ABSTRACT
The purpose of this study is to investigate the effect of leadership style and entrepreneurial orientation on the business performance of small and medium enterprises in Nigeria. Leadership style and entrepreneurial orientation has been widely touted as a fundamental ingredient for enhancing firm growth. Consequently, this aimed at examining the effect of leadership style and entrepreneurial orientation and its dimensional variables (innovativeness, risk-taking, and proactiveness) on SME growth (employment, sales, and asset growth). Using information from 150 SMEs, the results obtained indicated that while leadership style and entrepreneurial orientation had a significant positive association with SME growth (employment and sales growth), most SMEs show a moderate level of entrepreneurial orientation. Also, following the leadership style and entrepreneurial orientation dimensions, the findings established the emergence of proactive innovation (a combination of proactiveness and innovativeness) which showed a significant positive association on sales growth. Risk-taking was the only factor that showed a significant influence on employment and asset growth. Based on the findings of this study it was recommended that organizations should, adopt the democratic style of leadership and humane management practices in order to adequately commit the workforce to the work activities.
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TABLE OF CONTENTS
Page
Title Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgements v
Abstract vi
Table of Contents vii
List of Tables x
CHAPTER ONE: INTRODUCTION
1.1 Introduction 1
1.2 Background to the study 2
1.3 Statement of the problem 4
1.4 Objectives of the study 5
1.5 Research questions 5
1.6 Statement of the hypothesis 6
1.7 Significance of the study 6
1.8 Justification of the study 6
1.9 Scope of the study 7
1.10 Definitions of terms 7
CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction 9
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2.2 Conceptual frame work 11
2.3 Theoretical frame work 12
2.4 Definition of Entrepreneurship 16
2.5 Historical evolution of Small Scale Business in Nigeria 27
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction 38
3.2 Research Philosophy 39
3.3 Research Approach 39
3.4 Data Collection Method 40
3.5 Methods of Data Analysis 42
3.6 Limitations of the study 43
CHAPTER FOUR: DATA ANALYSIS, FINDINGS AND DISCUSSION
4.1 Results and Discussion 45
4.2 Respondents’ Socio- Demographic Characteristics 45
4.3 Discussion of Findings 49
4.4 Test of Hypothesis 63
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Introduction 65
5.2 Summary of findings 65
5.3 Conclusion 66
5.4 Recommendations 68
5.5 Proposal for further studies 69
References 70
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Appendix 78
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LIST OF TABLES
Table 4.2.1: Sex of Respondents 46
Table 4.2.2: Age of Respondents 46
Table 4.2.3: Marital Status 47
Table 4.2.4: Years in Occupation/Business 48
Table 4.3.1: SME contributed substantially to national output in Nigeria. 49
Table 4.3.2: SMEs are universally acknowledged as catalysts for industrial
development. 50
Table 4.3.3: An effective leader influences followers in a desired manner to
achieve desired goals. 51
Table 4.3.4: Today’s organizations need effective leaders who understand the
complexities of the rapidly changing global environment. 52
Table 4.3.5: Different entrepreneurship styles will affect organizational
effectiveness or performance. 53
Table: 4.3.6: Leadership is more about people and less about tasks 54
Table 4.3.7: Good leaders feel comfortable challenging the status quo and finding
efficient as well as long-term solutions to challenges. 55
Table 4.3.8: Entrepreneurs have become the heroes of economic development and
contemporary enterprises. 56
Table 4.3.9: Entrepreneurship is also the ability and willingness of individual both
on their own and within an organization to perceive and create new
economic opportunities (new products, new production method, new
organization schemes and new product-market combinations). 57
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Table 4.3.10: Entrepreneurial orientation is the presence of organizational-
level entrepreneurship. 58
Table 4.3.11: Entrepreneurship comprises human creativity and the ability to
discover profitable ideas that enable marketers to take advantage
of new and socially beneficial gains from trade. 59
Table 4.3.12: The leadership styles and entrepreneurial orientation determine the
level of subordinate participation in decision making and the way
an organization is run administratively. 60
Table 4.3.13: Participation in decision making creates an individual’s mental
and emotional involvement in a group situation which encourages
him or her to contribute to group goals and share responsibility. 61
Table 4.3.14: Leadership style of management and entrepreneur are a pre-requisite
for effective accomplishment in organizations. 62
Table: 4.3.15: Entrepreneurial orientation (innovation, proactiveness, and risk-
taking) has a significant relationship on SMEs in Nigeria and predict
the business performance. 62
Table 4.4.1: Test Statistics 63
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CHAPTER ONE
1.1 Introduction
An effective leader influences followers in a desired manner to achieve desired goals. Different leadership styles may affect organizational effectiveness or performance (Nahavandi, 2002); Entrepreneurs have become the heroes of economic development and contemporary enterprises (Sathe, 2003).
Entrepreneurial orientation is a commonly used measure in the literature (Morris & Kuratko, 2002). This concept is the presence of organizational-level entrepreneurship (Wiklund & Shepherd, 2005).
Some researchers have tried to combine the two concepts into entrepreneurial leadership to explore both leadership and entrepreneurship behavior (Gupta, MacMillan & Suriec 2004; Tarabishy, Solomon, Fernald & Sashkin, 2005). They have tried to combine entrepreneurship with leadership into a new form of leadership called entrepreneurial leadership. This new leadership model has been used to show both entrepreneurship and leadership behavior (Tarabishy et al, 2005). In the dynamic, complex, and uncertain competitive environment, a type of entrepreneurial leader who is distinct from the behavioral form of leaders is needed (Cohen, 2004).
This study was designed to examine how leadership styles can affect the development and implementation of entrepreneurial orientation in Small and medium enterprises (SMEs) in Nigeria, SMEs exert a strong influence on the economies of Nigeria. It also examines the effects of entrepreneurial orientation and leadership styles on business performance. The findings could contribute new knowledge in the fields of leadership and entrepreneurship, especially entrepreneurial leadership.
The development of entrepreneurship across cultures, economies and continents is an essential feature of economic change (Wright & Marlow, 2012). To date, entrepreneurship
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has become one of the major topics of discussion in the literature as it continues to grow both as a distinct academic discipline, and a recognized career (Alstete, 2008). The development of entrepreneurs and entrepreneuring SME’s has become a major contributor towards economic development in countries such as Malaysia (Hilmi, Ramayah, Mustapha & Pawanchik, 2010). Various studies have been conducted to identify the critical success factors and the reasons for failures among SMEs and the findings of these studies have been discussed in many books and journal articles (i.e. Perry, 2001; Beaver, 2003; Hung, Abdullah-Effendi, Talib & Rani 2010; Ghosh et al., 2001). But, a more detailed look at the characteristics of the factors identified in these studies especially from qualitative perspective is still lacking.
1.2 Background to the Study
Leadership is the art of influencing others (De Pree, 2004). Today’s organizations need effective leaders who understand the complexities of the rapidly changing global environment (Nahavandi, 2002). Hence, an effective leader influences followers in a desired manner to achieve desired goals. Leadership style is the ―relatively consistent pattern of behavior that characterizes a leader‖ (DuBrin, 2001). Different leadership styles may affect organizational effectiveness or performance.
The world has developed into an entrepreneurial economy; the creation of new ventures is at the center of activity. Entrepreneurs have become the heroes of economic development and contemporary enterprises (Sathe, 2003). Entrepreneurial orientation is a commonly used measure in the literature (Morris & Kuratko, 2002). This concept is the presence of organizational-level entrepreneurship (Wiklund & Shepherd, 2005).
Leadership and entrepreneurship are critical concepts in academic research. Leadership is considered a mature field (Hunt & Dodge, 2000); entrepreneurship is a relatively young field (Hitt & Ireland, 2000). The two, however, are interconnected (Colbert, 2003).
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Vecchio (2003) assumes that entrepreneurship is merely leadership in a special context. Cunningham & Lischeron (1991) indicated that an entrepreneur is often a leader; an entrepreneur must possess leadership skills to be successful.
Some researchers have tried to combine entrepreneurship with leadership into a new form of leadership called entrepreneurial leadership. This new leadership model has been used to show both entrepreneurship and leadership behavior (McGrath & MacMillan, 2000; Tarabishy, Solomon, Fernald, Sashkin & 2005). In the dynamic, complex, and uncertain competitive environment, a type of entrepreneurial leader who is distinct from the behavioral form of leaders is needed (Cohen, 2004; Tarabishy, Solomon, Fernald & Sashkin, 2005).
Small and medium enterprises (SMEs) exert a strong influence on the economies of all countries, particularly in the fast-changing and increasingly competitive global market (Ladzani & Van Vuuren, 2002). This study focused on top-level managers of SMEs in Taiwan who are identified as the CEOs, owners, founders, managers, presidents, or heads of SMEs.
The study was designed to examine how leadership can affect the development and implementation of entrepreneurial orientation in SMEs in Nigeria, using some selected SMEs in Ibadan metropolis. It also was designed to examine the effects of entrepreneurial orientation, leadership styles, and outcomes of leadership on business performance. Thornberry (2006) stated that ―entrepreneurial leadership is more like transformational leadership than it is like transactional leadership, yet it differs in some fundamental ways. The researcher used the Multifactor Leadership Questionnaire (MLQ; Bass & Avolio, 2005) to measure top-level managers’ transformational leadership, transactional leadership, passive-avoidant leadership, and outcomes of leadership. Furthermore, because entrepreneurial orientation is a critical concept in entrepreneurship literature, the
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researcher used the Entrepreneurial Orientation Questionnaire (EOQ; Covin & Slevin, 2009) to measure entrepreneurial characteristic of SMEs in Nigeria.
1.3 Statement of the Problem
Entrepreneurial characteristics are a pre-requisite for effective accomplishment in organizations. The entrepreneurial characteristics determine the level of subordinate participation in decision making and the way an organization is run administratively. Organizations which are low in efficiency tend to have leaders and entrepreneur who are highly bossy. Decision making is centered on them alone. Participation in decision making creates an individual’s mental and emotional involvement in a group situation which encourages him or her to contribute to group goals and share responsibility for them (Chruden & Sherman, 2005).
The problem with most small and medium scale enterprises (SMEs) is that the leaders are not democratic in their relationship with their subordinate. In fact, leaders in most small and medium enterprises are usually authoritarian in style. They dictate the tune and have the administration of the organization centered on them.
The need for subordinate to participate in decision making is not a passing fancy. It is rooted deep in the culture of free men around the world and it is no doubt the basic drive in men.
Another problem affecting leadership style in small and medium scale enterprises is the competence of the leaders so appointed. In most cases, some of their appointments lack merit. What becomes of such organization is having competent leaders who lack the abilities or capacities to use the appropriate leadership style to lead the members to attain set goals or objectives. Thus, what are usually found in some of these organizations are “round pegs in a square hole” rather than “round pegs in round holes”. Once this situation
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arises, there will be utterances in the way such leaders behave or administers the organization and these will in-turn affect the goals of the organization.
The burden of this study is to copiously review the effect of entrepreneurship characteristics on the business performance of small and medium enterprises in Nigeria, using selected SMEs in Ibadan metropolis as a case study.
1.4 Objectives of the Study
The main objective is to examine the effect of entrepreneurship characteristics on the business performance of small and medium enterprises in Nigeria, using selected SMEs in Ibadan metropolis as a case study; other specific objectives include:
i. To examine the effect of entrepreneurship characteristics on employees morale in small medium enterprises in Nigeria.
ii. To examine the effect of entrepreneurship characteristic on employees efficiency in small medium enterprises in Nigeria.
iii. To examine the effect of entrepreneurship characteristic on the overall performance of small and medium enterprises in Nigeria.
1.5 Research Questions
i. How does entrepreneurship characteristics affect employee’s morale in small medium enterprises in Nigeria?
ii. How does entrepreneurship characteristics influences employees efficiency in small medium enterprises in Nigeria?
iii. How does entrepreneurship characteristics enhances employees performances in SME’s?
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1.6 Statement of the Hypothesis
H0 (Null Hypothesis): Entrepreneurship characteristics as no significant effect on performance of small and medium scale enterprises.
H1 (Alternative Hypothesis): Entrepreneurship characteristics as significant effect on performance of small and medium scale enterprises.
1.7 Significance of the Study
This research work will attempt to give an insight to the effect of entrepreneurship characteristics on the business performance of small and medium enterprises in Nigeria, using selected SMEs in Ibadan metropolis as a case study
To use the outcome of this research work as a store of knowledge and a medium of educating the stakeholders on how to use the programme to achieve their respective goals and objectives.
This study will also be theoretically and practically significant to the general public and readers of this research work.
It will also give technical assistance generally to policy makers and stakeholders for planning and development.
1.8 Justification of the Study
The purpose of this study is to investigate the effect of entrepreneurial characteristic on the business performance of small and medium enterprises in Nigeria, using some selected SMEs in Ibadan metropolis as case study.
This study was designed to examine how entrepreneurial characteristic can affect the development and performance Small and medium enterprises (smes) in Nigeria, SMEs exert a strong influence on the economies of Nigeria.
It also examines the effects of entrepreneurial orientation and leadership styles on business performance.
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1.9 The Scope of the Study
The bulk of this research is basically aimed at understanding the effect of entrepreneurship characteristic on the performance of small scale enterprises. The study is divided into five chapters, chapter one deals with background to the study, statement of problem, purpose of the study, statement of hypotheses, scope of the study, operational definitions of terms and significance of the study. Chapter two deals with conceptual and theoretical framework of the study and also copiously review literature on the subject matter. Chapter three is for the research methodology, which deals with research design, population, sample and sampling technique, instrumentation, data collection procedure and data analysis techniques study. Chapter four is for Data analysis and the discussion of findings. Chapter five discussed the summary of findings, conclusion, recommendations and suggestions for further studies.
In general descriptive method will be used for this research and random sampling will also be used to collect data from the respondents using close ended and structure questionnaire with likert rating scale. The data, will be collected from the respondents, will be analysed chi-square statistical method using (SPSS) to generate tables.
1.10 Definition of the Terms
Leadership: is the art of influencing others. It can be defined as a process of how to influence people and guide them to achieve organisational goals
Leadership styles: is the ‘relatively consistent pattern of behavior that characterizes a leader.
Entrepreneurial Orientation: is the presence of organizational- level entrepreneurship
Business Performance: is defined as a measure of how well or poorly the business is doing
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Small and Medium Enterprise (SME): is a separate and distinct entity including cooperative enterprises and non-government organisations managed by one owner or more, including its branches or subsidiaries if any is predominantly carried out in any sector or sub-sector of the economy mentioned in the schedule of size standards and can be classified as a SME by satisfying the criteria mentioned in the schedule of size standards”.
Entrepreneurship: Entrepreneurship is a dynamic process of innovation, opportunity recognition and creation of a new venture to create wealth, and includes the assumption of the risks and rewards of new venture.
Strategic Entrepreneurship: Strategic entrepreneurship refers to the connection between entrepreneurship and strategic management literature.
Strategic Management: Strategic management is the set of analyses, decisions and actions an organisation undertakes in order to create and sustain its competitive advantage.
Firm’s Performance: is defined as a measure of how well or poorly the firm is doing.
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