AN EVALUATION OF ENTREPRENEURIAL ORIENTATION AND ITS IMPACT ON THE SURVIVAL AND SUSTAINABILITY OF SMALL AND MEDIUM-SIZED ENTERPRISES (SMES) IN NIGERIA: A CASE STUDY OF SELECTED SMES IN ADO-ODO OTA, OGUN STATE

CHAPTER ONE

INTRODUCTION

1.1 Background Of The Study

Entrepreneurial orientation is crucial on a global scale for fostering an environment conducive to entrepreneurial performance. Entrepreneurial orientation is defined by Covin and Lumpkin (2022) as the strategic aspect of organisational performance. On the contrary, Agboje (2018) provides a definition of entrepreneurial orientation as that of a forward-thinking professional who actively pursues profitable opportunities despite the presence of uncertainty. The entrepreneurial orientation vision necessitates that small and medium-sized enterprises (SMEs) establish standards and conduct that promote entrepreneurial processes in their business operations, as research has shown that an internal strategy continues to be a critical element in facilitating employee effectiveness and averting survival crises (Ajake, 2023). 

Entrepreneurial orientation is a collection of standards, processes, guidelines, and decision-making methodologies that an organisation employs to enhance its propensity for risk-taking, initiative, and innovation (Etim, Adabu, and Ogar 2019). Entrepreneurial orientation, as defined by Omisakin, Nakhid, Littrell, and Verbitsky (2020), pertains to the preparedness of small and medium-sized enterprises (SMEs) to innovate, undertake risks, exhibit self-directed conduct, and respond to emerging market opportunities with greater proactivity and aggression than their competitors. Brettel, Chomik, and Flatten (2020) define EO as the process of recognising, evaluating, and capitalising on opportunities to introduce new products or services. On the other hand, Asad, Sharif, and Hafeez (2018) defined EO as the framework and principles that inform decision-making. 

The capacity of startups to assess and capitalise on opportunities or openings is associated with their entrepreneurial orientation (Messersmith & Wales, 2023). Additionally, these startups must evaluate these opportunities or openings in order to capitalise on them. An organisation that possesses an unwavering commitment and association with entrepreneurship is considered to have an advantage in a business environment that is becoming progressively more competitive, turbulent, and stormy (Messersmith & Wales, 2023). Consequently, a robust entrepreneurship orientation characterised by proactiveness and innovation is equivalent to or synonymous with research into the progressively critical domain of startups expanding internationally. 

According to Mienpre and Onuoha (2018), the overarching purpose and concept of entrepreneurial orientation is to establish self-sustaining enterprises that guarantee the supply of novel products, deliver value to shareholders and customers, and satisfy market demands. This, in turn, generates employment opportunities that contribute to economic expansion (Duru, 2021). This is consistent with the earlier work of Drucker (2019), who stated unequivocally that the economy is impacted by the activities of entrepreneurs, given that they establish new organisations, generate new business concepts and values, and undertake calculated risks. 

According to Hsiung and Tsai (2021), entrepreneurial orientation is a necessary and accessible strategic element that can enhance the survival and sustainability of small and medium-sized enterprises (SMEs). According to a study by Masa‎deh, Al-Henzab, Tarhini, and Obeidat (2018), entrepreneurial orientation is crucial for the survival of small and medium-sized enterprises (SMEs) and has a positive effect on each of its five dimensions: innovativeness, proactiveness, risk-taking, autonomy, and competitive aggressiveness. An essential strategic asset, entrepreneurial orientation empowers small and medium-sized enterprises (SMEs) to effectively respond to evolving market dynamics, capitalise on emerging prospects, and gradually establish a competitive edge (Wiklund and Shepherd, 2023). The significance of organisational learning, innovation, and adaptation in attaining a competitive edge and ensuring long-term viability is further underscored by dynamic capabilities theory (Teece et al., 1997). Small and medium-sized enterprises (SMEs) that possess a robust entrepreneurial inclination are more adept at cultivating and implementing dynamic capabilities. This empowers them to efficiently confront market challenges and exploit nascent opportunities.

1.2 Statement Of The Problem

Modern business environments are marked by a high degree of international competition. SME competition in an economy that is now global and inundated with technology, as well as rapid technological changes involving processes, components, and methods used to develop a product or service, is more difficult than ever. These elements have incentivized management to seek strategies that guarantee the survival of the business. Extensive research has been conducted in the field of entrepreneurship to examine the correlation between entrepreneurial orientation and the survival of small and medium-sized enterprises (SMEs). However, the findings on this subject are inconsistent, ranging from a strong positive relationship to the absence of a significant direct relationship (Rauch, Wiklund, Lumpkin & Frese, 2019). 

The performance and market stability that have historically been associated with small and medium-sized enterprises (SMEs) in Nigeria have been jeopardised by technological advancements, resource scarcity, and a lack of an entrepreneurial mindset. As a result, the anticipated vital and dynamic impact of SMEs on the country's economic growth and development has not materialised (Wassim, 2019). The lack of sustainability among small and medium-sized enterprises (SMEs) can be attributed to several factors, including inadequate implementation of entrepreneurial orientation dimensions, insufficient capital expenditure, lack of focus, deficient market research, and inadequate planning. Globally, the failure rate of small and medium-sized businesses is higher due to their diminished propensity for favouring innovation, proactivity, competitive aggression, and risk-taking. This can be attributed to the negative qualities demonstrated by businesses, their proprietors, and executives (Ayeni-Agbaje & Osho, 2021). Furthermore, there exist significant concerns such as a dearth of entrepreneurial prowess, inadequate long-term strategic planning pertaining to products, operations, personnel, and competition, a deficiency in the capacity to participate in innovative processes and generate new ideas, a reluctance among management to undertake calculated risks, a reluctance to depart from secure positions in pursuit of groundbreaking concepts, an inability to attain a competitive advantage over rivals, diminished customer satisfaction, stagnant growth, and diminished profitability. The aforementioned concerns have had a substantial impact on the viability and longevity of small and medium-sized enterprises (SMEs) in Nigeria. 

1.3 Objectives of the Study

The main objectives of this study is to examine the entrepreneurial orientation and its impact on the survival and sustainability of small and medium-sized enterprises (SMEs) in Nigeria: a case study of selected SMEs In Ado-Odo Ota, Ogun State. Specifically the study intends to:

Assess the level of entrepreneurial orientation (EO) exhibited by SMEs in SMES in Ado-Odo Ota, Ogun State.

Determine whether there is a significant relationship between entrepreneurial orientation and SMEs' survival rates in Ado-Odo Ota, Ogun State.

Find out whether adequate entrepreneurial orientation promotes the sustainability of SMEs in Ado-Odo Ota, Ogun State.

Ascertain the dimensions of entrepreneurial orientation which aids the sustainability of SMEs in Ado-Odo Ota, Ogun State. 

Investigate moderating factors which influences the relationship between entrepreneurial orientation and SMEs' survival and sustainability in the Nigeria.

1.4 Research Questions

The researcher raised the following research questions to guide this study:

What is the level of entrepreneurial orientation (EO) exhibited by SMEs in Ado-Odo Ota, Ogun State?

Is there a significant relationship between entrepreneurial orientation and SMEs' survival rates in Ado-Odo Ota, Ogun State?

Does adequate entrepreneurial orientation promote the sustainability of SMEs in Ado-Odo Ota, Ogun State?

What are the dimensions of entrepreneurial orientation which aids the sustainability of SMEs in Ado-Odo Ota, Ogun State? 

What are moderating factors which influences the relationship between entrepreneurial orientation and SMEs' survival and sustainability in the Nigeria?

1.5 Research Hypothesis

Ho: Entrepreneurial orientation does not facilitate the survival and sustainability of SMEs in Ado-Odo Ota, Ogun State.

Ho: Entrepreneurial orientation facilitates the survival and sustainability of SMEs in Ado-Odo Ota, Ogun State.

1.6 Significance Of The Study

The findings of this study were significant to entrepreneurs in establishing the relationship that exists between entrepreneurship orientation and survival of small and medium enterprises. The findings of the study were significant to the Ministry of Industrialization and planning mandated with economic planning by highlighting the need to assess the influence of key pillars to the success of entrepreneurial activities. Besides, adding to the pool of knowledge in entrepreneurship, this study formed a basis for further research in the field of entrepreneurship.

1.7 Scope of the Study

The study focuses on entrepreneurial orientation and its impact on the survival and sustainability of small and medium-sized enterprises (SMEs) in Nigeria. Geographically, this study will be carried out among SMEs in Ado-Odo Ota, Ogun State.

1.8 Limitation of the Study

Finance for the general research work will be a challenge during the course of study. Correspondents also might not be able to complete or willing to submit the questionnaires given to them.

However, it is believed that these constraints will be worked on by making the best use of the available materials and spending more than the necessary time in the research work. Therefore, it is strongly believed that despite these constraint, its effect on this research report will be minimal, thus, making the objective and significance of the study achievable.

1.9 Definition of Terms

Entrepreneurship: This is a process of creating something different with the value by devoting the necessary time and effort assuming the accompanying financial, psychic and social risks and receiving the resulting rewards of monetary and personal satisfaction.

Entrepreneurial Orientation: Is a firm-level strategic orientation which captures an organization's strategy-making practices, managerial philosophies, and firm behaviors that are entrepreneurial in nature.

Small Scale Enterprise: An enterprise with a labor size of 11-1000 workers or a total cost of not more than 50 million including working capital but excluding cost of land. 

Medium Scale Enterprise: An industry with a labor size of between 10-300 workers or a total cost of over 50 million but not more than 200 million including working capital but excluding cost of land.

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