i THE EFFECT OF LEADERSHIP STYLES AND ENTREPRENEURIAL ORIENTATION ON THE BUSINESS PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN NIGERIA, USING SELECTED SMES IN IBADAN METROPOLIS AS A CASE STUDY PDF

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THE EFFECT OF LEADERSHIP STYLES AND ENTREPRENEURIAL ORIENTATION ON THE BUSINESS PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN NIGERIA, USING SELECTED SMES IN IBADAN METROPOLIS AS A CASE STUDY BY IDOKO SHEILA ENE MATRIC NO: NOU142673255 A PROJECT SUBMITTED TO THE DEPARTMENT OF ENTREPRENEURSHIP, FACU...

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THE EFFECT OF LEADERSHIP STYLES AND ENTREPRENEURIAL ORIENTATION ON THE BUSINESS PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN NIGERIA, USING SELECTED SMES IN IBADAN METROPOLIS AS A CASE STUDY

BY

IDOKO SHEILA ENE MATRIC NO: NOU142673255

A PROJECT SUBMITTED TO THE DEPARTMENT OF ENTREPRENEURSHIP, FACULTY OF MANAGEMENT SCIENCE, NATIONAL OPEN UNIVERSITY OF NIGERIA, ABUJA IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF BACHELOR OF SCIENCE (B.Sc. HONS) DEGREE IN ENTREPRENEURSHIP AND BUSINESS MANAGEMENT

APRIL, 2018

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DECLARATION I IDOKO SHEILA ENE do humbly declare that this research work entitled THE EFFECT OF LEADERSHIP STYLES AND ENTREPRENEURIAL ORIENTATION ON THE BUSINESS PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN NIGERIA is as a result of findings from my research efforts, carried out in the Faculty of Management Sciences, National Open University of Nigeria. It was carried out under the supervision of Dr. Afolabi I further declare that, to the best of my knowledge, this work contains no material previously published by another person or group except where due acknowledgement has been made in the text and stands subject to plagiarism scrutiny.

__________________________

_________________________

Name/Signature

Date

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CERTIFICATION This is to certify that this research project entitled THE EFFECT OF LEADERSHIP STYLES AND ENTREPRENEURIAL ORIENTATION ON THE BUSINESS PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN NIGERIA was carried out by IDOKO SHEILA ENE in the Faculty of Management Sciences, National Open University of Nigeria, Abuja, Nigeria for the award of Bachelor of Science Degree in Entrepreneurship and Business Management.

_______________________

_______________________

Dr. Yakibi Ayodele Afolabi

Date

(PhD)

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DEDICATION This project is dedicated to the God Almighty, for the strength, grace and kindness throughout my program.

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ACKNOWLEDGEMENTS I hereby register my profound gratitude to God Almighty who gave me good health, wisdom and enablement to see this project work through. May His name be Glorified. I am very much indebted to all those who contributed in one way or the other to the successful completion of this project. I thank my supervisor in the person of Dr. Afolabi who had swift solution to all my pressing problems during the course of the write-up. I equally extend my regards to Professor Bandele M.O., Director NOUN, Ibadan Study Centre and all the entire staff of National Open University of Nigeria (NOUN), Ibadan study center especially Mrs. F. Adeoye, Dr. Fagbola, Mr. Franklin and other staff in the Administrative Unit for their understanding and encouragement all through the degree programme. To my industrious and resilient parents, Mr. Idoko and Mrs. Lydia Idoko, I appreciate you greatly for your unprecedented love, care and the burden you took to make my life what it is today. And to my entire siblings, your goodwill, love and maximum support is highly appreciated. I also express my innermost thanks to my friends and course mates Ojo Aduragbemi, Adeyi Deola, Odebode Daniel, Oyebamiji Daniel, Adeniji Israel for their support and guidance during the research work and well-wishers I say God bless you all.

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ABSTRACT

The purpose of this study is to investigate the effect of leadership style and entrepreneurial orientation on the business performance of small and medium enterprises in Nigeria. Leadership style and entrepreneurial orientation has been widely touted as a fundamental ingredient for enhancing firm growth. Consequently, this aimed at examining the effect of leadership style and entrepreneurial orientation and its dimensional variables (innovativeness, risk-taking, and proactiveness) on SME growth (employment, sales, and asset growth). Using information from 150 SMEs, the results obtained indicated that while leadership style and entrepreneurial orientation had a significant positive association with SME growth (employment and sales growth), most SMEs show a moderate level of entrepreneurial orientation. Also, following the leadership style and entrepreneurial orientation dimensions, the findings established the emergence of proactive innovation (a combination of proactiveness and innovativeness) which showed a significant positive association on sales growth. Risk-taking was the only factor that showed a significant influence on employment and asset growth. Based on the findings of this study it was recommended that organizations should, adopt the democratic style of leadership and humane management practices in order to adequately commit the workforce to the work activities.

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TABLE OF CONTENTS Page Title Page

i

Declaration

ii

Certification

iii

Dedication

iv

Acknowledgements

v

Abstract

vi

Table of Contents

vii

List of Tables

x

CHAPTER ONE: INTRODUCTION 1.1

Introduction

1

1.2

Background to the study

2

1.3

Statement of the problem

4

1.4

Objectives of the study

5

1.5

Research questions

5

1.6

Statement of the hypothesis

6

1.7

Significance of the study

6

1.8

Justification of the study

6

1.9

Scope of the study

7

1.10

Definitions of terms

7

CHAPTER TWO: LITERATURE REVIEW 2.1

Introduction

9

vii

2.2

Conceptual frame work

11

2.3

Theoretical frame work

12

2.4

Definition of Entrepreneurship

16

2.5

Historical evolution of Small Scale Business in Nigeria

27

CHAPTER THREE: RESEARCH METHODOLOGY 3.1

Introduction

38

3.2

Research Philosophy

39

3.3

Research Approach

39

3.4

Data Collection Method

40

3.5

Methods of Data Analysis

42

3.6

Limitations of the study

43

CHAPTER FOUR: DATA ANALYSIS, FINDINGS AND DISCUSSION 4.1

Results and Discussion

45

4.2

Respondents’ Socio- Demographic Characteristics

45

4.3

Discussion of Findings

49

4.4

Test of Hypothesis

63

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS 5.1

Introduction

65

5.2

Summary of findings

65

5.3

Conclusion

66

5.4

Recommendations

68

5.5

Proposal for further studies

69

References

70

viii

Appendix

78

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LIST OF TABLES Table 4.2.1: Sex of Respondents

46

Table 4.2.2: Age of Respondents

46

Table 4.2.3: Marital Status

47

Table 4.2.4: Years in Occupation/Business

48

Table 4.3.1: SME contributed substantially to national output in Nigeria.

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Table 4.3.2: SMEs are universally acknowledged as catalysts for industrial development.

50

Table 4.3.3: An effective leader influences followers in a desired manner to achieve desired goals.

51

Table 4.3.4: Today’s organizations need effective leaders who understand the complexities of the rapidly changing global environment.

52

Table 4.3.5: Different entrepreneurship styles will affect organizational effectiveness or performance.

53

Table: 4.3.6: Leadership is more about people and less about tasks

54

Table 4.3.7: Good leaders feel comfortable challenging the status quo and finding efficient as well as long-term solutions to challenges.

55

Table 4.3.8: Entrepreneurs have become the heroes of economic development and contemporary enterprises.

56

Table 4.3.9: Entrepreneurship is also the ability and willingness of individual both on their own and within an organization to perceive and create new economic opportunities (new products, new production method, new organization schemes and new product-market combinations).

x

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Table 4.3.10: Entrepreneurial orientation is the presence of organizationallevel entrepreneurship.

58

Table 4.3.11: Entrepreneurship comprises human creativity and the ability to discover profitable ideas that enable marketers to take advantage of new and socially beneficial gains from trade.

59

Table 4.3.12: The leadership styles and entrepreneurial orientation determine the level of subordinate participation in decision making and the way an organization is run administratively.

60

Table 4.3.13: Participation in decision making creates an individual’s mental and emotional involvement in a group situation which encourages him or her to contribute to group goals and share responsibility.

61

Table 4.3.14: Leadership style of management and entrepreneur are a pre-requisite for effective accomplishment in organizations.

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Table: 4.3.15: Entrepreneurial orientation (innovation, proactiveness, and risktaking) has a significant relationship on SMEs in Nigeria and predict the business performance.

62

Table 4.4.1: Test Statistics

63

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CHAPTER ONE 1.1

Introduction

An effective leader influences followers in a desired manner to achieve desired goals. Different leadership styles may affect organizational effectiveness or performance (Nahavandi, 2002); Entrepreneurs have become the heroes of economic development and contemporary enterprises (Sathe, 2003). Entrepreneurial orientation is a commonly used measure in the literature (Morris & Kuratko, 2002). This concept is the presence of organizational-level entrepreneurship (Wiklund & Shepherd, 2005). Some researchers have tried to combine the two concepts into entrepreneurial leadership to explore both leadership and entrepreneurship behavior (Gupta, MacMillan & Suriec 2004; Tarabishy, Solomon, Fernald & Sashkin, 2005). They have tried to combine entrepreneurship with leadership into a new form of leadership called entrepreneurial leadership. This new leadership model has been used to show both entrepreneurship and leadership behavior (Tarabishy et al, 2005). In the dynamic, complex, and uncertain competitive environment, a type of entrepreneurial leader who is distinct from the behavioral form of leaders is needed (Cohen, 2004). This study was designed to examine how leadership styles can affect the development and implementation of entrepreneurial orientation in Small and medium enterprises (SMEs) in Nigeria, SMEs exert a strong influence on the economies of Nigeria. It also examines the effects of entrepreneurial orientation and leadership styles on business performance. The findings could contribute new knowledge in the fields of leadership and entrepreneurship, especially entrepreneurial leadership. The development of entrepreneurship across cultures, economies and continents is an essential feature of economic change (Wright & Marlow, 2012). To date, entrepreneurship

1

has become one of the major topics of discussion in the literature as it continues to grow both as a distinct academic discipline, and a recognized career (Alstete, 2008). The development of entrepreneurs and entrepreneuring SME’s has become a major contributor towards economic development in countries such as Malaysia (Hilmi, Ramayah, Mustapha & Pawanchik, 2010). Various studies have been conducted to identify the critical success factors and the reasons for failures among SMEs and the findings of these studies have been discussed in many books and journal articles (i.e. Perry, 2001; Beaver, 2003; Hung, Abdullah-Effendi, Talib & Rani 2010; Ghosh et al., 2001). But, a more detailed look at the characteristics of the factors identified in these studies especially from qualitative perspective is still lacking. 1.2

Background to the Study

Leadership is the art of influencing others (De Pree, 2004). Today’s organizations need effective leaders who understand the complexities of the rapidly changing global environment (Nahavandi, 2002). Hence, an effective leader influences followers in a desired manner to achieve desired goals. Leadership style is the ―relatively consistent pattern of behavior that characterizes a leader‖ (DuBrin, 2001). Different leadership styles may affect organizational effectiveness or performance. The world has developed into an entrepreneurial economy; the creation of new ventures is at the center of activity. Entrepreneurs have become the heroes of economic development and contemporary enterprises (Sathe, 2003). Entrepreneurial orientation is a commonly used measure in the literature (Morris & Kuratko, 2002). This concept is the presence of organizational-level entrepreneurship (Wiklund & Shepherd, 2005). Leadership and entrepreneurship are critical concepts in academic research. Leadership is considered a mature field (Hunt & Dodge, 2000); entrepreneurship is a relatively young field (Hitt & Ireland, 2000). The two, however, are interconnected (Colbert, 2003).

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Vecchio (2003) assumes that entrepreneurship is merely leadership in a special context. Cunningham & Lischeron (1991) indicated that an entrepreneur is often a leader; an entrepreneur must possess leadership skills to be successful. Some researchers have tried to combine entrepreneurship with leadership into a new form of leadership called entrepreneurial leadership. This new leadership model has been used to show both entrepreneurship and leadership behavior (McGrath & MacMillan, 2000; Tarabishy, Solomon, Fernald, Sashkin & 2005). In the dynamic, complex, and uncertain competitive environment, a type of entrepreneurial leader who is distinct from the behavioral form of leaders is needed (Cohen, 2004; Tarabishy, Solomon, Fernald & Sashkin, 2005). Small and medium enterprises (SMEs) exert a strong influence on the economies of all countries, particularly in the fast-changing and increasingly competitive global market (Ladzani & Van Vuuren, 2002). This study focused on top-level managers of SMEs in Taiwan who are identified as the CEOs, owners, founders, managers, presidents, or heads of SMEs. The study was designed to examine how leadership can affect the development and implementation of entrepreneurial orientation in SMEs in Nigeria, using some selected SMEs in Ibadan metropolis. It also was designed to examine the effects of entrepreneurial orientation, leadership styles, and outcomes of leadership on business performance. Thornberry (2006) stated that ―entrepreneurial leadership is more like transformational leadership than it is like transactional leadership, yet it differs in some fundamental ways. The researcher used the Multifactor Leadership Questionnaire (MLQ; Bass & Avolio, 2005) to measure top-level managers’ transformational leadership, transactional leadership, passive-avoidant leadership, and outcomes of leadership. Furthermore, because entrepreneurial orientation is a critical concept in entrepreneurship literature, the

3

researcher used the Entrepreneurial Orientation Questionnaire (EOQ; Covin & Slevin, 2009) to measure entrepreneurial characteristic of SMEs in Nigeria. 1.3

Statement of the Problem

Entrepreneurial characteristics are a pre-requisite for effective accomplishment in organizations. The entrepreneurial characteristics determine the level of subordinate participation in decision making and the way an organization is run administratively. Organizations which are low in efficiency tend to have leaders and entrepreneur who are highly bossy. Decision making is centered on them alone. Participation in decision making creates an individual’s mental and emotional involvement in a group situation which encourages him or her to contribute to group goals and share responsibility for them (Chruden & Sherman, 2005). The problem with most small and medium scale enterprises (SMEs) is that the leaders are not democratic in their relationship with their subordinate. In fact, leaders in most small and medium enterprises are usually authoritarian in style. They dictate the tune and have the administration of the organization centered on them. The need for subordinate to participate in decision making is not a passing fancy. It is rooted deep in the culture of free men around the world and it is no doubt the basic drive in men. Another problem affecting leadership style in small and medium scale enterprises is the competence of the leaders so appointed. In most cases, some of their appointments lack merit. What becomes of such organization is having competent leaders who lack the abilities or capacities to use the appropriate leadership style to lead the members to attain set goals or objectives. Thus, what are usually found in some of these organizations are “round pegs in a square hole” rather than “round pegs in round holes”. Once this situation

4

arises, there will be utterances in the way such leaders behave or administers the organization and these will in-turn affect the goals of the organization. The burden of this study is to copiously review the effect of entrepreneurship characteristics on the business performance of small and medium enterprises in Nigeria, using selected SMEs in Ibadan metropolis as a case study. 1.4

Objectives of the Study

The main objective is to examine the effect of entrepreneurship characteristics on the business performance of small and medium enterprises in Nigeria, using selected SMEs in Ibadan metropolis as a case study; other specific objectives include: i.

To examine the effect of entrepreneurship characteristics on employees morale in small medium enterprises in Nigeria.

ii.

To examine the effect of entrepreneurship characteristic on employees efficiency in small medium enterprises in Nigeria.

iii.

To examine the effect of entrepreneurship characteristic on the overall performance of small and medium enterprises in Nigeria.

1.5 i.

Research Questions How does entrepreneurship characteristics affect employee’s morale in small medium enterprises in Nigeria?

ii.

How does entrepreneurship characteristics influences employees efficiency in sm...