ABSTRACT
The study examined the effect of entrepreneurial orientation on business performance of small and medium scale enterprises in South East, Nigeria. Specifically, the study ascertained the level of innovativeness, proactiveness, competitive aggressiveness, risk taking and autonomy among SMEs in South East, Nigeria; examined the effect of innovativeness, competitive aggressiveness, on sales volume of SMEs in South East, Nigeria; determined the influence of innovativeness, autonomy and risk taking on competitive advantage of SMEs in the South East, Nigeria; examined the effect of proactiveness on customers retention by selected small and medium scale enterprises in the South East, Nigeria and examined the combined effect of entrepreneurial orientation on business performance of SMEs in the South East, Nigeria. The researcher adopted descriptive survey research design. The population of study were 7,789 (small scale businesses registered with CAC) and 203 (medium scale businesses registered with CAC) in the South East, Nigeria. With a known population, Yamane (1967) formula was adopted to select 516 sample size. However, from the 516 copies of the questionnaire administered, 494 copies were completed and returned. Proportionate and purposive sampling technique were adopted for the selection of respondents. Questionnaire was the instrument for data collection. The data were subjected to Cronbach Alpha reliability test and value of 0.833 was realized which showed that the instrument was highly reliable. The data were analyzed with descriptive statistics such as mean, frequency and percentage distribution. The hypotheses were tested with simple and multiple linear regression analysis models. The descriptive results revealed that among the five dimensions of entrepreneurial orientation, level of risk taking by the firms was ranked 1st with the mean value of 4.41; level of innovativeness of the firm was ranked 2nd with the mean value of 4.10. More so, competiveness aggressiveness of the firm and level of proactiveness of the firm were ranked 3rd and 4th with a mean value of 4.01 and 3.92 respectively. In addition, firm’s level of autonomy was ranked 5th with a mean value of 3.44. The empirical result revealed that; innovativeness has significant effect on sales volume. Innovativeness has significant influence on competitive advantage. Proactiveness has significant effect on customer retention. Competitive aggressiveness has significant influence on sales volume of SMEs in the South East, Nigeria. Autonomy has no significant effect on competitive advantage. Risk taking has significant effect on competitive advantage. There is significant combined effect of entrepreneurial orientation (innovativeness, proactiveness, competitive aggressiveness, risk taking, autonomy) on business performance (sales volume, customer retention and competitive advantage) of the selected small and medium scale enterprises in the South East, Nigeria. The researcher therefore, concluded that SMEs in South East, Nigeria integrate most of the entrepreneurial orientation dimensions into daily operation and that entrepreneurial orientation has significant positive effect on performance of SMEs in South East, Nigeria. The researcher recommended among others that managers of SMEs should improve their performance by maximizing opportunities existing in their business environment amongst others.
TABLE OF CONTENTS
Title
Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgement v
Table
of Contents vi
List
of Tables vii
List
of Figures ix
Abstract
xiii
CHAPTER 1: INTRODUCTION
1.1 Background of the Study 1
1.2
Statement of Problem 4
1.3
Objectives of the Study 5
1.4 Research Questions 6
1.5
Hypotheses of the Study 7
1.6 Significance of the Study 8
1.7 Scope of the Study 9
1.8 Operational
Definition of Terms 9
CHAPTER 2: REVIEW OF
RELATED LITERATURE
2.1 Conceptual Review 12
2.1.1 The concept of entrepreneurial orientation 12
2.1.2
Dimensions of entrepreneurial
orientation 15
2.1.3
Business performance 24
2.1.4 Performance variables 26
2.1.5
Innovation and business performance 31
2.1.6
Competitive aggressiveness and business
performance 34
2.1.7
Proactiveness and business performance 36
2.1.8
Risk taking and business performance 38
2.1.9
Autonomy and business performance 40
2.1.10
Entrepreneurial orientation and business
performance 42
2.1.11
Small and medium scale enterprises (SMEs) 44
2.1.12
Conceptual framework 48
2.2
Theoretical Framework 49
2.2.1 Resource based theory (RBT) propounded by
Barney (1991) 49
2.2.2 Entrepreneurial innovation theory (EIT)
propounded by
Joseph Schumpter (1940) 50
2.2.3 Dynamic capabilities theory (DCT) propounded
by
Teece, Pisano and Shuen (1997) 51
2.3 Review of Empirical Studies 53
2.4 Summary
of and Gap in Literature 75
CHAPTER 3: METHODOLOGY
3.1 Research Design 77
3.2 Area of the Study 77
3.3.
Population of the Study 79
3.4.
Sample Size Determination 80
3.5
Sampling Techniques 81
3.6
Source of Data and Collection 81
3.6.1
Source and type of data 81
3.6.2
Method of data collection 82
3.7
Validity of Research Instrument 82
3.8
Reliability of the Research
Instrument 83
3.9
Method of Data Analysis 83
3.10 Model
Specification 84
CHAPTER 4: RESULT AND
DISCUSSIONS
4.1
Questionnaire Administration 89
4.2 Background Data of Studied Enterprises 90
4.3
Data Presentation 95
4.4
Test of Hypotheses 105
4.5 Discussion
of Results 116
CHAPTER
5: SUMMARY, CONCLUSION AND
RECOMMENDATIONS
5.1
Summary of Findings 124
5.2
Conclusion 125
5.3
Recommendations 126
5.4
Suggestions for Further Research 126
5.5
Contribution to Knowledge 127
5.6
Limitations of the Study 128
References 129
Cover
letter 143
Appendix
1: Questionnaire 144
Appendix
2: Empirical Results 150
Appendix
3: Reliability test result 157
Appendix
4: List of Registered SMEs in Nigeria 158
LIST
OF TABLES
2.1
Summary of Empirical Studies 69
4.1 Questionnaire Administration 89
4.2 Distribution of respondents according to
location 90
4.3
Distribution of respondents
according to scale of enterprise 91
4.4
Distribution of respondents
according to number of employees 91
4.5
Asset base of the studied firms 92
4.6
Distribution of respondents based on
years of business experience 93
4.7
Dispersal of respondents based on
sector of business operation 94
4.8 Distribution of respondents based on level
of entrepreneurial
orientation adoption 95
4.9 Innovativeness of small and medium scale
enterprises in the
South East, Nigeria 96
4.10 Competitive aggressiveness of small and
medium scale enterprises 97
4.11
Proactiveness of small and medium
scale enterprises 99
4.12
Risk taking of small and medium scale
enterprises 100
4.13
Autonomy of small and medium scale
enterprises 101
4.14
SMEs Sales Volume in the Southeast of
Nigeria 102
4.15
Customer Retention among SMEs in
Southeast, Nigeria 103
4.15 Competitive advantage of studied SMEs in
Southeast, Nigeria 104
4.16 Simple linear regression analysis result of
innovativeness on sales
volume of SMEs in southeast, Nigeria 105
4.17 Simple linear regression analysis result of
how innovativeness
affect competitive advantage of SMEs 107
4.18 Simple linear regression analysis result of
effect of proactiveness on
customer retention of SMEs 108
4.19 Simple linear regression analysis result of
competitive aggressiveness
and sales volume of SMEs 110
4.20 Simple linear regression analysis result on
effect of autonomy on
competitive advantage of SMEs in South East, Nigeria 111
4.21 Simple linear regression analysis result on
effect of risk taking on
competitive advantage of SMEs in South East, Nigeria 113
4.22 Multiple linear regression analysis result
of combined effect of
entrepreneurial
orientation on business performance of SMEs in
South East, Nigeria 115
LIST
OF FIGURES
2.1
Operational conceptual framework of
entrepreneurial orientation and
Performance
of selected SMEs in South East, Nigeria 48
3.1 A map of South East geopolitical zone of
Nigeria 79
5.1
Heuristic model 128
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Small and medium enterprises (SMEs) play fundamental
role in the economic advancement of developed and developing countries.
Globally, SMEs constitute about 90% of business numbers and their contribution
to Gross Domestic Product is about 40% - 50% (Price Waterhouse Cooper’s (PWC)
MSME survey 2020). In Nigeria for instance, SMEs contribute meaningfully to the
economy. According to Price Waterhouse Cooper’s (PWC) MSME survey 2020, SMEs
represent 96% of the total businesses in Nigeria. Their input to the nations’
GDP and employment is rated at about 49% and 84% respectively. Hence, their
impact on economic development, poverty alleviation, income generation and
employment is widely acknowledged. SMEs take full advantage of resource
allotment and distribution by managing and controlling human and material
resources (Cunningham & Rowley, 2007). SMEs also act as dealers of goods
and service to large organizations.
SMEs are considered very important in the achievement
of a balanced economic growth and reasonable distribution of wealth. Hence
Nigerian government has engaged several measures to encourage SMEs in the
nation. For instance, government has established Small and Medium Enterprise
Development Agency of Nigeria (SMEDAN) to promote and strengthen SMEs in
Nigeria. The economic basis for supporting SMEs is that they often use
resources more efficiently than larger enterprises given the flexible and
adaptive nature of their management style (Deakins and Freel, 2009). Hence,
Pratono & Mahmood, (2014) explain that entrepreneurial activity and SMEs
are crucial to economic progress, and therefore recommend the study of small
and medium scale firms as it relates to entrepreneurial skills in order to
improve their performance and ensure their survival in the turbulent economic
and political environment. Furthermore, surviving in constantly changing
business environment may require firms to demonstrate entrepreneurial
capabilities. (Lumpkin & Dess, 1996; Wiklund & Shepherd, 2003).
A
firm is considered to be entrepreneurial if it is able and willing to innovate
(develop new products, provide distinct product alternatives and adjust
production level needed), take risks, and a propensity to be aggressive toward
competitors, and proactive with respect to marketplace opportunities and
threats (Chang & Lin, 2019). Entrepreneurial
orientation consists of five dimensions as stated by to Lumpkin and Dess
(2001). They are: autonomy, innovativeness, risk taking, proactiveness, and
competitive aggressiveness. Autonomy could be defined as an unconstrained
action by an employee or a team of employees designed to generate a business
idea or a vision, and carrying it through to completion. Innovativeness is the
predisposition of a business organization to encourage the conception of new
ideas, experiment with new ways of doing business, renew technological methods,
and improve existing products or services (Amodu & Aka, 2017). Innovation
also refers to the eagerness to undertake creativity and experimentation.
Risk-taking refers to the capability of a firm to engage in brave rather than precautious
actions such as venturing into unknown new markets (Edwards, Try, Ketchen &
Short, 2014). Proactiveness is the
ability of a firm to identify prospects and dangers existing in the market ahead
of its competitors. It is opportunity-seeking and forward-looking perspective. The
fifth dimension, competitive aggressiveness, suggests the amount of a firms’
efforts to outshine or do better than the competitors’ (Lumpkin & Dess,
2001). SMEs are noted for limited
resources, therefore they require entrepreneurial orientation in the deployment
of the limited resources so as to sustain their existence and as well achieve
improved performance amidst dynamic business environment.
Venkatraman
& Ramanujam (1986) defined business performance as a pointer of a firm’s
ability to achieve its goals. According to Rashid et al., (2018), business performance could be categorized into two;
financial and non-financial measures. Financial performance measures are a set
of variables, which are usually evaluated in financial term (return on assets,
return on equity, return on investment, profit, market share and others) while
non-financial indicators are a set of variables that are not measured in
financial terms. Indicators of non-financial performance variables include
corporate image, customer loyalty, customer base, sales volume, customer
retention, customer satisfaction and others.
Previous
studies revealed that entrepreneurial orientation has a positive effect on
business performance (Lomberg et al.,
2016), and this influence may increase over time (Kohtamäki et al., 2019; Liu et al., 2018). Moreover, Rauch, Wiklund, Lumpkin
and Frese,
(2009) and Rodrigo-Alarcón et al.,
(2018) opined that entrepreneurial orientation enables firms achieve
sustainable performance. According to Olubiyi et al., (2019) the performance of small and medium sized
enterprises (SMEs) has attracted the attention of scholars globally. However,
these firms have experienced sub-optimal performance characterized by poor
sales growth, weak profitability, and inability to retain customers which have
portrayed some of the SMEs as being less competitive and less profitable
resulting into business breakdown. These predominant challenges serve as the
antecedence for the high rate of business failure of a number of SMEs
especially in growing nations. These seemingly unsatisfactory degree of
performance have equally contributed to the global inefficiencies of SMEs and
which could be ascribed to non-application of entrepreneurial orientation by
SMEs in their business operations. Hence this study was poised to examine the
effect of entrepreneurial orientation on the performance of SMEs. Secondly,
many of the existing entrepreneurial orientation - business performance
relationship studies have been conducted in developed countries. Their findings
might not be applicable to firms in growing countries like Nigeria, as Thomas
and Mueller (2000) argued that certain dimensions of entrepreneurial orientation
may differ across countries while Nordqvist and Zellweger (2010) suggested that
national culture may influence entrepreneurial orientation adoption. Furthermore,
among the studies carried out in Nigeria, none has focused on SMEs in South East,
Nigeria.
1.2 STATEMENT OF THE
PROBLEM
Small
and medium scale enterprises (SMEs) are very essential part of the Nigerian
economy given their immense contribution to Nigerian GDP and employment, yet
they are faced with low performance resulting in poor sales growth, low market
share and profitability as noted by Olubiyi, Egwakhe, Amos, and Ajayi (2019). Nigerian,
scholars such as Arisi-Nwugballa, Elom, Duru, Ehidiamhen, and Chijioke (2018);
Bolarinwa and Okolocha (2016); Ibidunni, Ogunnaike and Abiodun, (2017); Otache
and Mahmood (2016); Namusonge, Muturi, and Olaniran (2016); Oyelola, Ajiboshin,
Raimi, Raheem and Igwe; Oladele (2013); Onyeizugbe (2016); and Oyeku, Oduyoye,
Elemo, Akindoju, and Karimu (2014) have associated the poor performance of SMEs
to the problem of innovativeness, risk taking, proactiveness, competitive
aggressiveness and autonomy. Other challenges identified are inadequate
knowledge of fundamental business principles, skillfulness and attitude; high
operating costs, marketing, and unfavourable government policies (Anderson
& Eshima, 2013; Ibidunni, Olokundun, Oke & Nwaomonoh, 2017). The
aforementioned have resulted into an upsurge in low performance and excessive
rate of business failure among the SMEs in Nigeria. Hence it is necessary that owners and
managers of SMEs develop strategies and operate with strategic orientations
that promote effective and efficient use of limited fund given the changing
nature of Nigerian macroeconomic environment. Entrepreneurial orientation has the
ability of enhancing business performance. With the complexity in operating
business in Nigeria, SMEs can survive and improve performance by adopting
entrepreneurial orientation in their business operations. Entrepreneurial
orientation reflects the behavior of entrepreneur like innovativeness,
proactiveness and risk-taking.
Several studies have examined the nexus between
entrepreneurial orientation (EO) and firm performance in different countries
and in different industries (Arshad, Rasli, Arshad & Zain, 2014; Mahmood
& Hanaf, 2013; Haider, Asad & Fatima, 2017; Ortt 2018; Mamary,
Alwaheedb, Alshammari, Abdulrab, Balhareth & Soltane, 2020; Olowofeso &
Aarinola, 2019; Akpa, Akinlabi, & Okusanya, Akpa and Akinlabi 2021; Hector,
Neftali & Rudy, 2019; Lesi, 2021; Afolayan, 2019 and others). Most of the studies in and outside Nigeria
did not capture customer retention as non-financial indicators of business
performance, hence the gap in literature. In Nigeria there seems to exist few
empirical studies on entrepreneurial orientation and business performance of
SMEs. Additionally, some of the existing studies examined entrepreneurial
orientation and survival of SMEs (Patrick, 2020; Nwankwo & Kanyangale,
2020). Furthermore, the existing empirical studies on entrepreneurial
orientation in SMEs are domiciled at state level in Nigeria (Edamisan &
Aarinola, 2019 – Akure and Afolayan & Opaleye, 2019 – Port Harcourt
Metropolis). There seems to be none at geopolitical zonal level. Hence this
study was poised to close these identified gaps by examining the effect of
entrepreneurial orientation on performance of SMEs in South East, Nigeria.
1.3 OBJECTIVES OF
THE STUDY
The
broad objective of this study was to examine the effect of entrepreneurial
orientation on business performance of small and medium scale enterprises in South
East, Nigeria. The specific objectives of the study were to:
i.
ascertain the level of adoption
of innovativeness, proactiveness, competitive aggressiveness, risk taking and
autonomy among SMEs in South East, Nigeria.
ii.
examine the effect of
innovativeness on sales volume of selected small and medium scale enterprises
in the South East, Nigeria.
iii.
determine the influence
of innovativeness on competitive advantage of selected small and medium scale
enterprises in the South East, Nigeria.
iv.
examine the effect of
proactiveness on customers retention of selected small and medium scale
enterprises in the South East, Nigeria.
v.
determine the influence
of competitive aggressiveness on sales volume of selected small and medium
scale enterprises in the South East, Nigeria.
vi.
examine the effect of
autonomy on competitive advantage of selected small and medium scale
enterprises in the South East, Nigeria.
vii.
determine the influence
of risk taking on competitive advantage of selected small and medium scale
enterprises in the South East, Nigeria.
viii.
examine the combined
effect of entrepreneurial orientation on business performance of selected small
and medium scale enterprises in the South East, Nigeria
1.4 RESEARCH
QUESTIONS
The study provided answers to the
following research questions;
i.
What are the levels of adoption
of innovativeness, proactiveness, competitive aggressiveness, risk taking and
autonomy among SMEs in South East, Nigeria?
ii.
In what way(s) does
innovativeness affect sales volume of selected small and medium scale enterprises
in the South East, Nigeria?
iii.
How does innovativeness
influence competitive advantage of selected small and medium scale enterprises
in the South East, Nigeria?
iv.
What is the effect of
proactiveness on customer retention of selected small and medium scale
enterprises in the South East, Nigeria?
v.
How does competitive
aggressiveness influence sales volume of selected and medium scale enterprises
in South East, Nigeria?
vi.
What is the effect of
autonomy on competitive advantage of selected small and medium scale
enterprises in the South East, Nigeria?
vii.
In what way(s) does risk
taking influence competitive advantage of selected small and medium scale
enterprises in the South East, Nigeria?
viii.
What is the combined
effect of entrepreneurial orientation on business performance of selected small
and medium scale enterprises in the South East, Nigeria?
1.5 HYPOTHESES OF THE
STUDY
The
hypotheses of the study were stated in a null form as follows:
H01: Innovativeness has no significant effect on
sales volume of the selected small and medium scale enterprises in the South East,
Nigeria.
H02: Innovativeness has no significant influence
on competitive advantage of the selected small and medium scale enterprises in
the South East, Nigeria.
H03: Proactiveness has no significant effect on
customer retention of the selected small and medium scale enterprises in the South
East, Nigeria.
H04: Competitive aggressiveness has no significant
influence on sales volume of selected small and medium scale enterprises in the
South East, Nigeria.
H05: Autonomy has no significant effect on
competitive advantage of the selected small and medium scale enterprises in the
South East, Nigeria.
H06: Risk taking has no significant influence on
competitive advantage of the selected small and medium scale enterprises in the
South East, Nigeria.
H07: There is no significant combined effect of
entrepreneurial orientation on business performance of the selected small and
medium scale enterprises in the South East, Nigeria
1.6 SIGNIFICANCE OF THE
STUDY
The
main thrust of this study was to ascertain the effect of entrepreneurial
orientation on business performance of selected small and medium scale
enterprises in Nigeria. The findings of this study are significant
theoretically as they provide theoretical insight in the existing knowledge
relating to entrepreneurial orientation and business performance of small and
medium scale enterprises in Nigeria. The findings and recommendations of this
study are of immense benefit to the following groups: managers and owners of
SMEs, entrepreneurs, policy makers, and researchers.
To managers and owners of SMEs, the study gives an
insight on how to adopt entrepreneurial orientation in order to enhance
business performance enhancement. To all entrepreneurs, this study reveals the
most beneficial entrepreneurial orientation dimension for achieving increased
sales volume, customer retention and competitive advantage. The study in
addition exposes SMEs (that are not adopting entrepreneurial orientation) to
the benefits of applying entrepreneurial orientation in their business
operations.
To
Policy makers, the findings and recommendations of the study if adopted can be
a basis for formulation of policies that would enhance the business performance
of small and medium scale firms. Hence, the study serves as a source of
knowledge to the marketing world. This study is also useful as a conceptual
guide and reference material to researchers and students who may be interested
in a similar field of study in future.
1.7 SCOPE OF THE STUDY
The study focused on the effect of
entrepreneurial orientation on business performance of selected small and
medium scale enterprises in South East, Nigeria. Conceptually, the study
examined the level of innovativeness, proactiveness, risk taking, competitive
aggressiveness and autonomy among SMEs in South East, Nigeria; examined the
effect of innovativeness on sales volume; determined the influence of
innovativeness on competitive advantage; examined the effect of proactiveness
on customer retention; determined the influence of competitive aggressiveness
on sales volume; examined the effect of autonomy on the competitive advantage;
determined the influence of risk taking on competitive advantage and examined
the combined effect of entrepreneurial orientation on business performance of
the selected small and medium scale enterprises in South East, Nigeria.
Geographically, the study was conducted in the South East, Nigeria which
consists of five states (Abia, Imo, Ebonyi, Enugu and Anambra). Furthermore, as regards level/unit of
analysis, that is survey scope, the study surveyed Owners/Managers of small and
medium scale enterprises registered with Corporate Affairs Commission who
operate business in the South East, Nigeria.
1.8 OPERATIONAL DEFINITION OF TERMS
Entrepreneurial Orientation: Entrepreneurial Orientation refers to the
innovativeness, proativeness, risk taking, competitive aggressiveness and
autonomy entrepreneurial decisions of small and medium scale firms in South East,
Nigeria.
Business Performance: This
captures the sales volume. Customer retention and competitive advantages of
small and medium firms in South East, Nigeria.
Sales Volume:
This is a reflection of the increase in the quantity of goods and
services sold and quantity of orders taken by small and medium scale
enterprises in South East, Nigeria in the past three years (2018 – 2020).
Customer Retention:
Customer retention is the effort made by small and medium scale firms in South East,
Nigeria to repeatedly sale to their customers, gain more new customers and get
referrals from their customers.
Competitive advantage: Competitive advantage is the
relative positional superiority of small and medium scale enterprises in South East,
Nigeria in terms of uniqueness of their products and services, corporate image,
brand name and communication technology and distribution channels.
Innovativeness: Innovativeness is the attitude of
small and medium scale enterprises in South East, Nigeria towards adopting new
technology, developing new products and services, acquiring new ideas,
identifying new markets and marketing approach.
Competitive Aggressiveness: This refers to intensive effort put
forth by small and medium scale firms in South East, Nigeria to outperform
their competitors which is reflected in the attention given to their
competitor’s actions in the market, aggressive promotion and marketing of
products/services, price manipulations, recruitment of rival’s employees and
effort to main industry position.
Proactiveness:
This is the tendency of small and medium scale enterprises in South East,
Nigeria to launch new products/services, venture into new markets, and adopt
new or emerging technology in production and marketing before competitors. It
also involves consistent search for business opportunities and threats existing
in the market and responding to such much earlier than competitors.
Autonomy:
Autonomy refers to the freedom given to employees or teams working in small and medium scale enterprises in South East,
Nigeria by their managers to take initiatives, develop new product ideas, seek
and decide new business opportunities and freedom to take necessary decisions
and actions at all levels without supervision.
Risk-taking: This refers to the
tendency of small and medium scale firms in South East, Nigeria to fund new
product/service ideas, new technology, bear the cost of exploiting potential
opportunities and the inclination to take risky projects and also to seek for
loans to execute projects.
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