Influence of Entrepreneurial Competencies on Performance of Small Business in North-eastern Nigeria
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INFLUENCE OF ENTREPRENEURIAL COMPETENCIES ON PERFORMANCE OF SMALL BUSINESS IN NORTH-EASTERN NIGERIA
By
Dr. Yunusa Mohammed Kaigama
School of Business Studies
Federal Polytechnic Damaturu Yobe State
Tertiary Education Trust Fund (TET Fund) Sponsored Study
Abstract
This study was aimed at examining the influence of entrepreneurial competencies on the performance of small business by developing causal model using data obtained from small business in north-eastern Nigeria. Even though many studies have been conducted on small business performance, but specific studies on the relationship between entrepreneurial competencies and performance of small business are limited. Therefore, drawing perspectives from resource-based theory, this study was designed to examine the aforementioned relationship and to help to increase further understanding on how entrepreneurial competencies are buffering small business performance. A quantitative research approach was employed with aid of structural questioners to collect primary data from 307 small business owners/managers. Partial least squares (PLS) algorithm and bootstrap were employed to test the developed hypotheses. The outcomes indicate that entrepreneurial competence plays an influential role in influencing small business performance. Specifically, five out of the seven competencies areas that is relationship competencies; conceptual competencies; organizing competencies; strategic competencies; commitment competencies, and learning competencies; positively influence small business performance. On the other hand, the results suggested negative influence of opportunity competencies and commitment competencies. This study provides insights regarding the importance of entrepreneurial competencies on small business performance. Finally, the competency measurement of this study provides a unique scope for designing such training and development programs for owners/managers.
Keywords: Entrepreneurs Competencies; Small Business Performance; Spatial Least Square Structural Equation (PLS)
1.0 Background of the Research
Scholars and policy makers in both emerging and advanced economies have recognized the vital role-played and still being playing by small business in the development process of modern economies (Folorunso, Abodunde, and Kareem, 2015). Unfortunately, a well-known challenge with small businesses is their poor performance that most a time lead to high exit rate (Abeer, 2014). This is particularly true, because empirical evidence established that in most developing economies small businesses performances are poor (Ahamad, Rani and Kassim, 2011).
Among the mentioned challenges attributed to the low performance rate among small business are, absence of requisite capital and poor entrepreneurial competencies (SMEDAN.2012). In addition, there is always a level of risk involved in managing small business. However, well they may be performing, poor performance will prevail particularly where the owners/managers lack the requisite entrepreneurial competencies. Although, the owners/managers may, without any fault, sink his fortune and in some extent the entire business. Unfortunately, till date effective approach to mitigate small business poor performance and stimulate start-ups is lacking and not forthcoming (Ahamad et al., 2011). This in itself demonstrates the crucial need for the present research.
The growing drive toward efficient performance of small business, that is aim at influence entrepreneurial activities and enhancing economic development are yet to be attained. This effort has been negatively hindered by poor performance among small business especially in developing economies (Ahamad et al., 2011).
Therefore, in an attempt to advance empirical explanation this study developed a model to examine the relationship between entrepreneurial competencies and small business performance in the context of six North-Eastern Nigerian states. The primary aim is to come up with a model that can effectively mitigate and influence performance among small business. Small business performance is conceptually defined as firm’s ability to attain pre-determined results, this is measured against its intended outputs and encompasses outcomes related to financial and market performance that ultimately, guarantee sustainable performance (Fraser et al., 2015). Thus, a compulsory exit, after a specific time in business is due to absence of adequate capital or opportunity to continue in the venture. This exit is related with business poor performance (Lampadarios, 2016).
It is therefore imperative to understand how and what influence small business performance particularly with regards to the level of entrepreneurial competencies among small business owners/managers. According to Abiola (2011), entrepreneurial competencies are important predictors of small business performance. The researchers observed that these factors influence owners/managers ability to mitigate failure risk in the long run and are positively related with small business efficient performance.
Furthermore, the key themes in the mainstream literature on the challenges and causes of poor performance of small business suggested that a vast number of new small businesses become unproductive within initial five years of operation (Zimmerrer et al., 2008; Ahmad et al., 2011). Studies have linked this low performance rate with the low level of entrepreneurial competencies among small businesses as the crucial threats to small business as a competitive enterprise (Lampadarios, 2016).
Empirical evidence, specifically concerned with small business performance suggested that absence and ineffective entrepreneur competencies reduces the profitability and long-term performance of small business (Man, Lau, and Chan, 2002; Man et al., 2002; Kuwahara, Yoshino, Sagara,). Thus, this affects the crucial role of owners/managers of mitigating poor performance risk in the small business sector. A competent and skilled entrepreneur or operator is prudent in making financial decision and effective in overcoming the intimidations of external environmental factors (Rahhman et al., 2011). Consequently, due to poor entrepreneurial competencies among small businesses owners/managers, which resulted to poor handling of financial matters and revenue (Hsu et al., 2014).
Regrettably, there is a significant lack of up-to-date evidence to account on the scale and basic features of the small business sub-sector, especially in relation to poor performance issues (Babandi, 2017). Thus, authority and policy makers are struggling to confine the challenges and intimidations of small business and emphasized to improve the prospective actions towards betterment of small business infrastructure in Nigeria (Kanayo, Jumare, and Nancy, 2013). Therefore, due to intensive gap between practice and theory; the small business poor performance is sloping towards edge that demand extensive, constant research work by the entrepreneur and researchers to enhance small business development for effective economic growth (Oke and Aluko, 2015).
Therefore, for effective performance of small businesses and in order to move the field in that direction, this study adopted conceptualized multidimensional performance variables by drawing a perspective from resource-based view (RBV) and contingency theory (CT) to examine the relationship between entrepreneurial competencies and small business performance in Nigerian context. The adoption of RBV and CT is a logical choice in this area due to its emphasis on explaining how firms use strategic resources to improve firm performance. Small businesses are at a critical point today where the interaction between entrepreneurial competencies, and long-term performance are no longer seen as externalities to the firm, but as being inextricably tied (Hart and Dowell, 2010).
1.1 Overview of Small Business in Nigeria
Nigerian is a developing country endowed with abundant human and material resources. However, these resources are not put to proper use. Inflation and economic recession are the order of the day as prices continues to go up and standard of living is on the sloping-edge. The current global down turn, which was further triggered by the advent of Covid-19, resulted in fall on price of crude oil globally. This has resulted to shift of emphasis by the policy makers in the country to industrial sector where small businesses are crucial drivers.
This is particularly true if one acknowledge the vital role played and still being played by small business in the country in the areas of: employment creation, provision of manufacturing input, developing rural technology, attracting foreign exchange earnings; and generally supporting the entire economy and social service development in the country (Folorunso et al., 2015). Although, recent years, witnessed growing number of studies to find the signals conveyed by small business performance on national economic development (Moruff et al., 2017). Studies have highlighted the important contributions of small business in the national economic development and its innovative roles. Small business sub-sector contributes nearly 75% share in all enterprise of Nigeria, providing employment for over 43.6 million people and contributing about 46.5% share in annual GDP of the country (SMEDAN, 2013). In fact, like other developing economies, of the Nigeria economy is significantly based on the operational capacity of small enterprises.
According to Omolomo (2015) the role of small business cannot be underestimated due to its significant contribution toward poverty reduction, creation of employment opportunities, growth and development of national economy, income re-distribution, wealth creation and improved standard of living of the poor who are the vast majority of Nigerian population. Due to socioeconomic importance of small business, overcoming these problems is a major challenge for all types of economies, researchers and policy makers. With this development in mind and the heated identified challenges, this study is articulated to examine the influence of entrepreneurial competencies on performance small business in Nigeria.
1.3 Statement of the Research Problem
Researchers and policy makers in both developing and developed countries have acknowledged the vital role played by small business in the development process of modern economies (Abeh, 2017). Despite the significant role played by small businesses, many businesses remain stagnant in growth stages for many years, and several more have not been able to attain maturity, which has led to their failure (Byrne and Shepherd, 2015). Globally, 50% of small businesses are unable to maintain their business operations after the first 5 years of initial setup because of poor entrepreneurial competencies (Singh et al., 2015). In fact, in most developing economies the main challenges of small businesses are that of poor performance that resulted to high failure rate (Ossai, 2017).
Prior empirical evidence examined the post entrance of new small business in seven (7) OECD countries established 20-40% of start-ups small business failed within the initial two years and 40-50% carry on further (Bartelsman et al., 2005). According to Ahmad et al. (2011), in Malaysia approximately 80% to 90% of small businesses fail within 5-10 year. Additional evidence on the scale and nature of failure rate in Nigerian small business is provided by Ishola et al. (2013) studies who established that only 20% of newly established small business survive up to the fifth year (i.e., an 80% failure rate), and the trend worsens to 15% fifth-year survival rate in just two years (SMEDAN, 2013). Even though many studies have been conducted on small business performance, specific studies to account for the causes poor performance of small business poor performance that resulted in high failure rate from developing economies perspectives is lacking.
Scanning through the prevailing literatures, poor entrepreneurial competencies are the most mentioned problems that account small business poor performance (Ossai, 2017). Unfortunately, prior researches attempt to mitigate the aforementioned problems lacks an appropriate and systematic approach. This led to the prevalence of inconclusive and often contradictory findings with huge theoretical and empirical gaps that may have practical and policy implications (Abiola, 2011; Mohd and Syamsuriana, 2013). Hence, the ability to determine effective performance of small business poses a greater challenge to researchers, policy makers and owners/managers.
Undoubtedly, the above highlighted situation has stressed the need and significance of the present study, of investigating the relationship between entrepreneurial competencies, and small business performance. This is aim at coming up with a performance model within the context of small business particularly from prospective of developing economies like Nigeria.
This is particularly significant because till date only limited studies have been carried out to examine this in relation to the aforementioned issues and small business performance and to advance an appropriate framework that can be applicable to emerging economies settings. Therefore, for this and many reasons the researcher argued and emphasised the need to fill this research gap to understand how entrepreneurial competencies can influence small business performance. Thus, to effectively accomplish this, perspectives were drawn from RBV and CT with aims of bridging the observed research gap and advancing a model that can effectively mitigate poor performance of small business and influence their long-term survival rate.
This is justified, because empirical evidence on the relationship between entrepreneurial competencies and small business performance is lacking and have not been intensively tested in Northeast, and where it was tested the findings suggested contradictory and inconclusive results (Abiola, 2011; Mohd and Syamsuriana, 2013). Such inconclusive and conflicting evidence have contradictory and conflicting consequences for theory, practice as well as policy making therefore, need for further intensive research, to advance the theoretical conception in that direction. As well as, strengthen small business profitability to improve their chances of long-term survival, and contribute to industrial development, job creation and economic prosperity of the country. Thus, filling the observed research gap, by further extending the RBV and CT logics to explain how the proposed research framework used entrepreneurial competencies in validating the aforementioned conceptualization and gain deep understanding of small business performance in Nigerian context.
1.4 Objectives of the Research
The problem associated with small business poor performance as presently obtainable in Nigeria’s small business sub-sector especially in the Northeast Geo-Political Zone underpins this research study. Accordingly, the general purpose of this study is to evaluate the influence of entrepreneurial competencies on performance of small business and expected outcomes of improve small business performance with a view to developing a more outcome-focused alternative that helps generate the critical mass of entrepreneurial activities upon whose subsequent socio-economic development of the region in particular and the nation in general rests. Specifically, the study seeks to attain the following objectives:
- To examine the relationship between opportunity competency and small business performance
- To examine the relationship between relationship competency and small business performance
- To examine the relationship between conceptual competency and small business performance
- To examine the relationship between Organizing competency and small business performance.
- To examine the relationship between strategic competency and small business performance.
- To examine the relationship between commitment competency and small business performance
- To examine the relationship between learning competencies and small business performance.
2.0 Literature Review
Reviewed literature has highlighted the roles of entrepreneurs for the business performance of SMEs. Entrepreneur develops and grows businesses through innovation and creativity, either by introducing new line of products or services, or by improving the existing techniques of production or service (Gerli et al., 2011). Therefore, the competencies of entrepreneurs make a business more effective and attain sustainable competitive advantage (Abdullah et al., 2017). Entrepreneurial competencies are connected with the firm long-term performance and its competitiveness (Mitchelmore and Rowley, 2013), performance and success of the venture (Uchebulam et al., 2015). Empirical evidence demonstrated that entrepreneur’s psychological and behavioural, demographic characteristics, managerial and technical skills are the pre-requisite determinants for the survival and performance or failure of small businesses (Abdullah et al., 2017). It is therefore crucial to appreciate entrepreneurial competencies in the context of developing economies since the entrepreneurial competencies needed for firm performance in developing economies are different from those of in developed nations as well as that of small firm is also differ from big firm (Olowa and Olowa, 2015) argued that entrepreneurial competencies differ according to economic contexts and ways at which competencies can be attained. Therefore, present study argues that in Nigerian context, entrepreneurial competencies play a vital role in enhancing entrepreneurial activities which positively reflects on performance of small businesses.
2.1 Components of Entrepreneurial Competencies
The entrepreneurs have to play diverse roles that are more complicated than that of managers of the firm since their involvement in diverse function, management and entrepreneurial roles. Such roles sometime are multitudinous and can be optimally accomplished through articulated behaviours (Davis et al., 2016). Such behaviours are the key components of entrepreneurial features such as: knowledge, traits, beliefs, motives, values, social-network, self-image and skills (Abdullah et al., 2016; Mitchelmore and Rowley, 2013) that influences on the capability of the entrepreneurs to execute the activities of business in most strategic approach (Tingko and Wenyi, 2017).
However, in describing competencies in terms of knowledge, traits, beliefs, motives, values, social-network, self-image and skills possession, researchers have tried to classify these entrepreneurial features into strategic competency areas. For example, Huck and McEwen (1991) established that management, planning and budgeting, and marketing are the three key competency areas for Jamaican entrepreneurs. On the other hand, Minet and Morris (2000) contend that adaptation is the core of entrepreneurial competency. Chandler and Jansen (1992) argue that to perform efficiently in entrepreneurial role, strategic competencies such as, ability to recognize and opportunity taking advantage and effort for firm creativity, which demands the capacity to generate intense effort for long working hours are requisite. Baum et al. (2001) differentiate between particular competency and general competency. Specific competency consists of industry skills and technical skills, while general competency includes organization skills and opportunity recognition skills. Onwuchekwa et al. (2017) decompose entrepreneurial competency into four dimensions: management skills, industry skills, opportunity skills and technical skills.
In a similar vein, Man et al. (2002) defined entrepreneurial competencies as higher-level characteristics encompassing personality traits, skills and knowledge, which can be seen as the aggregate capability of the entrepreneur to effectively accomplish a job. Seven major competencies areas are classified in their study: (a) opportunity competencies, (b) relationship competencies (c) conceptual competencies (d) organizing competencies, (e) strategic competencies, (f) commitment competencies, and (g) learning competencies; these competencies areas are recognized in most literature and are categorized according to (Man et al., 2002).
Therefore, present research adopts the entrepreneurial competency components proposed by Man et al. (2002) to serve as independent variable that may effectively influence small business performance for several reasons. Firstly, these components of entrepreneurial competency are not only applicable in entrepreneurial studies but also in other related fields, particularly, firm performance (Ala’a. 2016). Secondly, the components are sufficient enough as it taps various entrepreneurial features such as: knowledge, traits, beliefs, motives, values, social-network, self-image and skills advanced by (Tingko and Wenyi, 2017) that may positively influence firm performance (Ahmad et al., 2010). Finally, because of its widely acceptability in developing economies.
2.2 Opportunity Competencies
Opportunity competencies is a unique competency area for the entrepreneur, for example, Li (2009) argued that “to see and act on opportunities” is a requisite for entrepreneurs to be successful and attain firm survival. Chandler and Jansen (1992) observe that one of the most significant entrepreneurial tasks is the capability to scan and identify and take advantage of opportunities within the operational environment. This sets of competencies involves entrepreneurial activities in recognizing opportunities, actively seeking new opportunities, and developing the opportunities to enhance firm long-term survival (Adriana et al., 2014).
According to Man et al. (2002) opportunity competency refers to the ability to recognize the opportunities in the market through diverse mechanism. Man et al. (2002) operationalized by measuring different behaviours such as identifying the services or products needed by the customers, perceiving unmet needs of the customers, looking for beneficial product and services for the customers, and availing the best opportunities. De koning (2003) related the opportunity development with the entrepreneur’s capability to pursue, explore, develop and assess better existing opportunities in markets. On the other hand, Allison, Chell, and Hayes, (2000) argued that main characteristics of entrepreneur is the ability to effectively perceive or identify the opportunities where non-entrepreneur cannot do so (Tingko and Wenyi, 2017).
2.3 Relationship Competencies
This group of competencies relates to person-to-person or individual-to-group based interactions, e.g., building a context of cooperation and trust, using contacts and connections, persuasive ability, communication and interpersonal skill (Man et al., 2002). To successfully do so, the entrepreneur needs to possess competencies in relationship building, communication, persuasive and interpersonal abilities (Olowa Olowa, 2015). Bird (1995) described this relationship building activities as entrepreneurial bonding, which includes not only the creation of relationship, but also the restructuring of relationships as the company grows or a partnership is dissolved. Evidence suggests that small firms in particular are critically dependent on their networks, because it is through these that they gain advice and support from professionals and experts such as lawyers, accountants, and consultants, government bodies, research and training institutes, and even suppliers and customers (Shehu and Mahmood, 2014). Evidence suggested that relationships competency have positive influence small firm performance (Barazandeh, 2015).
2.4 Conceptual Competencies
According to Izquierdo et al. (2005) and Man et al. (2002) this area involves different conceptual abilities that the entrepreneurs reflect in their behaviours. Such as innovativeness, risk taking, decision skills, observing and understanding complex information. Whereas according to Chandler and Jansen (1992) this competency reflects the mental capability to coordinate all the activities of the business (Syed et al., 2015). Man (2001) operationalized this area of competency by measuring the following behaviours: (1) taking suitable risk related with job (2) understanding the understanding of the observations and issues (3) translating the ideas and observation of business into the context of business (4) monitoring progress towards the achievement of objectives in risky actions (5) exploring new ideas (6) looking problems in new ways (7) and treating the new problems as opportunities. Man (2001) identified that through factorial analysis this area of competency can be divided into innovative and analytical domains.
2.5 Organizing Competencies
The second group of competencies is similar to the managerial competencies suggested in the literature. For instance, McClelland’s (1987) “efficiency orientation”, “concern for high quality of work”, and “monitoring” should be the required competencies in managing various functional areas in a firm so as to keep the firm operating efficiently. Wang et al. (2015) and Chandler and Jansen (1992) also suggested the importance of managerial roles of an entrepreneur in human competence. In general, organizing competencies are similar to the managerial competencies identified in the literature (Shehnaz and Ramayah, 2015). This group of competencies calls for the ability to lead, control, monitor, organize, and develop the external and internal resources towards the firm’s capabilities through the entrepreneur’s organizing competencies in different areas.
2.6 Strategic Competencies
According to Man et al. (2002) this competency is related with the establishing, evaluating and executing the strategies for the firm. Man (2001) operationalized this area of competency by measuring the following behaviours: (1) knowing clearly the expected directions and the impact of changes on firm’s performance (2) giving priority to work that aligns the business goals only (3) redesigning the firm to achieve the goal in a better way (4) linking or associating the current actions with strategic goals (5) observing progress towards strategic goals (6) analysing results against strategic goals (7) establishing strategic actions by assessing cost and benefit (Man, 2001). Hence, managing change as a component of strategic competence that can be associated with competitive success of all those firms operating in highly competitive environment.
2.7 Commitment Competencies
Successful entrepreneurs are often characterized as diligent people with a restless attitude in their work. In other words, they have a strong competency in totally committing, determining and dedicating, as well as taking proactive actions towards their responsibilities and duties (Tehseen and Ramayah. 2015). This corresponds to the entrepreneurial role of the drive to see firm through to fruition applied by (Kabir et al., 2017). Another aspect of this competency area is the initiative or proactive orientation, which calls for the entrepreneurs taking actions before being asked or forced to by events (Hossein and Alireza, 2015). To sum up, commitment competencies are those drive the entrepreneur to move ahead with the business.
2.8 Learning competencies
McClelland (1987) argued that entrepreneurship is about learning the requisite skills required to undertake the risk of starting a venture, adopting and executing effective strategies with entire strength, determination and desire required to attain business objectives of long-term survival. Mitrani et al. (1992) refer to learning competency as an essential distinctive feature of an entrepreneur, which is causally connected to efficient or superior performance at business or work. This competency suggests the capability of the entrepreneurs to learn from diverse behaviours and conducts, maintain themselves up to date in the appropriate area, proactively learn, and then employ learned skills into practical business operation (Umeze and Ohen, 2015). In the present contemporary social era the new skills are learnt and disseminated quickly therefore, the entrepreneurs need to be sophisticated and dynamic in learning competency to stand the mentioned challenges and mitigate the risk of changing environment that might affect business negatively (Hossein and Alireza, 2015), entrepreneurs with adequate learning competency are more likely to manage business effectively. Learning competency is crucial for entrepreneurial performance because it supports the entrepreneurs to generate the skill and manage failure risks (Ward, 2004).
Additionally, in a business setting entrepreneur with high learning competency perform more effectively and proactively than others with less learning competency for such are less likely, to be motivated to manage business effusively and attain long-term survival. This competency indicates the ability of the entrepreneurs to learn from various ways and means, keep themselves up to date in the relevant field, learn proactively, and then apply learned knowledge and skills into practical activities (Syed et. al., 2014). In the new modern social era the new knowledge is created and disseminated rapidly thus, the entrepreneurs require the learning competency to meet the demands of changing environment (Wolff et al., 2015). Learning is critical for entrepreneurial process because it helps the entrepreneurs to generate the knowledge and reduce risks and uncertainty (Nancy et al., 2016). Stokes and Blackburn (2002) conducted a study regarding business failure experiences of the business owners and revealed that their three-quarters of the respondents had improved skills in the areas of personal management after experiencing business closure.
2.9 Entrepreneur Competencies and Small Business Performance
As observed by Man (2001) entrepreneurial skills and competency among small business operators strongly influence performance of their business. This in essence suggesting the influence of entrepreneurial competency development of small business and how it enhances firm performance (Lasar and Paul, 2015)
On the other hand, Tahseen et al. (2015) and Ahmad et al. (2011) argued that small business performance or growth are product of fundamental strategic features such as knowledge, generic innovation, skill, and motives put in practice by entrepreneur. Thus, empirical evidence has established that skills are the pre-requisite for entrepreneurs’ accomplishment (Lazar and Paul, 2015).
Furthermore, Nuthall (2009) and Bakar et al. (2014) established that entrepreneurial competencies have been recognized as a particular collection of competencies appropriate to the operation of successful small business venture. Hence entrepreneurship is often related with the performance and development of small and new venture, and in the perspective of entrepreneurship, competencies are specifically associated to the start and performance of a new business venture (Barazandeh, 2015). It can effectively suggest that, there is common opinion from the literature reviewed on the roles entrepreneurial competencies possessed by entrepreneur in transform their firm, through application of diverse acknowledged and skills. Entrepreneurial competencies are necessary for effective small business operation and long-term performance (Abdullahi and Burcin, 2017).
Wickramaratne et al. (2014) examined small businesses success and established that competencies, personal characteristics among small business entrepreneurs, and managerial skills are key contributors for survival. Tehseen and Ramayah (2015) argued that competencies of the entrepreneur or operator are positively related with performance of small firm. Likewise, internal locus control and need for achievement Personal characteristics of an entrepreneur contribute significantly to performance of small firm further observed by (Renko et al., 2015). Therefore, with above empirical evidence in mind we can argue, that entrepreneurial competencies can influence small business survival. Similarly, small business survival is influenced by the skill and the ability of the owner/manager. Appreciate the role of owner/manager gives a better insight about what competencies needed by entrepreneurs to ensure the survival of the business.
The decision of focusing on the influence of entrepreneurial competencies on small business performance is because entrepreneurial competencies involved broader entrepreneurs attributes, such as, beliefs, knowledge, skills, abilities, personality, expertise and behavioural tendencies needed for small business performance (Ahmad et al., 2010). Analysis of entrepreneurial competencies shows that entrepreneurial competencies are deeply rooted in the entrepreneur’s background (traits, personality, attitudes) and that this could be acquired at work or through theoretical or practical learning (skills, knowledge, and experience). Entrepreneurial competencies significantly relate with small business performance (Rey-Martí et al., 2015; Man et al., 2002). Ahmad et al. (2010) posit that entrepreneurial competencies are a predictor of small business performance in Malaysia, that its influence more strongly for stable business environment.
Thus, entrepreneurial competencies of the owners/managers are universally regarded as one of the most powerful factors that have positive or negative impact on small business survival (Zoysa and Herath, 2007).
Therefore, owners/managers need to pay more attention on the developing their competencies to effectively influence small business performance. In situations where entrepreneurs are willing to exercise the willingness to equip themselves with requisite competencies, they possess the capability to mitigate small business failure risk, thus may lead to efficient performance. Research and practice associated with competencies are usually driven by aspirations to achieve firm efficient performance (Mitchelmore and Rowley, 2010).
3.0 Methodology
The data for this study were collected between September and November 2022, with the help of the Small business owners/managers in Yobe state using a structured questionnaire. G* power software was employed for sample size calculation with the aid of the following settings: f2 (effect size) = 0.10 (small), a = 0.05, the number of predictors = 7 and the power was set at 95%. Therefore, the required sample size was 307 to test the model. The researcher sent out cross-sectional survey questionnaire to approximately 421 small businesses located across Yobe state. The researcher collected the database with the help of SMEDAN. The researcher employed improved version of total design test method to improve the response rate. Therefore, 421 small businesses were targeted for data collection. As a requirement of study, the respondents were small business owners/mangers. It is equally significant to mention that the data collection approach is exceptional, considering the distinctive nature of socio-economic parlance of Yobe State and to mitigate against possible bias that may lead to poor response rate. The researcher was able to collect a total of 307 complete and usable responses, having an effective response rate of about 72%.
4.0 Analysis using Descriptive Statistics
The seven key items in the demographic profile of respondents were analysed using descriptive statistics. The profile included a total of 307 respondents, out of which 266 (87%) were males and 41 (13 %) were females. The outcomes suggested the percentage of male is much greater the females’ owners/managers this demonstrating the different on career orientation perceptions among male and female small business owners/managers (Refers table 4.1). Whereas, the age group of respondents revealed that 143 (47 %) fell in the category of 20-30 years, which is the normal age; 31-40 (35%) fell in the category, similarly, category 41-51 and above 50 were 10% and 8% respectively.
The education levels accomplished by the sample respondents as demonstrated on (Table 4.1). The outcomes show that 48% of the total respondents hold bachelor’s degree, which demonstrate that the small business owners/managers are among the educated group in the population. More significantly, the total frequency showed that 146 respondents are bachelor’s degree holder which was higher than any other (See Table 4.1). Similarly, the educational qualifications shown that 106 (35%) had master’s degree, whereas 30 (9%) had Ph.D. while others are 25 (8%). The level of education has been mentioned as a crucial factor for success in enhancing small business survival potentiality and mitigate failure risk to improve business profitability.
With respect to working experience, it indicated that 61 (20%) have Less than 1 year working experience, while, 179 (58%) worked 1-5 years’ experience, whereas, 6-10 years working experience are 41 (13%), similarly, 26 (9%) represent 10 years and above working experience. These outcomes are in line with results from preceding studies which argued that small business which survive beyond five years. These results are consistent with findings from previous studies which suggest that microenterprises which survive beyond five years maintain their pre-inception features but do hardly expand (Abiola, 2011).
The position distribution of the business owners and managers suggested that 67 (22%) managers, while owners represent the significant percentage of (78%) 240. With regards to business type, 61 (14%) are sole proprietorship while 201 (65%) are partnership, whereas, limited liability company showed 45 (16%). Finally, sector which represented by seven items, agriculture was 73 (24%), while 12 (4%), were engaged in manufacturing sector, 33 (11%) were involved in building and construction, similarly, 125 (41%) are involved in information technology and communications, whereas, educational establishments 23 (7.4%), while transportation are 5 (2%), and finally, 3(1%) presented other sector. This suggests that majority of the small business involved in information technology and communications and agriculture which may be owing their small size and limited capital to develop (See Table 4.1).
Table 0.2: Demographic Profile
| Frequency | Percentage | |
| Gender | ||
| Male | 266 | 87 |
| Female | 41 | 13 |
| Age | ||
| 20-30 years | 143 | 47 |
| 31-40 years | 110 | 35 |
| 41-50 years | 31 | 10 |
| 50 years and above | 23 | 8 |
| Educational Qualification | ||
| Bachelor Degree | 146 | 48 |
| Masters | 106 | 35 |
| PhD | 30 | 9 |
| Others | 25 | 8 |
| Experience | ||
| Less than 1 year | 61 | 20 |
| 1-5 years | 179 | 58 |
| 6-10 years | 41 | 13 |
| 10 years and above | 26 | 9 |
| Position | ||
| Manager | 67 | 22 |
| Owner | 240 | 78 |
| Business Type | ||
| Sole proprietorship | 61 | 19 |
| Partnership | 201 | 65 |
| Limited Liability Company | 45 | 16 |
| Sector | ||
| Agriculture | 73 | 24 |
| Manufacturing | 12 | 4 |
| Building and Construction | 33 | 11 |
| Information Technology and Communications | 125 | 41 |
| Educational Establishments | 56 | 17 |
| Transportation | 5 | 2 |
| Others | 3 | 1 |
4.1 Internal Consistency Reliability
Internal consistency reliability indicates the level at which every item on a specific (sub) scale are evaluating the same concept (Bijttebier et al., 2000). Cronbach’s alpha coefficient and composite reliability coefficient are the commonly adopted indicators of the internal consistency reliability of an instrument in structural study (Peterson and Kim, 2013). Therefore, in the present study, composite reliability coefficient was adopted to establish the internal consistency reliability of measures employed.
The adoption of composite reliability coefficient was primarily based on two main reasons. Initially composite reliability coefficient was very effective in controlling estimate bias of reliability than Cronbach’s alpha coefficient, because the latter assumes all items contribute evenly to its predictor without reflecting the real contribution of specific loadings (Gotz, Liehr-Gobbers, and Krafft, 2010).
Table 0.3: Results of Measurement Model
| Constructs and Indicators | Loadings | Composite Reliability | Average Variance Extracted | ||||
| Microfinance Bank Services | 0.908 | 0.664 | |||||
| MB01 | 0.762 | ||||||
| MB02 | 0.838 | ||||||
| MB03 | 0.850 | ||||||
| MB04 | 0.824 | ||||||
| MB05 | 0.788 | ||||||
| Opportunity Competency | 0.872 | 0.632 | |||||
| OC01 | 0.748 | ||||||
| OC02 | 0.821 | ||||||
| OC03 | 0.819 | ||||||
| OC04 | 0.736 | ||||||
| Relationship Competency | 0.886 | 0.610 | |||||
| RC01 | 0.753 | ||||||
| RC02 | 0.874 | ||||||
| RC03 | 0.791 | ||||||
| RC04 | 0.721 | ||||||
| RC06 | 0.751 | ||||||
| Conceptual Competency | 0.885 | 0.659 | |||||
| CC01 | 0.768 | ||||||
| CC02 | 0.849 | ||||||
| CC03 | 0.790 | ||||||
| CC04 | 0.816 | ||||||
| CC05 | 0.746 | ||||||
| Organizing Competency | 0.895 | 0.588 | |||||
| OG01 | 0.799 | ||||||
| OG02 | 0.849 | ||||||
| OG03 | 0.779 | ||||||
| OG04 | 0.730 | ||||||
| OG05 | 0.786 | ||||||
| OG06 | 0.722 | ||||||
| Strategic Competency | 0.911 | 0.673 | |||||
| SC01 | 0.755 | ||||||
| SC02 | 0.866 | ||||||
| SC03 | 0.877 | ||||||
| SC04 | 0.781 | ||||||
| SC05 | 0.757 | ||||||
| Commitment Competency | 0.893 | 0.625 | |||||
| CM01 | 0.828 | ||||||
| CM02 | 0.857 | ||||||
| CM03 | 0.807 | ||||||
| CM04 | 0.753 | ||||||
| Learning Competencies | 0.899 | 0.640 | |||||
| LC01 | 0.846 | ||||||
| LC02 | 0.826 | ||||||
| LC03 | 0.764 | ||||||
| LC04 | 0.861 | ||||||
| LC05 | 0.731 | ||||||
| Small Business Performance | 0.895 | 0.587 | |||||
| BSP01 | 0.709 | ||||||
| BSP02 | 0.768 | ||||||
| BSP03 | 0.741 | ||||||
| BSP04 | 0.761 | ||||||
| BSP05 | 0.781 | ||||||
| BSP06 | 0.764 | ||||||
The structural model was tested using mediating variable as presented in Table 4.3. As indicated Table 4.3, of the seven (7) mediation hypotheses, only three (3) were found to be significant. The direct effect model for the significant findings showed that entrepreneurial competencies have a significant positive direct influence on small business performance. Particularly, relationship competency, and learning competencies, which in turns predicted small business performance in a positive direction. Specifically, Hypothesis 1 predicted that opportunity competency has direct positive influence on performance of small business, result (Table 4.3) showed no significant direct effect of opportunity competency on SBP (β = -0.18, t = 3.17, p < 0.01). Hence, this hypothesis was rejected.
Figure 0.1 Structural Model
Table 0.4: Results of Mediating Effect Model
| Hypotheses | Relationships | Direct Effect | SE | t-value | Bootstrapped Confidence Interval | Findings | |
| 95% LL | 95% UL | ||||||
| H1 | OC ->SBP | 0.01 | 0.01 | 0.67 | -0.01 | 0.02 | Not Supported |
| H2 | RC ->SBP | 0.04 | 0.02 | 2.21 | 0.00 | 0.07 | Supported |
| H3 | CC ->SBP | 0.05 | 0.02 | 2.55 | 0.01 | 0.09 | Supported |
| H4 | OG ->SBP | 0.00 | 0.01 | 0.08 | 0.01 | 0.01 | Supported |
| H5 | SC ->SBP | 0.02 | 0.03 | 0.90 | 0.03 | 0.08 | Supported |
| H6 | CM ->SBP | 0.02 | 0.01 | -1.18 | -0.05 | 0.01 | Not Supported |
| H7 | LC ->SBP | 0.07 | 0.03 | 2.39 | 0.01 | 0.12 | Supported |
| Opportunity Competencies = OC; Relationship Competencies = RC; Conceptual Competencies = CC; Organizing Competencies = OG; Strategic Competencies = SC; Commitment Competencies = CM; Financial Literacy = FL; Learning Competencies = LC; Small Business Performance = SBP |
Similarly, Hypothesis 1 posit that opportunity competencies has positive direct influence on performance of small business, result indicated that opportunity competencies had no significant direct relationship with SBP (β = -0.01, t = 0.67, p < 0.01, [-0.01;0.02]). Hence, Hypothesis 1 is not supported. Regarding the direct influence of relationship competencies on performance of small business, results demonstrate a significant direct effect (β = 0.04, t = 2.21, p < 0.01, [0.00; 0.07), thereby confirming hypothesis 2. The direct influence of conceptual competencies opportunity on performance of small business was also found to be significant (β = 0.05, t = 2.55, p < 0.01, [0.01; 0.09]) confirming hypothesis H3 as rejected. Conversely, the direct influence of organization competencies, strategic competencies were found to be positive. On the other hand, commitment competencies on performance of small business were not found to be significant. Specifically, these findings demonstrated non-significant coefficients as follows: (β = 0.00, t = 0.08, p > 0.10, [ -0.01;0.01]), (β = 0.02, t = 0.90, p > 0.10, [ -0.03;0.08]), and (β = -0.02, t = -118, p > 0.10, [ -0.05;0.08]) for Hypothesis 4, Hypothesis 5, and Hypothesis 6, respectively. Finally, Hypothesis 7, which predicted that learning competencies have direct influence on small business performance was found to be significant, hence, Hypothesis 7 is supported (β = -0.07, t = 2.39, p < 0.01, [ 0.01;0.12]).
The outcomes of the study offer a solid theoretical explanation and contextual understanding regarding the relationship between entrepreneurial competencies and small business performances. The findings of this study specifically suggest that all the entrepreneurial competencies, except strategic and opportunity competency, lead to the performance of small businesses. The evidence further indicates that these competencies are crucial for managing entrepreneurial activities. Thus, the long-term discrepancies in the firm’s performance can be explained by the entrepreneurial competencies. Some researchers have used entrepreneurial orientation instead of entrepreneurial competencies and linked it with the performances of small businesses. For example, Li et al., (2009) proved a positive association between entrepreneurial orientation (competitive aggressiveness, autonomy, innovativeness, proactiveness, and risk-taking attitude) and firm performance while considering the knowledge creation process as a direct role in this relationship. Oppositely, contradictory findings have also been found in the previous literature. There is no link between entrepreneurial orientation and small business performance in the context of Nigeria. However, others have explored a positive association of small business performances with entrepreneurial orientation in the same context of Nigeria. Similarly, explored no significant relationship between the management know-how competency of entrepreneurs on the business success of small business in the context of Malaysia. Despite this fact, a series of training and development programs would enhance the competencies of the entrepreneurs instead of simply giving them a positive environment and some resources for business. Additionally, the specific aspects of each entrepreneurial competency can provide a more focused approach to initiating entrepreneurial training and development programs. As explained, the survey instrument or competency measurement of this study can provide such a unique scope of designing training and development programs for each competency.
Similarly, the findings of quantitative analysis further suggest that the lack of formal training and development can be an extent of hindrance and less satisfactory performance for the two competency domains, instance, strategic and opportunity competency. Oppositely, entrepreneurs are more comfortable and satisfied with their commitment, relationship, learning, and organizing and leading competencies. Thus, high-performed and low-performed competency domains are significantly correlated with the trait-based and skilled-based competency areas. Skilled-based competencies depend on training and development programs, while trait-based competencies rely on the entrepreneur’s personal experiences and involvement in the business development process. Owing to the congruence with the research findings of this study suggests that training would need to be instilled to enhance the strategic and opportunity competencies of the entrepreneurs. Oppositely, an entrepreneur can acquire from experiences through day-to-day business performance and maintenance, commitment.
4.3 Significant Role of Entrepreneurial Competencies on Small Business Performance
The current study has also offered empirical evidence on the important role of entrepreneurial competencies on performance of small business. While most preceding studies (Abiola, 2011) have largely focused on investigating the indirect linkage between entrepreneurial competencies and performance of small business, this study incorporated entrepreneurial competencies as an independent variable on these relationships for the following reasons.
Firstly, effortful effective managerial skills such as entrepreneurial competencies may be able to override and influence small businesses owner’s/managers automatic tendencies toward long-term performance (Sarwoko et al., 2013), because owner’s/managers with high levels of entrepreneurial competencies operate positively and hedonistic in business approach than those with low levels of entrepreneurial competencies (Abdulwahab and Al-Damen, 2015).
Secondly, entrepreneurial competencies are expected to have direct relationship with small business performance because owners/managers with poor entrepreneurial competencies tend to be less effective, and they find it difficult to control and operate business profitably and also exhibit poor risk management ability (Atya et al., 2016). Ahmad et al. (2011) established that business performance or growth are crucial features of, experience, motives, and skills. Earlier studies in emerging economies (Jasra et al., 2011) have suggested that skills and external factors are the most critical for entrepreneurs’ accomplishment. Therefore, there is an agreement that entrepreneurial competencies are owned by owner’s/managers, who initiate and transform their firms, and an extensive recognition that the variety of skills and competencies requisite to control a small business are quantitatively as well as qualitatively unique from those required in bigger business (Barazandeh et al., 2015).
Therefore, the whole of this study has augmented the body of knowledge in the area of performance of small business and the research results could be a robust basis for future studies on small business as well as entrepreneurial competencies.
4.4 Theoretical and practical contributions
This study provides both theoretical and practical implications. Theoretically, the study contributes to the body of literature concerning the direct influence of entrepreneurial competencies and small business performance. Furthermore, the study provides initial evidence on the direct influence of small business performance which is not sufficient in the literature. Though there exists the direct relationship between entrepreneurial competencies and small business performance, the mechanisms under which entrepreneurial competencies influences small business performance are under research. The study fills this gap by revealing that such mechanisms greatly influence small business performance as compared to the direct effects. For managers and entrepreneurs, since entrepreneurial competencies contribute to both small business performance, managers and small business owners should address their competency deficiencies to develop more capabilities like management and marketing capabilities which could enhance better small business performance. To be specific, they should pay special attention to building networks through which they are exposed, learn and become more innovative as well as better decision makers and implementers.
4.5 Limitations and Future Research Directions
Limitations have been observed by the researcher. The data represents a limited variety of small businesses located in the north eastern Nigeria which is an emerging economy. Therefore, readers should assess the findings from the viewpoints of its limitations. On the other hand, readers should not generalize the findings of this study to all small businesses regardless of their size globally. Therefore, future studies can be conducted to scrutinize small businesses from different settings such as developed countries or from different time frames to ensure important environmental dynamism in the data. Similarly, future studies can be conducted to compare SME performances between a group of developing countries linked with entrepreneurial competencies along with developed countries to provide more generalized findings. In addition, there is avenue to upsurge the domain of entrepreneurial competencies in future studies. Further studies could also investigate whether there are any moderating or mediating roles between small businesses performances and entrepreneurial competencies. Additionally, future studies might employ longitudinal data to mitigate the likelihood of bias from a unit respondent’s cross-sectional approach.
5.0 Conclusion
From the outcomes of this study, it can be concluded that small business performance can be improved by enhancing entrepreneurial competencies. This could be done at individual level by entrepreneurs or managers taking advantage of any training opportunities through which skills and knowledge are attained or through specialized sector trainings organized by authorities like ministry of trade, industry and cooperatives. It’s evident that when entrepreneurs possess competencies such as organization competencies, strategic competencies, and relationship building, their business performance tends to improve. Therefore, entrepreneurs need to attain such competencies as a way to spur improved small business performance. This will also influence the increase of small business capabilities given the fact that small businesses have resource limitations. This implies that entrepreneurs with high networking, relationship building, and innovative thinking competencies able to create firm capabilities in form of marketing, market linking, and management capabilities. To sum up, the significant contribution of this study is to influence small business performance. It is revealed that where these managers focus on building the overall organization competencies, strategic competencies, small business capability, as a conduit to promote performance, firms perform better through the direct effect of entrepreneurial competencies.
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