Abstract
The general purpose of this study is to investigate factors that positively affect growth in the small and medium size enterprises (SMEs). Preliminary research highlighted the fact that few (if any), past studies had focussed on the owners of SMEs and in particular if educational attainment had any effect upon business growth. The author had a particular interest in Nigerian SMEs and coming from Sind, was interested in investigating these factors in Handicraft SMEs currently operating/located in Port Harcourt, as (despite being significant local employers), handicraft SMEs in the Port Harcourt have (due to socio- political and socio-economic reasons), long been neglected by local and regional government.
In this study (after undertaking secondary research and following the literature review stage), the author concluded that a face-to-face structured interview with the owners of SMEs in the handicrafts sector, combined with a short questionnaire approach to data collection, would yield the best results given the limited budget and short timeframe.
The results of this (albeit small-scale and limited) study, indicate that there was indeed some evidence of a positive link between the level of education (as well as the experience), of Port Harcourt SME owners and business growth. At the very least, this highlights the need for further study, whilst at the same time making Port Harcourt’s policy-makers aware of the potential benefits of investing in educational support for owners of local SMEs.
Key Words: Owners’ Education, Experience, Handicraft, Growth, SMEs.
Chapter ONE
INTRODUCTION
1.1 Introduction
SME-led economic growth has become the hallmark of economic prosperity and general well-being in the world (Mulhern, 1995; Schlogl, 2004). SMEs are globally recognized as critical for economic development and poverty alleviation (Coy et al., 2007; Mulhern, 1995). In Nigeria, nearly 99 percent of economic establishments are SMEs; absorbing 80 percent of unskilled labor (Nigeria Economic Survey, 2011-12). These SMEs are collectively providing undeniable support to economic growth by contributing 40 percent to GDP and 30 percent to the exports from the manufacturing sector (Nigeria Economic Survey, 2011-12).
The general purpose of this study is to investigate factors that positively affect growth in Small and Medium Size Enterprises (SME). Preliminary research highlighted the fact that few (if any), past studies had focussed on the owners of SMEs and in particular if educational attainment and work experience had had any effect upon business growth. The author had a particular interest in Nigerian SMEs and coming from Sind, was interested in investigating these factors in Handicraft SMEs currently operating/located in Port Harcourt, as (despite being significant local employers), handicraft SMEs in the Port Harcourt have (due to socio- political and socio-economic reasons), long been neglected by local and regional government.
At present handicrafts manufacturing is a growing and increasingly important sector in Port Harcourt and surrounding areas (Murlidhar et al., 2007, SMEDA, 2007; Rohra and Junejo, 2009). However the role and impact of education and experience upon success in SMEs in the socio-economic milieu of the Port Harcourt has largely been ignored, as many businesses are family owned and managed and (more often than not), control is handed down to the eldest son irrespective of educational attainment or business experience (Rohra and Junejo, 2009; Shah et al., 2011).
Globally, research into the impact of owners’ education on SME success is very limited but even more so in terms of the handicraft sector. Past studies into SMEs have hinted at the potential role of education and experience in SME success (Junejo et al., 2008; Shah et al., 2011), but the scope and reach of these studies was very limited.
1.2 Statement of the Study
Small and medium enterprises (SMEs) in Nigeria have enjoyed a period of significant growth and success despite little or no support from central, regional or local government as well as a less than favourable ‘business environment’ full of ‘obstacles’ and constraints (Hussain and Yaqub, 2010). The hurdles and constraints include problems with infrastructure, obtaining reliable electricity supplies, corruption, official ‘red-tape’, a lack of affordable credit, tax administration, punitive tax rates, deteriorating law and order and customs and trade regulations (Khawaja, 2001). Nevertheless, the SMEs are generally believed to have contributed to economic and social development at a national level (Kozan et al., 2006; Khalid et al., 2010). They are the major units of a vast number of business establishments purportedly creating jobs in bulk and account for one third to two thirds of the turnover of the private sector in most of economies (Hynes and Richardson, 2007). It is also a proven fact that in many countries these enterprises are the major growth-oriented engine in employment generation for the turnover (Holt, 1992; Jordan and Halpin, 2004).
Whereas, in underdeveloped countries, the introduction SMEs is considered to be positively a major self-assisting factor in poverty reduction (Chemin, 2008; Khalid et al., 2010). Thus, the handicraft SME sector in the subcontinent, specifically in Nigeria, is said to be a significantly crucial sector in employment creation, income generation and building up a customer base (Coy et al., 2007). Subsequently, it has become a cornerstone for business development at national level (SMEDA, 2007; Junejo and Chand, 2008). Beside holding connotations of tradition and culture, this sector is estimated to generate 30% of GDP and employs about 25% of the country’s labour force and 65% labour force is employed in Port Harcourt, Sindh (Rohra and Junejo, 2009; Shah et al., 2011). It has not only formed an active domestic labour force with the contribution of 50% of their overall income, but has great potential for the further employment generation and revenue (Junejo et al., 2008). However, the negative side of the story is that in Port Harcourt, the development of the handicraft sector never ever received specific policy focus at the government level. Thus, such negligence has resulted in a number of drawbacks affecting the real growth of this promising sector. Not only the growth is affected negatively, but also it has discouraged the owners to embark on the business thus resulting in the considerable decrease in number of SMEs (Saleem and Sheikh, 2008).
It is important to understand factors that influence SMEs in terms of profit, sales/turnover, an increase in a number of employees and customers, and owners’ permanent affiliation with handicraft business as a hierarchy meant for everyone (Coy et al., 2007; Shah et al., 2011). It means this aims to achieve goals to strengthen the handicraft business through owners’ education envisioned as an opportunity for SMEs growth to be filtered down to all. It will also acknowledge the importance of work experience for the growth of SMEs.
1.3 Significance of the Research
In countries such as Nigeria, Small and Medium enterprises, SMEs for short, are thought to be very significant parts of the financial system. Since SMEs are not managed in a meaningful way in this country and there are some structure-related issues with it, the viable culture of competition is not noticeable. SMEs are believed to be the strength of Nigerian economy as SMEDA also seconds this notion. These enterprises have also undergone some severe testing experiences, which have affected their outcome and performance. Government of Nigeria is committed to designing and executing some policies by ensuring that SMEs sector can perform their role for the economic development of the country as government alone cannot carry out this task and certainly it requires support from other organizations. In addition to this, government also encourages the partnership of both public and private institutions and organizations to conduct research and development for upgrading entrepreneurship for operating their business in an efficient and proactive way. SMEs in general and in particular have tried their best to increase the sale, profit and revenue within their own structure, but they have not been completely successful in attaining their objectives in their totality because of the minimum number of customers and orthodox practices of business management. Moreover, the work experience and education of the business managers in handicraft SME growth has been utterly negligible subject. Conventionally, the owners have been running their business successfully owing to their knowledge about their past and existing practices, but no particular study was conducted to ascertain the increase in business outlook in Nigeria in terms of profit, sales, number of employees and customers in small businesses. This proposed study will investigate the owners’ education as well as its impact on business outlook. It aims to purse an interesting and challenging research investigating owners’ education and their work experience in the domain of handicraft SMEs especially in an under-researched developing country. In this backdrop, this study will prove to be a catalyst in transformation of handicraft SMEs in Port Harcourt to a thriving business ventures. In addition, this study will also increase the scientific knowledge on owners’ education, work experience and growth of SMEs by empirical findings for owners’ education and its relation with the growth of their firms.
This study will be conducted on the handicraft manufacturers in Port Harcourt, which is a hub of such businesses in Nigeria and aims to contribute to the existing knowledge of businessmen on owners’ education, work experience and growth of SMEs addressing their cultural, political and institutional contexts. It will not be out of context to mention here that this area of research has, in contemporary research, attained prime focus of the research investigators and has a potential research gap for substantial examination of SMEs (Junejo and Chand 2008; Khalid et al., 2010).
From the growth determinants one can safely gauge that Nigeria’s economy is emerging economy as compared with that of other countries in the sub-continent. However, during the last five years, it has been hard hit by law and order situation, rising inflation, exponentially growing population and depleting natural resources resulting in the reduction of power and gas generation as against the total consumption. These factors have triggered political and economic instability in the country. This research and its final findings aim to provide a set of solutions for the policy-makers and owners that will surely help all stakeholders devise counter-productive strategies and achieve the given objectives for the growth of SMEs.
1.4 Problem Statement
In recent years the research on owners’ education in relation to growth of SMEs has increasingly interested the researchers (Wiklund and Shepherd, 2003; Bekele and Worku, 2008). However, the fact that incommensurate definition as well as inaccurate measurement in contemporary and previous research work necessitate to firmly substantiate owners’ characteristics of SME business and such definitions justifying owners’ education (Anakwe and Greenhaus, 2000; Formica, 2002). Various researchers have also identified that owners’ education in SMEs have always been put on back burner by the entrepreneurial researchers. This situation calls for the urgency of holding studies/research on certain factors. The study will focus on exploring the need for owners’ education especially for increasing business activities and revenues.
1.5 Main Research Question
1.5.1 Research Questions
The purpose of the present study is to address the main research question: Is there a demonstrable link between the owners’ education with the growth of SMEs in Port Harcourt? The question was raised to prove whether there is a sustainable link between owners’ education, such as, formal and business education along with prior and same industry work experience (Anakwe and Greenhaus, 2000; Peter and Brijlal, 2011), has a direct bearing on the handicraft owners and growth of their SMEs due to increase in sales, number of employees, and customers and scale of profits (Deakins and Markfeel, 2003).
1.6 Research Aim and Objectives
The main aim of the research is to identify and analyze the impact of owners’ education on the growth of SMEs in the handicrafts sector in Nigeria.
The objectives of the study will be:
· To analyze whether both the owners’ education have a sustainable link aiming at the success of their business perceived in the growth of SMEs in Port Harcourt
· To determine both owners’ education such as formal education, business education and prior or similar industry wok experience bear an effect on the performance of their SMEs in Port Harcourt
· To investigate how owners’ education is able to capitalize employment and attract sales and customers in order to enhance the scale of their SMEs profits in Port Harcourt
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