension of risk
taking, competitiveness, proactiveness, creativity and innovativeness.
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Word Count:184
Keywords: Business Environment, Entrepreneurship, Small and Medium
Enterprises (SMEs), & SMEs Support Institutions,
Introduction
A good number of academic works have been produced on small business and
entrepreneurship regarding how they heal fast the ailment of economies all over
the world. Many researchers have concentrated however, on how large
corporations alter their marketing strategies to achieving dynamism of targets
while leaving out small businesses share of the cake. It is on this premise that
researchers are focusing on empirical studies on SMEs development to ensure
be er performance through adopting effective growth strategies. For instance,
marketing capabilities have been reported to have a major influence on good
performance of SMEs (Banterle, Carraresi & Stranieri, 2010).
Akande (2012) reported dearth of adequate research on the impact of strategic
entrepreneurial skills on SMEs in Nigeria. Entrepreneurs use their dexterous
skills to float and grow various types of businesses into success, including micro,
small, medium and large-scale businesses. In particular, small businesses are
floated in numbers due to the ease with which they can be established.
Governments in many nations of the world have acknowledged the fact that small
and medium businesses are making significant contributions to economies all
over the world (Oyedijo, Idris & Aliu, 2012). Several scholarly works have shown
how SMEs are an inherent component of economic growth through innovation
(Okundaye, Fan & Dwyer 2019). Consequently, SMEs have an important function
in employment generation (Zafar & Mustafa, 2017; Niebel, 2018; Napitupulu,
2018).
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A major challenge in small business research lies in the ambiguity surrounding
the measurement of business size as well as its performance. As opined by
Stimpson and Farquharson (2010), the size of business varies- while there a sole
business with only the entrepreneur as the worker, there are small, medium and
large businesses employing hundreds and thousands of employees in businesses.
Therefore, using the yardstick of size of business when thinking of business
performance, should be taken with a bit of caution. Small businesses offer myriads
of benefits for the dynamism of an economy especially a mono-economy like that
of Nigeria that relies heavily on oil proceeds. Most big companies like Unilever
Plc, P&Z, May & Baker Plc that we see today actually started as small firms. Like
the large corporate organizations however, the adoption of appropriate business
strategies is quintessential for the survival of small businesses especially in this
era of voracious market competition. To sail the hurdle of cut-throat competition
to which they are unduly exposed, operators of small businesses should be highly
creative not only in adopting new innovations but also to craft strategies that
cannot be easily copied by rivals.
The Concept of Small Business
The usage, conceptualization of enterprises that are considered small is vague to
the extent that the term connotes different things in different contexts. Within the
context of a country, different institutions give different definitions of what
constitutes a small business. This is because different yardsticks like capital base,
employment, management structure, and material source are used in gauging the
structure of businesses. As at today, it is difficult to say that there are acceptable,
well-defined standards by which we can determine or classify business ventures
into such groups as micro, small, medium and large enterprises but such factors as
number of employees, market share, net asset, capital outlay, company's turnover
and so on have been reported in literature as some measuring criteria (Yusuff,
Olagbemi & Atere, 2012). Ekerete (2001) cited the following criteria as useful
measures of business size: Number of employees; Volume of sales; Insurance in
force and Volume of deposit (for banks).
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Environmental Factors and Entrepreneurship Development
In 2005, the International Labour Organization carried out a study in seventy-five
countries. In this study, more than fifty definitions were proposed. In these
definitions, provisions were made for variations in the definitions taking into
cognizance changes in economy over time. One of the earliest definitions of small
business in Nigeria was stated in the Nigeria's third National Development Plan
(1975-1980). In this document, small business was defined as a business that has
number of employees less than ten and capital outlay in plant machinery and
equipment is not above six hundred thousand naira only. However, a definition of
small business offered by the Central Bank of Nigeria (CBN) as stated in its
monetary policies circular No 22 of 1988 defined small business as a business
whose annual turnover is not above five hundred thousand naira only.
As expected, there has been a review of these definitions especially the definition
given by the National Council of Industry in 2002. In this definition, a small
business is defined as that business whose capital outlay including working
capital but excludes land is between N1.5m and N50m with total workforce
between eleven and one hundred. Others researchers and practitioners also
consider that the size of employees should not be more than fifty for small
business with a provision that the number of employees can differ from industry
to industry (Mbah, Ojelade, Lamidi & Olowa 2006).
Across international boundaries, the meaning of small business differs from
nation to nation depending on the volume and intensity of economic activities.
The value of a country's currency is also a determinant of the categorization of a
business into small, medium or large-scale. Thus, the capital specification for a
small business in country with a high-valued currency may be commensurate
with the volume of capital for large-scale business in a less-valued currency
economy.
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Environmental Factors and Entrepreneurship Development
A critical appraisal of EU definitions on SMEs was done. Based on EU's report on
SMEs in 2021, SMES was said to form the backbone of Nigeria's economy with
99.8% or 20.7million enterprises in Nigeria. The bulk of these enterprises i.e.,
92.2% are however, micro enterprises employing less than ten employees. This
implies that about 6.5% represent the real small and medium enterprises with
small enterprises employing between ten and forty-nine employees while
medium enterprises employ between fifty and two hundred and forty-nine
employees. For large businesses, this category accounts for about 0.2% of the total
enterprises but with number of employees above 250. However, in Pakistan, a
business of N25million in paid up capital and a total asset of N20million as well as
annual sales turnover of N250million is considered as a small and medium
enterprise.
In quantitative terms, SMEs in Nigeria provide about 67.4 per cent of the total
employments in the non-financial business sector of the Nigeria economy in the
year 2012. The same was 67.4% in 2011 and 66.9% in 2010.
In Malaysia, the National Small and Medium Enterprises Council provided
definition for SMEs in the country. In Malaysia definition, a venture with number
of employees between 5 and 50 on full time with annual sale turnover of about
RM200, 000.00 is SME (Hashim, 2000).
Nooteboom (2002) has also reported some characteristics of small businesses to
include characteristics such as independence, personality, and the small nature.
Like mentioned earlier, the definition of SMEs is not straight jacketed and could be
defined based on the situation on ground. For instance, the contingency
perspective is used to illustrate this with understanding that actions and decisions
could be contingent upon a given condition or circumstance.
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Environmental Factors and Entrepreneurship Development
Expectedly, organizations grow from micro to big as this happen the core
characteristic changes to reflect new status of the organization. For instance, as the
organization grows, the entrepreneurs will have to consider delegation of
authority, develop organizational chart and establish lines of authority while
building or establishing a formal organizational structure, as well as strategies to
navigate harsh economic environment and mitigate the effect of change.
Nooteboom (2002) also reported that small organizations are quite strong in terms
of invention and application of appropriate technologies to produce appropriate
products to serve the market. Some authors opined that wealth creation is the
focus of entrepreneurship most especially in the developing economies (Amit &
Zo , 2001; Hi , et al 2001, 2002; Morris, 2001; Kuratko & Welsch, 2003).
SMEs are mostly found in the food and drink sectors. They are also involved in the
clothing, leathers, woodworks and the cosmetics. Others include: automotive
parts, electrical parts, agro-processing and solid minerals processing. In service
sector, we have SMEs playing key role in wholesaling and retailing, consultancy,
computer servicing and maintenance, education, and so on (Fabayo, 2009).
Entrepreneurship and Small Business: A Misconception
Entrepreneurship and small business are two concepts that have been
misconcepted in literatures on management and business for many years. Many
authors have used entrepreneurship and small business as synonyms as if there
are no differences between them. Some thought it is an issue of semantics and one
can use one of the two as alternative. It is however, true that the two concepts are
closely related because small businesses provide a platform for the operation of
entrepreneurship but for sure, entrepreneurship and small business have
demarcation. Entrepreneurship is a broader term and it subsumes small business.
This implies that small business promotion and management is an aspect of
entrepreneurship but not entrepreneurship in itself. Some researchers have
however, made efforts at distinguishing these two all-important concepts.
Ogundele (2007) noted that the common practice is for discussions on
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Environmental Factors and Entrepreneurship Development
entrepreneurship to be focused on small business promotion and management
simply because SMEs constitute the natural habitat for entrepreneurship. Darren
& Conrad (2009) in their study reported that authors have used the two concepts
of entrepreneurship and small business interchangeably as if they are
alternatives. Though entrepreneurship and small business could be said to aim at
similar goal they tend to have some significant differences. Lucky and Olusegun
(2012) in their work made an a empt to distinguish between the two concepts
when they opined that entrepreneurship is the process that led to creation of small
businesses while small business is an entity on its own. In as much as this could be
a sharp distinction between the concepts, small business after creation still require
entrepreneurship to nurture and grow sustainably.
Similarities between Entrepreneurship and SMEs
There is no doubt that entrepreneurship and SMEs have many things in common.
Some of these are discussed below:
i.
Similar Objective
Entrepreneurship and SMEs have similar goal of job creation, wealth
creation, poverty alleviation/reduction, rural industrialization as well as
promoting national socio-economic development (Rebecca et al. 2009).
ii.
Affected by Similar Factors
Both entrepreneurship and SMEs are affected by similar factors. For
instance, factors that are responsible for success or failure of
entrepreneurship are the same factors for success or failure of SMES. Of
note amongst these factors are characteristics of individuals, business
location, culture in practice, environment, company's characteristics and
so on (Lucky, 2011; Lucky & Minai, 2011; Rebecca et al., 2009; & Ogundele,
2007).
iii.
Similar Caracteristic of Founders
In entrepreneurship the founder is referred to as entrepreneurs but
business owners/managers in SMEs. Though we can give them different
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Environmental Factors and Entrepreneurship Development
names but they have similar characteristics and traits necessary to manage
business. Such characteristics include: hardworking, perseverance,
passion, creativity, innovativeness, persuasiveness, energetic, risk taking,
proactiveness, competitiveness, flexibility, patience, integrity,
communication, decision making, and opportunity identification
(Ogundele, 2007; Rebecca et al. 2009). These are some of the traits and
characteristics possessed by entrepreneurs and business
owners/managers to assist them to navigate the storm and manage the
enterprise successfully.
Differences between Entrepreneurship and SMEs
There are some thin lines of differences between entrepreneurship and SMEs but
because the differences are not too obvious people including researchers and
practitioners use the two interchangeably. The following are some of the
differences:
i.
ii.
iii.
Output
The output of entrepreneurship effort of an entrepreneur is SMEs without
which the effort of the entrepreneur is wasted. What can be shown for
entrepreneurship effort is thriving SMEs, hence, SMEs are products of
entrepreneurship effort but not entrepreneurship itself.
Orientation
Entrepreneurship produces entrepreneurs who are different in orientation
from Business Owners/Managers who are not necessarily entrepreneurs.
Owning a business does not make anyone an entrepreneur in the real sense
of entrepreneurial orientation of risk taking, proactiveness, innovativeness
and creativeness.
Purpose
Entrepreneurship also differs with SMEs in terms of purpose of the
founders. While entrepreneurs set up new ventures, they innovate in every
aspect of the venture as well as constantly looking for and exploiting
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Environmental Factors and Entrepreneurship Development
iv.
business opportunities within the environment, Business owners are more
interested in just managing their businesses and they hardly innovate nor
exploit their environments for further business opportunities.
Skills
Though they may have similarity in trait and characteristics, the training of
an entrepreneur is more rigorous that that of Business owners because
multiple skills are needed by entrepreneurs to function and deliver new
ventures successfully.
Characteristics of Small Business in Nigeria
Small businesses have peculiar characteristics which distinguish them from large
ones. With particular reference to the Nigerian economy, Ogundele (2007)
identifies the following basic features:
1.
Few numbers of employees
2.
Relatively low investment and turnover per annum.
3.
Industry size is small.
4.
Owners are mostly the managers.
5.
The feature of owner-manager results in another feature of personalized
management style in small-scale enterprises with regards to most of the
activities of the enterprise, including decision making process.
6.
Small scale firms unlike large scale firms with complex structure exhibit
simple structure with few individuals involved and few levels also.
However, this simplicity of structure does not mean that small scale
companies do not exhibit managerial complexity of their own.
7.
The technical needs of SMEs are straight forward than those large
companies but their management activities are not so straight forward in
real situations.
8.
Although SMEs have simple structures, they often show complex a itudes
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Environmental Factors and Entrepreneurship Development
and behaviours. Therefore, the environmental factors of the individual
small-scale enterprises are important in managing SMEs effectively and
efficiently.
9.
There are also differences between small scale and large-scale
organizations in the areas of managerial structure, policy making
procedures and utilization of resources, as such, unmodified application of
large-scale management concepts and principles in the SMEs are
questionable. Even within the SMEs, managerial issues are not the same
across board for all SMEs.
10.
The link between performance on the job in SMEs and personnel training is
weak.
11.
SMEs have unique organizational management process. For example, they
maintain close contact and relationship with customers, clients based on
direct eye-to-eye contacts in most transactions.
12.
Definitions of SMEs also vary from country to base on relevant criteria in a
given country.
13.
SMEs are flexible because of the simple structure and thus given room for
technological innovations.
14.
A way of managing SMEs effectively and efficiently is through rational
combination of available resources of man, money, machine, material,
market, time relationships and management.
15.
On a macro-dimension, SMEs system affects the ability of any economy to
be innovative and change to meet the ever-changing needs and wants in
the economy.
16.
·
The role of entrepreneurs in the management of SMEs include:
Initiating profitable business idea.
·
Provision of initial capital.
·
Subsequent expansion and changes in the amount of goods and services.
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Environmental Factors and Entrepreneurship Development
·
Production/Product innovation.
·
Market innovation
Scanning the environment to determine factors that affect operations of the
SMEs. These are the areas of social, cultural, technological, economy,
competition, law, government regulations and policies, buyers' behaviour,
climate, industry structure and many more.
Institutional Supports for SMEs in Nigeria Universities
The Universities in Nigeria are used as resource centers to nurture and promote
entrepreneurship in some of the following ways:
·
i.
Entrepreneurial a itudes- Universities do this through teachings and
probably indoctrination to make students to develop entrepreneurial
a itudes.
ii.
Internship opportunities- Universities especially those spin off companies
and functioning entrepreneurship centers provide excellent opportunities
for internship for students where they are trained on business skills and
offered mentoring opportunities.
iii.
Own Your Own Business: Universities through the spin off companies and
entrepreneurship centers provide staff and students the opportunities to
own their own companies.
Support can flow from the universities to would be entrepreneurs through free
consultancy services, business plan preparation, equipment sourcing, raw
materials evaluation, registration with appropriate agencies like the Standard
Organization of Nigeria, factory space provision, equipment leasing and so on.
Research-Based Spin-off was defined by Shane (2004) to mean a new company
established by exploiting the innovation or patent or simply put intellectual
property from research and development effort of a university. Though this is
common in EU but spin-offs from private research organizations are more
prevalent than those of the public universities. As at today, there are over one
hundred and fifty established business incubators in EU with adequate support
from BIC, a non-governmental organization with headquarters in Brussels.
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Environmental Factors and Entrepreneurship Development
Small & Medium Enterprises Agency of Nigeria (SMEDAN)
The clamoring for the development of small and medium enterprises
development agency led to the establishment of this agency by the Act of
Parliament instrument SMEDAN Act 2003. The first Head of the agency
appointed by the government is Mrs. Dupe Adelaja. The agency is structured as a
“one stop” center to meet the needs of the small and medium enterprises. It
should be noted that the SMEDAN Act also makes provisions for the agency to
take care of the needs of the micro enterprises. In Nigeria small and medium
enterprises have also been documented to make significant contributions to
national economy despite the fact that the sector is still largely informal with
minimum form of organization. This is one of the major reasons for which
SMEDAN was established. That is to properly coordinate the activities of the
small and medium enterprises such that the sector will be able to perform
effectively its traditional role of job creation, create wealth and lift millions of
people out of poverty through gainful and sustainable employment.
In the SMEDAN Act 2003, eight major areas are highlighted as functions of the
agency. The agency is charged with issues of policy formulation for SMEs
development is Nigeria. The agency is allowed by law to initiate policies which it
considers appropriate for SMEs development. The agency is saddled with the
responsibility to coordinate and monitor all the activities of SMEs in Nigeria. The
issue of SMEs modernization was also captured expressly in the SMEDAN Act
with the agency empowered to develop programmes and services in support of
modernization of the operations of SMEs as well as to accelerate the development
of this very important sector of the economy. Easy access to finance and industrial
infrastructure have been the bane of SMEs in Nigeria; luckily these issues are
captured under the function of SMEDAN.
SMEDAN expectedly is also to facilitate easy access to finance and industrial
infrastructures by the SMEs. Aside from this, SMEDAN has the function of liaison
between SMEs and the government as well as to promote rural industrialization
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to reduce poverty and reduce rural-urban migration for all round socio-economic
development. Management training for SMEs is part of the major function of
SMEDAN. This aside from provision of technical skills and appropriate
technologies for the SMEs, management training of how to manage small
business is essential without which the business could fail within few months of
establishment.
SMEDAN is living to its responsibility fulfilling its mandate of promoting SMEs
development for job and wealth creation and promoting national and local
economy through measureable impact. This agency like many other government
agencies however, has its own limitations especially in terms of adequate funding
to execute its programmes with success. There is no doubt that with adequate
support by the government of Nigeria, SMEDAN has what it takes to enhance
rapid industrialization of Nigeria especially when working in synergy with other
SMEs support institutions.
Aside from the above support institutions for SMEs development in Nigeria, there
are many other organizations that are involved. Such includes the efforts of the
Federal Institute of Industrial Research Oshodi (FIIRO), Raw Materials Research
and Development Council (RMRCD), National Board for Technology Incubation
(NBTI), National Agency for Science and Engineering Infrastructure (NASENI),
Bank of Industry (BoI), Bank of Agriculture (BoA), National Directorate of
Employment (NDE), National Economic Reconstruction Fund (NERFUND) and
so on.
Environment of SMEs in Nigeria
The environment of SMEs is very important to its survival and business strategies
must be developed to play significant role in influencing both internal and
external environment of SMEs in positive manner to achieve business success
(Duncan, 1972 and Grant, 1999). Otokiti and Awodun (2003) in their study,
recommended that organizations must begin to pay more a ention to the issue of
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environment and how its affect business success when they are formulating
strategies for entrepreneurial success. Beal (2000) noted that organizations that
align their strategies with environment requirements perform be er than those
without such alignment.
Views are very divergent on the issue of environment in management literature.
Authors have expressed different views based on their perspectives influenced by
their disciplines, experience, orientation and theories guiding each author. Okoh
and Munene (1986) viewed environment beyond physical environment but
include persons and organizations as well as economic, technology and social
environments.
Obasan (2001) describe environment as a combination of both social and physical
forces interacting directly with an organization to achieve its set goal while
Osuagwu (2001) viewed environment as the total sum of factors - physical and
non-physical that determine the success or performance of an organization. A
more robust description of environment was presented by Adeoye and Elegunde
(2012) where environment was described as combinations of all the factors both
tangible and non-tangible that give lifeblood to organization for its survival and
success.
Environmental Factors
Every organization must be able to predict its environment especially in a manner
that it will have positive influence on its performance. Uncertainty results in
environment when organization is unable to predict its environment or factors
that are characteristics of such environment (Milliken, 1987).
Factors of the General External Business Environment
External environment can be described as relatively remote with elements
composing it having a more or less indirect influence on the organization. Grant
(1999) opined that physical and natural environment; legal, demographic,
educational as well as economic and legal factors form the core of environment.
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Types of External Business Environment
In the opinion of Duncan (1972) external environment refers to every factor that is
outside the organization that can affect its decision making to achieve
organizational goal. These factors could be complex or dynamic (Dess & Beard,
1984). Generally, an environment can be described as stable or unstable: it is stable
when it hardly shows any changes but unstable when the environment is
characterized with frequent changes (Aguilar, 1967). The size and type of the
industry will however, affect the perception of an organization about its
environment.
Economic Environment
The economic environment of an organization can makes or mar it, and so,
organizations must be well concerned about their economic environment. The
organization must be interested not just in the state of the economic nationally but
international environment must equally be of concern. This is because the
happenings on the international scene could have significant effect on what
happen nationally which in effect could affect the performance of an organization.
An organization must be well prepared to adjust and take the right decision to
survive and achieve its goals when the economy is undergoing structural change
with focus of economy shifting from one sector of the economy to another.
Equally, if the economy is undergoing cyclical change, the organization must
know what to do by taking the right decision. For instance, what happens to an
organization when the economy contracts and when the economy experience
growth?
Political Environment
Unstable political environment is bad for business. Such environment is
characterized with political risks and policy instability which could affect
organizational investment decision making to a very large extent. Other factors of
concern to an organization in the political environment include issues of trade
barrier, tariffs, taxation, government spending, licensing, patents, local
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Environmental Factors and Entrepreneurship Development
legislation. High tariffs for example will favor local production whereas low
tariffs will make imported products to be too cheap thereby discouraging local
production or investment. Pa ern of government spending says a lot about
investment pa ern or decision of an organization.
Strategic Approaches to Small Business Management
The role of vision cannot be overemphasized in strategic approach to small
business management. The enterprise vision statement should state clearly what
the enterprise wants to be in future while how such vision would be accomplished
should be stated in the enterprise's mission statement. Running an enterprise
without a vision is like having a ship without rudder. Vision and mission
statements go together and are very fundamental to enterprise success or
survival. Akande (2012) described vision as a projection, an image that is
imagined for the enterprise in the future. For enterprise vision to materialize,
concrete actions must be designed and implemented along the line of the
enterprise vision. For small businesses, vision must be well focused not diffused
and if possible, there should be a central vision targeted at the type of product(s)
and services imagined by the entrepreneur for his enterprise in the future. Once
the central vision is laid out by the entrepreneur, every other actions aim at
achieving the central vision would be built around the vision. This is the starting
point in strategic planning (Bird & Jelinek, 2002).
Entrepreneurs have different motives for starting new ventures (Wiklund et al.,
2003). These motives can be financial and non-financial motives. For instance,
while some entrepreneurs set out for profit maximizations others have the
objective for profit optimization. Some shrewd entrepreneurs pursue profit
maximization for selfish reasons not minding whether the value created by his
product or service worth the value of the money exchanged for the product or
service. However, in profit optimization, the entrepreneur care about the value his
product or service offers to the customer in mutual beneficial manner.
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Environmental Factors and Entrepreneurship Development
Entrepreneurs also have different perceptions about growth, how growth should
be measure and what constitutes real growth. Researchers have looked at growth
from perspectives of market, employees and profit. Hamel and Prahalad (2003)
looked at growth from the view point of new challenges and the opportunities
that can accrue to employees from these new challenges. Morris (2001) in his study
noted that growth in market does not automatically translate to growth for small
organizations due to some environmental challenges facing small organizations.
Researchers have studied some factors responsible for firms' growth. For instance,
Edward (2011) reported that entrepreneurs' characteristics which are personal in
nature have positive influence on performance of firms while strategic orientation
was found to mediate the relationship, the study provided explanation to the
reason why entrepreneurs make different strategic decision even when operating
under similar conditions and environments. The deduction from this is that
entrepreneurs' human capital which varies in manifestations from entrepreneur
to entrepreneur play key role in strategic decision making which could have
significant impact on the performance of firms. A company for example may be
running at a loss under an entrepreneur but when such business is taken over by
another entrepreneur, the business could start making profit even when
operating under similar conditions and environment with the only difference
being human capital of the new entrepreneur/owner/manager deployed.
Challenges of SMEs Operators in Nigeria
SMEs like any other sectors of the economy in Nigeria are faced with some
challenges. Some of these challenges have been identified and discussed below.
i.
Limited Access to Finance
This is a major challenge of SMEs in Nigeria. The development and
commercial banks are given out credit facilities to SMEs at rate that make
break-even very high and most a times unaffordable to the SMEs. The kind
of collateral required to secure these loans are also unaffordable to SMEs in
most cases.
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Environmental Factors and Entrepreneurship Development
ii.
Low Rate of Survival
The survival rate of SMEs is low in Nigeria. Policy instability is one major
challenge for low rate of survival. Also, lack of easy access to market as well
as informal nature of SMEs account for low survival rate
iii.
Inappropriate Technology
Inappropriate technology being deployed by most SMEs account for
production inefficiency resulting in low output from input thereby leading
to economic loss.
iv.
Hostile Business Environment
Business survival in hostile business environment is usually low especially
for SMEs with no or li le capacity and resources to develop survival
strategies to lead enterprise to success.
v.
Low Level of Linkage or Collaboration
Most SMEs like working alone instead of collaborating with others to take
advantage of resources and develop sustainable competitive advantage.
Conclusion and Recommendations
There is no doubt that SMEs are making significant contribution to the economy of
Nigeria. In 2005, African Development Bank reported that SMEs contributed over
55% to Nigeria's overall employment. The same sector contributed 22% of the
National Gross Domestic Product in the same year 2005. The need for
entrepreneurship at this moment of our national history with unemployment rate
of over 33% cannot be overemphasized. This is because entrepreneurship and
establishment of micro, small and medium enterprises is the major way out to
creating sustainable employment. The study carried out by Nkechi, Ikechukwu
and Okechukwu (2012) bu ressed this point where they opined that the need for
entrepreneurship in any developing economy cannot be overemphasized. The
study carried out by Oluremi and Agboola (2011) established a positive
relationship between entrepreneurship and economic growth.
Having recognized the great potentials of SMEs at enhancing socioeconomic
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Environmental Factors and Entrepreneurship Development
development, government is directing much a ention towards making SMEs to
be more functional to perform their role most especially job and wealth creation.
This a ention is justified not only from the view point of the benefits of SMEs to
the economy but also from the view point that SMEs are be er and efficient users
of resources compared to the large enterprises. More importantly, SMEs serves as
a middle link between micro enterprises and the large enterprises serving both
efficiently and effectively. As a result, SMEs are be er drivers of national
economy. Despite this, SMEs are faced with high cost of capital as well as wages
that are comparably low (Jaakkola, 2006). Most SMEs are managed by their
owners, as a result, they are more careful in deploying financial resources and this
in turn lead to efficiency in management.
This is a call for more action towards entrepreneurship to build functional SMEs
where the entrepreneurs/owners of SMEs will fully manifest entrepreneurial
orientation in the dimension of risk taking, competitiveness, proactiveness,
creativity and innovativeness. These dimensions of entrepreneurial orientation
are the impetus to enhance business performance. Researchers have noted that
entrepreneurship rate vary from country to country with advanced nations taking
the lead over developing nations that needed entrepreneurship most to take them
out of their numerous socio-economic challenges. Jaakkola (2006) reported that
developing countries has less understanding of entrepreneurship. Oswald (2008)
also reported that there is li le understanding of the entrepreneurship rates and
the reason for differences between nations. Equally, there is limited knowledge on
the success factors of entrepreneurial firms from country to country (Shane, 2000).
The above also calls for more research in the field of entrepreneurship most
especially research on entrepreneurial success factors and conscious
implementations of the findings of such results to enhance the performance of
SMEs to promote socioeconomic development. Policy makers should be up and
doing, looking for recommendations from entrepreneurship researches to assist
in formulating appropriate policies for SMEs development in Nigeria.
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Environmental Factors and Entrepreneurship Development
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GREEN MARKETING AND
ENVIRONMENTAL DEGRADATION IN
LAGOS STATE, NIGERIA
CHAPTER
10
AYEDOGBON Adeleye Olorunleke &
DOPEMU Olawale Samson
Abstract
This study examines the effect of green marketing on environmental degradation
in Lagos state, Nigeria. The study also explores various factors that contribute
towards environmental degradation. The study adopted a descriptive survey
research design and data collected from different respondents who are green
product users or consumers in Lagos state, Nigeria covering a sample of 100
respondents. The data collected through self-administered questionnaire and
analyzed using descriptive and inferential statistical techniques such as factor
analysis, and regression analysis. The study showed that taking all other
independent variables at zero, a unit increase in green marketing will lead to a (0.339) decrease in environmental degradation. This implies that as the green
marketing increases, environmental degradation decreases. The findings also
indicated that all the influential factors such domestic, industrial, socio-economic,
ecological and functionality are highly significant and found to be related to
environmental degradation. The study therefore, recommends that businesses
should do more in their responses to green marketing principle and while the
consumption activities of all households should be minimized in order to reduce
waste produced, rather than find inappropriate disposal for it.
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Keywords: Environmental degradation Green marketing, & Green products,
Introduction
One of the primary objectives of any society is to achieve environmentallyfriendly sustainable development, which can be achieved by addressing the
problem of environmental degradation (Durosinmi, 2017). The fundamental
environmental problem emanating from the process when the environment is
increasingly being exploited for one set of use (eg, provide sources of raw
materials and energy, and to assimilate additional waste), the quality of the
environment may deteriorate (Odunuga, Udofia, Osho & Adegun, 2018). An
environment that is providing resources as material and energy in excess of its
regeneration and continuously absorbing waste in excess of assimilative capacity
must be experiencing some ecological damage and deterioration (Adebiyi &
Sangosanya, 2007). The increase in environmental stress must ultimately affect
basic socio-economic requirements for human existence such as good road, air,
clean water, agricultural productivity and other natural services(Wahab, 2018).
However, the natural environment is essential for economic activity and human
welfare which can serve as the entire spectrum of utility-yield function, not only
the productive service of industrial raw materials, but also the life-support and
amenity services(Adebiyi & Sangosanya, 2007). Thus, natural environment can be
seen as a store of natural capital that yields streams of multi-purpose services
(Adebiyi & Sangosanya, 2007). These streams of multi-purpose services underline
the physical dependency of the economic process and human welfare on ecology.
The maintenance of environmental quality ensures ecological stability and this
has positive impact on social welfare (World Commission on Environment and
Development, 2005). Social welfare increases when environmental improvement
services, like infrastructure, are ensure. In every period, society must optimally
allocate resources between consumption and services to improve the
environment (Gbadeyan & Omolekan, 2015). Feeding on the environment
without improving its quality will increase environmental degradation.
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Consequently, the importance of environmental quality is very crucial for socioeconomic development (Anyahie, Nwachukwu & Ebimie, 2020). In this way, it is
imperative to bringing up a framework for reducing environmental stresses.
Green marketing has been considered as a process which can be used to protect
the environment and conserve resources (ABB FIA, 2014). This tends to get the
most practical benefits from products and to generate the minimum amount of
waste. This approach also triggers other positive externalities such as resource
savings, pollution reduction, and avoidance of greenhouse gas emissions,
development of sustainable technologies and creation of jobs (ABB FIA, 2014).
Therefore, it is against this background, that this study examines the effect of
green marketing on environmental degradation and pointing out the various
factors that contribute towards environmental degradation.
Statement of the Problem
In Nigeria generally, lack of environmental consciousness increases
environmental degradation, thus, reduces environmental quality. Meanwhile,
human activities exert great pressures on the environment which in turn cause
environmental stresses of various intensities depending on the factors involved
and the sensitivity of the receiving environment (Odunuga, Udofia, Osho &
Adegun, 2018). The environmental degradation takes diverse forms, ranging
from pollution and destruction of ecosystems to degraded fresh water supplies
and arable land (Durosinmi, 2017). In Lagos state, Nigeria, the major sources of
pollution are road transport, industrial emissions, and generators aggravated by
open burning and illegal dumping of waste (World Bank, 2020). The vehicle
emissions, toxic waste, carbon emissions, all emits toxins into the atmosphere
have consequential implications on the environmental quality(Durosinmi, 2017).
Environmental damage in the form of loss of green cover, loss of biodiversity,
huge landfills, increased air and water pollution causing Global Warming
(Odunuga, Udofia, Osho & Adegun, 2018). The behavioural a itude of people in
term of improper disposal of product wastes also promotes environmental
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Environmental Factors and Entrepreneurship Development
degradation (Gbadeyan & Omolekan, 2015). Likewise, the excessive waste from
the product packages such as cans, cellophane, plastic bags, bo les/sachets, nonrecyclable, non- reusable are dump on refuse or anywhere are capable of causing
environmental degradation(Iweama, 2015).
Moreover, the huge number of people presently relies on the coastal ecosystem
including the lagoon coast ecosystems, habitats and resources also use the coastal
areas as a dumping ground for sewage, garbage and toxic wastes (Odunuga,
Udofia, Osho & Adegun, 2018). The growing urbanization and industrialization
have worsened the condition (Odunuga, Udofia, Osho & Adegun, 2018).
According to some experts who predicted, Lagos becomes the world's largest city
by 2100, the sources of pollution will likely increase as industry grows and
transportation needs soar pu ing even greater pressure not only on the physical
environment but also on the social environment2 9 (Odunuga, Udofia, Osho &
Adegun, 2018; World Bank, 2020). As the commercial and industrial hub of
Nigeria and, indeed, West Africa, Lagos naturally runs the risk of environmental
hazard.
Despite efforts of government being put in place to sensitise residents on the need
to protect the environment, human health and social living standards of Lagos
residents, some still prefer to continue to live in the past as they still get involved
in actions capable of causing environmental degradation (Durosinmi, 2017).
However, in an a empt to ensure environmental sustainability, some
environmentalists have argued for a more dynamic and holistic approach to
environmental protection through green marketing in order to promote, preserve
and conserve the natural environment(Nkamnebe, 2011).
Objective of the Study
The study objectives are:
i.
To examine the effect of green marketing on environmental degradation
ii.
To investigate the impact of consumption behavior of the Lagos residents
on environmental degradation
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Environmental Factors and Entrepreneurship Development
iii.
To explore the various factors that contributes towards environmental
degradation.
Literature Review
Conceptual and Theoretical Framework
Presently, there is no consensus on the definition of green marketing (Ebhote &
Izedonmi, 2017). In other words, there is no universally accepted definition of
what a green marketing is. Nevertheless, based on the plethora of definitions of
green marketing, some defined green marketing solely to promotion or
advertising of products with environmental characteristics but it is a much
broader concept (Ahmad, 2014). Green marketing encompasses a broad range of
activities, which include product modification, changes to the production
process, changes in packaging, modification to advertising, and so on (Ahmad,
2014). Literally, green marketing refers to selling products or services by
highlighting their environmental benefits (Lesley, 2019). Green marketing is a
business practice that deals with the developing and advertising products based
on their real or perceived environmental sustainability (Fernando, 2021). Green
marketing is the marketing of products that are presumed to be environmentally
safe. Thus, it helps an enterprise make decisions that have a positive impact on the
environment. Advertising and product packaging are key elements in marketing
an environmentally sustainable business(Wahab, 2018).
Examples of green marketing include advertising that reduced emissions
associated with a product's manufacturing process, or the use of post-consumer
recycled materials for a product's packaging. Some companies also may market
themselves as being environmentally-conscious companies by donating a portion
of their sales proceeds to environmental initiatives, such as tree planting
(Fernando, 2021). Although green marketing refers specifically to environmental
initiatives, these efforts are increasingly presented alongside social and corporate
governance policies as well.
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Environmental Factors and Entrepreneurship Development
According toFernando (2021)., green marketing refers to the process of producing
and selling products based on their environmental benefits and such products
must be eco-friendly in nature. Marketing products that benefit the environment
and the ecological properties of products are important in order that companies
produce ecologically safer products, including recyclable and biodegradable
packaging. Green marketing is a technique used by brands to market their
products or services based on their green-appeal, that is, their eco-friendly
characteristics (Brightsea, 2020). The concept of green marketing appeared as the
after-effect of humans' negative impact on our planet. Brands illustrate how they
change their missions and practices from revenue-driven to environmentally
aware by business processes that have the least impact on the environment as
possible(Lesley, 2019).
However, be er pollution controls and more energy-efficient production
processes and product performance form a part of green marketing. This concept
has enabled for the re-marketing and packaging of existing products which
already adhere to such guidelines (Dono, 2010). The need for green marketing is
on the increase due to issues like Global warming and depletion of ozone
umbrella and the need for the healthy survival (Chan, 2012). The concept is
popular in the developed countries of the world while the developing nations are
catching the need of green marketing from the developed countries but still there
is a wide gap between their understanding (Gbadeyan & Omolekan, 2015).
Moreover, terminologies like environmental marketing and ecological marketing
are used to refer to green marketing(Gbadeyan & Omolekan, 2015). It can be ecomarketing or environmental marketing, and consumers recognize such brands by
terms like "organic," "eco-friendly," "recyclable," or "sustainable" (Lesley, 2019).
The development of green marketing has opened the door of opportunity for
companies that are environmentally-conscious. Recently, organizations are now
offering more eco-friendly alternatives for their customers; re-cycled products are
one of the most popular alternatives that benefit the environment (Ebhote &
Izedonmi, 2017). Organizations that are environmentally-conscious gain
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competitive advantage over the other non – environmental firms in the market
place because environmentally-conscious companies use green products to
distinguish themselves from others thereby building a competitive position at the
same time present the companies an opportunity to participate in the greening
process by creating new standards(Ebhote & Izedonmi, 2017).
Additionally, the practice of green marketing can lead to increased market share;
this is because consumer's awareness of green-based products that offers be er
quality and other products features are on the increase(Abdul &Alauddin, 2016).
In some cases, it is observed that firms promote their environmental behaviour to
reap benefits of the society and this pressure causes industries to modify and
reduce their harmful environmental behavior(Ebhote & Izedonmi, 2017).
It is also believed that the adoption of green marketing practices will improve the
organizational image and further increase their reputation among their target
customers which will have a ripple effect of increasing the revenue of the firms,
the efficiency of their resources, their savings, dipping the quantity of input that
they make use of in their operations, and increase their level profitability
(Anyahie, Nwachukwu & Ebimie, 2020). However, common features which
distinguished green products from non-green products exist. These features
include products with the following features: energy efficient (both in use and in
production), water efficient (both in use and in production), low emi ing (low on
hazardous emissions), safe and/or healthy products, recyclable and/or with
recycled content, durable (long-lasting), biodegradable, renewable, reused
products, third party certified to public or transport standard (e.g., organic,
certified wood), locally produced(Ebhote & Izedonmi, 2017). Products which are
recyclable, reusable and biodegradable in nature are referred to as green
products. It is produced with natural ingredients and containing recycled
contents, non-toxic chemical (Gbadeyan & Omolekan, 2015). Green products are
originally grown and manufactured under the approved chemical. They do not
harm or pollute the environment. That is why they are referred to as
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Environmental Factors and Entrepreneurship Development
environmental friendly. Green product development addresses environmental
issues through product design and innovation(Chan, 2012). Green products have
also been described as products that claim to offer an environmental benefit
(TerraChoice, 2010). Examples of these products are building materials,
furnishings, consumer products, electronics, washing machines, air conditioner,
fridge, health care products, organic and green foods(Wikipedia 2022).
Evolution of Green Marketing
The concept of green marketing came into being early 1990s(Ebhote & Izedonmi,
2017). The evolution of green marketing has been discussed based on three phases
(Wahab, 2018). The first phase was termed as "Ecological" green marketing, and
during this period all marketing activities were concerned to help environment
problems and provide remedies for environmental problems (Jaspreet, Jatin,
Jogesh & Jupinder, 2012). Second phase was "Environmental" green marketing
and the focus shifted on clean technology that involved designing of innovative
new products, which take care of pollution and waste issues(Ebhote & Izedonmi,
2017).
Third phase was “Sustainable” green marketing, where it has become essential for
companies to produce environmentally friendly products as the awareness for
such products is on the rise as customers are demanding eco-friendly products
and technologies(Nadaf & Nadaf, 2014).
Green Marketing and Environmental Sustainability
The conditions for productive harmony and fulfillment of the social, economic
and other requirements of present and future generations necessitate the practice
of environmental sustainability. Environmental sustainability involves making
decisions and taking actions that are in the interests of protecting the natural
world, with particular emphasis on preserving the capability of the environment
to support human life (Wahab, 2018). The need for sustainable environment
practices by all around the world is identified to be result of overall increase in the
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Environmental Factors and Entrepreneurship Development
awareness of lack of environmental protection and social inequities (Anyahie,
Nwachukwu & Ebimie, 2020).
The increasing issues related to acid rains, depletion of the ozone layer, and
degradation of the land and many more pressing environmental issues are very
vital to the environmental quality resulted in the increase in business and
consumer concern with regards to restoration of ecological balance by producing
and demanding for eco-friendly products in countries around the world(Janssen
& Jager, 2002). Utilizing green materials or products help to reduce the
environmental impact of degradation(Factorydirect, 2022).
Moreover, businesses have been independently assessed by not simply about
reducing the amount of waste produce or using less energy, but developing
processes that will lead to businesses becoming completely sustainable in the
future (Wahab, 2018). Thus, businesses are expected to lead in the area of
environmental sustainability as they are considered to be the biggest contributors
to environmental activities and are expected to make a significant difference
(Wahab, 2018). Advertising and product packaging are key elements in
marketing an environmentally sustainable business. Green advertising, which is;
advertising that, emphasizes the environmental friendliness of the product. For
example, the use of a ributes such as degradability, recyclability, lower pollution
is considered to be environmentally friendly(Akter, 2012).
Most organizations have adopted a green strategy in their operations. A green
strategy is one that complements the business, operations, and asset strategies
that are already well understood and often well-articulated by the enterprise. A
green strategy fundamentally helps an enterprise make decisions that have a
positive impact on the environment (Oslon, 2008). Likewise, also helps consumers
to choose and use their goods and services sustainably. This can be done by
creating sustainable value for consumers by supplying products and services that
meet their functional and emotional needs for the present and future generations
while respecting the environment(Saxena & Khandelwa, 2010).
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Environmental Factors and Entrepreneurship Development
Moreover, many studies have shown that current and potential consumers are
now more concerned about their environment and are gradually changing their
purchasing behavour (Odunuga, Udofia, Osho & Adegun, 2018; Adebiyi &
Sangosanya, 2007; Gbadeyan & Omolekan, 2015; Abdul & Alauddin, 2016). As
reported byDurosinmi (2017), most environmental issues faced by societies today
which are detrimental to human life are due to excessive production and
consumption eco unfriendly products. The study of Sheth and Sisodia (2015)
suggested that environmental and social issues can be addressed through
marketing. Brightsea (2020) noted that it is the sole obligation of the organization
to serve the society in eco-friendly way.
Taking account of environmental aspects to shape marketing strategy has
consequently given rise to the concept of green marketing or otherwise known as
ecological marketing (Wahab, 2018). Ginsberg and Bloom (2004) have noted that
most organization have adopted green marketing as a strategic move to leverage
competitive advantages. Generally, green marketing ensures those firms are
ethically conducting their businesses most especially in conducting business
activities with their customers, suppliers, dealers, and employees.
Theoretical Framework
The theoretical underpinning of this study stems from Dependency theory. The
theory was developed from a marxian perspective and shares many points with
earlier, Marxist, theories of imperialism has a racted continued interest from
Marxists. Dependency theory posits that population pressure has a direct
relationship with environmental degradation, in fact poverty and unequal
distribution of resources (inequality) is causing both environmental degradation
and a persistent increase in population. Dependency theorists are of equal
opinion that environmental degradation can occur as a result of over
consumption. For instance, the high rate of consumption of fossil fuel energy
generation and transportation create emissions that contribute the global
warming and ozone depletion. These became acute problems due to the loss of
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Environmental Factors and Entrepreneurship Development
carbon sinks. Also, the continued logging of forests in developing countries is
another cause of degradation. These forests were logged as a result of the high
demand for timber and land cleared of forest was being turned into farms to
produce products to be sold in industrial countries.
These dependency theorists argue that people can adopt new technologies
to safeguard the natural environment only when they have access to these
technologies. If a country is densely populated and has high population growth
rates with limited or no access to new and improved technologies, then they
would not be able to adopt new technologies to safeguard their fragile natural
resources. Degradation of natural resources in that country does not necessarily
mean that there is no willingness by its people to take care of their environment.
Rather, they are unable to afford any improved technology to maintain the
robustness of their environment. They conclude that elimination of poverty
would occur only with the improvement in the living conditions of the lowincome group. Coercing families living in abject poverty to have fewer children is
only a short-term solution to reduce the number of people living in poverty. Fewer
children with no change in economic well-being, no social security net
and without any assurance that a smaller family size would ensure survival and
sustenance would not bring any meaningful change as a result of reduced fertility.
Methodology
Research design: The study adopts quantitative research methods. Descriptive
explanatory research design was used. The purpose of using this research design
is to gather precise and describe the characteristics of the variables and at the same
time investigate the cause effect relationship between variables (Mugenda &
Mugend, 2003). This design allows the collection of quantitative data from a
sizeable population in an economical way(Belz, 2005).
Data Collection Methods: The study primarily covering a self-administered
questionnaire. This was designed to collect primary data by using literature
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Environmental Factors and Entrepreneurship Development
review on the green marketing practices and environmental degradation as well
as consumption behavior of the Lagos residents. Five-point Likert scale ranging
from 1 (strongly disagree) to 5 (strongly agree) was used to collect data from
respondents who are different green product users or consumers. Four
demographic variables, namely, gender, age, education and occupation are taken.
Sampling: The participants are selected by purposive sampling. The goal was to
cover a variety of experiences of different green product users or consumers. A
total of one hundred and thirty-three (133) sample populations were taken, and
then Taro Yamane formula was used to derive the sample size of one hundred
(100) respondents.
Data Analysis Methods: The study employed descriptive statistics, inferential
statistical techniques such as Factor analysis, and regression analysis were used to
analysis the data by using SPSS (Statistical Package for Social Science).
Hypotheses
To examine the effect of green marketing on environment degradation in Lagos
state, Nigeria, the following null hypotheses have been framed.
H01: Green marketing practices have no significant effect on environmental
degradation
H02: Consumption behavior of the Lagos residents has significant impact on
environmental degradation.
Research model: The study used the multiple linear regression model to test the
effect of the independent variable on the dependent variable.
The regression model can be expressed econometrically as follows:
ED = α + β1.GM +β2GP + β3PU +β4AE+ u … ……….. (2)
Where:
ED= Environmental degradation;
GM = Green marketing;
GP = Green product;
PU = Product usage;
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Environmental Factors and Entrepreneurship Development
AE = Awareness and Enlightenment;
u = error term,
Data Analysis and Findings Discussion
Table 1: Demographic Information
Frequency
Percent
Cumulative Percent
Male
67
73.6
73.6
Female
24
26.4
100.0
Total
91
100.0
Age of the
25-35 years
41
45.1
45.1
respondent
36- 45years
12
13.2
58.2
46-55years
38
41.8
100.0
Total
91
100.0
WAEC/OND
32
35.2
35.2
HND/BSC
51
56.0
91.2
Master/PhD
8
8.8
100.0
Total
91
100.0
40
43.9
43.9
37
40.7
84.6
14
15.4
100.0
91
100.0
Gender
Education
Occupation Self Employed
Private
Employee
Business
Owner/Invest
or
Total
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Environmental Factors and Entrepreneurship Development
Table 1 provides the demographic information about the respondents. The
frequency distribution of the gender comprised of male and female. A total of 91
questionnaires were filled and returned by the respondents, out of which 67 of the
respondents were male representing 73.6 % of the total population and remaining
24 respondents were female representing 26.4 % of the total population.
Regarding to the age of respondents, 41 respondents who were having age 25-30
years representing 45.1% of the total population and only 12 respondents were
heaving age 30-35 years representing 13.2% of the total population. The table also
indicates that there was a preponderance of WAEC/OND respondents (35.2%),
HND/BSC (56.0%) which was followed by MASTERS/phD (8.8%) while all the
respondents engages in one activities or the other. 43.9% of the respondents are
self-employed, (40.7%) are private employees, (15.4%) are business
owners/investors.
Exploratory Factor Analysis
A total 91 usable survey responses were analyzed using factor analysis technique
to examine the relationship between different factors and environmental
degradation. Based on research questions, multiple factors were identified that
seem to be relevant for the environment degradation. A total of 5 main categories
with subcategories found to be related to environmental degradation.
Those factors have been discussed in the following paragraph.
Factor-1 (Domestic): This includes variables like consumption level, purchasing
behavior, household size household product waste etc.
Factor-2 (Industrial): This includes variables like industrial waste (product waste,
packaging waste like containers, cans, cellophane, bo les, and sachets), industrial
emission, vehicle emission etc.
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Environmental Factors and Entrepreneurship Development
Factor-3 (Socio-economic): This includes variables like poverty, inequality,
population, education etc.
Factor-4 (Ecological): This includes variables like deforestation, excessive energy
usage, water usage, degraded soil etc.
Factor-5 (Functionality): This includes variables like enforcement, regulations,
environmental planning etc
Table 2: Factor Analysis of the environmental degradation
Factors
Sample Mean
Standard Deviation T Statistic P Values
Domestic
0.115
0.053
2.500
0.036
Industrial
0.260
0.057
3.590
0.000
Socio-economic
0.073
0.057
5.274
0.020
Ecological
0.229
0.042
3.449
0.000
Functionality
0.126
0.066
7.888
0.060
From table 2, the mean value indicates their relevance in influencing
environmental degradation. The findings also revealed that all of the T-Statistic
(domestic p= 0.036; t = 2.500, industrial p = 0.000; t = 3.590, socio-economic p =
0.020; t = 5.274, ecological p= 0. 000; t = 3.449 and functionality p = 0.060; t = 7.888)
are larger than 2.33 at the 5 % level of significance, we can say that these factors are
highly significant and found to be related to environmental degradation.
Test of Hypotheses
H01: Green marketing practices have no significant effect on environmental
degradation
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Environmental Factors and Entrepreneurship Development
Table 3 Regression Results for Green Marketing on Environmental Degradation
Statistic
R Squared
0.669
F-Statistic (df, n)
(4, 91) 39.93
Constant
Green Marketing
Green Product
0.000
Coefficients Statistics
P-Value
0.274
0.556
0.001
-0.339
3.451
0.000
0.446
2.898
0.031
Product usage
Awareness and Enlightenment
P-Value
0.369
-0.237
9.190
2.585
0.000
0.012
Source: Researcher’ Computation using SPSS
The results show that the R2 is 66.9% which shows that the model explains 66.9% of
variations in the dependent variable the rest are explained by the variables not
fi ed in the model. The F statistic is 39.93 with a P value of 0.000; therefore, the
explanatory variables are jointly significant in explaining variations in the
dependent variable. The constant coefficient is significant at 0.274, P = 0.001, < 0.05,
implying that the independent variables jointly explain the variations in
environmental degradation.
Green marketing coefficient is significant at = -0.339, t = 3.45 > 1.96, P < 0.05 this
indicates that there is an inverse but significant relationship between green
marketing and environmental degradation, green product coefficient is also
significant at = 0.446, P=0.031 that shows that green product has influenced in
reducing environmental degradation. Based on the findings, product usage
coefficient is significant at = 0.369, P= 0.000, meaning that product is used in a
manner that it is sensitive or responsive to environmental concerns. And also,
awareness and enlightenment coefficient is significant at= -0.237, t = 2.585 greater
or less than ± 1.96, P = 0.012 < 0.05 implying that the awareness and enlightenment
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Environmental Factors and Entrepreneurship Development
have not been made to educate members of the society to take caution on their
purchasing behavior and improper disposal of product wastes which can pose a
serious danger to the environment.
According to the regression model estimated, taking all other independent
variables at zero, a unit increase in green marketing will lead to a (-0.339) decrease
in environmental degradation. This implies that as the green marketing increases,
environmental degradation decreases. The findings indicate that the green
marketing could lead to be er efficiency of managing the environment. These
findings are supported by similar results by Wahab (2018) that a green strategy
fundamentally helps an enterprise make decisions that have a positive impact on
the environment. The findings also agree withthe study of Anyahie, Nwachukwu
and Ebimie (2020) that organizations who strategically carry-out green marketing
practices by producing and making available green products and services has a
high probability to excel in the market compare with its competitor, as consumers
are beginning to be environmentally conscious and sensitive to green products
and services which will give them extra value and satisfaction.
Hypothesis Two
H02: Consumption behavior of the Lagos residents has significant impact on
environmental degradation.
Table 4: Regression Results for Consumption Behavior on Environmental Degradation
Statistic
R Squared
0.5394
Adjusted R Square
0.5247
F-Statistic (df, n)
(4, 91)
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P-Value
36.64
0.001
Environmental Factors and Entrepreneurship Development
Coefficients Statistics
P-Value
Constant
3.076
8.45
0.000
Consumption behaviour
0.113
2.25
0.025
Purchasing pa ern
-0.014
0.62
0.538
Product usage
0.534
7.95
0.000
Disposable waste products
-0.347
4.08
0.000
ED = 3.076 + .113 CB - .014 PP + .534 PU - .347 DWP
Where,
ED = Environmental degradation, CB = Consumption behaviour, PP = Purchasing
pa ern, PU= Product usage, DWP = Disposable waste products
The results show that the adjusted R2 is 52.47%; this shows that the model explains
52.47% variation in the dependent variable the rest are explained by the error
term. The F statistic is 36.64, and P = 0.001 where P < .005. Hence, the independent
variables are jointly significant in explaining variations in the dependent variable.
In addition, the constant coefficient is positive and significant at 3.076, t = 8.45 >
1.96 and P value = 0.000 < 0.05, consumption behaviour is positive and significant
at 0.113, t = 2.25 > 1.96 and P = 0.025 < 0.05. The purchasing pa ern coefficient is
negative and not significant at -0.014 t = 0.62 and P = 0.538, product usage
coefficient is positive and significant at 0.534, t= 7.95 and P = 0.000 while that of
disposable waste products is negative and significant at -0.347, t= 4.08 and P =
0.001.
According to the regression model estimated in Table 4, taking the independent
variable consumption behaviour constant at zero, the environmental degradation
is 3.076. The findings reveal that taking all other independent variables at zero, a
unit increase in consumption behaviour will lead to a 0.113 increase in
environmental degradation. The consumption behaviour has a positive
coefficient and is significant indicating that consumption behaviour and
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Environmental Factors and Entrepreneurship Development
environmental degradation has a positive relationship. This implies that
consumption activities lead to environmental problems. In other words,
environmental degradation is brought about by the consumption activities of
members of the society. The findings are in agreement with Belz (2005) who
reported that consumer behaviour includes the purchase, use and dispose of
product or services to satisfy needs and the immediate antecedents and
consequences of the purchasing process have significant contributions that
consumers can make towards environmental degradation.
Conclusion and Recommendations
The adoption of green marketing today plays a significant role in helping to find a
way and means of being receptive to environmental issues. The need is on the
increase due to the threat of global warming affecting the world and the
implication it has on all both the consumers and businesses is huge. Every person,
rich or poor is affected. Many businesses have come to recognize the value of
green marketing by appreciating its relevance in helping organisations expand
their business operation. To a great extent, the practice of green marketing by a
firm gives the firm an edge over other firms within the same industry, including
engage in low cost for production, embarking on products differentiation and
using focus strategy which has be found to be effective. Besides, helping
consumers get the right value for their money by making organisation to produce
high quality and environmentally friendly products which are safe for the health
of the consumer. However, green marketing happens to be in a strategy that is less
detrimental to the environment.
The following recommendations are based on both empirical study and literature
survey exercise.
i.
Although some businesses have strive to a great extent applying green
marketing concept to their organizational activities, but there is need to do
more and ensure all businesses respond to green marketing principle in
order to protect the environment for future generations.
ii.
The consumption activities of all households should be minimized in order
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Environmental Factors and Entrepreneurship Development
iii.
iv.
v.
vi.
to reduce waste produced, rather than find inappropriate disposal for it.
Businesses and households should ensure appropriate management of
waste, they should be encouraged to apply three R's of environmentalism
(Refuse or Reduce, Reuse, and Recycle).
Government should put in place working policies on environmental issues
and ensure strict implementation with monitoring be made compulsory
Government should come out with programs and initiatives providing
opportunity for all and sundry to make be er decisions or to motivate
them to be more environmentally responsible.
Education and public awareness programmes on environment and their
protection be initiated by NGOs and implementation effected.
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Environmental Factors and Entrepreneurship Development
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Adebiyi, A. & Sangosanya, O. (2007). Modelling environmental degradation: An
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Abdul, M. & Alauddin, M. (2016). Prospects and challenges of green marketing in
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Ahmad, A. (2014) A synthesis of green marketing concept as a recipe for healthy
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Anyahie, A., Nwachukwu, P. & Ebimie, E. (2020). Green marketing practices and
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Chan, K (2012). Consumer responses to environmental advertising in China,
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CHAPTER
11
ENVIRONMENTAL FACTORS AND
ENTREPRENEURSHIP DEVELOPMENT
IN NIGERIA
AJANI Abiola Joshua & FAMUYIWA Oladapo
Abdullateef
Abstract
The influence of environmental factors on entrepreneurship had been known as
important in the entrepreneurship literature. This study aimed at identifying the
environmental factors that affects entrepreneurship development as well as the
overall effect of environmental factors on entrepreneurship development.
Primary data was adopted to generate data from 132 entrepreneurs and owners of
business enterprise in Kwara State. The chi-square (χ2) distribution was the
statistical tool used in testing the acceptability or otherwise of the hypothesis
posed for this study. Findings revealed that environmental factors have an overall
significant effect on entrepreneurship development in Nigeria. It was also
discovered by the findings that all the environmental factors dimensions have a
significant relationship with entrepreneurship development in Kwara State,
Nigeria. Thus it is recommended that communities should identify aspect of their
culture which hinder entrepreneurship development and make necessary
adjustment. Finally, the issue of infrastructural facilities should not be seen as the
sole responsibility of the government.
Word Count:156
Key Words: Entrepreneurship development, Environmental factors, &
Infrastructural facilities
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Environmental Factors and Entrepreneurship Development
Introduction
The study of entrepreneurship as an evolving area of research as well as an area of
human endeavor has become a field of increasing interest to researchers,
academicians and policy makers all over the world. It has also brought about
different arguments and controversies in its concept and its definition 1.
Entrepreneurship as a concept can be seen as an instrument for eradicating
unemployment, poverty, and under development in developing countries. It can
also be used as a strategy to bring about rapid economic development both in
developed countries as well as developing nations 2-5. Entrepreneurship provides
an interesting dimension in its study which is focused on the different operations
that it plays in the different levels of economic development. This implies that
entrepreneurship can be seen as functionally operating differently in the different
level of economic development. For instance, in developed nations,
entrepreneurship and entrepreneurial activity focus on reestablishing dying
industries as well as providing new jobs to tackle unemployment which is created
due to downsizing and corporate restructuring, and to further enhance the
general economic flexibility and development.
It also serves as an engine for technological progress 6. However, in developing
and less developed nations, entrepreneurial activities functions by stimulating
economic growth, replacing the collapsing state-owned businesses, acts as a
means of job creation and employment generation, and act as an avenue for
empowering the segment of the population who are at a disadvantage 7. The
research on entrepreneurship has provided a relationship between the
environment and entrepreneurial activities 8-9.
Statement of the Problem
The function of entrepreneurship development as well as the economic
development is frequently a ached to the existence of some environmental
factors which the entrepreneur has li le or no control over. These interactions
between entrepreneurship and the environment are identified as new venture
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Environmental Factors and Entrepreneurship Development
strategies which are designed to respond to the environmental forces; the
negative resistance and the resistance of entrepreneurs to political interference;
and the unstable environment which are negatively related to growth
opportunities 8. The environment includes the physical infrastructural facilities
which include transportation, water, and electricity as well as the non-physical
facilities which include the regulatory policies, education, procedures and
financial credit. Entrepreneurship has contributed to economic development
especially in the rural area. This has drawn a lot of a ention on the concept over
the past years beginning from the economist analyst discovery that discovered
that small firms contribute to economic development 10.
Entrepreneurship has also been linked with economic freedom and is seen as a
catalyst to economic growth. Nonetheless, recent research has just started giving
a ention to the environmental factors which affect entrepreneurship. Emphasis
on previous research which focused on the psychological and economic factors of
entrepreneurship development, with few studies focusing on the environmental
factors which have significant effect on entrepreneurship. This is still the case in
Nigeria where the environmental factors which affects entrepreneurship
development is still fresh, development in Nigeria, with particular emphasis on
Kwara State.
Aim and Objectives of the Study
The aim of this study is to investigate government policies and entrepreneurial
development in ten selected Local Government Areas (LGAs) in Oyo State. This
research therefore looks at the specific objectives which were to:
i.
Examine the influence of government policies on GDP contribution within
the study areas.
ii.
Determine the impact of technically skilled labour force on productivity in
the study areas.
iii.
Investigate the impact of capital availability on business growth in the
study areas.
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Environmental Factors and Entrepreneurship Development
Research Questions
The under listed questions were raised so that the study could be anchored upon
it.
i. How does a government policy influence GDP contribution in the study
areas?
ii. How does technically skilled labour force influence productivity in the
study areas?
iii. How does capital availability influence business growth in the study
areas?
Hypotheses
Based on the variables of this study, these null hypotheses were formulated for the
research work.
H₀₁: There is no significant relationship between government policies and GDP
contribution of selected Local Government Areas in Kwara State.
H₀₂: There is no significant relationship between technically skilled labour force
and productivity of selected Local Government Areas in Kwara State.
H₀₃: There is no significant relationship between capital availability and business
growth of selected Local Government Areas in Kwara State.
Significance of the Study
This study examined entrepreneurial development and poverty alleviation in the
study areas. The researcher is of the opinion that the findings of this study will be
of use to the government, entrepreneurs, relevant stakeholders and the public in
general in enhancing their understanding of the poverty alleviation and
entrepreneurial development. This study will further add to knowledge on how
policy-makers can grow the economy through their support on entrepreneurial
development in Kwara State which has been identified as the driver for poverty
alleviation. The State Government will benefit from the study because it will
provide a veritable base for the effective government policies to the development
of entrepreneurial activities.
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Environmental Factors and Entrepreneurship Development
Scope of the Study
This study investigated the impact of entrepreneurial development on poverty
alleviation within Ilorin East (Oke-Oyi), Ilorin South (Fufu), Ilorin West (OjaOba), Offa and from Ekiti (Ilofa) LGAs in Kwara State.
Limitations of the Study
The researcher encountered the following constraints in the course of this work,
data constraint, financial constraint, limited information due to the type of
research work, time constraint and retrieval of questionnaire from the business
owners likewise uncooperative a itudes of some of them due to fear of divulged
information been used against their businesses. This research work is also limited
to the use of secondary data go en from secondary sources, as such if there are
any errors made by those who generated these data; this research work
incorporates such errors.
Literature Review
Concept of Entrepreneurship Development
Entrepreneurship is a process which involves the effort of an individual or
individuals in identifying viable business opportunities in an environment and
obtaining and managing the resources needed to exploit those opportunities 11. He
notes that a focus on entrepreneurship is a focus on the processes involved in the
initiation of a new organization, the behavior of such organization and its
performance in terms of profit made. Entrepreneurship is defined as a catalyst to
increase the rate of economic growth, creating job opportunities as well as
reducing the dependence on the import of manufactured products 12 .
Entrepreneurship is a process undertaken by the government to reduce the level
of poverty in the economy. It also encompasses creating innovation, promoting
8
new sets of a itudes and culture for the a ainment of future challenges .
Entrepreneurship development refers to the process of enhancing
entrepreneurial skills and knowledge through structured training and
institutional building programmes focused on individuals who wish to start or
13
expand a business .
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Environmental Factors and Entrepreneurship Development
The aim of entrepreneurship development is to enlarge the base of entrepreneurs
in an economy in order to accelerate the pace at which new ventures are created
14,15,16
thereby speed up creation of jobs and economic growth
.
Concept of Environmental Forces
The environment is very important from the point of view of certain categories of
businesses. It is particularly important for industries directly depending on
imports or exports and import-competing industries. For example, a recession in
foreign markets, or the adoption of protectionist policies by foreign nations, may
create difficulties for industries depending on exports. On the other hand, a boom
in the export market or a relaxation of the protectionist policies may help the
export-oriented industries 17. A liberalization of imports may help some industries
which use imported items but may adversely affect import-competing industries.
It has been observed that major international developments have their spread
effects on domestic businesses. The last economic recession in the global world
sent its shock waves to a number of other countries. Oil price hikes seriously
affected a number of economies, and these hikes increased the cost of production
and the prices of certain products. The high oil price has led to an increase in the
demand for automobile models that economize fuel consumption.
Therefore, a good understanding of export market enables a firm to develop a
more profitable product mix and to consolidate its position in the domestic
market. Many companies now plan production capacities and investment taking
into account also the foreign markets. Export marketing facilitates the a ainment
of optimum capacity utilization; a company may be able to mitigate the effects of
domestic recession by exporting. However, a company which depends on the
export market to a considerable extent also faces the impact of adverse
developments in foreign markets. There are various environmental forces that
mitigate entrepreneurs seeking internationalization to their business. Some of
these factors which include but not limited to political and legal factors, natural
environmental factors, demographic factors, and physical and technological
factors are explained below.
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Environmental Factors and Entrepreneurship Development
Concept of Political and Legal Factors
Political and government environments have close relationship with business
strategy formulation because of competition. For example, the communist
countries had a centrally planned economic system. In most developed countries
such as the UK and USA, apart from those laws that control investment and
related ma ers, there are a number of laws that regulate the conduct of
businesses. These laws cover such ma ers as standards of products, packaging,
promotion etc.; also, with a view of protecting consumer interests and local
industries, regulations have become stronger 18. Regulations to protect the purity
of the environment and preserve the ecological balance have assumed great
importance in many countries. Some governments such as in the UK, USA, and
Germany specify certain standards for the products (including packaging) to be
marketed in the country and some even prohibit the marketing of certain
products. In most developed nations, as stated above and others, promotional
activities are subject to various types of controls 19.
Media advertising is not permi ed in Libya, and several European countries
restrain the use of children in commercial advertisements. In a number of
countries, including in Europe and India, the advertisement of alcoholic liquor is
prohibited. Advertisements, including packaging, of cigare es must carry the
statutory warning that “cigare e smoking is injurious to health.” Similarly,
advertisements of baby food must necessarily inform the potential buyer that
breastfeeding is the best 20. In countries like Germany, product comparison
advertisements and the use of superlatives like “best” or “excellent” in
advertisements are not allowed in the USA. Many countries today such as the EU
and USA have laws to regulate competition in the public interest. Elimination of
unfair competition and dilution of monopoly power are the important objectives
of these regulations 21. Changes are constant in various government policies such
as the industrial policy, fiscal policy, and tariff policy; these changes often have
profound impacts on businesses especially entrepreneurs; however, some
policies create opportunities as well as threats.
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Environmental Factors and Entrepreneurship Development
In other words, a development which brightens the prospects of some enterprises
may pose a threat to some others; for example, the industrial policy liberalizations
in Nigeria, particularly around the mid-1980s, opened up new opportunities and
threats. They provided a lot of opportunities to a large number of enterprises to
diversify and to make their product-mix be er. But they have also given rise to
serious threat to many existing products by way of increased competitions; many
seller's markets have given way to buyer's markets 22,23.
Concept of Socio-Cultural Factor
The socio-cultural fabric is an important environmental factor that must be
analyzed while formulating business strategies 24. The cost of ignoring the
customs, traditions, taboos, tastes and preferences, etc., of people could be very
high. It was stressed that the buying and consumption habits of the people, their
language, beliefs and values, customs and traditions, tastes and preferences, and
education are all factors that affect business 18. For a business to be successful, its
strategy should be the one that is appropriate in the socio-cultural environment.
The marketing mix will have to be so designed as best to suit the environmental
characteristics of the market. For instance, in Nigeria Nestle, a Swiss
multinational company today boasts of more than 20 varieties of instant beverage
products to satisfy different national tastes. Even when people of different
cultures use the same basic products, the mode of consumption, conditions of use,
purpose of use, or the perceptions of the product a ributes may vary so much so
that the product a ributes method of presentation, positioning, or method of
promoting the product may have to be varied to suit the characteristics of different
markets.
The differences in languages sometimes pose a serious problem, even
necessitating a change in the brand name. It was stressed that “Pree ” was,
perhaps, a good brand name in India, but it did not suit the overseas market, and
hence, it was appropriate to adopt “Prestige” for the overseas markets 25.
Chevrolet's brand name “Nova” in Spanish means “it doesn't go.” In Japan,
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Environmental Factors and Entrepreneurship Development
General Motors' “Body by Fisher” translates as “corpse by Fisher.” In Japan,
again, 3M's slogan “sticks like crazy” translates as “sticks foolishly.” In some
languages, Pepsi-Cola's slogan “come alive” translates as “come out of the grave”
26
. Similarly, the values and beliefs associated with color vary significantly
between different cultures. For instance, blue, considered feminine and warm in
Holland, is regarded as masculine and cold in Sweden. Green is a favorite color in
the Muslim world, but in Malaysia, it is associated with illness. White indicates
death and mourning in China and Korea, but in some countries, it expresses
happiness and is the color of the wedding dress of the bride 27.
Social inertia and associated factors come in the way of the promotion of certain
products, services, or ideas. There are such social stigmas in the marketing of
family planning ideas, use of biogas for cooking, etc. In such circumstances, the
success of marketing depends, to a very large extent, on the success in changing
social a itudes or value systems. There are also a number of demographic factors,
such as the age, sex composition of population, family size, habitat, and religion,
which influence businesses, while dealing with the social environment. A
business must also consider the social environments of the business which
encompasses its social responsibility and the alertness or vigilance of the
consumers and of society at large 28. The societal environment has assumed great
importance in recent years. Today, however, business is being asked to take a
responsibility for the quality of life in our society. The expectation is that
businesses, in addition to its traditional accountability for economic performance
and results will concern itself with the health of the society that it will come up
with the cures for the ills that currently beset the society and, indeed, must find
ways of anticipating and preventing future problems in these areas 29.
Theoretical Framework
The study is anchored on Opportunity–Based Entrepreneurship Theory
propounded by Peter Drucker and Howard Stevenson. An opportunity-based
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Environmental Factors and Entrepreneurship Development
approach provides a wide-ranging conceptual framework for entrepreneurship
research 30,31. Entrepreneurs do not cause change (as claimed by the Schumpeterian
or Austrian school) but exploit the opportunities that change (in technology,
consumer preferences etc.) creates 32. He further says, “This defines entrepreneur
and entrepreneurship, the entrepreneur always searches for change, responds to
it, and exploits it as an opportunity”. What is apparent in Drucker's opportunity
construct is that entrepreneurs have an eye more for possibilities created by
change than the problems. Drucker's opportunity-based construct to include
resourcefulness was extended 33. This is based on research to determine the
differences between entrepreneurial management and administrative
management. He concludes that the hub of entrepreneurial management is the
“pursuit of opportunity without regard to resources currently controlled.”
Review of Empirical Studies
The ever changing and dynamic business environment in which many business
outfits operate has contributed to the significant impact business environment has
on organizational survival and performance 31. The changes in the environment
continuously affect company's performance and to cope with these
environmental changes, companies often strategize by reorganizing and
reforming the methods products are produced and distributed to the final
consumers 32. The performance is related to personal factors such as demographic
variables and business factors like business age, business location, finance,
technology etc 33. A survey in Kwazulu-Natal South Africa to evaluate the factors
affecting the performance of SMEs. They reported that only competition revealed
a significant relationship with performance amongst all the internal and external
environmental factors they analysed 34.
A study on determinants of small and medium enterprises performance in Ekiti
State give factors determining the performance of SMEs as finance, politics,
education, infrastructure, government policies, raw materials, entrepreneur
competencies, patronage, technology and channel of distribution 35. The study
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Environmental Factors and Entrepreneurship Development
summarized a comprehensive number of factors influencing business
performance as individual characteristics, business strategies, parental influence,
networking and entrepreneurial orientation etc. and other factors 36. In addition, a
study on the impact of environmental factors on small scale enterprises
performance in East Gojjan zone, Ethopia, indicated that infrastructure and
finance have a significant positive relationship with MSEs performance 37. This
implies that lack of these two factors will bring about negative and significant
relationship. A showed that the determinants of SMEs performance in Ekiti State,
measuring performance of SMEs through some environmental factors like
funding, politics, education, infrastructure, government policy were significantly
related to performance, while, raw materials, patronage, channels of distribution,
political environment and technology were insignificantly related to performance
35
.
The study on the effect of environmental factors on small-scale businesses
performance in Kano and Sokoto States identified and utilized five key
environmental factors affecting small business performance, i.e management
inefficiency, marketing and sales problems, inadequate infrastructure, market
competition and financial inadequacy. He concluded that environmental factors
have significant impact on the performance of small-scale businesses in Kano and
Sokoto States in Nigeria 38.
Conceptual Framework
The conceptual framework for this study is built on the theory and literatures
reviewed. The model is broadly divided into two parts: independent and
dependent variables. The independent variable as depicted below which is
environmental factors are proxied with government policies, technically skilled
labour force, capital availability and infrastructural facilities. Also, the dependent
variable which is entrepreneurship development is measured with the GDP
contribution, productivity, business growth and enhanced efficiency.
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Environmental Factors and Entrepreneurship Development
Conceptual Framework for the Study
Environmental
Entrepreneurship Development
Factors
Government policies
GDP contribution
Technically skilled
labour force
Productivity
Capital
availability
Business growth
Infrastructural
facilities
Enhanced Efficiency
Source: Field Work by Researcher, 2022
Methodology
This study adopted survey design. The study focused on 40 respondents from
Ilorin East (Oke-Oyi) Local Government Area (LGA), 40 respondents from Ilorin
South (Fufu) LGA, 40 respondents from Ilorin West (Oja-Oba) LGA, 40
respondents from Offa LGA, and 40 respondents from Ekiti (Ilofa) LGA making a
total of 200 respondents from five LGAs in Kwara State. The respondents consist
of male and female respondents who have established business ventures in the
areas of study; 124 male which is 62% and 76 female which amounts to 38% of the
total respondents.
Using Krejcie and Morgan Table
Population size is 200 while sample size is 132
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Environmental Factors and Entrepreneurship Development
Source of Data Collection
To obtain reliable information that will help the researcher to ensure the
effectiveness of the study in question, data were collected from primary source
through structured questionnaire. The questionnaire was designed in a
structured form to be answered according to the hypotheses and was restricted
with the responses made of strongly agree (SA), agree (A), strongly disagree (SD)
and disagreed (D).
Description of Research Instrument
The data required to test the hypotheses were collected with the aid of research
instrument. Data were collected mainly through the primary method and the
instrument used for data collection was the questionnaire. The questionnaire was
a structured questionnaire administered by hand to the respondents. A four-point
Likert scale was employed to extract the data. The respondents were made to
indicate in the questionnaire the extent they agree or disagree to the stated
problems.
Validity and Reliability of the Research Instrument
In this research, the research has chosen to adopt the probability sampling. All the
individuals have the chances of being selected. For this research work, every
individual ma er. Simple random sampling method because it ensures that the
selection process is completely randomised.
The reliability of the instrument was estimated ¹⁰, the instrument yielded 0.725
reliability coefficient. This implies that instrument is both valid and reliable and it
was used in this study.
Method of Data Analysis
Data collected for the study were analysed by the researcher using frequency
counts, mean score. The three research questions were answered in line with the
hypothesis. The data collected were analysed by using percentage and inferential
statistics. The descriptive statistics of frequency count and percentages was
2
adopted for the analysis of the research questions while chi-square (χ )
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Environmental Factors and Entrepreneurship Development
distribution was the statistical tool used in testing the acceptability or otherwise of
the hypothesis posed for this study.
Results and Discussion of Findings
Table 1: Demographic Characteristics of Respondents
Demographic Characteristic
Frequency
Percentage
Analysis of Gender
Male
Female
Total
124
62
76
38
200
100
Analysis of Age
18-21
4
2.0
22-25
11
5.5
26-30
21
10.5
31-35
38
19.0
36-39
67
33.5
40 and above
Total
59
29.5
200
100
Analysis of Educational Qualification
Ph.D.
1
0.5
M.Sc.
14
7.0
B.Sc.
18
9.0
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Environmental Factors and Entrepreneurship Development
HND
34
17.0
OND
55
27.5
SSCE
78
39.0
Total
200
100
Analysis of Religion
Christianity
87
43.5
Islam
71
35.5
Others
Total
42
200
21.0
100
Source: Field Survey, 2022
Presentation of Data
The following results presented were based on the research questions and
hypotheses raised, which the study has sought to answer as follows:
i. How do government policies influence GDP contribution in the study
areas?
ii. How does technically skilled labour force influence productivity in the
study areas?
iii. How does venture capital availability influence business growth in the
study areas?
Hypotheses
Hypothesis I
H₁: There is significant relationship between government policies and GDP
contribution of selected Local Government Areas in Kwara State.
H₂: There is no significant relationship between government policies and GDP
contribution of selected Local Government Areas in Kwara State.
To test this hypothesis, statement used for table 4.2 was used.
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Environmental Factors and Entrepreneurship Development
Table 2: Analysis of the impact of government policies on GDP contribution
within the study areas
Description
Frequency
Percentage
Strongly Agree
17
8.5
Agree
87
43.5
Disagree
53
26.5
Strongly Disagree
43
21.5
Total
200
100
Source: Field Survey, 2022
The influence of government policies on GDP contribution within the study
areas was inadequate.
Contingency Table
CELL
O
E
O-E
(O-E)2
(O-E)2
E
C1
17
50
-33
1089
21.78
C2
87
50
37
1369
27.38
C3
53
50
3
9
0.1
C4
43
50
-7
49
0.98
TOTAL
200
χ2 = 50.24
Source: Field Survey, 2022
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Environmental Factors and Entrepreneurship Development
Where: χ2 is Chi-squared, O is each observed (actual) value, E is each expected
value and ∑ stands for summation. Expected value of classes of response level of
significance (α), the degrees of freedom (df) = (number of rows - 1) × (number of
columns - 1) = (r-1) (c -1)
Where: df is the degree of freedom, r is the number of rows, c is the number of
columns and α is the level of significance. χ2 calculated = 50.24. χ2 tab value at 5%
level of significance
α = 5% = 0.05
The degrees of freedom (df) = (number of rows - 1) × (number of columns - 1)
df = (4−1) × (2−1) = 3×1 = 3
χ2 tab value at 5% level of significance df 3 = 7.82
Interpretation
From the analysis above, χ2 calculated value is 50.24 while χ2 tabulated value is
7.82. This shows that χ2 calculated of 50.24 is greater than χ2 tabulated of 7.82 i.e. χ2
calculated (50.24) > χ2 tabulated of 7.82. Therefore, we accept H1 which states that
there is no significant relationship between government policies and GDP
contribution of selected Local Government Areas in Kwara State.
Research Question 2: How does technically skilled labour force influence
productivity in the study areas?
Hypothesis II
H₁: There is significant relationship between technically skilled labour force and
productivity of selected Local Government Areas in Kwara State.
H₂: There is no significant relationship between technically skilled labour force
and productivity of selected Local Government Areas in Kwara State.
To test this hypothesis, statement used for table 3 was used.
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Environmental Factors and Entrepreneurship Development
Table 3: Analysis of the impact of technically skilled labour force on productivity
Description
Frequency
Percentage
Strongly Agree
108
54.0
Agree
57
28.5
Disagree
8
4.0
Strongly Disagree
27
13.5
Total
200
100
Source: Field Survey, 2022
The impact of technically skilled labour force on productivity in the study areas
was significant.
Contingency Table
CELL
O
E
O-E
(O-E)2
(O-E)2
E
C1
108
50
58
C2
57
50
7
C3
8
50
C4
27
50
TOTAL
3364
67.28
49
0.98
-42
1764
35.28
-23
529
10.58
200
χ2 = 114.12
Source: Field Survey, 2022
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Environmental Factors and Entrepreneurship Development
χ2 calculated = 114.12
χ2 tab value at 5% level of significance, α = 5% = 0.05
The degrees of freedom (df) = (number of rows - 1) × (number of columns - 1)
df = (4−1) × (2−1) = 3×1 = 3
χ2 tab value at 5% level of significance df 3 = 7.82
Interpretation
From the analysis above, χ2 calculated value is 114.12 while χ2 tabulated value is
7.82. This shows that χ2 calculated of 114.12 is greater than χ2 tabulated of 7.82 i.e.
χ2 calculated (114.12) > χ2 tabulated of 7.82. Therefore, we accept H1 which states
that there is no significant relationship between technically skilled labour force
and productivity of selected Local Government Areas in Kwara State.
Research Question 3: How does capital availability influence business growth in
the study areas?
Hypothesis III
H₁: There is significant relationship between venture availability and business
growth of selected Local Government Areas in Kwara State.
H₂: There is no significant relationship between capital availability and business
growth of selected Local Government Areas in Kwara State.
To test this hypothesis, statement used for table 4 was used.
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Environmental Factors and Entrepreneurship Development
Table 4: Analysis of the impact of capital availability on business growth in the study
areas
Description
Frequency
Percentage
Strongly Agree
13
6.5
Agree
16
8.0
Disagree
99
49.5
Strongly Disagree
72
36.0
Total
200
100
Source: Field Survey, 2022
The impact of capital availability on business growth
in the study areas was not
impressive.
Contingency Table
CELL
O
E
O-E
(O-E)2
(O-E)2
E
C1
13
50
-37
1369
27.38
C2
16
50
-34
1156
23.12
C3
99
50
49
2401
48.02
C4
72
50
22
484
9.68
TOTAL
200
χ2 = 108.2
Source: Field Survey, 2022
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Environmental Factors and Entrepreneurship Development
χ2 calculated = 108.2
χ2 tab value at 5% level of significance, α = 5% = 0.05
The degrees of freedom (df) = (number of rows - 1) × (number of columns - 1)
df = (4−1) × (2−1) = 3×1 = 3
χ2 tab value at 5% level of significance df 3 = 7.82
Interpretation
From the analysis above, χ2 calculated value is 108.2 while χ2 tabulated value is
7.82. This shows that χ2 calculated of 108.2 is greater than χ2 tabulated of 7.82 i.e. χ2
calculated (108.2) > χ2 tabulated of 7.82. Therefore, we accept H1 which states that
there is no significant relationship between capital availability and business
growth of selected Local Government Areas in Kwara State.
Discussion of Findings
Table 1 show that one hundred and twenty-four (124) respondents representing
62% of the sample size were male while seventy-six (76) respondents representing
38% of the sample size were female. Thus, majority of the respondents were male.
The religion shows that eighty-seven (87) respondents representing 43.5% of the
sample size were Christians while seventy-one (71) respondents representing
35.5% of the sample size were Muslims, while forty-two (42) respondents
representing 21.0% were other religious followers. Thus, majority of the
respondents were Christians. The age shows that four (4) respondents
representing 2.0% of the sample size were within 18-21 age group, eleven (11)
respondents representing 5.5% of the sample size were within 22-25 age group,
twenty one (21) respondents representing 10.5% of the sample size were within
26-30 age group, thirty-eight (38) respondents representing 19.0% of the sample
size were within 31-35 age group, sixty-seven (67) respondents representing
33.5% of the sample size were within 36-39 age group, while fifty-nine (59)
respondents representing 29.5% of the sample size were 40 and above age group.
Thus, majority of the respondents were 40 and above age group.
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Environmental Factors and Entrepreneurship Development
The academic qualification shows that one (1) respondent representing 0.5% of
the sample size was Ph.D. holder, fourteen (14) respondents representing 7.0% of
the sample size were M.Sc. holders, eighteen (18) respondents representing 9.0%
of the sample size were B.Sc. holders, thirty-four (34) respondents representing
17.0% of the sample size were HND holders, fifty-five (55) respondents
representing 27.5% of the sample size were OND holders, while seven-eight (78)
respondents representing 39% of the sample size were SSCE holders. Thus,
majority of the respondents were SSCE holders.
Table 2, it showed that the influence of government policies on GDP contribution
within the study areas was inadequate.
Table 3, it showed that the impact of technically skilled labour force on
productivity in the study areas was significant.
Table 4, it showed that the impact of capital availability on business growth in the
study areas was not impressive.
Summary of Findings
The below is the summary represented in this study. The result of the findings
investigated the socio-demographic characteristics of the respondents in Ilorin
East (Oke-Oyi), Ilorin South (Fufu), Ilorin West (Oja-Oba), Offa and Ekiti (Ilofa)
LGAs in Kwara State. It was revealed that: age range 36-39 years were more
represented in the study; that SSCE holders were more represented in the study;
that Christians were more represented than the other religions in the study.
The result of the findings in the first research question examined the impact of
government policies on GDP contribution within the study. Table 2, it showed
that the influence of government policies on GDP contribution within the study
areas was inadequate.
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Environmental Factors and Entrepreneurship Development
The result of the findings in the second research question determined the impact
of technically skilled labour force on productivity in the study areas. Table 3, it
showed that the impact of technically skilled labour force on productivity in the
study areas was significant.
The result of the findings in the third research question investigated the impact of
capital availability on business growth in the study areas. Table 4, it showed that
impact of capital availability on business growth in the study areas was not
impressive.
Conclusion and Recommendations
This study has been an a empt to examine the effect of entrepreneurship
development on poverty alleviation: a study of Ilorin East (Oke-Oyi), Ilorin South
(Fufu), Ilorin West (Oja-Oba), Offa and Ekiti (Ilofa) LGAs in Kwara State, having
gone through the whole length of data analysis, hypothesis, testing and
discussions. The following conclusions are hereby drawn that financial problems,
lack of social amenities and poor funding of education were the major constraints
to the poverty alleviation in the study areas.
The following recommendations are made based on the findings of the study:
i.
This study recommends that government should make friendly policies in
terms of loan access and zero interest rate for entrepreneurs.
ii.
Financial institutions should make funds easily available to entrepreneurs
with low interest rate, and finally, government should implement friendly
fiscal and monetary policies to aid entrepreneurship development in
Nigeria.
iii.
This study also recommends that communities should identify aspect of
their culture which hinder entrepreneurship development and make
necessary adjustment.
iv.
The issue of infrastructural facilities should not be seen as the sole
responsibility of the government. Measures should be initiated by
traditional rulers as well as prominent members of the society to provide
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Environmental Factors and Entrepreneurship Development
basic infrastructural facilities in the community so as to aid
entrepreneurship development.
Contributions to Knowledge
The study will contribute to literature and offer some relevant recommendations
to policy makers, entrepreneurs and government officers in charge of enterprise
development or related duties. In addition, this study will be useful to
academicians to carry out a robust field work.
Suggested Areas of Further Research
The study established the effect of entrepreneurship development on poverty
alleviation: a study of Ilorin East (Oke-Oyi), Ilorin South (Fufu), Ilorin West (OjaOba), Offa and Ekiti (Ilofa) LGAs in Kwara State. Nevertheless, to further broaden
the frontier of knowledge, the following were the main limitations of this research
work, are outlined below:
1.
The study can be carried out in other states or geopolitical zones other than
Kwara State, Nigeria where the study was carried out.
2.
The future studies should include larger population study in order to
increase the generalisability of the findings.
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Environmental Factors and Entrepreneurship Development
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23
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CHAPTER
12
SIGNIFICANCE OF INTEREST RATE IN
BOLSTERING BUSINESS
DEVELOPMENT IN NIGERIA
OLATUNJI, Olanrewaju Patrick & OLALEYE John
Olatunde
Abstract
Most business in Nigeria, especially the SMEs has been facing with limited
financial support which genuinely the major hindrance to their development. One
of the main factors linked to the problem of financial support is high interest rates
that are associated with the provision of loans by financial institutions. The
prevailing legend is that high interest rates on loans are the major factor
restraining the business development in Nigeria. The objective of this paper is to
show that although high interest rates make loans to SMEs more expensive,
nevertheless high interest rates on their own are not the major impediment factor
affecting business development. This study considered descriptive design
method since this study is in qualitative in nature. The population of this study
comprised of 300 of micro, small and medium entrepreneurs in Osun State. This
study considered proportionate stratified sampling to choose 100 respondents.
The variables identified are business development (independent variable), loan
size, loan type, and length of term (independent variables). Frequency and
percentage were used as descriptive and logit regression was used to test the
hypothesis.
Word Count:197
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Keywords: Business development, Interest rates, Loan, & Small and Medium
Enterprises (SMEs)
Introduction
Undoubtedly, Small and Medium Enterprises (SMEs) which include small
businesses at all times have joined forces with many authorities not only to deal
with unstable economic trends but also act as a cushion during the unprecedented
condition. Additionally, they are not only believed to have been capable of
strengthening the domestic economy but also the country's economic
development. Besides that, they are accounted for more than 90% of enterprises
across the globe (Ayyagari et al. 2011) as recorded by statistical data, worldwide.
Accordingly, SMEs portray that they play a vitally important role in economic
growth from high-income countries to low-income countries (Blackburn et al.
2013; Syamsurianaet al. 2020).
In high-income countries, for instance, countries in the European Union, SMEs
establishments have indicated that 99.8% of all enterprises are in the non-financial
business sector (Muller et al. 2015). Similarly, in Asian high-income economies
such as Japan, Korea and Taiwan, SMEs are also depicted as statistically
significant towards economic development, indicated with 99.5%, 99.9% and
97.63% respectively (Japan Small Business Research Institute 2017; OECD 2016;
Wen-Ling 2017). Hence, for SMEs to continue to contribute effectively to the
economy, it needs to be supported and strengthen. SMEs experience business
development through many policies despite the numerous challenges that
negatively impact its growth and limited access to business development services.
The business development services are non-financial and financial services.
These two services contribute to the business growth of SMEs immensely. Hence,
interest rate as one of the financial services determines the business development
to SMEs. The importance of interest rate is hinged on its equilibrating influence on
supply and demand in the financial sector. Interest rate is the price paid for the use
of money. It is the opportunity cost of borrowing from a lender. The behavior of
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interest rates, to a large extent, determines the investments activities and hence
economic growth of a country.
Investment depends upon the rates of interest involved in ge ing funds from the
market, while economic growth to investments plays a very important role in
economic growth in a country. A large extent depends on the level of investment.
Countries rely on investment to solve economic problems such as poverty,
unemployment etc. According to Itodo and Uche (2020), opined that, if the rate is
high, investment is at low level. A low rate of interest leads to increase in
investment. There is therefore, a need to promote an interest rate regime that will
ensure “inexpensive” spending for investment and consequently enhancing
economic growth at low financial cost. Understanding the link between interest
rates and investment is, therefore, a great imperative to policy makers. Interest
rate policy in Nigeria is a major instrument of monetary policy with regards to the
role play in the mobilization of financial resources aimed at promoting economic
growth and development.
Since the time of Adam Smith and Karl Marx, investment has been deemed to be
both the engine of economic activity and the primary cause of economic malaise
(Ojima & Emerenini 2015). The behavior of interest rates to a large extent
determines the investment activities and hence economic growth of a country.
Investment depends upon the rate of interest involved in ge ing funds from the
market by investors, while economic growth to a large extent depends on the level
of investment. However, investment in developing countries is constrained by the
relatively low level of domestic savings and access to foreign financing. There is
no doubt that high interest rates in Nigeria have been a ributed to some reforms
implemented in the banking industry, including the adoption of Structural
Adjustment Programme (SAP) in 1986, leading to the liberation of the Nigerian
financial sector, upward pressure on interest rates and additional savings to the
banking sector.
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Environmental Factors and Entrepreneurship Development
This was followed by consolidation of the banking industry in 2005, which led to
substantial increase in portfolio investments. The adverse effects became move
pronounced during the 2007/2008 global financial crises and during the COVID19 pandemic which (subsists even beyond 2021 in the country), when the country,
like many other developing countries, struggled to minimize the negative impacts
of volatile capital flows, as portfolio investors began to repatriate capital back to
safer countries. The Central Bank of Nigeria (CBN), in response to emerging
challenges, have continued to fixthe Monetary Policy Rate (MPR) based on
prevailing monetary conditions, to anchor other rates in the market and enhance
competition among the Deposit Money Banks (DMBS) towards enthroning a free
market system for loanable funds in Nigeria.
In the year 2020, the CBN policy measures in response to COVID 19 outbreak and
spill overs as contained in its circular dated March 16, 2020
FPR/DIR/GEN/CIR/07/049 and in furtherance of its financial stability mandate the
CBN promised providing Support for affected households, businesses, regulated
Financial Institutions, and other stakeholders in order to cushion the adverse
economic impact of the pandemic.
Statement of the Problem
Governments within the free-market systems manipulate interest rates through
the banking system as an instrument of monetary policy, often raising interest
rates when intending to control inflation or calming an overheating economy.
High interest rates discourage additional investments as the cost of borrowings
gets higher (Rahman et al. 2016). When interest rates are high, it compensates
entrepreneurs to retain their funds in financial institutions rather than invest,
especially when the marginal efficiency of capital is lower than the interest rates
(Beck, Demirguc-Kunt, & Martinez Peira, 2018). Investors within SMEs would not
be indifferent to this phenomenon. When interest rates are high, fewer
entrepreneurs would venture into start-up SMEs, because the cost of borrowing is
high. For established SMEs it would result in limited business development as
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SMEs would fail to procure additional goods and services for their shops or invest
in new machinery and tools, impacting on SMEs ability to add to further
employment.
Objectives of the Study
The main objective of the study is to examine the significances of interest rate in
bolstering business development in Nigeria. Therefore, the study sought to:
I.
Examine the extent to which interest rate has strengthen business
development in Nigeria.
ii.
Assess the change of interest rate regulation on business behavior in
Nigeria.
Hypothesis
H0: There is no significant relationship between interest rate and business
development in Nigeria.
H1: There is a significant relationship between interest rate and business
development in Nigeria.
Literature Review
The Classical Theory of Interest
According to the classical theory, the rate of interest is determined by the
intersection of demand for and supply of investment (capital). Interest is the price
of investment because firms borrow money for investment. Thus, investment
depends on interest rate. Low interest rate encourages high investment and high
interest rate leads to reduction in investment. So, investment is inversely related
to interest rate. Household save their money to earn interest rate. High interest
leads to high savings and low interest rate.to low savings. Thus, savings directly
(or positively) related to interest rate. Firms' demand for investment is fulfilled by
households' savings. Thus, saving is supply and investment is demand in goods
market. Therefore, interest rate in goods market is determined at the point where
both supply of saving and demand for investment crosses each other or intersect
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Environmental Factors and Entrepreneurship Development
each other. Interest rate adjusts to equilibrate the goods market through saving
and investment. Expectation theory states that current long-term rates can be used
to predict short term rates of future. It simplifies the return of one bond as a
combination of the return of other bonds. For instance, a 3 – year bond would yield
approximately the same return as three 1 – year bonds.
The Keynesian Liquidity Preference Theory
This theory perfects the more commonly accepted understanding of liquidity
preferences of investors. Investors have a general bias towards short – term
securities, which have higher liquidity as compared to the long – term securities,
which get one's money tied up for a long. Key points of this theory are: The price
change for long term debt security is more than that for a short term debt security;
Liquidity restrictions on long term bonds prevent the investor from selling it
whenever he wants; The investor requires an incentive to compensate for the
various risks he is exposed to, primarily price risk and liquidity risk; and Less
liquidity leads to an increase in yields, while more liquidity leads to falling yields,
thus defining the shape of upward and downward slope curves.
Market Segmentation Theory / Segmentation Theory
Market segmentation theory is related to the supply – demand dynamics of a
market. The yield curve shape is governed by the following aspects; preferences of
investors for short term and long-term securities; an investor tries to match the
maturities of his' assets and abilities. Any mismatch can lead to capital loss or
income loss; securities with varying maturities form a number of different supply
and demand curves, which then eventually inspire the final yield curve, low
supply and high demand lead to an increase in interest rates.
In contrast to other concepts in economics, there are a few competing definitions
of the term interest rate. The interest rate is the annual fee charged by a lender to a
borrower in order for the borrower to acquire a loan (Kamunge et al. 2014;
Rahman et al. 2016). The asset borrowed could include cash, or merchandised
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Environmental Factors and Entrepreneurship Development
goods; other assets include houses or cars. So, interest rates are the rental charged
to the borrower by the lender for the use of the asset. It may also be termed as an
opportunity cost to lenders for the loss of use of the asset they borrow out (Beck et
al., 2018). If the asset was cash money, the lender could have used the money for
own investment or for savings. The magnitude of interest would depend on the
perceived risk of the borrower.
The interest rates would be low if the borrower is thought to be of low risk, and if
the borrower is seen as belonging to the high-risk category the interest rates will
be higher (Rahman et al. 2016). Although the concept interest rates may be
universally known, few people or businesses are aware of how financial
institutions and lenders determine interest rates and what impact they do have on
the borrower businesses and in the economy. Interest rates are not universally
identical. Camba-Mendez, Durre, and Mongelli (2019) reveal that interest rates
differ in accordance to the time-span of the loan. In addition, interest rates can be
distinguished between nominal and real interest rates. Nominal interest rate is
rates that are conceived without taking inflation into account (Tondl, 2016). These
are interest rates referred to when quoting bond values and loans in general.
Real interest rates on the other hand are interest rates that have had inflation
adjusted; as such they represent the real value an investor, saver or lender gets
back in return after taking into account and offse ing inflation (Beck et al., 2018).
Real interest rates or also called natural interest rates are related with different
pa erns of growth rates (Smithin, 2019). Interest rates may be applied either as
simple interest or compound interest rates (Berger et al., 2019). Simple interest
rates usually apply on loans for non-expensive articles or on short term loans.
With simple interest, only the original principal gains interest and the realized
interest are placed separately from the capital. Compound interest rates refer to
the earned interest combined with the principal in this way the interest gained
keep adding up over a period of time (Smithin, 2019). As such, for a prearranged
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Environmental Factors and Entrepreneurship Development
base interest rate, compounding will result in a higher interest rate earning than
with simple interest rates.
The Role of Interest Rates in the Economy
Of all economic variables that influence economies in the world, interest rates are
amongst the most important concept to be considered. Interest rates are normally
manipulated in the financial sector through the control of the ultimate authority:
the central banks (Onakoya, Fasanya, & Abdulrahman, 2019). The central banks
would directly influence the refinancing terms of other financial institutions in the
economy, namely commercial banks and micro-finance institutions and give
instructions on the interest costs to be paid by the lenders (Kamunge, Agnes,
Njeru, & Tirimba, 2019). Open market operations are frequently used by central
banks to guide short-term money market interest rates, which in turn influence an
assortment of mercantile rates, including commercial bank lending and deposit
rates. When the central bank adjusts interest upwards, commercial banks, microfinance organizations and building societies likewise increase their charging rates
on loans, and also the interest they charge on savings.
Central banks do determine the real interest rate, merely by regulating nominal
rates to compensate for changes in anticipated inflation. High real interest rates
replicate positive shocks to investment demand (such as expansion in the
predictable turnover of investment) or negative shocks to desired saving
(including temporary reduction in firms' income; Camba-Mendez et al., (2019).
This phenomenon is called interest rate conduit of monetary policy (Smithin,
2019). The application of interest rates as an instrument of monetary policy and as
a regulatory tool in the economy is a subject of dispute amongst scholars. Interest
rates have been used for manipulating and curbing exchange rates speculation in
India (Kar & Sarkar, 2017) and a restraint devise to conciliate the shocks of budget
deficit in Pakistan.
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Environmental Factors and Entrepreneurship Development
Interest Rates influencing SMEs financing
No ma er how well a business performs, it depends on the economic
environment of the country to be sustainable and prosperous. Economic variables
such as interest rates can determine a company's success or failure. When interest
rates go up, banks charge more for business finances. Businesses dissipate more of
their earnings in servicing loans, contrived through financial institutions as a
result of the increased interest rates. This decreases their disposable income
(Berger et al., 2019) owner-managers would not launch new project or invest in
expansion when interest rates are high. Camba-Mendez, Durre, and Mongelli
(2019) revealed that the opposite is true; in that when interest rates are low firms
would borrow more voluntarily, invest in new ventures and make more returns.
Some smaller banks would permit relationship lending to small firms by devising
lending schemes that offer advantages to the small firms (Rahman, Rahman, &
Ključnikov, 2016). Conversely, larger banks argue that due to their size they offer
additional advantages to small firms through the availability of specialized
financial instruments such as factoring that allows small firms to avoid financial
risks. Foreign banks on the other hand claim to bring in more competitive and
innovative ways of lending techniques that benefit small firms (Beck, DemirgucKunt, & Martinez Peira, 2018). The culmination and competition of these banks is
intended to help curb the negative effect of high interest rates facing small firms.
While the conventional belief is that smaller banks allow relationship lending and
are more available for lending to small firms, nonetheless, small firms still face the
crunch on prohibitive high interest rates (Rahman et (which are always higher
than normal lending rates) to cover themselves in case of default. In many African
countries although SMEs form the largest number of banks' clients, but banks
prefer to work with large multinational conglomerates and governments which
offer less risk and higher returns, crowding out most of the private sector from the
financial system (Gbandi & Amissah, 2014).
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Environmental Factors and Entrepreneurship Development
Prohibitively high rates of interest would force some SMEs into opting for
financing outside the formal financial institutions (Calice et al. 2012). In Kenya, the
so-called Pyramid schemes stepped in with the promises of financial rescuing of
small firms though soft borrowing free from collateral exigencies, and reduced
interest rates (Kamunge, Agnes, Njeru, & Tirimba, 2014). In Mozambique similar
scenario is evidential with SMEs opting for the so called Xitique financing
schemes that offer interest free loans to their members (Cunha, 2014). High
interest rates have made it difficult for start-up SMEs to be launched by potential
entrepreneurs. A study in Kenya by Ong'olo and Awino (2013) revealed that
nearly three quarters of new start-up SMEs obtained their initial capital from
personal fund, with a bit of over ten percent depending on family help.
Merely less than 2 percent of start-up SMEs got assistance from banks, partially
due to high interest rates and insistence on collateral. A secondary effect of high
interest rates affects the general population, being that high interest rates have
negative effect on the disposable income that is available to clients. Kamunge et al.
(2014) admit that if clients have limited funds to spend there would be li le
demand for goods and services from SMEs. In the long run, high interest rates can
limit company sales, as money that could have been paid for SMEs goods and
services is diverted to interest payments or savings. The basic functions of interest
rates in an economy in which individual economic agents take decisions as to
whether they should borrow, invest save and / or consume, are summarized by
international monetary fund (IMF) under three aspect; namely; interest rates as
return on financial assets serve as incentive to savers, making them defer present
consumption to a future date; interest rates being a component of cost of capital
affect the demand for and allocation of loanable funds ; and the domestic interest
rate in conjunction with the rate of return on foreign financial assets and goods are
hedged against inflation. The behavior of interest rates to a large extent
determines the investment activities and hence economic growth of a country.
Investment depends upon the rate of interest involved in ge ing funds from the
market by investors, while economic growth to a large extent depends on the level
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Environmental Factors and Entrepreneurship Development
of investment. If interest rate is high, investment is at low level and when interest
rate falls, investment will rise (Olagbenro, 2020). CBN, in its January 2020 business
expectations survey report the statistics department, has identified high interest
rates, unfavorable economic climate and insufficient power supply as the major
constraints to business in the country. Part of the report reads, “Respondent firms
identified insufficient power supply (66.2 points), high interest rates (57.1 points),
unfavorable economic climate (54.6 points), and financial problems (52.8) points)
among others (Olagbenro 2020).
The basic functions of interest rates in an economy in which individual economic
agents take decisions as to whether they should borrow, invest, save and / or
consume, the CBN asserts that interest rates in 2020/2021 fiscal years shall
continue to be market driven. The CBN shall continue to influence interest rates
indirectly, through the adjustment of its anchor rate, the monetary policy rate
(MPR). Accordingly, interest rates used by banks in the 2020 / 2021 fiscal years
shall comply with the following guidelines. Banks shall continue to pay
negotiated interest rates on current account deposits at the instance of the
customer. Where special purpose deposits (such as deposit held as collateral or
other similar deposits) are held, banks shall pay interest at a rate negotiated with
the customer, subject to a minimum of 30.0 Percent of MPR per annum for naira
denominated deposits.
A special purpose deposit, as used in these guidelines, is a deposit made by, on
behalf of, or transferred from the customer's account which is not accessible to the
customer's account, for more than Seven (7) days. Interest on savings deposit shall
be accrued on daily basis and credited to the customer's account at the end of each
month. The balance on a personal savings account on which interest is payable is
not subject to any threshold. Where the bank discovers a non-payment or
underpayment of interest on deposits, other entitlements, excessive interest and
/or bank charges, the bank shall refund the charges and / or excessive interest to
the customer within two weeks of the discovery / customer complaint, with
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Environmental Factors and Entrepreneurship Development
simple interest at the banks prevailing maximum lending rate from the date of
such of non- payment, underpayment and or excessive interest up to the date of
refund, along with a le er of apology to the customer. Where necessary, the
customer's account should be reconstructed. Any bank that fails to comply with
this provision shall, in addition to the refund to the customer, be liable to a penalty
as may be prescribed by the CBN. Banks are expected to seek profitability by
driving down costs and charging competitive rates instead of charging excessive
rates of interest. Therefore, banks shall develop and implement a Risk – Based
Pricing Model in line with the provisions of CBN circular referenced
BSD/DIR/GEN/RPN 04/120 on the need for banks to develop and implement a
Risk – Based Pricing Model” issued in October, 2011. To ensure that the MPR is an
effective tool for driving lending rates, banks are expected to disclose their prime
and maximum lending rates as a fixed spread over the MPR.
Methodology
The research design involved a survey of 159 respondents from three local
governments of Osun State, Nigeria. Most of them were knowledgeable and able
to provide relevant information on the significance of interest rate in bolstering
their businesses.
Relevant data were from: (1) Primary information through questionnaire
responses, and secondary information from published articles, books, and
statistical bulleting selection of respondents was by simple random sampling. To
ensure maximum response rate, a fixed response questionnaire was administered
face to face to 159 SMEs.
Relevant questionnaire instrument was designed to elicit responses requiring
simple analytical procedures in the form of question-to-question analysis.
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Environmental Factors and Entrepreneurship Development
Data Analysis, Results, and Discussions
The analytical procedure applied simple statistical techniques, such as simple
percentages an responses to the research questions.
The research results and discussions draw from responses to our research
questions, as well as from secondary information in the literature.
Type of Small/Medium Enterprise;
Types
Numbers
%
Fashion designer
26
16
Hairdresser/Berber
21
13
Traders
36
23
Farmers
12
08
Wine/beer Bar
15
10
Transports
14
09
Mechanics
12
08
Petrol dealers
10
06
Chemists
11
07
157
100
Out of the 157 respondents interviewed 26 (10%) were fashion designer,
21 (13%) were Hair dresser/Baber
36 (23%) were Traders
12 (08%) were Farmers
15 (10%) were Wine/Beer Sellers
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Environmental Factors and Entrepreneurship Development
14 (09%) were Transporters
12 (08%) were Mechanics
10 (06%) were Petrol dealers
11 07%) were Chemists
The highest level of education possessed by the proprietor;
PHD
MSC
BSC/HND
ND
SCRT
BELOW
SCERT
-----
05 91
48
13
00
----3%
58%
31%
08%
----The education of the respondents were as stated, 05 (3%) are holder Master
degree, while 91 (58%) possessed BSc/HND, 48 (31%) has ND and 13 (08%) are
school cert holder.
Years of operations of the SME
1-10 YRS 11-20 YRS
21 & Above 49 68 40 31 % 43 % 26 % The above table posits the years of experience as the proprietor of their business.
About 49 (31%) have between 1 year to 10 years' experience, while 68 (43%) have
between 11 years and 20 years of experience. Also, 40 (26%) have between 21 years
and 30 years of experience as proprietor.
Deposit Money Bank Customers
157
- 100%
All the respondents have either savings or current accounts with Deposit Money
Banks (DMBs)
Types of Account held by DMB
Savings Account
Current Account Fixed deposit Account
157
48
2
100 %
30.2 %
1.3 %
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Environmental Factors and Entrepreneurship Development
From the table above, all the respondents have savings account,48 (30.2%)
operate current account while 2 (1.3%) have fixed deposit accounts.
Those who obtain credit to finance their trade
157 -100 %
The businesses of the 157 respondents are financed through credit.
The institution the credit was obtained
DMB (alone) Cooperative Alone ESUSU
15
140
02
9.5%
89.2%
1.3%
The above table shows that 15 (9.5%) respondents obtained credit from Banks, 140
(89.2%) enjoyed credit from various cooperative societies while 02 (1.3%)
patronize the Esusu (Traditional Daily Collectors)
Size of Credit obtained by the 15 SMEs from DMB
,000 ,000
,000
,000
N 1 – 100
N 101 – 500
N 501 – 1000
N 1001& Above
12
03
80%
20%
Size of Credit obtained by 142 SMEs from Cooperative Society
,000
,000
,000
,000
N 1 – 100
N 101 – 500
N 501 – 1000
N 1001& Above
10
50
70
12
07%
35.2%
49.3%
8.5%
Size of Credit Obtained by 2 SMEs from ESUSU
,000 ,000
,000
,000
N 1 – 100
N 101 – 500
N 501 – 1000
N 1001& Above
02 100%
Item No. 8 – 10: Out of the 15 respondents that are customers from the Banks 12
(80%) obtained credit between N500,000 and N1,000,000 while out 142 who
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Environmental Factors and Entrepreneurship Development
patronize cooperative societies 10 (07%) obtained between N1 - N100,000 credit,
50 (35.2%) took between N101,000 and N500,000. 70 (49.3%) enjoyed between
N501,000 and N1,000,000 and 12 (8.5%) took between N1001,000,000 and above.
Side effect of the DMB credit's interest on the business
Worst
Bad
Not too bad
12
03
-----80%
20%
The Table 12 shows that the rate of interest charged on credit by banks affect their
business negatively.
The rate of interest on savings in DMB encourages me to safe
Large extent Poor extent
Mild extent
155 02
The interest of savings is paid regularly
Large extent
Poor extent
Mild extent
150
06
The respondents were unequivocal on the fact that the rate of interest on savings
does not a ract them to safe into their bank accounts. The fact still remains that
the li le interest is not even paid regularly.
Interest rate on credit from cooperative societies is lower than that of DMB
Large extent
Poor extent
157
Lower interest rates on cooperative credit bolster business growth
Large extent
Mild extent Poor extent
155
02
Item 13 – 15: The table shows that all respondents agreed that cooperative credit
and interest charges encourage the growth of their businesses.
Cooperative credit bolsters the growth of business
Large extent
Mild extent
Poor extent
151
06
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Environmental Factors and Entrepreneurship Development
Conclusion
The rate at which SMEs don't depend on the DMBs for credit to finance their
business is on the high side especially in the less city on the other hand the interest
rate on savings is not a ractive, hence they patronize cooperative societies. This
phenomenon has encouraged high liquidity in circulation. In the past interest is
paid on savings every month but this has become history in Nigeria. In the same,
vein many SMEs are relying on non-bank Institutions for assistance especially
cooperative societies instead of Banks, this will in no small way affect the
development of business in the country. Further research needs to be conducted
on the effectiveness of cooperative societies on bolstering business growth in
Nigeria.
We need to know the adverse effect of cooperative societies taking up the
responsibilities of Banks especially in the fewer cities.
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Environmental Factors and Entrepreneurship Development
Endnotes
Book
1. Gbosi, A. N. “Contemporary Macro Economic Problems and Stabilization
Policies.” 2nd Edition Benin City Nigeria Spirit and Truth Publishers, 2015.
th
2. Jhingan, M. L. “Macro Economics Theory.” 10 Revised Enlarged Edition
India; Vrinda Publications (P) Ltd, 1997.
Electronic Book
3. Chick, V. “Macroeconomics After Keynes Massachuse s: The MIT Press
Cambridge, 1983.” Accessed November 10, 2021.
Journal Article: Online
4. Beck, T., Demirguc-Kunt, A. & Martinez Peira, M. S. “Bank Financing for
SMEs: Evidence Across Countries and Bank Ownership Types”, Journal of
Financial Services Research, 39, 35-54. 2018, Accessed November 11th, 2021.
5. Berger, A. N. & Udell, G. F. “A More Complete Conceptual Framework for
SME Finance”, Journal of Banking and Finance, 30, 2945-2966. 2019. Accessed
November 11th, 2021.
6. Chimobi, O. P. & Uche, U. C. “Money, price and output. A Casually Test for
Nigeria.” American Journal of Scientific Research, 8: 78 – 87. 2010 Accessed
November 15, 2021.
7. Gbandi, E. & Amissah, G. “Financing Options for Small and Medium
Enterprises (SMEs) in Nigeria”, European Scientific Journal, 10(1), 1857 –
7881. 2014. Accessed November11th, 2021.
8. George-Anokwuru C. C. & Itoro B. “Influence of interest Rate on Industrial
output In Nigeria.” Journal of Economics and Management Sciences, 3(2), ISSN
25763008 E-ISSN 2576-3016, 2020 Accessed November 11th 2021
9. Itodo A. I., Eche, E. & Kano, K. “An assessment of the impact of interest
rates deregulation and ecnomics growth in Nigeria.” International Journal of
Economics, Vol14-No 2(July – December 2020). Accessed November 11th
2021
10. Kamunge, M. S., Njeru, A. & Tirimba, O. I. “Factor Affecting the Small and
Micro Enterprises in Limiru Town Market of Kiambu Country, Kenya”,
270
Environmental Factors and Entrepreneurship Development
International Journal of Scientific and Research Publications, 4(12), 1-19. 2014.
Accessed November 11 2021
11. Ojima, D. & Emerenini, F. “Impact of Interest Rate on Investment in
Nigeria. Developing Country Studies. ISSN 2224-607X, ISSN 2225,vol. 5, No. 3,
2015. Accessed November 12, 2021
12. Olagbenro S. “CBN Identifies High Interest Rates as Major Constraints to
Business. Nigerian Business Monetary, Credit, Foreign, Trade and
Exchange Policy Guidelines for Fiscal Years 2020/2021. Monetary Policy
Circular No 43. April 2020. Accessed November 11th, 2021.
13. Onakoya, B. O., Fasanya, I. & Abdulrahman, H. D. “Small and medium
scale enterprises financing and economics growth in Nigeria,” European
Journal of Business and Management, 5 (4), 130-136 2019. Accessed November
12th, 2021.
14. Rahman A., Rahman M. T. & Klijucnikov A. “Collateral and SME financing
in Bangladesh: An analysis across bank size and bank ownership types”,
Journal of International Studies, 9(2), 112-126. 2016. Accessed November 12,
2021.
15. Udede, C. C. “Impact of interest rate on savings on the Nigeria's economy.”
Journal of Policy and Development Studies, 9(3) ISSN: 157-9385 May 2015
Accessed November 12, 2021.
Miscellaneous
16. Calice, P., Chando, V. & Sekioua, S. “Bank financing to small and medium
enterprises In East Africa: Findings of a survey in Kenya, Tanzania, Uganda
and Zambia, African Development Bank”, Working Paper Series No146,
African Development Bank, Tunis, Tunisia. Accessed November 15, 2021.
17. Camba-Menedez, G., Duure, A. & Mongeli, F. P. “Fisher's Theory of
Interest Rates and the Notion of “Real”: A Critique by Eric Tymoigna”,
European Central Bank, Working Paper No. 483, California State. 2019
Accessed November 15, 2021
18. Kar, R. & Sarkar N. “Mean and Volatility Dynamics of Indian Rupee/US
Dollar Exchange Rate Series: An Empirical Investigation”, Asia-Pacific
271
Environmental Factors and Entrepreneurship Development
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
Finance Markets 13, 41-69. 2021 Accessed November 16th 2021
Osadume, R. “Effect of interest rate mechanisms on the economic and
business management.” 4(4). ISSN – 0065. 2018 Accessed November 12,
2021
Smithin, J. “Controversies in Monetary Economics”. Northampton, U.K.:
Edward Elgar. 2019.
Calice, P., Chando, V. & Sekioua, S. “Bank financing to small and medium
enterprises in East Africa: Findings of a survey in Kenya, Tanzania, Uganda
and Zambia, African Development Bank”, Working Paper Series N° 146,
African Development Bank, Tunis, Tunisia.
Camba-Mendez, G., Durre, A. & Mongelli, F. P. “Fisher's Theory of Interest
Rates and the Notion of “Real”: A Critique by Eric Tymoigne”, European
Central bank, Working Paper No. 483, California State, (2019).
Camba-Mendez, G., Durre, A. & Mongelli, F. P. “Fisher's Theory of Interest
Rates and the Notion of “Real”: A Critique by Eric Tymoigne”, European
Central bank, Working Paper No. 483, California State, (2019).
Chimobi, O. P. & Uche, U. C. “Money, price an Output. A casually Test for
Nigeria.” American Journal of Scientific Research, 8: 78-87, (2010).
Gbandi, E. & Amissah, G. “Financing Options for Small and Medium
Enterprises (SMEs) in Nigeria”, European Scientific Journal, 10 (1), 18577881, (2014).
Itodo A. I., Eche, E. & Kano K. “An assessment of the impact of interest rates
deregulation an economic growth in Nigeria.” International Journal of
Economics, 14(2), (2020).
Kamunge, M. S., Njeru, A. & Tirimba, O. I. “Factors Affecting the
Performance of Small and Micro Enterprises in Limuru Town Market of
Kiambu County, Kenya”, International Journal of Scientific and Research
Publications, 4(12), 1-19, (2014).
Kamunge, M. S., Agnes, Njeru, A. & Tirimba, O. I. “Factors Affecting the
Performance of Small and Micro Enterprises in Limuru Town Market of
Kiambu County, Kenya”, International Journal of Scientific and Research
272
Environmental Factors and Entrepreneurship Development
29.
30.
31.
32.
33.
34.
35.
Publications, 4(12), 1-19, (2019).
Kar, R. & Sarkar N. “Mean and volatility dynamics of Indian rupee/US
dollar exchange rate series: an empirical investigation”, Asia-Pacific Finance
Markets 13, 41-69, (2017).
Olagbenro, S. “CBN identifies high interest rates as major constants to
business Nigerian Busine Monetary, credit, foreign trade and exchange
policy guidelines for fiscal years 2020 / 2021.” Monetary policy circular No
43. April 2020 Information Feb, 10, (2020).
Onakoya, B. O., Fasanya, I., & Abdulrahman, H. D. “Small and Medium
Scale Enterprises Financing and Economic Growth in Nigeria,” European
Journal of Business and Management, 5 (4), 130-136, (2019).
Rahman, A., Rahman, M. T. & Ključnikov, A. (2016), “Collateral and SME
Financing in Bangladesh: an analysis across bank size and bank ownership
types”, Journal of International Studies, 9(2), 112-126.
Richard, O. “Effect of interest rate mechanisms on the economic and
business management.” 4 (4). (2018). ISSN – 0065
Smithin, J. “Controversies in Monetary Economics”. Northampton, U.K.:
Edward Elgar. (2019).
Udude, C. C. “Impact of Interest rate on savings on the Nigeria's Economy.
Journal of Policy and development studies, 9(3), (2005). ISSN: 157-9385
273
Environmental Factors and Entrepreneurship Development
CORPORATE SOCIAL RESPONSIBILITY
ON BUSINESS GROWTH IN BUSINESS
ENVIRONMENT
CHAPTER
13
AMOO Olatunji Shina & KUJORE Oluwatobi
Abodunrin
Abstract
The influence of large and even small business organizations in society has made
the issue of corporate social responsibility a very important issue for all business
organizations and their stakeholders. Rapid changes in society such as business
interactions have led to many changes throughout the social system, and this has
caused many problems. The seminar examines and investigates the Impact of
Corporate Social Responsibility on Business Growth in Business Environment.
The study adopts the quantitative research method through survey research
design.
Word Count:81
Keywords: Corporate Social Responsibility, Business Growth, Environment
Introduction
Businesses have been changing in recent years, and they have been required to
reconsider their business objectives and operations. Today, new regulations,
changes in customer's tastes and preferences, globalization, advanced
technological innovations, new product development, and new market
competitions, have brought new challenges that organizations must cope with in
order to survive and perform effectively for the a ainment of business goals and
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Environmental Factors and Entrepreneurship Development
objectives. As competition among business organizations grows stronger,
organizations look forward for ways to gain competitive advantage over their
rivals. Organizations are seeking new strategies to ensure their survival and
growth in order to achieve certain goals and objectives. Organizations have been
trying a few different things recently, including working on corporate social
responsibility activities and communicating about them.
In the last few decades, there has been a popular outcry for organizations to be
aware of their social responsibilities. Education and increased media awareness
have also made CSR difficult to ignore. Corporations use corporate social
responsibility as a vital instrument to enhance their marketing image, customer
satisfaction and stakeholder's acceptance, and improve long-term performance
and business survival. The influence of large and even small business
organizations in society has made the issue of corporate social responsibility a
very important issue for all business organizations and their stakeholders. Rapid
changes in society such as business interactions have led to many changes
throughout the social system, and this has caused many problems.
Currently, organizations realize that, in the long run, no social organization,
including commercial organizations, can survive for a long time. With increasing
a ention to environmental challenges and issues related to various products and
services, delivery systems are becoming a sensitive business strategy for
organizing corporate social responsibility activities to promote socially sensitive
corporate images. It is expected and important for organizations to fulfill their
expectations and moral obligations at the social level. However, the status and
performance of enterprises and the social conditions in which they operate must
indicate the extent to which they assume social responsibility to society.
Corporate social responsibility has developed into an indispensable business
strategy in the current business environment. It is not enough and acceptable for
organizations to produce high-quality products and services and make a profit.
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Environmental Factors and Entrepreneurship Development
Now they are expected to take responsible actions and establish a positive
relationship with the society and environment in which they operate. People have
high expectations for the performance of the organization, that is, it is responsible
to the society for the stakeholders. In order to do this, managers of commercial
organizations began to use their annual reports or their websites as
communication tools for voluntary disclosure of some of their social
responsibility activities to exchange information about their ethical practices and
social responsibilities, in order to create, Develop and promote a friendly and
good reputation and a good public image for their organization.
Perhaps many organizations are doing CSR activities, which mean extra expense
and wasted financial resources. However, organizations operating in a highly
competitive and complex environment can engage corporate social responsibility
activities with the goodwill and sponsorship of the general public, a racting
existing customers, a racting new customers, and host communities. It is a
favorable environment for peaceful coexistence and promotes employee
satisfaction in the workplace. The relationship between business and society and
between business and its participants is very complex but dynamic. Corporate
social responsibility activities can improve efficiency and innovation
management by strengthening corporate intangible assets such as reputation,
brand, and stakeholder management.
Statement of Problem
Despite the great a ention that has recently been given to Corporate Social
Responsibility (CSR) in Nigeria, there is still an area of concern to access the how
CSR can affect the growth of business and sustainability of CSR to development
of environment. Another area of corporate social responsibility where there is less
research is with developing nations. Therefore, this study wills the impact of
corporate social responsibility on business growth in business environment,
problems and prospects of corporate social responsibilities in Nigeria. It is ironic
that most organizations take resources from the external environment, and it is
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Environmental Factors and Entrepreneurship Development
only natural to give back what has been exploited. Unfortunately, this anomaly is
a norm in this part of the globe and this cankerworm can only be ameliorated
through research, such as this, publication, media publicity, campaigns and
awareness emphasizing the importance of corporate social responsibility in our
society.
Objectives of the Study
The purpose of this seminar paper can be summarized as follows:
i.
Identify how corporate social responsibility can affect the growth of
business.
ii.
Examine the economic, social and environmental factors influencing
corporate social responsibility in Nigeria.
iii.
Examine the problem and prospect between corporate social responsibility
and business environment.
Research Questions
The following research questions should be considered to obtain an accurate
answer to the corporate social responsibility on business growth in business
environment:
i.
What are the problem and prospect between corporate social
responsibility and business environment?
ii.
Do the economic, social and environmental factors influencing corporate
social responsibility in Nigeria?
Hypotheses
The following hypotheses developed are tested to provide answers to the survey
questions.
H01: There is no significant correlation between corporate social responsibility
and business growth.
H0 2 : There is no significant correlation between economic, social and
environmental factors and corporate social responsibility in Nigeria.
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Environmental Factors and Entrepreneurship Development
Literature Review
Concept of Corporate Social Responsibility
Business and society are interconnected and cannot be separated. Corporate
social responsibility is a business obligation, beyond that required by law and
economics, to pursue long-term goals that are good for society. The expectation
that society in general and social segments in particular have placed on business.
It is the intelligent and objective concern for the well-being of society which
constrains the behavior of individuals and firms from destructive activities at an
inopportune time no ma er how profitable they are on the spot and which leads in
the direction of positive contributions to human improvement.
Corporate social responsibility is a management obligation to take action to
protect and improve both the welfare of society as a whole and, in particular, the
interests of the organization and its shareholders. In other words, corporate social
responsibility focuses on both organizational success and social welfare. World
Business Council for Sustainable Development (WBSCSD), corporate social
responsibility is the ethical behavior of a company's society, and management
may bring legitimate benefits to the business. Act responsibly in relation to one
other interested party. It is an ongoing effort by businesses to act ethically,
contribute to economic development, and at the same time improve the quality of
life for workers and their families, as well as communities and society as a whole.
This definition seems to cover all aspects required by stakeholders in corporate
social responsibility, because it touches the wishes of all stakeholders. However, it
failed to resolve the organization's responsibility to the owner.
Developing CSR for an organization is not an overnight business; CSR is a process
that requires an organization to follow the path of working with all stakeholder.
Corporate CSR initiatives and effective implementation are no different from
quality and may contribute to corporate profitability. An important factor
influencing CSR growth is how an organization raises awareness and involves
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Environmental Factors and Entrepreneurship Development
stakeholders in its CSR activities. Stakeholders can contribute to different aspects
and lead to different interests when involved in supporting or participating in a
CSR initiative. In addition, stakeholders can have a variety of impacts on the
operation of the organization, so stakeholders contribute to key segments that
support or ruin CSR initiatives.
Types of Corporate Social Responsibility
1.
The economic responsibility to make money. Required by simple
economics, this obligation is the business version of the human survival
instinct. Companies that don't make profits are in a modern market
economy doomed to perish. Nonprofit organizations make money (from
their own activities as well as through donations and grants), but pour it
back into their work. Also, public/private hybrids can operate without
turning a profit. In some cities, trash collection is handled by this kind of
organization, one that keeps the streets clean without making anyone rich.
For the vast majority of operations, however, there have to be profits.
Without them, there's no business and no business ethics.
2.
The legal responsibility to adhere to rules and regulations. This
responsibility is not controversial. What proponents of CSR argue,
however, is that this obligation must be understood as a proactive duty.
That is, laws aren't boundaries that enterprises skirt and cross over if the
penalty is low; instead, responsible organizations accept the rules as a
social good and make good faith efforts to obey not just the le er but also
the spirit of the limits. In concrete terms, this is the difference between the
driver who stays under the speed limit because he can't afford a traffic
ticket, and one who obeys because society as a whole is served when we all
agree to respect the signs and stoplights and limits. Going back to John
Travolta racing his Porsche up and down the rural highway, he sensed
none of this respect.
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Environmental Factors and Entrepreneurship Development
3.
The ethical responsibility to do what's right even when not required by
the le er or spirit of the law. This is the theory's keystone obligation, and it
depends on a coherent corporate culture that views the business itself as a
citizen in society, with the kind of obligations that citizenship normally
entails. When someone is racing their Porsche along a country road on a
freezing winter's night and encounters another driver stopped on the
roadside with a flat, there's a social obligation to do something, though not
a legal one. The same logic can work in the corporate world. Many
industrial plants produce, as an unavoidable part of their fabricating
process, poisonous waste.
4.
The philanthropic responsibility to contribute to society's projects even
when they're independent of the particular business. A lawyer driving
home from work may spot the local children gathered around a makeshift
lemonade stand and sense an obligation to buy a drink to contribute to the
neighborhood project. Similarly, a law firm may volunteer access to their
offices for an afternoon every year so some local schoolchildren may take a
field trip to discover what lawyers do all day. Instead, these public acts of
generosity represent a view that businesses, like everyone in the world,
have some obligation to support the general welfare in ways determined
by the needs of the surrounding community.
Challenges of Corporate Social Responsibility
Corporations face difficulty in CSR implementation and in its effectiveness. The
main reason of challenge in practical work was that CSR requires high cost and
corporations' in adequate financial resources to train the staff. It is most
commonly understood that the greatest main challenge for implementing and
developing CSR were steady competitive tension, inadequate backing from the
government and other nongovernment organizations beside the huge cost of
implementation. Moreover, lack of support from customers and investors was an
additional challenge. Complimenting to these, the core challenge in
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Environmental Factors and Entrepreneurship Development
implementation of CSR was difficulty in changing traditional business practices
to CSR agenda that requires leaders' great commitment in managing and in
changing their focus and behavior. Furthermore, the lack of managers' expertise
and capability to successfully implement desired changes was also creating
challenge in CSR implementation process.
A change is not an easy process and it requires commitment and hard work to
make a desired change. It became evident that the changes in developed CSR
plans means that they are not easy to administer it and there is also an increasing
proof that a basic transformation in the business model cannot happen without a
major dedication by the leadership and an alteration in the target area and
behavior of leaders. Considering the changes required for effective CSR
implementation, it is crucial to follow up on how changes could be most actively
done. Past researches indicated that it is not easy to introduce and make change in
corporations because of which most of the instructions and ways of change were
unsuccessful in brining needed results. However, more current research points
out that there are other ways of thinking about and coming to change which is
most of the time directs to greater favorable results. Change could be a linear
process and should be done from the upper level of corporations and made
uniformly across all levels in reference to specific plans.
Business Environment
The environment of a business is the sum of all external and internal conditions
and influence pa erns that affect the survival, growth and development of the
enterprise. Business environment analysis is the inspection and evaluation of the
opportunities and threats provided by the environment, as well as the potential
advantages and disadvantages of the enterprise. Opportunities and threats are
related to the external environment of the company, while strengths and
weaknesses are related to the internal environment of the company. Therefore, the
external analysis examines the opportunities and threats in the environment,
while the internal analysis examines the advantages and disadvantages of the
company.
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Environmental Factors and Entrepreneurship Development
Opportunities and threats exist independently of the company. If there is a
problem in the absence of a given business, the problem must be a factor in the
external environment; otherwise, it is an internal environmental factor.
Alternatively, if the problem coexists with the business, but the business is unable
to control or influence the problem, then the problem is an external environmental
factor. Opportunities are a favorable condition of the external environment,
which can reward an organization if acted properly. That is, they exist, but
businesses need to act on them in order to benefit from them. A threat is a
condition or barrier that can prevent a business unit from achieving its purpose.
Several studies have a empted to analyze or assess the impact of environmental
factors on various aspects of a corporate organization. Organizations that
recognize the presence and intensity of competition have a greater tendency to
seek out information about customers for the purpose of evaluation and to use
such information to their advantage.
Environmental Conservation and Organizational Growth
Traditionally, environmental protection has been considered to be “in the public
interest” and external to private life. Governments have assumed principal
responsibility for assuring environmental management, and have focused on
creating and preserving a safe environment. They have directed the private sector
to adopt environmentally sound behavior through regulations, sanctions and
occasionally, incentives. Environmental problems have arisen, the public sector
has generally borne the responsibility for mitigation of environmental damage.
However, the roles of sectors have been changing, with the private sector
becoming an active partner in environmental protection through CSR adoption.
Many governments and businesses are now realizing that environmental
protection and economic growth are not always in conflict. Environmental
sustainability is an integral part of a sustainable growth strategy. While protection
of the environment and economic growth are often seen as competing aims,
highlighting the financial benefits of increased eco-efficiency, Akpan (2006)
observed that the natural environment is central to economic activity and growth,
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Environmental Factors and Entrepreneurship Development
providing the resources we need to produce goods and services, and absorbing
unwanted processing by-products in form of waste.
Moser and Miller, (2001) observed that the current strength of the arguments for
CSR programs are driving companies increasingly towards the adoption of
socially and environmentally responsible strategies. There has been much
popular discussion of the role of „green investors‟ in driving societies to adopt or
advocate for environmentally friendly practices (Baron, 2007). Investors allocate
their wealth between savings, charitable donations, or shares of a socially
responsible firm. If some investors prefer to make their social donations through
investing in socially responsible companies (perhaps in order to avoid taxation of
corporate profits), then CSR can increase the value of the firm by a racting these
investors.
Another way is where companies try to a ract and retain the best employees by
making environmental commitments that are aligned with these employees‟
environmental values. Frank (2003) surveyed Cornell University graduates and
found that many are willing to accept substantially lower salaries in firms
engaged in socially responsible activities. Dibb, et al., (2012) observed that most
companies that are environmentally responsible eventually have enhanced brand
image and reputation which generate strategically important goodwill and
enhanced customer loyalty from a CSR perspective. Typically, a consumer is
drawn to a company and a brand that has a good reputation for providing service
and products and delivering value, as defined by the customer. However, they
failed to show how gained customer loyalty from CSR activities enhances
organization growth. With many key natural resources and ecosystems services
scarce or under pressure, achieving sustained growth require absolute
decoupling of the production of goods and services from their environmental
impacts. Akpan (2006) observed that policies that improve the efficiency with
which businesses use resources, such as energy, water and materials, produce not
just environmental benefits but also financial savings for businesses.
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Additionally, organizations that are commi ed to CSR have access to socially
responsible investment (SRI), where investors take into account considerations
such as a company's environmental and socially responsible activities.
Theoretical Review
Economic Theory
According to economic theory, the main goal of a company is to invest funds,
allow management to carry out management activities, and use such investment
funds to develop social initiatives that may improve the world. To increase profits
and bring more profits to shareholders who are prohibited from achieving (Lee
2018). For a sustainable society, we need to not only change our focus from the
economic side, but also include the social and environmental aspects. In other
words, it's important to look far beyond single revenue. It should include multiple
revenues that specifically incorporate social and environmental, commonly
referred to as the "triple bo om line," rather than "economical.”
Elkington (1997) established the concept of a triple bo om line with respect to
economic growth, environmental excellence and social justice, and pointed out
that stakeholder dialogue is the main driver of the triple bo om line. Stakeholder
theory disagrees with the perspective of CSR's economic theory and coordinates
and combines with stakeholders to promote satisfaction and integrity, give
companies a positive perception, and create a good corporate image. We advocate
the ability of CSR to bring about corporate benefits (Sun & Price 2017) because
stakeholders can influence and be influenced by our CSR policy (Córdoba-Pachón
et al. 2014).
The idea of involving stakeholders in companies remained a topic of much
discussion. The argument that sees stakeholders as a negative force that could
slow the work and organizational goals was later changed to the notion that
stakeholders are vital for the overall performance and company's success.
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Environmental Factors and Entrepreneurship Development
Organizations often use the communications with stakeholders to learn about the
outside world and try to adopt it. The stakeholders, who are affected by the
corporations' business operations, can both directly and indirectly influence the
corporations' progress. Even though businesses are meant to make money,
businesses are part of a web of social relations and therefore should work with the
aggregation of ma ers and concerns given by different people with different
backgrounds and interests.
Business Sustainability Development Theory
Business sustainability has received considerable a ention from stakeholders
(Enquist et al. 2006). Stakeholders are "groups or individuals who may or may
affect the achievement of an organization's goals" (Johnson 2007). Sustainability is
the assurance of a company's existence and the efficient use of available resources
to continue its business (Wackernagel & Rees 1996, pp.32-40). Milne and Gray
(2013) stated that for sustainable business development, companies cannot easily
recycle products that could pose a danger to society or to properly dispose of used
items to save resources claims that the product needs to be considered. Some
scholars have associated sustainable development with the triple bo om line
(TBL).
This means that beyond the economic aspect, environment and social aspects
need to be recognized and work up on it. Social, environmental, and economic
progress are the three building blocks for sustainable growth. 2006). Sustainable
development, which is often referred to as "triple bo om line," puts focus on the
environment, people, and economic integration when businesses conduct their
operations (Elkington 1997, p.1; Schieg 2009). The article considers how to make
the decisions in the future be in the best interest of both present and future
generations. Preserving and protecting the environment is important for future
generations in fulfilling their needs. The two of them were si ing down for dinner
when the topic of the night's movie came up. The world is ge ing more and more
crowded. According to the Sustainable Development Solutions Network (2013),
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Environmental Factors and Entrepreneurship Development
in less than a decade, the global population will grow by 75 million people. So, the
triple bo om line (economy, society and environment) is necessary to consider for
sustainable business development. This concept requires the participation of all
stakeholders at all stages, namely from planning to decision-making and
implementation (Ness et al. The film follows the story of a woman who is stalked
and tortured by a serial killer, who is eventually caught and put to death.
Empirical Review
Eruemegbe (2015) examined the impact of business environment on organization
performance in Nigeria using Union bank of Nigeria. The study relied on
questionnaire to generate relevant data out of 39 questionnaires administered on
officers in Union Bank of Nigeria, Lagos, only 20 were properly completed and
returned. This gave an effective response rate of 51%. The method of data analysis
and test of operational hypothesis is nonparametric technique which utilize chisquare statistic. The survey revealed that, among the top ten critical factors (i.e.
teamwork, work based on contract, supervision based on leadership by example
and provision of equipment) had great effect on motivation as well as impact on
productivity. More so communication, love and belongingness, opportunity to
undertake challenging task, identification with goal and overtime were among
the critical factors.
Summary of Gap
Previous work on the subject had only been limited to the benefits of CSR, on how
CSR could be put in business practices as well as its helpfulness to business
sustainability when CSR initiatives such as economic, social and environmental
aspects are incorporated into the strategic business-planning document.
However, past researches had failed to address the challenges faced in
implementation of CSR and ways of overcoming those challenges of business
growth in Nigeria context. This paper contributes to this research gap that there
are several challenges in CSR implementation when CSR is practiced and also
approaches that should be considered to overcome the challenges.
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Environmental Factors and Entrepreneurship Development
Methodology
A research paradigm was considered important in the design and choice of
research methodology. A qualitative research approach was chosen to do this
research paper. The motive for choosing the qualitative approach is because,
corporate social responsibility, primarily centers around business practices and
the ways of day to-day operational activities, which requires a researcher to
understand the business practices through interviews rather than using
quantitative methods. Hence, the qualitative research method looks to be useful
and the right approach for this study. Qualitative research approach is suitable
when researchers are primarily interested in knowing and understanding of some
circumstances or occurrences (Easterby-Smith et al. 2015). A qualitative approach
makes significance in bringing out information by allowing the researcher to get
more opportunity from the responses obtained by asking relevant questions for
be er clarifications in order to accomplish the research paper.
Conclusion
In a global entrepreneurial environment, the CSR is gaining more and more
significance. The CSR will bring a company adequate benefit only if it prepares
and carries out meaningful and credible projects. Credibility of socially liable
activities of companies supports in public their individuality, originality,
personal involvement and conviction that they take these activities seriously. The
public expects socially answerable behaviour from companies. Companies in the
hotel industry are aware of the fact that the best marketing results come from
satisfying the customer´s needs in order to return to their catering and
accommodating services and to pass on good references to his/her acquaintances.
Public opinion turns against a company which refuses to take on social
responsibility and due to negative publicity in the media; a company can quickly
lose its position. This is why a number of companies comprehend how important
it is to search for and use possibilities that present their social responsibility,
whilst at the same time allowing them to gain their set economic objectives
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Endnotes
P. Castka and M. A. Baizakova, “1S0260000 and supply chain on the diffusion of
social responsibility standard.” International Journal of production economics, 113,
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M. B Baridam, “Business: A management approach,” Port Harcourt: (1995)
Formbrum, G. J., Gardbery, N. and Sever, J. M. “The population quotient:
corporate reputation,” The Journal of Brand Management, 7 (4): (2002), 241-255
Ibid
H. A. Miabhoy, “A discussion on the importance of corporate social
responsibility.” Retrieved from h p://brandwagon.com.pk/2010/10/adiscussion-on-the -importance- of-corporate-social-responsibility. (2010).
P. Stanton and J. Stanton, “Corporate annual report. Research perspective
used Accounting.” Auditing and Accountability Journal, 15(4): (2002), 478-500.
Aluko, M, Odugbasan, O. and Osuagwu, L. “Business policy and strategy,”
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N. Li and A. Toppinen, “Corporate social responsibility and sustainable
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Goals? Forest Policy and Economics, 13(2): (2010), 113-123.
A. B. Carrol, “Social responsibility as an objective of business: evaluating
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S. E. Cook and J. L. Mendleson, “Androgynous management: key to social
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I. Rosam and R. Peddle, “Implementing Effective Corporate Social
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J. R. Córdoba-Pachón, R. Garde-Sánchez and M. P. Rodríguez-Bolívar “A
systemic view of Corporate Social Responsibility (CSR) in state owned
Enterprises (SOEs).” Knowledge & Process Management, 21(3), (2014), 206–219.
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H. Aguinis and A. Glavas, “What we know and don't know about Corporate
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J. Jonker and M. D. Wi e, “The challenge of organizing and implementing
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R. Edelman, “Managing corporate risk and reputation, Global Agenda,” 2,
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D. J. Duck, “The Change Monster: The Human Forces that Foil or Fuel
Corporate Transformation and Change,” New York: Crown. (2000).
S. F. Slater and J. C. Narver, “Does competitive environment moderate the
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h ps://doi.org/10.2307/1252250
289
ABOUT THE AUTHORS
Dr. Joshua Adewale ADEJUWON
Dr. Joshua Adewale Adejuwon’s first degree (B.Sc.) is in Accounting from the
University of Lagos. He has his Master of Business Administration from the University
of Ibadan and a Doctorate in Business Administration from Lead City University,
Ibadan. He is a Fellow of the Institute of Chartered Accountants of Nigeria (FCA), a
Full member of the Nigeria Institute of Management (MNIM), a Fellow, of the
Association of Forensic Accounting Researchers (FAFAR), and a Fellow, of the
Association of Management and Social Sciences Research of Nigeria (FAMSSRN). He
is a strongly committed academic, with a focus on the growth of Management and
Accounting, through teaching, research, and community service.
He is the pioneer Bursar of Lead City University and a former Head of, the
Management and Accounting Department, of the University. At the professional
level, Dr. Adejuwon has been Chairman of the Technical Committee, Library
Committee, and Publications Committee of Ibadan and District Society of ICAN for
different terms and periods as well as being a member of the ICAN examination
process for over twenty (20) years.
PROFESSOR GODWIN EMMANUEL OYEDOKUN
Prof. Oyedokun is an experienced multi-talented and multidisciplinary
scholar-practitioner of good repute with over 20 years of experience. He is
currently a Professor of Management & Accounting in the Department of
Management & Accounting of Lead City University Ibadan, Nigeria. He is a
Visiting & Adjunct Professor at many Universities both in Nigeria and
overseas. He is the Principal Partner, Oyedokun Godwin Emmanuel & Co
(Chartered Accountants, Tax Practitioners & Forensic Auditors)
ABOUT THE BOOK
This book brings together, the ideas of different Scholars, Practitioners, and
Authorities concerning the subject matter, Environmental Factors and
Entrepreneurship Development. There are 13 chapters which were jointly
contributed by 25 scholars in the field with the range of title such as Corporate
Social Responsibility and Organizational Survival; Environmental Factors and
Performance of Small-Scale Businesses in Shomolu Local Government, Lagos; Government
Policies and Entrepreneurial Development in Nigeria; Organizational Culture and Business
Perfo
rmance in the Nigerian Service Sector; Sustainability of Small and Medium Scale Enterprises in Nigeria: The Role
of Government Policies; Role of Entrepreneurship in Achieving Economic Growth in Nigeria; Impact of
Macroeconomics Fluctuation on the Growth of Small and Medium Scale Businesses in Nigeria; Workforce Diversity
and Organisational Productivity in Unilever; Entrepreneurship and Small Business Development in Nigeria; Green
Marketing and Environmental Degradation in Lagos State, Nigeria; Environmental Factors and Entrepreneurship
Development in Nigeria; Significance of Interest Rate in Bolstering Business Development in Nigeria; and
Corporate Social Responsibility on Business Growth in Business Environment. This edited book is an addition to
the frontiers of knowledge in business and entrepreneurship. Scholars, Practitioners, and Authorities will find the
contents useful, and it is also recommended for all postgraduate students in the field of business and
entrepreneurship.
ISBN: 978-978-59453-4-8