ENTREPRENEURSHIP PRACTICE AND ECONOMIC GROWTH (A SURVEY OF SELECTED SOFT DRINK FIRMS IN RIVERS STATE)

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Nigeria is naturally endowed with entrepreneurship opportunities; however the realization of the full potential of these opportunities has been dampened by the adoption of inappropriate industrialization policies at different times. Several policy interventions that were aimed at stimulating entrepreneurship development via small and medium scale enterprises promotion, based on technology transfer strategy, have failed to achieve the desired goals as it led to the most indigenous entrepreneurs becoming distribution agents of imported products as opposed to building in-country entrepreneurial capacity for manufacturing, mechanized agriculture and expert services (Thaddeus, 2012).

With the collapse of the last vestiges of the socialist economic system in 1991, virtually the whole world has embraced free enterprise economic system. Entrepreneurship is the cornerstone and at the heart of the free enterprise economy (Popoola, 2014). Entrepreneurship is an activity that involves the discovery, evaluation and exploitation of opportunities to introduce new goods and services, ways of organizing, markets, processes, and raw material through organizing efforts that previously had not existed (Shane and Venkataraman, 2000; Venkataraman, 1997).

Moreover, studies by UNIDO-Nigeria, 2012 show that Micro, Small and Medium Enterprises (MSMEs) has the propensity to drive the Nigerian Economy, and data reveal that there are currently over 17 million MSMEs employing over 31 million Nigerians. MSMEs account for over 80% of enterprises that employ about 75 % of the Nigeria’s total workforce, and therefore formulating and effectively implementing MSMEs friendly policies represents innovative ways of building the capacity to engage in entrepreneurial activities and creating job opportunities thus, playing a central and invaluable role in helping Nigeria realize its quantity advantage.

In addition, the 2012 Global Entrepreneurship Monitor (GEM) has empirically identified Nigeria as one of the most entrepreneurial countries in the world. The study showed that 35 out of every 100 Nigerians (over a third) are engaged in some kind of entrepreneurial activity or the other. It is therefore imperative at this point in time to critically evaluate not just the principles of entrepreneurship but the practice and its crucial role in fostering economic growth and development in a developing economy like Nigeria.

The hypothesis that entrepreneurship is linked to economic growth finds its most immediate foundation in simple intuition, common sense and pure economic observation: activities to convert ideas into economic opportunities lie at the very heart of entrepreneurship. Entrepreneurship is a source of innovation and change, and as such spurs improvements in productivity and economic competitiveness (UNCTAD, 2004).

Entrepreneurship is not synonymous with small business. Certainly, small firms are an out-standing vehicle for individuals to channel their entrepreneurial ambitions. The small firm is an extension of the individual in charge (Lumpkin and Dess 1996). However, entrepreneurship is not restricted to persons starting or operating an (innovative) small firm. Enterprising individuals in large firms, the so-called ‘intrapreneurs’ or ‘corporate entrepreneurs’, undertake entre- preneurial actions as well.

Economic growth is the large variation in the growth experience of different countries in recent history. Some parts of the world, like the United States or Western Europe, experienced sustained economic growth over a period of more than 100 years, so by historical standards these countries are now enormously wealthy. Nigeria’s GDP growth rate of between 6 – 8 percent in the last ten years shows the country is one of the fastest growing economies in the world. The implication is that any good business established is capable of generating unusual and above average returns. It is one of the few countries with the highest returns on investment anywhere in the world- money, market, capital market, mutual funds, real estate and property, entrepreneurship, etc (Popoola, 2014). Furthermore, for entrepreneurs to play an appropriate role, the role of the state remains important; if not more so than before. Strong states, as regulators and gatekeepers, play a particularly vital role. In the absence of appropriate ‘rules of the game’, entrepreneurship may result in undesirable social outcomes, including corruption, crime, speculation and financial crises, and may worsen the vulnerabilities of people during natural disasters (UN Report, 2011).

Mobilizing the specific factors of capital, labor and technology which are generally imperfectly marketed, may not otherwise be allocated to activities supplied where productivity could be the greatest (Arogundade, 2011). The creation of successful new ventures locally also helps to generate indigenous growth and reduce the reliance on the mercurial character of foreign direct investment (Adeolu and Taiwo, 2004). However, entrepreneurship consistent source of income earnings not only to the entrepreneur and labor but also other factor inputs and given the long-term focuses and the growth potential of entrepreneurial activities Ogundele (2007). The entrepreneur and labor with all income earners become more economically independent and confident to confront the challenges of life and it can, therefore, be stated that entrepreneurship promotes income empowerment in an economy and in the modern world; entrepreneurship provides a new approach for fighting poverty and stimulating economic growth in developing countries Ogundele (2007).

Entrepreneurship practice contributes to poverty reduction when it creates employment through the startup of new entrepreneurship or the expansion of existing ones and they increases social wealth by creating new markets, new industries, new technology, new institutional forms, new jobs and net increases in real productivity, increases income which culminates in higher standards of living for the population then it is logically to state that if the number of entrepreneurs of any given country increase the poverty indicators will decrease and economic growth indicators will increase (Ogundele, 2007). In 2013, Bruton, G. D., D. J. Ketchen Jr., et al. examined the extant knowledge about entrepreneurship and where the future research on this important topic should move to enhance the knowledge about entrepreneurship as a pathway to reducing poverty (Okechuku, C. 2009). Entrepreneurship is viewed today as a key driver of economic growth (Ariyo, 2008). This is because small rapidly growing firms started by entrepreneurially minded individuals, create wealth and a significant number of jobs economies, thereby impacting greatly on social and economic growth. From the foregoing, therefore the study is determined to examine the relationship between entrepreneurship practices and economic growth with references to sole selected soft drink firms in Rivers State.

1.2 Statement of the Problem

To deal with the problem of economic growth through entrepreneurship practices in an African country like Nigeria, knowledge of economic profile is essential. Entrepreneurial innovation in Nigeria is faced with the given below problems: Capital constitutes a major constraint from the entrepreneurs in Nigeria and also most of the entrepreneurs run into the problems of commercialization which is more crucial Developing the equipment and machinery used by enterprises which cost money. Working capital is also hard to come by. Small business has problems securing bank loans. The infrastructure is lacking, and entrepreneurs sometimes have to provide generators, dig boreholes, etc. by themselves, it could be better the Nigerian government provide for these.

There are quite a lot of researches and studies on the link between entrepreneurship and economic growth and development, there is still the need to assess the case of the Nigerian economy. The real question is what is the contribution of micro, small and medium enterprises (MSMEs) to the nation’s Gross Domestic Product or more importantly how has the multiplicity of MSMEs bettered the living standard of the over 170 million Nigerians. Against this background, the study seeks to examine the relationship between entrepreneurship practices and economic growth.

1.3     Objective of the Study

The main objective of the study is to examine the relationship between entrepreneurship practices and economic growth. Other specific objectives to be accomplished include:

1.       To examine the extent to which innovativeness enhances economic growth.

2.       To examine the extent to which pro-activeness enhances economic growth.

3.       To examine the relationship between risk-taking and economic growth.

1.4 Research Questions

The following question shall be use in course of this research study.

1.       To what extent does innovativeness leads to economic growth?

2.       How can pro-activeness enhance economic growth?

3.       In what way can risk-taking enhance economic growth?

1.5 Research hypotheses

HO1: There is no significant relationship between innovativeness and economic growth

HO2: There is no significant relationship between pro-activeness and economic growth.

HO3: There is no significant relationship between risk-taking and economic growth

1.6 Significance of the Study

The study will serve as guide to entrepreneurial support agencies in particular and the Nigerian entrepreneurs as a whole in determining the best way of getting the best output from their businesses  who  are  presently  demoralized  in  the  face  of  the prevailing socio-economic hardship.

The study is also aimed at contributing to the literature in entrepreneurship practices with reference to economic growth in Nigeria. Also, this work on completion will broaden the essence for entrepreneurship practices in Nigeria.

1.7 Scope of the Study

The study is delimited under the following heading: content scope, geographical scope and unit of analysis.

Content Scope: The content scope of this study involves an investigation to ascertain the relationship between entrepreneurship development and poverty eradication in Nigeria. The dependent variable is economic growth measured by Increased GDP, Employment Generation and Infrastructural development. While dependent variable is entrepreneurship development, measures by innovativeness, proactiveness and risk-taking.

Geographical Scope: This study is delimited in Port Harcourt Metropolis with special reference to selected soft drink firms which include Pepsi and Coca-Cola Company.

Unit of Analysis: The unit of analysis in this research involves the individuals at the time of carrying out the study.

          This study involves an investigation of entrepreneurship practices in relation to economic growth.

1.7 Limitation of the Study

The major limitation of the study is the short time frame the research lasted, coupled with the tight academic time table, which prevented a very comprehensive study. The fund available to the researcher was also limited and therefore the study was limited to a small portion of the survey population.

Another limitation is the difficulties, encountered by the researcher in obtaining all needed information and materials from the right source and compilation of data for the project.

1.8 Definition of Terms

EMPLOYMENT

The state of being employed or having a job; is also the work in which one is engaged; an activity to which one devotes time, the percentage of number of people gainfully employed.

ENTREPRENEURSHIP

Entrepreneurship is the willingness and ability of an individual to seek out investment opportunities and take advantage of scarce resources to exploits the opportunities profitably.

INFRASTRUCTURE

The basis structure of features of a system or organization. Also is the stock of facilities, service, and equipment in a country, including factories, roads, and schools, that the needed for it to function.

INNOVATIVENESS

The innovativeness dimension of entrepreneurship reflects a tendency of a firm to engage in and support new ideas, novelty, experimentation, and creative processes, thereby departing from established practices and technologies, and leading to new products, services, or technological processes.

POVERTY

Poverty is the state of being very poor.

PROACTIVENESS

Proactiveness reflects an action orientation and refers to a firm’s response to promising market opportunities.

RISK-TAKING 

Risk-taking refers to a firm’s tendency to engage in high-risk projects and managerial preferences for bold versus cautious actions in order to achieve firm objectives.