THE ROLE OF ENTREPRENEURIAL COMPETENCIES ON THE SUCCESS OF SME IN NIGERIA
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Small and Medium Enterprises (SMEs) are the backbone of the contemporary economic development due to the significant role they play in the sustainability of the
world economic development (Carter and Tamayo, 2017; Wattana pruttipaisan, 2002). SMEs account for more than
90 percent of businesses, contribute to more than 50 percent of employment and over 50 percent of gross domestic
products (GDP) in the world (Kessey, 2014). In Africa, the commonest business entities are SMEs. The enterprises
contribute significantly to the provision of employment, the formation of capital, economic viability and poverty
alleviation among others (Ganyaupfu, 2013). Today, Africa’s growing economy sees SMEs as the mechanism for
achieving growth and excellence (Roldan, 2015). The sector provides substantial employment and stimulates
economic growth. For example, in Ghana, the sector constitutes 92 percent of businesses in the country (Steel and
Webster, 1991). In South Africa, Ganyaupfu, (2013) confirmed that 91 percent of all the registered business entities
fall under SMEs and constituting about 52 to 57 percent of the country‟s GDP. However, in Nigeria, a number
challenges overwhelmed the country‟s business milieu, which renders the environment not only difficult for business
but resulting to the increasing failure of SMEs in the country. Studies established that 85 percent of businesses in the
country do not survive beyond the first five years of their establishment (Ogboru, 2005; Olu and Haynes, 2006; Ariyo,
2008). Moreover, even the little percentage that manages to sustain beyond five years, collapse between sixth to
tenth years of their existence which leaves only around 5 to 10 percent of the SMEs in business (Onugu, 2005).
Despite the effort and contribution of the Nigerian government to the development of SMEs, yet the input of the
enterprises including micro businesses to the country‟s exportation is as low as 7.27 percent (SMEDAN, 2013). The
lack of entrepreneurial competencies has been identified as the leading cause of business failure in the country
(Inyang and Enuoh, 2009). Therefore, the need for entrepreneurial competency become necessary as it provides
practical solutions to the mystery of business downfall (Sánchez, 2013).
Competency of the entrepreneurs is one of the significant determining factors for success, performance and growth or
failure of business operation (Kiggundu, 2002; Brinckmann, 2008; Mitchelmore and Rowley, 2013). Furthermore,
female Entrepreneurs mostly operate small-scaled type of businesses which requires the businesses to depend
mainly on the competencies of the owner. Thus, understanding the nature of such competencies in the context of
female Entrepreneurs is very important (Mitchelmore and Rowley, 2010; Mitchelmore et al. 2008).
Competencies as the characteristics of entrepreneurs that differentiate excellent from average or poor entrepreneurial
performance are a cluster of knowledge, behaviours, skills and abilities (Wu, 2011; Athey and Orth, 1999). Similarly,
Man, Lau, and Chan, (2002) view entrepreneurial competencies as nothing but a bunch of high-level characteristics
which includes knowledge, skills and personality traits. Entrepreneurial competencies lead enterprises to achieve
sustainable competitive advantage and eventually result in the achievement of business success and growth (Man et
al., 2002). Tehseen and Ramayah, (2015) stressed the need for the understanding of the significance of
entrepreneurial competencies more especially in the developing economies because entrepreneurs‟ competencies
are vital for business survival, performance and success. However, the measurement of entrepreneurial
competencies varies depending on the context, prediction and assumption (Mitchelmore and Rowley, 2010).
Therefore, in the Nigerian business milieu, as established by numerous scholars, the leading competencies related
obstacles that result in poor performance and failure of businesses in the country are; lack or ineffective innovation,
unfavourable marketing strategies, lack of distinctive entrepreneurial traits (Duru, 2011; Eneh, 2010; Onugu, 2005;
Adeoti, and Adeoti, 2005; Siyanbola et al., 2012).
The principal aim of the study is therefore to examine the relationship between the entrepreneurial competencies and
business success in SME’s in different settings within the same country.
1.2 STATEMENT OF THE PROBLEM
Even with the fact that SME’s in all sectors of the economy; they are dominant in trade (54%) followed by services
(34%). Micro and small enterprises are critical for supporting livelihoods as well as overall prosperity and progress.
They create employment at relatively low levels of investment per job; utilize and add value to local resources; foster
equitable income distribution; and are better positioned to meet local needs in small markets. The technologies used
by them are easier to acquire, transfer and adopt even for people with little education and training. They have the
potential to compliment large enterprises through partnerships and subcontracting relationships. Micro and small
enterprises also serve as training ground for entrepreneurship managerial development (Olomi, 2006).
Lots of problems makes it very difficult for SME’s to exploit the existing potentials for further employment and wealth
creation. One of the most serious impediments is the competency of the entrepreneur, in terms of the attitudes,
motivation, exposure, skills and experiences. This capacity limitation is exacerbated by the effects of other problems
including a cumbersome regulatory framework, limited access to finance and working premises. At the same time,
entrepreneurship development are underdeveloped and not readily available or affordable to SME’s.
1.3 OBJECTIVES OF THE STUDY
The main objective of this study is to find out the role of entrepreneurial competencies on the success of SME in
Nigeria, specifically the study intends to;
- Find out how competence entrepreneurs are in terms of skills and experience
- Analyze the effect of entrepreneurial competencies on the success of SMEs in Nigeria
- Examine the challenges of SMEs in Nigeria
THE ROLE OF ENTREPRENEURIAL COMPETENCIES ON THE SUCCESS OF SME IN NIGERIA