Entrepreneurship and Business Environment
Entrepreneurship and
Business Environment
Edited By
Godwin Emmanuel Oyedokun
Joshua Adewale Adejuwon
2023
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Entrepreneurship and Business Environment
Entrepreneurship and Business Environment
NATIONAL LIBRARY OF NIGERIA CATALOGUING - IN- PUBLICATION
DATA
STUDIES in Entrepreneurship and Nigerian Business Environment
1. Entrepreneurship - Nigeria
2. Entrepreneurship - Study and Teaching (Higher)
I. Title II. Oyedokun, Godwin Emmanuel III. Adejuwon, Joshua Adewale
HB 615.A685 338.04 2022
ISBN: 978-978-59453-5-5 (Pbk)
AACR2
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Entrepreneurship and Business Environment
Entrepreneurship and Business Environment
ISBN: 978-978-59453-5-5
Copyright © 2023 – OGE Business School Publisher
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Entrepreneurship and Business Environment
Environmental Factors and Entrepreneurship Development in Nigeria
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Entrepreneurship and Business Environment
Entrepreneurship and Business Environment
Reviewers
Godwin Emmanuel Oyedokun
Joshua Adewale ADEJUWON
Oluwatobi Abodunrin KUJORE
Olawale Samson DOPEMU
Oladapo Abdullateef FAMUYIWA
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Entrepreneurship and Business Environment
PREFACE
A business environment is all the components that affect a business. These include
both internal factors, like employees and resources, and external factors, like
customers and markets. Each of these contributes to a company's working
environment and can influence how the business functions. 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, Entrepreneurship and Business
Environment. There are 14 chapters which were jointly contributed by 26 scholars
in the field with the range of title such as Corporate Social Responsibility and
Business Performance of Promasidor Nigeria Limited; Globalisation,
Government Support and Entrepreneurial Development in Nigeria; Digital
Marketing Skills Acquisition and Self-Reliance of Youths in Lagos Mainland Local
Government Area of Lagos State; Social Capital and Entrepreneurial Intention;
Strategic Flexibility and SME Performance during Economic Crisis in Nigeria
Empolyees' Welfare, Industrial Accident and Safety in a Manufacturing Company
in Nigeria; Microfinance Institutions and Social Entrepreneurship among Small
and Medium Scale Enterprises in Ibadan, Nigeria; Impact of Government Policy
on the Growth of Small and Medium Scale Business in Nigeria; Indices for
Determining Economic Viability of Investments in Nigeria; Green Marketing
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Entrepreneurship and Business Environment
Practices and Business Environment in Nigeria; Entrepreneurship Development
and its Impact on Poverty Alleviation in Nigeria; Human Resource Management
and Employees' Job Performance; Developmental Values of Street Trading in the
Growth of Nigeria Economy; andBusiness Angel Model in Financing Small and
Medium Businesses South West Nigeria. 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.
Professor Godwin Emmanuel Oyedokun
Associate Professor Joshua Adewale Adejuwon
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Entrepreneurship and Business Environment
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.
Professor Godwin Emmanuel Oyedokun
Associate Professor Joshua Adewale Adejuwon
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ABOUT THE EDITORS
PROFESSOR GODWIN EMMANUEL
OYEDOKUN
ND (Fin), HND (Acct.), BSc. (Acct. Ed), BSc (Fin.), LLB., MBA (Acct. & Fin.),
MSc. (Acct.), MSc. (Bus &Econs), MSc. (Fin), MSc. (Econs), Ph.D. (Acct), Ph.D.
(Fin), Ph.D. (FA), CICA, CFA, CFE, CIPFA, CPFA, CertIFR, ACS, ACIS,
ACIArb, ACAMS, ABR, IPA, IFA, MNIM, FCA, FCTI, FCIB, FCNA, FCFIP,
FCE, FERP, FFAR, FPD-CR, FSEAN, FNIOAIM
Prof. Oyedokun is a multi-talented and
multidisciplinary scholar-practitioner of good repute
with over 22 years of experience. He is a forensic
accountant, public policy analyst, author, and international speaker who is
currently a Professor of Accounting & Financial Development at the Lead City
University Ibadan, Nigeria. He is a Visiting Professor of Forensic Accounting &
Finance at Charisma University, Turks & Caicos Island, West Indies, UK. a visiting
Professor at the Department of Management Science of Coal City University,
Enugu, he is an Adjunct Professor of Accounting & Finance at both McPherson
University, Nigeria & Crawford University, Igbesa, Nigeria. He was an Adjunct
Professor of Accounting at the Department of Accounting, Igbinedion University,
Okada, Nigeria, and he was a Senior Lecturer in the Department of Accounting
and Department of Taxation of Nasarawa State University Keffi. Likewise, he was
an adjunct lecturer at Babcock University, and South-Western University.
He is a faculty member at the Joseph Business School Chicago/Lagos, and an
international faculty member at the Mississippi State University's Continue
Education programmes in Lagos.
Prof. Oyedokun is currently a faculty member for the supervision of Postgraduate
Students at the University of South Africa (UNISA). He is also an External
Examiner for the undergraduate Accounting programmes of Abia State
University, Uturu Nigeria, Atiba University, Oyo, Nigeria, and Dominican
University, Ibadan, Nigeria.
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Entrepreneurship and Business Environment
Prof. Oyedokun is a sought-after intellectual, who had presented various
technical/seminar papers at conferences/training/seminars, and he is an examiner
to some professional bodies, both in Nigeria and abroad. He has authored over 50
professional articles, 22 conference papers, 15-chapter contributions, and 171
peered-reviewed academic articles. He has edited 10 books and published 20
books to the Glory of God. He has successfully supervised 121 BSc Projects, 7 PGD
Projects, 35 MSc Dissertations, and 11 completed Ph.D. Theses in management,
accounting, finance, taxation, and forensic accounting & audit in Nigeria and
overseas.
Prof. Oyedokun is the founder of OGE Group and the Principal Partner at
Oyedokun Godwin Emmanuel & Co (A Firm of Chartered Accountants, Tax
Practitioners & Forensic Auditors), he is an Erudite Contemporary Professor, a
Consummate Educationist, and a Human Capital Development Expert who has
taught at all levels of education. He has a ended several local and international
conferences in the last 20 years, including but not limited to the programmes at
Lagos Business School, Lagos Nigeria, Joseph Business School, Chicago, USA.,
University, Dallas Texas, USA, Greenwich University, London, University of
Bristol, England, University of Johannesburg South Africa, University of Kenya,
Nairobi, among others.
He is currently a Governing Council member of the Chartered Institute of
Taxation of Nigeria (CITN), Business Recovery and Insolvency Practitioners of
Nigeria (BRIPAN), Global President of the Association of Forensic Accounting
Researchers (AFAR), Board Chairman of Association of Certified Fraud
Examiners (ACFE, Lagos Chapter) and the Chairman, Ilupeju/Gbagada & District
Society of the Institute of Chartered Accountants of Nigeria (ICAN) among
others.
Professor Oyedokun is happily married with children.
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Entrepreneurship and Business Environment
Dr. Joshua Adewale ADEJUWON
B.Sc, MBA, PhD, FCA, MNIM, FAMSSRN
Dr. Joshua Adewale Adejuwon's first degree (B.Sc.) is in
Accounting from University of Lagos. He has a Master
of Business Administration from University of Ibadan
and a Doctorate degree in Business Administration from
Lead City University. He is a Fellow of the Institute of
Chartered Accountants of Nigeria (FCA), Full member
of Nigeria Institute of Management (MNIM), Fellow,
Association of Forensic Researchers (FFAR), and Fellow,
Association of Management and Social Sciences
Research of Nigeria (FAMSSRN). He is a strongly commi ed academic, with a
focus on the growth of Management and Accounting, through teaching, research
and community service.
Dr. Adejuwon has been a University lecturer for more than 21 years, lecturing
Accounting and Management courses, and supervising undergraduate and post
graduate projects at both levels. He has participated in workshops and presented
his research outputs in both national and international conferences. He has a total
of thirty-two (32) published articles (as at September 2021) in circulation in
reputable, high impact factor foreign and University based/professional and
national journals.
He is the immediate past Head, Management and Accounting Department, Lead
City University, Ibadan, during which period the department obtained full
accreditation status for the University's Accounting and Business Administration
programmes from both the National University's Commission (NUC) and
Institute of Chartered Accountants of Nigeria (ICAN).
At the professional level, Dr. Adejuwon has been chairman of Technical
Commi ee, Library Commi ee and Publications Commi ee of Ibadan and
District Society of ICAN for different terms and periods as well as being a member
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Entrepreneurship and Business Environment
of the ICAN examination process for over twenty (20) years. His research focus is
in the area of Management and Accounting, which is critical to corporate and
national sustainable development. His vision is to enhance research capacity
generally, continue publishing in top ranking academic and professional journals,
become a legend and be self-fulfilled in the area of Management and Accounting.
He also intends to continue mentoring the younger academics and match his
research efforts to societal needs. His research are reported in various
publications, some of which are already uploaded on Research Gate for more
visibility
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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
Ayedogbon, Adeleye Olorunleke is the Chief Executive Director of Teenadex
Nigeria Enterprise, Ogba, Lagos, Nigeria
Azeez, Sherifat Abiodun is a Lecturer at the Federal College of Education
(Technical), Akoka, Lagos, Nigeria
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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
Oloni, Olu Daniel is a Lecturer at Department of Business Administration, Lagos
State University of Science and Technology, Lagos Nigeria
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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
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TABLE OF CONTENTS
CHAPTER 1
1
Corporate Social Responsibility and Business Performance of
Promasidor Nigeria Limited
OYEDOKUN Godwin Emmanuel & OLUKOYA Sikirat Adetutu
CHAPTER 2
17
Globalisation, Government Support and Entrepreneurial Development
in Nigeria
HASSAN Olatunji Alaba & OJOMOLADE Jacob Dele
CHAPTER 3
39
Digital Marketing Skills Acquisition and Self-Reliance of Youths in
Lagos Mainland Local Government Area of Lagos State
AZEEZ Sherifat Abiodun & KUJORE Oluwatobi Abodunrin
CHAPTER 4
Social Capital and Entrepreneurial Intention
ADEJUWON Joshua Adewale & OYEKU Oyedele Ma hew
68
CHAPTER 5
91
Strategic Flexibility and SME Performance during Economic Crisis in
Nigeria
ADEKUNLE Ebenezer Adewunmi & DOPEMU Olawale Samson
CHAPTER 6
115
Empolyees' Welfare, Industrial Accident and Safety in a Manufacturing
Company in Nigeria
OLADEJI Adesola Alaba & OLALEYE John Olatunde
CHAPTER 7
133
Microfinance Institutions and Social Entrepreneurship among Small
and Medium Scale Enterprises in Ibadan, Nigeria
JEGEDE Folukemi Ruth & ADEWUMI Moyosore Akingbade
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CHAPTER 8
Impact of Government Policy on the Growth of Small and Medium
Scale Business in Nigeria
AJAYI Olawale Azeez & OLALEYE John Olatunde
166
CHAPTER 9
Indices for Determining Economic Viability of Investments in Nigeria
OYEWO Victoria Adebola & OLADEJO James Olusola
193
CHAPTER 10
Green Marketing Practices and Business Environment in Nigeria
AYEDOGBON Adeleye Olorunleke & OYEDOKUN Godwin
Emmanuel
219
CHAPTER 11
245
Entrepreneurship Development and its Impact on Poverty Alleviation
in Nigeria
AJANI Abiola Joshua & OYEKUNLE Oyesola Rasheed
CHAPTER 12
Human Resource Management and Employees' Job Performance
OLONI Olu Daniel & ADEOLU-AKANDE Modupeola Atoke
282
CHAPTER 13
298
Developmental Values of Street Trading in the Growth of Nigeria
Economy
OLATUNJI, Olanrewaju Patrick & FAMUYIWA Oladapo Abdullateef
CHAPTER 14
321
Business Angel Model in Financing Small and Medium Businesses
South West Nigeria
OLATOYAN Segun Anthony & ADEJUWON Oluwakemi Adefisayo
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CHAPTER
01
CORPORATE SOCIAL RESPONSIBILITY AND
BUSINESS PERFORMANCE OF
PROMASIDOR NIGERIA LIMITED
OYEDOKUN Godwin Emmanuel & OLUKOYA Sikirat Adetutu
Abstract
The main objective of this research was to investigate the effect of Corporate Social
Responsibility (CSR) on business performance with emphasis on the operation of
Promasidor Nigeria Limited. Over the years, it has been observed that a number
of businesses have not understood the benefits of CSR to business performance,
hence, the low involvement of businesses in CSR initiatives. The research adopted
descriptive survey research design. The sample size of the study was 330 based on
the outcome from Taro Yamane sample size determination. Primary data was
collected with the use of structured questionnaire from 330 employees' selected
with random sampling technique from a total population of 1,873 employees' of
Promasidor Nigeria Limited while secondary data from journals, textbooks and
other relevant publications were used for the literature review. The research
hypotheses were tested with Pearson's Correlation coefficient on Statistical
Package for the Social Sciences (SPSS). The findings revealed that there is
significant relationship between economic responsibility and the profitability of
Promasidor Nigeria Limited. Also, there is significant relationship between legal
responsibility and the market share of Promasidor Nigeria Limited. The study
concluded that the measures of CSR (Economic responsibility, legal
responsibility, ethical responsibility and philanthropic responsibility) had
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significant influence on the business performance of Promasidor Nigeria Limited.
Furthermore, the study recommended that the management of Promasidor
Nigeria Limited should ensure that more effort is put to strengthen and improve
their CSR activities as this will have far reaching effects on the performance of the
business.
Word Count:246
Keywords: Business, CSR, Economic responsibility, Legal responsibility, &
Stakeholder
Introduction
Corporate Social Responsibility (CSR) is a concept that has a racted worldwide
a ention. Indeed, growing interest in CSR in recent years has emanated from the
advent of globalization and international trade, which have reflected in increased
business complexity and new demands for enhanced transparency and corporate
citizenship. Moreover, while governments have traditionally assumed sole
responsibility for the improvement of the living conditions of the population,
society's needs have exceeded the capabilities of governments to fulfill them.
Hence, businesses have indeed ventured into CSR initiatives to improve the
welfare of the society. Carroll and Shabana (2010) as cited in Mohammed (2020)
suggested that over the decades, the concept of CSR has continued to grow in
significance and prominence.
For instance, Governance and Accountability Institute (GAI) reported that in
2018, 86 per cent of S&P 500 firms released sustainability or corporate
responsibility reports compared with just under 20 per cent in 2011 (Gillan, Koch,
& Starks, 2020). This is a significant increase and indeed demonstrates the
increasing participation of businesses in CSR, which is the aim of CSR advocacy
groups all over the world. “The relationships between business organizations and
the society have been widely studied for decades with outcomes being influenced
by the prevailing economic paradigm at a specific point in time. Over the past
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sixty years, CSR has grown from a narrow and often marginalized notion into a
complex and multifaceted concept, one which is increasingly central to much of
today's corporate decision making” (Mohammed, 2020, p.37). CSR is a concept
whereby business organizations consider the interest of society by taking
responsibility for the impact of their activities on customers, suppliers,
employees, shareholders, communities and other stakeholders as well as their
environment. This obligation shows that the organizations have to comply with
legislation and voluntarily take initiatives to improve the well-being of their
employees and their families as well as for the local community and society at
large. “Not only has CSR received academic a ention in recent years but it is
becoming a mainstream issue for many organizations, as governments, the
media, social activists and employees are increasingly becoming adept at holding
organizations to account for the consequences of their activities” (Mohammed,
2020, p.38).
Performance is a critical factor to business success (Onifade, Opele & Okafor,
2018). According to Jain, Apple and Ellis (2015) as citied in Nebo, Nwankwo and
Okonkwo (2015), performance is the act or process of carrying out actions and
activities to accomplish an intended outcome. It is therefore important to
understand the factors that play a relevant role in any performance. According to
Richard et al. (2009) as cited in Shonubi and Akintaro (2016), business performance
is measured in three areas: financial performance (profit, return on assets, return
on investment, etc.), product market performance (sales, market share etc.); and
shareholder return (total shareholder return, economic value added, etc.).
Statement of the Problem
Over the years, it has been observed that a number of businesses have not
understood the benefits of CSR to business performance, hence, the low
involvement of businesses in CSR initiatives. A significant number of studies have
shown no negative influence on shareholder results from CSR but rather a slightly
negative correlation with improved shareholder returns. Some studies have
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shown strongly positive correlations between a CSR and business performance in
the long-term. However, some critics argue that CSR distracts from the
fundamental economic role of businesses; others argue that it is nothing more
than a waste of resources. Others argued that it is an a empt to pre-empt the role
of governments as a watchdog over powerful corporations though there is no
systematic evidence to support these criticisms. But while there have been
important breakthrough in the theoretical understanding of corporate social
responsibility empirical studies have generally remained scanty. To this end the
study undertake to determine the effect of corporate social responsibility on
business performance of Promasidor Nigeria Limited.
Objective of the Study
The specific objective of the study is to explore the effect of corporate social
responsibility on business performance of Promasidor Nigeria Limited. The
specific objectives of the study are as follows:
i.
To investigate the influence of economic responsibility on the profitability
of Promasidor Nigeria Limited.
ii.
To investigate the influence of legal responsibility on the market share of
Promasidor Nigeria Limited.
iii.
To investigate the influence of ethical responsibility of Promasidor Nigeria
Limited on customer satisfaction.
iv.
To investigate the influence of philanthropic responsibility of Promasidor
Nigeria Limited on community engagement.
Research Questions
The study shall be guided by the following research questions:
i.
What is the influence of economic responsibility on the profitability of
Promasidor Nigeria Limited?
ii.
What is the influence of legal responsibility on the market share of
Promasidor Nigeria Limited?
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Entrepreneurship and Business Environment
iii.
iv.
What is the influence of ethical responsibility of Promasidor Nigeria
Limited.on customer satisfaction?
What is the influence of philanthropic responsibility of Promasidor
Nigeria Limited on community engagement?
Research Hypotheses
H01: There is no significant relationship between economic responsibility and the
profitability of Promasidor Nigeria Limited.
H02: There is no significant relationship between legal responsibility and the
market share of Promasidor Nigeria Limited.
Literature Review
Corporate Social Responsibility (CSR)
“In the literature there are varying perspectives on corporate social responsibility
(CSR), each with their own agenda; while some managers and researchers
emphasize management responsibilities towards all stakeholders, others argue
that companies should actively contribute to social goals, and yet others reject a
social responsibility of business beyond legal compliance” (Mohammed, 2020,
p.37). Dahlsrud (2008) as cited in Sameer (2021) stated that although different
definitions have been made by a number of scholars, yet there exists no
universally accepted CSR. According to Adeyanju (2012, p.18), “Corporate social
responsibility has to do with an organization going out of his way to initiate
actions that will impact positively on its host community, its environment and the
people generally”. Ohiokha, Odion, and Akhalumeh (2016, p.2-3) CSR “may be
defined as the duty of care which corporation exhibits not only with respect to
their business operations such as profits, return on investment, dividends
payment and so on, but also with respect to social, environmental, health,
education and other consequences”.
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Entrepreneurship and Business Environment
A number of claimants to a business have been identified in the literature, these
claimants include customers, shareholders, employees, government, and the
public (Adeyanju, 2012). Hence, business social responsibility occurs and can be
seen in a number of aspects in a firm's engagement with stakeholders such as
suppliers, customers, employees, host community, owners of businesses,
creditors, management, government and the society (Ohiokha et al., 2016).
According to Clarkson (1995) as cited in Adeyanju (2012) “CSR is concerned with
treating the stakeholders of the firm ethically or in a socially responsible manner.
Since stakeholders exist both within a firm's and outside a firm, hence, behaving
socially and responsibly will increase the human development of stakeholders
both within and outside the corporation”. “Policymakers, the general public and
even corporate leaders, agree that companies of all types must also be responsive
to the needs of the communities in which they do business” (Mohammed, 2020,
p.38). Adeyanju (2012) pointed out that in the past the society relied on businesses
for efficient resource allocation and its maximization, but today, this has
dependence has gone beyond profit maximization to include social responsibility.
Srivastava, Gupta, Singh and Srivastava (2017) noted that in the past, different
scholars have explored the theme of CSR and related concepts derived from
various perspectives, such as social obligation, marketing, stakeholder-relation,
integrated strategy, and leadership themes.
Starks (2009) as cited in Gillan et al. (2020) noted that there are assumptions in the
literature that CSR factors could add to reducing a firm's risk (such as regulatory
risk, supply chain risk, product and technology risk, litigation risk, reputational
risk, and physical risk). But, Becche i, Cicire i, and Hasan (2015) agree with the
opinion that CSR increases firms' idiosyncratic risk. “Archie B. Carroll had said
that “there had been economic, ethical, legal and philanthropic aspect to the
subject”. Therefore, one of the most used and quoted model is the Carroll's
pyramid of CSR, 1991. Carroll considers CSR to be framed in such a way that the
entire range of business responsibilities is embraced in these four responsibilities”
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Entrepreneurship and Business Environment
(Adeyanju, 2012, p.20). Therefore, corporate social responsibility indicates the
degree of moral obligation that may be ascribed to corporations beyond simple
obedience to the laws of the state (Kilcullen & Kolstra, 1999 as cited in Srivastava et
al., 2017). The social legislation of the early 1970s which led to the creation of the
Environmental Protection Agency (EPA), the Equal Employment Opportunity
Commission (EEOC), the Occupational Safety and Health Administration
(OSHA), and the Consumer Product Safety Commission (CPSC) (Carroll, 1991 as
cited in Mohammed, 2020). These new governmental bodies established that
national public policy now officially recognized the environment, employees,
creditors and consumers to be significant and legitimate organizational
stakeholders (Mohammed, 2020).
Business Performance
Business performance comprises the actual output or results of an organization as
measured against its intended outputs. It differs from one organization to the
other with each trying to gain competitive advantage. Internally, performance is
driven by the firm's motivation to perform. Kloot and martin (2000) as cited in
Auka and Langat (2016) suggests that there should be a strong linkage between
performance measures and organizational objectives. Hence, measuring the
different elements that maybe associated with success of an organization using a
multidimensional approach to business performance that incorporates both
financial and nonfinancial factors. The majority of studies use a variety of
measures, such as non-financial (success) or financial. Financial measure
comprises such indicators as: profit turnover, return on investment, return on
capital employed and inventory turnover. Non-financial measures include
innovation and market standing.
Business performance can be defined as an organization's ability to obtain and
maximize its scarce resources and valuables as possible in the quest of its
operational goals, whilst strategic planning is a progressive tool that managers
should be engaged in. Nickols, (2011) cited in Adetayo (2019) for organizations to
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Entrepreneurship and Business Environment
survive, they ought to operate successfully with forces present in the
environment. Rasoulzadeh, Hosseinipour, Yusuand and Hashemi (2013) noted
that while organizations social awareness is becoming one of the most important
business intangible assets in competitive environment, CSR is being considered a
more essential factor for organizations performance, maintenance and survival.
Theoretical Framework
The literature therefore recognizes four major theories of Corporate Social
Responsibility (CSR) or four theories about the responsibilities of business in
society, which can be considered contemporary mainstream theories, namely:
Corporate Social Performance (CSP), Shareholder Value Theory or Fiduciary
Capitalism, Stakeholder Theory and Corporate Citizenship (Crane, et al., 2008 as
cited in Mohammed, 2020, p.38). Based on its relevance to this study, we shall
consider stakeholder theory as the theoretical basis of this paper.
“The stakeholder theory is the most common theory, with the most important
argument that there are wider groups of stakeholders in a corporation than
merely shareholders and investors” (Basuony, Elseidi, & Mohamed, 2014, p.763).
Along with shareholders, organizational stakeholders include creditors,
employees, customers, suppliers, and the communities at large. Thus, stakeholder
theory asserts that companies have a social responsibility that requires them to
consider the interests of all parties affected by their actions. Management should
not only consider its shareholders in the decision making process, but also anyone
who is affected by business decisions (Branco & Rodriguez, 2007).
Empirical Framework
A number of empirical studies have been conducted on the variables of the study,
a few of these studies shall be reviewed in this section to provide the empirical
basis of the study. Adeyanju (2012) conducted a study on the impact of corporate
social responsibility on Nigerian society. The study focused on the banking and
communication industries. The objective of the study was to consider the
8
Entrepreneurship and Business Environment
imperative and benefits of CSR on the Nigeria society. The study adopted
descriptive survey design. Data was collected from primary and secondary
sources. Both regression and correlation analysis were used to test the suggested
hypotheses in the study. The result reveals a strong and significant relationship
between CSR and societal progress such that the relationship between CSR and
Societal Progress is statistically significant. It was concluded that CSR plays a
significant role in societal progressiveness in terms of environmental and
economic growth. Therefore, it was recommended that, while improvement in the
depth of participation by banking and telecommunication industries in economic
and environmental development is desirable, they are encouraged to collaborate
and maintain a common interest in engaging in certain social responsibilities,
especially those that are concerned with security and technological advancement
of the Nation.
Ohiokha et al. (2016) conducted a study on corporate social responsibility and
corporate financial performance: The Nigerian experience. The objective of the
paper was to demonstrate empirically the impact of corporate social
responsibility on firms' financial performance. Pooled panel survey research
design was used in the study. Annual reports of twenty nine (29) sample firms
from 2005 to 2010 formed the source of data collection where CSR (donations),
earnings per share (EPS), size, tang, and leverage for 174 observations were used
for the computational experiment. Panel data regression analysis was conducted
to test the hypotheses raised in the study. It was found that CSR has slight impact
on the sample firms' EPS. It was concluded that the performance of EPS is higher
than the independent CSR from the analysis result because lower coefficient of
variation deduces higher performance, consistency and efficiency of result. The
paper recommended that business organizations should be involved in CSR by
spending substantial amount of their profits on CSR engagement as this will
result to increase in earnings according the philosophy of the triple-bo om-line.
Sameer (2021) conducted a study on the impact of Corporate Social Responsibility
(CSR) on organization's Financial Performance (FP): Evidence from Maldives
9
Entrepreneurship and Business Environment
public limited companies. The major objective of the study was to determine CSR
disclosures and to find out the association between CSR and FP by the public
companies of Maldives. Mixed-method research and is longitudinal research
design was adopted in the study. The period of the study spanned from 2014 to
2018. Data were collected from annual reports of the listed companies in MSE.
Judgmental sampling technic was used in the study and panel data regression
was used to analyze the data on STATA 15 software. The finding indicated that
diversity and Return on Asset, environment and Return on Equity, diversity, and
Earning per Share, and when the size of the firm controlled, there exhibit
significant negative relation between CSR and ROA. It concluded that there is a
significant negative relationship between CSR and FP.
The review conducted indicated that there is strong indication that CSR improves
business performance in a variety of ways particularly as it helps the business to
operate without disruption from members of the community where the business
is domiciled.
Methodology
The research methodology is invariably the heart of any study as it presents a
picture of how the researcher went about gathering materials in the conduct of the
study (Ibikunle, 2016). The research method is the systematic approached used by
a researcher to collect data for the purpose of conducting an investigation
(Ibikunle, 2016). Therefore, the study adopted descriptive survey research design.
The sample size of the study was 330 based on the outcome from Taro Yamane
sample size determination. Primary data was personally collected by the
researcher with the use of a Likert scale type structured questionnaire from 330
employees' selected with random sampling technique from a total population of
1,873 employees' of Promasidor Nigeria Limited while secondary data from
journals, textbooks and other relevant publications were used for the literature
review. The research instrument achieved a response rate of 69.70 (230 copies).
The research hypotheses were tested with Pearson's Correlation coefficient on
Statistical Package for the Social Sciences (SPSS).
10
Entrepreneurship and Business Environment
Results and Discussions
Hypothesis One
H0: There is no significant relationship between economic responsibility and the
profitability of Promasidor Nigeria Limited.
Correlations
Economic
responsibilit
Economic
Pearson
responsibility
Correlation
y
Profitability
1
.445**
Sig. (2-tailed)
N
Profitability
Pearson
Correlation
.000
230
230
.445**
1
Sig. (2-tailed)
.000
N
230
Source: Correlation is significant at the 0.01 level (2-tailed).
11
230
Entrepreneurship and Business Environment
Hypothesis Two
H02: There is no significant relationship between legal responsibility and the
market share of Promasidor Nigeria Limited.
Correlations
Legal
responsibilit
Legal responsibility
Pearson
y
Market share
1
.454**
Correlation
Sig. (2-tailed)
N
Market share
Pearson
.000
230
230
.454**
1
Correlation
Sig. (2-tailed)
.000
N
230
230
Source: Correlation is significant at the 0.01 level (2-tailed).
The correlation coefficient for economic responsibility and the profitability of
Promasidor Nigeria Limited was statistically significant at 0.445 (0.05). Therefore,
the null hypothesis is rejected while the alternative hypothesis is accepted; this
implies that there is significant relationship between economic responsibility and
the profitability of Promasidor Nigeria Limited. Hence, economic responsibility
12
Entrepreneurship and Business Environment
led to 44.5 per cent increase in the profitability of Promasidor Nigeria Limited. In
the test of hypothesis two, the correlation coefficient for legal responsibility and
the market share of Promasidor Nigeria Limited was statistically significant at
0.454 (0.05). Therefore, the null hypothesis is rejected while the alternative
hypothesis is accepted; this implies that there is significant relationship between
legal responsibility and the market share of Promasidor Nigeria Limited. Hence,
legal responsibility led to 45.4 per cent increase in the market share of Promasidor
Nigeria Limited.
The two hypotheses tested indicted that there is significant relationship between
economic responsibility and the profitability of Promasidor Nigeria Limited.
Also, there is significant relationship between legal responsibility and the market
share of Promasidor Nigeria Limited. Hence, it could be seen that CSR has
significant influence on the profitability and market share of Promasidor Nigeria
Limited. Also, the CSR activities of Promasidor Nigeria Limited have significant
influence on customer satisfaction and community engagement. The findings of
the study are in agreement with studies (see Ohiokha et al., 2016; Sameer, 2021).
Conclusion and Recommendations
The study investigated the effect of CSR on the business performance of
Promasidor Nigeria Limited. The findings revealed that there is significant
relationship between economic responsibility and the profitability of Promasidor
Nigeria Limited. Also, there is significant relationship between legal
responsibility and the market share of Promasidor Nigeria Limited. It was
therefore concluded that the measures of CSR (Economic responsibility, legal
responsibility, ethical responsibility and philanthropic responsibility) had
significant influence on the business performance of Promasidor Nigeria Limited.
The following recommendations are made:
i.
The management of Promasidor Nigeria Limited should ensure that more
effort is put to strengthen and improve their CSR activities as this will have
far reaching effects on the performance of the business.
13
Entrepreneurship and Business Environment
ii.
iii.
Engagement in CSR activities should be an ongoing activity in the
organization to foster cordial relationship between Promasidor Nigeria
Limited and its community.
The management of Promasidor Nigeria Limited should also increase the
level of its involvement in CSR activities to help be er the welfare of the
society.
14
Entrepreneurship and Business Environment
References
Adetayo, A. S. (2018). Impact of strategic planning on organizational
performance: a study of Unilever Nigeria plc and May & Baker Nigeria plc.
International Journal of Scientific & Engineering Research, 9(2), 1256-1263.
Adeyanju, O. D. (2012). An assessment of the impact of corporate social
responsibility on
Nigerian society: The examples of banking and
communication industries. Universal Journal of Marketing and Business
Research, 1 (1), 17-43.
Auka, D. A., & Langat, J. C. (2016). Effects of Strategic Planning on Performance of
Medium Sized Enterprises in Nakuru Town International Review of
Management and Business Research, 5(1), 188-201.
Basuony, M. A. K., Elseidi, R. I., & Mohamed, E. K. A. (2014). The impact of
corporate social responsibility on firm performance: Evidence from a
Mena Country. Corporate Ownership and Control, 12(1), 761-774.
Becche i, L., Cicire i, R., & Hasan, I. (2015). Corporate social responsibility,
stakeholder risk, and idiosyncratic volatility. Journal of Corporate Finance 35,
297–309.
Branco, M. C. & Rodriguez, L. L. (2007). Positioning stakeholder theory with the
debate on corporate social responsibility. Electronic Journal of Business
Ethics and Organisational Studies, 12(1), 5-15.
Gillan, S. L., Koch, l., & Starks, A. T. (2020). Firms and social responsibility: A
review of ESG and CSR research in corporate finance. CSB Working Paper
Series. Working paper no. 2020-20.
Ibikunle, S. O. (2016). Research methods and statistics: Theory and applications (New
ed.). Yaba, Lagos: Ablek.
Mohammed, S. (2020). Components, theories and the business case for corporate
social responsibility. International Journal of Business and Management
Review, 8(2), 37-65.
Nebo, C. S., Nwankkwo, P. N., & Okonkwo, R. I. (2015). The role of effective
communication of organizational performance: A study of Nnamdi
Azikwe University, Awka. Review of Public Administration and Management,
15
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4(8), 131 – 148.
Ohiokha, F. I., Odion, O. A., & Akhalumeh, P. B. (2016). Corporate social
responsibility and corporate financial performance: The Nigerian
experience. International Journal of Accounting Research, 2(10), 1-13.
Onifade, T. A., Opele, A. M., & Okafor, L. I. (2018). Communication: An effective
tool for employee performance in Unilever Nigeria plc. International Journal
of Management Technology, 5 (2), 16 – 27.
Rasoulzadeh, H., Hosselnipour, S. J., Yosouf, N. A. M., & Hashemi, S. (2013). Effect
of dimension of corporate social responsibility on organization
performance. International Journal of Innovative Ideas. 13 (2), 37-42.
Sameer, I. (2021). The impact of corporate social responsibility on organization's
fnancial performance: evidence from Maldives public limited companies.
Future Business Journal, 7(29), 1-21.
Shonubi, A. O. & Akintaro, A. A. (2016). The impact of effective communication on
organizational performance. The International Journal of Social Science and
Humanities International, 3(3), 1904 – 1914.
Srivastava, A. K., Gupta, A., Singh, R., & Srivastava, A. A. (2017). Corporate social
responsibility: A literature review. International Journal of Pure and Applied
Research, 2(2), 121-131.
16
Entrepreneurship and Business Environment
CHAPTER
02
GLOBALISATION, GOVERNMENT SUPPORT AND
ENTREPRENEURIAL DEVELOPMENT IN NIGERIA
HASSAN Olatunji Alaba & OJOMOLADE Jacob Dele
Abstract
This study investigated the influence of globalisation on entrepreneurial
development alongside with the government support programme, in seven
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 140 entrepreneurs in Ogbomosho North, Saki West, Ibadan NorthWest, Ibadan South-East, Ibadan South-West, Oluyole, and Oyo West 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 with chi-square method at 5% significance level. Due to
the under-development of the entrepreneurial sector in the state, the globalisation
ideology has suffered setbacks despite the availability of numerous opportunities
that would have been hitherto utilised to put the state at vantage point in the
global order. The study concluded that the role played by the government
towards entrepreneurship development in the state is not effective. Government
should support entrepreneurship development through adequate and
functioning physical infrastructures; cultural norms; access to professional
services good and corrupt-free democratic governance; and market dynamics.
The paper recommended that government at all levels should provide possible
17
Entrepreneurship and Business Environment
solutions to the challenges hindering entrepreneurial development in the country
especially because of the numerous opportunities that exist in the sector which, if
properly utilised will benefit the state and make it to be among the gainers in the
game of globalisation. The Government and the organised private sector should
increase their support for entrepreneurial/vocational training programme in
tertiary education system.
Word Count:253
Keywords: Entrepreneur, Entrepreneurial development, Globalisation,
Government support, Market dynamics, & Physical infrastructure
Introduction
In the past decade, issues of globalisation have been discussed in the media and
the literature, and one issue that is of most concern to the small business sector of
developing countries is how this phenomenon might influence their business
operations and the wellbeing of the population. Studies on the effects of
globalisation or a free trade environment on business operations and
performance have been explored principally with big multinational corporations
and there is a perceived lack of equivalent studies of the small and medium sized
enterprise especially for some particular industries in developing countries.
Statement of the Problem
Globalisation has created significant international resistance over concerns that it
has increased inequality and environmental degradation. Although,
globalisation has to offer positives to the global economy, it has polluted the
environment and imposed miserable working conditions and merger wages on
local workers, making it hard for developing countries to prosper financially.
There is a reduction in African global economic race. Globalisation has affected
job creation with poor entrepreneurship development, poor capacity utilisation,
dumping ground for all kinds of foreign products, competition with the problem
18
Entrepreneurship and Business Environment
of local entrepreneurial cross-border financial flow, increasing of financial system
integration. Globalisation impacts the financial sector in different and complex
ways. Generally, capital flows, exchange rates crisis and inflationary pressure are
some of the major avenues through which the effect of globalisation can be quickly
imparted into the domestic economy. This global effect can lead to volatile shortterm capital flows and exchange rates which causes an increase in the
uncertainties surrounding the outcome of entrepreneur development, forces
policymakers to undertake structural adjustment/reforms.
Aim and Objectives of the Study
The aim of this study is to examine the influence of globalisation on
entrepreneurial development in seven selected Local Government Areas (LGAs)
in Oyo State. This research therefore looks at the specific objectives which were to:
i.
Examine the influence of education and training on employment growth
within the study areas.
ii.
Determine the impact of technology on productivity and growth in the
study areas.
iii.
Investigate the impact of ease of trade on market expansion in the study
areas.
Research Questions
The under listed questions were raised so that the study could be anchored upon
it.
i.
How does education and training influence the employment growth in the
study areas?
ii.
How does technology influence productivity and growth in the study
areas?
iii.
How does ease of trade influence the market expansion in the study areas?
19
Entrepreneurship and Business Environment
Hypotheses
Based on the variables of this study, these null hypotheses were formulated for the
research work.
H₀₁: There is no significant relationship between education and training and
employment growth of selected Local Government Areas in Ibadan, Oyo State.
H₀₂: There is no significant relationship between technology and productivity and
growth of selected Local Government Areas in Ibadan, Oyo State.
H₀₃: There is no significant relationship between ease of trade and market
expansion of selected Local Government Areas in Ibadan, Oyo State.
Significance of the Study
This study examined globalisation 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 globalisation 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 entrepreneurship development within
state.
Scope of the Study
This study investigated the impact of globalisation on entrepreneurial
development within Ibadan North, Ibadan North East, Ibadan North West,
Ibadan South East, Ibadan South West, Oluyole, and Akinyele LGAs, Ibadan, Oyo
State.
20
Entrepreneurship and Business Environment
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 Globalisation
Globalisation is a process that erodes national boundaries, integrates national
economies, cultures, technologies and governance, and produces complex
relations of mutual interdependence¹. Globalisation involves a process (or set of
processes) which embodies a transformation in the spatial organisation of social
relations and transactions - assessed in terms of their extensity, intensity, velocity
and impact - generating transcontinental or interregional flows and networks of
activity, interaction, and the exercise of power ². He went further to analysis this
by emphasising some key points in the definition. First, globalisation is a set of
processes rather than a description of the (fixed) state of a system. Second, central
to the concept is the idea of spatial transformations in pa erns of
interconnectedness. He further argues that conceptually and analytically,
globalising processes can be seen to operate in a number of different realms, four
of which bear on the argument here: trade, finance, migration and culture.
Globalisation is a conceptualisation of the international political economy which
suggests and believes essentially that all economic activity, whether local,
regional or national, must be conducted within a perspective and a itude that
constantly is global and worldwide in its scope.
21
Entrepreneurship and Business Environment
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 economy ³.
Theory of Liberalism
The founding liberalism as a district tradition, based on the social contract,
arguing that each man has a natural right to life, liberty and property and
governments must not violate these rights as it was stated in the Two Treatises of
Government published in 1689 ⁴. Liberalism comprehends the process of
globalisation as market-led extension of modernisation. At the most elementary
level, it is a result of 'natural' human desires for economic welfare and political
liberty. As such, trans-planetary connectivity is derived from human drives to
maximise material well-being and to exercise basic freedoms. These forces
eventually interlink humanity across the planet. They fructify in the form of:
i.
Technological advances, particularly in the areas of transport,
communications and information processing, and,
ii.
Suitable legal and institutional arrangement to enable markets and liberal
democracy to spread on a Trans world scale.
Such explanations emanate mostly from Business Studies, Economics,
International Political Economy, Law and Politics. Liberalists stress the necessity
of constructing institutional infrastructure to support globalisation. All this has
led to technical standardisation, administrative harmonisation, translation
arrangement between languages, laws of contract, and guarantees of property
rights ⁵. But its supporters neglect the social forces that lie behind the creation of
technological and institutional underpinnings. It is not satisfying to a ribute
these developments to 'natural' human drives for economic growth and political
22
Entrepreneurship and Business Environment
liberty. They are culture blind and tend to overlook historically situated lifeworlds and knowledge structures which have promoted their emergence. All
people cannot be assumed to be equally amenable to and desirous of increased
globality in their lives. Similarly, they overlook the phenomenon of power. There
are structural power inequalities in promoting globalisation and shaping its
course. Often they do not care for the entrenched power hierarchies between
states, classes, cultures, sexes, races and resources ⁵.
Review of Empirical Studies
The growth effects of globalisation are measured based on an appropriate
globalisation index, which determines the development of globalisation in the
countries studied to make it quantitatively visible. The report is closely aligned
with the established KOF Index of Globalisation of the Eidgenössische Technische
Hochschule Zürich ⁶. An econometric analysis then establishes the causative
relationship between globalisation in the individual countries and their
respective economic growth. This is the basis on which the respective growth
effects of globalisation are quantified. The changes to each country's economic
performance due to globalisation are then transferred into a ranking. Finally, the
“globalisation champ” is chosen. This is the country exhibiting the highest
absolute growth in per capita income. Two highly developed, well connected, and
relatively small EU countries lead the ranking with a generous margin: The
Netherlands and Ireland achieve more than 90 index points as shown in Table 1,
Appendix Ii⁷.
The subsequent ten ranks are also held by member states of the European Union,
and by Swi erland, which is also closely integrated into the structures of the
European Single Market through numerous bilateral agreements. The most
strongly globalised non-European countries follow on places 13 (Canada) and 21
(Australia). Among the larger European countries, the United Kingdom makes
place 6. Note that the country was still an EU member in 2018, the current end of
the analysis period. France, Germany, Spain, and Italy follow on the middle ranks.
23
Entrepreneurship and Business Environment
The United States ranks 25th, just behind this group of countries. The two East
Asian countries of Japan and South Korea occupy ranks 33 and 36, respectively.
This makes them the last among the group of highly developed economies. The
major emerging markets, China, Nigeria, Brazil, Argentina, and India, show the
least level of international integration.
The overall index of globalisation contains the three economy (weighting: 60 per
cent), social and political (weighting: 20 per cent each) sub-indices. The economy
sub-index maps indicators of cross-border integration in the areas of trade in
goods and services, wage income, and capital flows. In addition to transaction
sizes, these values reflect restrictions such as capital controls. The social
dimension comprises indicators of cultural proximity and personal contacts,
among other things. Political globalisation considers aspects such as the number
of international treaties or membership of international organisations ⁷.
The advancing globalisation has a positive impact on the material prosperity of
people as measured by real gross domestic product, GDP (at least on average and
without consideration of intra-societal distributional issue) ⁸. It was suggested
that certain standards and principles must be considered in the further design of
the legal framework for the border crossing exchange of goods, services,
production factors, and technologies to allow globalisation to actually take its
growth- and welfare-enhancing effect, most of all through international division
of labour and the associated international trade. The developed industrialised
nations have benefited the most from globalisation so far in absolute terms of real
GDP per capita as an indicator. In order to ensure that the promotion of
international trade allows emerging markets and developing countries a greater
share of the economic benefits of the international division of labour, it would be
helpful, for example, if industrialised countries opened their markets to processed
products from developing countries without demanding the same in return (since
developing countries are generally unable to enter competition with
industrialised countries on equal terms) ⁸.
24
Entrepreneurship and Business Environment
The results of the study suggested that globalisation decreases the level of
necessity entrepreneurship due to an increased flow of goods between countries,
resulting in higher demand for products and services and, consequently,
resulting in an increase in labor market opportunities. As more labor market
opportunities became available, there was a resultant decrease in necessity
entrepreneurship. This decrease in the level of necessity entrepreneurship was the
factor mainly responsible for the overall negative effect of globalisation on
entrepreneurship.
Synthesis of Gap Identified
Despite the increasing effects of globalisation, there is still limited literature on its
effect in developing countries. This is because while a lot has been documented
about the concept of globalisation in advanced nations, most works related to
globalisation in areas concerning entrepreneurial development in less
industrialised nations are hardly found. Many developing nations, already
heavily affected by the injustices of a globalised economic system, are in a
situation that is regarded as even more fragile. This study, while validating some
empirical works has bridged the gap between existing literatures by providing
evidence on the effects of government policies and globalisation on
entrepreneurial development in a region.
Conceptual Framework
The conceptual framework for this study is built on the theory and literatures
reviewed. It is broadly divided into two parts: independent and dependent
variables. The independent variable as depicted below which is globalisation is
proxied with human capital; ease of trade; technology; cheaper imports; larger
export markets; and access to international aid and financial support.
25
Entrepreneurship and Business Environment
Globalisation
Entrepreneurial
Development
Human capital
Employment growth
Ease of trade
Market expansion
Technology
Boosting productivity
and growth
Cheaper imports
GDP
Contribution
Larger export markets
Access to international
aid and financial support
Business growth
Government Support
Physical infrastructures
Education and training
Commercial and professional infrastructure
Social and cultural norms
Ease of entry: Market dynamics
Moderating Variable
Source: Field Work by Researcher, 2022
26
Entrepreneurship and Business Environment
Also, the dependent variable which is entrepreneurial development is measured
with the employment growth, market expansion, boosting productivity and
growth, GDP contribution and business growth. These two variables are being
moderated or controlled with the moderating variable, government support
which includes physical infrastructures; education and training; commercial and
professional infrastructures; social and cultural norms and market dynamics.
Methodology
This study adopted survey design. The study population focused on 20
respondents from Ibadan North LGA, 20 respondents from Ibadan North East
LGA, 20 respondents from Ibadan North West LGA, 20 respondents from Ibadan
South East LGA, 20 respondents from Ibadan South West LGA, 20 respondents
from Oluyole LGA and 20 respondents from Akinyele Local Government making
a total of 140 respondents from 7 LGAs. The respondents consist of male and
female entrepreneurs who have established business ventures in the areas of
study; 96 male which is 68.6% and 44 female which amounts to 31.4% of the total
respondents.
The sample size of this research is determined by the use of formula below ⁹. The
formula is concerned with the use of normal approximation with 95% confidence
level and 5% error tolerance. The formula is represented mathematically as:
Table 1: Demographic Characteristics of Respondents
Demographic Characteristic
Frequency
Percentage
Analysis of Gender
Male
58
56.9
Female
44
43.1
102
100
Total
27
Entrepreneurship and Business Environment
Analysis of Age
18-21
3
2.9
22-25
10
9.8
26-30
6
5.9
31-35
27
26.5
36-39
23
22.5
40 and above
33
32.4
102
100
Ph.D.
1
1.0
M.Sc.
7
6.9
14
13.7
Total
Analysis of Educational Qualification
B.Sc.
HND
19
18.6
OND
25
24.5
SSCE
36
35.2
Total
102
100
54
52.9
Analysis of Religion
Christianity
Islam
Others
Total
Source: Field Survey, 2022
28
40
39.2
8
7.8
102
100
Entrepreneurship and Business Environment
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 education and training influence the employment growth in the
study areas?
2.
How does technology influence productivity and growth in the study
areas?
3.
How does ease of trade influence the market expansion in the study areas?
Hypotheses
H₁: There is significant relationship between education and training and
employment growth of selected Local Government Areas in Ibadan, Oyo State.
H₂: There is no significant relationship between education and training and
employment growth of selected Local Government Areas in Ibadan, Oyo State.
To test this hypothesis, statement used for table 2 was used.
Table 2: Analysis of the influence of education and training on employment
growth within the study areas
Description
Frequency
Strongly Agree
1
Percentage
0.98
Agree
3
2.94
Disagree
24
23.53
Strongly Disagree
71
69.61
Neither (Undecided)
3
2.94
Total
102
Source: Field Survey, 2022
29
100
Entrepreneurship and Business Environment
The influence of education and training on employment growth within the
study areas was not effective
Contingency Table
CELL
O
E
O-E
(O-E)2
(O-E)2
E
C1
1
20.4
-19.4
376.36
18.45
C2
3
20.4
-17.4
302.76
14.84
C3
24
20.4
3.6
12.96
0.64
C4
71
20.4
50.6
2560.36
125.5
C5
3
20.4
-17.4
302.76
14.84
TOTAL
102
χ2 = 174.27
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 = 174.27. 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
30
Entrepreneurship and Business Environment
Interpretation
From the analysis above, χ2 calculated value is 174.27 while χ2 tabulated value is
9.49. This shows that χ2 calculated of 174.27 is greater than χ2 tabulated of 9.49 i.e.
χ2 calculated (174.27) > χ2 tabulated of 9.49. Therefore, we accept H1 which states
that there is no significant relationship between education and training and
employment growth of selected Local Government Areas in Ibadan, Oyo State.
Research Question 2: How does technology influence productivity and growth in
the study areas?
Hypothesis II
H₁: There is significant relationship between technology and productivity and
growth of selected Local Government Areas in Ibadan, Oyo State.
H₂: There is no significant relationship between technology and productivity and
growth of selected Local Government Areas in Ibadan, Oyo State.
To test this hypothesis, statement used for table 3 was used.
Table 3: Analysis of the impact of technology on productivity and growth in the study
areas
Description
Frequency
Percentage
Strongly Agree
1
0.98
Agree
3
2.94
Disagree
22
21.57
Strongly Disagree
74
72.55
Neither (Undecided)
2
1.96
Total
102
100
Source: Field Survey, 2022
31
Entrepreneurship and Business Environment
The impact of technology on productivity and growth in the study areas is not high yielding and impressive.
Contingency Table
CELL
O
E
O-E
(O-E)2
(O-E)2
E
C1
1
20.4
-19.4
376.36
18.45
C2
3
20.4
-17.4
302.76
14.84
C3
22
20.4
1.6
2.56
0.13
C4
74
20.4
53.6
2872.96
140.83
C5
2
20.4
-18.4
338.56
16.60
TOTAL
102
χ2 = 190.85
Source: Field Survey, 2022
χ2 calculated = 190.85
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 190.85 while χ2 tabulated value is
9.49. This shows that χ2 calculated of 190.85 is greater than χ2 tabulated of 9.49 i.e.
χ2 calculated (190.85) > χ2 tabulated of 9.49. Therefore, we accept H1 which states
that there is no significant relationship between technology and productivity and
growth of selected Local Government Areas in Ibadan, Oyo State.
Research Question 3:
How does ease of trade influence the market expansion in the study areas?
32
Entrepreneurship and Business Environment
Hypothesis III
H₁: There is significant relationship between ease of trade and market expansion
of selected Local Government Areas in Ibadan, Oyo State.
H₂: There is no significant relationship between ease of trade and market
expansion of selected Local Government Areas in Ibadan, Oyo State.
To test this hypothesis, statement used for table 4 was used.
Table 4: Analysis of the impact of ease of trade on market expansion in the study
areas
Description
Frequency
Strongly Agree
Percentage
2
1.96
Agree
6
5.88
Disagree
15
14.71
Strongly Disagree
77
75.49
Neither (Undecided)
2
1.96
Total
102
100
Source: Field Survey, 2022
The impact of ease of trade on market expansion in the study areas has not
yielded a substantial result
Contingency Table
CELL
O
E
O-E
(O-E)2
(O-E)2
E
C1
2
20.4
-18.4
376.36
16.60
C2
6
20.4
-14.4
207.36
10.16
C3
15
20.4
-5.4
29.16
1.43
C4
77
20.4
56.6
3203.56
157.04
C5
2
20.4
-18.4
338.56
TOTAL
102
16.60
χ2 = 201.83
Source: Field Survey, 2022
33
Entrepreneurship and Business Environment
χ2 calculated = 201.83
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 201.83 while χ2 tabulated value is
9.49. This shows that χ2 calculated of 201.83 is greater than χ2 tabulated of 9.49 i.e.
χ2 calculated (201.83) > χ2 tabulated of 9.49. Therefore, we accept H1 which states
that there is no significant relationship between ease of trade and market
expansion of selected Local Government Areas in Ibadan, Oyo State.
Discussion of Findings
Table 1 showed that fifty-eight (58) respondents representing 56.9% of the sample
size were male while forty-four (44) respondents representing 43.1% of the sample
size were female. Thus, majority of the respondents were male. The religion
shows that fifty-four (54) respondents representing 52.9% of the sample size were
Christians while forty (40) respondents representing 39.2% of the sample size
were Muslims, while eight (8) respondents representing 7.80% were other
religious followers. Thus, majority of the respondents were Christians. The age
shows that three (3) respondents representing 2.9% of the sample size were within
18-21 age group, ten (10) respondents representing 9.8% of the sample size were
within 22-25 age group, six (6) respondents representing 5.9% of the sample size
were within 26-30 age group, twenty-seven (27) respondents representing 26.5%
of the sample size were within 31-35 age group, twenty-three (23) respondents
representing 22.5% of the sample size were within 36-39 age group, while thirtythree (33) respondents representing 32.4% of the sample size were 40 and above
age group. Thus, majority of the respondents were 40 and above age group.
34
Entrepreneurship and Business Environment
The academic qualification shows that one (1) respondent representing 1.0% of
the sample size was Ph.D. holder, seven (7) respondents representing 6.9% of the
sample size were M.Sc. holders, fourteen (14) respondents representing 13.7% of
the sample size were B.Sc. holders, nineteen (19) respondents representing 18.6%
of the sample size were HND holders, twenty-five (25) respondents representing
24.5% of the sample size were OND holders, while thirty-six (36) respondents
representing 35.2% of the sample size were SSCE holders. Thus, majority of the
respondents were SSCE holders.
Table 2, it showed that the influence of education and training on employment
growth within the study areas was not effective.
Table 3, it showed that the impact of technology on productivity and growth in the
study areas is not high-yielding and impressive.
Table 4, it showed that the impact of ease of trade on market expansion in the
study areas has not yielded a substantial result.
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 Ibadan
North, Ibadan North East, Ibadan North West, Ibadan South East, Ibadan South
West, Oluyole, and Akinyele LGAs, Ibadan, Oyo State. It was revealed that: age
range 22-25 years were more represented in the study; that SSCE holders were
more represented in the study; married were ranked highest among other status
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
education and training on employment growth. Table 2, it showed that the
influence of education and training on employment growth within the study
areas was not effective.
35
Entrepreneurship and Business Environment
The result of the findings in the second research question examined the impact of
technology on productivity and growth. Table 3, it showed that the impact of
technology on productivity and growth in the study areas is not high-yielding
and impressive.
The result of the findings in the third research question examined the impact of
ease of trade on market expansion. Table 4, it showed that the impact of ease of
trade on market expansion in the study areas has not yielded a substantial result.
Conclusion and Recommendations
This study has been an a empt to examine the impact of globalisation on
entrepreneurship development: a study of Ibadan North, Ibadan North East,
Ibadan North West, Ibadan South East, Ibadan South West, Oluyole, and Akinyele
LGAs, Ibadan, Oyo State, having gone through the whole length of data analysis,
hypothesis, testing and discussions. The influence of education and training on
employment growth within the study areas was not effective. In addition, the
impact of technology on productivity and growth in the study areas is not highyielding and impressive.
The following recommendations are made based on the findings of the study:
i.
The following conditions are key in order to augment viable
entrepreneurial development in Oyo State and in Nigeria as whole adequate and functioning physical infrastructures; cultural norms; access
to professional services good and corrupt-free democratic governance;
and stable market-oriented economy.
ii.
Entrepreneurs should also be aware of the importance of education and
training in ensuring the success of their business endeavours.
iii.
Finally, this study recommends that more studies should be carried out on
other factors that could contribute to entrepreneurship development in
other states or geopolitical zones.
36
Entrepreneurship and Business Environment
Contributions to Knowledge
Despite the increasing effects of globalisation, there is still limited literature on its
effect in developing countries. This is because while a lot has been documented
about the concept of globalisation in advanced nations, most works related to
globalisation 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 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 globalisation on entrepreneurship
development: a study of Ibadan North, Ibadan North East, Ibadan North West,
Ibadan South East, Ibadan South West, Oluyole, and Akinyele LGAs, Ibadan, 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 suggests that future studies should include larger
population study in order to increase the generalisability of the findings.
3.
In addition, this study suggests that researchers should apply for grants
and enough time in order to carry out an excellent field work in future
studies
37
Entrepreneurship and Business Environment
Endnotes
¹ Savina Gygli, Florian Haelg and Jan-Egbert Sturm, The KOF Globalisation Index –
Revisited, KOF Working Papers, No. 439 (Swi erland: KOF Swiss Economics
Institute, 2018)
² M. Selden and L. Grove, China, East Asia and the Global Economy: Regional and
Historical Perspectives, (London: Routledge, 2008).
³ Universal Academy, “Concept of Entrepreneurship Development,” Edurev.in,
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 (accessed 21 August, 2021).
⁴ Wikipedia, “All mankind [...] being all equal and independent, no one ought to
harm another in his life, health, liberty, or possessions", John Locke, Second
Treatise of Government, h ps://en.wikipedia.org/wiki/Liberalism, accessed August 8,
2021.
⁵ Political Science Notes, “8 Theories of Globalisation,” accessed August 8, 2021,
h ps://www.poli calsciencenotes.com/ar cles/8-theories-of-globalisa on-explained/642.
⁶ Dreher Axel, “Does Globalisation affect Growth? Evidence from a New Index of
Globalisation” Applied Economics 38, no. 10 (2006): 1091-1110
⁷ Bertelsmann Stiftung, “Who benefits the most from Globalisation?” Globalisation
Report 2020.
⁸ Bertelsmann Stiftung, “How do Developing Countries and Emerging Markets
Performs?” Globalisation Report 2020.
⁹ Yamane Taro, Statistics: An Introductory Analysis, 2nd ed., (New York: Harper and
Row, 1967).
¹⁰ L. J. Cronbach, “Citation classics,” Current Contents, (1978), 13, 263.
38
Entrepreneurship and Business Environment
CHAPTER
03
DIGITAL MARKETING SKILLS ACQUISITION AND
SELF-RELIANCE OF YOUTHS IN LAGOS MAINLAND LOCAL
GOVERNMENT AREA OF LAGOS STATE
AZEEZ Sherifat Abiodun & KUJORE Oluwatobi Abodunrin
Abstract
The world has been metamorphosed into a global village with the advent of
computers and internet services with their multiple usages; this has opened up
lots of job opportunities for youth to become self-reliance by floating businesses
on-line. This study identifies the use of digital marketing skill acquisition for selfreliance for youths in Lagos state as a means of boosting their employability in
high paid job or for self-employment opportunities. Digital marketing skill
acquisition in social media, e-commerce, e-mail direct marketing, display
advertising etc., has greatly empowered large number of youth to become selfreliant in recent time. Three research questions were formulated to guide the
study. Data collected using the structured questionnaire was analyzed with
simple percentage and Arithmetic mean. The population of the study is final year
students of Business Education in Federal College of Education (Technical),
Akoka; the idea of choosing these participants is to prepare their minds for selfreliance upon graduation. Sample size of fifty students was randomly selected
from the School to determine the relationship between the digital marketing skills
and self-reliance among youths. Findings revealed that lack of qualified digital
skill trainers, financial constraints and poor infrastructural facilities are among
the problems facing digital skills acquisition and application for youths' self-
39
Entrepreneurship and Business Environment
reliance. The study therefore recommended that government, non-governmental
organizations and education stakeholders should focus more on digital
marketing skill training for youths at various levels and make necessary facilities
available in order to realize the potential of digital marketing skills as tools for
Self-reliance of youths.
Word Count:251
Keywords: Digital marketing skill, Internet, Self-reliance, & Youth.
Introduction
Skill acquisition is a major tool for solution for unemployment amongst the
vibrant youths in our society today. It is capable of creating enabling avenue for
jobs and wealth creation which will bring self-reliance among the youths and
contribute to the economic growth of the country if its potentials are
appropriately utilized1. The main reason for high rate of unemployment amongst
the vibrant youth in our society today is due to lack of vocational skill to add up to
what they learnt from their various institutions and become self-reliant in terms of
employment creation.
2
noted that youth unemployment has negative implications for economic and
social progress, and that youth unemployment in Nigeria hit an all-time high of
55.4% in the third quarter of 2018. The insurgent of social vices in the country is
a ributable to abject poverty in some parts of the nation as a result of lack of
gainful employment of the youth in such areas.
Skill is very important in the life of every citizen. The reason why many
technicians earn higher than our university graduates is because the technicians
acquired more skills and were more practical than the theories the graduates were
fed with while they were in the universities. The absence of self-reliance among
our vibrant youth is as a result of the lack of requisite skills to back up what they
learnt from their institutions of learning. Most Nigerian graduates roam the
40
Entrepreneurship and Business Environment
streets endlessly years after graduation seeking for non-existing white collar jobs
rather than applying their creative thinking and vibrancy to create jobs for
themselves and others youth alike.
With almost all sectors been digitalized. Digital skills become one of the most
promising solutions to youth unemployment. It is a necessity for wage
employment and in the creation of a personal business for them to be self-reliance
rather than searching endlessly for government jobs. Digital marketing is an
emerging issue in the world of work nowadays as lots of people are switching into
or upgrading their skills to become fit and more relevant for today's job.
Self-reliance is the autonomy of decision- making and full mobilization of a
society's own resources. It also means self-confidence, reliance primarily on one's
resource, human and natural, and the capacity for autonomous goal-se ing. A
self-reliant person is an individual who relies on oneself or on one's own powers
and resources, depending less on other people in the management of human,
financial and material resources. For most people, education has not realized its
expected ends because majority of students from tertiary institutions graduate
without having the basic skills required for entrepreneurship and self-reliance.
3
on educational policy of “Education for self-reliance” suggested that basic
education should not just be a preparation for higher education, but instead, it
should be a complete education in itself that provides knowledge, skills and
a itudes; means that education for self-reliance should be cognitive, affective and
psychomotor based. It should go beyond teaching students the basic numeracy
and literacy but rather it should produce individuals that are thoroughly
integrated into local life of work with basic skills to fall back on after graduation.
Self-reliant education emphasizes freedom and independence of the individual; it
encourages creative thinking as well as practical creative transformation activity
that will lead to self-emancipation and self-realization. Critical thinking is a
crucial a ribute of a self-reliant person. He or she must be critical and
independent in his thinking and action. Digital marketing skill is one of the
41
Entrepreneurship and Business Environment
readily available skills in this century that enhances critical thinking and
facilitates self-reliance.
The Concept of Digital Marketing
In today's marketing, emphasis has shifted from conventional marketing mix of
the 4ps model in terms of product, place, promotion and price to current
marketing mix that yields the 4Cs model which turn product into customer
solution, price into cost to the customer, place into convenience and promotion
into communication4. There is more emphasise on communication now as it
creates wider awareness for existing and potential customers. Due to the
complexity of modern day marketing, there is need for individuals and
organizations to focus on environmental trends affecting organizations in recent
years and proffer possible panacea to such problems as they rear heads. Digital
marketing will foster on an on-the-spot solution to some of these problems.
Digital marketing has become a new phenomenon that brings together
customization and mass distribution to accomplish marketing goals. It covers all
forms of internet advertising, internet payment system, internet marketing,
internet customer support service and internet order and delivery. Its application
in communication, online business, creativity, entrepreneurial, career counselling
services, computer proficiency to mention but a few, will give youths be er job
creation and employment opportunities5. It is a crucial aspect in Information and
Communication Technology (ICT) which as taking over as engine tool for any
form of development.
According to 6 there is the need for individuals of different ages to possess skills
and competencies for ICT as these equipment, interconnected system or
subsystem of equipment are useful in the management, display, transmission or
reception of data. ICT usage skill is a very important entrepreneurial skill in fields
of work considering the rate with which ICT is being introduced in all the sectors
of the economy including business, trade and even in educational sector.
42
Entrepreneurship and Business Environment
It is therefore necessary that young entrepreneurs should possess the relevant
digital marketing as a tool could help them to establish small scale businesses to
reach a wider local market, make gain through competitive advantage while
6
serving a larger part of the local and international market . Digital marketing
skills can give the small scale businesses an opportunity to access new export
markets. It creates increased demand for goods and services, encourages
production and distribution activities and thus offer more employment
opportunities for teeming jobless youth. Thus, the acquisition of digital marketing
skills enhances self-reliance of youth as it can be exploited to access its economic
gains.
This is a new perspective for operational marketing that will be of special
relevance for the online world and boost marketing activities globally. The
Internet boom for organisations and the daily life of different categories of people
brought about a deep transformation of marketing, its tools and strategies. This
creates a be er avenue for youths who are always clue to Phone to maximize their
potentials in the economic use of internet facilities to enhance job opportunities as
well as for self-reliance.
Digital marketing, sometimes referred to Internet marketing, utilizes the power of
electronic commerce to sell and market products. Electronic commerce refers to
any market on the internet. The electronic commerce supports selling, buying,
trading of products or services over the internet. Internet marketing forms a
subset of electronic commerce. With the outburst of internet growth, internet
marketing has started becoming very popular. It is said that Internet marketing
first began in the beginning of 1990 with just text based websites which offered
product information Source. With growth in internet, it is not just selling products
alone, but in addition to this, information about products, advertising space,
software programs, auctions, stock trading and matchmaking. Expertise of using
the digital tools give power to the youth to excel in every field of life be it teaching,
learning and working environment; it connects everyone with the rest of the
world to achieve their full potentials in this digital age.
43
Entrepreneurship and Business Environment
Digital Marketing Skill Acquisition
Considering the up-growth in the use of technology for marketing activities of all
types of goods and services by many organizations, it is important to ascertain
what types of digital marketing strategies and how such skills can be applied by
youths as business tools which will give them competitive advantage to start and
grow their own businesses and become self-reliance. If the educational sector,
industrial sector, non-governmental organisations and other stakeholders take
active role in creating awareness and training of digital marketing skills to the
teeming youths in or out of schools, this will foster their readiness to adopt the
economic benefits of internet as vital tools for self-reliance rather than using it as a
mere tool for socialization.
Contribution of Government and other Stakeholders to Digital Marketing
Skill Acquisition
According to the Nigerian Bureau of Statistics, there are over 17.4 million small
and medium businesses and due to the COVID-19 pandemic effect on their sales,
these businesses need to hire people with digital marketing skills to move,
manage and grow their sales strategy online. This has created a massive demand
for well-trained digital marketing professionals while there is a shortage of digital
marketing professionals to take up this new job in the new digital economy. This
fact was a ested to by the survey carried out between 94 business owners, where
we discovered that 77.7% said “moving their sales online was the most important
action they took when the COVID-19 Pandemic emerged while 97.9% said that
selling online is very important to their business8.
In this vein government at both Federal and State levels as well as well-meaning
individuals and organizations identify digital marketing skill as a prominent tool
for individuals and organizations to grow their products and services during and
after the Covid-19 pandemic; and to improve the employment and income of
micro, small and medium-sized enterprises (MSMEs).
44
Entrepreneurship and Business Environment
For instance, the Lagos State Government, as part of the strategy to break the circle
of poverty, has trained 5, 000 unemployed youths and owners of Small and
Medium business across the State in a one-day Intensive training on digital
Marketing skills as part of initiative of the Office of the Special Assistant to the
President on Sustainable Development Goals and supported by Google Nigeria
and to prepare the participants for ideal jobs as digital marketers or in businesses
as digital experts9.
The Edo State Skills Development Agency (EDOJOBS) 10 in collaboration with the
Edo State Investment Promotion Office (ESIPO) and the Edo State Ministry of
Wealth Creation, Cooperatives and Employment, with support of the Pro-Poor
Growth and Promotion of Employment in Nigeria Programme – SEDIN of GIZ
organised a Digital Marketing Training for Micro, Small, and Medium
Enterprises (MSMEs) in Edo State to train them in Digital Marketing Skills and to
assist them to catch up with the new normal resulting from the Covid-19
pandemic. The trainings covered essential topics including Search Engine
Optimisation, Pay Per Click Advertising (PPC), Social Media Marketing
(YouTube, Instagram, Facebook etc.) and Management, Email Marketing, Mobile
Marketing, Content Marketing and Digital Copy Writing.
Challenge Fund for Youth Empowerment (CFYE), a non-governmental
organization, in an effort to find solutions to reduce unemployment in Nigeria,
organised training for young women in less privileged communities (especially
nursing and single mothers) on digital marketing skills to create more jobs
through entrepreneurship and digital marketing field which has been maledominated. This will allow young women to meet their personal and career
aspirations in the new digital economy11.
45
Entrepreneurship and Business Environment
Digital Marketing Skills Acquisition and Youth Employment
For a third world country like Nigeria to be economically self-reliant, she must
necessarily diversify her economy as well as encourage the youth to embrace selfemployment through appropriate favourable policy environment that would
facilitate skills acquisition, entrepreneurship, and self-reliance12. The place of skill
acquisition cannot be overemphasized in the rapid development of other sectors
of the economy. A skill can be seen as a talent or ability an individual possesses
and this could be acquired through deliberate personal experiences, training,
observation and practice. Skill acquisition on the other hand involves the
development of a new skill, practice or a way of doing things usually gained
through training or experience.
Skill acquisition has been described by many as the recipe for eradicating extreme
poverty and hunger by creating avenues for employment, thereby creating an
avenue for jobs and wealth creation while instilling self-sufficiency and reliance.
Acquisition of skill has been conceived as an effective remedy for self-reliance. It
will develop individuals who are problem solvers and economically productive,
individuals who do not need to wait for a white-collar job to survive but will create
jobs for others. It will also give them have the spirit of adventure, exploration and
discovery which will in turn help the nation to overcome the problem of
unemployment which is currently bedeviling the nation.
Digital Marketing Skills Acquisition and Youth Employment
In this golden era, individuals and organizations are constantly looking and
searching more on internet to meet their wants and at best deal from the sellers all
over the world as compared to traditional or conventional methods been confined
to in the late centuries. Business owner, small or large, can really benefit from
Digital Marketing such as search engine optimization (SEO), search engine
marketing (SEM), content marketing, influencer marketing, content automation,
ecommerce marketing, campaign marketing, and social media marketing, social
media optimization, e-mail direct marketing, display advertising, e–books,
46
Entrepreneurship and Business Environment
optical disks and games and are becoming more and more common in our
advancing technology to reach large audience.
The world has become a global village; we all are connected through whatsapp
and facebook. The increasing use of social media is creating new opportunities
for digital marketers to a ract the customers through digital platform. This is a
great opportunity for youth to establish and run their online businesses to become
self-reliance from their home zone. Proficiency in the use of social media and other
internet “app” to sell goods or render services remotely project digital marketing
skills in inquisitive youths who are business inclined to apply his critical thinking
and affordable economic resource to start small scale businesses. Digital
marketing is cost effective and having a great commercial impact on the business.
It is demonstrated that people all over the world are connected through
WhatsApp and Facebook and the increasing use of social media is creating new
opportunities for digital marketers to a ract the customers through digital
platform. Awareness of consumer's motives is important because it provides a
deeper understanding of what influences users to create content about a brand or
store. This is also supported by 13 who examined the link between Facebook brand
related group participation, advertising responses, and the psychological factors
of self-disclosure and a itudes among members and nonmembers of Facebook
groups. The study discovered that users who are members of groups on Facebook
are more likely to disclose their personal data than nonmembers are. He also
found that users who are Facebook group members maintain a more favorable
a itude toward social media and advertising.
Educators and other recruitment agencies identify numerous skills that assist the
students and citizens to grow in this digital age. According to 14 computer, internet
skills and technology are in the fore-runners to bridge the gap between labour
market and teeming population of unemployable youths. Digitally equipped
citizens have advantage of high employment rate and other benefits for greater
chances of survival in life. Digital marketing as a tool could help the youth to
47
Entrepreneurship and Business Environment
establish small scale businesses to reach a wider local market and blossom into
conglomerates having representatives across the countries. Internet marketing
gives the youth and other small scale business operators the opportunity to access
and enter new export markets.
Digital Marketing Skills needed for sustainable development for youths in
Nigeria
The following are some digital marketing skills and tools available online for
youth to earn legitimate sources of living and become self-reliance and even
employment of labour 15:
1.
Social Media Marketing: Social media are great opportunity to establish
significant relationships and create ways of social interaction through
dynamic exchanges between their members. Social media is booming in
terms of the number and variety of platforms and users. Kashan, P. (2013)
opined that youth can find audiovisual platforms such as YouTube, Vimeo
and SoundCloud; Instagram; Facebook, Twi er, Google+ or specialised
ones such as LinkedIn; news or bookmark aggregators such as Digg or
Delicious; blogs; and wikis, etc., a vast digital arena where they become the
new Web member and establish business relationship with other
members. Social network marketing connects users, who can interact,
discuss, offer insights or knowledge. However, the low efficiency of this
digital marketing tool is due to overuse and abuse.
2.
E-commerce: E-commerce means the development of transactions
between companies and/or individuals on Internet. It is mainly used for
buying and selling products and services, using applications such as email, instant messages, shopping carts or Web services, to name a few. The
boom of mobile devices, smartphones in particular, has opened the doors
to mobile commerce (m-commerce), i.e. electronic commerce using a
mobile device. Youths and other users can adopt the classifications of ecommerce that are best suited for them to reach their final customers based
on the nature of the transactions and the relationship between them.
48
Entrepreneurship and Business Environment
3.
4.
5.
6.
7.
Shopping cart: This is a common section in any online shops where
product catalogues are properly displayed with images showing the
product as well as accurate and honest product descriptions; with or
without price tag. Shopping cart is always visible so that the customer can
check, with just one click, the products added, shipping costs, taxes and
discounts (if applicable) and the total purchase price.
E-mail Marketing: E-mail marketing is an online marketing technique that
uses e-mail to send advertisements or commercial information. This is a
communication tool used to a ract new customers or make those that one
already has loyal to the brand. E-mail and Internet have gone hand in hand
since the Web was created.
BlaBlaCar or Uber and Gokada: These are business models that are
becoming stronger with crowd sourcing investment opportunities
through online booking in transportation business. They are delivery
service rendering outfits that offers customers to book their destination
online, pick the customer or even goods and supply at receivers' door
steps. A lot of youth are benefiting from this sector either to send them on
urgent errands or to drive them to various destinations or for pleasure.
Coding: This is the process of creating instructions for computers using
programming languages. Computer coding is the use of computer
programming languages to give computers and machines a set of
instructions on what actions to perform. It is used to create programs like
computer software, the websites, apps and other technologies we interact
with every day.
Pop-up ads or pop-ups are forms of online advertising on the World Wide
Web. A pop-up is a graphical user interface display area, usually a small
window that suddenly appears in the foreground of the visual interface. It
creates more customers, subscribers and repeat buyers for your business.
Different types such as mobile pop-ups, sales promotion pop-ups,
discount pop-up etc are available for profitable usage.
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Entrepreneurship and Business Environment
Benefits of Digital Marketing over Traditional Marketing
There are lots of business opportunities that youths can derive from running their
businesses on line compare to using the conventional traditional marketing
practices, then there are lots of areas where online marketing is competent and
have its many advantages that can enhance youth's self-reliance. Some of these
benefits can be viewed from the following angles:
i.
Digital marketing is real time and responses from customers are on-thespot and instantly, unlike traditional marketing where suppliers/sellers
have to wait for stipulated time frame to find out the response from the
customers.
ii.
Since we can the response of the customers in real time, it is easier to know
if a particular marketing strategy is working for the product or not, and
based on the feedback marketer, can made the appropriate changes in the
promotional campaign. Customers have flairs for rapid transactions and it
is necessary to keep track with them to maintain customers' loyalty.
iii.
In traditional marketing, it is difficult for small retailers to compete with
the big competitors in the market owing to the cost involved and strategy
making expertise whereas in case of digital marketing, through a crisp
website, it is possible to reach out to wider target audience with be er
service assurance.
iv.
Cost involvement is another point which creates a lot of difference between
the conventional marketing techniques over digital marketing; it is
possible to create personal digital marketing strategies with very li le cost
available within the reach of small business owners and cut or reduce the
conventional costly advertising methods such as print media, radio
coverage, television and magazine. This is an entrepreneur youth to cut his
coat according to his materials.
v.
Through online marketing business promotional ideas can reach greater
coverage as it can be seen in any part of the world via one marketing
campaign in optimal cost compared to conventional marketing campaigns
and once any marketer optimized the important word search criteria
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Entrepreneurship and Business Environment
vi.
content in website then it is a great return on investment with very
marginal cost to maintain the positioning.
With digital marketing skill, brand development and loyalty can be built
be er than traditional mode of marketing, a well-designed website with
quality information that meet the requirement of the customers and add
significant value to their expectations will be a salable opportunity for an
individual who is vast in digital marketing. For an instance using social
media networking website, email and social media channels promulgates
the content of the message to be shared incredibly quickly16.
Advantages of Digital Marketing Skills to Customers
With rapid technological developments, digital marketing has changed
customers buying behavior. It has brought various advantages and conveniences
to the consumers as given below:
Stay updated with products or services: Digital marketing technologies allow the
consumers to stay with the company information updated. Nowadays a lot of
consumer can access internet any place anytime and companies are continuously
updating information about their products or services.
Greater engagement: With digital marketing, consumers can engage with the
company's various activities. Consumers can visit company's website, read
information about the products or services and make purchases online and
provide feedback.
Clear information about the products or services: Through digital marketing,
consumers get clear information about the products or services. There is a li le
chance of misinterpretation of the information taken from sales person in a retail
store. However, Internet provides comprehensive product information which
customers can rely on and make purchase decision.
51
Entrepreneurship and Business Environment
Easy comparison with others: Since many companies are trying to promote their
products or services using digital marketing, it is becoming the greatest
advantage for the customer in terms that customers can make comparison among
products or services by different suppliers in cost and time friendly way.
Customers don't need to visit a number of different retail outlets in order to gain
knowledge about the products or services.
24/7 shopping: Since internet is available all day long; there is no time restriction
for when customer wants to buy a product online.
Share content of the products or services: Digital marketing gives viewers a
chance to share the content of the product or services to others. Using digital
media, one can easily transfer and get information about the characteristics of the
product or services to others who may even need the product more than the first
contact.
Apparent pricing: Company shows the prices of products or services through
digital marketing channel and this makes prices very clear and transparent for the
customers. Company may regularly change the prices through the use of different
pricing strategies.
Enables instant purchase: With traditional marketing, customers first watch the
advertisement and then find relevant physical store to purchase the products or
services. However, with digital marketing, customers can purchase the products
or services instantly by making online order.
Challenges of Digital Marketing skill acquisition
Digital marketing, being a faceless transaction, is faced by several challenges
which users or customers must be conscious of, this range from financial,
technological and human angles. However, there are legal frameworks that are
put in place to overcome the challenges. 17 highlighted some challenges as follows:
52
Entrepreneurship and Business Environment
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
Each country develops laws to regulate mass mailing, a standard that
influences commercial communications or advertising and those of
transnational or relational character. Regulating e-mail marketing is
important as it can inhibit some of its features.
Legislation also protects personal data in order to prevent the illicit transfer
of databases. The relevant legislation forces the company to have a
register— in some cases physical—of user data and makes the company
responsible for the protection of such data.
Mutual understanding of payment methods is allowed and
contact/customer support area. The availability of several payment
options is recommended. Some of the most common payment methods are
credit card, which needs a safe payment gateway, bank transfer or other eservices of great penetration and reliability such as PayPal.
Mailing must have explicit authorisation by the recipient. This
authorisation must be prior to the inclusion of the person in the mailing
list.
The fact that the message is linked to advertising must be explicit, as well as
the identification of the sender on the e-mail, the subject and the heading of
the message.
In the cases of offers, competitions and promotional games, they must be
identified as such and be clear and explicit about the conditions and
participation on them, as well as with a valid postal address for the
company.
As there is no physical contact, companies must offer communication
pathways for their online shops so that users can share their concerns and
increase their trust in the company.
Simple procedures for the user to withdraw consent are a must. In the case
of multinational companies, the relevant legislation is that of the country
where the company is based and not that of the recipient.
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Entrepreneurship and Business Environment
Other challenges faced by digital marketers in the developing nation like Nigeria
is majorly in the areas of financial resources and infrastructural facilities that are
necessary to facilitate the usage and application of digital marketing skills in
educational and industrial sectors. Large capital and expertise trainers /
facilitators are necessary for proper implementation of digital marketing skills for
self–reliance and advancement in the labour industry.
Theoretical Framework
The theoretical framework of digital marketing includes all the strategies on how
to best reach this online audience. This might include Social Marketing Theory,
email marketing, direct message marketing to reach people on their mobile
devices, video streams, and social media announcements. According to18 digital
marketing theories include; market segmentation theory, customer-led
positioning theory, Acquire, Convert, Retain and Grow theory and Mobile Phone
Economy.
Some of these businesses theories about online marketing offer a new look at how
consumer and marketers interact. One theory, known as the postulates that
markets get divided among some commonalities to be er reach their targeted
consumers. The Segment of One theory suggests that marketers are moving away
from mass marketing methods to specify a more customized group of individuals
with shared buying pa erns and emotions.
Positioning to the Customer: This holds that the customer is the one showing the
marketers what they want in the product or service. The customer can offer
insights to the product team by gathering data about prices, product features,
product function and more. For example, when customers purchase medications,
they are more inclined to know how the product interacts with their body, and
how it can combine with other medications. These a ributes in a customer-led
theory of digital marketing are more important than price to medical drug
purchasers.
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Entrepreneurship and Business Environment
Mobile Phone Economy: Another theory about online business revolves around
people's use of their mobile phones. Over half of all internet traffic is now
conducted via our mobile devices. Using a few finger swipes and a click or two,
consumers can buy and sell goods and services, check bank balances, purchase
stocks, buy a car and many other things that were unthinkable 25 years ago.
Theories on digital marketing enhances the possibility for product and service
development as well as redefinition of existing product and strategically using the
communication developments and innovations to capture large audience to boost
online business for youth to give them financial independent.
Empirical Review
The terms digital marketing, online marketing, web-based marketing, digital
business, online advertising, e-commerce and electronic marketing have been
used interchangeably in most research works authored by renown Scholars. As
astutely posited by 19 online marketing is gaining increasing a ention in Africa
with consumers gradually accepting to transact businesses in the fast expanding
virtual market place. According to 20 digital media platforms have in the past
15years changed the shopping culture and revolutionized marketing practice in
the creation of new ways to reach, inform, engage, sell to and provide
goods/services to customers. It is mandatory for business minded individuals to
grasp the opportunity and turn it to wealth creation.
The digital business environment is strongly influenced by technological
innovations which demand the dynamic capabilities and resources of a company.
Also, the definition and implementation of a digital marketing strategy
significantly contributes to a company's long-term success with the adoption of
the right strategies. Such strategy especially demands four dynamic abilities
(success factors): digital innovativeness, strategic and organizational flexibility,
networking and integration capability, as well as ease of use.
55
Entrepreneurship and Business Environment
Statement of the Problem
There is a disturbing rate of youth joblessness in Nigeria. These young people
made up of greater percentage level of Nigeria's economically active populace.
Youths are seen to be deficient in essential skills which incorporate business
enterprise abilities, interpersonal skills, teamwork skills, personal/executives'
skills, computer/technical education skills, and administration / management
abilities among others. They tend to build up the psychological area to the
determent of psychomotor domain and effective domain. In this manner we have
youths who are sound in information but lack capacity to combine the
information with practical abilities to provide solutions to human needs that will
translate to financial benefits for them.
The advent of internet and social media has opened up greater avenues for youth
to embark on economic activities on their smartphone as a means of earning a
living. The power of smartphones in combination with social media is a constant
expanding opportunities to many individuals particularly youth who always clue
to their smart phones 24/7 to become self-reliance. The continuing trend in the
introduction of many “apps” in the internet is a great opportunity to entice
children, adolescents and teenagers using digital and social media to be more
productive socially, economically and even politically to contribute to general
development of the economy.
In view of this therefore, this study seeks to significantly ascertain how digital
marketing skill is perceived as means to enhance self-reliant in business
development and thus as opportunity for the survival and thriving of small scale
businesses for youths in Lagos state of Nigeria. The paper examines the various
types of digital marketing skills applicable to youth and how such skills could be
used to start small scale businesses in Nigeria to boost their self-reliance.
56
Entrepreneurship and Business Environment
Purpose of the Study
The main purpose of this study is to evaluate the effect of digital marketing skills
acquisition on self-reliance of youths in Lagos State Mainland Local Government
Area of Lagos State. Specifically, the study sought to:
i.
To identify how digital marketing skill could be applied by youth in
Nigeria to tackle the problems of unemployment and become self-reliance.
ii.
To determine digital marketing skills needed by youth in Lagos for selfreliance in today's digital world to make their goods and services appeal to
large number of customers.
iii.
To investigate the challenges undermining the prospect of digital
marketing skills acquisition in Nigeria.
Research Questions
The following research questions were formulated to guide the study:
i.
How could digital marketing skills acquisition assist youths in Mainland
Local government area of Lagos state for self-reliance?
ii.
What are the types of digital marketing skills practicable for youths in
Mainland Local Government, Lagos for self-reliance?
iii.
What are the challenges experienced by youths in the acquisition and
application of digital marketing skills for self-reliance?
Significance of the Study
This study will be of importance to the youths, parents, employers, lecturers,
government, scholars and researchers. The findings of this study will give youths,
parents and government be er understanding of the potentials of digital
marketing skills for self-reliance. It will tailor the youth mind on economic
benefits of digital skills. It will also be useful for government in organising
vocational and technical training for the teeming youth population as a means of
curbing the ugly incidences of unemployment, poverty and a endance social
vices. The implication of this work will boost entrepreneurship and consequently
economic development in the country.
57
Entrepreneurship and Business Environment
Methodology
The study is descriptive in the nature, data was gathered through survey design
and questionnaire is being used for primary data collection purpose. The
population of the study are final year students of Business Education in Federal
College of Education (Technical), Akoka; who have been introduced to skill
acquisition during the course of their study. The idea of choosing the participants
in this research is to prepare their minds for self-reliance upon graduation.
Sample size of fifty (50) students was randomly chosen in order to know the
relationship between the digital skills and self-reliance. The questionnaire is
comprised on 15 items LIKERT scale. The objects are support on 4 - points Likert
scale where 4- Strongly Agree, 3 - Agree, 2 - Disagree and 1 - Strongly Disagree.
Data collected were analyzed using simple percentage for demographic data and
Arithmetic mean for research question items.
Mean Formula:
X = ∑fx
Where: N
X = mean of the score
∑ = summation
x = score
f
=
frequency
Presentation of Data
Table 1: Distribution of Respondents’ Demographic Data
Variables
Frequency
Percentage
(%)
Sex:
Age:
Male
19
38
Female
31
62
18 – 22years
22
44
23 – 25years
18
36
Above 25 years
10
20
58
Entrepreneurship and Business Environment
Exposure to
Yes
38
76
digital
No
12
24
Nature of
Services
29
58
Business:
Trading
21
42
skills:
Research Question 1: How could digital marketing skills acquisition assist
youths in Mainland Local government area of Lagos state for self-reliance?
Table 2: Digital marketing skills acquisition assists youths for self-reliance
Source: Field Survey, 2022
SA
A
D
SD
N
X
Remark
s
1.
Digital marketing skill helps youth
32x4 15x3 3x2
to acquire necessary creativity and
128
innovative business ideas for
45
-
6
50
3.58
Agree
3.74
Agree
179
easy
implementation on the job.
2.
Digital marketing skills in such
22x4 22x3 5x2
1x1
50
areas as local computer
88
1
187
transactions, communication and
internet are predictable to offer
youths basic step towards securing
higher paying jobs.
59
88
10
Entrepreneurship and Business Environment
3.
Businesses shift from traditional
26x4 20x3 5x2
marketing to digital marketing for
104
60
-
10
50
3.48
Agree
3.38
Agree
3.26
Agree
3.5
Agree
174
greater productivity and
profitability
4.
With digital marketing skill,
26x4 19x3 4x2
business operations now take place
104
57
-
8
50
169
at the owners’ comfort zone hence,
no need for huge startup capital.
5.
Digital marketing skills lead to
20x4 23x3 7x2
provision of superior services,
80
69
14
-
50
163
premium products and managerial
efficiency to a ain and retain large
market shares.
Mean score
The respondents agreed with the item statement that digital marketing skill helps
youth to acquire necessary creativity and innovative business ideas, offer youth
basic step towards securing higher paying jobs, and that digital marketing skill
acquisition leads greater productivity, profitability and efficiency at service. The
table shows that respondents agreed on all the items on how digital marketing
skills acquisition assist youths for self-reliance.
Research Question 2: What are the types of digital marketing skills applicable for
youths in Mainland Local Government, Lagos for self-reliance?
Table 3: Digital marketing skills applicable for youths for self-reliance
Source: Field Survey, 2022
60
Entrepreneurship and Business Environment
SA
A
D
SD
N
X
Remar
ks
Social networks have features aim at 29x4 18x3 3x2
6.
creating a community by connecting 116
54
-
6
50
3.52
Agree
3.44
Agree
3.48
Agree
3.48
Agree
3.38
Agree
3.5
Agree
176
users, who can interact, discuss or
share knowledge.
7.
Smart ph ones and social media are
25x4 22x3 3x2
vital tools for youth sources of
100
66
-
6
50
172
income.
8.
E-mail marketing is applicable for
26x4 22x3 2x2
sending advertisements or
104
66
-
4
50
174
commercial information to new and
existing customers.
9.
On-line business advertisement
24x4 23x3 2x2
1x1
50
moves freely to reach large number
96
1
174
-
50
69
8
of potential customers on the net
within short time.
10.
E-commerce enhances the
25x4 19x3 6x2
development of business
100
57
12
169
transactions on Internet by using
applications like e
-mail, instant
messages, shopping cart, Web
services.
Mean score
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Entrepreneurship and Business Environment
From table 3 above, it was discovered based on the mean values that the
respondents agreed on the opinion that internet, social network, smart phones,
on-line business advertisement and e-commerce are suitable tools for business
communication and advertisement capable of enhancing self-reliance of youth in
this digital era. The grand mean score is 3.5.
Research Question 3: What are the challenges experienced by youths in the
acquisition and application of digital marketing skills for self-reliance?
Table 4: Challenges experienced by youths in the acquisition and application of
digital marketing skills for self-reliance
Source: Field Survey, 2022
SA
11.
Inadequatequalified
A
D
18x4 26x3 5x2
educators/facilitators to educate youth 72
78
10
on digital marketing skills
12.
Lack of adequate facilities f
or 19x4 25x3 6x2
organizing digital marketing skill
76
75
SD N
X
Remarks
1x
50
3.22
Agree
1
16
1
1
-
50
3.26
Agree
2.96
Agree
3.22
Agree
3.36
Agree
3.2
Agree
12
training for the youth.
13.
Unstable electricity and lack of
18x4 14x3 16x2 2x
50
modern ICT facilities incapacitated
72
1
14
2
8
21x4 20x3 8x2
1x
50
84
1
16
1
1
42
32
digital marketing.
14.
The ing
enuity and fraudulent
practices scare lot of people from
60
16
patronising online marketing.
15.
Financial institutions are not
27x4 15x3 7x2
1x
50
providing necessary network and
108
1
16
1
8
support to youths with good business
45
14
ideas.
Mean Score
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Entrepreneurship and Business Environment
From the table above, based on the mean value opinions of the respondents with
grand mean score of 3.2 revealed the challenges militating against potentials of
digital marketing skill among youths for self-reliance which include inadequate
qualified trainers/facilitators, inadequate facilities, irregular power supply and
lack of cooperation from the financial institutions. There should be improvement
in the infrastructural facilities, credit facilities and appropriate remuneration pay
to digital skill facilitators to entice many trainers in the field.
Discussion of Findings
The analyses on Table 2 revealed that digital marketing skill is a viable tool for
youth employment opportunities as it enhances their creativity and innovation of
business ideas thus becoming self-reliance. It gives youths greater advantages in
establishing small scale businesses or get employed in highly paying
organizations. The findings of 21 is similar to the finding of this present study that
digital marketing as a tool could help the youth to establish small scale businesses
to reach a wider local market and make gains through competitive advantage.
The analysis of Table 3 revealed that smart phones, internet, social media, on-line
advertisement and other ICT gadgets can serve as self-reliance tools for youth to
start small businesses and help to serve as information flow between youths and
their potential customers. The work of 22 supports the finding that social media
and other websites provide opportunities for businesses to engage and interact
with potential consumers, encourage an increased sense of intimacy with existing
consumers and build an important relationship with potential consumers. This
will boost the youth self-reliance by creating business contact on line, they can
learn and trade at the same time.
The analysis of Table 4 showed that inadequate qualified educators, lack of
modern facilities and financial resources for acquisition of digital marketing skills
are major challenges confronting the use in application of digital marketing for
self-reliant. 23 observed that a digital marketer needs to secure enough money to
63
Entrepreneurship and Business Environment
develop a powerful advertisement campaign successfully to woo potential
customers; also digital marketing skill acquisition involves lots of capital and
professional trainers to put one through because of its technicality, and therefore
youth would require external assistance to pull through at the beginning.
Conclusion and Recommendations
Skills acquisition involves different ways through which graduates and youths
can be trained to achieve job creation and self-reliance rather than waiting for jobs
in the formal sector endlessly. It is believed that training youths in digital
marketing skill programmes will enhance their sustainability in different fields of
trade. Digital marketing skills are very crucial for starting a business or ge ing
desire jobs placement for youth self-reliance. ICT gadgets are capable of offering
rewarding and enjoyable careers to both women and men.
The world is experiencing a radical change towards the digitalization. The
consumers are looking and searching more on internet to find the best deal form
the sellers compared to traditional or conventional marketing methods. A social
networking site provides convenience means of trading and shopping for both
traders and consumers. In this study, the researcher acknowledged that
businesses can really benefit from Digital marketing such as search engine
optimization (SEO), search engine marketing (SEM), content marketing, ecommerce marketing, campaign marketing, social media marketing, e-mail direct
marketing, display advertising, e–books etc. Digital marketing is cost effective
and having a great commercial impact on the business, digital marketing skill has
greatly empowered a large number of youth in recent time, they are now proud
owner of viable business and the rush for white collar job is gradually reducing;
the labour market is now flourishing with vibrant self-reliant and self-employed
youths in their own capacities.
However, it is observed that the potentials of digital marketing skill in boost selfreliance of youth is being undermined by several challenges particularly in the
64
Entrepreneurship and Business Environment
area of financial constraints and effective training required to start-up. It is
believed that if digital skill is given the a ention it deserves by the government
through its empowerment agencies and other stakeholders, there will be a turnaround for youth employment and economic growth at large.
Based on the findings of this study, the following points are recommended:
I.
A department of training and development should be set up by the federal
ministry of education in every higher educational institution and at local
levels to see to the training of youths on career development programme
that will enhance high performance and self-reliance of youths on
graduation.
ii.
Government and other institutions should equip youth with digital and
infrastructure facilities to start up their businesses. The social amenities
available should be overhaul for maximal effectiveness.
iii.
Youths should be given vocational skill training in addition to their regular
academic programme in different educational sector as a remedy to the
mis-match between educational output and requirements of the labour
market in order to enhance the employability of students passing out of
school.
iv.
Financial institutions should grant loans to youth to start small businesses
or even support them with machines and equipment as their corporate
social responsibilities. Bank can also go into partnership agreement of
sharing profit together.
v.
Government should also put in a place strict monitoring and disciplinary
measures against government official who may want to corruptly allocate
funds meant for poverty alleviation and support for small scale business.
vi.
Due to the negative a itude of some parents and students towards skills
acquisition, there is the urgent need of to embark on programmes that
enlighten the public about benefits of digital skills acquisition training so
as to encourage the interest of both parents and students the programme.
65
Entrepreneurship and Business Environment
Endnotes
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Olayeni, T. P., Osabuohien, E., Yabkwa, E. & Ademola, A. “Youth
Employment Creation as an Inclusive Solution for Sustainable Development:
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Laudon, K. C. & Traver, C. G. E-commerce: Business, technology, Society.
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Oyedemi, T. 2014.
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CHAPTER
04
SOCIAL CAPITAL AND ENTREPRENEURIAL
INTENTION
ADEJUWON Joshua Adewale & OYEKU Oyedele Ma hew
Abstract
Addressing poverty has been a major issue for any responsible and responsive
government. Development and promotion of entrepreneurship has been well
documented in literature as a formidable strategy to escape poverty and create
sustainable wealth in both developing and developed nations. Entrepreneurship
is also a catalyst which boosts a stagnant economy and helps it grow and develop.
Thus, for the progress of any country, entrepreneurship must be promoted and its
contribution should not be ignored all across the boundaries. In Nigeria, the
government has realized that entrepreneurship is tool needed to establishing
SMEs which are needed to promote socio-economic development. This study
confirms that social capital of individual entrepreneur has direct effect on the
entrepreneur's implementation of his or her entrepreneurial intention as well as
his or her desire or the push to start an enterprise or engage in entrepreneurial
activity. Both formal and informal social network resources were found to have
direct effect on the entrepreneur's intention to engage on entrepreneurial activity
as demonstrated by starting up an enterprise. It is recommended that relevant
authorities should create awareness of various opportunities for entrepreneurial
engagement for entrepreneurs with potential social capital to take advantage to
establish and run SMEs profitably. This study concludes that development of
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entrepreneur's social capital could enhance implantation of individual
entrepreneur's entrepreneurial intention.
Word Count:217
Keywords: Entrepreneurship, Social capital, Entrepreneurial intention
Introduction
There have been extensive research works that support the link involving
entrepreneurship and economic development, and stressing the positive
relationship between these two key factors. An entrepreneur can be described as
an individual who eagerly takes initiative and assumes the full responsibility for
the initiative taken, with the ability to create unique products or processes, and
openness to the risk associated with this effort. Entrepreneurs are oftentimes
persistent in their goals, even if they face diverse challenges while pursuing their
initiatives (Paul & Seok-Woo, 2018). Entrepreneurial activity is a key driver of
economic development (Howard, 2020). The correlation between the
entrepreneurial activity of the local population, small business, and the economic
development of the state has been confirmed in numerous studies (Acs, Desai, &
Hessels, 2008; Naudé, 2010; Wennekers, Van Stel, Carree, & Thurik, 2020).
Globally, policy makers both in public and private sectors are on the look-out for
innovative techniques to create jobs and wealth (John, 2020). The truth of the
ma er is that youth of these days are embracing technology which is the precursor
for entrepreneurship because entrepreneurship is all about innovation, creativity
and how these are well packaged to solve problems and provide sustainable
income for the entrepreneurs. The psychological traits of individuals have helped
to classified individuals into entrepreneurs and non-entrepreneurs (Davidsson,
2019). Social capital could be said to be trait-based dwelling on the network and
relationship of individuals with others and how these could be harnessed
profitably to start and manage an enterprise to success.
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Holly, Joseph, and Jennifer (2020) described social capital as the value derivable
for individual's social relationship. Social capital has also been described from
theoretical perspective as having the potential to take cognizance of skills and
abilities useful for entrepreneurial development (Adler, 2020). Agu (2020) in his
empirical study, confirmed that entrepreneur's social ties has significant effect to
increase shared a itudes capable of increasing cognitive bias in favorable manner
making social capital a valuable a ribute in entrepreneurship development with
no exclusion of making entrepreneurial intension a reality of the aspiring
entrepreneurs. The paper therefore, reveals that social capital is very important in
enhancing and providing explanation for entrepreneurial intention.
Much a ention is currently being directed to the relevance of social capital in
implementing entrepreneurial intension (Dakhli & De Clercq, 2020). Light &
Dana (2019) have analyzed the relationship between cognitive social capital and
entrepreneurship and it has been established that social capital pays a very
significant role in business start-ups. Individuals with very strong social ties are
very likely to succeed in entrepreneurial activities most especially new ventures
rather than individuals with less social ties. Individuals with strong social capital
have the tendency to relinquish their jobs and start a new venture in and around
areas where they are well known or have lived for a long time in order words in
areas where their social relationship are very high giving them some marketing
advantages (Alwis & Senathiraja, 2020). Therefore, this is a strong indication that
social networks are very important factor to consider in se ing up and developing
new business venture. Bridge, O' Neil, and Cromie (2019) have reported that
social capital is important in sustaining individual's entrepreneurial starting from
the point of entrepreneurial intension to entrepreneurial activity and profitable
operation of the business enterprise.
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Literature Review
Social Capital
To study entrepreneurship effectively, we must begin to act holistically rather
than looking at entrepreneurship in isolation but the whole entrepreneurship
process must be studied, analyzed and assessed considering the entire process
(Jack & Anderson, 2020). We must begin to look beyond considering
entrepreneurship only as an economic process but examine the social context of
entrepreneurship and its a endant benefits to achieving set goals for
entrepreneurial action. With this view in mind, it is very easy to localize
entrepreneurial action giving the entrepreneur the benefit of identifying, and
utilizing entrepreneurial opportunities within the locality. Applying
structuration to the study of entrepreneurship gives the opportunities to examine
how social structures could influence entrepreneurial activity positively (Jack,
Anderson, 2020).
In the study conducted by James (2018), social capital was reported as providing
the entrepreneur the opportunity to overcome the challenge resources through
collective action and network relationships especially in localities where relevant
support institutions are not easy to come by. Bauernschuster (2019) opined that
social capital can facilitate technology diffusion and adoption of technology.
Entrepreneurial Intention
The literature on entrepreneurial intentions (EI) presents numerous definitions
(Brown, Doyle, Malle e, & Young 2019). For instance, Chell, Haworth, and
Brearley (2021) perceived EI as the sole intent of an individual to be selfemployed, while (Bandura, A. 2019) considered EI the intent of a particular
individual to initiate his or her own business. Intent is taken as a reasonable
process to collect resources, obtain knowledge, and act in a specific manner
(Drucker, 2018) Therefore, the definition considered for this study defines EI as a
process of thought that encourages an individual to acquire information, collect
resources and concentrate behavior. Thus, Entrepreneurial Intention is defined as
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a cognitive process that motivates an individual to allocate resources, acquire
knowledge, and concentrate behavior toward “initiating economic activities in
the formal sector under a legal form of business” (Bird, 2018).
To understand the individual as an entrepreneur, EI follows the trait approach.
On another hand, due to the boundaries of trait approach, Walstad, and
Kourilsky. (2020) got encouraged to present an economic psychological model of
the factors that could provide an understanding of EI. The model comprises of six
components; conviction, background of the individual, domain a itude,
intention and situation. Elizabeth, U.A. (2020), Bhagvatula, Elfring, Van Tilburg,
and Van De Bunt (2018) asserted that to be er comprehend the planned behavior
and predictors of entrepreneurship, the literature of entrepreneurship contacts
the psychological literature. Theories of intention were already developed and
intention considered as the major indicator for every planned behavior. Planned
behavior was best indicated by intention especially when the behavior in question
is difficult to perceive, exceptional or includes uncertain time lags (Kolvereid, &
Isaksen, 2021). The entrepreneurial activities based on consistent efforts over the
time, Kolvereid & Isaksen, 2021; Krueger Jr, Reilly, & Carsrud, 2019) support that
entrepreneurship is basically a planned behavior related to intention building.
Intention in the description of Hair (2020) is the cognitive expression of
individual's objective and individual's plan that is put in place to achieve the set
objective while Krueger & Carsrud (2020) viewed intention as the individual state
of mind directing the a ention of the person towards a set objective or goal. In
both view objective is crucial which in the case of entrepreneur is to set up a new
venture to create value for solving problem while earning income in doing this. It
is important to note that intention is very crucial at the commencement of the
entrepreneurial process; this is necessary to provide the initial driving force.
Entrepreneurial intention is equally important in driving existing businesses
because every action starts with intention. Therefore, in this paper
entrepreneurial intention would be referred to a state of individual's mind
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directing his or her a ention to the entrepreneurial objective of se ing up a new
venture (Landry, Amara, & Lamari, 2021).
Entrepreneurial A itude
According to Landes, Harrison & Huntington (2020) education programmes on
entrepreneurship focus on management, finances, and marketing control
characteristics of self-efficacy, while ignoring risk taking and innovation. As
stated by Kuratko, Ireland, Covin, & Hornsby (2021) such deficiencies point back
toward Perceived Behavioural Control (PBC) and Theory of Planned Behaviour
(TPB), as these theories state that entrepreneurial efficacy is often referred to as an
individual's thoughts or beliefs regarding his or her capabilities and self-control.
As highlighted by most entrepreneurial researchers, it is true that self-efficacy is
most times lacking important and vital characters, such as risk taking and
innovation, but one's reactiveness toward entrepreneurial opportunities (Kwon &
Arenius, 2020) which indicates how an individual's intention leads to his or her
actual behavior in certain tasks. Cognitive biases and styles are also used by
different researchers to learn about individual's self-efficacy and
entrepreneurship. Oftentimes, stability in an individual's entrepreneurial
behavior and intent is influenced highly by cognitive style. Entrepreneurs with an
analytic approach are always stable in making their decisions to pursue
entrepreneurial opportunities because they heavily rely on skills to control
financial risks and problems, marketing skills, and managerial skills, which are
held by them and their team. In another vein, it is difficult to predict how
entrepreneurs with holistic behavior will pursue entrepreneurial opportunities
because they tolerate a higher level of risks, so a higher level of generalized selfefficacy lies between them (Light & Dana, 2019). Added to this, cognitive biases
also play a vital role in most individual's intention as entrepreneur. Such cognitive
biases comprise of overconfidence, illusion of control and belief in the law of small
numbers. Overconfidence often prevails in entrepreneurs with intent, specifically
those entrepreneurs who are tangled back to their perception about risk and
improvement in their actual behavior (Choo & Wong, 2020). PBC is interlinked
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with the bias of illusion of control. Control and overconfidence are displayed by
belief in the law of small numbers. As per the definition of Ajzen (2019), belief and
confidence in limited and small numbers is an entrepreneur se ing their decisions
upon limited and small experiences. Finally, Ajzen (2019) noted that
overconfidence is not a negative and destructive bias because it initially allows
individuals the opportunity to be entrepreneurs by taking risks. Thus, new
entrepreneurs gain valued experience and skills by passing through this process
toward future opportunities.
Entrepreneurial Intent
Starting up a business is an example of planned behavior and it used to be
intentional as the intentions to predict the individual's behavior be er than any
other factor such as personality traits, demographics and beliefs. Although these
intentions are built of an explicit a itude, the intentions are strong mediator
between a itude and behavior, even in some cases where a itude appears to
predict the behavior. Intentions most times ignite the cognition process, which
makes a base for perception and encourages an individual to act in an expected
manner (Leedy & Ormrod, 2020). In relation to the TPB, although there is a very
insignificant ratio for business startups; intentions play a crucial role in initiating
this process. The theory supports the notion that intentions lead to initiatives, and
such intention base models have often revealed in various entrepreneurial
research that activities are an output of planned behavior.
The understanding of EI has gained importance in recent years, yet the literature
remains limited. The meta-analysis of the literature asserted that entrepreneurial
behavior is always predicted by EI (Leedy & Ormrod, 2020). The most dominant
part of literature is based on Ajzen's TPB and Shapero's model of EI. Leedy &
Ormrod (2020) clarified the intentions with the link of a itude, perceived
behavioral control, and subjective norms, while Lin (2021) explanation of EI was
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based on perceived desirability, perceived feasibility, and propensity to act.
Intention can be said to be a representation of an individual's drive to invest effort
and act accordingly based on planned and conscious decisions.
Entrepreneurial Behavior
Exogenous factors push individual's perception which then leads to a certain
a itude. This a itude also leads to building intentions for a specific action that
leads a certain behavior (Clark & Creswell, 2020). Thus, intentions serve as a
middleman for actions and behaviors that can be predicted by the existing
a itude regarding that certain behavior. A large part of entrepreneurial research
covers the influence of external factors on entrepreneurial actions, and usually
there is a weak link found between the two (Coleman, 2019). There is no major
empirical evidence for behavioral prediction based on a itude, yet external
factors change a itude and indirectly influence intentions and entrepreneurial
behavior (Landry, Amara, & Lamari, 2018). Coleman (2019) supported this
concept by reviewing empirical tests, and explained that intentions are predicted
by a itudes and behaviors. Even role models only influence entrepreneurial
behavior when they can affect the a itude of individuals through personality
traits, such as self-efficacy.
Social Capital and Entrepreneurial A itude mediated by Self-efficacy
Social capital can be described as an individual's resource for being familiar and
connected with people in various facets of the society, and by maintaining a
positive reputation among other individuals in the society. The greater the social
circle, the greater the chance to gain information and awareness, which may
enhance the trust of others in the individual (Do Paço, Ferreira, Raposo,
Rodrigues, & Dinis, 2020). There is more than one dimension of social capital; the
relationship dimension, cognitive dimension, and structural dimension are three
dimensions proposed by (Coleman, 2019). The TPB developed by Coleman (2019)
states that one's intent to perform a certain behavior or role directly depends on
three perceptions and observations. The first two of these are self-efficacy and
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personal a raction, which are similar to those stated by Lin, & Erickson (2019)
(perceived feasibility and perceived desirability). The third perception is
subjective norms which refer to societal pressure to undertake a certain behavior
or role. This theory states that an individual's belief about other individual's
societal role influences their behavior toward certain responsibilities. With
greater social capital, the chances of an individual increase for a positive
reputation and personal linkages with other members of the society, which helps
the individual to access other benefits, such as access to capital, access to supply
chains, and even approaching or expanding customer markets.
Social Norms and Entrepreneurial Intention
In the last few decades, the role of societal and social norms in predicting human
behavior has been explored, and it has been recognized that social norms directly
lead to action (Iversen, Jørgensen, & Malchow-Møller, 2018). A known
phenomenon of every society is that communication spreads among groups of
people, which builds their perception about norms. Particularly at a collective
level, norms are the perceived behavior or code of conduct that is expected from
members of society. Diverse cultures have peculiar social norms, depending on
the prevailing values, conventions and customs (Liñán, Urbano, & Guerrero,
2021). The expectations of an individual's family or closely connected people
influence the individual's perceptions about certain tasks. This perception leads to
the intentions of that individual (Choo & Wong, 2019). Various studies reveal that
social norms have been found to control behavioral problems through the
perceptions of people in the society. Thus, social norms have a prominent effect on
individual's personality or preferences. Therefore, if entrepreneurs were
promoted in society, we could assume that the intention to become an
entrepreneur would increase. Intentions are influenced by perceptions and the
desire for action, so the perceptions produced by social norms ultimately move
toward intention building (Mair, & Noboa, 2019). Intention can also be predicted
by the perception of personal a ractiveness, feasibility, and social norms. These
social norms are often based on the emotional and behavioral tendencies of the
individuals in the society (Gird & Bagraim, 2020).
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Social Capital and Entrepreneurship Intention mediated by Social Norms
Social capital is designed by various aspects most commonly by social circle
which can be support for different actions. It is often the existence of norms at a
social level and it is very productive and crucial for certain achievements that
cannot be a ained without it. Social capital refers to actions that are followed by
the rules, regulations, and norms of that society. Thus, it can predict the actions,
shape, construct, and social context. Social capitals most times have a positive
influence, yet its effect varies with the situation, so that it can be beneficial or
negative (Gird & Bagraim, 2020). Unlike other capital such as physical, financial,
and human capital; social capital is dependent on relationship building and
embraces all contacts, from neighbors to high school friends to professional
associates. Social capital affects individual's' perceptions regarding quality of life,
and thus affects action to a great extent (Choo & Wong, 2019). However, the
influence of people in society depends on the degree to which the individual is
connected and affiliated with them. Perceptions lead to the behavior of the
individual (Malebana, 2021).
A significant part of the literature has examined the effect of individual's personal
and psychological traits on entrepreneurship, while less work has analyzed the
demographic and socioeconomic factors. In addition, the relationship between
the social context and EI has not been well considered, although it is recognized as
important for economic development by the scientific community (Van Der Gaag
& Snijders, 2020). The intention caused by an individual's motivation influences
their behavior and sometimes leads to certain actions that ensure performance of
that task. Thus, the ultimate behaviors are predicted by the individual's intentions
(Van Der Gaag & Snijders, 2020). Social capital refers to the social network in
which an individual is embedded. It is interlinked with social norms because
norms generate values that help people hold perceptions and mold behavior.
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Self-efficacy and Entrepreneurial Intention
Self-efficacy refers to individual's belief in their abilities. Malhotra & Stanton
(2019) defined it as individual's view of his or her capability to have influence in
events that affects or determines their lives. He also included perceived selfefficacy in his TPB, as it builds the perception of individuals, which leads to
intentions and behaviors. Yang (2020) affirmed that self-efficacy could inspire
individual actions based on their pa erns of thought. Thus, self-efficacy predicts
how much effort will be invested by the individual, and the sustainability of this
effort in the face of hurdles. With higher self-efficacy, individuals have more
tendencies to invest the increasing effort for be er performance to support
entrepreneurial intention (Yang, 2020). Thus, with reference to the theory, selfefficacy builds the success or failure understanding of the individual for an
entrepreneurial a itude, which leads to entrepreneurial intention (Markman,
Balkin, & Baron, 2021). The greater the self-efficacy held by individuals, the more
likely they will agree to take the initiative and risk in starting an entrepreneurial
venture, with belief in their abilities and perceptions of success. Self-efficacy is
very significant in explaining venture creation entrepreneurship literature (Gist,
2017). Individuals are more inclined toward activities that they perceive as
controllable and accomplishable. Thus, the entrepreneurial situation also
influences perceived self-efficacy and intentions.
Entrepreneurial A itude and Entrepreneurial Intention
Various perceptions about certain activities build individual's a itude toward the
same activity. This a itude further leads to intention building, as a itude and
exogenous factors usually affect intention (Gist, 2017). Marginson and Rhoades
(2020) stated that certain a itudes predict EI. Gird and Bagraim (2015) defined EI
as a state of mind directing a person's a ention and action toward selfemployment as opposed to organizational employment. Situational variables also
affect individual's intentions; however, at times, the intention might not lead to
the initiation process, as entrepreneurial ventures are not so frequently observed.
Mair and Noboa (2020) asserted that understanding EI for business startups is
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crucial to benefit researchers, teachers, and students. Self-efficacy leads to the
behavioral sets of individuals that lead to intention. Similarly, social norms are
external forces that influence the individual's a itude. Moreover, according to the
study of Gird & Bagraim (2019) entrepreneurial intent formation is directly
influenced by social capital. According to the TPB, self-efficacy, social norms, and
EA positively affect EI (Malhotra & Stanton, 2019). Mair and Noboa (2020)
affirmed that a itude positively influences individual's' EI. Consequently, all
these factors positively support EA, which leads to EI.
Social Capital Theory
Social capital as a hypothetical idea is available inside both financial and
humanistic customs, giving two unmistakable yet covering disciplinary points of
view. This double methodology might well have added to the 'applied
ambiguity's that Durlauf and Fafchamps (2020) depict. We accept this
'dubiousness' as guaranteed and endeavor to sum up the two methodologies here
to comprehend the various parts of social capital that have been distinguished in
the writing, and their logical use in financial ma ers. Social capital is an
exceptionally old thought in humanism and arises normally from a discipline that
accentuates strategic cooperation and construction, rather than the independence
and office of financial hypothesis. Portes (2021) partners the principal present day
utilization of the term social funding to Bourdieu (2019) whose work recommends
two unmistakable components; initially, social connections themselves that give
people admi ance to the assets of other gathering individuals, and furthermore,
the sum and nature of those assets.
Paxton (2018) additionally focuses on two related parts; a 'quantitative' one that
alludes to the genuine relationship among people, and a 'subjective' one that
alludes to the kind of affiliations, which should be equal and trusting. This
qualification has been perceived in exact examinations. For instance, Conley and
Udry (2017) show that it is important to comprehend both the number and sort of
organizations that individuals have a place within their investigation of social
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learning among famers in Ghana. Likewise, Videras et al. (2019) showed that the
sort (not just the quantity) of social connections ma er for understanding the
determinants of supportive of ecological practices. Chalupnicek (2019) has
contended that a pressure exists in social science between friendly capital as a
singular resource and the significance of its social se ing. Coleman (2018), for
instance, adopts the previous strategy in his work on the job of social capital in the
formation of human resources; though the last option approach is elucidated by
Putnam (2020) in his work on the decay of metro society in the USA.
Theory of Planned Behavior (TPB)
Most investigators meandered into the enterprising objective space and found
TPB explains each pioneering points (Sanyang & Huang, 2020). Most business
researchers concur that social capital's impact on pioneering assumptions is still
to a great extent untested (Schlaegel & Koenig, 2020). A couple of specialists have
observed perspective in the TPB construction to be the best mark of pioneering
assumption (Sanyang & Huang, 2020) while others uncovered mixed overviews
as a result of disposition in enterprising points. It is situated that social qualities
and PBC quite influence innovative assumptions. A couple of experts focused on
friendly loads and norms, and found that social principles (counting family loads
and the evident awesomeness of claiming a business curiously with the possible
hardships of making the decision to start a business) to be the most remarkable
TPB work in expecting enterprising objective (Marginson & Rhoades, 2020).
Further, the association between innovative points and prior privately-owned
company insight (Substance, 2017) in number strain to remain in the family firm,
and significant need to keep family associations alive through choosing the right
family replacement is particularly extraordinary.
The conduct assumption is solidly related to its pointers which are connected with
the conviction fabricates (social convictions, standardizing convictions, and
control convictions). The conviction harbingers express the individual's thought,
discernment, and ability to play out specific direct, and the centrality of the given
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outcome, prior to partaking in the lead. Henceforth, to choose individuals'
perspectives, conceptual principles, and conduct control, it is crucial to set up the
forerunners of these practices. As demonstrated by the hypothesis of organized
direct, objective choices supervise people's choices and practices (Significance, M.
E. 2017). As such, when an individual can overview their convictions about the
lead, she or he will presumably se le on a particular outcome. Each outcome is
surveyed to pick whether the direct will make the outcome being looked for. As
demonstrated by Van Der Gaag and Snijders (2020) before an individual picks
whether to participate specifically lead, she or he will presumably survey the
benefits and costs that are the results of the direct. Yang (2020) portrayed social
points as "how much a man [or woman] has figured perceptive designs to perform
or not play out some specific future direct." In this review, chiefs' means to offer
passage level positions could be impacted by their a itudes, passionate norms,
and conduct control considering their convictions.
Dimensions of Social Capital and Entrepreneurial Intention
There are many aspects of social capital that can influence entrepreneurial
intention and such aspects include: entrepreneurial activity and its a ached value
in a close environment as well as in the general society (Kibler & Fink, 2019);
availability of role models in entrepreneurial activity (Carr & Sequeira, 2018);
approval for decision to commence new venture in the immediate environment of
the entrepreneur (Liñán & Santos, 2020) and social support from strong and weak
ties (Dohse & Walter, 2020).
Studies have shown that entrepreneurs access resources and support more
readily to start new ventures form people they have close social relationships with
(Bhagavatula, Elfring, Van Tilburg & Van de Bunt, 2019). The belief of individual
entrepreneur that he or she can secure access to the resource and support they
need from social ties increase the chances of survival of the enterprise as well as
enhances its transition from the level of intention to entrepreneurial action and
finally start-up (De Carolis et al., 2009; Zanakis, Renko & Bullough, 2018).
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Ramos-Rodríguez, Medina-Garrido, Lorenzo-Gómez & Ruiz-Navarro (2019)
opined that it is easier for individuals to recognize business opportunities needed
to start a venture when they have social relationships with some people who are
entrepreneurs and probably must have invested in some of those opportunities
within the immediate environment. It can therefore, be said that social capital
enhances the human capital acquisition as well as opportunities identification
(Anderson & Miller, 2020). It can be inferred from the above discussions that social
capital dimension have positive effects on entrepreneurial intension. Liao &
Welsch, 2020) identified three dimensions of social capital as a concept that is
multidisciplinary in nature namely: structural, relational and cognitive
dimensions. Studies carried out by Liao and Welsch (2002) and Liao and Welsch
(2005) indicated that foundation both social and relational social capital is
structural social capital while the studies also established that there exist positive
relationship between cognitive social capital and relational social capital.
Discussion of Findings
This section presents the discussion of findings as it reveals the conversation of
discoveries of the review comparable to other exact works. This review finds that
business is a significant supporter of financial advancement that creates openings
for organizations and lessens joblessness. Innovative Expectation is the way to
producing business venture and is useful for making pioneering exercises.
Different innovative examinations have focused on show to pioneering genuine
models, disposure of academic capital, and past enterprising experience and
information, yet have seldom thought to be the fused impacts of innovativeness
and social capital, which are particularly critical in the current extraordinary
condition and for more energetic ages. The inspiration driving the momentum
research was to decide the associations between friendly capital and Business
Aims, prompting pioneering conduct considering the social speculations
contemplated. The discoveries uncovered that social capital is basically and
fundamentally associated with pioneering plan and its forerunners (self-viability
and emotional standards). This study recommend that individuals are bound to
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plan to go into business, feel motivated to participate in business venture, and feel
equipped for going into business when they accept their decision will be
embraced by their nearby relatives, sidekicks and accomplices; when innovative
action is regarded by those close to them and the overall population; when they
know others who are fruitful business people; and when they believe that
everyone will reinforce them in beginning a business. Also, the outcomes showed
that social capital has a feeble legitimate control over the reliant factors, and a
more grounded direct impact on EI.
There are various perspectives on proper relationship networks as a feature of
social capital and achievement in business. Wide conventional organizations can
be utilized viably for business, for example, to find or acquire the important data
or to defeat regulatory obstructions (Yang, 2019). Nonetheless, social capital as
friendly connections generally requires interest in itself, and time is a significant
asset for a business person. Appropriately, in regards to a social relationship,
"from one perspective, it without a doubt gives entertainers scant assets and
business related information. Then again, building up and keeping up with it
require significant venture, bringing about 'sunk expense' for business people"
(Van Der Gaag & Snijders, 2020). In this review, it was shown that enrollment in
associations was significantly affected beginning a business. We characterize this
to the way that the proper connections (participation in associations) don't need
such critical tedious assets as casual (fellowship, family) connections. Other than
that, with participation in associations, the organization of social contacts is
drastically extended, which might actually give them critical social assets
Gaps in Existing Literature
The new businesses made by enterprising firms have birthed rebounds from
economic droops and empowered such countless people from various
foundations to seek after financial triumphs. With such a significant job, it is basic
that the generative and self-restoring commitment of enterprising abilities to
showcase economies be sought after proficiently and painstakingly created in the
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current economies, particularly in emerging nations like Nigeria. Different
investigations have set up the great and beneficial outcome of social capital on the
achievement of undertakings (Extension & Cromie, 2019). In any case, other
eminent elements actually request the consideration of analysts to uncover how
friendly capital aides start undertakings or how it assumes its part.
Social capital is significant as it increments conduct control, which, as per
hypothesis of arranged conduct (TPB), is a central point that impacts conduct aim.
Accordingly, social capital can undoubtedly be worked through social
organizations and can be significant in adapting to the ecological difficulties
looked by business visionaries. In addition, business venture schooling advances
solidarity of the gatherings while likewise uplifting the solidarity in different
social orders, which has since a long time ago spoke to instructors and
policymakers (Heyneman, Kraince, Lesko, & Bastedo, 2017). Researchers are
additionally taking a look at gander at understanding the impact of social capital
on understudies' practices, including their learning direction (Anderson, 2018),
scholarly execution, interpersonal organization use (Valenzuela, Park, & Kee,
2019), and dropout goal. At the college level, disciplinary environment, scholarly
standards, and divided trust among the home and school are significant types of
social capital (Forsyth & Adams, 2020). Accordingly, in this review, the impact of
social capital with regards to the TPB will be inspected to decide what it means for
pioneering goals.
Conclusion and Recommendations
This study shows the impact of social capital on Entrepreneurial Intentions (EI)
through multi-intercessions with regards to a developing nation, Nigeria in the
present circumstance. It has shown a solid and huge circuitous impact on EI
through the intercession of self-adequacy and accepted practices.
In our different colleges, understudies are by all account not the only possible
business visionaries; various examinations have shown that workers and
scholarly staff may likewise be engaged with pioneering exercises meaning future
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explores may likewise research administrative and scholastic college staff. In this
way, future exploration could concentrate on other hypothetical systems, like the
hypothesis of social learning, persuasive speculations, and anticipation
hypothesis, with respect to EI and innovative conduct. In the college se ing, the
ebb and flow concentrate on just viewed as friendly capital, yet there are various
college related elements, for example, innovative work, the accessibility of
brooding focuses, and enterprising help. These elements could be considered by
future exploration.
In our various schools, students are by all account not by any means the only
conceivable business visionaries; different assessments have shown that
specialists and insightful staff may similarly be locked in with spearheading
practices meaning future investigates may moreover explore regulatory and
academic school staff. Along these lines, future investigation could focus on other
theoretical frameworks, similar to the theory of social learning, influential
theories, and expectation speculation, as for EI and inventive direct. In the school
se ing, the recurring pa ern focus on saw as cordial capital, yet there are different
school related components, for instance, creative work, the availability of
agonizing centers, and venturesome assistance. These components could be
considered by future investigation.
In our different colleges, understudies are by all account not the only possible
business people; various examinations have shown that workers and scholastic
staff may likewise be engaged with innovative exercises meaning future explores
may likewise research administrative and scholarly college staff. Subsequently,
future exploration could concentrate on other hypothetical structures, like the
hypothesis of social learning, inspirational speculations, and anticipation
hypothesis, with respect to EI and enterprising conduct. In the college se ing, the
flow concentrate on just thought to be social capital, yet there are various college
related elements, for example, innovative work, the accessibility of hatching
focuses, and pioneering support. These elements could be considered by future
examination.
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CHAPTER
05
STRATEGIC FLEXIBILITY AND SME PERFORMANCE
DURING ECONOMIC CRISIS IN NIGERIA
ADEKUNLE Ebenezer Adewunmi & DOPEMU Olawale Samson
Abstract
This study examined the relationship between strategic flexibility and SMEs
performance during economic crisis in Nigeria. The main objective of this study is
to analyze the impact of the independent variables on each of the dependent
variables. Primary data were sourced through the use of questionnaires. 134
respondents participated in this research work. The dependent variables are sales
revenue and customer satisfaction; they are proxies for performance of SMEs.
Manufacturing process flexibility, market flexibility and product flexibility are
the independent variables and are proxies for strategic flexibility. PLS-SEM
technique was adopted for this study. The results of the test conducted reveal that
strategic flexibility has direct impact on performance of SMEs during economic
crisis in Nigeria. Therefore, it is recommended that SMEs in Nigeria should
engage on strategic flexibility in all its business activities as this will serve as a tool
for the accomplishment and continue existence of its business in Nigeria.
Word Count:152
Keywords: Economic crisis, Strategic flexibility, & SMEs performance,
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Introduction
Firms all over the world are faced with serious risks and uncertainties in their day
to day business activities as a result of dynamic business environment. Firms
compete to survival and to gain competitive advantage. More often, developed
firms out beat the oncoming small firms that are well known as small and medium
scale enterprises. The performance of small and medium scale enterprises is not
only affected by other well established firms in the industry but also because of the
nature of the business environment. For instance, during economic depression
small firms will be adversely affected. This can lead to the permanent closure of
the firm. In Nigeria, during the last economic crisis it was recorded that a lot of
small and medium scale businesses collapsed. In order to avoid future winding
up or collapsed of this sector there is need for strategic planning flexibility.
As defined by Feifei (2011) strategic flexibility is the firm's ability to adapt to
environmental changes by changing continuously. Strategic flexibility is essential
as it makes the firm to be able to respond quickly and successfully to unforeseen
changes in the environment and less at risk of collapse. In various situations that
the firm faced strategic flexibility is now the main tactic used by firms to achieve
and maintain competitive advantages in varied situations (Cao et al., 2018).
Adopting strategic flexibility rightly will help to boost and maintain customer
satisfaction and make the firm less vulnerable to negative changes of the
environment. According to Han and Gao, (2017) and Lin et al. (2017) strategic
flexibility and organizational competitive advantages or organizational
performance are positively related. In the same way, Emoh and Alagah (2020)
discovered that strategic flexibility has positive and significant impact on
operational effectiveness. Also, Wang, Cao, Xi, and Chen, (2021) declared that
strategic flexibility and organizational performance are positively related. Hsien,
Jin-Li, and Chia-Lin (2014) and Alamro (2015) revealed that flexibility has
positively affects operational performance. However, Sajjad, Sajjad and Asif
(2020) found out that strategic flexibility has insignificant effect on SMEs
performance.
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From the foregoing studies it appears that there is a gap in the literature on the
effect of strategic flexibility on performance of SMEs. It is clearly seen that
previous studies have not examined the causal link between strategic flexibility
and SMEs performance during economic crisis in Nigeria. This very point serves
as the motivation for this study.
Objective of the Study
The broad objective of this study is to examine the casual relationship between
strategic flexibility and performance of small and medium enterprises during
economic crisis in Nigeria, while the specific objectives are to.
1)
Examine the extent to which manufacturing process flexibility influences
SMEs sales revenue.
2)
Investigate whether market flexibility relates to SMEs sales revenue.
3)
Explain the nature of the relationship between product flexibility SMEs
sales revenue.
4)
Evaluate the impact of manufacturing process flexibility SMEs customer
satisfaction.
5)
Examine whether market flexibility relate to SMEs customer satisfaction.
6)
Appraise the extent of the relationship between product flexibility and
SMEs customer satisfaction
Hypotheses of the Study
The testable hypotheses for this study are cast in the null forms as shown below to
address the gap identified in this study.
1)
2)
3)
4)
Manufacturing process flexibility has no direct influence on SMEs sales
revenue.
Market flexibility does not relate positively to SMEs sales revenue.
The nature of the relationship between product flexibility and SMEs sales
revenue is not significant.
There is no significant impact of manufacturing process flexibility on SMEs
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Entrepreneurship and Business Environment
5)
6)
customer satisfaction.
Market flexibility does not relate to SMEs customer satisfaction.
The extent of the relationship between product flexibility and SMEs
customer satisfaction is not strong.
Literature Review
Concept of Strategic Flexibility
Sanchez (1995, 1997) proposed the concept of strategic flexibility and divided it
into two namely coordination flexibility and resource flexibility. Other authors
such as Yu, (2012), (Kazozcu, 2011) and Li, Su, Liu & Li, (2011) grouped strategic
flexibility into coordination flexibility and resource flexibility. Over the years, the
term strategic flexibility had been defined by several authors. One of these authors
is Grewal and Tansuhaj (2001), they defined strategic flexibility as “an ability of a
firm to proactively or reactively respond to business opportunities and threats
posed by changes in economic and political environments”. Adopting strategic
flexibility, a firm will be able to manage uncertainty and changes in economic or
political environments more efficiently. It has been stated in previous studies that
a firm resources can become inflexibly/rigid and not able to adapt to the changings
in the business environment since the firm is in a dynamic competitive
environment. Ketkar and Se (2009) explained that such changes may result in the
total loss of the intrinsic value particularly the intellectual capital which is not
static but it is updating fast. It is crucial for firms to be able to allocate its resources
flexibly and systematically. Current studies define strategic flexibility based on
the study of Evans (1991) and Sanchez (1995, 1997) as “in response to the dramatic
changes in the dynamic environment, enterprises use flexible and effective
management to identify markets, adjust strategies, allocate resources, and obtain
competition advantages.”
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Therefore, Kamasak, Yozgat, and Yavuz, (2017) stated that strategic flexibility can
solely be a ained by utilizing resources flexibly. They likewise claimed that
reconfiguration of a firms' process will bring about strategic flexibility. Also,
Chen, Wang, Nevo, Benitez, and Kou (2017) asserted that a firm should adopt
strategic flexibility as this will aid their operations and it will outperform other
firms in the competitive and new markets. In order for a firm to achieve a
successful strategic flexibility, the firm should be able to examine it environment,
identify changes in the internal and external environment, determines the extent
of the impact of the changes on the performance of the firm. Furthermore, the firm
should be able to rank the resources that will be needed to adapt. Also the firm
should have the ability to adopt coordination flexibility so as to maintain
competitive advantage. In a dynamic competitive environment it is possible for a
firm can achieve competitive advantage if it adopts strategic flexibility (Martín et
al., 2008).
Dimensions of Strategic Flexibility
The dimensions of strategic flexibility are not the same as different authors view it
differently. Strategic flexibility is group into three namely production flexibility,
competitive flexibility and market flexibility (Abbo & Banerji, 2003). According
to the studies of Beach et al., (2000) and Setijono (2010) strategic flexibility is
divided into two dimensions which are internal and external. The internal
flexibility is further broken down into value chain flexibility ability to implement
strategy, control flexibility, functional flexibility, learning flexibility, information
system flexibility and human resource flexibility. Meanwhile, external flexibility
includes operational scope flexibility, manufacturing process flexibility, financial
flexibility, product flexibility, procurement flexibility and market flexibility.
Thus, this study uses some dimensions in external flexibility as classified by Beach
et al., (2000) and Setijono (2010) to achieve the objective of the study.
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Concept of Performance
Omar and Zineb (2019) itemized some performance indicators like return on
assets, market performance, market share and operating efficiency. These
indicators are measure of customer knowledge. They also identified trend
performance, relative performance, system performance which is referred to the
rate of production or market. System performance includes profitability, service
quality, customer satisfaction, employee satisfaction, sales revenue and strategic
marketing performance. Rogo, Shariff, and Hafeez, (2017) declared that
performance of a firm can be divided into the levels of business operations, levels
of product development, levels of productivity, levels of human capital and
levels of efficiency in production.
Theoretical Review
The theory of resource based view (RBV) was coined from the discipline of
strategic management. In the word of Kellermanns, Walter, Crook, Kemmerer,
and Narayanan (2016) resource based view has it root in strategic management
and over the years, researchers' interest have been on understanding reasons why
some firms performed be er than others in the same industry. Early than this
Barney (1991) stated that this performance is as a result of the firm developing
unique and valuable resources that is known as “strategic resources”. This
suggests that firms try to make every effort to out beat their competitors through
developing and accumulating of resources that leads to successful business
operations in the long run (Wiklund & Shepherd, 2005). According to Barney
(2001) and Ayuso and Navarrete-Báez, (2018) if the firm is able to develop and
accumulate strategic resources successfully it will a ain competitive advantage.
Therefore, the concept of strategic flexibility is based on resource based view.
Empirical Review
Emoh and Alagah (2020) studied the relationship between strategic flexibility and
operational effectiveness of oil producing firms in Rivers state, Nigeria. From the
population of 1,293 managerial employees in twenty (20) oil producing firms in
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Entrepreneurship and Business Environment
Rivers state, simple random sampling technique was utilized to select a sample of
297 used in this study. The independent variable which is strategic flexibility was
defined relating to production flexibility, market flexibility and financial
flexibility. While dependent variable was operational effectiveness, both the
independent variables and dependent variable were captured through the use of
well-structured questionnaires. Pearson correlation technique was used to test the
formulated hypotheses of the study. The results of their findings reveal that
strategic flexibility has positive and significant relationship with operational
effectiveness. Thus, the study recommended that the management of the selected
firms used in this study should instill policies that will enhance flexibility in
production as this will result in effectiveness in their operations. Similarly, Chan,
Ngai, and Moon (2017) carried out an investigation on the relationship between
SMEs performance and strategic flexibility of garment industry of Hong Kong.
They used about one hundred and forty-one (141) SMEs in the garment industry.
Their results show that strategic flexibility and manufacturing flexibility have
significant impact on both the market and financial performance of SMEs.
In the study of Xiu, Liang, Chen, and Xu (2017) the effect of strategic flexibility on
performance of firms in China was examined. They adopted a sample of 113
Chinese SMEs. The outcome of their study revealed that strategic flexibility has
significant positive impact on firm performance.
Likewise, Yazan (2018) examined the impact of some components of strategic
flexibility (Market Flexibility, Production Flexibility and Competitive Flexibility)
on organizational effectiveness in the Jordanian hotels (five stars). Primary data
were used for the study and ANOVA was employed to test the hypotheses of the
study. It was discovered that the three components of strategic flexibility adopted
in this work have positive influence on organizational effectiveness of the five
stars' Jordanian hotels. Thus, strategic flexibility has direct impact on
organizational effectiveness. Based on these findings, the author recommended
that a ention should be given to production flexibility that is the management of
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Entrepreneurship and Business Environment
these hotels should adopt new method in production within the hotel by updating
the equipment's and transforming their current products.
Sajjad, Sajjad and Asif (2020) studied the impact of entrepreneurial orientation,
access to finance and strategic flexibility on SMEs performance in Pakistan. The
study was conducted in the sports goods manufacturing sector of Sialkot,
Pakistan. Out of the total ten thousand four hundred (10,400) sports
manufacturing SMEs in Sialkot, Pakistan, only four hundred (400) were carefully
chosen using random sampling technique. However, only three hundred and
seventy-two (372) respondents agreed to partake in the research work. The
authors revealed that entrepreneurial orientation and access to finance have
positive and significant influence on SMEs performance. Nonetheless, strategic
flexibility and SMEs performance were insignificantly related.
Asikhia and Naidoo (2020) carried out an investigation on the moderating effects
of the Nigerian market environment on the relationship between management
success determinants and SMEs' performance. Probability sampling methods of
stratified, proportionate, and random sampling were adopted for this study and
about 1,102 samples were used. Primary data were employed for the study. The
findings of this study showed that Nigerian market environment had significant
and positive moderating effects on management success determinants and SMEs'
performance.
Raheleh and Yousef (2018) studied the relationship between strategic flexibility
and knowledge management in Ghalamchi, the Cultural and Educational Center.
Out of 212 managers and employees in Ghalamchi, the Educational and Cultural
Center only 136 was used for this study using simple random sampling technique.
Ordinary Least Square method is adopted to analyze the date using SPSS 22. The
outcome of the analysis revealed that strategic flexibility has a significant impact
on knowledge management.
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Onoshakpor, Etuknwa and Gaiballa (2020) analyzed the concept of strategic
flexibility and organizational resilience of women entrepreneurs' in Africa during
the covid-19 pandemic. The study used Scenarios to evaluate the prospects,
limitations, challenges or hindrance and resilience of women entrepreneurs
during the period of COVID-19. The scenarios analysis was done based on three
Africa countries namely Nigeria, Sudan and South Africa. The findings of this
study showed that establishing a good network, associations with stakeholders
and information technology advancement will enhance access to information,
support and funding of women entrepreneurs. Therefore, the authors concluded
that strategic flexibility is an important tool to the accomplishment and continued
existence of women-owned businesses in Africa.
Wang et al. (2021) conducted an investigation on the high-performance work
system, strategic flexibility, and organizational performance focusing on the
moderating role of social networks. This study used the dynamic capability
theory to examine the effect of a high performance work system on the
performance of an organization, the mediating role of strategic flexibility, and the
moderating role of an enterprise's social network in this relationship. Fifty-eight
Chinese enterprises were the sample size of this study. The respondents
comprises of about two hundred and fourteen senior and middle managers in
these enterprises. The results of this work revealed that there is a positive
correlation between high-performance work system and organizational
performance. The authors stated that this positive correlation is partially
mediated by strategic flexibility. It was also revealed that social network of an
enterprise negatively moderated the relationship between strategic flexibility and
a high-performance work system. Finally, the study showed that social network
did not moderate the mediating role of strategic flexibility in organizational
performance and high-performance work systems.
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Method and Data
In this study, quasi experimental research design is adopted this includes survey
and relational techniques of explaining the relationships between variables.
Primary data is employed on a couple of construct variables determined in this
study. These construct variables are manufacturing process flexibility, market
flexibility, product flexibility, customer satisfaction and sales revenue. Each of
these construct were measured with 3 items. Well-structured questions that relate
with the construct variables are administrated to the owners and top management
personnel of SMEs companies in Lagos Nigeria. And the study used Average
Variance Extracted (AVE) to ascertaining the reliability of the instruments. The
Items were rated on a 4-point Likert scale from 1-strongly disagreed, 2- disagree,
3-agree and 4-strongly agreed. The hypotheses were tested using PLS-SEM with
SMARTPLS software.
Model Specification
In the spirit of Wang et al. (2021) with modification, the model that links the
construct variables is defined below.
Construct Equations/Structural Equations
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Definition of Variables
Sr and cs are the dependent variables; they are sales revenue and customer
satisfaction as the proxies for performance. mpf, mf and pf are manufacturing
process flexibility, market flexibility and product flexibility. They serve as the
independent variables and proxies for strategic flexibility. Thus, each of the
dependent variable is related to all the independent variables.
Validity Test
As claimed by Odegard and Bjorkly (2012) both internal and external validity are
the components of quality in a research work. The main features of a good
research are credibility, confirmability, and transferability (Yilmaz, 2013).
According to Zachariadis et al. (2013) the element of credibility of a research work
is when the results of the research is ascertained by accurately rendering and
explaining the data collected from the field of study. They further explained the
three wide components of validity in a qualitative research design to be analytical
validity, design validity and inferential validity. Analytical validity consists of
four parts which are one, dependability of the research and it is done through
accurate accounting for changes in the research se ing and how that affects the
research approach. Two, theoretical validity, this pertains aligning the theoretical
explanation with the data collected. Three, considering the conceivability of the
study and this is about alignment of the findings with the data analyzed. Lastly,
consistently verifying the steps involve in the research process (Zachariadis et al.,
2013). Zachariadis et al. (2013) explained that design validity includes descriptive
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validity (this is based on the accuracy of objects, events, behaviors and se ings as
reported), credibility (the results obtained is verified based on the analysis
conducted on the data collected from the respondents) and transferability of the
research results by generalizing it to other research methods. To end with
inferential validity includes interpretive validity, this deals with the accuracy in
interpreting the participants' views. And confirmability of the outcome obtained
by others who are external to the study (Zachariadis et al., 2013). Other studies
like Houghton et al., (2013); Moore and Prentice (2013) stated that 87 credibility of
the research result is improved when multiple sources of evidence through
methodological triangulation such as a combination of interviews, member
checking, and direct observations are adopted.
Reliability Test
Houghton et al. (2013) asserted that authenticity and the quality of a research are
the element of its credibility and this is achieved in the way or method research is
carried out. Using member checking helps in validating and assuring
trustworthiness of primary data that is collected through interview (Fusch and
Ness, 2015; Maslch and Salterio; 2016). Elo et al. (2014) declared that rigors involve
in sampling and data saturation will guarantee thoroughness, this is one of the
criteria for validity. Data saturation principle increases the credibility and quality
of the data collected. Dependability of a research is ascertained when the
researcher endeavor to collect and analysis credible data (Peyrovi et al., 2014). A
research results is said to be dependable if can be easily replicated (Mangioni and
McKerchar, 2013; Peyrovi et al., 2014).
Results
The demographic results show that 134 responses were collected. About 106
(79.1%) are male and only 28 (20.9%) are female that participated in the survey
field work. The age range below 30 is 8 (6.0%); 31-40 is 35(26.1%); 41-50 is 63
(47.0%) and 51 and above is 28 (20.9). This result shows that most of the
respondents are between ages 41 to 50. Percentage of respondents with regard to
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their educational qualification are 3.7%, 3.7%, 40.3%, 33.6% and 18.7% for
secondary education, OND/NCE, HND/BSC, post graduate degree and
professional qualification respectively. 51.5% are owners or the entrepreneur,
26.1% are senior level officials, 15.7% are middle level officials and low level
officials are about 6.7%. This is an indication that most half of the respondents are
entrepreneur.
Table 1: Descriptive Statistics
No
items
Mean Media
Min
Max
STDEV
n
Excess
Skewnes
Kurtosis
s
1
mlt
2.828
3
1
4
0.728
1.091
-0.894
2
pqs
2.776
3
1
4
0.698
-0.272
-0.059
3
usw
2.664
3
1
4
0.846
-0.35
-0.415
4
pdr
2.619
3
1
4
0.689
-0.101
-0.162
5
dnp
2.806
3
1
4
0.777
0.288
-0.609
6
mvp
2.888
3
1
4
0.698
0.578
-0.507
7
lcq
2.284
2
1
4
0.788
-0.457
0.095
8
inp
2.627
3
1
4
0.688
-0.18
-0.05
9
rtp
2.396
2
1
4
0.801
-0.507
-0.05
10
ddp
2.642
3
1
4
0.805
-0.308
-0.298
11
lpm
2.828
3
1
4
0.697
0.366
-0.42
12
dpi
2.769
3
1
4
0.762
-0.138
-0.295
13
tsc
2.59
3
1
4
0.683
0.016
-0.4
14
iss
2.634
3
1
4
0.728
-0.113
-0.244
15
psd
2.731
3
1
4
0.704
0.491
-0.606
Source: SMARTPLS Output
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The above table represents the descriptive characteristic results of each of the
items or measurement variables. Considering the average value of these variables
they are positive and above 2. The median, minimum and maximum values are 3,
1 and 4 respectively. The standard deviation values are high; this suggests that the
measurement variables are volatile. Almost all the items are negatively skewed
and have negative excess kurtosis values.
The reliability and validity tests of the instruments were conducted using Average
Variance Extracted (AVE) and Composite reliability. The outputs are presented in
the tables below.
Table 2: Average Variance Extracted (AVE) and Composite Reliability (CR)
Average Variance Extracted (AVE)
Latent
Original
Variable
Sample
Composite Reliability (CR)
T-Stat
P-V
Original Sample T-Stat
P-V
s
MF
0.388
8.107
0.000
0.539
2.564
0.011
MPF
0.362
6.761
0.000
0.483
2.595
0.010
PF
0.318
4.155
0.000
0.335
1.635
0.103
SR
0.437
6.713
0.000
0.67
2.869
0.004
Source: SMARTPLS Output
In the above table the results of AVE and CR are reported side by side. All the
latent variables are for model 3.1 to 3.3 are examined. Using the probability value
of these statistics, it is seen that all the variables are significant under AVE test.
This implies that all the latent variables are dependable. For the CR test only the
latent variable PF is not significant other variables are significant.
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Table 3: Average Variance Extracted (AVE) and Composite Reliability (CR)
Average Variance Extracted (AVE)
Latent
Original
Variable
Sample
Composite Reliability (CR)
T-Stat
P-V
Original Sample T-Stat
P-V
10.887
0.000
0.795
0.00
s
CS
0.564
17.221
0
MF
0.419
8.598
0.000
0.681
6.749
0.00
0
MPF
0.356
8.484
0.000
0.060
0.362
0.35
9
PF
0.474
7.798
0.000
0.429
3.315
0.00
0
Source: SMARTPLS Output
The results of AVE and CR displayed above show that all the variables except
variable MPF in model 3.4 to 3.6 passed both the validity and reliability tests. Then
we proceed to test all the hypothesis of the study.
Figure 1 Path Algorithm
Source: SMARTPLS Output
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The path algorithm shows the impact of each individual item of the independent
variable on the dependent variable. The path coefficient of MPF, PF and MF are
approximately 0.26, 0.52 and 2.15. This implies that each of these variables has
strong influence on SR. The construct variable MPF has three measurement items.
Under the latent variable MPF, the first item is manufacturing lead-time is low
(mit) with path coefficient of 1.85. Second item is production is done to required
quality standards (pqs) with path coefficient of 0.01 and the third item is
unavailability of skilled workers (usw) path coefficient of 0.51. By implication
only the second item that has low measurement capacity. For the construct
variable PF the coefficient of the first, second and third items are approximately
1.66, 0.28 and 0.48, meaning only the first item that captured the latent variable PF
accurately. Variable MF is also measurement by three items and their coefficient
values are approximately 0.04, 1.34 and 1.94 respectively. The second and third
items here has high path coefficient which implies that the items were able to
capture the variable MF. Finally, the adjusted R-Square of the path Algorithm is
approximately 0.15. All the items to measure SR have high path coefficient values.
Table 4: Test of Hypotheses Result
Original
Sample Mean
T-Stat
Sample
(M)
STDEV
P
Values
(O)
MF -> SR
0.373
0.308
0.174
2.147
0.032
MPF -> SR
0.059
0.093
0.227
0.259
0.795
PF -> SR
0.064
0.126
0.122
0.523
0.601
Source: SMARTPLS Output
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As shown in table 4 above, Market flexibility (MF), Manufacturing process
flexibility (MPF) and Product Flexibility (PF) have positive impact on Sales
revenue (SR). Only Market flexibility has significant impact on sales revenue.
Therefore, the null hypothesis that manufacturing process flexibility has no direct
influence on SMEs sales revenue is rejected. We reject the hypothesis that market
flexibility does not relate positively to SMEs sales revenue. Lastly, the hypothesis
that the nature of the relationship between product flexibility and SMEs sales
revenue is not significant cannot be rejected.
Figure 2 Path Algorithm
Source: SMARTPLS Output
In the figure 2 above the path algorithm that relate all the explanatory variables
and the explained variable is presented. The explained variable is customer
satisfaction (CS) as a proxy for performance. Three items were used to measure CS
variable. These items are one, technical assistance of services to customers are
improve, two improvement of after sale service and three, increase in product or
service delivery speed. The path coefficient values of these three items are
approximately 11.58, 4.15 and 5.17. It is evident that these coefficient values are
high, which symbolizes that the items well explained the latent variable CS. Also,
the path coefficients of the explanatory variables are strong and positive. This
suggests that all the measurement or manifest variables have strong and positive
influence on the construct variable CS.
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Table 5: Test of Hypotheses Result
Original
Sample Mean
STDEV T-Stat P Values
Sample (O)
(M)
MF -> CS
0.21
0.24
0.101
2.087
0.019
MPF -> CS
0.152
0.124
0.169
0.901
0.184
PF -> CS
0.206
0.219
0.142
1.448
0.074
Source: SMARTPLS Output
The table above shows that the independent variables have direct influence on the
dependent variable. The above results reveal that there is significant relationship
between manufacturing process flexibility and SMEs customer satisfaction. So we
reject hypothesis number four. We also reject the hypothesis that market flexibility
does not relate to SMEs customer satisfaction. We fail to reject the hypothesis that
the extent of the relationship between product flexibility and SMEs customer
satisfaction is not strong since it coefficient value is approximately 21 percent.
Discussion and Implication of Findings
In this research work, it is observed that production flexibility and market
flexibility have positive influence on performance of SMEs during economic crisis
in Nigeria. It implies that as production flexibility and market flexibility is
increasing performance of SMEs will increase. This finding is in line with the
findings of Emoh and Alagah (2020) who discovered that production flexibility
and market flexibility have direct impact on operational effectiveness of oil
producing firms in Rivers state, Nigeria. Also, this study found out that
manufacturing process flexibility has insignificant impact on SMEs performance.
This finding is against the finding of Chan, Ngai, and Moon (2017) who revealed
that manufacturing flexibility has significant impact on both the market and
financial performance of SMEs. However, the findings of Sajjad, Sajjad and Asif
(2020) stated that strategic flexibility and SMEs performance were insignificantly
related.
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Conclusion and Recommendation
It is concluded that strategic flexibility has positive influence on the performance
of SMEs in Nigeria during the economic crisis. Thus, it is recommended that
owners or the management of SMEs in Nigeria should put in place policies or
standards that are flexible to adopt or easy to change at any time in order to gain
competitive advantage and stay in business during economic or political crisis.
SMEs in Nigeria should engage on strategic flexibility of all it business activities
since strategic flexibility is an important instrument that will lead to the
accomplishment and continued existence of SMEs businesses in Nigeria.
Contribution to Knowledge
This study has added to the ongoing debate on the impact of strategic flexibility on
performance. Various studies have examined this relationship using different
variables to proxy both strategic flexibility and performance. This recent work has
been able to contribute to old literature as it examined the impact of strategic
flexibility on SMEs performance during economic crisis in Nigeria.
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CHAPTER
06
EMPOLYEES' WELFARE, INDUSTRIAL ACCIDENT
AND SAFETY IN A MANUFACTURING
COMPANY IN NIGERIA
OLADEJI Adesola Alaba & OLALEYE John Olatunde
Abstract
People are to work effectively and efficiently in an organization, and on this
emphasis, Industrial accident and safety should be taken cognizance of. The
welfare of the employees should be placed upper most among other priorities. In
this then, it could be said that management of employee welfare not completed
without providing a conducive and enabling working environment for workers
in an organization. Due to the importance of making sure that employees of a
given organization are safe and secure. There is need to device on effective means
of ensuring employees safety and security in order for the organization to achieve
its goals and objectives effectively and efficiently.
Word Count:108
Keywords: Employees welfare, Industrial accident, & Safety
Introduction
Employee welfare means anything done for the comfort and (intellectual or
social) improvement of the employees, over and above the wages paid. In simple
words, it means “the efforts to make life worth living for workmen.” It includes
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various services, facilities and amenities provided to employees for their
be erment. These facilities may be provided voluntarily by progressive
entrepreneurs, or statutory provisions may compel them to provide these
amenities; or these may be undertaken by the government or trade unions, if they
have the required funds.
The objectives of employee welfare are to improve the life of the working class, to
bring about holistic development of the worker's personality and so on. Employee
welfare is in the interest of employee, employer and the society as a whole. It
enables workers to perform their work in healthy and favorable environment.
Hence, it improves efficiency of workers and keeps them content, thereby
contributing to high employee morale. It also develops a sense of responsibility
and dignity amongst the workers and thus makes them good citizens of the
nation.
Apart from the wages and salary, anything done by the organization to improve
the living standard of employees and keep them contented comes under the realm
of employee welfare. All those services, benefits and facilities offered to
employees by the employer to make his life worth living, are included in
employee welfare.
Employee health and safety programs should be a major priority for management
because they safe lives, increase productivity, and reduce costs. These health and
safety programs should stress employee involvement, continued monitoring, and
an overall wellness component (Anthony et al., 2007). Work safety requires that
safe working conditions should not create significant risk of people being
rendered unfit to perform their work.
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Health and safety at work is therefore aimed at creating conditions, capabilities,
and habits that enable the worker and his/her organization to carry out their work
efficiently and in a way that avoids events which could cause them harm (GarciaHerrero et al., 2012). It is clear that safe working conditions have an effect on the
habits of workers, which in turn impacts on efficiency. This implies that
employees working in a safe condition are likely to perform in a way that will not
cause them harm.
According to ILO, “Employee welfare should be understood as such service,
facilities and amenities which may be established in or in the vicinity of
undertakings to enable the persons employed in them to perform their work in
healthy and peaceful surroundings and to avail of facilities which improve their
health and bring high morale”.
Employee welfare is for the be erment of the workers. It involves adjustment of
an employee's work life and family life to the community and social life. Welfare
measures may be both voluntary and statutory (prescribed under labour laws).
The need and importance of employee welfare is being increasingly appreciated
throughout the civilized world. The concept of welfare is a dynamic one and has
different connotations in different countries and at different times in the same
country, according to the prevailing value system, social institution, degree of
industrialization, and the general level of social and economic development.
Some describe employee welfare or labour welfare as 'an a itude of mind' while
others merely catalogue the schemes and measures which should be included in
labour welfare. There are some who emphasize the voluntary nature of measures
and include the measures that are undertaken by the employers beyond what is
required by law. Some interpret labour/employee welfare measures to mean only
measures which are legally obligatory.
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According to the ILO, 'employees' welfare should be understood to mean such
services, facilities, and amenities which may be established in or in the vicinity of
undertakings to enable the persons employed in them to perform their work in
healthy and congenial surroundings, and provided with amenities conducive to
the good health and morale.’
Welfare work is the task to be done by the employer voluntarily for the
intellectual, physical, moral, and economic be erment of employees, over and
above which is laid down by law, or what is expected as a part of contractual
benefits for which the employee may have bargained.
Thus, under this definition we may include housing, medical and educational
facilities, nutrition, facilities for rest and recreation, cooperative societies, day
nurseries and creches, provision for sanitary, accommodation, holidays with pay,
social insurance measures undertaken voluntarily by the employers, and would
also include schemes like provident fund, gratuity, and pension etc. The term
welfare is thus very flexible.
According to Section 17 (3) (a) of the Constitution of the Federal Republic of
Nigeria 1999, it is the right of every Nigerian to be gainfully employed in order to
cater for himself. Therefore, the employer should rather see the engagement of an
employee from a mutual benefit perspective in order to ensure a healthy
employer/employee relationship at the workplace. Furthermore, Section 17 (3) (b)
(c) stipulated that the right and work condition in which an employee will be
engaged with should be 'just' and 'humane', with the health, safety and welfare of
all persons in employment safeguarded.
Falana (2010) therefore opined that fundamental rights are generally regarded as
those aspects of human rights which have been recognized and entrenched in the
constitution of any country, hence, employers should ensure that, machinery and
equipment are safe and without risk to health.
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Anyakwe's (1997) assertion was that human rights are founded in a single
demand, which is, that respect is shown for human dignity under any
circumstance and this is explicitly stipulated in Section 17 (2) (b) of the 1999
Constitution, that the sanctity of an individual shall be acknowledged with the
maintenance of human dignity. The ILO (n. d.) acknowledges the dignity of the
individual and developed treaties tagged with labour codes based on the respect
for the dignity of labour, which is the right to health and safety at workplace and
the most paramount to this paper.
In fairness to the legislative arm of the Federation, Nigeria has formulated laws
aimed at ensuring the protection of the rights of workers starting with Section 17
(3) (b) (c) of the 1999 Constitution which stipulates that an employer is expected to
provide a safe working environment, equipment and procedure that is devoid of
risk to the employees' wellbeing. Similarly, where an employee perceives a
workplace to be dangerous to his health, he has the right to discontinue with such
an engagement.
Statement of the Problems
Accidents are mishaps and may result in damage to property and or injury or
death to persons whilst accidents are unplanned for, their adverse effects can be
managed by industrial safety programs. Principal items in an industrial safety
program include, engineering a stage machine and operating manual, educating
all employees to act safety deeply accurate record of operational accidents illhealth, injuries and deaths, accident analysis safety contests and enforcing the
release (flip, 1980).
Employee morale impacts on productivity the be er the morale, the higher the
productivity. Industrial accidents reduce productivity (and actual reduce
production). It can be inferred that boosting morale can reduce accidents.
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Facility design and layout contribute to employee morale. Besides morale
equipments failure reduces productivity and increase industrial accidents.
We can therefore say that there are two categories of causes of industrial accidents
technical and human. Technical causes are connected with deficiencies in
factories, machine tool, materials, and the general working environment. On the
other hand, human causes are connected with deficiencies in the individual. Such
as improper a itudes, carelessness, recklessness, inability to perform the job, daydreaming, alcoholism and the use of drugs on the job.
It is estimated that accidents in industry are caused by human deficiencies (flip
1980). When accidents occur, damage, injury or death may result, each of these
involve some form of cost both direct and indirect.
There are some problems associated in Manufacturing Company and they are as
follows:
1.
ILLITERACY: The majority of the workers are half educated ones and
many do not know when information was sending and what it talks about.
2.
Some managers are disillusioned because major decisions effecting their
departments are taken without them was being contracted.
3.
OVER LOADING: The overloading of the machines causes accidents.
4.
Bad construction and design of machine.
5.
NOISE: There are relationships between noise and accidents rate but
evidence in support of this is not over whelming.
What is the relationship between specific employees and environment
characteristic and accidents behavior?
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Literature Review
The Concept of Employees Welfare and Safety Management
Changes in managerial thinking with regard to safety and welfare of employees
have undergone many development stages. Originally, the only form of
incentives was salary. But very li le concern was shown for workers' safety and
general welfare. The vogue was to satisfy workers' immediate material needs
while neglecting the important need, need for a conducive working environment.
Modern safety movement is believed to have started around 1912 with the First
Cooperative Safety Congress and the Organization of the National Safety of
(USA). The early movement was primarily interested in acquainting the general
public with the fact that there existed in business a high incidence of industrially
caused accidents and diseases. The campaign became necessary because the wellbeing of workers then depended entirely on the discretion of their employers. Any
expenditure which had no direct bearing on increase profit was considered not
worthy and therefore many incidental expenses had to be borne by the workers
themselves. Many employers then accepted no responsibility voluntarily to
compensate victims of hazardous working conditions. This situation continued
for some time even with the campaigns. As owners, they directed the mode of
behavior in the workplace, (Nwachukwu, 1992:29).
The first indication of change for be er of employees was the work of a British
Social reformer and industrialist named Robert Owen, which was complimented
by a Philosopher named Andrew Ure.
There systematic but forceful call for positive change was according to the report,
based on their conviction that improving workplace condition would increase
workers productivity. The Elton Mayo's in the famous Hawthorne Plant studies of
Western Electric Company in the US showed that increase in production would
result by providing enabling environment in the workplace, (Nwachukwu,
1992:27).
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Gradually, many employers began to realize that good working environment is
also good business.
This realization led to many technological break-through with the aim of making
the working environment free from accidents. It has become a universal
acceptance, much later, that government regulations in this regard are not for the
benefit of the workers alone, but also the employers as well.
Between 1960, this subject underwent a legal metamorphosis. For example the
British Parliament placed into law, the offices, shops and railway and premises
Act of 1963, with the aim of protecting employees against unsafe working
conditions.
This followed much later by the Health and Safety of work Act of 1974, with the
aim of giving wider protection to both office and factory workers. Similarly, in the
United State of America, the occupational safety and health Act of 1970 came into
existence as a result of increasing national concern with unsolved problems of
safety at workplaces. The Act imposes a duty on all employers to provide a safe
and conducive working environment for their workers, (Holt, 1992: 6). In Nigeria,
the situation is not different, (Shell, 1998: 4), sees safety management system as an
integrated quality management system designed for managing risks within the
manufacturing industry, so as to ensure the protection of people, assets
reputation and the environment from the hazard of industrial activities. Safety
and productivity are goals organizations would desire to achieve. According to
Greg, author of “SWART' (a business journal). Productivity plays a part in
maintaining the calculated rate of a firm's ability to make things so as to sustain its
life span. Safety therefore ensures that such productivity is maintained at li le or
no harm to the people involved or associated with, (Greg, 1999:8).
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Industrial Accidents
United Nations Environment Programme (1996) noted that accident in the
industry can take any or all of these three forms:
1.
Fire
Fires occur in industry more frequently than explosions and toxic releases.
However, the consequences in terms of loss of life are generally less. For instance,
a leaking pipeline caught fire near the fishing village of Ebute near Lagos, killing
at least 60 people on November 30, 2000 (The Nation, 2008). However, the effects
of fire on people usually take the form of skin burns caused by exposure to thermal
radiation.
The severity of burns depends on the length of time exposed and on the intensity
of the heat. Heat radiation is inversely proportional to the square of the distance
from the source. This means that at twice the distance from the source, the
intensity will be reduced to a quarter.
The highest number of deaths occurred in the rubber products industry, followed
by the food processing industry; the highest number of injury occurred in the food
processing industry followed by the rubber products industry.
Fires also give off fumes which may include toxic gases. For example, combustion
of polyurethane foam gives off cyanides. Fire can cause severe damage to physical
structures either by combustion or by the effects of heat. It may also have an effect
on essential services with damage to power and instrumentation supplies,
possibly causing an escalation of the incident.
Fires can take several different forms including:
a)
Jet fires: a long, narrow flame produced, for example, from an ignited gas
pipeline leak.
b)
Pool fires: produced, for example, by the ignition of crude oil released from
a storage tank into a bund.
c)
Flash fires: rapid, virtually instantaneous, ignition which could occur if an
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d)
escape of gas reached a source of ignition and rapidly burnt back to the
source of the release.
Boiling Liquid Expanding Vapour Explosions (BLEVEs): Sometimes called
a 'fireball' – a combination of fire and explosion with an intense emission of
radiant heat following failure of a pressure vessel due to overheating of the
tank wall surrounding the vapour space.
2.
Explosion
Explosions are characterized by a shock-wave which can be heard as a bang. The
shockwave can cause damage to buildings and people can be blown over.
Although the effects of overpressure can be fatal, the indirect effects of collapsing
buildings, flying glass and debris cause far more loss of life and severe injuries.
For example, in July 16, 2008 not less than 100 villagers died when a ruptured
pipeline exploded in Warri, Delta State, Nigeria (The Nation, 2008). Explosions
can be of a number of types:
a)
Gas explosions occur when considerable quantities of flammable gases are
released and mix with air to form an explosive vapour cloud before
ignition takes place.
b)
Vapour cloud explosions can be either confined such as those which occur
within some form of containment (e.g. vessels, pipework), or in less
obvious situations (e.g. between buildings), or unconfined occurring
within the open air.
c)
Dust explosions occur when flammable solids in the form of very fine
powder are intensively mixed with air and subsequently ignited. It is
sometimes difficult to make a distinction between a fire and an explosion.
Often an explosion is followed by a fire, with damage and casualties being
caused by both. Probably the greatest danger arises from the sudden
massive release of flammable material producing a large cloud of
flammable and possibly explosive vapour. If this cloud were ignited, the
effects would depend on a number of factors including wind speed and the
degree of dilution of the cloud with air. It could lead to large numbers of
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casualties and wholesale damage both on site and beyond. However, even
in major incidents, the effects are generally limited to a few hundred metres
from the site.
3.
Toxic Release
Sudden releases of toxic vapours have the potential to cause death and severe
injuries at a much greater distance. In theory, such a release could produce lethal
concentrations at several kilometres from the point of release. On July 25, 2015, a
chlorine cylinder explosion at the Lamingo Water Treatment plant in Jos, Plateau
state, left 14 people dead, with over a hundred sustaining varying degrees of
injuries from poisonous gas inhalation (Ejiofor, 2015).
In practice, the actual number of casualties depends on the weather conditions,
the population density in the path of the cloud, and the effectiveness of the
emergency arrangements.
Toxic materials can also be carried considerable distances by water. Their release
into the public sewage system or into rivers, canals and other water courses, either
directly or through contaminated water used in firefighting can result in serious
threats to public health.
Causes of Accidents in Industries
Ezenwa (2001) opined that preventive actions require a full understanding of the
events leading to an accident in the industry.
Groff (2015) identified the following as major causes of accidents in the industry:
i.
Trips and Falls: Uneven terrain, tripping hazards, and conditions that
require work on ladders, scaffolding, and roofs. These hazards in
combination with high working conditions can result in fatal trips and
falls.
ii.
Machinery/Vehicle Accidents: There are a lot of moving parts to an
industry including machinery, vehicles, and large trucks on and around
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iii.
iv.
the jobsite. With increased activity in the industry, workers are more
susceptible to being hit by moving vehicles and machinery.
Falling Objects: Workers up high do not always pay a ention to what is
going on down below. This could result in injuries and fatalities due to
falling objects and debris.
Exhaustion: Industrial work usually covers hours of manual labour in the
outdoors. This can quickly cause exhaustion and when workers are tired, it
can lead to mistakes and an increase in industrial injuries.
Prevention of Accidents in Industries
Practically, all accidents can be prevented if the workers can abide by the rules and
regulations of the industry. Prevention of any kind of accident in organization
should therefore be the priority of good industrial management (Inegbenebor,
1999).
1.
Danger Zone Warnings: A lot of industrial accidents result from
neglecting to inform or warn people of danger zones. In industrial se ings,
there are places that have industrial hazards that can lead to different kinds
of accidents. For this, it is imperative that the people working on the site are
warned. Safety engineers are the ones who will be responsible for this.
2.
Quality Assurance of Equipment: Another cause of industrial accidents is
due to equipment that is not checked for quality. This can cost the lives of
the employees. More often, equipment must be checked for quality. It must
pass the established standards in order for it to be used.
3.
Employee Training: Employee incompetence is another thing that causes
injury accidents. In order for employees to work in dangerous se ings,
they must be trained on how to handle certain equipment and dangerous
substances. This will ensure that they know how to handle and operate
heavy and dangerous equipment.
4.
Emergency Briefing of Employees: Employees must be briefed on
emergency procedures when industrial accidents happen. If employees
are not briefed, there is a bigger chance that more people can be harmed
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5.
6.
7.
when accidents occur. Panicking or not knowing what to do when faced
with a difficult situation may cause this.
Proper Handling of Hazardous Waste Materials: Some industrial
accidents occur because of proper disposal of hazardous waste materials
and chemicals. This may cause fires and explosions. Employees should be
briefed on the proper handling and disposal of these materials to avoid
untoward incidents.
Health and Safety Inspection Checks: There are some non-profit
organizations that conduct health and safety inspection checks in different
industrial se ings. These organizations not only inspect the workplace, but
they also provide training to employees, consulting for improvement and
dissemination of important information on industrial health and safety.
Regular Breaks: Workers should be given and advised to take regular
breaks to reduce the chances of accidents due to exhaustion.
Theoretical Review
In the School of Human Relation, one of the most prominent pioneers is Elton
Mayo who is regarded as the founder of the human relations movement. Elton
Mayo's management style was a departure from that of Taylor who believes that
man was an economic animal and would respond to financial incentives.
Nwachukwu, (1992:26), opines that Elton Mayo while at the Harvard University
conducted series of studies at the Hawthorne Plant at the Western Electric
Company. The purpose of these studies was to determine the effect of
illumination on employees productivity. The intensity of the lighting was varied
from fairly dark to bright to very bright from 24 to 46 to 70 foot candles. The
lighting in the control group remained the same. In each instance, the
productivity of the workers increased, showing no relationship between the
lighting and output. Instead of productivity going down when the intensity of the
lighting was reduced, it went up. The researcher was surprised and believed that
something other than illumination was responsible for the change in the output.
The same experiment was tried with rest periods. There was no decline in
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productivity when the rest period was reduced, instead, productivity went up. To
determine the cause of the rise in productivity, there was a need to return to the
basic condition of the factory before the experiments. Rest period was removed,
lighting went back to original condition and employees were required to work for
48 hours a week. This did not affect employee productivity which remained at the
usual high level. It was conclude that social and psychological factors were
responsible for behaviour of the employees, (Nwachukwu, 1992:27).
The work of these pioneers was to increased productivity. For example, the
incentive pay plan of Taylor at Bethlehem Steel Company made the shovelers to
produce more. By the use of Gilbreth's time and motion studies, the brick layers
saved time by reducing the number of motion and laying more bricks. Many
employers adopted the scientific works of these pioneers, but the real mental
revolution was not completely realized, because man is not just an economic
animal reacting only to financial incentives. There was resistance to change on the
part of the employees who had been used to their own method of executing the
tasks, (Dorman, 2000:45).
Another school of taught, The Health and Safety Commission (HSC) on May 1994
published the report on its review of health and safety regulation. This school did
a thorough examination of the health and safety regulatory system, involving
people, trade unions and many areas of business. Its aim was to achieve a simpler,
clearer and therefore more effective regulatory system without reducing health
and safety standards. Also, another school of taught, The Health and Safety
Executive (HSE) believes in giving a simple explanation of the architecture of
health and safety legislation. Their aim was to make new guidance and to clarify
its legal status on the health and safety of employees, Tolley, (1996:3). A safety
management system ensures that manufacturing hazards are linked to specific
tasks to be executed and at every stage of the work, supervisors, foremen and
work man are aware of their control measures, (Brace, 1991:156).
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Another School of Taught, The UK Construction, Design and Management
Regulation (1994:5) made allowance for this phenomenon and stated that workers
health and safety must be protected so far as is reasonably practicable.
Empirical Review
Nwachukwu, (1992:27) in a study of a Scotish Manager in a textile industry
believes that employees should be seen as “vital machines.' He compared workers
to machines by pointing out that if workers are looked after as machines are by
being kept in a state of good repair, greased and cleaned, the effort expended in
caring for them would be paid off by increased productivity. He believed that if
this was true of inanimate machines”, it had to be true of “vital machines.”
Cooper, (2006:18) carried out a research in a Nicked Refinery within 93 week
periods with 275 employees. The research focused on managerial commitment
behaviours and employee safety behaviours. The result showed that safety
behaviour improved by 40%, while lost time injuries reduced by 82.26% in the first
year, and it reduced to zero percent in the second year. Also minor injuries were
reduced by 35% during the period.This showed that managerial commitment
impacted 35% on the employees safety behaviour. The timing and the magnitude
of the impact suggests that management must continually demonstrate their
commitment to safety health and environment. Deo, (2005:16) after an explosion
at BP's Texas City Refinery, the investigation revealed that the company had put
much emphasis on personal safety thereby ignoring the safety of their processes.
Effective safety management means that organizations need to ensure they are
looking at all the risks within the organization as a single system, rather than
having multiple or competing safety management system. He opines that if safety
is not seen holistically, it can interfere with the prioritization of improvement or
even result in safety issues being missed. He concluded that the antidote to such
mistake is the proper evaluation of all risks, a key aspect of an effective safety
management system. Brace, (1991) carried a review on the foundation of safety
management, which states that safety is a ma er of mutual concern and respect
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for yourself, your fellow worker, and the equipment you will be using. Without
this foundation, a suit of amour would not be sufficient to protect you.
Effects of Industrial Safety Management on Productivity
Safety and productivity are goals organizations would desire to achieve.
(Wustemann, 2008:203), asserts that productivity plays a part in maintaining the
calculated rate of a firm's ability to make things so as to sustain its life-span. Safety
ensures that such productivity is maintained at li le or no harm to the people
involved in or associated with it. Both the employer and the employee have their
expectations or goals. While the employer would want the employee to be
productive, the employee would want the employer to guarantee him of his
safety. These two ends must be achieved for there to be progress or success. This
means that both the employer and the employee have linked their success to the
goals they set for each other. So when ones goals are accomplished within the
specified time frame, one feels he is successful with regard to the goals. Se ing
and accomplishing goals keeps any organization moving in the right direction.
According to Holt, (1997:105), avoidance of accidents requires a sustained
integrated effort from all departments, managers, supervisors and workers in an
organization. But only the management can provide the authority to ensure that
this activity to 20 ensure that this activity is coordinated, directed and funded. In
addition, he said that the most effective means of demonstrating management
commitment and support is by issuing a safety policy statement, signed and
stated by the most senior member of the management team, and then ensuring
that the requirements of the policy are carried out by managers, supervisors and
workers.
Wusterman, (2011:1) states that positive response at work is that health and safety
professionals sense of the importance of what they do each day, ensuring that
workers go home unharmed, is enough than to compensate for the discomfort at
work. It shows that the safety needs of the workers and the productivity needs of
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the employer seen to run counter to each other. While the employer is much more
interested in securing high level of productivity may be, without a corresponding
provision of safety measures to the workers, the workers insist that their safety
needs be fully met for them to be productive as demanded by their employers. The
employers because of the cost inherent in providing those safety need, tend to
dodge them, while the workers, because of risks inherent in their activities, may
tend to dodge work. Although, it is the duty of the industrial engineers to
formulate the most effective ways of using people, machines, materials,
information, and energy to produce goods or services. But they should strive to
balance management goals with the operational performance. In other to get the
maximum value out of the employees, the employer should invest in safety
training.
Conclusion and Recommendations
It is important that safety measures are implemented in order to have a secure
industrial environment where negligence and incompetence cannot be blamed
for accidents that occur. With these safety or accident prevention measures,
industrial accident rates will decrease significantly, as some accidents (such as
natural disasters) cannot be avoided.
The following recommendations can be made:
i.
A special task force be enacted to record, investigate, analyze, interprete
safety and health accident report from firms, then provide their result and
the actions to the company to respond accordingly within a time frame
upon which they are expected to either compensate or penalized and
correct the error form reoccurring.
ii.
The Ministry of Labour should be called to order if it fails to punish
offenders where an accident happens due to negligence or violation of the
law by a firm, especially when it leads to injury or loss of life.
iii.
The Federal Government through the Ministry of Labour and
Productivity, Ministry of Youth Affairs and other intervention agencies
should develop programmes that promote and increase the discovering,
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iv.
harnessing, sponsoring and mentoring of entrepreneurs with innovative
ideas to create jobs so as to help workers from being exploited because of
the availability of fewer jobs.
Labour unions, human right organizations and other non-governmental
agencies should sensitize workers of their rights, privileges and protection
as stipulated by the law.
Reference
Ejiofor, C. (2015). Naij.com Accident news. Retrieved January 27, 2016, from
Naij.com: h ps://www.naij.com/498758-jos-chemical-explosion-14-killedhundred-hospitalizedinhaling-poisonous-gas.html
Ezenwa, O. A. (2001): A study of fatal injuries in Nigerian factories. Occupational
Medicine, 51(8), 485-489.
Falana, F. (2010): Fundamental Rights Enforcement in Nigeria. 2 nd Edition. Lagos:
Legal Text Publishing Co. Ltd.
Groff, A. (2015). Top tips for preventing accidents on a construction site. Retrieved
January 13, 2016, from Construction global:
h p://www.constructionglobal.com/managementplanning/491/Toptipsfor-preventing-accidents-on-a-construction-site
Inegbenebor, A. (1999). The Effect of Accidents on Productivity of Some
Companies in North Eastern States of Nigeria. Journal of Social and
Management Sciences, VI, 46-52.
International Labour Organization (ILO) (n. d.): Occupational Health Service and
Practices. www.iloencyclopaedia.org/component/k2/item/155occupational-health-services-and practice (Accessed 20 February 2020).
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CHAPTER
07
MICROFINANCE INSTITUTIONS AND SOCIAL
ENTREPRENEURSHIP AMONG SMALL
AND MEDIUM SCALE ENTERPRISES IN IBADAN, NIGERIA
JEGEDE Folukemi Ruth & ADEWUMI Moyosore Akingbade
Abstract
Commercial banks traditionally lend to medium and large enterprises, which are
judged to be creditworthy. They avoid doing business with the small and medium
scale industry owing to the associated cost and risks which are considered to be
relatively high. Microfinance institutions (MFIs) have therefore become the main
sources of funding entrepreneurship small and medium scale industry in
developing regions and particularly our study area, Ibadan, Nigeria. The success
of Micro Finance Institutions (MFIs) across the world have increasingly become
enthusiastic in the promotion of financial services to the poor as a development
intervention tool and specifically to reduce poverty as it stimulates the growth of
micro enterprises by developing new markets and promoting a culture of
entrepreneurship. It is on this note that this study examines the impact of the
Microfinance on growth of the Small and Medium Enterprises (SMEs) in Ibadan,
Nigeria. The specific objectives of this study were as follows; to determine at what
extent accessibility of microfinance lead to increase in the volume of gross sales of
entrepreneurs and to understand other factors that enhance SME's growth. The
role of entrepreneurship in boosting economic activity and social development is
widely recognised. The field of social entrepreneurship is rapidly expanding,
a racting a large number of volunteers. Today's challenges for SMEs such as
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unstable exchange rates, political instability, inflation, higher transaction and
production costs, insufficient infrastructure, inadequate technology and
information are ultimate the economic characteristics of a developing country.
Along with social issues, environmental issues are a focus of social
entrepreneurship. The study revealed that microfinance services have significant
impact on the level of entrepreneurship activities of SMEs in Ibadan metropolis.
The study recommends that the amount of loan given by MFIs to SMEs should be
increased and they should also be encouraged to save to enable them grow and
propel their enterprises and towards social developments.
Word Count:309
Keywords: Micro-Finance Institution, Social Entrepreneurship, Small and
Medium Enterprises
Introduction
According to Abdulkadir, F.; Salisu, U.; Garba, B.; and Ibrahim, I. (2019), Nigeria
posseses entrepreneurs who deserve support at every level and this includes
Micro, Small and Medium Enterprises as well as big enterprises. The government
in Nigeria has over the years pursued series of policy and institutional reforms
which aims at enhancing the flow of finance from the banking sector to Small and
Medium Enterprises (SMEs) up to the level of those involved in the growing
businesses and even entrepreneurial ventures at the informal level in particular.
However, the major objective of improving the performance of the
entrepreneurial activities of SMEs has failed to materialized. Commercial banks
perceive microfinance activities as bad risk, hence have li le interest in funding
that particular sector, this is coupled with issues of high transaction costs and
short tenure of payback period when funding ma ers. Since a boosted economic
growth cannot be actualized without pu ing in place meaningful programmes to
reduce the rate of poverty through empowering of people by increasing their
access to formal financial services; the Central Bank of Nigeria in line with its
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banking reform agenda embarked on licensing Microfinance Institutions (MFIs)
which is aimed at providing financial services to entrepreneurs who are deprived
of some benefits by the conventional financial institutions (Abimbola, O. H. &
Agboola, M. G. 2020). Emphasis, then shifted from large-scale industries to SMEs,
which have the potentials for upgrading domestic links for rapid and sustainable
industrial growth.
The concept of Social Entrepreneurship has assumed a global movement with a
goal of achieving positive social change. Traditionally, entrepreneurship has been
closely associated with the world of Business and Profit maximization. However,
in reality social entrepreneurship has insights that go beyond just making profit.
Unfortunately, Nigeria's policies and programmes in this area has been
insufficient (Tende, 2014). Social entrepreneurs are well-intentioned and they can
improve the lives of people in poor communities. Increasingly, since the
neoliberal revolution of the 1980s, social entrepreneurship, and especially
microfinance, has received greater resources and more focus as a potential
solution to market failures and development problems. However, to date, the
results of social entrepreneurship on poverty alleviation and increased income for
the beneficiaries of microfinance are at best inconclusive (Van Rooyen et al.)
What motivates individuals to become entrepreneurs are varied. While some are
encouraged by the desire to make money and become wealthy, others are
motivated by the desire to create a be er world for others. There are several
activities that are clearly outside the purview of business but are still classified as
entrepreneurial activities. The social entrepreneur can be seen as much an
entrepreneur as the classical commercial entrepreneur. The difference between
them as explained by Wickham (2006) lies within seven (7) clear premises. These
are: Personal motivation, sector activity, organizational form created, strategies
adopted, definition of stakeholders, interaction with environment and ethical
reflection.
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While the classic entrepreneur is motivated by the desire to maximize personal
wealth in a commercial se ing, the social entrepreneur seeks to maximize social
value in a public or non-profit making se ing. Therefore, in an effort to make
money the classic entrepreneur focuses on competition with rivals while the social
entrepreneur tries to avoid competition and focuses on creating positive change
by delivery of social value.
The SMEs contributions to economic growth and development have been
recognized worldwide, Nigeria inclusive. Abiola, A. (2019) agree that SMEs are
the solution for the economic development of many developing countries
including Nigeria. The believe is that interest on SMEs would create jobs, reduce
income disparity, help with production of goods and services, as well as
providing a fertile ground for skill development and acquisition, it will also serve
as a mechanism for integration and a vehicle for technological innovation drive
and development especially in modifying and perfecting emerging technological
breakthroughs. SMEs contribute to improved living standards; it also brings
about substantial local capital formation and achieves high level of productivity
and capability. Furthermore, SMEs are regarded as the principal means of
achieving sustainable industrial diversification. Abraham, F. and Morgan, J. H.
(2018) both concur that SMEs account for over half of the total shares of
employment sales and value added and also believe that SMEs constitute the most
viable and veritable vehicle for self -sustaining industrial development, as they
possess the capability to grow an indigenous enterprise culture more than any
other strategy. SMEs represent the sub sector of special focus in every meaningful
economic programmes that targets employment generation, poverty alleviation,
food security, rapid industrialization and reversing rural urban migration.
In Nigeria and Ibadan in particular, one of the greatest obstacles that Small and
Medium Enterprises (SMEs) have to grapple with is access to funds. This is further
compounded by the fact that even where credit facilities are available, they may
not be able to muster the required collateral to access such. This situation
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invariably, has led to many of them closing down their shops, resulting in the loss
of thousands of unskilled, semi and skilled jobs across the country. Microfinance
however, emerged as a vital substitute for informal credit and an effective and
powerful tool for poverty reduction among the citizenry, who are economically
active, but financially-constrained and vulnerable in so many ways. Microfinance
covers a broad range of financial services including loans, deposits and payment
services and insurance to the poor and low-income households and their micro
enterprises. (Adejumo, G. 2021)
Nowadays, there are numerous problems and challenges posing a threat to the
world that are affecting and damaging the society. We can highlight various social
problems such as poverty, inequity, global warming and climate change,
corruption, homelessness, drug and alcohol abuse, lone parenting, and so forth
which require hasty and urgent a ention. All these issues raise concerns among
socially-conscious people to find solutions and of course ways to uplift the society
to higher levels. It is also fortunate to note that social entrepreneurs have emerged
to combine their entrepreneurial skills and business techniques with innovative
ideas in order to help society and improve the quality of life (Aderemi, H. O., Ilori,
M. O., Siyanbola, W. O., Adegbite, S. A., & Abereijo, I. O. (2018). Based on market
failure theory, social entrepreneurs are born when the government is unable to
satisfy the unmet needs of the society (McMullen, 2011).
Literature Review
Microfinance Institutions
Microfinance basically refers to financial services afforded to low-income people,
it usually helps support self-employment. Examples include; small loans, savings
plans, insurance, payment transfers, and other services that are provided in small
catchments that low-income individuals can afford. These services help families
start and build “micro” businesses, the very small enterprises that are important
sources of employment, income, and economic vitality in developing countries.
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Aina, O. I. (2019), Micro-finance not only covers financial services but nonfinancial assistance also such as training and business advices. Micro-finance is
sometimes called “banking for the poor.” It is a uniquely simple, proven idea that
empowers very poor people around the world to bring themselves out of poverty.
Relying on their traditional skills and entrepreneurial instincts, very poor people,
mostly women, obtain small-unsecured loans, usually less than $200, from local
organizations called micro-finance institutions (MFIs).
Micro financing can be a critical element on effective poverty reduction strategy.
Improved access and efficient provision of savings, credits and insurance facilities
in particular can enable the poor to smoothen their consumption, manage risk
be er; build assets gradually to develop micro enterprises, enhance their income
earning capacity and enjoy improved quality life (Aina, S. 2017). The major
features of a microfinance institution which differentiates it from other
commercial institutions are such that, it is a substitute for formal credit; generally
requires no collateral; have simple procedures and less documentation; easy and
flexible repayment schemes; financial assistance of members of group in case of
emergency; most deprived segments of population are efficiently targeted.
SMEs face various issues which includes the absence of access to credit facilities
due to their powerlessness to provide security/collateral being demanded by the
commercial banks, lack of business management and entrepreneur skills, dangers
from International Markets, regulatory constraints, troubles in accessing fi ing
innovations and data on accessible techniques (Akerlof, G. A. & Kranton, R. E.,
2020). With the reasons stated, SMEs are viewed as high hazard enterprises and
henceforth don't get the required backing from banks and other customary
financial institution. However, Micro-finance establishments now turned into the
conspicuous answer for this booming sector. The apparent advancement which
was to be expected required a specific push and drive (Akerlof, G. A. & Kranton, R.
E., 2020). The wonder of expected development was not materializing because of
the unsteady structure which SMEs began. It is on this note that another
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framework for the arrangement of microcredit was to be presented as SME
improvement turned into a noteworthy issue of worry inside the monetary
environment of fast developing economies.
Moving forward, Micro-financing is not a new phenomenon in the Nigerian
society as evidenced by cultural economic activities such as “OSUSU”
contribution which was practiced to provide funds for producers in our rural
communities. The efforts of successive governments in Nigeria is to modernize
micro-finance in our rural and urban communities to improve the productive
capacity of the rural and urban entrepreneurs, enhance their economic standing
which alleviates the level of poverty and aggregates to improve development of
the national economy. Micro-finance in Nigeria is culturally rooted and dates
back to several centuries. The traditional micro-financial institutions provide
access to credit for the rural and urban small-scale entrepreneur. Some
highlighted features of micro-finance institutions are;
The absence of asset based collateral before the advancement of the loans to
the small-scale entrepreneurs.
It is very simple to operate and devoid of conventional banking
administration bo lenecks.
The smallness of the loans advanced or savings collected make it easy for
monitoring.
Relevance of Microfinance Banks on Small and Medium Scale Enterprises
Development in Nigeria
The major relevance of microfinance banks on SMEs is bent on lifting the poor, low
income earners, artisans, small business men and women from their current level
of poverty or disarray to a level more stable, productive, self- sufficiency and
development. Microfinance banks in Nigeria are guided by the micro-finance
regulatory policies and these guidelines provide an appropriate vehicle that
would enhanced the utilization of the fund. No micro banker may therefore,
operate outside the dictates of this stated and wri en policy. In Nigeria,
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microfinance banks render services to the poor in order to embark on SMEs or
entrepreneur venture where the poor is defined as a person living with below the
poverty line. The Small and Medium Enterprises are defined as persons doing
business with less than N 1.5 million (Akeredolu-Ale, E. O. 2019). However,
microfinance programmes tend towards providing loans, savings and other
financial services to low-income and poor people for use in small businesses.
Micro-finance is found all over the world in places such as African, Latin America
and Asia. Informal microfinance systems pre-dated the formal microfinance
sector in Nigeria and remain in existence Akpa, A. (2018) and about 90% (percent)
of Nigeria's businesses are considered micro enterprises and these farm or nonfarm activities serve as the main income source for the majority of the labour force.
What is Social Entrepreneurship?
Social Entrepreneurship is a process involving the innovative use and
combination of resources to pursue opportunities aimed at catalyzing social
change thereby addressing social need.
Robinson (2001) defines social entrepreneurship as a process that includes the
identification of a specific social problem and a specific solutions or sets of
solutions to address it. This include the evaluation of the social impact, the
business model, and the sustainability of the venture, and the creation of a social
mission – oriented for profit or a business –oriented non-profit entity that pursues
the double bo om line.
On their part, the Schwab foundation for social entrepreneurship observe that
social entrepreneurship is about applying practical, innovative, and sustainable
approaches to benefit society in general. As is always the case with an emerging
area of intellectual significance, it is important to provide a guiding definition of
social entrepreneurship for ease of understanding. A guiding definition does not
necessarily mean a unifying definition. In real sense, there is no unifying
definition of social entrepreneurship. However, common to all definitions is the
fact that social entrepreneurship is concerned with the creation of social positive
change in the society rather than “Mere” profit-driven objective.
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Social entrepreneurship seeks innovative, creative and valuable solutions to social
issues such as education, health care, water and sanitation, electricity and son on.
Therefore, innovation is just as important in social entrepreneurship as it is with
classic entrepreneurship. According to Udeh (2012), social entrepreneurs are
individuals with innovative solutions to society's problems.
Innovation is at the heart of Schumpeter's (1934) force of 'creative destruction'. The
entrepreneur is seen as one who seeks to create new opportunities that can result
in increases in productivity that will lead to economic growth and enhancement
of social values. Naude (2013) observes that entrepreneurship contributes to
employment generation and national growth in all spheres in advanced,
emerging and developing nations of the world. Afolabi (2015) notes that social
entrepreneurs engage in value added activities in such areas as health that could
raise the happiness levels of citizens.
Many researchers a empted to justify the importance of social entrepreneurs by
focusing on “definitions, demarcations and goals (Akintayo, W. L. & Banjo, A. O.,
2020). Moreover, there is a shift towards focusing on the actual impact of social
entrepreneurs, as the idea is to ascertain the contributions made by linking their
activities to the social change claimed (Akinwumi, O. 2018). To understand be er
social entrepreneurship is, there is a need to unpack the “social” element of the
concept. Allen V. J. (2019) presents the example of three successful cases of
entrepreneurship around the globe which are essential for understanding the
'social' aspect in social entrepreneurship. These social businesses reveal a
common feature: all three creatively combine resources—resources that often
they themselves do not possess to address a social problem and thereby alter
existing social structures. The Grameen Bank, founded by Professor Muhammad
Yunus in 1976, has changed the lives of millions by bringing financial services to
the poor (Arimah, B. C. 2020). This example reveals how social entrepreneurship
addresses social problems, in this situation poverty, because poor people do not
have access to loans in commercial banks.
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Ariyo, D. (2021) further argues that there is need to develop new forms of social
capital through social entrepreneurs to empower poor people and encourage
them to take greater responsibility for their lives. It is evident that Leadbeater
concurs with Kao's view that entrepreneurship, regardless of its context, must
include innovation and also adding value to the society. Social entrepreneurship
differs from business entrepreneurship. Social entrepreneurs operate in the
community and are more concerned about social issues affecting the community
than “profit making” as this is common in business entrepreneurship (Ariyo, D.
2021). Asakitikpi, A. O. (2020), points out that a business entrepreneur may create
changes in the society, but that is not the primary purpose of starting up the
venture. Likewise, a social entrepreneur may generate profits, but that might not
be the primary reason for starting off the venture. Being 'profitable' helps selfsustainability of the venture, and also works as a mechanism for self-monitoring.
It is apparent that social entrepreneurs focus on innovation for the purposes of
social change rather than the maximizing of profits as the true reward to a social
entrepreneur is not financial gain but social capital to influence change in the
communities. Common across all definitions of social entrepreneurship which
have been discussed hitherto is the underlying drive for social entrepreneurs to
create social value, rather than personal and shareholder wealth.
Babalola, S. S. (2019) recognise that placing social entrepreneurs into specific
categories (typology) is a limitation as it narrows social entrepreneurship;
however such typology is advantageous as it provides an important theoretical
framework to the academic enquiry in the field of social entrepreneurship. To that
end, the different types of social entrepreneurs will be discussed so as to provide a
much enlarged understanding of the concept.
Types of Social Entrepreneurs
According to Babalola, S. S. (2019), there are three types of social entrepreneurs.
These include social bricoleur, social constructionist and social engineers. Social
bricoleurs target the local social issues. They have first-hand experience with the
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problems which the community faces. The recognition of the problem is
stimulated by their exposure to the community they reside in.
Social constructionists generally identify opportunities that others would not
have yet identified to be an opportunity until their venture is successful and
operational. Unlike social bricoleur their target is broader than the local
community and their solutions can be used in various contexts. This then makes
social constructionists to be resource dependent because the scalability of their
mission depends on the resources they possess. Social engineers on the other hand
focus on large-scale issues with mass appeal that everyone is well aware of, like
unemployment. They also create solutions that transform the entire system to
deal with the existing issue.
Social Impact Assessment of Social Entrepreneurs
Social impact assessment is often viewed as the “research and development arm
of community development initiatives” (Acs, Z. J., Desai, S., & Hessels, J. 2020). As
it can be utilized as a feedback mechanism to all stakeholders involved in
entrpereneurs. With time as the social entrepreneur makes more impact in the
community, they are able to catalyze change in government policies; hence this
exercise is critical to show the contribution of social entrepreneurs to
stakeholders. Social impact assessment is defined as the process which results in
finding how much one particular social problem has been relieved by the
activities of one particular organisation (Alwis, W. P. G. & Senathiraja, R. 2020).
Social impact assessment is therefore essential so as to understand the perceived
impact of social entrepreneurship.
Social entrepreneurs also face an immense challenge in measuring social impacts.
This problem endangers the NGOs, government and development agencies
around the world. When social entrepreneurs are able to demonstrate their social
impact, it will provide credibility to the sector, and provide access to more work,
finance and support, encouraging an upward spiral of success (Bandura, A. 2019).
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Bhagvatula, S., Elfring, T., Van Tilburg, A., and Van De Bunt, G. G. (2018) concurs
with Shah's view by acknowledging that the current success stories while
powerful and moving, lack hard data or proven measures of success. Otherwise,
this could look like a field with lots of li le ventures that are admirable but almost
never come close to the espoused goal of widespread, lasting impact, and that
never match up to the problems they are designed to solve.
Social Entrepreneurship and Development
Social entrepreneurship could play an important role in development by
facilitating the creation of organic, productive, community-centered
organizations that build on local culture and institutions. However, social
entrepreneurship has limited potential for structural transformation and poverty
alleviation, which calls into question the recent prioritization of social
entrepreneurship. Furthermore, in some cases social entrepreneurship has
undermined support for the type of state-led development and democratic
reforms that are the preconditions necessary for structural transformation and
long term, large scale development. Thus, social entrepreneurship is best seen as a
useful microeconomic strategy that can contribute in small ways to development
but that cannot possibly replace a democratic developmental state.
The Concept of Entrepreneurial Development
Given the various contributions entrepreneurs make to the economic
development of a nation, there is li le wonder governments have sought to foster
or develop entrepreneurship, with some countries like Nigeria even placing
entrepreneurship at the heart of the national economic development plan (Abdel
Hafiez Ali, Abdimajid Omar Abu-Hadi, & Ali Yassin Sheikh Ali 2019). However,
there is not much clarity about the process involved in developing entrepreneurs
at the center of economic growth. Thus, this section of the study explores the
meaning of entrepreneurship development, its components, and its role in
facilitating business growth. Referring to entrepreneurship policy there is the
need to coordinate state and private economic actors to create the necessary
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conditions needed for increased entrepreneurship activity and entrepreneurial
business growth. Entrepreneurship development is a broad term used with two
distinct but related meanings. The first meaning connotes positive efforts to foster
entrepreneurial activity and entrepreneurial business growth in an economy.
Entrepreneurship development means developing specific entrepreneurship
policy, creating the business environment comprised of institutions to support
entrepreneurship in line with policy, and fostering the acquisition of
entrepreneurship knowledge, skills, and abilities within the population. When
used in a narrow sense, entrepreneurship development refers to offering
entrepreneurs the human capital through training and education needed to
succeed in the business environment. Thus, in the wider definition,
entrepreneurship development refers to a range of activities, including creating
macro-economic policies to incentivize entrepreneurship, creating an enabling
business environment by investing in institutions, and training and educating
entrepreneurs. In the narrow sense, entrepreneurship development means to
deploy specific training and education to improve entrepreneurial performance.
Despite this distinction, any effort to invest in the human capital of entrepreneurs
using training and education is part of a larger NHRD policy approach to enhance
the performance of entrepreneurs and; as such, these interpretations of the
entrepreneurial development are connected, Abdel Hafiez Ali, Abdimajid Omar
Abu-Hadi & Ali Yassin Sheikh Ali (2019).
Entrepreneurial development involves the formulation of entrepreneurship
policy to ensure the business environment is favorable to entrepreneurs to
introduce policy to furnish the population with entrepreneurship knowledge,
skills, and abilities, and to foster a positive cultural a itude towards
entrepreneurship. Each component of entrepreneurship development is complex
and coordinating these components can seem daunting, the effects of which
influence entrepreneurial outcomes such as entrepreneurship participation and
business growth. Thus, it is important to consider the literature exploring the
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different components of entrepreneurship development in Nigeria to be er
understand the role entrepreneurship policy, the business environment,
entrepreneurship knowledge, skill and ability acquisition and societal a itudes
play in the growth of entrepreneurial businesses in Nigeria (Abiola, B. 2017).
Entrepreneurial developments is a pre-planned advancement, increase or growth
in skills, and capacity which entrepreneurial ability in a given set of people
especially when conscious efforts are made to purposefully re-orientate the
people by inculcating positive entrepreneurial a itude/spirit in the people by
redirecting or changing the taught pa ern of the citizens.
Small and Medium Scale Enterprises
Small and medium enterprises describes group of business organisations that are
especially heterogeneous as they embrace a broad varied forms ranging from
hotels, manufacturing industries, agriculture, restaurants, computer software
firms and small machine shops among many others. According to Aggarwa, S.
Klapper, L., and Singer, D. (2020), the sole aim of the introduction of the concept
small and medium enterprises into development scenery was to perk up trade
and industrialization in the today developed nations. The small and medium
enterprise definitions are drawn from each country based on the policies,
agencies, programs and institutions, and the role of SMEs in the economy.
The survival of SMEs has long been recognized crucial to the growth of any
economy in the world. Existing reports show that SMEs occupies 80% of the global
economy (Alalade Y. S., Olubunmi, B. A. & Adekunle O. A. 2017). The
categorization of business enterprises into large, medium or small scale has
tagged along diverse decisive factor such as the total employment, revenue, assets
or investment. According to existing studies, the characterization of SMEs varies
in different economies although the core concept is similar. Moving on, the
meaning given to small and medium enterprises differs in accordance with
country, schools, context, scholars and author. In some countries, SMEs are
defined in relation to their yearly turnover and number of staff. In other countries,
SMEs are defined in term of the industry and nature of businesses.
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Challenges in Nigerian SMEs
Lots of factors affect the performance of Nigerian SMEs and these factors increase
their rate of failure. Egbulonu (2020) stated that SMEs hindered in adopting
technologies because of the barriers that arises in the organizations. The factors
also includes lack of awareness among owner-managers, lack of skills and
training, cultural factors, lack of government policies that support IT adoption
and integration in SMEs Egbulonu (2020). The state of infrastructures, especially
telecommunications infrastructures, poses a major hindrance to the use of IT in
Nigeria.
However, there still exist lots of challenges for SMEs in adopting Entrepreneurial
Development (ED). ED is changing business process in many organizations and,
is set to have significant socio-technical implications (Abumere, S. I., Aigbokhan,
A. O., Mabumere, S. I., Aigokhan, A. O., & Mabawonkwu, 2020). This is due to the
fact that many researchers hold the view that EDI has positive impact on business
operations. Policy makers and managers are certain that EDI conveys wide range
of benefits, and companies that are left behind in adopting this new system cannot
compete favorably in the global marketplace. Some business entities around the
world have implemented ED and some of the benefits reaped includes:
improvements in operational efficiency and revenue generation by integrating
ED into their value chain activities, access to wider range of markets, greater
potential for partnership with suppliers and vendors, improved customer
services, accessibility, flexibility in administration and partnership, information
update, lower transaction costs, product/service differentiation, ability to enter
supply chain of larger companies. Unfortunately, SMEs in Africa has lagged
behind most of the world's economies in tapping into these possibilities and
emerging technologies and therefore could not realize the full potential benefits of
ED (Arrow, K. J. 2019).
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Theoretical Framework
The Harold Dolmar Growth Model
The assumption of this model is that, for constant state of growth, aggregate
demand must grow at the same rate as an economy's output capacity grows. The
model has the following implication to this study, first we see the need for
investment, if an entrepreneur has to grow, and this idea corresponds to the loans
and savings given by MFIs to enable more investment by entrepreneurs. The
resultant effect is that, despite the efforts made to lend to entrepreneurs, their
business prosperity is limited by the country and the global economic
performance. As national economic performance grows the SMEs and members
also perform well because there will be more business opportunities. The theory
believes that the activities of the microfinance banks in form of credit provision,
savings mobilization, insurance, training etc serves as a useful tool for increasing
the productive capacity of the users. The importance of microfinance banks in
generating growth has been widely discussed in literature. In addition, Vining
Aidan R. (2018) explained that development of microfinance banks and efficient
financial intermediation contributes to economic growth of rural area by
channelling savings to high productive activities and reduction of risks that may
endangered their productive capacity.
The Theory of Social Entrepreneurship
Social entrepreneurship is often defined as “entrepreneurial activity with an
embedded social purpose” Idowu, A. O. (2019) has become an important
economic phenomenon at a global scale (Jocumsen, G. 2019). Some of the most
striking social entrepreneurship innovations originate from developing countries
and involve the deployment of new business models that address basic human
needs (Jocumsen, G. 2019) such as the provision of low-cost cataract surgeries to
cure blindness or the deployment of sanitation systems in rural villages
(Ogujiuba, K. K., Ohuche, F. K., & Adenuga, A. O. 2018). Yet, social
entrepreneurship is a vibrant phenomenon in developed countries as well.
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Although social entrepreneurs usually start with small, local efforts, they often
target problems that have a local expression but global relevance, such as access to
water, promoting small-business creation, or waste management. The innovative
solutions that social entrepreneurs validate in their local context often get
replicated in other geographies and can spun new global industries (Ogujiuba, K.
K., Ohuche, F. K., & Adenuga, A. O. 2018). An example is the growth of the
microfinance industry throughout the world (Jocumsen, G. 2019). Social
entrepreneurship is thus having profound implications in the economic system:
creating new industries, validating new business models, and allocating
resources to neglected societal problems.
Despite the increasing academic interest in social entrepreneurship, the
management field still lacks a good conceptual understanding of the economic
role and logic of action of social entrepreneurship. Definitions abound - a recent
paper summarized twenty of them (Onugu Ngwu, (2017)) - but they are usually
driven by practice rather than theory. Current research typically (and
tautologically) defines social entrepreneurs as entrepreneurs with a social
mission (Opare-Djan, 2019) and considers social entrepreneurship as
entrepreneurial activity with an embedded social purpose. Definitions are then
derived from the integration of these two concepts – entrepreneurship and social
(Barre , M. A. (2020). Social entrepreneurship has also been called the
simultaneous pursuit of economic, social, and environmental goals by
enterprising ventures (Baron, R. A. (2021). One approach offers a more idealized
view of social entrepreneurs as change agents in the social sector Baron, R. A.
(2021). This approach contrasts with more pragmatic definitions that see social
entrepreneurship as the generation of earned income by ventures in the pursuit of
social outcomes.
The development of a theory of social entrepreneurship is important because this
phenomenon is fundamentally distinct from other forms of economic
organization. While our economic theories are based on the assumption of self-
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interested economic actors, social entrepreneurs exhibit economic behaviours
that seem inconsistent with this motivation. While our strategy theories suggest
how organizations can develop sustainable competitive advantages, often social
entrepreneurship does not seem to involve competitive behaviour. And while
organization theory is still centered on the organization as unit of analysis, social
entrepreneurship often involves systems of cooperation that transcend formal
organizations.
The Pecking Order Theory
This study at hand also anchors on pecking order theory. The theory was
popularized by Myers and Majluf (1984). The theory states that the financial needs
of small and medium businesses are met in order of hierarchy. Small businesses
access the first set of funds internally and as the financial needs increases, they
obtain more funds through the use of debt capital. Subsequent increases in
financial needs leads to sourcing for funds through external equity. The theory is
familiar with the fact that small enterprises have some stages to pass in their life
cycle Therefore, the theory states that businesses mostly obtain funds internally,
but if there is none availability of such funds, the business would then result to
sourcing of fund through debt financing as its first step before going for equity
financing as an external financing source. It is widely agreed that small businesses
follow the Pecking order theory because of the plight they encounter in sourcing
loans externally. Financial organizations have elected to become financial holding
companies, though only a few firms are active in the full financial services
especially on rural dwellers. Banks also are shifting from interest-based revenues
towards fee-based activities, including lines of credit and many types of credit
guarantees.
The Link and Convergence of Microfinancing and Social Entrepreneurship
The history of micro financing dates back to 1800s when the theorists Lysander
Spooner wrote on the benefits of small credits to entrepreneurs as a way of ge ing
people out of poverty (Pant, 2015).
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Microfinancing, the provision of small-scale loans to enterprising individuals in
developing countries came into being in the la er half of the 1900s. Two
organizations currently involved in channeling those types of financial resources
are the Grameen Foundation and Women's World Banking. Social
entrepreneurship, represented by Agora Partnerships, developed somewhat
later. Over the past two decades, the revolution in information technology and
competition in the “development space” have led to much change in both
microfinance and social entrepreneurship.
Microfinance consists of extending financial services to individuals, usually
women, to establish or expand a small, self-sustaining business. One of the
components of microfinance is microcredit – the extension of small loans to
individuals who are too poor to qualify for traditional bank loans. Microfinance
institutions often offer business advice and counseling and facilitate peer support
between clients in order to facilitate the transition out of poverty.
Microfinance specifically targets women. Studies have shown that women are
more likely to reinvest their earnings in the business and in their families. This
process has helped elevate the status of women, given people employment, and
formed economically successful communities. Microfinance is considered one of
the most effective and flexible strategies in the fight against global poverty. It is
sustainable and can be implemented on the massive scale necessary to respond to
the urgent needs of the world's poorest.
The modern use of the word “micro financing” became popular in the 1970s. The
idea for microfinance began in 1976 by Professor Muhammed Yunus when he
loaned the equivalent of $27 from his own pocket to forty-two stool-makers living
in a tiny village in Bangladesh. These individuals simply needed enough credit to
purchase the raw material for their trade. Yunus's loan allowed them to break out
of the cycle of poverty. The Grameen Bank was then formally established in 1983
and has since lifted millions of people in developing countries out of poverty. Mr.
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Yunus won the Nobel Peace Prize in 2006 for his work in micro-credit and helping
economic and social development. Muhammad Yunus pioneered the micro
finance idea of Grameen Bank of Bangladesh. Yunus is a typical example of a
social entrepreneur. To this end, it is safe to say, Social entrepreneurship is the use
of entrepreneurial principles to organize, create and manage a venture to create
social changes. Hence, Social Entrepreneurs assess the success of their business in
terms of the impact they have on society.
Many of the Scholars who promote microfinance generally believe that such
access will help the poor out of poverty. For others, microfinance is a way to
promote development through the support of social entrepreneurs. Bornstein and
Davis (2010) assert that the Grameen Bank and another microfinance institution,
the Bangladesh Rehabilitation Assistance Commi ee (BRAC), “demonstrated
that it was possible to mitigate poverty on a massive scale.” This sort of
interpretation garnered tremendous support for microfinance. The United
Nations declared 2005 the International Year of Microcredit, and microfinance is
promoted extensively by USAID and the World Bank.
A wide variety of studies on Microfinance indicate that it has great impact on
poverty reduction and household wellbeing at various levels such as, household
nutrition, food security, children education, women empowerment as well as
social interactions (Mahmood, 2016). As aptly captured by Tende (2014),
Microfinance is a source of financial and other services to the social entrepreneur,
cooperative organizations, and other small business owners.
The rapid rise of social entrepreneurship efforts has been striking. Much of the
increase can be a ributed to the perceived success of the Grameen Bank and other
microfinance examples. As the premier example of social entrepreneurship, it is
worth spending some time evaluating the impact of microfinance on
development and poverty.
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The Role of Microfinance on SMEs Growth
Since the World Summit for Social Development the priority given to poverty
eradication has grown. As stated in the previous report of the Secretary-General
on the eradication of poverty, it is now broadly accepted that robust economic
growth that is labour-intensive and equitable, combined with larger outlays of
social expenditures, especially directed towards the poor (now estimated at 1.3
billion people), are a winning combination in the fight against poverty (Bartol, K.
M. & Martin, D. 2018). Several factors have led to increased interest in micro-credit
in promoting growth with greater equity. There has been a growth in the
recognition of the importance of empowering all people by increasing their access
to all the factors of production, including credit. In addition, the value of the role
of Non-Governmental Organizations in development is receiving more a ention.
It is in that context that micro credit has recently assumed a certain degree of
prominence. It is based on the recognition that the latent capacity of the poor for
entrepreneurship would be encouraged with the availability of small-scale loans
and would introduce them to the small-enterprise sector. This could allow them to
be more self-reliant, create employment opportunities, and, not least, engage
women in economically productive activities. In many developing countries,
many loan takers have been proven to have much benefit as they get credits.
Studies undertaken by Bartol, K. M. and Martin, D. (2018), and Bassani, C. (2019).
on the impact of micro-credit programmes on household income show that
participants of such programmes usually have higher and more stable incomes
than they did before they joined the programmes. Some practitioners still have
reservations about the findings of those studies. Moreover, not many micro credit
programmes can afford to undertake impact assessments because they are
generally expensive and time-consuming. There are serious disagreements
among experts on the validity methodologies used in some of the published
studies. In some cases, even the more rigorous studies have produced
inconclusive results (Bassani, C. (2019).
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Baumol, W. J. (2017) revealed that there are limits to the use of credit as an
instrument for poverty eradication, including difficulties in identifying the poor
and targeting credit to reach the poorest of the poor. Added to this is the fact that
many people, especially the poorest of the poor, are usually not in a position to
undertake an economic activity, partly because they lack business skills and even
the motivation for business. In addition, the administrative structures governing
these institutions are commonly either fragile or rudimentary, and often involve
large transaction costs. A study by the Organization for Economic Cooperation
and Development (OECD), for example, found that many specialized agricultural
institutions were not designed to serve as financial intermediaries.
In many cases, micro-credit programmes have been stand-alone operations.
There is now considerable consensus that lending to the poor can succeed
provided it is accompanied by other services, especially training, information and
access to land. According to the Birds, B. (2020) cited in Bosma, N.; Hessels, J and
Schutjens, V.; Praag, M. and Verhuel, O. (2019), credit needs to be supplemented
with access to land and appropriate technology. But such activities require strong
support from the public sector. In some of the lowest-income countries, lack of
access to land is the most critical single cause of rural poverty, which dominates
the poverty situation in those countries.
Linkage between Microfinance and SME
Microfinance impacts go beyond just business loans. The poor make use of
financial services not only for business investment in the microenterprises but
also to invest in health and education, to manage household emergencies and to
meet the variety of other cash needs that they encounter. In terms of
understanding poverty, Boyd, N. and Vozikis, G. (2020) maintains that a simple
distinction can be drawn within the group 'the poor' between the long-term or
'chronic poor' and those who temporarily fall into poverty as a result of adverse
shocks, the 'transitory poor'. Within the chronic poor one can further distinguish
between those who are either so physically or socially disadvantaged that without
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welfare support they will always remain in poverty (the 'destitute') and the larger
group who are poor because of their lack of assets and opportunities. Furthermore
within the non-destitute category one may distinguish by the depth of poverty
(how far households are below the poverty line) with those significantly below it
representing the 'core poor', who are sometimes categorized by the irregularity of
their income (Boyd, N. & Vozikis, G. 2020). In principle, micro finance can relate to
the chronic (non-destitute) poor and to the transitory poor in different ways.
The Distinctive Domain of Social Entrepreneurship
A difference between commercial entrepreneurship and social entrepreneurship
is that social entrepreneurs are majorly driven primarily by a motivation to create
value for society, not to appropriate value for themselves. What legal form an
entrepreneurial organization actually adopts (profit vs. non-profit) and whether
entrepreneurs eventually appropriate value through their activities or not (they
may fail and go bankrupt or their initial perception about the potential for value
appropriation may be wrong) is irrelevant for their institutional role since what
ma ers for economic activity is the motivations that drive economic behavior. In
most activities with a perceived potential for value appropriation, commercial
entrepreneurship is a more effective mechanism for action than social
entrepreneurship due to the strong influence of market-based incentives in
capitalist economies. For example, let us imagine that an activity that has a
potential for value appropriation starts to be performed simultaneously by a
social entrepreneur and by a commercial entrepreneur (Boyd, N. & Vozikis, G.
2020).
Social entrepreneurship is all about recognizing the social problems and
achieving a social change by employing entrepreneurial principles, processes and
operations. It is all about making a research to completely define a particular
social problem and then organizing, creating and managing a social venture to
a ain the desired change. The change may or may not include a thorough
elimination of a social problem. It may be a lifetime process focusing on the
improvement of the existing circumstances.
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Entrepreneurship and Business Environment
Social entrepreneurship is a kind of entrepreneurship initiative that aims at taking
up a social problem for bringing about a transformation in the same. The person
who takes up the challenge is called a social entrepreneur and he / she uses
principle of entrepreneurship with the intent of creating social capital and not
being essentially profit centered, though there are divergent thoughts on whether
Social Enterprises should be profit oriented or not.
Discussion of Findings
The study revealed that micro-finance banks have impacted so much on the
development of Entrepreneurship in Nigeria. However, there are several
problems confronting their effective performance in Nigeria which must be
addressed as a package. This could be handled through the framework of a
national policy for micro-institutions. The study also revealed that despite series
of policy and institutional reforms aimed at enhancing the flow of finance from
the banking system to small business enterprises this important objective have not
materialized. Banks still perceive micro business as bad risk, hence the very low
level of funding to the sector. Furthermore, there are also issues of high cost and
short tenor.
It was also discovered that micro finance institutions in line with its objectives and
policies have strategized programmes and strategies to enhance the growth and
development of small business and entrepreneurs in Nigeria.
Gaps in Existing Literature
However, many studies on impact of microfinance on the SME's growth have
been conducted in other parts of the world but rare studies have been conducted
in the country to verify positive impact brought by micro-loan accessibility to
SME practitioners. This situation may be associated with strangest of the sector in
Ibadan, Nigeria. This study is in the right time to assess the impact of small loans
on the improvement of Small and Medium Enterprises. Conventionally,
economic indicators have been widely utilized in assessing the impact of micro
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Entrepreneurship and Business Environment
finance where analyzers are particularly interested in measuring changes in
income, sales, expenditure, consumption and assets.
Furthermore, empirical literatures on impact analysis of micro credit in Nigeria
which Ibadan is situated remains scanty. One of these few literatures is the study
done by Selejio (2002) who studied the impact of micro credit in Nigeria. The
study revealed that micro credit has high possibility of increasing the borrower's
income and maintaining the living standards. Thus, it can turn back the future
dream of the marginalized group of people who are seeking to be alleviated from
poverty.
Conclusion and Recommendations
The role of microfinance banking in the growth and development of small and
medium scale enterprises has been recognized in the extant literature across the
globe. This is true because, microfinance banks provide the closest link with
micro, small and medium enterprises by providing them with the necessary funds
needed for the day-to-day running of the enterprises. It has been severally argued
by many scholars such as Carpenter (2001), [19] and Lawson (2007) that lack of
access to finance has been identified as one of the major constraints to small
business growth. The reason is that provision of financial services is an important
means for mobilizing resources for more productive use (Watson & Evere , 1999).
The extent to which small enterprises could access fund determines their savings
and investment capacity.
There is no doubt that social entrepreneurs have an important role to play in
community development. They motivate change in communities by creating a
new equilibrium in the communities and affecting many people through
innovative ideas therefore addressing social issues. They are able to identify
opportunities and devise ways of taking advantage of these opportunities.
Despite the growing popularity of the concept, the field of social
entrepreneurship is still fuzzy. A empting to uncover a universal definition of the
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Entrepreneurship and Business Environment
concept or to clarify social entrepreneurial activities; is not sufficient to legitimize
this emerging field. Undertaking social impact assessment might be challenging;
however it is crucial as it brings to the fore the actual role played by social
entrepreneurs in communities thus legitimizing their operations. When
businesses work together with social entrepreneurs, they both achieve mutual
benefits; these include sharing of knowledge, reputation, market access and so on
(Dahan et al., 2010:331). Dahan et al. illustrate the role played by a business in
advancing a social entrepreneur's goals where by a multinational water
distribution company and a social entrepreneur worked together in making an
irrigation scheme in Latin America successful. The company provided the
technology required for irrigation and the NGOs educated the farmers on the new
technology available for irrigation. This resulted in 88% of the rural population
engaging in commercial farming. We highlighted in this paper that without such a
partnership such lofty results would not have been possible. This is a good
example that both business and the Nigerian government can emulate.
Hopefully, the Nigerian government can desist from viewing social
entrepreneurs' operations as risky and dubious endeavours (Urban, 2008: 347).
i.
Government can support microfinance development by promoting
Macroeconomic stability, avoiding interest rate caps and high inflation.
Efforts should be made to ensure that the benefits of MFBs are targeted at
the core poor. They should provide seed Money to MFBs and monitor its
usage to ensure that these micro credits are granted for investment and not
consumption.
ii.
Government should desist from pursing two incompatible goals at the
same time, the pursuit of poverty eradication and youth empowerment
with downsizing and retrenchment of public servants is not compatible. It
is anti-tactical to poverty reduction strategy.
iii.
There should be provision of appropriate business environment for microentrepreneurs in order to encourage new start-ups.
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Entrepreneurship and Business Environment
iv.
v.
vi.
vii.
viii.
It is important for MFBs to focus on the needs and wants of the clients. And
every kobo given out should be thoroughly supervised for it to impact on
poverty reduction.
It is not always necessary to design a totally new product, redesigning an
existing product is also an important strategy. In the same vein, product
development should be market focused and market-driven.
Earning clients trust is crucial for the survival of microfinance banks.
Credit is not sufficient as a developmental tool; low-income persons need a
range of financial services to really appreciate the operations of MFBs.
Microfinance banks cannot have lasting outreach without sustainability.
Therefore, directors need to know their organization's outreach priorities
so they can strive to improve performance in the areas that ma er most.
Government at all levels should encourage entrepreneurs who possess
ideas that are of social benefits, of high social safety nets and that can
improve living and livelihood of comm unities and assist in facilitating
funding.
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Entrepreneurship and Business Environment
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CHAPTER
08
IMPACT OF GOVERNMENT POLICY ON THE
GROWTH OF SMALL AND MEDIUM SCALE
BUSINESS IN NIGERIA
AJAYI Olawale Azeez & OLALEYE John Olatunde
194Abstract
This academic study evaluated the impact of government policies on the growth
of small and medium enterprises that operates in Nigeria. The study adopted
descriptive ex-post facto type and involved both primary and secondary data. The
researcher used stratified sampling technique for determination of exact sample
population to use for the study. Structured questionnaires were used as the main
tools data collection. Both the descriptive and inferential analytical techniques of
the SPSS packaged were used to analyze the data obtained from the respondents.
The result of this research shows that there is a significant relationship between
government policy and business growth of Small and Medium Enterprises
(SMEs) in South Western Nigeria. These results indicate the need for the Nigeria
government to formulate and implement policies that will help ensure the
optimal performance and subsequent survival of small-scale businesses in the
country. Furthermore, the country's monetary policies and macroeconomic
indicators ought to be modified, to become more suitable for SMEs operating in
the country. It is also important for the various levels of government in the country
to embark on the massive infrastructural development.
Keywords: SME, policies, business, government, growth and macroeconomic
indicators
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Word Count: 183
1. Introduction
Background to the Study
The Merriam-Webster Online Dictionary defines Policy as a definite course or
method of action selected from among alternatives to guide and determine
present and future decisions. Policy can also be defined as a principle of behaviour
or conduct thought to be desirable or necessary, especially as formally expressed
by a government or other authoritative body. Thus, policy represents a particular
political, ethical, or programmatic viewpoint. Governmental policy reflects
theoretical or experiential assumptions about what is required to resolve a
particular issue or problem 1.At the federal and state levels, governmental policy is
reflected in multiple ways:
1.
The federal and state constitutions set the general framework, as
interpreted in specific instances through court decisions.
2.
Legislative policy is expressed in speeches and press releases by the
leadership and formulated in policy and appropriation bills.
The chief executive's agenda is presented through speeches, press releases, “State
of the State” and budget messages to the legislature, executive orders, and
instructions to department heads.
1.1
It is not commonly revealed that budgets, expressed in appropriation acts and
taxes, are critical statements of social policy. Budgets distribute resources and
determine what government can and cannot do. They may or may not make
available stable resources for governmental services. Policy can also be found in
the determinations and decisions of state department heads and middle
management. Their decisions or actions determine how legislative policy and
broad governmental mandates are actually translated into services. Policy is
reflected in strategic plans and policy memoranda. It is translated and carried out
through rules and regulations, manuals, requests for proposals, contractual
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agreements, enforcement actions, and so forth. However, many researchers has
proved in the past that government policies do influences small and medium scale
enterprises.
Small and medium enterprises are believed to be the engine room for the
development of any economy, because they form the bulk of business activities in
a growing economy like that of Nigeria. This is manifested in the following ways,
employment generation, rural development, economic growth and
industrialization, be er utilization of indigenous resources. Governments create
the guidelines and sstructures in which small and medium scale enterprises are
able to compete against each other. From time to time the government will change
these gguidelines and structures forcing small and medium scale enterprises to
change the way they operate. Thus, Small and medium scale enterprises are
keenly affected by government policy. Key area of government policy that affects
business is taxation policy. Taxation policy affects business costs. For example, a
rise in corporation tax (on business profits) has the same effect as an increase in
costs. Small and medium scale enterprises can pass some of this tax on to
consumers in higher prices, but it will also affect the bo om line.
Other business taxes are environmental taxes (e.g. landfill tax), and VAT (value
added tax). VAT is actually passed down the line to the final consumer but the
administration of the VAT system is a cost for business. Moreover, the
government of the day regularly changes laws in line with its political policies. As
a result small and medium scale enterprises continually have to respond to
changes in the legal framework. Globally, Small and medium enterprises have
,
been recognised as an engine of growth and development . Previous literature
acknowledged that it is not the large firms that are fuelling leading economies
around the world but small and medium firms. SMEs have gained increasing
interest and have made a worthy contribution to a nation's economy, particularly
in the areas of employment opportunities, income generation, poverty reduction,
providing support for large industries, innovation, promotion of
entrepreneurship and rapid industrialisation,,.
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Furthermore, Small and medium enterprises are perceived to have provided
fundamental economic advantages particularly in the areas of regional income
generation, savings, and raw material supply, enhance export earnings and boost
capacity utilisation within the key industries and actualising women and youths'
potentials. Above all, SMEs are contributing vastly in the areas of the business
establishment and gross domestic product (GDP) transversely. In Nigeria today,
Small and medium enterprises play a vital and significant role towards the
7,,8
nation's economy development . Small and medium enterprises achievements
are significantly connected to the strengthening and improvement of the
development of business enterprise and job creation, hence providing
employment for over 90% of the Nigerian population7,. Despite the exploitation of
petroleum products and various challenges faced by this sector, SMEs has
developed rapidly.
In actualizing top economic development, and to lessen dependency on crude oil
for redistribution of economic wealth, the current government seeks rescue from
the SME sector by employing economic diversification, especially in the agrobased and mining sectors to succeed and promote the growth of the economy.
Most of the players in the agricultural and mining sectors are small-scale selfemployed people engaged in agro-allied and mining processing activities such as
11
agroforestry, farming, fishing, livestock rearing and handicraft . In spite of its
various contributions towards social as well as economic development, Small and
medium enterprises in Nigeria were greatly underserved, hence resulting to nonperformance in the sector.
Report highlights some of the major constraints militating the growth of the
sectors performance as: (i) access to finance, (ii) weak infrastructure, (iii)
inconsistency in government policies, (iv) access to market, (v) multiple taxation,
and (vi) obsolete technology among others then effect, recognition of SMEs by
regional governments and development experts as one of the main source of
economic growth and a significant factor in promoting national economic
development, that inspired the curiosity of various researchers13,,.
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Entrepreneurship and Business Environment
1.2
Statement of the Problem
Small and medium enterprises are crucial for the sustainable and equitable
development and growth of the economy. About 90 percent of businesses that
operate in the world today fall under the category of SMEs. But the failure of
Nigerian industrial development process over the last few years has made it
largely impossible to obtain a strong and efficient SME's sub-sector. Therefore,
even though an overwhelming percentage of the country's business are small and
medium enterprises, the sub-sector is known to make just small contribution to
the country's overall GDP. It was summed that the initial progress made by
Nigeria's pioneer industrialists was almost wiped out, following the gross
devaluation that was carried out under the Structural Adjustment Programme
(SAP). But the truth remains that Nigeria has huge potentials for SMEs. In
addition to its vast natural resources, the country also has large population and a
very productive farmland. But the failure of the country to ultilize its huge
potential means that its challenges as a country still remains on the increase.
The increasing rise of the country's population as well as its already high and
rising unemployment and poverty levels are in clear contrast to its level of
infrastructural, technological and communication development. In factor, the
poor level of infrastructural development in the nation has been blamed largely
blamed on the government. In addition to the high incidents of corruption, the
various governmental policies have not been favourably effective in bringing out
the best in terms of development. This is further compounded by socio-political
instability, economic instability and high turnover, all of which have had
significant negative effects on the primary institutions that are responsible for
policy monitoring and implementation. Unfortunately, such failures have also led
to low productivity as well as distortion of the macroeconomic structure, and are
therefore a germane obstacle to the development of SMEs in the country. The
effects of such failures are quite so dire for the development of the private sector,
industrialization of the country and sustainability of economic growth. Therefore,
this study will evaluate the impact of government policies on Small and medium
enterprises in Nigeria.
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Entrepreneurship and Business Environment
1.3 Aim and Objectives of the Study
The aim of this study is to evaluate the impact of government policies on small and
medium enterprises in Nigeria. This research therefore looks at the specific
objectives which were to:
1. examine the major government policies that affect business most favourably.
2. determine the major government policies that affect business most
unfavourably.
3. investigate the top priority areas of assistance that businesses need most.
1.4 Research Questions
The under listed questions were raised so that the study could be anchored upon
it.
i. What are the major government policies that affect business most favourably?
ii. What are the major government policies that affect business most
unfavourably?
iii. What are the top priority areas of assistance that businesses need most?
1.5 Hypothesis
Based on the variables of this study, this null hypothesis was formulated for the
research work.
H₀₁: There is no significant relationship between government policy and business
growth of Small-Scale Enterprises (SSEs) in Nigeria.
2. Review of Related Literature
2.1 Concept of Government PolicyGovernment policy is seen as an anchor to all
other factors which are also essential and paramount to any entrepreneurial
scheme. Governments create the guidelines and structures in which Small and
medium scale enterprises are able to compete against each other favourably.
Government policies are policies designed to moderate the relationship between
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Entrepreneurship and Business Environment
the entrepreneurship and the economic development of SMEs development
through wealth creation and job creation. Government support agencies are
institutions that aim at regulating and be ering the conditions of Small and
medium enterprises and entrepreneurs in terms of supportive, implementation
and funding policies by the government. By this definition, government support
agencies as it relates to entrepreneurial practice is targeted at encouraging
entrepreneurship by creating an enabling environment for the entrepreneurship
by making a favourable environment for the entrepreneurs. This, it does through
enactment of rules that will regulate entrepreneurial activity generally for the
reason that entrepreneurship is the foundation of nation's path to
industrialization.
Additionally, government needs to enact policies that would be user friendly to
the entrepreneurs. It was argued that there is a need for government policies as
they relate to entrepreneurship to be successfully implemented irrespective of
which administration is in power in order to a ain the goals of the guideline
which often times is always lacking. In the case of government support policies, it
is assumed that since government is in the lead for entrepreneurial development,
it should make available the much-needed resources within its capacity. Such
resources include provision of environment conducive to business that will
highly promote entrepreneurship.
2.2 An Overview of SMEs in NigeriaNigeria, an African country on the Gulf of
Guinea with diverse religious, cultural and ethnicity is reported to be the largest
black populous nation in the world. According to report the estimated population
of Nigeria stands at over 170 million which is divided into over 250 multi-ethnic
and cultural groups. The Nigerian government depended on oil revenue for over
four decades, neglecting other sectors of the economy. Nigeria was placed as the
8th largest producer of crude oil in the world. The nation has 36 states that are subdivided into six (6) geo-political zones of northeast, northwest, north central,
south east, south west and south-south, with the Federal Capital Territory as the
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seat of the national government. The climate varies across all regions in the
country; equatorial in south, tropical in central and arid in north. Nigerian
business sectors are classified into four (4) scales; these are the micro/co age
industry, small scale industry, medium scale industry and large-scale industry.
However, this study covers only the small and medium scale enterprises.
From these reports, there are approximately 72,838 registered SMEs in Nigeria.
Nevertheless, the Small-Scale Enterprises sector has been neglected by the
government for an extended period due to overdependence on oil as a primary
source of government revenue. This resulted in the poor performance of the
Small-Scale Enterprises, and very few of them survive in the very competitive
business environment, this is a serious issue of concern to all stakeholders16. The
current government reiterates its commitment to revive the sector and make it
viable economy. Therefore, given this commitment, the provision of
entrepreneurial orientation will enhance the performance of the SMEs sector in
Nigeria. There is no clear-cut definition of Small and medium scale enterprises in
the literature. The concept varies over time and from organization to organization.
Various organizations or institutions in Nigeria have at different times, defined
SME in various ways, but the definitions have standard measures, fixed assets,
gross output, and the number of employees. Hence, Small and medium scale
enterprises are defined based on the number of employees and total assets in
Nigerian Naira (NGN), excluding land and building.
In effect, Small and medium scale enterprises gained a tremendous a ention
worldwide as the sector played a very key role in the societal as well as economic
growth and development across the globe. Conclusively, the significance of SMEs
can never be over-emphasised as SMEs contribute greatly to the economy in the
areas of innovation, regional development and social cohesion, which in turn
contribute to the GDP and employment opportunities.
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2.3 The Nigerian Enterprise Environment and its SupportThe term enterprise
refers to any social activity whose primary goal is to offer services or produce
goods within the framework of a community or society. The exact type of venture
that takes place in a given society is largely determined by the a itudes, needs and
beliefs of members of such community. In real life case scenario, the society makes
demand on the business and vice versa. The term business environment refers to
the interrelationship that exists between the community and the business
establishments that operate within the community. However, it is important to
note that the support and specific business environment varies from one
geographical location to another. So while some business environments may be
hostile, others can be very favourable for the growth of business. The conceptual
meaning of the term business environment is quite complicated. Thus, business
environment ought to be dynamic, so that it can be compatible with the
independent actions of all organizations and institutions as well as people that
have both direct and indirect effects on business operations. In addition, it was
identified the various stakeholders that are involved directly or indirectly in the
country's business environment as follows:
The Individuals, which include customers that are in needs of the services or
goods offer by a business organization; employees that provides the necessary
entrepreneurial skills required for the provision of services and production of the
goods.
The business establishments, which are primarily responsible for supply of
services and input necessary for production, distributions and subsequent
retailing of the goods and services. Most time, these stakeholders also act as
competitors in the market. The state, which includes regulators of the economy,
employers, producers and consumers of services and goods etc. In a study, an
author identified two broad categories of business environment. These are
internal business environment and external business environment. According to
him, the internal business environment composes of technologies and tools that
are used by organization for normal business operations. Examples of
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Entrepreneurship and Business Environment
components of the internal environment include control procedures,
administrative procedures, production system, products, service, marketing
procedures and the market itself. On the other hand, author listed some
components of external business as follows: government regulatory system,
ethical system, technological system, social system, economic system, legal
system, political system, customers and competitors in the same business
environment.
But most importantly, it was pointed out that the business is strongly related to its
environment. In other words, the two are somewhat interdependent. As a
emerging nation, Nigerian business environment is constantly evolving. Such
evolution, whether negative or positive, can either offer more opportunities or
create more threats for the existing businesses. This partially explains why the
decision taken by many business organizations are greatly influenced by
numerous elements of external and internal business environment. It also
explains the interdependence between business and its environment. It was
observed that this interdependence is crucial for adequate understanding of how
business functions as well as how policies are being formulated. Base on the above
assertion, it was affirmed that the business operations involved two basic
institutions namely: the market environment and the organization. In this case,
the organization is majorly responsible for dispatching services, goods and
information (communication) to the market. In return, the market generates
feedback and sales (money) for the company.
It was pointed out that in a study, the existence of other elements, which are very
much capable of influencing the company and market. According to it, such
elements are the primary determinants of the exact services which the company
has to offer in the market, and ultimately a ain success. He pointed out
competitive environment, which consists of intermediaries and industry, as the
first of such element. For instance, the organization's level of success in its normal
business operation is primarily determined by the materials, capital, proficiency
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Entrepreneurship and Business Environment
of suppliers/distributors and competitiveness for labour in the industry. It was
also pointed out that the second levels of environmental elements are found
majorly in the micro-environments. In this perspective, macro-environments
simply refer to independent institutions that can facilitate the operations of a
business organization. Typical examples include market intermediaries,
insurance firms, financial institutions, members of the public. The last and most
general level of environmental forces identified by author is the macro
environment.
The numerous elements of the business environment can have significant effect
on the organizational's performances, conduct and structure. In fact, it is
practically impossible for any business to operate effectively without them. This is
one of the main reasons why it is very important for every enterprise to establish
operational structures that will enable them conform to any changes in the
market. The success of any enterprise depends largely on the extent, to which it is
fine-tuned to its environment. The term innovative is commonly used to describe
any firm that take advantage of the opportunities that comes with change, and
overcome any threats that come with such change. Therefore, a business can only
be prosperous, if it is innovative and adaptive. This was illustrated by author, as
he strived to revealed the inter-dependence between the organization and its
environment, and went further to explain the open system concept.
2.4 The Effects of Government Policy on Performance of Small and Medium
Scale Enterprises
In every nation, the existing governmental policies have the potential to affect the
operation as well as performance of every Small and medium scale enterprises.
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 popularly known as one factor that can
affect the performance of every organization. For example, the imposition of high
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Entrepreneurship and Business Environment
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 discouraged to begin 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
significant effects on economy as well as the business environment. For example,
if the bank's lending rate is high, then businesses will be discouraged to borrow
from the financial institution. Unfortunately, such trend will result to a significant
decrease 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 regulations 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. Consequently, government policy can have considerable impacts on
the operations as well as performance of Small and medium scale enterprises.
In every nation, the government's contribution to the nation's economy remains
the most essential aspect of its economic policy. After the Second World War,
various 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. Nonetheless, these private acquisitions make the
business environment to become even more competitive. The interest rate is
another important aspect of economic policy that depends largely on the
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Entrepreneurship and Business Environment
government's specifications. In Nigeria, this responsibility is overseen by the
Monetary Policy Commi ee, which has monthly meeting with the main goal 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 instance, any increment of interest rates will result
to a complementary rise in the costs of doing business. It can also have significant
negative effects 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 considerable effect on business operations. In general,
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 considerable increase in their income. In addition, 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.
2.5 Factors Affecting Entrepreneurship, SMEs Productivity and the Investment
Climate in NigeriaThe results of several academic studies have indicated that the
development and growth of any business organization depends majorly on the
business environment. For example, researchers showed that an adverse business
environment can place a limitation on the development of a business, which also
increases the operational costs of such business at the same time. But the authors
observed that a good business environment enhances the development of a
business ventures. Nigeria like every other emerging nation is still being faced by
some institutional barriers, which are also negatively impacting on the nation's
business environment authors identified some of these barriers as:
I.
lack of quality education;
ii.
inefficient financial system;
iii.
customs, traditions and religion;
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Entrepreneurship and Business Environment
iv.
poor infrastructural development and;
v.
inefficient legal system, political instability and corruption.
However, the numerous factors that affect entrepreneurship, SMEs productivity
and the investment climate in Nigeria can be grouped into four categories namely:
education of the labour force, access to infrastructure, access to finance and
age/size of the business organization. These factors are the primary determinant
of productivity and investment in the country.
Summary of Gaps
SMEs are not only contributing notably towards improving the standard of living,
job creation, and poverty alleviation but also, brings about substantial domestic or
local capital formation and a ainment of high levels of productivity and
capability9,8. Nevertheless the significance of SMEs to the Nigerian economy, most
of the prior studies were carried out in the advanced country with conflicting
findings,,. Conversely, there are a number of studies on SMEs performance in an
emerging market that found out the role of entrepreneurially orientated towards
SMEs performance,,. Equally, studies on entrepreneurially orientated application
towards SMEs performance in Nigeria is limited as compared to developed and
other emerging economies. Additionally, studies have shown that very few SMEs
undertake entrepreneurially orientated activities. Furthermore, the findings of
these studies were inconsistent22,, found a positive relationship while an author
suggested a negative relationship. A number of prior studies,,, have looked into the
role of government policies on SMEs performance.
For example, authors29 found out government support policy as having a
significant impact on the competitiveness of SMEs. Equally, another author30
suggested that government support policy on SMEs for effective performance,
and authors31 confirmed government policy as having an important role as a full
moderator on SMEs performance.
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Entrepreneurship and Business Environment
3.0 Methodology
The study adopted descriptive ex-post facto form. This design is appropriate
because the researcher does not have control over the concomitant variables as
their manipulation had already occurred.
For this study a stratified method has been employed so as to enable the
researcher to provide answers to the research questions raised and the stated
objectives. A stratified technique allows the researcher to divide the population
into homogeneous separate state called strata. After, the population has been
divided into strata then the sampling was done. This gave equal chances to the
respondents of been included in the survey. The advantages inherent in this
method are stated as follows. Firstly, it reduces sampling errors and biasness.
Secondly, the measurement becomes more manageable and most suitable for
research of this nature. What inform the choice of the method to be adopted
depends largely on the research questions and the objective of the study.
The population of this study was based on the entire SSEs operating in regions
sca ered across Nigeria using a multistage method at the first stage that used
microfinance banks. The study adopted SMEDAN report on SSEs, 2012 to draw a
purposive sample from the population comprising a total of seven thousand, six
hundred and ninety (7690) participants from table 1.1 Therefore, a convenience
sampling method was used to justify a true representation of the population
across the South Western states comprising five hundred and sixty participants
(560) for the study. This is because the study divided the population into a group
in form of a strata before questionnaire were administered. This study combined
secondary and primary data. The primary data were those that were sourced
through the administered questionnaire. The researcher utilized the
questionnaire to obtain necessary information needed on microfinance and small
business survival, growth and performance. The secondary data were obtained
from the Microfinance Bank records through clients' membership cards. The
psychometric property was tested for a week before the real administration to
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Entrepreneurship and Business Environment
certify that the scales are fit and does not have ambiguous items. The
questionnaire was divided into two sections.
Questionnaire was used as primary source of data the research instrument for the
study. This questionnaire was expected to reveal the instruments subject ma er.
For the secondary data, selected relevant work such as dissertations, conferences
and seminar papers as well as online resources, periodicals and series of
journals/textbooks were used. The instrument was divided into two major
sections which include section.
Section A: Demographic information of the students such as age, business age,
marital status and gender etc.
This section was developed by the researcher.
Section B: Government Policy Scale (GPS): The scale was well structured and
approved by my supervisor.
The questions had a five (8) point Likert format. It has 2 items; a typical example of
the items is: “What are the major government policy that affects your business
most favourably?” or “What are the major government policy that affects your
business most unfavourably?” among others. It has a reliability coefficient of 0. 72
using Cronbach-alpha method after pilot tested. The variables used were coined
from the objective of the study from the micro financing which is regarded as the
independent variables (government policies) while SSEs growth is the dependent
variable. Intuitively, the amount of funds, government policies might influence
the rate and level of growth and survival of the SSEs in South Western Nigeria.
The data generated for the study were analyzed using both descriptive and
inferential analytical techniques, using Statistical Package for Social Sciences
(SPSS version 22). Additionally, tables and Bar-Chart graph were used in the
descriptive analysis study while Pearson Product Moment Correlation
Coefficient (PPMC) analysis were used to test the stated hypotheses at 0.05 level of
significant.
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Entrepreneurship and Business Environment
4. Results and Discussion of Findings
Table 1: Frequency Distribution of Questionnaires Returned from South
Western States:
S/N
State
Frequency
Percentage
1
Lagos
100
19.2
2.
Benue
100
19.2
3.
Kano
80
15.4
4.
Edo
80
15.4
5.
Imo
80
15.4
6.
Cross Ruver
80
15.4
Total
520
100
Source: Field Survey, 2022
Table 2: Frequency Distribution of Respondents by Business Age
Age of Business (Years)
Frequency (f)
Percentage (%)
1-5
223
42.9
6 - 10
157
30.2
11 - 20
80
15.4
21 - 30
38
7.3
31 - 50
16
3.1
50 years and above
6
1.2
Total
520
100.0
Source: Field Survey, 2022
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Entrepreneurship and Business Environment
Table 3: Frequency Distribution of Respondents who obtained Loans
Loan from any micro credit Frequency (f)
Percentage (%)
institutions
Yes
389
74.8
No
131
25.2
Total
520
100
Source: Field Survey, 2022
Testing of Hypotheses
This section reports the results of the null hypotheses tested in this study in order
to draw salient inferences and conclusions.
H₀₁: There is no significant relationship between government policy and business
growth of Small-Scale Enterprises (SSEs) in Nigeria.
Table 4 reveals that there is a significant relationship between government policy
and business growth of Small in scale Enterprises (SSEs) in Nigeria. The r-value
(518) =.230, p<0.05). Hence the null hypothesis is rejected. The table further reveals
that government policy had positive influence on business growth of Small-Scale
Enterprises (SSEs) in South Nigeria. This implies an increase in government
policy (infrastructure, electricity and low interest rate of loan etc) will increase the
tendency for business growth of small-scale enterprises (SSEs). Coefficient of
determination (r2=0.0529) reveals that government policy had a moderate effect
on business growth, that is it accounts for 53% variance in business growth of
Small-Scale Enterprises (SSEs) in Nigeria.
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Entrepreneurship and Business Environment
Table 4: The relationship between government policy and business growth of
(SSEs) in South Western Nigeria.
Variable
N
Mean
Government
520 57.15
Sdf
r-value
P
16.491
Ho
Policy
Business growth
Remark
rejected
520 66.033
17.2525
518
230**
<0.05
of
SSEs
Source: Field Survey, 2022
*. Correlation is significant at the 0.05 level (2-tailed).
Discussion of Findings
The hypothesis states that there is no significant relationship between
government policy and business growth of Small and Medium Enterprises
(SMEs) in Nigeria. The result of this research shows that there is a significant
relationship between government policy and business growth of Small and
Medium Enterprises (SMEs) in Nigeria. This finding is quite similar to what have
been observed in other studies. For instance, in a study45 of factors that affect the
performance of SMEs in Nakuru town discovered that infrastructural
development, management skills, finance, macro-environment factors are the
major study determinant of SMEs' ability to perform optimally. In another similar
study, author32 investigate the effects of financial supports, technological and
infrastructural development on the performance of Nigerian-based SMEs.
The results like in the previous case showed that the performances of SMEs are
positively influenced by technological development and financial support.
However, the author observed that infrastructural support impact negatively on
SMEs' performance. This prompted the authors to argue that finance, technology
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Entrepreneurship and Business Environment
and infrastructures can have considerable effects on the overall performance of
SMEs. Similar results were also obtained by an author45, who in his investigation
of the relationship between technological activity and firm survival discovered
technology can either enhance or prevent the survival of any business
organization. Thus, just as confirmed by the result of this academic research,
growth and survival of SMEs is determined to a considerable extent by the various
polices implemented by the government.
5. Conclusion
5.1 Summary of Findings
The primary objective of this academic study is to evaluate the impact of
government policies on business growth of small and medium enterprises in
Nigeria. The results confirmed the findings of most previous studies, as the
findings indicates that business growth of SMEs correlate significantly with the
government's policy. Specifically, the findings indicate that government policy
had positive influence on business growth of SMEs that operate in Nigeria. This
implies any increase on development of infrastructures and decreases on interest
rate of in loan, will help to trigger growth of SMEs. Furthermore, the coefficient of
determination reveals that government policy had a moderate effect on business
growth and is also responsible for 53% variance in business growth of SMEs.
These results indicate the need for the Nigeria government to formulate and
implement policies that will help ensure the optimal performance and subsequent
survival of small-scale businesses in the country.
5.2 Conclusion
This study has been an a empt to investigate the impact of government policy on
the growth of small and medium scale business in South Western States, having
gone through the whole length of data analysis, hypothesis, testing and
discussions. The country's monetary policies and macroeconomic indicators
ought to be modified, to become more suitable for SMEs operating in the country.
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Entrepreneurship and Business Environment
It is also important for the various levels of government in the country to embark
on the massive infrastructural development. Through these ways, Nigerian
economy growth can be facilitated.
5.3 Recommendations
The following recommendations are made based on the findings of the study:
1.
SMEs in Nigeria need 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 lower interest rates
and direct government financial support are reported in surveys of
entrepreneurs as a serious problem for small businesses in Nigeria¹˒².
2.
SMEs should also be aware of the importance of education and training in
ensuring the success of their business endeavours.
3.
There should be sound national economic policy in recognition of the vital
contribution of SMEs to national economic development.
4.
Finally, this study recommends that more studies should be carried out
on other factors that could contribute to the growth of small and
medium scale business in other states or geopolitical zones.
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Entrepreneurship and Business Environment
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H. S. Al-Dhaafri, A. K. Al-Swidi and R. Z. B. Yusoff, “The Mediating Role of Total
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Mohammad Suleiman Awwad and Abdullah Aref Abu-Karaki, “The Impact of
Corporate Entrepreneurship on the Performance of Jordanian Telecom,”
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Thorsten Semrau, Tina Ambos and Sascha Kraus, “Entrepreneurial Orientation
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I. M., Aminu and Mohd, M. N. Sheriff, “Mediating Role of Access to Financial on
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N. I. Ibrahim, & A. Mas'ud, “Moderating Role of Entrepreneurial Orientation on
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and Marketing Capabilities in the Performance of Born Global Firms,”
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A. Eniola, and H. Entebang, “Government Policy and Performance of Small and
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E. Hadiyati, “Marketing and Government Policy on MSMEs in Indonesian: A
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CHAPTER
09
INDICES FOR DETERMINING ECONOMIC
VIABILITY OF INVESTMENTS IN NIGERIA
OYEWO Victoria Adebola & OLADEJO James Olusola
Abstract
In Nigeria, there are diverse opportunities for investment especially given the
abundant natural and human resources in the country. However, in recent time,
there have been cases of abandoned and/or non performing projects in the
country, which has been a ributed to factors such as non-involvement of
professionals in carrying out viability study of such projects, and the use of wrong
indices for decision-making. It becomes expedient, given that a good investment
is an offset of a good economic viability appraisal, to assess the indices of
determining the economic viability of investments in Nigeria. Secondary analysis
was employed in sourcing and analyzing the data obtained from 18 articles. It was
revealed that economic viability serves as the key determinant for management in
accepting or rejecting a proposed investment opportunity. The outcome of
economic analysis is the economic viability or otherwise Two basic economic
appraisal techniques exists namely deterministic (single point) or probabilistic,
under which other categories are grouped. The most popular is cost benefit
analysis and scenario analysis respectively under both categories. The main index
derived from financial and economic cost-benefit analysis and vital in
determining the economic viability of investment is the Net Present Value.
Additional information is provided by the Internal Rate of Return or the
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Economic Rate of Return respectively, and the Benefit-Cost Ratio. Notably, there
is no single one way indicator for economic viability of investment. Even when an
investment is not considered viable given the economic indices, there is a range of
alternatives to be chosen from, depending on the entity concerned and their target
on the return on investment. It is important than any investor in Nigeria consider
the various economic analysis tool and apply as fi ed before commitments
whether monetary or otherwise are made. Also, seeking an economic or financial
consultancy should be adequately considered by every proponent, especially
when such investment is massive and requires high monetary commitment.
Word Count:314
Keywords: Economic analysis, Economy viability, & Investment
Introduction
Investment is the sacrifice of an individual, group, organisation or governmental
resources (time, money, and effort) today for the expectation of earning more
1
resources tomorrow. It is the action of applying resources in means of production
2
with expectation of future returns. In Nigeria, there are diverse opportunities for
3
investment. Nwoye noted that the country is blessed with abundant natural and
human resources hence create numerous opportunities for investment in the
country. Also, the country is an a ractive ground for international investors and
an active domain for exploration by local entrepreneurs. As a ma er of fact, every
government and policy makers makes provision for investments be it
infrastructural development, agriculture, health, oil and gas, real estate, mining,
4
etc. They also make policies that favour or a ract investment into the country,
and create awareness about them. Various opportunities for investments in
Nigeria are in the domains of agriculture and agro allied, artisans, clothing and
textiles, mineral resources, hydrological resources, building, construction and
estate management, environmental management, food and beverage, tourism,
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transport and logistics, information and communication technology, health,
medicare and beautification, education, sports and entertainment, events
planning and management, oil and gas and energy. 3,5
Investments requires a lot of financial, human and material resources, hence the
assessment of the economic viability is important. It must be justified strategically
or politically as well as economically. 4 Economic viability also referred to as
economic feasibility, economic analysis or financial feasibility is concerned with
achievability of a particular project or activity. It is the adeptness with which
resources are employed in the production process at a given period. 6 It is also
referred to as the capability of an entity in achieving financial operational
objectives and fulfilling the mission and vision for an extended duration. 7 It goes
beyond just the financial implications of an investment to include the social and
environmental externalities. The World Bank group8 stated that project is
economically viable if the economic benefits of the project exceed its economic
costs, when analyzed for society as a whole. The economic viability of an
investment or project can only be determined through an economic analysis. 9
Various aspects involved in the evaluation involve the appraisal of project cost (in
this case, cost of investment), projected revenue, funding avenues and the
financial risks or projected loss, which results in the determination of overall
financial viability. 7
Understanding the viability of investments is critical for diverse reasons. One, the
economic viability serves as the key determinant for management in accepting or
rejecting a proposed investment opportunity. Also, it aids decision making, in
that the investment which suits and meets the goal of the investor is selected. 9
European Investment Bank10 particularly noted that it informs political choice on
the socio-economic value of a project. This is of primary benefit to national
authorities themselves, especially in justifying the use of public funds to
taxpayers. Furthermore, it helps in creating awareness, generating interest and
soliciting for the necessary support for a proposed investment. It helps in properly
advising investors and the general public.
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In recent time, there have been cases of abandoned and/or non performing
projects in the country. These have been a ributed to factors such as noninvolvement of professionals in carrying out viability study of such projects, and
the use of wrong indices for decision-making. 9 It becomes expedient in the face of
different investment opportunities open to a prospective investor, viability
appraisal is required in order to choose an investment that best meets the
objective(s) of the investor. A good investment is an offset of a good viability
appraisal, and the valuers' role is to give such advice that will maximize the
benefit's objective of the investor. 9, 10An invaluable tool in achieving this and
supporting the decision-making process, is the use of effective appraisal indices.
On the other hand, public investment is the foundation of growth, equal
opportunity and quality of life. At the same time, the critical public has the right to
demand public investments that are reliably planned and executed successfully. 11
This study thus appraised indices of determining the economic viability of
investments in Nigeria. Specifically, the objectives were to:
i.
Appraise application of economic analysis tools to investment opportunity
areas in Nigeria.
ii.
Identify the indices of economic viability of investments
Literature Review
Economic Analysis
The economic analysis is used to document that the project is a net benefit to
society as a whole. This is especially interesting in relation to public investments.
It is not enough to develop an excellent project from the technical point of view, if
it is unfeasible economically. Thus, a project is be er evaluated if these two
analyses have been developed. 12 Economic analysis is most useful when used
early in the project cycle, when very different possible courses of action may be
taken to catch bad projects and bad project components. If used at the end of the
project cycle, economic analysis can only help in the decision of whether or not to
proceed with a project (EID 2020). Appraisal can take years and in some sector
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days, weeks and months. The result of economic analysis is the economic viability
of a project or investment.
A close term to economic analysis is financial analysis. WBG8 and COWI13
differentiated between financial analysis and economic analysis. The goal of the
financial analysis is to demonstrate the ability of the project to generate a sufficient
return on investment to be interesting for investors. An economic analysis takes a
broader view of the profitability of the project. In an economic analysis, external
effects such as environmental impacts and health impacts are included. The value
of external effects is typically assigned using economic opportunity costs or
shadow prices. An economic analysis does not include taxes, tariffs, subsidies, etc.
These costs do not add to economic productivity and are merely transactions
between entities within the eco. An economic analysis is always a comparison
between a base case – the expected present and future situation without the
project – and the project alternative. Without this comparison, it would be
impossible to assess whether the external effects are an improvement or not.
Whenever the term "benefit" is used in an economic analysis it refers to the change
in external effects that can be a ributed to the project. 10
The Questions that Economic Analysis Should Answer
According to Blli14 and EID10, economic analysis aimed at determining the
economic viability of investments needs to answer the following questions
1.
What is the objective of the investment?
The first step in the economic analysis of an investment is to define clearly
the objective(s) that the project is trying to achieve. A clear definition of the
objective is essential to reduce the number of alternatives considered, and
to select the tools of analysis and the performance indicators.
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2.
What will happen if the project is undertaken? What if it is not?
One of the most fundamental questions concerns a counterfactual: What
would the world look like without the investment and what would it look
like with the investment? The difference between the situation with and
without the project is the basis for assessing the incremental costs and
benefits of the project. B
3.
Is the project the best alternative?
Alternatives could involve, for example, different technical specifications,
different policy or institutional reforms, different location, different
beneficiaries, different financial arrangements, or differences in the scale or
timing of the investment.
4.
Are there any separable components? How good are they?
A closely related question concerns the separability of the components. Is
the investment one integrated package, or does it have separable
components that could be undertaken, and justified, by themselves? If the
investment contains separable components, then each and every separable
component must be justified as if it were the marginal component.
5.
Winners and losers: Who enjoys the music? Who pays the piper?
A good investment contributes to the country's economic output; hence it
has the potential to make everyone be er off. Nevertheless, normally not
everyone benefits, and some people may lose. Moreover, groups that
benefit from an investmenr are not necessarily those that incur the costs of
it. Identifying those who will gain, those who will pay, and those who will
lose gives the analyst insight into the incentives that various stakeholders
have to see that the project is implemented as designed. It is especially
important to identify the benefits accruing to and the costs borne by the
“poor” or “very poor,” as defined for the country by poverty assessments
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6.
What is the project's fiscal impact?
How and to what extent will the costs of the investment be recovered from
its beneficiaries? What changes in public expenditures and revenues will
be a ributable to the investment? What will be the net effect for the central
government and for local governments? Will the cost recovery
arrangements affect the quantities demanded of the services provided by
the investment? Are these effects being properly taken into account in
designing the project? What will be the effect of the cost recovery on the
distribution of the benefits (gainers and losers)? Will the cost recovery
arrangements contribute to the efficient use of the output from the
project (and resources generally)? Is the nonrecovered portion factored
into the analysis of fiscal impact.
7.
Is the investment financially sustainable?
It is important to know how the project is to be financed and who will
provide the funds and on what terms. Is adequate financing available for
the project? How will the financing arrangements affect the distribution of
benefits and costs of the project? Is concessional foreign financing available
only for the project, and not otherwise?
8.
What is the project's environmental impact?
A very important difference between society's point of view and the
private point of view concerns costs (or benefits) a ributable to the
investment but not reflected in its cash flows. When these costs and benefits
can be measured in monetary terms, they should be integrated into the
economic analysis. In particular, the effects of the investment on the
environment, both negative (costs) and positive (benefits), should be taken
into account and, if possible, quantified and assigned a monetary value.
The impact of these external costs and benefits on specific groups within
society, especially the poor, should be borne in mind.
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9.
Techniques for assessment: Is the investment worthwhile?
After taking into account all the costs and benefits of the investment, the
analyst needs to decide whether the project is worth undertaking. Costs
and benefits should be quantified whenever reasonable estimates can be
made.
10.
Is this a risky investment?
Economic analysis of investments is necessarily based on uncertain future
events and involves implicit or explicit probability judgments. The basic
elements in the costs and benefit streams are seldom represented by a
single value, but more often by a range of values with different likelihoods
of occurring. It is desirable, therefore, to take into consideration the range
of possible variations in the values of the basic elements and to reflect
clearly the extent of the uncertainties a ached to it.
Economic analysis techniques for determining economic viability
According to Ojo15, appraisal techniques can either be deterministic (single
point) or probabilistic.
The deterministic approach: This approach relies totally on the best estimate of all
variable inputs for the viability computation perceived from a single-point
view, and the result is run once. It has been criticized on the ground that it does
not incorporate risk in its computation, especially in an economy that is very
susceptible to inflationary changes and uncertainty. Therefore, they cannot be
relied upon in a situation where the economy is unstable, inflation is high, and
there is high interest and exchange rate as is the case of Nigeria. 9
The techniques used under this approach include:
Cost-Benefit Analysis (CBA): This is also referred to as the cost–benefit technique.
This is the standard and most popular economic appraisal technique of any
project or investment, which helps assess the socio- economic desirability of the
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project. A CBA is a method that applies a systematic process for calculating and
comparing benefits and costs of private or public investments. It seeks to know
whether the benefits of a particular action are greater than its costs. 4 Costs and
benefits are expressed as far as possible in monetary terms so that they can be
compared on an equal level. A project is assessed as economically viable if the
project benefits exceed the project costs. 8 CBA measures the difference between
the flow of costs and benefits with the project and those without (the "with project"
and "without project" scenario). It is viably designed to produce a measure of
project returns corrected for the various distortions and constraints to markets. 10
A CBA according to the author has two main purposes:
1.
To determine whether a planned investment or decision can meet the
viability criteria that are considered sufficient and thus whether or not it is
justified and feasible
2.
To provide a basis for comparing projects when different options are
considered.
The main result of a CBA, which doubles at the index of economic viability, is the
benefit-cost ratio (BCR). The BCR is the ratio of discounted benefits (Net Present
Value (NPV) benefits in monetary terms) relative to its discounted costs (NPV
costs in monetary terms). However, the result is not a value in monetary terms but
a ratio, which allows comparing alternatives with different NPVs. 4
The outcome of a CBA is summarized in two complementary figures – the
economic rate of return (ERR) and the economic net present value (ENPV). 10 The
ERR of a project is the average annual return to society on the capital invested over
the entire life of the project. It is, in other words, the interest rate at which the
project's discounted benefits equal discounted costs, both valued from the entire
society's point of view. A project is accepted if the ERR is equal to or exceeds a
certain threshold (the social discount rate). The ENPV of a project is the difference
between discounted benefits and costs at a given discount rate. The correct
discount rate equals the threshold rate just mentioned. Projects are accepted if the
ENPV is positive.
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Net Present Value (NPV) Analysis: The NPV is a measure of profitability used in
corporate budgeting to assess a given project's potential return on investment. It is
the difference between the present value of cash inflows and the present value of
cash outflows. Due to the value of time, the NPV takes into account the discount
rate over the lifetime of the project, thus presenting the annual cash flows in
present values. A NPV of zero (0) implies that the return on the investment equals
the WACC. Therefore, a negative NPV can be found for a project with a positive
return, but where this return is lower than the investor's required return. 16 The
NPV method is good for keeping track of cash flow and variations in costs and
revenues over time. On some projects, revenues and costs vary over time, e.g. up
front investments and revenues that fluctuate (in real terms) over time. In that
case, it is used the NPV method to calculate the difference between the present
value of all future costs and the present value of all future revenues. 13
The NPV is considered to be one of the most important assessment criteria
because it reflects how much the project will earn in present value terms. When
there is positive net present value, it means that the capital invested in the project
could be paid back. A negative NPV means that the project is financially or
economically loss-making and not viable. The annual net benefits of a project are
calculated by subtracting total costs from total benefits each year. Taking the
influence of time on values into account by discounting annual net benefits to the
present value of net benefits, the sum of all present values is the NPV and indicates
how much all future annual net benefits are worth today in monetary terms. 4
Internal Rate of return (IRR) Analysis
IRR is a measure used for assessing the profitability of potential investments. The
internal rate of return is the discount rate that makes the net present value of all
cash flows equal to zero. 16 This rate is called the internal rate of return (IRR) for
financial analysis and the economic rate of return (ERR) for economic analysis.
The IRR is additional information that allows a choice to be made between
different projects, everything else being equal, in particular risk and size of the
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investment. If NPV (a magnitude) and IRR (a yield) give conflicting signals,
additional analysis is needed. 4 It provides a means for comparing alternative uses
of funds. The ERR is similarly interpreted except that it shows what society can
expect to receive back in consumption benefits for a given investment of its scarce
resources. General condition for accepting a project: the IRR must be equal or
bigger than the discount rate
Cost Effectiveness Analysis: This is a technique used to determine whether the
project is the lowest-cost alternative to achieve the identified benefits. 10 It is a
useful methodology in evaluating interventions when benefits are defined but
cannot be quantified in monetary terms. There are cases where benefits are hard to
quantify, in which case a traditional CBA cannot be applied, and a costeffectiveness analysis becomes more appropriate. In such cases the decision to
carry out a certain type of investment or program is determined as part of the
political process and a CEA is used to determine the best project to achieve the
desired results, generally the one that achieves the greatest output per unit of
input. 10 It is generally more difficult to assess benefits than costs, e.g. the benefits
of a forest reserve are more complex to assess than the costs of maintaining it, or
the value of a child that finishes basic education is also harder to evaluate in
monetary terms than the costs associated with sending that child to school. 13 It
typically focuses on the cost of a aining a given target.
In these cases, CEA allows comparisons of costs to be made of the various
alternatives to a aining a certain objective, e.g. rainforest protection or school
enrolment. Hence, CEA is a form of analysis that compares the relative costs and
benefits of two or more interventions that are intended to produce the same
outcome. It is distinct from CBA, which assigns a monetary value to the measures
of outcomes. 4 It divides the total costs of an intervention by the benefit of an
invention. Since benefits cannot be quantified monetarily they are measures in
units of effectiveness, such as the number of acres of rainforest preserved or the
number of school dropouts prevented. The result of this calculation is the cost-
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effectiveness ratio which indicates how much it costs to preserve one acre of forest
reserve or prevent one school dropout for example.
Besides environment and education the main and most common fields of
application are governance and health. CEA is mainly used in ex-ante evaluations
to justify an approach for funding (as compared to alternatives). It is thus most
useful when the desired outcome of an intervention is known and there are
different approaches to reaching it. In fact, it forces decision-makers to consider
alternative strategies to achieving a set goal and helps to identify the intervention
that creates the greatest and most durable benefits. 4
Cash- Flow Analysis
Policy choices are rarely between a project and no project; rather, there are usually
several plausible policy alternatives. 10 Economic analysis will typically compare
several policy scenarios against a common “without project” baseline. Moreover,
as infrastructure and other capital assets typically have long lives, these different
scenarios must measure flows over many years. Cash flow is the movement of
money into or out of a business, project, or financial product, over a specified,
limited period of time. For an economic analysis of an investment, costs and
benefits are accounted for in a cash flow table, which lists all the direct inputs and
outputs that need to be quantified. And, to arrive at an intervention's total costs
and benefits they need to be multiplied by market prices (or forecasts of them) and
added up. The result is a cash flow table that shows the movement of money into
or out of a project, thus comparing costs and benefits of a specific individual actor
over time. 4
Value flow analysis
Economic analysis can go beyond accounting only for direct costs and benefits but
for indirect effects as well. Value flow analysis serves the same purpose as a cash
flow analysis and share similar elements, it however also appraise society's costs
and benefits as a whole such as externalities for example. These indirect effects
however may be difficult to quantify and monetize. 4
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Payback Period Analysis
Payback period is the period necessary to earn back the initial capital investments.
The shorter the payback period, the stronger is the financial viability of the project.
16
This is a viable method for low investment and short term assessment with
a ractive economic viability which is one of the traditional methods of
appraisal, is the most adopted appraisal technique in practice
Total Annual Net Cost Analysis (TANCA)
On investments where revenues and operating costs are constant over time, it
may be a disadvantage to use a simpler approach than NPV. The Total Annual Net
Cost method annualizes all capital costs into annual payments on a loan with
either WACC or the Economic Discount Rate as the interest rate. 13 Since operating
costs and revenues are identical from one year to the next it will be sufficient to
calculate the sum of the annual payment on the capital investment, the annual
operating cost and the annual revenue for a single year. This Total Annual Net
Cost is directly comparable to other alternatives calculated in the same manner.
This method is especially effective for a project or investment with many technical
components with different technical life spans.
Discount Rate Analysis (DRA)
Discount rate refers to the interest rate. DRA is used to determine the present
value of future cash flows. This translates future costs and benefits into presentday values to account for the time value of money. It takes into account not just the
time value of money but also the risk or uncertainty of future cash flows; the
greater the uncertainty of future cash flows the higher the discount rate.4 High
discount rates tend to penalise long-term projects, such as environmental
protection, and to favour short-term projects and projects with quick-benefits. 14
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Debt Service Coverage Ratio Analysis
The debt service coverage ratio (DSCR) is the ratio of cash available for debt
servicing to interest, principal and lease payments. The DSCR is a measurement of
an entity's ability to earn enough cash to cover its debt payments. 16 The higher this
ratio is, the lower the risk of the lender. To be confident that the investor or project
owner can repay his debt, financial institutions (lenders) will demand that the
DSCR is larger than one (1) by a certain margin.
Multi-Criteria Analysis (MCA)
Where the other methods are deemed impractical, MCA involves combining
various evaluation techniques addressing different criteria and applying
weightings to each of them in order to arrive to a single score used to compare
alternative projects. Typical criteria would include affordability tests, income
distribution considerations, compliance with strategic objectives, quality of the
internal decision-making of the promoter, visual appeal, etc. 10
Others include residual valuation method, developmental method, and breakeven valuation, annuity method, profitability index, etc.
The probabilistic approach
This approach incorporates risk, which the deterministic approach does not
include. 15 It hinges on the premise that the expected returns (best estimate) might
not actually be achieved (uncertainty). However, even in the face of economic
instability, they are rarely used common probabilistic approaches such as:
Sensitivity Analysis (SA)
A sensitivity analysis, also referred to a scenario analysis, assesses the impacts of
uncertainty/risk by varying one or more uncertain parameters at a time. 4 It is the
most popular under this segment and identifies the main parameters that
influence the profitability of a project and allows simulations by changing project
assumptions one by one or several at a time, including product prices, crop yields,
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sales, etc. 4 By observing the impact these variations have on the results of the
financial and economic analyses, greatest sources of risk on investments are
identified. 13 This is based on the premise that analysts cannot be sure today about
the future. They therefore use available information such as surveys, reports or
data relating to past events, to make forecasts. A sensitivity analysis tests a chosen
indicator with different assumptions to see how values change. It identifies
critical values, in particular values that change the interpretation of an indicator.
Thus, the results of a sensitivity analysis can be used in ac redit proposal's risk
assessment. The three involved include: 4
1.
Identify likely major sources of uncertainty for the project and for each
source estimate some reasonable alternative values. Possible sources
are:natural factors such as weather, insects or diseases for agricultural
projects; technology and productivity factors related to processing, e.g.
effects of alternative technologies; financial and economic factors related to
assumed values for inputs and outputs, e.g. exchange rates, oil price, etc.;
human factors e.g. related to labour availability and cost as well as
management capability.
2.
Carry out a sensitivity analysis for the project using various combinations
of different value estimates associated with the major sources of
uncertainty.
3.
Analyse the parameters for which changes in value assumptions are
critical in terms of project outcome: Where a reasonable change in an
assumption of an indicators value is critical, in the sense that it drastically
changes expected outcome, it is desirable to gather additional information.
If further information suggests that there is a reasonable chance that the
value could change and that this would lead to a change in the decision
regarding a project, this must be stated explicitly. Decision-makers then
need to reconsider the investment bearing in mind all other non-financial
or non-economic factors.
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Others include the risk-adjusted discount rate and Monte Carlo simulation
Viable Areas with Investment Opportunities in Nigeria
Opportunities for investment in Nigeria across various sectors are: 3,5
Agriculture and Agro-Allied: Food Crop Farming – Roots & Tuber (Cassava,
Yam, Potato); Grains & Legumes (Rice,Maize, millet, wheat, Cowpea, Groundnut,
beans, soyabeans); Vegetables (Pumpkin, Melon, Okra, Melon, Water melon,
Pepper); Fruits (Citrus, Mango, Banana, Pineapple, Pear, Plantain); Cash Crop
Farming – Palm, Kolanut, Timber, Rubber, Castor Oil Seed, Cashew, Sugarcane;
Horticulture – Aesthetic Plants, Flower, Tree Nursery and Landscaping; Aquaculture – Fish (Fish Pond), Crayfish, Prawn, Shrimps; Animal Husbandry –
Poultry (Chicken, Turkey and Duck); Aviary (Birdhouse); Livestock Rearing
(Rabbit, Goat, Sheep, Ca le, Grass-cu er, Snailry, Piggery); Apiculture (Bee);
Agro-Technology – Fabrication of Farm Machinery, Equipment and
Tools, Food Processing and Storage Facilities, Irrigation System Design and
Farm Spraying Devices; and Agro-Allied Services and Solutions – Seed Banks,
Seedling Nursery, Green Farms, Animal Feeds, Fingerling Hatchery, Chick
Hatchery, Veterinary Services, Extension Services, Fertilizers/Manures,
Pesticides, Insecticides, Agricultural Project Financing and Consultancy.
Artisans: Automobile Services – Automobile Diagnostics and Troubleshooting
(Auto-mechanical, Auto-electrical), Auto-welding & fabrication, Auto-spray, Car
Wash; Metal Works - Welding and Fabrication, Aluminium Works, Roofing
Sheets; Wood Works – Furniture, Carpentry, Upholstery, Cushing, Carving and
Frames; Art Works – Drawing, Painting, Frames, Sculpture, Art Gallery; and
Plumbing – Household and Industrial. Clothing and Textiles:
Clothing - Fashion Design, Weaving, Kni ing, Hat Making, Tie & Dye, Batik;
Ornamentation - Bead Making, Diamond, Gold and Silver Jewelry, Leather - Shoe
Making, Bag Making, Belt; and Others – Beddings, Mat/Basket Weaving.
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Mineral Resources: areas of investment here are Solid Mineral Extraction and
Processing:. Industrial Chemicals and Mineral Utilization – Silica (for Glass),
Bauxite for Aluminium and Refractory Materials, Clay and Kaolin for Ceramics,
Refractory Materials, Insulators, Paper, Pharmaceuticals, Soap and Paint Making;
Building / Construction Aggregates - River Sand, Laterite and Gravel; and Lignite
for Fuel – Domestic or Industrial
Hydrological Resources: Spring Water / Water Treatment / Water Storage / Water
Packaging forboth domestic and industrial or commercial use; Borehole Drilling
and Maintenance; Irrigation Water; Oilfield Water such as Treatment, Recycling
or Disposal of oilfield water.
Building, Construction and Estate Management: Building Design and
Construction – Architecture and Project Management; Building and Construction
Materials – Sand, Laterite, Cement, Blocks, Bricks, Tiles, Ceramic Sanitary Wares,
Glass Wares and Paint; Electrical Installations - Electrical Design, Wiring, Lighting
and Fi ings; and Estate Management - Property Management, Housing Agent,
Land Speculation
Environmental Management: Refuse / Waste Management - Refuse Disposal,
Industrial Waste Disposal; Sewage Management - Domestic Sewage Disposal,
Public Toilet, Mobile Toilet Material Recycling - Scrap Metals, Plastic and Paper
Recycling; and Green Initiatives
Food and Beverage: Catering Services – Events Catering, Restaurant, Canteen, Bar
(Mobile Catering, Restaurant, Canteen and Bar): Bakery / Confectionery – Cakes,
Bread, Cookies (Biscuits); Dairy Products and Beverages – Yoghurt, Ice-cream,
Fruit Juice, Cocktails, Zobo.iii. Chocolates and Candy – Chocolate Products,
Sweets
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Tourism, Transport and Logistics: Accommodation – Hotel and Guest House;
Transport, Logistics and Haulage – Land and Water; Tourism - Cultural Tourism,
Tourist Event Marketing, Tourist Site Guide
Information and Communication Technology: Computer - Hardware, Software,
Networking, Security, Repairs and Installation; Internet – Software and
Networking Designs, Web Design and Hosting, Voice Over IP(VOIP) Services, Epayment Solutions, E-marketing Solutions; Mobile Telephone - Mobile Phone
Repairs, Recharge Cards, Bulk SMS, Voicemail, Mobile Apps Designs and
Installation, M-marketing, Mobile Money; and Intelligent Security Systems –
CCTV Systems, Mantrap Door Systems, Infra-Red Censored Doors.
Health, Medicare and Beautification: Hospitals and Clinic - Mobile Clinics and
Hospitals; Medical Tourism; Dietician Consultancy Services – Dietary Treatment,
Food and Nutrition; Pharmaceuticals - Production and/or Marketing;
Phytomedicine – Herbarium, Herbal Medicine Products (Garlic, Ginger,
Moringa, AleoVera, Bi erns), Agarium (Mushroom); Beautification Technology
and Management – Skincare, Cosmetology, Barbing & Stylistics, Manicure &
Pedicure.
Education: School and School Management – Nursery, Primary,
Secondary, afterschool and holiday/summer care; Vocational and Technical
Education – Schools for special skills such as Catering, Fashion Design,
Carpentry, Welding, Auto and Electrical Technicians etc; and Literary Works –
Book / Journal / Magazine Publication, Bookshop, specialized Library.
Sports, Entertainment, Events Planning and Management: Mass Media/Print
Media – Radio/TV Shows, Talk Shows, Magazines, Newsle ers and Interviews;
Events Management – Events Planning/Marketing like Gala Nites, Award Nites,
Party, Dinners, Picnics, Carnival, Events Stage Set-up and Events Decoration;
Music / Movie / Comedy – Music Production, Music for Events including DJ or
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LifeBand, Movie Production, Comedy Shows, Cartooning; Photography / Video
Coverage like Red Carpet Photography, Photo Gallery, Digital Photo Studio and
Displays; and Sports –Sporting Events, Sports Be ing / Lo ery; and others like
Road Shows, Talent Hunts.
Oil and Gas: Strategic Marginal Fields Investments; Oil and Gas Contracts,
Consultancy and Supply; Pipeline Protection and Security; Health, Safety and
Environmental Management Systems (HSEMS); Maritime Logistics (Onshore
and Offshore Logistics); Petroleum Product Refining and Marketing; Manpower
Development (Training and Certification of Manpower).
Energy: Electrification Projects (Rural and Urban); Power Generating Plants; Gas
Turbine Plants; Biofuel Technology (Biogas, Ethanol Fuel). Alternative Power –
Solar Panel, Windmills and Inverter System Installations and Maintenance; as
well as Power Surge Devices, Switch-over Devices and Alarm.
Method
Secondary analysis of articles on and related to the topic, as retrieved from online
libraries was done. A total of 18 articles were reviewed. Some of the search words
engaged on google include 'investment', 'economic viability', 'investment
viability', 'project viability', 'economic viability of investment and indices of
economic viability', 'investment opportunities in Nigeria', and other related
terms.
Results and Discussion
Application of economic analysis tools to investment opportunity areas in
Nigeria
A shown on Table 1, application of cost benefit analysis (CBA) is relevant to all
sectors of the economy, especially given the fact that the tools is concerned with
determining the ratio of the benefits of an investment to the cost. This is a default
tool, as it connotes weighing the pros of an investment against the cons and
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designation of a monetary worth to a project. The relevance of this as identified by
is the fact that it aids in determining whether a planned investment can meet the
viability criteria that are considered sufficient and thus whether or not it is
justified and feasible, as well as provide a basis for comparing projects when
different options are considered.
4
Similarly, net present value analysis (NPVA) is applicable to a lot of fields.
However, 16opined that it is good for keeping track of cash flow and variations in
costs and revenues over time for an investment. Hence can feature in agriculture,
environment, real estate, etc. The internal rate of return analysis (IRRA) given its
peculiarity too applies to all sectors. This feature agrees with 4 which emphasizes
that it gives an estimate of what can be received back in consumption benefits for a
given investment of its scarce resources. However for cost effectiveness analysis, a
tool which is employed in determining whether an investment is the lowest-cost
alternative to achieve the identified benefits, 10 is of much relevance in the fields of
health, education, governance and environment. It takes into cognizance that
some values or benefits cannot be quantified monetarily, for example the
preservation value of a national park and benefits of education can be deduced
from the number of acres of parks preserved or the number of school dropouts
prevented.
Cash flow analysis is most applicable for areas with cash inflow and outflow for
long period of time. Example of sectors that this is relevant in Nigeria includes
building, construction and real estate, health, education and environment. Value
flow analysis is of more relevance in health, environment and education domains,
placing more relevance on value addition rather than cost. Pay-back analysis
(PBA) given that it is most ideal for short term investments, 4it is applicable in short
term agricultural projects, artisan, transport and logistics, and events. Also, these
fields are applicable for discount rate analysis (DRA) as it tends to favour short
term investments. DSCR can be applied to all fields. As documented by16, it aids in
measuring an entity's ability to earn enough cash to cover its debt payments. For
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an investment, loan institutions tend to apply this in quantifying the ability of the
customers to repay.
Table 1: Application of economic analysis tools to investment opportunity areas in
Nigeria
CB
NPV
IRR
CE
CF
VF
PB
DR
TANC
DSC
A
A
A
A
A
A
A
A
A
R
ü
ü
ü
Artisans
ü
ü
ü
Clothing
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
Agriculture
ü
ü
ü
and agro
allied
ü
ü
ü
and textiles
Mineral
resources
Hydrologic
ü
al resources
Building,
ü
ü
ü
ü
construction
and estate
management
213
ü
ü
ü
Entrepreneurship and Business Environment
Environmental
ü
ü
ü
ü
management
ü
ü
ü
Tourism
ü
ü
ü
Transport and
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
Education
ü
ü
ü
ü
Sports and
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
Food and
ü
ü
beverage
ü
ü
ü
ü
logistics
Information
ü
ü
and
communication
technology
Health,
ü
medicare and
beautification
ü
ü
ü
entertainment
Events
ü
ü
planning and
management,
Oil and gas and
energy
214
ü
Entrepreneurship and Business Environment
Main indices for determining economic viability of investments in Nigeria
They approaches can also be grouped into exact or non-exact methods or static
and approximated models.15,17 Particularly, there are two ways to assess whether a
project is feasible from the economic point of view. First, using non-exact (or not
analytical) methods, which do not consider investment life and the value of
money over time. The main non-exact method is time of return on invested capital
or simple Payback time. Second, the other assessment approach uses the
exact methods (or analytical methods), which, unlike the first one, consider the
value of money over time. Within this evaluation methodology, some authors
use only the NPV, IRR and Payback.18
The main index derived from financial and economic cost-benefit analysis and
vital in determining the economic viability of investment is the NPV. Additional
information is provided by the IRR or the ERR respectively, and the BCR.
Table 2: Criteria for interpreting NPV, IRR and ERR, and BCR
Red
Green
IRR
IRR < discount rate
ERR
ERR < discount ate
ERR ≥ discount rate
NPV
NPV<0
NPV≥0
BCR
BCR<1
BCR≥1
IRR ≥ discount rate
Source: SDC4
As a general rule, the colours in table 2 show the value criteria as a basis for
making a judgment. If this were the only decision-making criterion, projects with
values that are in the left column (red) should be rejected while values in the right
column (green) should be accepted. In general all results should be challenged
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Entrepreneurship and Business Environment
critically by decision-makers by asking for sensitivity analyses. They need both to
make sure that their specific questions are answered and to control: whether the
analysis was done from the asked point of view (financial and/or economic); if all
relevant costs and benefits were accounted for in the cash-flow and/or value-flow
table; what prices were used to value the listed costs and benefits (and why); what
discount rate was applied (and why); and over what time horizon the analysis was
conducted (and why).
Conclusion
The economic viability serves as the key determinant for management in
accepting or rejecting a proposed investment opportunity. The economic analysis
is used to document that the project is a net benefit to society as a whole. This is
especially interesting in relation to public investments. Two basic economic
appraisal techniques exists namely deterministic (single point) or probabilistic,
under which other categories are grouped. The most popular is cost benefit
analysis and scenario analysis respectively under both categories. The main index
derived from financial and economic cost-benefit analysis and vital in
determining the economic viability of investment is the Net Present Value.
Additional information is provided by the Internal Rate of Return or the
Economic Rate of Return respectively, and the Benefit-Cost Ratio. Notably, there
is no single one way indicator for economic viability of investment. Even when an
investment is not considered viable given the economic indices, there a range of
alternatives to be chosen from, depending on the entity concerned and their target
on the return on investment. It is important than any investor consider the various
economic analysis tool and apply as fi ed before commitments whether
monetary or otherwise are made. Also, seeking an economic or financial
consultancy should be adequately considered by every proponent, especially
when such investment is massive and requires high monetary commitment.
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Entrepreneurship and Business Environment
1.
2.
3.
4.
Endnotes
Laopodis, N. T. (2020). Understanding investments: Theories and
Strategies. Second edition. Taylor & Francis Group Routledge London
and New York
Dixit, A. K. & R. S. Pindyck (1994). Investment under Uncertainty,
Princeton University Press, Princeton.
Nwoye, M. I. (2011). Entrepreneurship and investment opportunities in
Nigeria, Benin: Highclif publishers
Swiss agency for Development and Cooperation (SDC) (2015). Financial
and economic analysis of projects with a focus on cost benefit analysis
(CBA) and cost effectiveness analysis (CEA).
h ps://www.shareweb.ch/site/Water/news-networkingtools/Documents/SDC%20How-to%20Note%20CBA_CEA.pdf (accessed January 18,
5.
6.
7.
2022)
Federal Government of Nigeria Ministry of Niger Delta Affairs (2012).
Investment guide in the Niger Delta Region, Federal secretariat – phase
1 Shehu Shegari way, Abuja. Hamilton,
Ehui, S. K. & D. S. Spencer. (1993). Measuring the sustainability and
economic viability of tropical farming systems: A model from subSaharan Africa. Agric. Econ., 9: 279–296.
IHA Sustainability Limited 2021. Economic viability.
h ps://www.hydrosustainability.org/economic-viability on 19 January 2022
8.
9.
(accessed January 18, 2022)
The World Bank group (2022). Assessing project feasibility and economic
viability. h ps://pppknowledgelab.org/guide/sec ons/50-assessing-projectfeasibility-and-economic-viability (accessed January 17, 2022)
Ezeokoli, N. B., Adebisi, O. S. & Olukolajo, M. A. (2014). The practice of
investment viability appraisal in akure, Nigeria. Ethiopian Journal of
Environmental Studies & Management 7, no 5: 581 – 587,
doi:h p://dx.doi.org/10.4314/ejesm.v7i5.11
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10.
European Investment Bank (EIB) (2020). The economic appraisal of
investment projects at the EIB (March 2013 Under Review).
h ps://www.eib.org/a achments/thema c/economic_appraisal_of_investment_proj
ects_en.pdf (accessed January 18, 2022)
11.
12.
13.
Prognos (2022). Investment and economic viability of projects.
h ps://www.prognos.com/en/investment-economic-viability-projects (accessed
January 16, 2022)
Trentin, M. G., Oliveira, G. A., Batistus D. R. & Se i, D. (2015) 'A
systematic approach for the analysis of the economic viability of
investment projects', Int. J. Engineering Management and Economics. 5,
No ½:.19–34.
COWI (2016). Economic and financial analysis. Guide repotr 3
h ps://www.diva-portal.org/smash/get/diva2:1057029/ATTACHMENT04.pdf
14.
15.
16.
17.
18.
(accessed January 18, 2022)
Belli, P., Andrson, J., Barnum, H., Dixon, J. and Tan, J-P. (1997).
Handbook on economic analysis of investment operations.
h ps://www.unisdr.org/files/1064_econanal.pdf (accessed January 14, 2022)
Ojo, B. (2006). Development Appraisal Practice and Risk
Adjustment in Commercial Property Development in Lagos
Metropolis. Journal of Land Use and Development Studies, 2 no 1: 60 – 69.
IFC. (2016). Converting Biomass to Energy - A Guide to Developers and
Investors. Publication ultimo.
de Lima, J. D., Trentin, M. G., Oliveira, G. A., Batistus, D. R. & Se i, D.
(2015). Asystematic approach for the analysis of the economic viability
of investment projects. International Journal of Engineering Management
and Economics, 5, no 1/2:19-24
Casaro o Filho, N. C. & B. H. Kopi ke (2010). Analysis of investments:
Mathematical, financial and economic, Tomada de Decisão, Estratégia
Empresarial, 11th ed., Editora Atlas S.A, São Paulo
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CHAPTER
10
GREEN MARKETING PRACTICES AND BUSINESS
ENVIRONMENT IN NIGERIA
AYEDOGBON Adeleye Olorunleke &
OYEDOKUN Godwin Emmanuel
Abstract
Purpose: This paper reviews green marketing practices and business environment in
Nigeria, the current challenges and strategies for the way forward. In order to provide a
deeper analysis, the paper discussed how green marketing gives businesses a broader
commitment toward socially and environmentally conscious business practices.
Methodology: The study adopted exploratory research design to give a descriptive
information and be er understanding of the green marketing and business environment.
Data were collected from secondary sources.
Findings: The study revealed that there are several factors impeding the full completion of
Abuja light rail transit system. These include lack of fund, poor policy framework, poor
management, and obsolete national transport policy.
Implications: The study proffered solutions that will help improve railway system in
Nigeria which will not only reduce the traffic congestion but open substantial economic
and social opportunities.
Word Count:136
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Entrepreneurship and Business Environment
Keywords: Business environment, Green marketing, & System in Nigeria
Introduction
Recently, the issue of environmental protection becomes a great concern for all
and sundry especially for businesses. The importance of environmental quality is
very crucial to keep businesses maintaining long term economic, social and
environmental gain (Anyahie, Nwachukwu & Ebimie, 2020). The emergency of
business movement toward natural environment arises from increasingly issues
related to waste from the products' remnants or product packages which capable
of causing environmental degradation. The activities of some of this business
sometimes result to environmental pollution which makes the environment
becomes inimical to human habitation(Gbadeyan & Omolekan, 2015).
The excessive waste from the product packages such as cans, cellophane, plastic
bags, bo les/sachets, non-recyclable, non- reusable are dump on refuse or
anywhere are capable of causing environmental degradation (Iweama, 2015).
However, the harmful impact of pollutants (waste products) having consequence
implications of global warming (Gbadeyan & Omolekan, 2015). Though,
businesses all over the world are striving to reduce the impact of products and
services on the climate and other environmental parameters. This becomes
pronounced to modify organizational behavior in promoting, preservating and
conservating natural environment (Wahab, 2018). Thus, the natural environment
are essential for economic activity and human welfare 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).
As a ma er of urgency, most businesses begin to address this concern by offering
more eco-friendly products and services to their customers, and have integrated
environmental issues into all their business activities in a end to improve and
achieve organisational objectives in the face of stiff competition (Gbadeyan &
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Entrepreneurship and Business Environment
Omolekan, 2015). It is with a view to marry the maintenance of ecological quality
and progress in development and strike a cost-benefit balance between
productive or economic activities and environmental integrity which has led to a
search for a sustainable business-ecology trade-off as explained through green
marketing concepts(Gbadeyan & Omolekan, 2015).
Green marketing is a new concept coined by the application of three R's to ensure
eco-friendly in the production, marketing, consumption and disposal of products
and services. The application of the three R's of environmentalism; Reduce the
amount of waste produce, Reuse old items; donate, repair if broken and Recycle as
much as possible; buy recycled products to support recycling are of tremendous
benefits to the developing nations (Dhiraj, 2014). In fact, It is 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).
Although green marketing refers specifically to environmental initiatives, these
efforts are increasingly presented alongside social and corporate governance
policies as well (Fernando, 2021). It is on this premise that this study set out to
review green marketing practices and business environment in Nigeria. Also,
how green marketing makes businesses to be more responsible in terms of
ecological and social responsibility. The remaining session of this paper is divided
into four sessions. Session two deals with the review of relevant literature on
green marketing including, conceptual literatures. Session three presents the
green marketing and business environment, and previous studies review while
session four discusses challenges of green marketing, solutions and prospects of
green marketing in Nigeria. Session five provides conclusion and
recommendations.
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Entrepreneurship and Business Environment
Literature Review
Concept of green marketing
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.
According toFernando (2021), green marketing refers to the process of producing
and selling products based on their environmental benefits and such products
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Entrepreneurship and Business Environment
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 (Dhiraj, 2014). It can be eco-marketing 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
competitive advantage over the other non – environmental firms in the market
place because environmentally-conscious companies use green products to
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Entrepreneurship and Business Environment
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).
Green Business and Green Product
Accordimg to Wahab(2018) there are businesses that contribute to conservation of
the environment through Biodiversity, producing environment friendly
products, conservation of energy, water and natural resources, climate protection,
maintenance of schools, roads, parks, providing assistance for uplifting of the
rural sector and the underprivileged among others (Nadaf & Nadaf, 2014). They
are characterized by the following features:
i.
Use natural gas for boiler fuel.
ii.
Recycle biodegradable waste.
iii.
Minimum use of plastic material; use recyclable packaging materials.
iv.
Use biomass and solar radiation as sources of renewable energy.
v.
Generate electricity from hydroelectric plants.
vi.
Reduce toxic emissions, etc.
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Entrepreneurship and Business Environment
However, they produce with natural ingredients that containing recycled
contents, non-toxic chemical and manufactured under the approved chemical
(Gbadeyan & Omolekan, 2015). They do not harm or pollute the environment.
That is why they are referred to as environmental friendly business. They address
environmental issues through product design and innovation(Chan, 2012). Green
products have 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). In the
opinion of Lee(2009) green products are those products whose functions or ideas
deal with the process of material retrieval, production, sales, utilization and waste
treatment available for recycling, reduced pollution and energy saving.
According to Ebhote and Izedonmi (2017), Geen products are the products with
the following features:
1.
Energy efficient (both in use and in production),
2.
Water efficient (both in use and in production), low emi ing (low on
hazardous emissions),
3.
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.
Green products are recyclable, reusable and biodegradable in nature(Gbadeyan &
Omolekan, 2015). These are products that are manufactured through green
technology and that cause no environmental hazard(Wahab, 2018). Promotion of
green technology and green products is necessary for conservation of natural
resources and sustainable development (Ebhote & Izedonmi, 2017). Developing
green products is not just creating products that are environmentally friendly,
rather creating a system of change in society that includes all the stakeholders;
that is the suppliers, producers, consumers and the general commercial structure
within which they negotiate(Sarkar, 2012).
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Entrepreneurship and Business Environment
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 Strategies
Consumers are becoming conscious of what they consume and so firms that do
not inculcate environmentally responsive strategies risk losing customers to
competitors that imbibe green strategy. However, there are different green
marketing strategies a firm can adopt. Three of these strategies are discussed
below: Tulin and Ufuk (2022) opined that organisation can adopt various green
marketing strategies to get to target consumers in a bid to satisfy them. These are
green innovation, green business and green strategic partnership.
Green innovation entails developing new or innovative products. Oltra and Saint
(2009) saw green innovation as innovation that relate to green products or
processes, in addition to technological innovation involving energy-saving,
prevention of pollution, recycling of waste, designing green products that
contribute to environmental sustainability The second strategy according to Tulin
and Ufuk (2022) is green business strategy which focuses on the company's
environmental dealings. Green business implies adopting principles, policies and
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Entrepreneurship and Business Environment
practices that help the organisation improve the quality of life of their consumers,
employees and communities. A green business strategy focuses on forwardthinking policies towards consumers' environmental problems and policies likely
to affect human rights.
Thirdly, the green strategic partnership involves developing green products or
greening the process of organization. Organisations in most cases partner with
others in order to easily implement green activities (Ebhote & Izedonmi, 2017).
Furthermore, Ginsberg and Bloom (2004) stressed that firms should realize that
there is no universally accepted green marketing strategy. Therefore, the basis of
selecting green marketing strategy should be the nature of market as well as
competitive conditions they are faced with. The researchers present a model of the
green marketing strategy mix with four diverse strategies:
1.
Lean green strategy is adopted by organizations that do not concentrate on
marketing their green initiatives rather they focus on reducing costs by
creating a lower-cost competitive advantage. Furthermore, such firms do
not consider green market segments to be profitable and most of the
performed green initiatives are largely due to legislation though lean green
organisations try to be good corporate citizens(Joanna & Johanna, 2016)
2.
Defensive green strategy is adopted by organizations that view green
marketing to be precautionary action in order to respond to competition.
They consider green market segments to be profitable, they seek to
enhance a green brand image and although their green initiatives are
genuine, their promotion is irregular and temporary. Moreover, defensive
greens only invest in green campaigns when they see a chance of obtaining
competitive advantages.
3.
Shaded green strategy is practice by organizations that invest in long-term,
systematic and environmentally friendly activities that require smaller
investments or non-financial commitment. However, they are not stressing
their greenness as a primary factor, as they have other more primary and
profitable a ributes to stress. Furthermore, the majority of shaded greens'
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Entrepreneurship and Business Environment
4.
promotion is conducted in mainstream channels emphasizing the direct
and tangible benefits.
Extreme green strategy is a practice by firms whose holistic philosophies
and values integrate with environmental issues. Further, the greenness is
the driving force and their practices involve life-cycle pricing approaches,
total-quality environmental management. Extreme greens sell their
product or services through special channels or on their niche market.
Finally, on green marketing strategies, Sharma (1998); McDaniel and Rylander
(1993) opined that reactive and proactive green marketing strategies exist in the
area of green marketing. Based on the general marketing strategies theories,
McDaniel and Rylander (1993) came up with the defensive or reactive green
marketing strategy. Reactive strategy also known as compliance strategy occurs
when companies react to changes they see in the external environment (Sharma,
1998). A defensive-reactive green marketing strategy has the following a ributes
(Sharma, 1998): limited resources (not very expensive and low in risk), low level of
organisational commitment, low involvement of top management, low
organisational ecological commitment and resource allocation, less likely to
develop continuous innovations Pea ie and Crane (2005) stated that defensivereactive green marketing strategies can lead to: short-term benefits (e.g. short-run
increases in sales and profits), risks of green-washing criticisms, lower levels of
ecological sustainability.
Proactive strategy on other hand, involves firms that act before they are compelled
to react to the external threats and external forces thereby using the opportunity to
be innovative in the environment (Sharma, 1998). The aim of proactive green
marketing strategy would normally address what is known as the "triple bo om
line" of economic, social, and ecological sustainability (Sharma, 1998). The
proactive green marketing strategy has the following characteristics (Pea ie &
Crane, 2005; Sharma, 1998) great resource allocation, it is more expensive and
riskier and possesses a high organisational ecological commitment including an
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environmental corporate policy which reflects high levels of top management and
employee involvement.
Furthermore, proactive green marketing strategy affords the practicing firm the
following benefits: longer-term financial benefits related to competitive
advantage (lower total cost, higher return on investment), greater product
differentiation, higher customer brand loyalty, enhanced corporate reputation
and social image, higher research & development support, more ecological
sustainability for the common good of the society.
The Green Marketing Mix
Green marketing has become inevitable with regard to the growing markets for
sustainable and socially responsible products and services. Scholars are in
agreement that green marketing mix model contains all the 4 main marketing mix
elements (Ahmad, 2014) This is a combination of four green P's that the firm
blends to produce the desired response it and wants in the target market4. The four
P's include; Product, Price, Place and Promotion.
1.
Green Product: While manufacturing green products the firms should
include environment friendly resources or materials in the product. The
characteristics of the resources or materials used in the product and its
packaging should influence environmental elements.
2.
Green Price: Consumers perceive prices of green products to be relatively
higher than prices of the traditional products. If production and operating
costs are lowered, it would give green products more competitive
advantage on the market.
3.
Green Place: Green products which are to be delivered from the point of
producers to the point of ultimate green consumers. In this context, the
firm should choose a proper channel of distribution considering product
characteristics, consumer characteristics and market characteristics.
4.
Green Promotion: Firms should focus more on “Green Advertising” in
order to communicate to its green customers (who use eco-friendly
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Entrepreneurship and Business Environment
products) and as well as traditional customers (who are not green users)
about the concept of environmental protection. Firms should have special
sales promotion for eco-friendly products such as coupons, cash refunds,
and offers etc to a ract consumers.
Green Marketing and Business Environment
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.
Utilizing green materials or products help to reduces the environmental impact of
degradation(Sharma,1998).
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(Nadaf & Nadaf, 2014). 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
(Nadaf & Nadaf, 2014). 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(McDaniel & Rylander, 1993).
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 (Pea ie & Crane, 2005). Likewise, also helps
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Entrepreneurship and Business Environment
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(Janssen & Jager, 2002).
Moreover, many studies have shown that current and potential consumers are
now more concerned about their environment and are gradually changing their
purchasing behavour (Gbadeyan & Omolekan, 2015; Iweama, 2015; Dhiraj, 2014;
Lee, 2009). As reported by Anyahie, Nwachukwu and Ebimie (2020), 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 Janssen and Jager (2002) 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 (Nadaf & Nadaf, 2014). 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.
Review of previous studies
The effect of green marketing on environmental sustainability has been a subject
of fierce debate among scholars and this had been dominated by the postulation
that green marketing has a positive influence on people's health and the state of
the environment. However, the study of green marketing and business
environment is very scanty in the literature. Thus, the gap in the literature is how
green marketing gives businesses a broader commitment toward socially and
environmentally conscious business practices. Such analysis becomes
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Entrepreneurship and Business Environment
particularly important in the current context where our environment is currently
experiencing some ecological damage and deterioration.
Several studies have been conducted according to Gbadeyan and Omolekan
(2015), examining the effect of green marketing on environmental degradation in
Benin City, Edo state Nigeria using Non-experimental descriptive research
method. It was observed that the concept of green marketing is not popular
among selected consumer in Benin metropolis of Nigeria and thus appropriate
strategies for effective application of green marketing are lacking. Besides,
adaptability, compatibility and relative advantage by consumers of green
products remains the hiccups to the successful application of green marketing in
Nigeria. The study of Wahab (2018) examines some theoretical issues about green
marketing. The study was descriptive in nature focusing on divergent
perspectives of green marketing. There is a great concern for environmental
protection the world over. In an endeavor to address this concern, the study
argued that most businesses are now adopting a green marketing strategy. A
green strategy complements the business operations, and asset strategies that are
already well understood and often well-articulated by the enterprise.
Furthermore, a green strategy fundamentally 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.
Similarly, Azunwo, Ikechukwu and Eleke (2021) examine the impact of green
marketing practices on organizational performances, adopting a descriptive and
quantitative design. The study used a structured questionnaire to obtain data
from 162 marketing managers and brand ambassador of different organization in
Rivers state. Findings from the study revealed that organizations who
strategically carry-out green marketing practices by producing and making
available green products and services enjoyed high probability and sustained
business performance in the market than their competitors, as consumers are
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Entrepreneurship and Business Environment
beginning to be environmentally conscious and sensitive to green products and
services, which gives them extra value and satisfaction, organizations are also
realizing the need to embrace green business culture in order to continue to
provide customers and consumers with desired value.
Ebhote and Izedonmi (2021) review relevant literature on green marketing and
identified competitive advantage firms will obtain from the practice of green
marketing. The study argued that marketing firms/companies should avoid
producing products that are detrimental to the health of consumers and
environmental concerned bodies in Nigeria should wake up to their
responsibility through enacting environmental laws aimed at protecting the
wellbeing of the consumers.
While examining the green marketing, Ahmad (2014), established that green
marketing if properly exploited can serve as a solution to the vulnerable and
volatile environmental situation we are in. The paper therefore recommends that
government should provide the enabling environment and structure for business
in Nigeria and reorient the citizenry on the importance of proper refuse disposal.
Iweama (2015) in his work also provided a critical appraisal of the implications of
green marketing for a developing economy. The study sought to investigate the
extent green marketing is practiced by producers and consumers in developing
countries as well as their challenges. Also, to educate producers and consumers on
ways of increasing green marketing behaviour and the role of government to
encourage it. Both primary and secondary data were used to elicit needed
information. The study showed that only 30% of Nigerian organizations are
environmentally friendly and consumers are not adequately informed on green
marketing principles.
Challenges of Green Marketing Practice
Green marketing practice is relatively a new concept and as such consumer needs
proper enlightenment and education on the environmental threats they faced
233
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daily occasioned by firms' practices in Nigeria. Chang and Chen (2012), Parag
(2012), Mahower, (2013) extensively point out the challenges of green marketing
and these challenges are equally being encountered in Nigeria. For instance,
Consumers usually believe in a company's advert messages and this usually
influences their purchasing behaviour but in practice most of these adverts are full
of high sounding flummeries thereby misleading the consumers about the actual
greenness of a product. However consumers are mainly carried away by
messages relating to environmental friendly products (Polonsky & Rosenberg,
2010) even when they do not know the company so much and these advert
messages have a way of influencing them.
Kotler (2011) opined that when consumers are misled they simply believe that
green products claims are just marketing tricks and this could have adverse
damage on the green marketing activities of the company. Green marketing
involves heavy expenditure on research and development programmes in other
to market green products/services, green technology, green power/energy for
their development and subsequent promotional events which ultimately may
lead to increased costs.
Kulbir (2016) opined that green marketing requires huge spending in research
and development from technology point of view and this is capital intensive and
very costly. Furthermore, there is no standard for comparing or authenticating
green campaign claims by many firms believed to have engaged in producing or
marketing green products. This is because green marketing is still at infancy stage
and most consumers are really not aware of its existence. So, consumers need to be
educated about the environmental threats they are faced with and this will require
a lot of time and effort.
Mustapha, Abdulraheem and Omelekan (2016) opined that green marketing
focuses on environmental sustainability. However, when prices of green products
are exorbitant compared to other alternative products, the organisation will face
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Entrepreneurship and Business Environment
the problem of market acceptability a situation that might lead to green marketing
myopia. In other words, green marketing tends to satisfy two main objectives,
namely; improvement in the quality of the environment and customer
satisfaction. Misjudging either or concentrating on the former objectives might
have negative consequences on the la er; a situation referred to as green
marketing myopia. According to Shifa Wahab 2018 that many green products
have failed because of marketers' myopic focus on their product' “greenness” over
the broader expectation of consumers or other market players. Most companies
tend to focus on profits rather than on the benefits achieved from using the green
products.
Lack of cooperation from all parties (stakeholders) on the long-term advantage of
green products in relation to short term investment of huge amount of
organisations resources is yet another problem encountered when practicing
green marketing. The management makes substantial effort in convincing the
major stakeholders and at times this effort might not yield positive result in
convincing them about the long- run benefits of green marketing practice as
opposed to the short-term expenditure (Mustapha, Abdulraheem & Omelekan,
2016). Pea ie and Crane (2005) opined that five marketing practices led to the
malfunctioning of green marketing within the last three decades and these
practices are presented below:
i.
Green spinning challenges – This implies adopting a reactive approach by
using public relations to deny or discredit the public's criticisms against the
company's practices.
ii.
Green selling challenges – This means companies taking an opportunistic
approach in the practice of green marketing, this they achieve by adding
some green claims to product already in the market with the intention to
increase sales. Thereby making said claims different from the products
a ributes.
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Entrepreneurship and Business Environment
iii.
iv.
v.
Green harvesting challenges – This connotes a situation where the companies
become interested about the environment only when greening is seen as
cost savings (e.g., in terms of energy and material input efficiencies,
package reductions, etc.). Otherwise firms are not interested in green
marketing if dose not lead to cost savings.
Entrepreneur marketing challenges – implying developing innovative green
products to the market neglecting customers needs and wants which ought
to be the basis of such innovation.
Compliance marketing challenges – Ensuring adequate compliance with
compulsory environmental legislation as an opportunity to promote the
company's green credibility without taking voluntary initiative in green
policies. Non-voluntary green procedures should not be promoted
publicly and should not be treated as green marketing strategy.
Overcoming the Challenges of Going Green in Nigeria
Green marketing as a concept is relevant in our society due to its economic and
social importance though bedeviled by many challenges Ebhote and Izedonmi
(2021). Kotler and Keller (2009) suggested that firms should do the following to
forestall the above challenges.
i.
That firm should develop environmental products that are capable of
performing more than the available alternatives.
ii.
Firm should promote and ensure proper delivery of environmental
products to the targeted consumer segments.
iii.
Firm should inculcate consumer desired value into the development of
environmental products, this they will achieve by seeking to know the
consumers actually need or desire.
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Entrepreneurship and Business Environment
iv.
Firm should embark on proper education of consumers with marketing
messages that relates to environmental features with desired consumer
value and structure environmental product as a solution for consumer
needs.
v.
Firm should develop educational interest sites relating to environmental
products and their desired consumer value.
Firm should procure product endorsements or eco-certifications from trust
worthy third parties and educate consumers on the benefits of
endorsements and eco-certifications.
Focus on delivery the desired consumer's benefits hence this is the main reason
why consumers venture into buying certain products. Other suggestions on
overcoming the challenges emanating from green marketing practices worth
mentioning are the submissions of O man and Mallen (2014); Kuthiala and
Mahajan, (2012). The above-mentioned authors summarized their opinions as
follows:
i.
That firm's practicing green marketing should focus on delivery primary
benefits of products to consumers while at the same time incorporating
environmental responsibility as a ractive additions to the products.
ii.
Firms practicing green marketing understand what customer's needs and
wants at a specific time in other to provide a solution that addresses their
concern; otherwise the firm's effort will be futile.
iii.
Firm's practicing green marketing should organize eco-friendly events and
symposiums that will give the consumers the opportunity to take part in
such events. This way they will have the feeling of being part of the green
product development from the onset.
iv.
Firm should communicate more closely with host communities and
government in a bid to solve environmental challenges facing the
consumers. Firms should be pro-active in their dealings, this may lead to
lesser regulations and requirements hence both parties have their prospect
to making their expectations known.
vi.
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Entrepreneurship and Business Environment
Firms should advocate meticulous consumption all through the life cycle
of the green products.
vi.
Firm's practicing green marketing should be transparent by giving details
of the products to consumer; this will help consumers make informed
decisions on the products after knowing the contents of such products.
vii.
Firm's practicing green marketing should be cautious not to shy away from
promoting incremental enhancements on their green products that
constitute eco-friendliness.
viii.
Finally, companies should make available to consumers point blank on the
specific and tangible green benefits offered by their products.
The view of this paper is that the opinion of O man and Mallen (2014); Kuthiala
and Mahajan, (2012); Michael (2011), Kotler and Keller (2009) will help to
overcome the local challenges that green marketing practices faced in the country.
v.
Prospects of Green Marketing in Nigeria
Green marketing a empts to promote offering of safe products by organisation
concerned with no threat of harmful effect to consumers and such products are
quite be er when compared with non-ecofriendly alternatives. The campaign for
green marketing emerged some few decades ago and has assumed a global
phenomenon due to it varied advantages. For instance, in the manufacturing
sector, green marketing is aimed at encouraging the production of eco-friendly
products while it is about communicating green benefits of products to
consumers. Green products are healthier alternatives though a racts extra cost on
the part of the consumers. Furthermore, firms go green because of government
regulations, which compel them to do so for the well-being of the general society.
In Nigeria today, regulatory agencies and Acts are established to ensure
environmental safety and consumer's protection from the consumption of
hazardous products. Rashad and Igbazua (2011) asserted that some of these
agencies includes National Agency for Food Drug Administration and Control,
Standard Organisation of Nigeria, Occupational Safety and health Act,
Comprehensive Environmental Respond Compensation Liability Act, Toxic
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Entrepreneurship and Business Environment
Substance Control Act, Hazardous Material Transportation Act, Federal
Insecticide, Fungicide and Rodenticide Act, Federal food, Drug and Cosmetic Act,
Clean Air Act, Clean Water Act and others. Inyanga (2012) asserted that these
environmental agencies, to a reasonable extent, have succeeded in sustaining
environmentalism in Nigeria but much is still expected of the concept to fully
succeed in the country. Therefore, one can say categorically that green marketing
has a future in Nigeria, If all these organisations carryout their duties without fear
or favour.
Conclusion and Recommendations
The primary objective of green marketing is to ensure that business produces high
quality and environmentally friendly products which are safe for the health of the
consumer. Green marketing today plays a significant role in helping to find way
and means of being receptive to environmental issues bordering consumers
(Ebhote & Izedonmi, 2021). 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 happen to be in a strategy that is less
detrimental to the environment.
In the light of the discussion in this paper, the following recommendations are
therefore put forward:
i.
All businesses should embrace true green marketing initiatives and be
more responsible in terms of ecological and social responsibility.
ii.
Businesses should always demonstrate perceived commitment to the
cause of environmental sustainability alongside producing eco-friendly
products to the public.
239
Entrepreneurship and Business Environment
iii.
iv.
v.
vi.
vii.
Businesses should develop eco-friendly programs for product users or
consumers in order to increase environmental or ecological awareness
among consumers, and showing customers how to be green.
Business should engage sustainable practices in key areas of their business
by using eco-friendly materials, eliminating wastefulness and properly
utilize resources.
Government should develop environmentally-friendly policies and
procedures that makes all and sundry be environmentally conscious and
responsible.
Government should implement environmental programs to improve ecofriendly approach to business.
Government should provide a policy levers that bring incentives for
companies that choose to engage in green marketing initiative.
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Entrepreneurship and Business Environment
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CHAPTER
11
ENTREPRENEURSHIP DEVELOPMENT AND ITS
IMPACT ON POVERTY ALLEVIATION IN NIGERIA
AJANI Abiola Joshua & OYEKUNLE Oyesola Rasheed
Abstract
Entrepreneurship is one of the major ways to solve some of the socio economic
problems that are facing some nations, especially problem of high unemployment
and poverty. Entrepreneurship is a process undertaken by the government to
lessen the level of poverty in the economy. One of the major challenges facing
developing and underdeveloped countries of the world is poverty. It has been so
endemic as a result of the high rate of unemployment that has become the major
characteristic of the developing and underdeveloped countries of the world. The
study focused on the effect of entrepreneurship development on poverty
alleviation in Nigeria. It was concluded that Entrepreneurship development is a
key instrument for poverty reduction; stimulating employment and economic
growth in developing countries. Entrepreneurship boosts economic growth,
enhances educational a ainment and increases the rate of economic growth and
for Nigeria to move out of the disturbing high level of poverty, adequate a ention
must be given to the growth of entrepreneurship. The study recommends that
Entrepreneurship development should be planned into the school's curriculum to
promote human empowerment and development through entrepreneurial
education and training and also the federal government should provide enabling
environment conducive for the smooth operation of both indigenous
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entrepreneurs and foreign investors' in order to boost the economy, reduced
unemployment and ravaging level of poverty in Nigeria.
Word Count:220
Keywords: Employment, Entrepreneurship development, Economic growth,
& Poverty alleviation
Introduction
Entrepreneurship development is considered as a way to tackle some of the socio
economic problems that bedeviled some countries presently, especially problem
of high poverty and unemployment 1. The role of entrepreneurship is to promote
prosperity by establishing new jobs, decreasing the level of unemployment and
increase economic growth and development of a region 2. They also increase
productivity by introducing new innovation and speed up structural changes by
forcing existing business to reform and increase competition 3. Entrepreneurship
development contributes to poverty alleviation when it creates employment
through the startup of new entrepreneurship or the expansion of existing ones
and they increases social wealth by creating new markets, new industries, new
technology, new institutional forms, new jobs and net increases in real
productivity, increases income which culminates in higher standards of living for
the populationthen it is logically to state that if the number of entrepreneurs of any
given country increase, the poverty indicators will decrease and vice versa.
Entrepreneurship remains the gateways to sustainable wealth creation in Nigeria
. It was advocated that if Nigeria desire to move out of the high level of
unemployment and ravaging level of poverty, adequate a ention must be giving
to the growth of entrepreneurship 5. The poverty situation in Nigeria has indeed
assumed a crisis dimension. Records from the Bureau of statistics show that about
67% of Nigerians live below the poverty line 6. The Nigeria government through
most of her policies and programmes has made tremendous effort towards
changing the scenario in the country. Despite the effort of government in this
4
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direction, the “poverty virus” is ge ing more entrenched and spreading faster
and wider among the populace. This incidence is higher among the youth who
falls within the age bracket of 15 to 35 7. The untrained and unskilled youth grows
into an unemployable man who cannot be employed because of his lack of
marketable skills to be engaged in a job that can adequately support his family 7.
The best remedy for poverty alleviation in any country of the world lies in
encouraging more on business activity and startup the new ventures through
entrepreneurship development. Moreover, entrepreneurship provides a basis for
economic change through new knowledge creation and application.
Entrepreneurship promotes income empowerment in an economy and in the
modern world; entrepreneurship provides a new approach for fighting poverty
and stimulating economic growth in developing countries. One line of thinking
about poverty reduction has developed around the idea of entrepreneurial
activities in the form of new venture formation, innovation and high-growth
firms. In Nigeria most of the poverty alleviation measures or initiatives are
embedded in entrepreneurship but have suffer several challenges culminating
into their failure. This was as a result of political and policy instability, poor
mechanisms of sustainability, lack of transparency and accountability,
inadequate coordination of various programmes, inefficient budgetary
management, absence of effective collaboration and complementation, absence of
agreed poverty reduction agenda and failure of policy mechanism targets 8.
Despite the colossal amount of resources commi ed to those programmes, the
poverty situation aggravates, and more and more people fall into the poverty
region instead of escaping. The study tends to examine the effect of
entrepreneurship development on poverty alleviation in Nigeria.
Statement of the Problem
One of the major challenges facing developing and underdeveloped countries of
the world is poverty. It has been so endemic as a result of the high rate of
unemployment that has become the major characteristic of the developing and
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underdeveloped countries of the world 7. Poverty still remains the major obstacle
to the success of the struggle for the optimum utilization of human resources for
both social and economic development of nations. More than a billion people, live
in extreme poverty 9. Poverty in Nigeria is becoming widespread and severe and
in spite of the Nigeria's vast resources, the country is known for her low Gross
Domestic Product (GDP), low per capital income, high unemployment rate, low
industrial utilization capacity and high birth rate. Both scholars and policymakers
have proposed that entrepreneurship is an effective means for economic
development and poverty alleviation in impoverished and lower income regions
of the world 10.
The problems of poverty in Nigeria is multifaceted, among which are , lack of
access to good health facilities, high infant mortality rate, lack of essential
infrastructure, unemployment, underemployment and corruption. Poor people
lack the capacity to meaningfully participate in the economy, either as producers
of goods and services or as suppliers of labour. There is a close relationship
between employment performance and poverty prevalence: poverty rates have
remained roughly constant in the same manner as the recorded unemployment
rate since the 1980s. The rate of poverty in Nigeria may be related to the problem of
inequality in distribution of resource, high unemployment, low per capital
income, high level of illiteracy etc. The goal of addressing poverty might remain
intangible unless much emphasis is laid down on the development of
entrepreneurial skill. Poverty has negative implications in people's lives and its
devastating and humiliating effect on human and national development cannot
be underestimated. For instance poverty has been associated with poor health,
low level of education or skills and high rates of disruptive or disorderly behavior
among others.
Nigeria's unemployment and high poverty level poses even greater threat to its
development, security and peaceful co-existence. The depth and extent of global
poverty would be far greater without the actions of entrepreneurs who have
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created jobs and wealth. This clearly signifies that entrepreneurship is a good tool
in fight poverty. The reduction of poverty is the most difficult challenge facing any
country in the developing world where on the average majority of the population
is considered poor. Poor people have severely limited access to, and control over,
key assets, including land and physical and human capital. Lacking production
and labour market endowments, the poor have low income and low
consumption. In Nigeria, not only do many people live below the poverty line but
they also stay poor for long and sustained periods. Many of these chronically poor
people only emerge briefly from poverty because of seasonal employment, but
lack the impetus to contribute to technological change and economic growth and
development. The Nigeria government have introduced and established various
programmes, policies and agencies saddled with the responsibility of alleviating
poverty in the country. However, despite this policy stance very li le seems to be
accomplished in terms of real impact of the plight of the poor.
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 access to finance on health-care (mortality rate)
within the study areas.
ii.
Determine the impact of social amenities on standard of living in the study
areas.
iii.
Investigate the impact of education on illiteracy rate in the study areas.
Research Questions
The under listed questions were raised so that the study could be anchored upon
it.
i.
How does access to finance influence health-care (mortality rate) in the
study areas?
ii.
How does social amenities influence standard of living in the study areas?
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How does education influence illiteracy rate in the study areas?
Hypotheses
Based on the variables of this study, these null hypotheses were formulated for the
research work.
iii.
H₀₁: There is no significant relationship between access to finance and health-care
(mortality rate) of selected Local Government Areas in Kwara State.
H₀₂: There is no significant relationship between social amenities and standard of
living of selected Local Government Areas in Kwara State.
H₀₃: There is no significant relationship between education and illiteracy rate 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.
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.
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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.
Entrepreneurship can be define as the processes of emergence, behavior and
performance of entrepreneurs 4. 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 new sets of a itudes and culture for the
a ainment of future challenges 8.
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
expand a business 13. The aim of entrepreneurship development is to enlarge the
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base of entrepreneurs in an economy in order to accelerate the pace at which new
ventures are created thereby speed up creation of jobs and economic growth 14,15,16.
Entrepreneurship development involves three types of related activities that
stimulate, support and sustain the practice of entrepreneurship. This process
involves various stakeholders that include the government and its agencies,
academic institution`s at all levels, primary, secondary and tertiary education and
technical or vocational training, and the private sector that includes entrepreneurs
and large companies 13.
Concept of Poverty
One of the major challenges facing developing and underdeveloped countries of
the world is poverty. It has been so common problem for all is that the high rate of
unemployment and that has become the major obstacle of the developing and
underdeveloped countries of the world. Although the level and extent of poverty
and unemployment has been observed to be different within and across the
nations and it is still remains the major obstacle to the optimum utilization of
human resources for both social and economic development of the nations. The
World Bank indicates that poverty is categorized as both absolute and relative 17.
When poverty is said to be absolute, it describes as a lack of resources to meet the
physical needs for survival, a lack of basic security, the absence of one or more
factors that enable individuals and families to assume basic responsibilities and to
enjoy fundamental rights 17.
On the other hand, relative poverty can be categorized in relation to particular
groups or areas in relation to the economic status of other members of the society
which is interpreted as a lack of resources to achieve a standard of living that
allows people to play roles, participate in relationships, and live a life that is
deemed normative of the society to which they belong 17. Poverty results from and
even consists of a lack of basic securities, which not only include financial
resources, but also education, employment, housing, health care and other related
aspects leading to deprivation 17. The World Bank also believes that political
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instability, lack of improvement in infrastructure, inadequacy of national policy
and structural adjustment, lack of investment are among the main causes of
poverty 17.Poverty is widely understood as the condition of living on an income
below a certain minimum threshold. The World Bank defines those living on
under US$2 a day as living in poverty, and those living on under US$1.25 as living
in extreme poverty internationally 18.
Individual countries generally have their own poverty lines, based on a basket of
„essential‟ goods, including the cost in that country of obtaining 2100 calories, a
minimum for healthy functioning 18. Poverty also relates, however, to other
deprivations such as poor health, lack of education, vulnerability, exposure to risk
and powerlessness 18.On the other hand, the four broad categories of assets have
been identified by Rogerson in 1999 for measuring poverty in the context of South
African perspective these are; i. Human capital, such as labour, education, health,
ii. Social and institutional assets, such as household relations, trust, access to
decision-making, iii. Natural resources, such as land, water, common property,
and, iv. Human made assets, such as housing, productive infrastructure, social
infrastructure 19. The individuals, households and communities have or secure
access to and those who are these assets managed, they are less vulnerable, on the
other hand, those who are the greater the losses of their assets have more
insecurity and they have associated poverty 19.
However, poverty is a state of absolute economic deprivation in which the
individual cannot independently have access to the basic human life-sustaining
essentials such as food, clothing, protection, and shelter 20. The Western societies
have become less tolerant against poverty over time, on the other hand, Asian
societies tolerate high economic inequality or poverty 21.
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Entrepreneurship Development and Poverty Alleviation Strategy
Alleviating Poverty through Entrepreneurship Education
Entrepreneurship education seeks to provide students with the knowledge, skills
and motivation to encourage entrepreneurial success in a variety of se ings 22.
Entrepreneurship education is known as a specialized knowledge that inculcates
in learners the traits of risk-taking, innovation, arbitrage and co-ordination of
factors of production for the purpose of creating new products or services for new
and existing users within human communities 23. Entrepreneurial education is
considered central to the economic development of nations 24. Entrepreneurship
education has to increase entrepreneurial self-efficacy, self-employment, and
risk-taking a itude of the entrepreneur 25. Entrepreneurship education creates
enormous business opportunities and trains people with innovative enterprise
skills to grasp the opportunities for starting new entrepreneurial activities 25.
Entrepreneurship education is one way of addressing poverty reduction, as there
is strong empirical evidence suggesting that economic growth over time is
necessary for poverty reduction.
Entrepreneurship boosts economic growth, enhances educational a ainment and
increases the rate of economic growth 26. The World Economic Forum in 2009
claims that the three relationships are suggestive of productive outcomes
emanating from education provision 26. For example, in eradicating extreme
hunger and poverty even if developing countries focus on innovation, creativity,
talent and resources to overcome poverty, they lack the infrastructure and the
expertise to support such an objective 26. These deficiencies could be overcome
through capacity building through entrepreneurship education to transform
these assets into products and services, thereby creating more jobs, enhancing
their global trade opportunities and reducing the incidence of poverty 26.
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Entrepreneurship and Business Environment
Alleviating Poverty through Micro, Small & Medium Enterprises
Micro, Small & Medium Enterprises (MS&MEs) has been played an importance
role for development of the economic growth of a country as well as alleviating
poverty through new jobs creation and provides income for the people 27.
MS&MEs not only help during the period of economic growth but also in
economic recession 27. The strong turbulence in the world economy in 1970s had
made many large firms in developed countries lay off their employees then
MS&MEs were regarded as the problem solver to these structural changes 27. The
strategic importance of micro, small and medium-sized enterprises in national
economic development is widely recognised by many countries, developed and
developing countries alike 28. Simultaneously, there have been reports and
evidence of contributions that MS&MEs make in the process of industrial
development 28. It was noted that MS&MEs consist of 91–93% of the total industrial
establishments in countries such as Singapore, Taiwan, Thailand and South Korea
28
. In these countries, contributions of MS&MEs to employment ranged from 35 to
nearly 61% with the contribution to value added ranging between 22 and 40% 28.
In Malaysia, MS&MEs accounted for about 84% of manufacturing establishments,
while their contribution to total value added and employment was about 28 and
38%, respectively 28. Moreover, there has been evidence that MS&MEs link
themselves with large and multinational companies as has been the case in Japan,
the United States, the United Kingdom, Canada, Germany etc 28. MS&MEs remain
a vital force in the manufacturing sector and their importance has increased rather
than diminished in many countries 28. An ILO study in 2003 examined firms with
fewer than 10 workers found that they generated 58% of total employment in
Paraguay, 54% in Mexico, and 53% in Bolivia, on the other hand, its contribute
approximately 31% of overall GDP in the Dominican Republic, 13% in Kenya, and
11% in Pakistan 30.
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Alleviating Poverty through Social Entrepreneurship
Social entrepreneurship is now creating new business model. It also bridges an
important gap between business and social action. Social entrepreneurship,
commonly defined as entrepreneurial activity with an embedded social purpose 31.
Social entrepreneurship is perceived to be about applying the expertise, talents
and resources of entrepreneurs to the variety of problems developing countries
face, such as education, health, personal safety and security, poverty alleviation,
social advancement, environmental sustainability, and so forth 32. Social
entrepreneurship has developed a global phenomenon that influences the society
by using innovative approaches to elucidate social problems 33. Therefore, Duke
University's Fuqua School of Business, the Center for the Advancement of Social
Entrepreneurship (CASE) writes, Social entrepreneurship is the process of recognizing
and resourcefully pursuing opportunities to create social value with the innovative
method. Social entrepreneurs are innovative, resourceful, and result-oriented, who draw
upon the best thinking in both the business and nonprofit worlds to develop strategies that
maximize social impact. These entrepreneurial leaders operate in all kinds of
organizations: large and small; new and old; religious and secular; non-profit, for-profit,
and hybrid 33.
The term “social entrepreneurship” is used to refer to the rapidly growing
number of organizations that have created models for efficiently catering to basic
human needs that existing markets and institutions have failed to satisfy 34. Social
entrepreneurship combines the resourcefulness of traditional entrepreneurship
with a mission to change society 34. Social entrepreneurship offers insights that
may stimulate ideas for more socially acceptable and sustainable business
strategies and organizational forms, because, it contributes directly to
internationally recognized sustainable development goals, social
entrepreneurship may also encourage established corporations to take on greater
social responsibility 34. Finally, Social entrepreneurship paves the way to a future
that may allow coming generations to satisfy their needs be er than we are able to
satisfy even the basic needs of today's population 34. Social entrepreneurship is
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thus having profound implications in the economic system: creating new
industries, validating new business models, and re-directing resources to
neglected societal problems 31.
The World Bank brings social entrepreneurs with poverty-fighting ideas into
contact with partners that have the resources to help them implement their vision
34
. In 2003, World Bank President James Wolfensohn awarded more than US$6
million in seed money to be shared among 47 small-scale, innovative
development projects in 27 countries 34.
Alleviating Poverty through Women Entrepreneurship
Entrepreneurship is today considered to be a relevant vehicle for economic
development and women contribute to it significantly worldwide: indeed, in
2010, 187 million women were involved in creating and operating enterprises,
meaning that almost 42% of entrepreneurs in the world were women 35. On the
other hand, however, women have a number of parental duties and inflexible
household obligations which they try to effectively combine to maintain a balance
between running a business and running a home 36. Moreover, women to date
represents an important engine of economic growth for developing countries as it
has a leading role in generating productive work, achieving gender equality and
reducing poverty 35. Global Entrepreneurship Monitor (GEM) in 2004 showed that
women perform 66% of work globally and produce more than 50% of food
globally and these women turn locally available raw materials into processed and
finished goods for sale, therefore making them innovators in business 17. Women
entrepreneurship is relatively new area of research which originated in the mid1980s 36.
Three stages can be illustrious in the research into women entrepreneurship 36. The
first stage, before the 1970s, was a move from the gender-neutral position to the
male-specific position 36. The second stage, from the 1970s to the beginning of the
1990s, was conventional in nature, indicating how women are perceived in
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relation to men 36. Finally, the third, postmodernist, stage began to study the
otherness of women entrepreneurship 36. The postmodernist context makes it
possible to ask questions about how women perceive being entrepreneurs and
business owners 36.
Female entrepreneurship can be divided into two categories: the traditional
generation of entrepreneurial women, concentrated around businesses involving
household services, which require reduced skills and experience; on the other
hand, the modern generation, more actively involved in businesses more oriented
towards profit and creating new markets 36. Women entrepreneurship is
becoming gradually popular across the globe.
The participation of women is progressively being observed as one of the major
contributors in economic growth. Regardless of their involvement in small or
medium scale enterprises or in the informal or formal sectors, their contribution to
output and value addition is considerable 37. Women entrepreneurship is not only
necessary for their economic survival but also for strengthening the social system
37
.
Poverty Alleviation Strategies in Nigeria
In Nigeria, the federal government has initiated several measures and policies to
reduce the level of poverty among the masses. Poverty alleviation programmes
are categorized into two periods, and this includes Pre-Structural Adjustment
Programme and Post Structural Adjustment Programme era. The Pre-SAP era,
includes Agricultural Development Programme, Rural Banking Programme,
Operation Feed the Nation, River Basin Development Authorities, Free and
compulsory primary education, Federal Low-cost Housing Scheme, Strategic
Grains Reserve Programme, Rural electrification scheme, National Agricultural
Land Development Authority, Agricultural Credit Guarantee Scheme and Green
revolution 38. The post-SAP poverty alleviation programs were put in place to
cushion the outcomes for instance, People`s Bank of Nigeria, National Directorate
for Food, Roads and Rural Infrastructure, National Directorate of Employment,
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Entrepreneurship and Business Environment
Family Economic advancement Programme, Community Banks programme,
Family Support Programme and Be er Life Programme were implemented.
However, most of these programmes failed to meet up with their objectives, due
to lack of mechanisms for sustainability, inadequate coordination of various
programmes, inefficient budgetary management, absence of effective
collaboration and complementation, lack of transparency and accountability,
failure of policy mechanism targets, political and policy instability and absence of
agreed poverty reduction agenda 39. On the return to democracy in the year 1999,
the government realizes that about 70 percent of the populations are living in
abject poverty, this led to the launching of the Poverty Alleviation programme
(PAP). The programme provided jobs to 200,000 people. Despite these efforts
poverty remained higher in the country 40. The failure of this programme, led to
the establishment of National Poverty Eradication Program (NAPEP), with the
aim of coordinating all poverty alleviation programs from the national level to all
the local governments in Nigeria.
NAPEP has been structured into four schemes and these include: Natural
Resources Development and Conservation Scheme, Social Welfare Service
Scheme, Youth Empowerment Scheme and Rural Infrastructure Development
Scheme. These programmes were designed to eradicate absolute poverty, a sum
of six billion Naira was approved in the year 2001. The major difference between
NAPEP and previous poverty reduction projects was that it coordinates the
activities of other relevant ministries, parastatals and agencies nationwide. Even
though, NAPEP appears to be capacious programmed but poverty level remained
unchanged 38.
Theoretical Framework
The study is anchored on Human Capital Theory propounded by Robert (1991).
He advocates that education is a tool for improving human capital, stimulating
labour productivity and boasting the levels of technology across the globe. He
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Entrepreneurship and Business Environment
encourages spending on nation's workforce because expenditure on education,
training and development is a productive investment. Besides, human capital
improvement through quality education and training is a critical factor that
propels economic growth and development in many parts of the countries.
Human capital can have major effects on an individual's risk of poverty or success.
It was indicated that human capital significantly affects people's earning, and
consequently lack of human capital can place an individual at risk for poverty.
According to Rank (2004) and Darling (2002), individuals with greater human
capital are more likely to be competitive in the labor market than those who lack
human capital. Human capital is seen as a set of skill/characteristics that increase
workers' productivity and performance in any organization.
Human capital has played a positive significant role in economic development,
productivity, education, growth and innovation which has been stated as a
justification for government subsidies for education and job skills training.
Human capital improvement through quality education and training is a critical
factor that propels economic growth and development in Nigeria. The theory is
relevant to the study because it emphasis that when people acquired quality
education and skill training they will contribute to economic growth and
development by establishing and managing new venture, creating employment
which will improved the standard of living of the people. McClelland's'
achievement motivation theory (1961) McClelland, advocated that some people
have need for achievement, some for power and others for affiliation.
People with strong need for achievement tend to be highly motivated by
challenging and competitive work situations. He asserts that a high need for
achievement in a national population is necessary to launch and sustain a high
level of economic development which means that there is a correlation between
high achievement needs and high performance. The high achievement is linked
with entrepreneurial spirit necessary to take some risks and develop country's
economic resources. The relevance of this theory is that when youths are
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Entrepreneurship and Business Environment
sufficiently motivated to have high need for achievement in life through
entrepreneurship education and training, there is greater tendency for them to set
up their own businesses after graduation without waiting for white collar jobs.
Empirical Studies
Effect of Entrepreneurship Training and Education on Poverty Alleviation
Entrepreneurship training and education entails philosophy of self-reliance such
as creating a new cultural and productive environment, promoting new sets of
a itudes and culture for the a ainment of future challenges 8. Entrepreneurship
education prepares youths to be responsible and entering individuals who
become entrepreneurial thinkers by exposing them to real life learning
experiences where they will be required to think, take risks, manage
41
circumstances and incidentally learn from the outcome . Entrepreneurship
Training will equip the people with skills for constant improvement and
innovation in their undertaken. The entrepreneurship development programme
in Nigeria is designed to help an individual in strengthening his/her
entrepreneurial motivation and in acquiring skills and capabilities necessary for
playing his/her entrepreneurial role effectively 41.
Entrepreneurship education creates enormous business opportunities and trains
people with innovative enterprise skills to grasp the opportunities for starting
42
new entrepreneurial activities .
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
entrepreneurial development is proxied with access to finance, education, social
amenities and new business ventures. Also, the dependent variable which is
poverty alleviation is measured with the healthcare (low mortality), low illiteracy
level, improved standard of living and job opportunities.
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Entrepreneurship and Business Environment
Conceptual Framework for the Study
Entrepreneurial
Poverty Alleviation
Development
Healthcare (low mortality)
Access to finance
Education
Low illiteracy level
Social amenities
Improved standard of living
Job opportunities
New business ventures
Source: Field Work by Researcher, 2022
Methodology
This study adopted survey design. The study focused on 50 respondents from
Ilorin East (Oke-Oyi) Local Government Area (LGA), 50 respondents from Ilorin
South (Fufu) LGA, 50 respondents from Ilorin West (Oja-Oba) LGA, 50
respondents from Offa LGA, and 50 respondents from Ekiti (Ilofa) LGA making a
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total of 250 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; 180 male which is 72% and 70 female which amounts to 28% of the
total respondents.
Using Krejcie and Morgan Table
Population size is 250 while sample size is 152
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.
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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
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.
Results and Discussion of Findings
Demographic Data Analysis
Table 1: Demographic Characteristics of Respondents
Demographic Characteristic
Frequency
Percentage
Analysis of Gender
Male
Female
Total
180
72
70
28
250
100
Analysis of Age
18-21
2
0.8
22-25
13
5.2
26-30
21
8.4
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31-35
48
19.2
36-39
79
31.6
40 and above
87
Total
34.8
250
100
Ph.D.
2
0.8
M.Sc.
14
5.6
B.Sc.
22
8.8
Analysis of Educational Qualification
HND
46
18.4
OND
77
30.8
SSCE
89
35.6
Total
250
100
Analysis of Religion
Christianity
102
40.8
Islam
99
39.6
Others
49
19.6
250
100
Total
Source: Field Survey, 2022
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Entrepreneurship and Business Environment
Presentation of Data
The following results presented above were based on the research questions and
hypotheses raised, which the study has sought to answer as follows:
Research Questions
i.
How does access to finance influence health-care (mortality rate) in the
study areas?
ii.
How does social amenities influence standard of living in the study areas?
iii.
How does education influence illiteracy rate in the study areas?
Hypotheses I
H₁: There is significant relationship between access to finance and health-care
(mortality rate) of selected Local Government Areas in Kwara State.
H₂: There is no significant relationship between access to finance and health-care
(mortality rate) of selected Local Government Areas in Kwara State.
To test this hypothesis, statement used for table 4.2 was used.
Table 2: Analysis of the impact of access to finance on healthcare within the study areas
Description
Strongly Agree
Frequency
Percentage
23
9.2
Agree
105
42.0
Disagree
76
30.4
Strongly Disagree
Total
46
250
18.4
100
Source: Field Survey, 2022
266
Entrepreneurship and Business Environment
The influence of access to finance on healthcare within the study areas was not
effective.
Contingency Table
CELL
O
E
O-E
(O-E)2
(O-E)2
E
C1
23
62.5
-39.5
1560.25
24.96
C2
105
62.5
42.5
1806.25
28.9
C3
76
62.5
13.5
182.25
2.92
C4
46
TOTAL
250
62.5
-16.5
272.25
4.36
χ2 = 61.14
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 = 61.14. 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 61.14 while χ tabulated value is
267
Entrepreneurship and Business Environment
7.82. This shows that χ2 calculated of 61.14 is greater than χ2 tabulated of 7.82 i.e. χ2
calculated (61.14) > χ2 tabulated of 7.82. Therefore, we accept H1 which states that
there is no significant relationship between access to finance and health-care
(mortality rate) of selected Local Government Areas in Kwara State.
Research Question 2:
How does social amenities influence standard of living in the study areas?
Hypothesis II
H₁: There is significant relationship between social amenities and standard of
living of selected Local Government Areas in Kwara State.
H₂: There is no significant relationship between social amenities and standard of
living of selected Local Government Areas in Kwara State.
To test this hypothesis, statement used for table 3 was used.
Table 3: Analysis of the impact of social amenities on standard of living
Description
Frequency
Percentage
Strongly Agree
18
7.2
Agree
39
Disagree
122
Strongly Disagree
Total
15.6
48.8
71
250
Source: Field Survey, 2022
268
28.4
100
Entrepreneurship and Business Environment
The impact of social amenities on standard of living
in the study areas
was not
significant.
Contingency Table
CELL
O
E
O-E
(O-E)2
(O-E)2
E
C1
18
62.5
-44.5
1980.25
31.68
C2
39
62.5
-23.5
552.25
8.84
C3
122
62.5
59.5
3540.25
56.64
C4
71
TOTAL
250
62.5
8.5
72.25
1.16
χ 2 = 98.32
Source: Field Survey, 2022
2
χ calculated = 98.32
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 98.32 while χ tabulated value is
2
2
2
7.82. This shows that χ calculated of 98.32 is greater than χ tabulated of 7.82i.e. χ
2
calculated (98.32) > χ tabulated of 7.82. Therefore, we accept H1 which states that
there is no significant relationship between social amenities and improved
standard of living of selected Local Government Areas in Kwara State.
Research Question 3: How does education influence illiteracy rate in the study
areas?
269
Entrepreneurship and Business Environment
Hypothesis III
H₁: There is significant relationship between education and illiteracy rate of
selected Local Government Areas in Kwara State.
H₂: There is no significant relationship between education and illiteracy rate of
selected Local Government Areas in Kwara State.
To test this hypothesis, statement used for table 4 was used.
Table 4: Analysis of the impact of education on ill
Description
Frequency
Strongly Agree
37
Percentage
14.8
Agree
129
51.6
Disagree
53
21.2
Strongly Disagree
31
Total
12.4
250
100
Source: Field Survey, 2022
The impact of education on illiteracy rate in the study areas was not impressive.
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
129
62.5
66.5
4422.25
70.76
C3
53
62.5
-9.5
90.25
1.44
C4
31
62.5
12.4
153.76
2.46
TOTAL
250
χ2 = 85.06
Source: Field Survey, 2022
270
Entrepreneurship and Business Environment
χ2 calculated = 85.06
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 85.06 while χ2 tabulated value is
7.82. This shows that χ2 calculated of 85.06 is greater than χ2 tabulated of 7.82 i.e. χ2
calculated (85.06) > χ2 tabulated of 7.82. Therefore, we accept H1 which states that
there is no significant relationship between education and illiteracy rate of
selected Local Government Areas in Kwara State.
Discussion of Findings
Table 1 show that one hundred and eighty (180) respondents representing 72% of
the sample size were male while seventy (70) respondents representing 28% of the
sample size were female. Thus, majority of the respondents were male. The
religion shows that one hundred and two (102) respondents representing 40.8% of
the sample size were Christians while ninety nine (99) respondents representing
39.6% 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 two (2) respondents
representing 0.8% 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 nine (79) respondents representing 31.6% 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.
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Entrepreneurship and Business Environment
The academic qualification shows that two (2) respondent representing 0.8% of
the sample size was Ph.D. holder, fourteen (14) respondents representing 5.6% of
the sample size were M.Sc. holders, twenty two (22) respondents representing
8.8% of the sample size were B.Sc. holders, forty six (46) respondents representing
18.4% of the sample size were HND holders, seventy seven (77) respondents
representing 30.8% of the sample size were OND holders, while eighty nine (89)
respondents representing 35.6% of the sample size were SSCE holders. Thus,
majority of the respondents were SSCE holders.
Table 2, it showed that the influence of access to finance on healthcare within the
study areas was not effective.
Table 3, it showed that the impact of social amenities on standard of living in the
study areas was not significant.
Table 4, it showed that the impact of education on illiteracy rate 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 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 health-care (mortality rate) within the study areas. Table 2, it
showed that the influence of access to finance on healthcare within the study areas
was not effective.
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Entrepreneurship and Business Environment
The result of the findings in the second research question determined the impact
of social amenities on standard of living in the study areas. Table 3, it showed that
the impact of social amenities on standard of living in the study areas was not
significant.
The result of the findings in the third research question investigated the impact of
education on illiteracy rate in the study areas. Table 4, it showed that the impact of
education on illiteracy rate 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.
Entrepreneurship development should be inculcated into the school's
curriculum to promote human empowerment and development through
entrepreneurial education and training.
ii.
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.
iii.
Government should create awareness on the benefits and role of
entrepreneurship development to individual towards poverty alleviation,
economic growth and development.
iv.
There should be sound national economic policy with respect to SMEs,
including recognition of the vital contribution of entrepreneurship to
national economic development.
273
Entrepreneurship and Business Environment
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:
i.
The study can be replicated in other states or geopolitical zones other than
Kwara State, Nigeria where the study was carried out.
ii.
Also, this study suggested that future studies should include larger
population study in order to increase the generalisability of the findings.
274
Entrepreneurship and Business Environment
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281
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CHAPTER
12
HUMAN RESOURCE MANAGEMENT AND
EMPLOYEES' JOB PERFORMANCE
OLONI Olu Daniel & ADEOLU-AKANDE Modupeola Atoke
Abstract
This research investigated the impact of Human Resource Management (HRM)
on employees' job performance, a study of Fast-Moving Consumer Goods
(FMCG) firm. The study adopted survey research design. Primary and secondary
sources of data were used in the study. A sample size of 306 participants
determined with Taro Yamane formula was drawn from a population of 1302
employees of PZ Cussons Nigeria Plc. Questionnaire was used to collect data for
the study. Pearson Product Moment Correlation Coefficient on SPSS was used to
test the hypotheses. The finding indicated that training and development has
significant impact on employees' efficiency. Also, it was found that there is
relationship between compensation management and quality of work. Therefore,
it was concluded that effective HRM practices led to improvement in employees'
job performance. The management should ensure that its HRM policies and
practices are continuously improved to meet the changing needs of its
employees'. Also, the organizational should ensure that its HRM practices are
regularly updated to meet up with global best practices in employees'
management.
Word Count:171
282
Entrepreneurship and Business Environment
Keywords: HRM, employee, job performance, compensation management,
training and development.
Introduction
Business organization over the years are facing challenges in both internal and
external work environment, private sector organizations therefore cannot achieve
their aims and grow without effective management of their employees' (Elumah,
Ibrahim & Shobayo, 2016). In the midst of the global competition, it is very
essential to identify and retain efficient, competent and knowledgeable
employees' in the organization by developing and maintaining an effective
workforce through Human Resource Management (HRM) (Samwel, 2018).
Employees are the organization's key resource and the success or failure of an
organization is based on the ability of the employers to a ract, retain, and reward
appropriately talented and competent employees. Employees' willingness to stay
on the job largely depends on the HRM policies and practices of the organization
(Armstrong, 2005). In an a empt to ensure employees optimal performance and
retention, organizations need to consider a variety of appropriate ways to manage
their employees' (Nafiseh & Fereshte, 2015). It has been argued that the degree to
which employees are satisfied with their job and their readiness to remain in an
organization is a function of their HRM policies and practices (Dike, Okeke, &
Mbah, 2016).
Employees play very important role in the daily operations of any organizations
especially where the markets are very competitive (Mandani & Minhaj, 2016). The
company will have a high chance of achieving it goals, if its employees are
properly managed. Private sector organizations as compared to the public sector
devote more a ention and resources to HRM an activity as a result of this,
employees' performance is enhanced (Mandani & Minhaj, 2016).
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Entrepreneurship and Business Environment
HRM is the management functions is basically concerned with the
implementation of strategies and policies relating to the management of
individuals at work (Pa erson, 2002 as cited in Jolaosho, Shodiya, Olajide, &
Akintan, 2018). It reflects a quantitative and strategic approach to workforce
management demanded by cooperate management to gain a competitive
advantage, and to utilize limited and highly skilled workers (McLean et. al, 2004 as
cited in Jolaosho, et al., 2018).
Statement of the problem
One of the challenges confronting organizations today is how to gain advantage
over its competitors via satisfying the needs of its customers and achieving its
goals of profit maximization. This can only be achieved by having competent and
motivated staff who are commi ed to the wellbeing and success of the
organization. Employee performance plays an important role in competitive
environments, where good performance leads to success and poor performance
can lead to failure. Competent human capital could transform other resources
(such as money, machine, methods & methods & material) into products or
service. Moreover, every organization needs result-oriented employees to
compete in the market. Therefore, organizations should focus on ensuring that the
employees are adequately taken care of through effective human resource
management. Business organizations rely of their HRM practices to increase their
employees' ability and performance in order to achieve their objectives. For this
reason, this research investigated the impact of HRM on employees' job
performance in a Fast-Moving Consumer Goods (FMCG) firm.
Objective of the Study
The research is set to achieve the following objectives:
i.
To investigate the influence of training and development on employees'
efficiency
ii.
To investigate the influence of compensation management on quality of
work
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iii.
iv.
v.
To investigate the influence of HR policies and practices on employee
productivity
To investigate the influence of talent management on employees' job
outcome
To investigate the influence of performance appraisal on profit margin
Research Questions
The research methodology is designed to address the following research
questions:
i.
What is the influence of training and development on employees'
efficiency?
ii.
What is the influence of compensation management on quality of work?
iii.
What is the influence of HR policies and practices on employee
productivity?
iv.
What is the influence of talent management on employees' job outcome?
v.
What is the influence of performance appraisal on profit margin?
Research Hypothesis
Hypothesis I
H0: There is no significant impact of training and development on employees'
efficiency.
Hypothesis II
H02: There is no relationship between compensation management and quality of
work.
Literature Review
Human Resources Management (HRM)
Nowadays it is impossible to overestimate the importance of employees'
performance for organizational success. Employees' are the organizations' human
capital and their performance is a key indicator for the company to achieve its
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objectives (Ali, Nor, Mudaser, & Muhammad, 2017). Human resource
management refers to the policies and practices involved in carrying out the
human resource aspects of a management position which involves human
resource planning, job analysis, recruitment, selection, orientation,
compensation, performance appraisal, training and development and labour
relation. The policies, practices and systems if effectively used by human resource
management will influence the employees' behaviour, a itude, performance and
productivity (Shaukat, Ashraf & Ghafoor, 2015). Human resource management
practices are designed and implemented in such a way that human capital plays a
vital role in the achievement of the organizational goals (Delery & Doty as cited in
Hassan, 2016).
HRM has been defined in many ways. For example, Scholar and Jackson, cited in
Hassan (2016) defined human resource management practices as a process which
involves a racting, motivating and retaining employees to ensure the survival of
the organization. Schneider (1994) as cited in Jalagat and Revenio (2016), defined
human resource strategy as the plans to achieve the organization goals by
maximizing the use of human resources. It also addresses the common question of
the company's present position and the direction the company should follow. In
relation to human resource management, he exclaimed that a aining an effective
human resource management can be done through promoting employee
motivation, commitment and development, which in turn create a positive
relationship between human resource strategy and the firm's strategy.
Human resource strategy is instrumental in meeting the sustainable competitive
advantage by organizations as well as the realization of the organization's goals.
Its role extends to combining tactics, programs and purposes to meet the overall
company's performance and the main duties of companies. Furthermore, the focal
point of human resource strategy is defined with the employees having superior
qualities, unique competencies and capabilities to match the customers'
requirements of customer satisfaction.
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Kelvin and Kinemo (2018) posit that the fundamental tasks in human resources
management include compensation management, training and development,
recruitment and selection, performance appraisal, talent management, employee
welfare, discipline etc. Compensation management requires integrating
employees' processes and information with business process and strategies to
achieve optimal organizational goals and objectives (Samwel, 2018). It has been
found that there is a significant relationship between compensation strategies and
employee performance. For example, Nafiseh and Fereshte (2015) found that a
firm's ability to a ract, motivate and retain employees by offering competitive
salaries and appropriate rewards is linked to firm performance and growth. On
the other hand, Hasan (2016) found that the compensation system used for the
employees has significant effects on individual performance and organization
effectiveness. Therefore, in an ever-competitive business environment, many
companies globally, in Africa, regionally and locally are today a empting to
identify innovative compensation strategies that are directly linked to improving
employee performance (Aliku, Morka, & Igemohia, 2020). Companies tend to
initiate compensation strategies in the aspects of direct and indirect financial
compensation as well as benefits that motivates and ultimately improves
performance. The financial compensation such as wages, salaries or performancerelated payments is adhered to in many organizations to retain employees and
outwit their competitors.
Employees' Job Performance
According to Iswati and Anshori (2011) as cited in Mohammadi and Sherafati
(2014), performance is known as an important factor to management. The output
of an individual or a team in an organization is considered as the performance,
which relates to the authority and responsibility to achieve objectives in a lawful
manner in tackling with the standards of morale and ethics. Hameed and Waheed
(2011), explained that employee performance means employee productivity and
output as a result of employee development and which such performance will
ultimately affect the organizational effectiveness. Two types of performance can
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be stated financial and non-financial. Nkechi (2013), productivity is the driving
force behind an organization's growth and profitability. Productivity is the
relationship between output of goods and services of workers of the organization
and input of resources, human and non-human, used in the production process.
On the other hand, productivity is the ratio of output to input and the higher the
numerical value of this ratio, the greater the productivity. Therefore, productivity
can be applied at any level, whether for individuals, work unit or organization.
When employees are unproductive, they take longer time to finish tasks, which
cost employers more money because of the time wasted. The importance of higher
productivity of the employees in public enterprises cannot be neglected, which
include the following; higher incomes and profit, higher earnings, increased
supplies of both consumer and capital goods at lower costs and lower prices,
ultimate shorter hours of work and improvements in the general economic
foundation of workers (Nwachukwu, 2010 as cited in Nkechi, 2013).
Theoretical Framework
Contingency Theory
According to Waiganjo, Mukulu, and Kahiri (2012), in contingency theory,
otherwise known as "best fit" human resource management, there are no
universal prescription of human resource policies and practices. It is all
contingent on the organization's context, culture and its business strategy.
Contingent scholars have argued that human resource strategy would be more
effective only when appropriately combined with a specific organizational and
environment context. This theory emphasized the relevance of ensuring that
human resource strategies are appropriate to the circumstances of the
organization, including the culture, operational processes and external
environment. Human resource strategies have to take account of the particular
needs of both the organization and its people. It examines the close link between
strategic management and human resource management by assessing the extent
to which there is vertical integration between an organization's business strategy
and its human resource management policies and practices.
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Configurational Theory
According to Halim and Alkhazali (2015), combination of internal and external
strategies activates success. An organization with bundles of human resource
practices should have a high level of performance, once it also achieves high levels
of fit with its competitive strategy. Emphasis is given to the importance of
bundling strategic human resource management practices and competitive
strategy, so that they are interrelated and also complement and reinforce each
other. Implicit in, is the idea that practices within bundles are interrelated and
internally consistent, and has impact of productivity because of multiple
practices. Employees' productivity is a function of both ability and motivation.
Though, there are many ways in which employees can acquire needed skills such
as careful selection and training and multiple incentives to enhance motivation,
different forms of financial and non-financial rewards. An important theme that
emerges in relation to best practice human resource management is that
individual practice cannot be implemented effectively in isolation (Storey, 2007,
cited in Halim & Alkhazali, 2015), rather combining them into integrated and
complementary bundles is crucial. MacDuffie, 2005 as cited in Halim and
Alkhazali (2015), argues that a bundle creates the multiple, reinforcing conditions
that support employee motivation, given that employees have the necessary
knowledge and skills to perform their work effectively in the configuration
school, cohesion is thought to create synergistic benefits which in turn enable the
organization's strategic goals to be achieved, the aim of bundling is to achieve
coherence which exists when a mutually reinforcing set of human resource
practices have been developed that jointly contributed to the a ainment of the
organization's strategies for matching resources to organization needs,
improving performance, quality and achieving competitive advantage in
commercial enterprises. The approach of bundling is holistic as it is concerned
with the organization as a total entry and addresses what needs to be done as a
whole in order to enable it to a ain its corporate strategic objectives.
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Empirical Review
Jolaosho et al. (2018) examined how the recruitment and selection process impinge
on job performance in the Nigeria telecommunication industry. Survey research
design was used in the study. The target population comprised all the members of
staff of MTN telecom service Centre in Abeokuta. Simple random sampling
technique was adopted to select 50 members of staff of the customer service
center. The analysis was conducted using SPSS AMOS (maximum likelihood
method of parameter estimation) based on the information collected from the
field. The chi-square statistic was reported to test the goodness of fit of the model
where p-value indicates that the data fit the model. Also, the Root Mean Square
Error of Approximation (RMSEA), the Comparative Fit Index (CFI) Values for the
CFI greater than 0.94 suggesting good fit between data sets and path model.
Estimated path coefficients for the hypothesized model differed significantly
from zero, X2 (9, N=45) = 10.923, p < .01 which indicated that the data fit the model.
Squared multiple correlation values for overall performance (R2 = .56) and key
performance indicators (KPIs) (R2 = .58) indicated that the predictor variables
capture large percentages of the observed variance in the dependent variable.
Hameed, Ramzan, Zubair, Ali and Arslan (2014) examined the impact of
compensation on employee performance (empirical evidence from banking
sector of Pakistan). A questionnaire was designed to solicit response from the
respondents on factors related to compensation like indirect compensation,
wages, salaries and employee's performance. Approximately 45 banks were
included to collect data. 200 questionnaires were distributed among the full-time
working employees of banks selected randomly for the study. Correlation
analysis and Regression analysis using SPSS 17.0 version was conducted on the
collected data. The findings suggested that compensation has positive impact on
employee performance. It is proved from correlation analysis that all the
independent variables have weak or moderate positive relationship to each other.
Regression analysis shows that all the independent variables have insignificant
and positive impact on employee performance.
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Daniel (2019) investigated in his study the effects of incentives on employee's
productivity. The study had the following objectives: The relationship in
organization, to determine the influence of employee's productivity incentives on
employee productivity in the organization, to analyze the link between incentive
and employee productivity in organizations in Nigeria. To achieve these goals, a
questionnaire was designed based on the objectives. The completed
questionnaires were processed and analyzed using Pearson Product Moment
Correlation Coefficient. The findings of this study revealed that there was a
positive relationship between incentives and productivity, alongside monetary
incentives, another key factor in motivating employees is to involve them in the
process aimed at a aining organizational effectiveness because without their cooperation the organization cannot perform. The study recommends the
establishment of a unit to look at issues of incentives that will enhance
productivity.
Dike et al. (2016) in their research work examined the effect of monetary incentives
on worker's performance with particular reference to selected firms in Anambra
State. This research work became necessary following incessant conflict in the
organization as a result of the incentive scheme. The population of used for the
study was 1019; a sample size of 287 participants was determined using Taro
Yamane formula which was considered adequate for the study. The principal
instrument for collection of primary data was the questionnaire which was
structured in five-point Likert scale. A content validity approach was adopted.
The result gave a reliability coefficient of 73% which indicated an acceptable
degree of consistency. The findings indicated that monetary incentives had
significant impact on worker's performance.
From the empirical review conducted it is suggested that there is a relationship
between HRM and employees' job performance, it is possible to recognize the
existence of a trend that suggest that HRM practices when properly implemented
can influence the employees to performance excellently.
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Methodology
In this study the major design that was used is survey design. This is an efficient
way of gathering primary data from a population to help address the research
problem being investigated. The selected population of the study was 1302
employees of PZ Cussons Nigeria Plc. Male and female employees' at various
levels of the organization participated in the study. A sample size of 306
respondents participated in the study. 150 copies of the questionnaire were
returned and used in the analysis, indicating a response rate of 49.02 per cent.
Participants in the study were selected using simple random sampling technique.
The data for this work would be collected through primary and secondary
sources. The primary source involved the use of questionnaire method, while
secondary data was go en from journals and textbooks. Pearson Product Moment
Correlation Coefficient on SPSS was used to test the hypotheses.
Results and Discussions
Hypothesis I
H01: There is no significant impact of training and development on employees'
efficiency
Correlations
Training and development
Training and
Employees’
development
efficiency
1
.353**
Pearson Correlation
Sig (tailed 2)
.000
150
N
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Entrepreneurship and Business Environment
Employees’ efficiency Pearson
.353**
Correlation
1
.000
Sig. (2 tailed)
150
150
N
Source: Correlation is significant at the 0.05 level (2-tailed).
Hypothesis II
H02: There is no relationship between compensation management and quality of work.
Correlations
Compensation Quality of work
management
Compensation management
1
.457**
Pearson Correlation 1
.000
Sig. (2 tailed)
150
150
.457**
1
N
Quality of work
Correlation
Sig. (2 tailed)
Pearson
.000
150
150
N
Source: Correlation is significant at the 0.05 level (2-tailed).
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Entrepreneurship and Business Environment
In the test of hypothesis one, the data indicated that about 35.3 per cent variance in
employees' efficiency was due to training and development, this indicated that
training and development has a significant impact on employees' efficiency in PZ
Cussons Nigeria Plc. While the test of hypothesis two indicated that 45.7 per cent
variance in quality of work resulted from compensation management, this
indicated that a relationship existed between compensation management and
quality of work in PZ Cussons Nigeria Plc.
Conclusion and Recommendations
The study investigated Human Resources Management (HRM) and employees'
job performance in FMCG (PZ Cussons Nigeria Plc). The summary of the findings
are as follows:
i.
Training and development has significant impact on employees' efficiency.
ii.
There is relationship between compensation management and quality of
work.
The finding indicated that a significant relationship existed between HRM and
employees' job performance. Based on the analysis and summary of findings, it
could be stated that organizations are understandably concerned with human
resource management for the achievement of employees' effectiveness and
invariably sterling organizational performance and competitive advantage.
Therefore, it was concluded that effective HRM practices led to improvement in
employees' job performance.
Based on the conclusion drawn from the findings, the following
recommendations are made:
i.
The management should ensure that its HRM policies and practices are
continuously improved to meet the changing needs of its employees'
ii.
The organizational should ensure that its HRM practices are regularly
updated to meet up with global best practices in employees' management.
iii.
Management should pursue policies which facilitate harmonious
workplace, thus, fostering employee commitment and satisfaction.
iv.
The management should ensure that both monetary and non-monetary
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Entrepreneurship and Business Environment
v.
incentives are provided regularly to motivate its employees'.
Effort should be made by both the management and the employees to
maintain a cordial relationship in the organization.
References
Ali, Z., Nor, H., Mudaser, J., & Muhammad, A. H. (2017). Impact of human capital
management practices on employees' job performance. International Post
Graduate Conference on Applied Science & Physics, 4-11.
Aliku, I. H., Morka, T. O. & Igemohia, F. (2020) compensation management and
employee performance; manufacturing industry I. O. Focus Palarch's.
Journal of Archaeology of Egypt/Egyptology, 17(7), 87 92-8810.
Armstrong, M. (2005). A hand book of human resource management practice (9th ed.).
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Daniel, C. O. (2019). Effects of incentives on employee's productivity. International
Journal of Business Marketing and Management, 4(1), 41-48.
Dike, L., Okeke, G., & Mbah, S.I. (2016). Effect of monetary incentives on workers
performance: A Study of selected firms in Anambra state. International
Journal of Current Research, 8(10), 40151-4016.
Elumah, L.O., Ibrahim, O.M., & Shobayo, P.M. (2016). The impact of financial and
moral incentives on organizational performance: A study of Nigerian
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Halim, M., & Alkhazali, Z. (2015). The influence of strategic human resource
management on firm performance of Jordan's corporate organization.
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342-353.
Hameed, A., & Waheed, A. (2011). Employee development and its effect on
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Hammed, A., Ramzan, M., Zubair, H. M., Ali, & Arslam (2014). Impact of
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Compensation on Employee Performance (Emperical Evidence from
Banking Sector Pakistan)
Hassan, S. (2016). Impact of human resource management practices on
employee's performance. International Journal of Academic Research in
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Jalagat, J., & Revenio, C. (2016). A critical review of strategic human resource
management and organizational performance. Global Journal of Advance
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Jolaosho, S. O., Shodiya, O.A., Olajide, A. R., & Akintan, I. O. (2018). The effect of
recruitment and selection process on job performance in
telecommunication industry in Nigeria: An assessment of MTN customer
service centre Abeokuta. International Journal of Management and Economics
Invention, 4(2), 1639-1651.
Kelvin, M. M., & Kinemo, S. M. (2018). The role of green recruitment and selection
on performance of processing industries in Tanzania: A case of Tanzania
Tobacco Processors Limited (TTPL). International Journal of Human Resource
Studies, 8(4), 35-46.
Mandani, K.F., & Minhaj, S. (2016). Effects of motivational incentives on
employee's Performance: A case study of banks of Karachi, Pakistan, South
East Asia.
Mohammadi, R., & Sherifati, M. (2014). The impact of strategic human resource
management on organizational performance. Indian Journal of Scientific
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Nafiseh, R., & Fereshte, D. (2015). The role of human resources management on
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Nkechi, A. O. (2013). Human resource planning and employee productivity in
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International Journal of Research in Business Studies and Management.5 (3), 2430.
Shaukat, H., Ashraf, N., & Ghafoor, S. (2015). Impact of human resource
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Waiganjo, E. W., Mukulu, E., & Kahiri, J. (2012). Relationship between strategic
human resource management and firm's performance of Kenya's corporate
organizations. International Journal of Humanities and Social Science, 2(10), 6270.
297
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CHAPTER
13
DEVELOPMENTAL VALUES OF STREET TRADING
IN THE GROWTH OF NIGERIA ECONOMY
OLATUNJI, Olanrewaju Patrick & FAMUYIWA Oladapo Abdullateef
Abstract
This study sought to assess the developmental values of street trading in the
growth of Nigeria economy. Qualitative data was collected using questionnaires
structured interviews, observation. Moreover, ge ing the actual number of street
traders was not easy due to the nature of their operation. However, the researcher
managed to interview 50 respondents using an interview guide from markets in
Oyo and Osun State. This study reveal that most of the Street Traders are well
educated and live a good life because the returns on their business is enough to
take good care of them and family. In the same vein, the research found out that
both male, female, children are fully involved. Also, the study showed that
despite numerous constraints, the street traders developed survival and
resistance strategies that enabled them to maintain their livelihoods from public
urban space. The study suggested that the local governments be allowed to be
independent to allow managing the street trading efficiently and effectively. The
study revealed that the local governments can generate enough revenue to sustain
their operation.
Word Count:175
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Keywords: Developmental values, Local Authority, Local Government,
Operation, & Street Trading.
Introduction
Street trading has been in existence since ancient times. It is on record that
merchant's travel selling their wares in the town by going from house to house but
also traded in neighboring Countries. Therefore, street trading as an occupation
has been in existence for hundred of years and is considered as the economic
backbone of many town, villages and cites (Bromely, 2005). Street trading from all
indications has come to stay in view of the high rate of unemployment and lack /or
dearth government job in the country. This unfortunate phenomenon has
increased the rate involvement of people street trading which involves both
educated and non-educated people.
This Street Traders are integral part of both less city and urban economics around
the world, offering easy access to a wide range of affordable goods and services in
public domain. They sell everything from fresh vegetables to prepared foods,
from garments, house accessories, garments, crafts and from consumer
electronics to auto repairs to haircuts. The street trading in no small measure has
reduced the spate of unemployment in Nigeria. These set of traders are found in
every nooks and crannies of villages, towns, cities, garages, major roads and even
on the streets displaying and moving from one place to another scouting for those
who will patronize their wares.
It is no gain saying that significant proportions of labour force in developing
countries are street traders. This indicates that the street trading are generally
sources of employment for both men and women.
The street trading goes with its own limitation and challenges. The street trading
demands a certain level of skill because there is a keen competition among the
traders either for space in the streets or access to customers. Apart from local
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Entrepreneurship and Business Environment
government agents that collect fees, in some areas, there are “area boys” who
claim to be the landlord and the authority, who daily collect money from the
traders before they are allowed to occupy a space or to be able to trade, Failure to
comply with their order may lead to exposure to harassment, evictions and
confistication of their wares. This poses a lot of challenges for those who work in
the streets. The street traders are always under the scorch of the sun during dry
season, exposed to harsh harma an and without hesitation move from one corner
to another during rainy season.
These traders and their families typically rely on profits from vending as their
primary source of household income (Mituallah 2010). Despite these challenges,
street trading has allowed the vendors the opportunity to fend for themselves and
their families. It is pertimen o state that street traders provide employment not
only for themselves but for porters, security guards, transport operators, storage
providers and their clerk or errand boys. In the same, vein they generate revenue
for the local governments for licenses, permits, fees, fines and taxes (WIEGO,
2021).
Statement of problem
Street trading is being embraced by many people that cut across literate, illiterate,
female, male and has remains the main source of income for most of them. This
sector is faced with a lot of challenges that are numerous. It is difficult for them to
access loan and overdraft from banks to complement their capital for the growth
and diversification of their business. Equally, they are harassed by government
agencies and even the 'area boys' which portray them as irrelevant in the society.
These negative trends in no small way have been limiting and create hindrance to
the growth of their business thereby depriving them to contribute to economic
growth at the expected rate.
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Research Question
In view of the above Mentioned Problems Confronting Street Traders hence the
Following
i.
What are the Challenges faced by the Street Traders?
ii.
How can the Street Traders be Supported or Encouraged?
iii.
How do they Contribute of the Economy
Hypothesis
HO: Street Trading Promote Economic Growth H1: Street Trading Don't Promote Economic Growth
Literature Review
Economic growth can be defined as the increase or improvement in the inflation
adjusted market value of the goods and services produced by an economy over
time (wikipedea). Economic growth exerts a direct impact on the quality of the
people's standard of living (a term used to describe the level of income,
necessities, luxury, and other goods and services) (Balance 2021).
Also, economic growth is an increase in the amount of goods and services
produced per head of the population over a period of time (Roser, 2021).
Therefore, Economic growth means an increase in the quantity and quality of the
economic goods and services that a society produces. The economic growth in a
broad term is the process of increasing a country real gross domestic product
(GDP). The growth can be measured as an expansion of real GDP or gross national
product (GNP) over a given period.
While street trading is defined as the selling or offering for sale of any article in the
street. Trader who use the public highway to sell goods or service. Bhowmik
(2005) defined a street vendor as a person trading from the street who offers goods
for sale structure from which to sell. While Mitullah (2005) described street trade
as an activity which takes place outside enclosed premises or covered workspace
on street pavements, sidewalks, bus stops, and in other public places. Therefore
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Entrepreneurship and Business Environment
the street traders can be described as traders who belong to informal sector who
move from one place to another to satisfy or meet demand, want of final
consumers in their bid to earn a daily living.
Many people join this informal sector and thus become street traders because
there is no option left and not that they desire to. A lot of people lost their jobs
through retrenchments and they are compelled to keep body and soul together,
pay their children school fees etc. Also shortage of jobs in the formal economy is
another salient reason that force people to the informal sector. In view of high rate
of unemployment many people have engaged themselves in street trading, this is
not even limited to Nigeria even in some other developing countries. Over the last
three decades, many countries have witnessed a dramatic increase on the
informal economy, with street vending among the most visible trades, and
informality is now seen as a generalized mode of metropolitanurbanization' (Roy
2005). The international Labour organization (ILO) (2018) assents that more than 6
out 10 workers as well as 4 enterprises among 5 in the world operate in the world
operate in the informal economy. This indicates that the informal sector, where
street trading stems from, is overwhelm dominating the economy, hence the need
for Governments to review their stand and position on street trading there is no
doubt that the street trading is contributing immediately to poverty alleviation
and serving as an alternative for those who cannot find formal employment.
Empirical Review
Street trading can be defined as the selling of goods & services in the street without
using a permanent built up structure (Bhowmik, 2005).Street vendor include all
those that sell goods & services in a public space such as regulated street markets,
transportation, huts,natural market areas, sidewalks mainly along the streets.
Street trading is caused by poverty, broken homes / marriages, where children are
left to fend for themselves. It needs to be stressed that, street hawking has been
observed to be highly deleterious to children's psychological, social, physical and
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mental development. Another major cause of child abuse is economic. This is
associated with poverty. This hawking of wares and food product on the roads
and Motor Parks is an economic means of making ends meet, either sponsored by
parents or the child personal interest (Ebigbo, 2003).
There is no doubt that street trading is now trending in the country and the whole
world with the increase in the influx of people daily in the street trade. This
informal sector has account for over 70% of the urban employment in Nigeria
(Onodugo 2016). This is evident in most urban of the country, where people
migrates from villages for survival. In a global perspective people migrate from
the Africa, most of the time risking their lives to enter Europe. On arrival they find
securing employment very difficult, despite having official documents. In view of
this, they have no choice but to create their own work, including selling goods on
the streets (Pillar 2021).
Challenges experienced by street traders: The underlistedhave been identified as
some of the challenges faced by the street traders while on duty; these are:
I.
Lack of Financial Support: The major hindrance in growing street trading
is finance. Difficulty to access finance has been the cog preventing the street
traders to expand and formalizing their informal business. The banks are
always reluctant to grant the street traders loan and / or overdraft due to
the fact that they may not be able to provide collateral or a credit worthy
guarantor. This makes granting credit to street traders una ractive to
conventional banks. Akinbode et al. (2016) found that access to finances is
one of the key factors associated with low firm growth in emerging
countries. Chimucheka&ors (2013) confirmed that financial institutions
such as banks anticipate collateral security for risk purposes from
applicants, but the majority of street traders assets that can be acceptable by
banks as collateral. The government policy and practices hamper the
dynamism and feexibility that allow street trading activities to exist.
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Entrepreneurship and Business Environment
ii.
Lack of Government Support: The unabated economic recession,
lingering job loss, and continuous rise in unemployment rate occasioned
the rise and increased flow of street traders. This phenomenon a ract the
a ention of the Nigeria governments at all levels to make all sorts of
repressive legislation against the street traders even with the additional
caveat that purchasing from street traders is criminalized for instance, the
Lagos state's law enforcement unit – kick against indiscipline – is a constant
threat to street traders (Roever, 2021). In Abuja, the Abuja Environmental
Protection Board, ACPB frequently harassed and sometimes manhandled
the street traders (Ekeanyanwu, 2012). However, this is not limited to
Nigeria even in India, it was revealed that traders are exposed to all forms
of harassment by the municipal authorities and police due to not having
trading licences and that municipal authorities raid their places and
confiscate goods (Mulhusamy & Ibrahim, 2016).
iii.
Hygiene and Lack of Ablution Facilities for Traders: The street traders
daily are faced with conducting their livelihoods in public spaces, with
woefully inadequate infrastructure, particularly access to portable water
and toilets. They are found around nearby bush or corners of the streets to
ease themselves where they are made to pay out of the measured earned to
enjoy the service. Carr (2021), examined how inadequate access to water,
sanitation, and hygiene has affected street traders and found that the
resulting economic, health and environmental burdens can have long term
consequences that may further entrench workers' poverty and exclusion.
iv.
Business Space for Trading and Storage: it is quite unfortunate that most
of the blocks of shops built by Governments meant for the street traders are
bought and controlled by powerful interests because the street traders
cannot afford it.
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Entrepreneurship and Business Environment
Contributions: Despite all the challenges inhibiting and militating against street
trading, it is performing important and result oriented services that uplift and
grow and the economy. The most important of roles are:
I. Source of Income: Many people have been rusticated and retrenched from
their formal employment which made them to lose their source of income
(Liman 2021) the street trading provides a be er alternative to the formal
employment. Thus allows the street traders to provide the main source of
income for their households, bringing food to their families and paying
school fees for their children (Dipeolu et al, 2007).
ii. Formal Economy: The street traders perform a key and important function
to the formal sector of the economy. They ensure that goods produced by
the manufacturer (even hundred of miles away) are taken to the door steps
of the consumer. The street traders go to the extent of defending the
producers of goods (despite the fact they have not met) to convince the
buyer to purchase the goods. Therefore, the informal sector assists in no
small measure in sustaining the formal sector. WIEGO (2014) confirmed
the extensive link of street trading to the formal sector of the economy.
iii. Job Creation: In view of the size of the street traders especially when they
converge to trade in a place (market) a lot of transporters are found with
their vehicles like trailers, buses, cars, tricycles and machines to convey
goods and street traders to their destination. Also, they create job for a lot of
informal security guards, porters, storage providers. It is no gain saying
that they assist in providing source of income to “Area boys' who would
have constitute a security threat to the environment (Anetor, 2015)
iv. Revenue generation to Local Government: The Local Government official
on either daily, weekly or monthly basis collect payments for fees, licenses,
permits, taxes and fines from street traders before they can operate within a
public space
Street trade also adds vibrancy to urban life and in many places is considered a
cornerstone of historical and cultural heritage (WIEG 2014).
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Entrepreneurship and Business Environment
Shortcomings
However, the rate at which street traders constitute social and environmental
nuisance in Nigeria and areas covered has become worrisome (Nduka & Duru,
2014). Ugochukwuet, 2012; Amoo et al, 2012). The extents that the street traders
constitute social and environmental challenges are well explained by the above
named scholars. The menace of activities created by the street traders include
operating on sidewalks and on the main roads, streets; thereby making vendors
and the pedestrians struggling for space. Also, they allow for conflict of vehicular
and pedestrian traffic in view of occupation by the street trader of roads.
Despite the challenges faced by the traders they increase in population daily,
doing what they know best and contributing to the economic growth of the
country.
Argument in favour and against Street Vending
There is no clear, simple and absolute way of determine which set of arguments is
correct. Both sets are correct to some degree, and it is possible to mix the two sets,
arguing that some types and locations of street vending are desirable while others
are undesirable. The arguments for and against street vending have obvious class
and ideological dimensions (Bromely, 2000: 10; Bromely, 2000:11).
Further elaborates that street vending can be portrayed as a vivid example of grass
– roots entrepreneurship, individualism and the exercise of civil liberties, and the
a empts to suppress, regulate or control street vending may be viewed as
authoritarianism, statism, censorship, or the protection of oligopolies established
by off – street traders.
Similarly, those who adopt a populist, democratic socialist perspective focusing
heavily on the needs, rights and potentials of ordinary people, tend to advocate
for street vending because of the income opportunities it provides. Many of the
arguments against street vending are then dismissed as “blaming the victim”
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Entrepreneurship and Business Environment
criticizing the poor when the socio economic system is characterized by gross
inequality and exploitation. Much of the research on the informal economy based
on Valodia, Lebani and skinner (2005: 26) has concentrated on explaining the
growth of the informal economy. From an employment policy perspective there is
an urgent need for research aimed at identifying areas for growth in informal
employment including experiences of street vendors and the policies needed to
realize this potential. The reality is that most of these people are illiterate and have
no skills to fill any of the existing vacancies in Nigeria.
Global perspective
Street vending is an integral component of urban economies around the world
and has become a common phenomenon in most of the developing countries. It
has existed for hundreds of years and is considered as a cornerstone of many cities
historical and cultural heritage (skinner 2011).
Street vending constitutes a significant proportion of the informal sector activities
in Africa Asia, and Latin America. For example, it is estimated that street vending
account for 15% to 25% of total informal employment in Africa cities (skinner,
2011). In Asia countries such as India, street vending account for about 3% of the
total non – agricultural employment, which translate to more than 3.1 million
street traders nationwide (Unni, 2010). In Latin America such as Peru, street
vending constitutes about 9% of the total informal employment which translate to
about 240,000 vendors (Herrera et al, 2011). Street vending in recent year has
become an area of interest and has culminated into heated debate. Extant
literature has argued that street vending in Nigeria has exposed children to abuse
such as physical injuries, abandonment, sexual abuse and child labour (Akpan &
Oluwabamide, 2010). It is also argued that the non – regulation of street food
vending in Africa; particularly Nigeria pretends danger of outbreak of food
poisoning (Nurudeen et al., 2014). The history of street trader in Kenya dates back
to many years. Until the early 1990 street trading was largely the main domain.
Over the years, street selling has become very popular and highly.
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Entrepreneurship and Business Environment
Sought after across all social status especially in Urban areas. It is a common scene
nowadays to see middle and upper – class consumers purchase assorted goods in
traffic jams and by roadsides on their way to or from work and other commuters.
Hawkers have devised a number of ways to convey their goods aside from the
traditional head porterage to include wheel barrows, table – tops and mobile
kiosks among others.
Street vendors can and often do “forestall' off – street business, a racting potential
purchasers as they walk into concentration. Indira (2014: 5) reported that street
vending can be portrayed as a vivid example of grass – roots entrepreneurship,
and in the process the authorities lack the capacity to acknowledge that the urban
poor street vendors provide goods including food at low prices.
Hence the section of urban poor namely street vendors support and subsidizes the
existence of other section of the urban poor by providing them cheap goods,
including food coupled by the fact that middle income groups also benefit from
street vending because of the affordable prices they are offering. Similarly, those
who adopt a populist, democratic socialists perspective focusing heavily on the
needs, rights and potentials of ordinary people tend to advocate for street vending
especially as they are dismissed, as “blaming the victim” …criticizing the poor
when the socioeconomic system is characterized by gross inequality and
exploitation.
Gender differences in street trading
Based on one of the objectives, thus wanting to determine the gender
(bibliographical information), Aseidu et al (2008; 193) believe that due to limited
economic opportunities, which in turn are primarily due to gender bias in
education, women dominate the informal sector, as it offers the flexibility in
combing their activities with other household related ones, particularly taking
care of children. Men on the other hand, have been noted to join the street trade,
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Entrepreneurship and Business Environment
but leave while they are still young for other jobs in contrast women join the trade
later in life and continue until old age.
Furthermore, men are known to invest in more capital intensive and high profit
yielding businesses than women. Street vendors constitute a significant share of
total employment in the informal sector and street vending units constitute a
significant share of total enterprises in the informal sector. Women account for
more than 50% and up to 70% of informal employment in trade, except in those
countries (such as Tunsia and India) where social norms restrict women's mobility
outside the home (Chen, 2002: 4).
Legalizing Street Trading
Bhownmik (2003) states that one of the ways of legalizing street vendors is by
issuing licenses to them. The municipal authorities are thus able to keep a check
on the number of vendors and can also earn revenue through license fees and
other charges. Legalizing of street vending and eviction by the concerned
authorities provided this system is more liberal. Unlicensed street vendors are
vulnerable to all sorts of extortion from various quarters. The police and
municipal authorities extract rents for allowing them to operate. Studies on street
vendors indicate that around 20 per cent of the meager earnings of these people
are paid as rents. According to Bhowmik (2003), the underworld provided steps in
many places, ostensibly to provide protection. Vendors become victims of these
corrupt practices and also depend on them for the survival. Another aspect
connected with legalization is eviction. Besides causing financial hardship and
impoverishment, eviction leads to loss of dignity for the vendor. The policy lays
down that evictions should be avoided but where relocation of street vendors is
necessary, a minimum notice of 30 days should be served to them. It further notes
that vendors or their representatives should be involved in the planning and
implementing of relocation and efforts have to be made to ensure that vendors in
the new locality have the same earnings as the pre – evicted level (Bhoiwmik,
2003).
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Entrepreneurship and Business Environment
Theoretical Review
Scholars such as, (Skinner 2008) have found the study of street trading difficult to
categorise. The challenge emanates from the lack of analytical rigour and dearth
of studies that independently look at urban street trading. As a result, there are
competing theories regarding the role of street trading as an important economic
activity. Since street trading is largely considered as a mere spectacle of the urban
informal sector, most of the arguments on street vending are polarised into either
the Reformists or Marxist Theorectical discourses within the informal sector. The
reformist theory's view is that street vending contributes to the economic growth
through alleviation of poverty and unemployment. On the contrary the Marxist
theory does not acknowledge the informal sector contribution to national gross
domestic product (GDP). The theory states that there would be very li le loss to
the economy, if the informal traders are taken off their occupation.
According to Williams (2012), Street vending has been traditionally viewed from
two theoretical viewpoints:
i.
Modernisation Theory
ii.
Structuralist Theory
Modernisation Theory's news street vending as a remnant of a pre-modern era
that is slowly becoming extinct while the structuralists perceive street vending as
a survival tactic of last resort driven by economic necessity in the absence of
alternative means of livelihood. Contrary to the structuralist, contemporary
studies perceive street vending as a rational economic choice as expounded by the
Neoliberal, Bhowmik (2012). This study will be grounded with both the
structuralists and Neoliberal perspective whereby street vending is viewed as a
necessity-driven activity or a rational economic choice.
The street vendor has been categorized as survivalist entrepreneurs which are less
growth oriented (Berner, 2012). In the same vein, Gomez (2008) insisted that
majority of survivalist micro enterprises in developing countries do not pursue
expansion in their business rather they are necessity driven entrepreneurs that are
forced into selling due to joblessness or other economic shocks.
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Entrepreneurship and Business Environment
Methodology
The research used a case study which was an appropriate design for the
exploratory research project. In an effort to get an in – depth understanding
regarding the implication of street trading, qualitative research paradigm was
employed in a natural se ing. This approach is supported by flick (2007: 3) who
argues that qualitative research paradigm claims to describe life – worlds “from
the in out” from the point of view of the participants in the research project.
Target Population and the Chosen Sample
The target population of the research project was 50 who operated as street sellers
in the streets of Ibadan Oyo State and Osun State.
Data Collection and Analysis
Data was collected by means of semi – structured individual interviews,
interlinked with observation techniques and questionnaires Qualitative derived
data was analyzed through open coding. The information was then interpreted
and compiled into a research report.
Data Analysis, Results, and Discussions
Literature Review revealed that women account for more than 70% and up to 50%
of informal employment in trade except in countries such as Tunsia and India
where social norms restricts women's nobility outside the home (Chen, 2002:4).
Thus the report presents what was revealed by the findings of the research project.
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Entrepreneurship and Business Environment
Table 1: Age of t he Participants
Age
Number
%
Number
Male
%
Total
Female
%
Number
1-20
2
4
2
4
4
8
21-30
3
6
3
6
6
12
31-40
5
10
5
10
10
20
41-50
5
10
6
12
11
22
51-60
4
8
2
4
6
12
61- above
5
10
8
16
13
26
TOTAL
24
48%
26
52%
50
100%
Table 1 depicts 24 male respondents (48%) out of total respondent of 50 2(4%)
aged 1-20, 18, 3(6%) aged 21-30, 5(10%) aged 31-40, 5 (10%) aged 41-50, 4 (8%)
aged 51-60 while 5(10%) aged 61 and above. Also, Out of the 26 (52%) female
respondents 2(4%) aged 1-20, 3(6%) aged 21-30, 5(10%) aged 31-40 6(12%) aged
41-50, 2(4%) aged 51-60, 8(16%) aged 61 and above
Table 2: Academic Qualification
Primary
Secondary
Freque
Gender Frequency %
Tertiary
%
G
Gender
Female
Male
Female
6
12
Gende
ncy
20
13
26
r
10
16
Male
8
zF
10
Post Graduate
female
Female
Frequency %
6
Freque
%
Gend
ncy
4
er
2
12
5
Male
Femal
e
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Entrepreneurship and Business Environment
Table 2 shows that in Primary category 6 (12%) male, 13 (26%) female, in
secondary school cadre 6(12%), female 5 (10%) while in Post graduate 2 (4%)
Table 3: Sampling Distribution of Location
S/N
Name of the Market
Frequency
%
1. Bodija Market , Ibadan Oyo State
10
20
2. Scout Camp Market, Ibadan Oyo State,
10
20
3. Adelabu Shopping Complex, Ibadan Oyo State.
4. Igbonna Market, Osogbo, Osun State.
10
7
14
5. Orisunbare Market, Osogbo, Osun State.
7
6. Atakunmosa Market, Ilesa, Osun State
Total
20
6
50
14
12
100
Table 3 above reveals that 10(20%) each of the respondents were from Bodija
Market, Scout Camp and Adelebu Shopping Complex all in Ibadan Oyo State
respectively and 7(14%) each were from both Igbonna and Orisunbare Markets
from Osogbo, Osun State while 6(12%) came from Atakumosa Market in
IlesaOsun State.
Table 4: Stocks in Trade
*Food ------- Cooked, Raw, Pastry
*Drinks------ Satchet/ Bo led water, Juice & Wine.
*Household Durables ------- Children and Adult wares, Second Hand
Clothing, New *Clothes, Beddings.
*Traditional Medicine Sellers
*Electronics--------- All Electronic Appliances
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Entrepreneurship and Business Environment
Table 5: Experience on Trade
Years
Numbers of Street
Percentage %
Traders
0-1
----------
------------
1-5
5
10
5-10
6
12
10-20
11
22
20-25
9
18
25-30
8
16
30-40
5
10
40-Above
6
12
TOTAL
50
100%
Table 5 Indicates that 5 (10%) respondents have experience of 1-5 years, 6(12%)
have 5-10 years' experience, 11 (22%) have 10 – 20 years' experience, 9(18%)
Possess 20-25 years' experience, 8(16%) have 25-30 years' experience and 5(10
years) have 30-40 years of experience while 6(12 %) have 40 years and above.
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Entrepreneurship and Business Environment
Table 6: Estimated Monthly Revenue
Income per Month
Number of Street trader Percentage %
20,000 – 50, 000
12
24
50,000 – 100,000
06
12
100,000-200,000
07
14
200,000-300,000
04
08
300,000-400,000
11
22
400,000 Above
10
20
TOTAL
50
100
Table 6 depicts that 21(42%) generate income of N 300,000 and above monthly,
(inclusive of expenses and Tax). This indicates that despite the street trade is
informal are contributing to the nation's GDP in the Form of indirect taxes
Conclusion and Recommendations
Despite the shortcomings and the challenges faced by the street traders, This
paper has revealed the need for the governments to appreciate the importance
and impact it can make in the development of the economy. The Street Trade in
view of its volume and capacity can sustain The Local government can generate
enough revenue from the street trade if properly harness, in view of its volume
and capacity. A new study on how Street trade sustains local Government needs
to be researched into. This Golden Fleece has been allowed to waste away while
emphasis on the short comings and neglecting the productive aspect.
Nigeria should allow for the independent of local government, in the country. The
Local Government Should be at the front line in managing the street traders but
unfortunately the state governments have caged them resulting in our Local
Government been in active, ineffective, underfunded and Understaffed, winning
li le Local and National respect.
315
Entrepreneurship and Business Environment
The Government should be able to efficiently and effectively manage the street
trader in a way that their rights will not be trampled upon which will allow them
to contribute their own quota to the development of the economy. After all,
Section 16 of Nigeria's Constitution directs the government to.
“Protect the right of every citizen to engage in any economic activities outside
the major sectors of the economy”.
It also says the state is to:
“Control the National economy in such manner as to secure the maximum welfare,
freedom and happiness of every citizen on the basis of Social justice and equality of
status and opportunity”
316
Entrepreneurship and Business Environment
Endnotes
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Policy in Nigeria; Lagos; Olubamise Printers 1992
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Akpan N. & Oluwabamide, A. J. “The Menace of Child Abuse in Nigeria: A
Case Study of Street Hawking Uyo, AkwaIbom State. J. Soc. Sci, 24(3), 189-192.
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2021
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Aseidu, A. B. & Agyei – Mensah, S. “Traders on the run: Activities of Street
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Appel, J.M. Mixed Motives, Mixed Outcomes When Accused Parents
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Babie, E. & Mouton, J. The Practice of Social Research. Cape Town Dialogo
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BagoroAuduGani. Effects of Streets Trading on Urban Areas in Nigeria.
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Bromely, R. Street Vending and Public Policy; Global Preview International
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Dipeolu, O.A., Akinbode, O.S Income Generating Potentials of Street Food
Vending Businesses in Ogun State, Nigeria ASSET: An International Journal
(Senesc), 2(1) Accessed November 10th 2021
Flick, U. Managing Quality in Qualitative Research London; Sage
Publication Ltd. 2007. Accessed November 10th 2021
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November 10th 2021
Luther King Junior ZogliNonduduzoDladla. Assessing the Challenges
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State Nigeria. FUTY Journal of Environment. Accessed November 10th 2021
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Safety And Associated Food Handling Practices in Street Vending;
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Olaposi Titilayo Olubunmi “Towards the development of the Informal
Economy: The Case of Street Trading in Ile – Ife, Nigeria Accessed
November 10th 2021
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November 10th 2021
Miscellaneous
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Accessed November 10th 2021
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Ripples Nigeria Accessed November 10th 2021
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Bhowmuk, S. K. “National Policy for street Vendors; Economic and
P o l i t i c a l
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CHAPTER
14
BUSINESS ANGEL MODEL IN FINANCING SMALL AND
MEDIUM BUSINESSES SOUTH WEST NIGERIA
OLATOYAN Segun Anthony & ADEJUWON Oluwakemi Adefisayo
Abstract
Angel investors can also be referred to as business angels or informal investors.
These are prosperous and comfortable people in the society who are ready to
invest their money into small businesses especially feasible start-up firm or
nascent business while in many cases they request for ownership equity or some
form of convertible debt in exchange for their investment. Business Angels carry
out a crucial purpose in rendering seed capital or start up financing where the size
of the funding is considerably small and no other investor is ready to serve the
purpose. Small businesses are important innovators in most economic
development. It was observed that the death of many small businesses was due to
lack of fund to survive and or expand. Due to limited fund available to small
businesses to operate at the start up, they have to rely on personal resources, bank
credit, friends and relatives, trade finance, government aids and business angels
as primary sources of fund to commence operations and planning for future
development. This paper addresses the different the significant of business angel
and the impact on the small business. The study proposes an understanding to
fortify a very good structure in which small business can benefit abundantly from
business angel.
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Entrepreneurship and Business Environment
Word Count:207
Keywords: Business Angel, Network, & Small and Medium Enterprise Scale
(smes)
Introduction
Small and medium-sized enterprises (smes) account for a sizable proportion of
ventures and employment in the private sector of the world's most advanced
economies. Small and medium-sized enterprises (smes) are regarded as the
foundation and backbone of all economies as a key segment and player in national
development and improvement. They are frequently portrayed as capable and
productive job creators, the seeds of massive organizations, and the fuel for
national economic engines. SME in developed industrialized countries, the
private sector outperforms large corporations in terms of job creation monetary
systems.
The critical role they play in a country's economic development has been
overstated; smes are a significant source of financial development in developing
countries. They also play an important role in the development of industrialized
countries' economies. Smes have an advantage over their larger competitors in
that they can easily respond to changing economic conditions and are also
prepared to survive adverse economic conditions owing to their adaptability.
Access to capital is a critical issue for small company organizations during the
establishment, existence, and development processes. The current state of small
business in Nigeria reveals financial difficulties at the early stages of the life cycle,
indicating the need to increase the importance of alternative sources of external
financing and provide an instrument for governments and other stakeholders to
understand the smes financing needs.
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Financing is an essential element for any firm's growth and is necessary at all
stages of the firm's lifetime. The availability of funds has been identified as a
critical factor in the growth, development, and success of smes. Smes, on the other
hand, frequently face funding challenges; they consistently report higher
financing barriers than large enterprises. Bank credit/lending is the most
generally known external source of funds for certain smes and business
visionaries, who are heavily reliant on traditional debt to meet their start-up,
income, and investment requirements.
However, the existences of business angels have brought a new dimension the
access of funds to the small and medium enterprise in Nigeria. Business angels
play an vital role in SME finance by offering small loans to firms in their early
phases of growth. According to statistics, business angels provide about the same
amount of capital as formal funding financial specialists and support a big
number of enterprises. As a result, business angels help enterprises enhance the
flow of finance by making direct contributions. They do have a few negatives,
which are as follows: it takes a long time to find the right angel investor, they can
be dishonest, and the owner must give up some of his business share; many
investors sometimes ask for a percentage of the company's equity.
Literature Review
Concept of SMEs
Most of the definitions of a small business a empts to provide a proxy for what is
the essence of “smallness” in business units. Smallness is about being
autonomous yet having limited resources of manpower, time, skills, sales
turnover, expertise and total funds invested, and therefore having to be
dependent on external support. It is about having to cope with greater uncertainty
and about carrying greater risk while having few opportunities for risk spreading.
Small businesses are an important part of the private sector, refers to the Bank of
England reports, during 2000 in the UK, businesses with fewer than 50 employees
accounted for 45 per cent of employment and 37 per cent of the sales turnover of all
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businesses. The Department for Business, Enterprise and Regulatory Reform
(BERR), UK (2007) gives official definitions of small business as small firm that
have of up to 49 employees, micro firm has up to 9 employees, medium firm of 50249 employees and large firm of up to 250 employees and over.
Sources of Financing Small Business
Understanding finance for business can help business owners understand their
options for ge ing the money required to start or grow, and can also introduce
them to potential sources of finance. Capital as any form of wealth employed to
produce more wealth. Stated that while fixed capital is used to purchase a
company's fixed assets, working capital is used to sustain day-to-day operations
and growth capital is used to expand an existing business or to change its primary
direction. Raising capital from external investors in return for handing over a
share of one's business can be through equity finance.
Delineate equity as the finance contributed by the owner(s) of the enterprise,
equity financing can be an effective source of funding for entrepreneurial
ventures, particularly for businesses that cannot meet the funding requirements
to use only debt financing or that need more capital than realistically be raised
through debt. Equity financing for small businesses is internal capital supplied by
the principal owners while the remaining other equity is likely partially
composed of the “nearly internal funds provided by other members of the startup team, family and friends. Equity financing represents the personal investment
of the owner(s) of the business. The primary advantage of this type of financing is
that is does not have to be repaid with interest. Due to lack of fund to run the
business successfully, small businesses tend to rely on three main primary sources
of outside equity financing; Venture capital funds, Angel Investors, and Business
growth/Corporate investor.
Concept of Business Angels
The term business angel conceptually indicates former successful entrepreneurs
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or former successful leaders of certain companies – corporations which finance
start-up projects occurring as high-risk projects. They exercise their financial
investments in the way that they either personally or through their
representatives enter the ownership structure of the project or financially support
further development of a particular project.
An Angel Investor are normally a well-off individual that is looking for an
investment opportunity in an area that they understand, or have an interest in,
whereby they provide funding and sometimes expertise, in exchange for an
equity share of the business.11 Angel Investors as a high net worth individuals
who invest their personal capital in a small set of companies.
An Angel Investors are private investors, wealthy individuals, often
entrepreneurs themselves, who invest in business starts-ups in exchange for
equity stakes in the companies. Angel investors commonly show their readiness
to finance small business based on the recommendation from family and friends.
Frequently business angels come together and form groups known as angel
groups or angel networks, so, they combine their resources, capital, and necessary
data for the usefulness of each other. It was argues by that business angels are a
source of informal venture capital, who are wealthy individuals, rather than
financial institutions that tend to have considerable business experience and are
willing to invest in start-ups, early-stage or expanding enterprises9. It was
observed that angels release fund at an early stage of the business and adequately
provide few post-investment assistance to support the venture.
In legal terms, they are informal individual's investors who use their previously
acquired business experience and their financial arrangement to help and advice
young entrepreneurs and their small enterprises that prepare a promising
product for the market. The most important element in this process is business
value of business angels oriented on the so-called smart financing which includes
expertise, skills and a network of new business contacts. Based on the above, it can
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be concluded that business angels primarily invest in segments of economy they
are well-acquainted with and regions in which they previously worked. The main
reason for their economic activities is making profit, but also a certain personal
satisfaction in the creation of a new social value in an engagement in which large
investors showed no interest. Business angels are typically individuals who
possess certain capital from previous business activities, and who are willing to
invest in a small business owner who tries to place a new product or service on the
market, provided that they themselves get a share in the future profit.
As a rule business angels are individual financial investors who previously dealt
with some entrepreneurial or managerial business activities and acquired a
certain expertise and experience, while their investment, along with financial
investment, also involves a certain level of personal counselling in the future work
of the new small or medium sized enterprise12.
The predominant form of a business angel investment is equity deal investment
type, or, in other words, in exchange for the investment, a business angel gets a
share in the enterprise invested in. In this way, investors share business risk with
entrepreneurs, and are often personally involved in the management and
operational activities of the company in which they invested their funds. Such an
investment is eventually formed into a financial investment a convertible loan
which is transformable, and in which the business angel invests in the form of a
credit or loan. In case the agreed conditions are fulfilled, the loan need not be
returned, but is rather converted into equity. On the other hand, in the first phase
of activities, when the entrepreneur does not own anything except an elaborated
project, business angels except for financial investment, also invest their
experience, their own work and knowledge in the project. In this way, a business
angel can very successfully help the entrepreneur in the elaboration of his/her
business plan, production strategy, product definition, business model of market
approach, as well as facilitate contact with some potential partners in the market
and future clients or users of the product or service.
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Angel Investors Syndicates and Networks
Angel investors' syndicates are associations of angels, who combine their capital,
experience and knowledge in order to share risk and invest in be er and bigger
deals. The syndicate, which was established in Silicon Valley in 1995, named as
Band of Angels, is considered as the first angel investors' syndicate. Then were
formed and other angels' syndicates, such as Tech Coast Angels (1997), Sierra
Angels (1997), Common Angels (1997) and The Dinner Club (1999). They are
grouped according to sectors in which they invest, investors' gender, etc, such as
health care angel's association, female-angels' associations, national association of
cohesion and meeting the angel syndicates, in order to transfer knowledge and
experience, lobbying, data collection, etc. Angels' syndicates have appeared since
individual angels found advantages of working together, greater flow of
investment opportunities (deals), be er evaluation of investment opportunities
(due diligence), ability to make more and larger investments, and other benefits.
Angels' syndicates can be managed in two ways.
They can hire a professional manager, or may choose one or more members of the
syndicate who will manage them. A professional manager manages all things of
the syndicate, such as looking for interesting deals, analysing and evaluating
them and if there is an interesting deal, he recommend the syndicate to invest on it.
Manager for his work done in the syndicate can be paid through salary,
participates in part of the profits of a successful deals, or a combination of these
two ways of compensation. Syndicates managed by their members elect the most
prominent members to manage the syndicate's issues.
The members elected to manage the syndicate's issues in some cases are
compensated for their work, but in most of cases, they manage the syndicate's
issues without any compensation. These members are bound to find interesting
deals, to evaluate them and to present them to the other syndicate's members
eventually to invest in them. Angel syndicates organize meetings once a month,
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while some of them have meetings every week. They are more in the form of a joint
dinner at which syndicates' members discuss specific investment opportunities,
their characteristics, etc. At these meetings could be invited 1-3 entrepreneurs who
will present their business plans, under which angel investors would decide to
invest in their enterprises.
SME's Benefits from Angel Investors
Many researches certify that angel investors play an important, vital role in
financing small and medium enterprises and the development of the
entrepreneurship. The importance of angel investors for the development of small
and medium enterprises is evident in the following:
First, the amount of finances which is invested by angel investors, or being
planned to be invested, is significant.
Second, many entrepreneurs are interested in the so called “smart money”, which
would mean that angel investors in companies do not invest only money, but
expertise and know how as well, and due to this reason, angel investors are more
and more “interesting” for entrepreneurs in comparison to other sources of
capital.
Third, angel investors have a lot of experience in the business. During their work,
angel investors have earned many relationships, namely have created a network
of contacts like successful entrepreneurs, bankers, insurance companies,
accountants, etc. Once they invest in small and medium enterprises, they use
these contacts in order to help these enterprises to develop and reach positive
financial results.
Fourth, the importance of angel investors for small and medium enterprises is
linked to succession. It often happens that after retirement or death of the owner of
the enterprise, a part of his successors do not want (or cannot) carry on the same
business.
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A research made in Australia, 63% of businesses are in hands of the succeeding
first generation, and only 7% of businesses are led by the third and 4% by the
fourth generation, respectively. In such cases, business will survive, if it is
successful or it has the needed potential to be successful, thankful to angel
investors. However, the size and power of angel investors is not identified and
understood yet, although it is of special importance for the small and medium
enterprises and the entrepreneurship in general.
Therefore, angel investors have recently started creating their groups (syndicates)
and networks. These groups (syndicates) represent associations of angel investors
and they gather their capital, experience and knowledge in order to share the risk
and invest in greater and be er deals. On the other hand, angel investors'
networks represent organizations, whose initial aim is to connect owners of small
and medium enterprises with angel investors.
Theoretical Framework
Institutional Theory
Institutional theory a empts to explain the impact that contextual systems have
on organizational behavior and economic performance. Institutions as providing
the rules of the game in a society or, more formally, the humanly devised
constraints that shape human interaction. Institutional theory is comprised of
three categories: normative, regulatory, and cognitive. Sco defines normative as
the acceptable behavior and values of individuals and organizations. The
regulatory category consists of the laws and political power that regulate
individuals and organizations, and cognitive represents the influences that
develop through social interaction. Regulatory institutions, especially legal and
financial ones, tend be more fully developed and effective in developed countries,
especially in comparison to developing countries.
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The impact of the lack of institutional support in developing countries is a higher
cost of doing business. In order to be effective, private equity investors (including
both venture capitalists and business angels) require fully developed legal and
financial institutions, robust IPO markets, a strong entrepreneurial culture, and
developed physical infrastructures. Entrepreneurs are a key factor in economic
development and are positively impacted by developed institutions (Boe ke &
Coyne, 2006).
Empirical Review
Prior research on business angels has increased rapidly in recent years and we can
today find studies from a wide range of countries, including the US, UK,
Germany, Japan, Singapore and the Nordic countries, compared with the very
earliest studies in the field. In particular, research has revealed that the typical
business angel is a middle-aged male who invests a relatively large amount of his
personal wealth, most often in young and technology-oriented firms. The
working relationship between the business angel and the entrepreneur can in
most cases be characterized as fairly active. The most common form of business
angel involvement seems to be by way of working on the board of directors and by
providing consultancy services to the firm when required
Extant research has also pointed out that business angels tend to work closely
with their portfolio firms as a means of both promoting and protecting their
interests. Even if business angels are a very heterogeneous population there seem
to be some defensible generalities among many of them.
Several studies have pointed out that business angels have a genuine
entrepreneurial career background, in which they often have made their fortunes
through a cash-out of their own previous ventures. In the early US study of
business angels conducted that 78% had previous start-up experience. He also
noted that about two thirds of them have been involved in starting up two or more
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companies. However, the most impressive results in terms of prior
entrepreneurial experience come from studies in the Nordic countries. He
reported that as many as 96% of the business angels had previous start-up
experience, Furthermore, in a study of Norwegian business angels, that even if
'only' 46% of the surveyed business angels had prior start-up experience most of
them had management experience from new ventures or in relation to company
ownership. In a study conducted of 20 Japanese business angels noted that they
often provided business advice to the businesses in which they invested.
Conclusion
This paper contributes to literature and research on business angels in two
important ways. First, it provides a systematic overview of previous literature
and research on business angels. Second, the paper presents set roles that business
angels have been reported to perform together with links to theoretical
perspectives that explain why these roles have the potential to contribute to the
sustainable entrepreneurship development in Nigeria. There is now a growing
recognition that improving the access of entrepreneurs to finance is not
exclusively a supply-side issue.
The impact of an increase in the supply of early stage venture capital will be
limited because many of the businesses that come forward are not investment
ready. The consequences are, first, that investors are unable to make as many
investments. Business Angels are involved in their investee companies in many
different roles and provide a significant impact upon these companies, especially
in relation to success, survival, efficiency and profile of the investee. Some
recommendations on the study own view of their impact were, amongst others,
their provision of experience with handling unforeseeable events and their
strategies for avoiding their own prior mistakes.
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