CHAPTER ONE
INTRODUCTION
1.1. Background to the Study
Small and medium enterprises (SMEs) play a crucial role in the sustainable development of a nation. SMEs help in the creation of employment, industrial production increase, and export, social enrichment as well as political stability. Enterprises are seen as an organisation established for the purpose of providing goods and services that meet customers’ needs. Small and Medium Enterprises (SMEs) are undoubtedly recognized by the government, private individual and developmental expert as the main engine room for any nation’s growth and development which can be summarily referred to as the bedrock of the nation. However, for SMEs to achieve performance there are a number of organisational factors that must be considered, such as teamwork, education and training and reward system, which will be elucidated in the course of this work.
Christensen, Johnson, and Rigby (2018) revealed that entrepreneurial activities are the major driving forces to the growth and performance of small and medium enterprises (SMEs). However, there are a number of entrepreneurial activities that needs to be considered when an individual wants to be an entrepreneur. Among these entrepreneurial activities is preparation prior to starting the business, while doing business and also after plans to quit from the business sector (Frank, Lueger, & Korunka, 2017). In spite of the government introducing a lot of developmental programs towards assisting entrepreneurs to grow, however, these entrepreneurs are still losing their competitive advantage in the global business environment as a result of their low productivity and poor performance (Tehseen, Sajilan, Ramayah, & Gadar, 2016). Thus, it is very important to identify the various organisational factors that can improve the entrepreneurial performance of SMEs.
In Europe, Small and Medium Scale Enterprises (SMEs) constitute the driving force of such industrial growth and development. Wolfenson (2016) reported that environmental changes are continuously exerting new pressures on SMEs performance and in order to adapt with these changes, SMEs often formulate and implement strategies to re-organize and reform the way they carry out their business services. Thus the impact of environmental factors on SMEs performance is found to have increased which require more sophisticated business strategy, (Stokes & Wilson, 2015). In USA, new ventures and entrepreneurs are important for economic development (Kim & Ames, 2016). SMEs drive innovation, create jobs, and generate wealth for founders, employees, and owners. Besides, new technology-based ventures are suggested to exhibit a `multiplier' effect in terms of job creation (Stewart, 2015). The technology developed by these types of new ventures often creates employment in additional industry sectors such as the service, retailing, or public sector. Unfortunately, SMEs tend to fail in higher proportions than mature businesses, (Flynn, 2015).
In China, Kelly (2020) argued that SMEs is the driving force of the economy. However, he stated that a contemporary issue identified is the diversity of employees, with individuals of different backgrounds and personalities. Thus, in order to achieve the objective of the organisation, it is very crucial for organisation leadership to effectively manage diversity in the workplace so as to ensure that every customer needs is met and satisfied in the dialect which they understand. Kochan, Bezrukova, Ely, Jackson, Joshi, Jehn, and Thomas (2019) argued that modern-day organisations find it very uneasy to create standardized policies that will accommodate employees’ diversity in the workplace. They further claimed that, people who are advocating for cultural diversity in the workplace, may themselves have cultural diversity issues within themselves in the workplace, thus, making it challenging for them to effectively manage.
In Africa, SMEs are characterized as low income earners for several reasons (Ariyo, 2018). According to Ariyo (2018), most of the SMEs are faced with perennial issues of shortage of working capital which hinders their ability to produce efficiently. Consequently, most SMEs resort to external funding which is characterized by high interest rate. However, financial institutions are unwilling to lend to them on long-term basis as they are considered highly vulnerable with high credit risk. Furthermore, Osotimehin, Charles, Babatunde, and Olajide (2016) argued that the organisational factors of inadequate finance and lack of education affects the effective performance of SMEs.
In Kenya, SMEs on average achieve decent levels of productivity especially of capital and factors taken together (that is, total productivity factor) while also generating relatively large amount of socio-economic development. In dynamic terms, the SMEs sector is viewed as being populated by firms most of which have considerable growth potential. SMEs in Kenya achieve productivity increases to a great extent simply by borrowing from the shelf of technologies available in the world, (Bowen, Morara, & Mureithi, 2020). The dynamic role of micro and small enterprises (SMEs) in developing countries as engines through which the growth objectives of developing countries can be achieved has long been recognized. It is estimated that SMEs employ 22% of the adult population in developing countries.
In Ghana, SMEs have been able to contribute to Gross Domestic Product (GDP) of the country by reducing the rate of unemployment, thereby increasing the standard of living of the people (Ariyo, 2018). SMEs is considered as an impediment to further economic development and growth, as they often fail within their first three years of operations as a result of low technical capabilities, low entrepreneurial skills, limitation of their sizes among others, have been adduced to their low survival rate, therefore as a result of these factors, and for SMEs to survive in this contemporary age of technology and competitive business environment, customer relationships management programs was introduced to help give advice, assistance and to assist SMEs for survival (Philips, 2021).
In Nigeria, many small and medium scale enterprises operate in a poor economic condition which also implies poor finance and lack of infrastructures, which have been identified as the most crucial organisational factors. This position is corroborated by the study of Adeoye (2015) who identified financial support as one of the main organisational factor responsible for SMEs failure in Nigeria. In addition, there are also personal attitudes, lack of team work among employees or internal organisational factors that affect the performance of SMEs, (Ariyo, 2018)
In all successful economies, SMEs are seen as an essential springboard for growth, job creation and social progress. Besides, it is seen as an important force to generate employment and more equitable income distribution, activate competition, exploit niche markets, and enhance productivity and technical change and, through the combination of all of these measures, to stimulate economic development (Okpara, 2017). SMEs can be said to be performing only when they can overcome the challenges that stand in their way in the business environments. It is important for a business to keep a pace with the various changes in the environment in order to survive in the long run. Similarly, every business settings often bring in a new way of thinking about the business environment and new way of acting.
Therefore, understanding the organisational factors affecting SMEs performance is considered an important area of focus in enterprises. Thus, this study seeks to examine organisational factors and entrepreneurial performance of selected SMES in Abuja.
1.2. Statement of the Poblem
Quite a number of studies have been examined on organisational factors and entrepreneurial performance of selected SMES in Abuja. However, despite the importance of organisational factors in influencing entrepreneurial performance, there is a dearth of study in particular focusing on the topic which is a gap this present study seeks to fill and address.
Small and Medium Enterprises (SMEs) are considered as the engine of economic growth in every country. In spite of the major role, the significance and contribution of SMEs to a given economy, these enterprises are faced with several problems that exist in promoting their development and growth. The situation is more disturbing and worrying when compared with what other developing and developed countries have been able to achieve with their SMEs.
Sunia (2020) stated that, in every contemporary organisation, it is very important that individuals work as a team regardless of their cultural background and race. However, this can be very exciting, but as well be very frustrating in most cases, (Bindu, 2018). Thus, it becomes imperative for every organisation to find ways on how to effectively manage these issues. The study of Kochan, Bezrukova, Ely, Jackson, Joshi, Jehn, and Thomas (2019) revealed that the employees of today’s business environment are more diverse in nature than in the past and if their diversity is not properly managed, it could affect the ability of a business to achieve team success and innovative ideas. In the study of Ang, Van Dyne, Koh, Ng, Templer, Tay, and Chandrasekar (2020), the authors revealed that the rate of diversity in today’s workplace will negatively affect organisational factors like teamwork, innovativeness and creativity, positive communication, and problem solving if not effectively managed. Similarly, Kochan et al. (2019) argued that modern-day organisations find it very uneasy to create standardized policies that will accommodate employees’ diversity in the workplace, thus affect the innovative process of the organisation. However, the various empirical findings showed mixed findings. Therefore, the study will fill the identified gap by examining teamwork and innovation of SMEs in Abuja.
According to Armstrong (2016), staff training is recognized as a crucial element in the attainment of organisational goals and objectives. The study of Fatai (2017) showed that the consistent failing rate of SMEs in Nigeria due to lack of knowledge on the importance of employees training towards job performance. Corresponding to the above, Gilaninia (2021) revealed that, there is little or no attention with respect to training of employees among SMEs due to the nature of their size. Thus, the problem here is to find out why SMEs do not training their employees.
Based on the above, it is important that a study of this nature is conducted to examine organisational factors and entrepreneurial performance of selected SMEs in Abuja.
1.3. Research Objective
The broad objective of this study is to examine the effect of organisational factors on entrepreneurial performance of selected SMEs in Abuja. However, the specific objectives were to:
- examine the effect of team work on innovation of SMEs
- assess the influence of training on customer satisfaction of SMEs
- examine the effect of reward system on job satisfaction of SMEs
- evaluate the combined effects of organisational factors on entrepreneurial performance of selected SMEs in Abuja
1.4. Research Questions
The following research questions were posed for the study
- What is the effect of team work on innovation of SMEs?
- How does training enhance customer satisfaction of SMEs?
- What is the effect of reward system on job satisfaction of SMEs?
- What is the combined effect of organisational factors on entrepreneurial performance of selected SMEs in Abuja?
1.5. Research Hypotheses
The research hypotheses for this study will be formulated in their null form, which are:
Ho1: Teamwork has no significant effect on innovation of SMEs in Abuja, Nigeria
Ho2: Training has no significant effect on customer satisfaction of SMEs in Abuja, Nigeria
Ho3: Reward system has no significant effect on job satisfaction of SMEs in Abuja, Nigeria
Ho4: Organisational factors have no significant combined effects on entrepreneurial performance of selected SMEs in Abuja, Nigeria.
1.6. Operationalisation of Research Variables
The dependent variable is SMEs, represented by Innovation (INN), Customer Satisfaction (ST), and Job Satisfaction (JS). On the other hand, organisational factors, being the independent variable, are proxied by Team Work (TW), Education and Training (ET), and Reward System (RS).
Where Y= Dependent variable
X= Independent variable
Y= f(X)
X= Organisational Factors
X = f(x1, x2, x3,)
x1= Team Work (TW)
x2= Education and Training (ET)
x3= Reward System (RS)
Y= SMEs Performance
Y= f (y1,y2, y3)
y1 = Innovation (IN)
y2 = Customer Satisfaction (CS)
y3 = Job Satisfaction (JS)
The three specific objectives were:
To assess the examine the impact of team work on innovation of SMEs.
y1 = f (x1)
y1= +1x1+e
To assess the impact of education and training on customer satisfaction of SMEs.
Y2 = f (x2)
y2= +2x2+e
To examine the impact of reward system on job satisfaction of SMEs.
Y3 = f (x3)
y3= +3x3+e
Where;
= Constant
1-3= Coefficient of independent sub variables
e= Error terms
1.7. Scope of the Study
The study is focused on organisational factors and entrepreneurial performance of selected SMES in Abuja. The reason for the choice of SMEs in Abuja is that, studies focusing on SMEs particularly in Abuja are limited; therefore, this study will expand the knowledge gap and literature on SMEs in Abuja, Nigeria. The study made use of a primary source of data through the use of questionnaire which was administered amongst the selected SMEs in Abuja. The units of analysis were business owners, managers and employees of SMEs. The reason for this was because they were in the best position to provide relevant data that was useful for the study. The population of the study consisted of 250 employees of Fraser Suites hotel and Atelier Hotel, Abuja, Nigeria. Based on the result of the Yamane formula, the sample size came to 156 employees of Fraser Suites hotel and Atelier Hotel, Abuja, Nigeria. Data was collected through a structured questionnaire and administered to the respondents.
1.8. Significance of the Study
This study will be of benefit to small and medium enterprises, as it will help them to identify and understand the various organisational factors affecting their business performance. In addition, the findings will provide adequate information to business owners and managers on how their business can adopt the best and suitable strategy that will enhance business performance.
The findings from this study may lead to formulation of policies and strategies that enhance the growth and performance of SMEs in Abuja. Furthermore, the findings from this study may benefit SME leaders by equipping them with adequate information on the various organisational factors and challenges they face in growing their businesses and increasing their resilience.
The finding of the study will contribute to the existing literature in the field of organisational factors and entrepreneurial performance of selected SMES. In addition, this study will act as a reference point for further research to refine and extend the present study.
Lastly, this study will assist other researchers to further their studies on areas of interest not exploited yet in the study.
1.9. Operational Definition of Terms
Small and medium-sized enterprises (SMEs): refers to businesses whose scale of operation is less than the average for the industry.
Organisational Factors: refers to factors within SMEs that affect their business performance
Performance: is defined as the ability of an SMEs to achieve result or given objectives
Team Work: refers to how a group of individuals’ works together to achieved a given task
Innovation: refers to the act of employees being creative or innovating in the organisation.
Education and Training: Education is the process of gaining knowledge, skill, and development from study or training. Training, on the other hand, is the process of learning the skills one needs to do a particular job or activity
Customer Satisfaction: It is a measure of how products and services supplied by a company meet or surpass customer expectation
Reward System: refers to the reward system in place in an organisation which are offered to employees such as bonuses, salary increment etc. in order to enhance his or her job performance.
