ABSTRACT
The business
environment is turbulent and laced with uncertainty which is continuously
changing and is full of opportunities and challenges. However, studies that
assess economic, socio-cultural and technology environment on performance of
SMEs in Oyo State are insufficient. As a result, this study investigated the
effect of external business environment (economic, socio-cultural and
technology) on SMEs performance in Oyo State. Questionnaire was distributed
using cluster sampling. 424 copies of the questionnaire were used for analysis
with a population of 7,987 registered SMEs operating within the state. Partial
Least Square - Structural Equation Model (PLS-SEM) path modelling was employed
to process the data. Finding revealed
that economic and socio-cultural environment have positive significant effect
on performance of SMEs at 1 and 5 % significant level respectively, while
technology environment have negative effect on SMEs performance at 10%
significant level. The study concluded that external business environment has
positive effect on performance of Small and Medium Enterprises (SMEs). The
study therefore recommended that owners/managers of SMEs should have positive
perception towards economic environment as customers today tend to have control
of the economic environment in order to increase their performance. The study
also recommended that owners/managers of SMEs should adapt to the cultural
environment in which their business is set, thereby producing what the cultural
environment wants. This can be done by carrying out feasibility studies to know
what the environment really need. Finally, the study recommended that prompt
knowledge of new technologies should be adapted by the owners/managers of SMEs
as it will go a long way in enhancing the quality of goods and services.
TABLE OF CONTENTS
Title Page………………………………………………….…………………………………
i
Declaration……………………………………………………………………………..…….ii
Certification………………………………………………………………………………….iii
Dedication.......................................................................................................................….....iv
Acknowledgements...................................................................................................................v
Abstract...........................................................................................................................…....vii
Table of
Contents……………………………………………………………………......…viii
List of Tables……………………………………………………………………………......xii
List of
Figures…………………………………………………………………………...….xiii List of
Appendices.................................................................................................................xiv
CHAPTER ONE: INTRODUCTION
1.1 Background
to the Study………………………………………………………...………1
1.2 Statement
of the Problem………………………………………………………...……...7
1.3 Research
Questions………………………………………………………………...…...11
1.4 Objectives
of the Study…………………………………………………………..….….11
1.5 Hypotheses
of the Study………………………………………………………………...12
1.6 Significance
of the Study……………………………………………………………......12
1.7 Scope
of the Study………………………………………………………………............13
1.8 Limitations of the
Study……………………………………………………………….14
CHAPTER TWO: LITERATURE REVIEW AND THEORETICAL
FRAMEWORK
2.1
Introduction………………………………………………………………………….….15
2.2 The Concept of
SMEs......................................................................................................15
2.3 The Concept of
Performance...........................................................................................17
2.4 SMEs Performance
Measures……………………………………………………….…19
2.4.1 Increase in
Sales……………………………………………………………………......20
2.4.2
Profitability…………………………………………………………………………......20
2.4.3 Innovation………………………………………………………………………….…...20
2.4.4
Effectiveness……………………………………………………………………..…….21
2.4.5 Efficiency……………………………………………………………………….….......212.5 Concept of External Business
Environment.........................................................….....21
2.5.1 Economic
Environment……………………………………………………………..….25
2.5.2 Socio cultural
Environment………………………………………………………….....27
2.5.3 Technology Environment………………………………………………………………29
2.6 External Business Environment and
Performance of SMEs…………………….......32
2.7 Review of Empirical
Studies……………………………………………………………34
2.8 Theoretical
Framework……………………………………………………………...…54
2.8.1 Contingency
Theory……………………………………………………………….…...54
2.9 Research
Model…………………………………………………………………….…...55
2.10 Summary of the Chapter……………………………………………………………...56
CHAPTER THREE: RESEARCH METHODOLOGY
3.1
Introduction……………………………………………………..………………………57
3.2 Research
Design…………………………………………………………………….…...57
3.3 Population of the
Study………………………………………………………………....58
3.4 Sample Size of the Study………………………………………………………………..58
3.5 Sampling
Technique…………………………………………….………………….…...59
3.6 Sources and Method of Data
Collection..................................................................…...60
3.7 Measurement of Variables...............................................................................................60
3.8 Pilot
Study……………………………………………………………………………….61
3.9 Technique of Data
Analysis…………………………………………………………….61
3.9.1 Construct Reliability and
Validity……………………………………………..……….62
3.9.2 Factor
Loadings……………………………………………………………………...…62
3.9.3 Test of
Hypotheses………………………………………………………………..……63
3.9.4 Effect
Size…………………………………………………………………………..….64
3.9.5 Predictive Relevance for Direct and Indirect
Relationship (Q2)……………………….64
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.1
Introduction……………………………………………………………………………..65
4.2 Response
Rate……………………………………………………………………...……65
4.3 Preliminary
Analysis……………………………………………………………………65
4.3.1 Missing Values…………………………………………………………………………66
4.3.2 Assessment of
Outliers…………………………………………………………….…...66
4.3.3 Multicollinearity
Test………………………………………………………………..…66
4.4 Demographic
Statistics…………………………………………………………………67
4.5 Descriptive
Statistics……………………………………………………………………69
4.6 Assessing Model Fit………………………………………………………………….….69
4.7 Bootstrapping
Analysis…………………………………………………………….…...72
4.7.1 Test of Hypotheses……………………………………………………………….…….74
4.7.2 Effect Size of Exogenous
Variables……………………………………………….…...75
4.7.3 Predictive Relevance of Exogenous
Variables………………………………….……...75
4.8 Discussion of
Findings…………………………………………………………………..76
4.8.1 Economic Environment and Performance of
SMEs……………………………………76
4.8.2 Socio cultural Environment and performance of
SMEs………………………………..76
4.8.3 Technology Environment and performance of
SMEs………………………………….77
4.9 Implications of the
Study……………………………………………………………….77
4.9.1 Managerial Implication…………………………………………………………….…..77
4.9.2 Theoretical Implication…………………………………………………………….…..78
CHAPTER FIVE: SUMMARY, CONCLUSIONS AND
RECOMMENDATIONS
5.1
Summary……………………………………………………………………………..….79
5.2
Conclusions……………………………………………………………………………...80
5.3
Recommendations………………………………………………………………….…...80
5.4Contribution to
Knowledge…………………………………………………………….81
5.5 Suggestions for Further Study……………………………………………………………….82
References......................................................................................................................................….83
Appendices………………………………………………………………………………..……….…95
LIST OF TABLES
Table 3.1 Distribution of Questionnaires among 3 Senatorial
Zones……………………......59
Table 4.1 Questionnaire Distribution and Response
Rate……………………………………65
Table 4.2 Multicollinearity Statistics: VIF Values and
Tolerance…………………………...67
Table 4.3 Demographic Characteristics of
Respondents………………………………….....67
Table 4.4 Descriptive Statistics of
Variables………………………………………………...69
Table 4.5 Construct Reliability and
Validity…………………………………………….…...71
Table 4.6 Discriminant Validity using Fornell-larcker
criterion……………………………..72
Table 4.7 Path Coefficient………………………………………………………………...….74
Table 4.8 Effect Size………………………………………………………………………....75
.
Table 4.9 Predictive Relevance of Exogenous
Variables…………………………………….75
LIST OF FIGURES
Figure 2.1 Research Model…………………………………………………………..………55
Figure 4.1 Measurement Model………………………………………………………….…..70
Figure 4.2 Structural
Model...............................................................................................…..73
LIST OF APPENDICES
Appendix A: Questionnaire…………………………………………………………..………95
Appendix B:
Overview..................................................................................................….......97
Appendix C: Latent Variable
Correlations…………………………………………………...97
Appendix D: Construct Cross
Loading..............................................................................…..97
Appendix E: Cross Validated Communality…………………………………………………98
Appendix F: Multicollinearity Statistics: VIF Values and
Tolerance…………………..........98
Appendix G: Descriptive Statistics of
Variables………………………………………......…98
Appendix H: List of Small and Medium Enterprise Owners in Oyo
State…………………..99
CHAPTER ONE INTRODUCTION
1.1 Background to the Study
The role of Small and Medium
Enterprises (SMEs) in the national economy cannot be underestimated as they
play important role in the global economy (Taiwo, Ayodeji & Yusuf, 2015).
SMEs are key players in the economy and the wider eco-system of firms. Enabling
them to adopt and thrive in a more open environment and participate more
actively in the digital transformation for essential boosting of economic
growth and delivering a more inclusive globalisation (Organisation for Economic
Co-operation and Development, 2017).
However, in the developed economy
particularly the OECD countries, SMEs are the predominant form of enterprise,
accounting for approximately 99% of all firms. They provide the main source of
employment, accounting for about 70% of jobs on average, and are major contributors
to value creation, generating between 50% and 60% of value added on average
(OECD, 2016). In emerging
economies, SMEs contribute up to 45% of total employment and 33% of GDP. SMEs
contribute more than half of employment and GDP in most countries irrespective
of income levels when taking the contribution of businesses into account
(International Finance Corporation 2010).
Furthermore, according to
Ruchkina, Melnichuk, Frumina and Mentel, (2017), SMEs constitute an important
part in economic development of any given country and contribute considerably
to regional economic development by creating new jobs, providing investment
opportunities and forming the economic capital and potential required for
sustainable economic growth.
In developing economy such as
Nigeria, SMEs are widely acknowledged as the key engine of economic development
(Small and Medium Development Agency of Nigeria, 2013). Because of this
realization, a central issue dominating policy debates around the world and
Africa has been to induce economic growth through the growth of SMEs. Most
people in developing countries must support themselves and their families
(Ball, Geringer, Minor& McNett 2010).
Thus, understanding economic
growth is essential to understand the economic challenges facing a country and
how resources should be managed to maintain sustainable development at
regional, national and international levels (Wiik, 2017). The contribution of
the SMEs sector to the Nigerian economy is essential for the accomplishment of
the broader development objectives such as poverty relief, spreading of
employment opportunities and increasing indigenous ownership of resources in
the economy (Chidoko, Makuyana, Matungamire & Bemani 2011). Furthermore,
SMEs facilitates the growth and development of human and capital resources
towards general economic development and the rural sector in particular
(Chinweuba & Sunday, 2015).
Small and Medium Scale
Enterprises (SMEs) contribute about half of Nigerian GDP and accounts for over
25 per cent of employment in the country (Small and Medium Development Agency
of Nigeria, 2013). There are 17 million SMEs in Nigeria, employing 60 million
persons and contributes about 48 per cent to the nation’s Gross Domestic
Product in nominal terms (Small and Medium Development Agency of Nigeria,
2013). This sector is responsible for most of the advances in new products and
process and provides most of the employment opportunities, as a central
indicator of the overall operation of an economic system (Enterprise Baseline Survey
2012).
There are various definitions as to what
constitutes SMEs. Small and Medium Development
Agency of
Nigeria (SMEDAN) definition adopts a classification based on dual standards,
employment and assets (excluding land and buildings). Small Enterprises are
those enterprises whose total assets (excluding land and building) are above
Five Million Naira but not exceeding Fifty Million Naira with a total workforce
of above ten, but not exceeding forty-nine employees. Medium Enterprises are
those enterprises with total assets (excluding land and building) are above
Fifty Million Naira, but not exceeding Five Hundred Million Naira with a total
work force of between 50 and 199 employees. For this study, SMEDAN definition
of SMEs was adopted. SMEs is regarded as enterprises whose total assets
(excluding land and building) are
above Five Million Naira, but not exceeding Five Hundred Million Naira, with a
total work force of between 10 and 199 employees. However, SMEs play a
significant role to the growth and development of a country.
Baloyi (2010) opined that despite
the existence of SMEs, their performance has become a thing of concern as SMEs
in the country still continue to weaken (not all SMEs are experiencing
growth).Douglas, Micah and Tom (2014) opined that 90% of the business startups
do not operate beyond the third anniversary due to lack of environmental
factors. More so, there are other SMEs that have stagnated at the survivalist
stage which may be due to poor performance (Bidzakin, 2009).
Performance is the ability of an
organization to achieve objectives such as high profit, quality product; large
market share, good financial outcomes and survival at pre-determined time using
relevant strategy for action. Thus, performance can also be employed to
consider how an organization is performing in terms of market share, volume of
products, customer’s demand, loyalty and investment.(Obiwuru, Okwu, Akpa and
Nwankwere, 2011).
Business enterprise performance
according to Oghojafor, Olamitunji, and Sulaimon (2011) is how a manager
effectively and efficiently utilizes the organisation’s resources so as to
achieve the organisational goals and satisfy the stakeholders. However, Neringa
and Justina (2014) performance of enterprise as service quality that denotes
the discrepancy among customer’s anticipations and opinions about quality of
services provided. Furthermore, enterprise performance means how the growth
potential exhibited by the SMEs contributed substantially to job creation,
thereby improving the economic status of the business enterprise as opine by
(Adesanya, 2014).
Performance does not take place in a
vacuum but, within certain environment which has challenges and opportunities
(Walter, Clynes, Tang, Marmostein, Mellor, & Berger, 2008).
Environmental forces create
challenges and opportunities for the organization (Pearce & Robinson,
2007). Nevertheless, managers/owners must respond and adjust to alterations in
their surroundings so as to be able to recognize the challenges and opportunity
that lies ahead of them in their business environment in order to perform
efficiently.
Business environment is marked by
different dynamic features such as global competition, information technology,
quality service revolution and corporate social responsibility which compel
managers to rethink and reshape their approach to various operational
responsibilities. Due to this paradigm switch, new firms are emerging that are
more responsive to their external environment (Luthans, 2007). Furthermore,
Ibidunni and Ogundele (2013) classified the nature of the business environment
as stable, dynamic and unstable and this habitually assists a business
enterprise in selecting suitable strategies. Pearce and Robinson (2011), an
enterprise external environment was first recognized by open systems theorists
who observed that organizations operate not as self-contained isolated units
but in continuous and inevitable interaction with the large system surrounding
them and within which they exist. The external environment is that system which
consists of factors that affect business enterprises from outside such as
economic, socio-cultural and technology and these environmental factors are
beyond the control of the enterprises (Alkali & Abu, 2012; Pearce &
Robinson, 2011).
Economic environment according to
Omobolanle (2009) refers to those economic factors, such as inflation rate,
exchange rate, unemployment rate among others which have overbearing effect on
the performance of small scale business. Omobolanle (2009) further observed that
small scale businesses depend on the economic environment for all the needed
inputs. Therefore, economic environment influences the operations of small
scale businesses. In order words, economic environment consists of those
economic factors that directly or indirectly affect the operations of small
scale businesses in Nigeria. These economic factors help owners and managers to
measure the strength and weakness of their business enterprises in order to
perform adequately.
Wetherly and Otter (2011) described
the socio-cultural environment as factor consisting of everything that is not
incorporated within the economy or political system. According to Wetherly &
Otter, socio-cultural context is fixed up of collection of activities, and the
relationships people engage in their personal and private lives which include
population features, age, ethnicity, religion, values, attitude, lifestyles and
associates. These environmental patterns of behavior lead to the foundation of
various cultural values in different societies, some of which determine the
decision to create new business. Sociocultural environment is important
because, it determines the product, service and the level of conduct that the
society is likely to get. It allows a cordial relationship between management,
workers and their customers.
Technology forces refer to the
rate of scientific change and fastest growth of technology that have
potentially wide-ranging effects on society (Gamble 2014). According to
McNamara and Watson (2005), technology can be defined as the aggregate of means
such as knowledge, methods, materials, and instruments used to achieve
practical results in order for the enterprise to establish work methods, work
pattern and information structures. Technological factor have rendered some
SMEs not competitive and not able to meet the needs of customers. However,
entrepreneurs in Small and Medium Enterprise need to recognize the nature of
technology change, and the need to go with the flow to have competitive
advantage in order to improve change or implement new technology process to
meet customer want and needs.
According to Agbolade, 2014;
Ridwan& Ina, 2015 have identified variables which are related to external
business environment prominent among which include economic environment,
socio-cultural environment, and technology environment. For SMEs to perform efficiently, an effective
way of managing external environment components are present and functioning and
these components operate together in an integrated manner. Most studies on
business environment and SMEs performance have focused their attention on the
developed or advanced countries, but only few have look at the developing
countries (Olarewaju & Elegunde 2012; Adeoye & Elegunde 2012 and
Agbolade 2014).
Yet according to Gamble (2014),
SMEs owners still find it difficult to know the right environment to operate
even with the effort of the government to create an enabling environment for
businesses in the country. Thus, this study set out to investigate factors that
impact external business environment on how the SMEs will perform effectively.
1.2 Statement of the Problem
Several of the existing
literatures such as Samad (2007), Saleh and Ndubisi (2006), Teoh and Chong
(2008) identified various problems facing SMEs in a globalized environment such
as, difficulty in facing recession, low productivity, lack of managerial
capabilities, lack of financing, environmental factors, difficulty in accessing
management among others. These problems cause the small and medium enterprises
not to perform effectively. Environmental downturn has been a constant
challenge facing SMEs since the year 2007 (Harvie, 2004). The world economy
experienced several unfavourable environments, which lead to low performance of
SMEs. Most nations are currently showing a diminishing environmental growth and
increasing cost of production, which results to collapse of these business
firms (Harvie, 2004). However, SMEs suffers from a number of challenges leading
to poor business operation. According to World Economic Forum (2017) survey,
SMEs rank 127 out of 138 countries in Global Competitiveness Index and 169 out
of 190 countries in doing Business Index (World Bank, 2017).The avoidance of a
future crisis could, therefore, depend upon developing a favourable environment
that will make these SMEs compete in both domestic and external markets
(Harvie, 2004). However, due to the differences in economic condition,
socio-cultural and technological advancement of the global economies, it may
lead to differences in the findings. Therefore, there is need to look at the
environmental factors that impact SMEs performance in developing countries such
as Nigeria (Li & Liu, 2014).
Stagnated growth of SMEs in
Nigeria as a developing country is an issue of great concern (Omolomo, Odunayo
and Tobora, 2014). This is because its persistence may serve as a stumbling
block to any effort by the government to eradicate poverty and unemployment
because of its impact on income distribution and employment generation.
However, agreeing with the report by Small and Medium Enterprise Development
Agency of Nigeria SMEDAN (2013), 95% of SMEs in Nigeria still operate as micro
businesses and only around five per cent of start-up companies survive and
develop to maturity SMEDAN (2008). Thus, Omolomo, Odunayo and Tobora (2014)
indicated that irrespective of country, more than 50% of SMEs collapse within
their first five years and about 25% go bankrupt or fold up in Nigeria due to
poor management and unfavourable environment which result in poor performance
and eventually total collapse.
One of the major issues that
impacts SMEs in Nigeria may be tied to non-conducive business environment that
enable SMEs flourish (MSME banking study sector report 2016). Small and Medium
Scale Enterprises (SMEs) are key in delivering effective performance in most
economies (OECD 2017) and Nigeria is no exception. In
a developing economy like Nigeria, SMEs represents one of, if not the
most important sector of the economy. It currently represents 96% of the businesses
in Nigeria (Nextzon Business Service, 2017).According to a report by Stanbic
IBTC Bank (2016) SMEs was identified to have failed overtime. It was also
stated in the Stanbic IBTC Bank 2016 report, which for SMEs to survive in
business, there should have knowledge of the external environment and how they
can affect the performance of the business enterprises.
Furthermore, external business
environment is categorised into economic factor, sociocultural factor and
technology factor among others.In Nigeria, SMEs have not performed commendably
well as they have not adequately played the expected significant role in the
economic growth of the nation (Taiwo & Falohun, 2016). In the economic
environment most especially in recession period, there is inadequacy in the
performance of the SMEs role in influencing apprentice training so as to speed
up employment and growth (Osotimehin, Jegede, Akinlabi & Olajide, 2012).
Also the socio cultural environment of businesses in the country is porous as
there is high preference among consumers for imported goods and the country
engages in more importation than exportation (Muktar, Gambo, & Mukhtar,
2015). However, Adegoke (2013) assert that most SMEs in the country are face
with the challenges of cultural factors such religious activities, insecurity
among others as it makes business investment uninviting to investors.
Furthermore, Okonkwo and Obidike (2016) posted that the condition of insecurity
in Nigeria accelerates the cost of operating a business incurred either in the
course of taking defence against business uncertainty and risks or through loss
of goods and properties. These expenses may have a detrimental impact on
business development as cause socio cultural aspect of SMEs not to perform
adequately. However, according to Casey (2015) SMEs are face with critical
technology problems that make businesses underperform. Most SMEs
owners/managers actually avoid addressing their technology issue in their
businesses due to lack of knowledge. Furthermore, owners/managers SMEs find it
difficult to invest in new technology as they see it as a daunting and
overwhelming task.
However, there are divergent views
on which among the category of the factors influences performance of firm
better. Some scholars (Nwekpa & Evans, 2015: Adeoye, 2015 and Okwu, Bakare
& Obiwuru, 2013) are of the opinion that economic factor are in better
position to impact on performance of SMEs. While others such as (Mai &
Phuong, 2013 and Abdullahi, Ali, Ghali & Majid, 2015) considered technological
factor as more efficient in determining performance of SMEs. Finally,
socio-cultural factor as most influential in determining SMEs performance was
supported by Felicia, Olusoji, Oluwakemi and Mofope, (2013); and Vincent and
Ifeanyi, (2015). Consequently this provides a basis of combining the three
categories in this study.
Further, studies have been
conducted linking external business environment and firm performance in
Nigeria. However, it is observed that these studies concentrated on either
economic environment (Milly 2015; Babalola & Abel 2013 and Adeoye &
Elegunde 2012) or socio-cultural environment (Felicia et al 2013 and Vincent
& Ifeanyi 2015) and some dwell to technology environment (Audrey 2016;
Olatunji 2015; NjanjaOgutu & Pellisier 2012).
However, Akinruwa, Awolusi and
Ibojo, (2013); Agbolade, (2014); Adeoye and Elegunde (2012) and Gloria, (2015)
conducted a study in Ekiti, Ogun, Osun and Lagos state respectively, and
reported that SMEs in the south western states of Nigeria, are mostly faced with
the challenge of environmental factors which Oyo state is not an exception.
Also Bayode and Adebola, (2012); Olatunji, (2015) and Olarewaju and Elegunde,
(2012) conducted a study in Oyo state but focus their attention on large
enterprises; they also found that large business enterprises are faced with
unconducive business environment. Despite the contribution of the state
government in assisting small and medium enterprises, by conducting trainings
to all SMEs owners in the state, their performance continue to be a thing of
concern as most SMEs in the state still underperform. These maybe due to
business environment factors (Olatunji, 2015). Furthermore, according to Adeoye
(2015), about 20% of SMEs in the state collapse, these maybe due to
unfavourable business environment. This study therefore, considered three
categories of external business environment (Economic, Sociocultural and
Technology) as the independent variable measuring external business environment
on performance of small and medium enterprises in Oyo state to fill the obvious
gap of the study.
In this vein, despite the study
conducted on external business environmental factor, there is need for further
emphasis on undertaking continuous studies on external business environment and
how it can lead to performance of SMEs which is the backbone objective of most
business organizations. However, to the best of the researchers’ knowledge, few
studies have been conducted using economic, socio-cultural and technology as
external business environmental factor on performance of SMEs in Oyo State.
Therefore, this study seeks to contribute to the existing literature by
empirically examining the effects of external business environment (economic,
socio-cultural and technology) on the performance of small and medium
enterprises SMEs in Oyo State.
1.3 Research Questions
In line with the above research problem stated, the
following research questions were asked:
i. Does economic environment have an effect on the performance
of SMEs in Oyo
State? ii. Does socio-cultural environment have an
effect on the performance of SMEs in Oyo
State? iii. Does technology environment
have an effect on the performance of SMEs in Oyo
State?
1.4 Objectives of the Study
The main objective of the study
is to examine the effect of external business environment on performance of
SMEs in Oyo State. Specifically, the study was guided by the following
objectives to:
i. Determine the effect of economic environment on
the performance of SMEs in Oyo
State. ii. Examine the effect of
socio-cultural environment on the performance of SMEs in Oyo
State. iii. Determine the effect of
technology environment on the performance of SMEs in Oyo
State.
1.5 Hypotheses of the Study
Based on the objectives, the following hypotheses were
formulated in null form:
H01 Economic environment has no significant
effect on the performance of SMEs in
Oyo State.
H02 Socio-cultural environment has no
significant effect on the performance of SMEs in
Oyo State.
H03 Technology environment has no significant
effect on the performance of SMEs in
Oyo State.
1.6 Significance of the Study
This study set out to confirm the
contingency theory, by studying the best way on the environment factors that
make SMEs perform effectively. This study thus theoretically enhances the body
of knowledge by combining economic, socio-cultural and technology environment
in the model. Furthermore, most previous related researches studied these
environmental factors differently. In addition, studies that have considered
these environmental factors have looked at the large enterprise. This study
thus contributes to the body of knowledge by combining the environmental
factors on performance of small and medium enterprises, as there is scarcity of
related studies that have look at the combination of these three environmental
factors on one model.
The study is of benefit to SMEs
owners/managers operating in Oyo state, providing ways on how to survey the
business environment appropriately thus ensuring that SMEs objectives are
achieved. And also the study was
significant to owners/managers of business enterprises in the state to know
which among the three environmental factors impact on business performance
effectively.
Government also may benefit from
this study to craft appropriate enabling environment and policies that promote
the growth and stability of SMEs in Oyo state and help them safeguard their
assets.
Furthermore, the study may enable
future researchers, academicians and students to understand the impact and
importance of these three external business environment (economic,
socio-cultural and technology) on the performance of SMEs in Oyo state, adding
to existing knowledge.
Government agencies, like Small
and Medium Development Agency of Nigeria (SMEDAN), Youth Enterprise with
Innovation in Nigeria (YOUWIN) and National Enterprise Development Program
(NEDEP) employed findings to train SMEs owners/managers on how to handle their
business environment through economic, socio-cultural and technology factors.
It may also serve as a reference point for future researchers in the state.
1.7 Scope of the Study
The scope of this study cover
registered SMEs in Oyo State. Oyo State was chosen because of its large
concentration of SMEs among the various states in Nigeria, and it was ranked as
the 3rd largest concentration of SMEs after Lagos and Kano (SMEDAN, 2013). The
study was limited to the owners/managers of registered SMEs in Oyo State. The
study also involve a cross section of businesses in different industries such
as manufacturing, wholesale and retail trade, accommodation and restaurant
services, mining and quarrying, agriculture, transport and storage, and
information and communication. These sectors were chosen because they are
mostly affected by the business environment in the state.
1.8 Limitations of the Study
The following were the
limitations of this study. Firstly, it arises from its scope that is limited to
SMEs operating in Oyo State. As a result, the findings of the study may not be
generalised among all SMEs as a whole in Nigeria. Another limitation is that,
the findings of this study cannot be generalized in a large extend or context
among all SMEs sub-sector because the study did not look at the SMEs sector
individually. As such, various studies need to look at the impact of the
variables on performance of SMEs sub-sector such as building and construction,
rental services, waste management and remediation, water supply, sewerage,
among others.
The study was
also limited to external environmental factors neglecting the internal
environmental factors. This stood as another flaw of the study.
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