What Are the Basic Concepts and Characteristics of Entrepreneurship?


By: Site Engineer, Staff

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Entrepreneurship is associated with the processes by which business organizations come into being. It is an important factor in the process of any country’s economic development, and so has understandably featured prominently in sociology, business, and economic literature.

This article focuses on the nature of the entrepreneurial function, its role at various stages in the growth of the firm and the problems associated with it in the industry.

Nature of Entrepreneurship

The word entrepreneurial was coined early in the 18th century by Richard Cantillon, to express a unique function that must be performed in any business activity. A businessman usually acquires and combines certain resources such, as land, buildings, labor, materials, and money, for the purpose of producing goods and services for sale to consumers.

The businessman cannot predict with certainty what the behavior of the consumer will be. The consumer may like the product or service, and by the quantity, he requires to satisfy his needs. However, if the consumer does not like the product or service, the businessman cannot compel him to buy. Nevertheless, the businessman must produce in anticipation of demand.

Cantillon used the word entrepreneurial to express this unique risk-bearing activity, against which the businessman cannot insure.

Entrepreneurship is also defined with certain other activities. Before the businessman starts operation, several decisions have to be taken on how a selected product is to be produced, the technology to be used and how the product is to be sold.

Operations cannot take place in a vacuum. Therefore, a location has to be selected for the business. Labour and capital needs have to be selected for the business. Labour and capital needs have to be determined and procured.

Entrepreneurship encompasses various activities which are carried to ensure the survival and growth of the business. The satisfactory relationship must be maintained with critical sectors of the environment, such as banks, government, and investors so that they continue to support the enterprise.

Adequate provisions must also be made for decision-making and control of the activities of the business. Entrepreneurship may involve such innovation as creating a new product, modification of an existing one in order to serve a need better, adoption of new technology, or opening up of a new market for an existing product.

However, the innovation need not involve a fundamental change in technology or production process. Thus entrepreneurship is the businessman’s ability, based on personal attributes, knowledge, and experience, to establish and operate a business. Evidently, therefore, entrepreneurship entails the acquisition of resources for productive activities, risk bearing, decision-making, innovation, provision of capital for continuing the operation of the business establishment.

The Growth of the Firm and Entrepreneurship

In the small firm, the entrepreneur is identical with the proprietor or owner. We all know that as the firm experiences growth and development, the internal factors of the firm changes as well.

During this stage, the firm is composed of the entrepreneur and a few subordinates. The entrepreneur occupies a dominant position within the firm. The operations of the firm are built around the skills of the entrepreneur, and he makes all decisions in the areas of marketing, production, personnel, and finance.

Control of the firm’s operation is maintained through an informal personal relationship with subordinates. Information needed for decision-making is limited and can often be remembered.

The entrepreneurial stage is the second stage. This is essentially a transition stage. Initial growth is generated either from sales or production, due to the ability of the entrepreneur to recognize a growth opportunity and exploit it. The source of the growth opportunity may be a market that has not been adequately served, or to which a new product or service can be profitably introduced.

The growth opportunity may also arise from an awareness of a new source of raw material, or a new method of production, which reduces the cost of improved quality.

The entrepreneur finds that he needs to depend more on banks and credit from suppliers to finance operations. It becomes increasingly difficult for him to supervise all the employees directly. Consequently, departments are differentiated by function, and a flat hierarchy to coordinate the functional departments emerges.

Objectives, policies, and procedures become recognizable, although not fully formalized. The entrepreneur retains all decision-making authority in the firm. However, with time, he begins to share some decision-making authority with the appointed head of departments, even though in a strictly limited sense.

The second stage merges into the third, through a need to solve the problem of coordination and control of the expanded activities. The need for effective distribution of output, financial control, appropriate staffing of the enterprise, and effective utilization of resources leads to the separation of administrative from operative management.

At this stage, the entrepreneurial talent upon which the organization was built may no longer be appropriate, as the need for more rational management techniques to solve the complex problems of the firm arises. Paid executives replace the entrepreneur in planning, organizing, decision making, initiating improvement projects, and coping with the uncertainties of the environment. Therefore, the new managerial function changes to broad policy-making and control.

The transition from entrepreneurship to a professionally managed firm is a critical process in the development of the firm. A successful transition requires that informality in a relationship, ad-hoc planning, and control which prevail during the entrepreneurial stage, be changed to systematic processes of planning and control. Budgets, formal organization charts, meetings, management reports become the basis of planning and control.

This means a significant change in the belief values and philosophy of the management of the firm. Secondly, the shift requires the creation of a management team accomplished through recruitment and a formal programme of managerial development. These are difficult changes for the firm to make and which most firms are unable to make. Consequently, their growth is undersized, and if they survive, they invariably remain small.

African Entrepreneurship

In developing countries, the role of the indigenous enterprise assumes greater significance. The indigenous enterprise occupies a unique position in any free enterprise economy. Many developing nations have elaborate policies designed to attract foreign capital into their economies, in order to accelerate economic growth beyond what domestic savings can sustain. For example, a substantial proportion of the planned investment in the Nigerian development plans was expected to be foreign capital.

Similarly, they depend a great deal on foreign skilled manpower to manage and provide technical expertise in the large industries. However, expatriate ownership and control of productive enterprises are at a great cost to the host economy. Dividends, interest payments, salaries of managers, management fees, licensing or royalty payments, and directors’ emoluments are usually paid in hard currency. These represent resources leakage in the economy. This problem is intensified by the requirement of foreign investors for a high rate of profit, to compensate for the risks of operating in a foreign country.

There are other problems associated with foreign dominance of the economy. It is more difficult to control foreign firms than indigenous ones since the loyalty of foreign firms is first and foremost to foreign shareholders. The interest of these shareholders may not be in consonance with the interest of the economy in which they operate. For example, while the interest of the economy may call for reinvestment of profits, for the purpose of increasing productive activity and long-run profits, the interest of the foreign shareholder may dictate high dividend payments and recovery of investments in the shortest possible time. Another crucial problem associated with foreign firms is that they may base decisions on political factors, rather than on economic considerations.

The indigenous enterprise plays a significant role in the industrial process. Besides providing a means by which productive activities are indigenously owned and controlled, it enables the economy to mobilize resources and talents that might not otherwise be put into productive use. The indigenous enterprise accounts for as much as 30% of non-agricultural wage employment in the Nigeria economy and has considerable potential for expansion in employment, both at the technical and managerial levels. It, therefore, provides Nigerians the opportunity of acquiring managerial and technical skills.

Similarly, it is, perhaps, the most effective means of acquiring or developing technology that is suitable to local needs, as well as ensuring even geographic spread of industries.

It is for these reasons that the issue of economic independence has become the bedrock of the industrial policy of newly independent and developing nations. One major effort to realize these goals is through the indigenization of business enterprises. In Tanzania, the Arusha Declarations of February 1967, and in Nigeria, the Nigerian Enterprises Promotion Actions of 1972 and 1977 are positive efforts in this direction.

The main objectives of the Nigerian Enterprises Promotion Acts are:

  1. To create opportunities for Nigerian indigenous businessman;
  2. To maximize local retention of profit;
  3. To raise the level of intermediate capital goods production;
  4. To raise the proportion of indigenous ownership of industrial investment; and
  5. To increase Nigerian participation in decision making the larger commercial and industrial establishment.

Characteristics of Developing Nations’ Entrepreneurship

There is a tendency to confuse African entrepreneurship with small-scale industries. For example, Kilby uses indigenous enterprise and small-scale industries interchangeably. The tendency is understandable because African owned enterprises are invariably small-scale enterprises. These enterprises abound in the country and cover almost every sector of the economy-mining, crafts, consumer goods, construction, printing, services such as repairing, servicing and supplying of various items, retailing, transportation, etc.

One of the characteristics of developing nations’ entrepreneurship is that they are relatively small in size. Although the number of entrepreneurs is large, their establishments are, on the average small, both in terms of capital investment, turnover, and a number of people employed.

A large majority of African enterprises employ less than ten paid employees, and the enterprises range from one-man businesses using hand operated implements to modern enterprises using modern equipment and power-driven machines. Even though several larger African businesses now exist on average, the capital base of the enterprises is low.

African enterprises have remained small due to several factors. Most of the businesses were started with personal savings and small loans from friends and relations. They tend to depend solely on profits for further expansion. Bank overdrafts and credits from suppliers are either not available, or cannot be utilized, because of the stiff conditions under which they are given.

Other reasons why the businesses have remained small include early diversification, investment of resources in real estate, transportation and other businesses which seem to yield quick and steady revenue. This attitude may not be as irrational as it might seem. It is due to a desire to diversify risks and to maximize returns on assets, even if these are short-run measures.

The second characteristic of African entrepreneurship is that the business establishments are operated as sole proprietorships.

Thirdly, African enterprises also tend to be concentrated in large urban centers, where there is considerable employment. Since the enterprises produce consumer goods and services, they tend to be located where purchasing power is sufficiently high to sustain the profitable operation. Besides, infrastructural facilities such as roads, water, fuel and electricity, bank, insurance, and postal services are either non-existent or inadequate in rural areas. Therefore, African businesses tend to locate in urban centers, not only to take advantage of the economic potentials of the areas but also to avoid the large cost of providing itself with basic infrastructural amenities.

Finally, African entrepreneurship is also characterized by an aversion to recording keeping and maintenance of simple accounts. Although this problem seems to vary directly with the size of the business unit, there is ample evidence that even the larger units fail to give adequate attention to proper record keeping and accounts. Where books are kept, they are hardly ever used for decision-making and control. The explanation of the aversion of African entrepreneurship to record-keeping and account is related to the managerial capacity of the entrepreneurs. The business owner may be unable to recruit and retain the personnel who can keep the books; or where it is about to obtain the services of such personnel, the entrepreneur may not have the capacity to use the records and books of account.

Therefore, except the records and required by some legal or regulatory agencies, they are not kept. Lack of record-keeping has consequences for the management of the business units. Without records, it is impossible for the firms to grow to any appreciable size. It is also difficult for such firms to obtain credit or loans from financial institutions. Without adequate records, unit costs can only be guessed at, and this situation has serious repercussions for appropriate pricing strategies, competitiveness, and profitability.

Personal Characteristics of Entrepreneurs

Certain socio-economic characteristics, such as family background, occupational background, education, work experience, motives, etc, are often associated with entrepreneurship.

It is generally agreed that entrepreneurs are socially active, alert to profitable opportunities, seek material rewards and that entrepreneurship is socially honored. Their occupational backgrounds are varied. They have had considerable working experience in businesses, government, and other professions.

Education is significant for several reasons. It is expected that education will provide entrepreneurs with the means by which new ideas could be acquired, and the skill to manage a sizeable business organization. However, higher formal education has not been found to be significantly related to successful performance as an entrepreneur.

Problems of Entrepreneurship

Entrepreneurship is faced with several constraints which limit its development. Among these constraints are financial or capital shortage, infrastructural problems, technology, organizational constraints, inadequate awareness of government programmes designed to assist small business.

1. Capital Shortage

We have seen earlier that most enterprises are sole proprietorships, which were started with the personal savings of the owners, or loans from friends and relations. We also noticed that they maintain inadequate records of their financial transactions. These characteristics have implications for the entrepreneurs’ ability to raise equity capital or maintain an adequate level of working capital.

The source of long-term capital which can be used to purchase additional equipment to expand the business is usually the money realized from the sale of shares, profit that is restrained in the business, long-term loans from financial institutions, and in a few cases, loans from friends and relations. Many entrepreneurs are not able to raise equity capital by floating shares. There are two principal reasons for this. Majority of the businesses are sole proprietorships and cannot sell shares. Most of the rest are private limited liability companies, and therefore can only sell shares to a limited number of people. However, entrepreneurs generally do not utilize these opportunities for obtaining additional equity capital, since they restrict shareholding in their companies to their infant children and wives, who, usually, have no personal resources to invest in the business.

In a prosperous business, retained earnings are a very good source of additional capital for expansion. In most cases, however, very little profit is generated. In other cases where substantial profit is earned, the entrepreneurs have the tendency to use such resources to establish new businesses or to invest them in real estate. Thus, very limited funds are available from this source for business expansion.

Long-term loans are usually available from financial institutions. These institutions, however, usually require some security and a demonstrated ability to utilize the loans profitably. Entrepreneurs are generally unable to satisfy the stringent requirements of the institution. In addition, many entrepreneurs are not attractive borrowers because of the lack of efficient organization structures, the inadequate commitment of long-term survival of the business, and poor management practices.

Therefore, even though an African entrepreneur may have a viable business proposal, he may not have the capacity to afford the loan, because of the inadequacies of his company. Those who are lucky enough to attract loans have a tendency to waste them on expensive parties, burial ceremonies, colorful marriage ceremonies or expensive cars.

African entrepreneurs also suffer from a shortage of working capital. Working capital can be obtained from banks through short-term funds or credit from suppliers. Many entrepreneurs are unable to maintain a satisfactory relationship with commercial banks because they have not acquired the habit of following simple accounting procedures. For example, daily sales collections may not be paid to the bank. Instead, it is spent directly on raw material purchases or payment of wages. In some cases, it is spent on consumer items and no records are kept. Entrepreneurs are also unable to depend on credit from suppliers, most of who hesitate to extend credit to them because of the fear of default. On their part, some entrepreneurs are unable to sustain for a business relationship long enough to establish trust between the parties.

2. Manpower Problems

One of the major factors hindering the growth and development of enterprises is their inability to recruit and retain competent personnel, especially in the technical and managerial cadres. Technical and managerial manpower is generally in short supply in the African economy. For example, a shortage of executive capacity has been identified as a major bottleneck to the execution of development plans. With respect to the Nigerian enterprise, the situation is especially critical, for several reasons.

Firstly, African entrepreneurs have to compete with government establishments and foreign-owned businesses for the limited pool of manpower available within the economy. Since the remuneration, prospects for advancement and public image or status are lower in the private indigenous enterprises they up with lower quality personnel than the others.

Secondly, indigenous enterprises do not engage in positive recruitment efforts, rather, they rely on referrals from friends and relations to get their personnel. This method is unlikely to yield suitably talented individuals who can execute complex business plans.

Thirdly, there is total neglect of educational and technical staff, which indicates not only the lack of knowledge of the potential of these sources but unwillingness to invest time and resources in the process.

Fourthly, even though indigenous enterprises are handicapped in the recruitment of managerial and technical manpower, there is no discernable policy on training and development to rectify the situation. While substantial on-the-job training goes on, this is unlikely to be sufficed to bridge the vast gap between the present quality of managerial and technical manpower and what is required to compete, or, at least, operate effectively.

Finally, there is a tendency for entrepreneurs to be in the administration of their employment policies, and reluctant in delegating authority to their managers. This tendency has a strong negative impact on the career aspirations of managers in indigenous enterprises and results in high labor turnover.

3. Organizational Problems

A significant feature of African enterprises is the low level of efficiency prevailing in the establishments. This is the result of poor planning and control systems, inadequate structural arrangements to accomplish tasks, lack of delegation, poor compensation system, etc.

A large majority of African enterprises are in the first stage of development. Only a few have reached the second stage while sprinkling at the third stage. They exhibit all the characteristics of the stage at which they are at. For instance, those at the first stage of development do not have clearly defined objectives and policies. Their operations are determined by the needs of the time, and because there is no known organizational structure, functions are fluid. This means that functions are performed by any available personnel when a function is to be performed. Although flexible, the enterprise is only capable of producing simple products, in small quantities. Arising from this, there is limited marketing organization since most of the products can be sold off the factory floor.

Raw materials purchases are made only when they are needed, with the result that operations are disrupted if the materials are not immediately available from the traditional source of supply. Books of account are not kept. The personal funds of the entrepreneur are spent when needed, and he may withdraw any amount he requires to maintain himself.

The second stage is an improvement on the first. There is some division of functions and coordination of activities. However, most enterprises at this stage are unable to recruit and retain the caliber of manpower required, to run the operations which have increased in size and a multitude of problems flow from this. Even though the entrepreneur recognizes the need for certain services, such as proper planning and control, a delegation of responsibility and authority, he is unable to implement them. From experience, he has found that elaborate planning is unworkable because it is not understood or appreciated by his subordinate staff.

The entrepreneur is also unable to delegate authority to an inexperienced subordinate who could desert the business without any notice whatsoever. Due to the lack of skill and inexperience of subordinates, the entrepreneur is compelled to exercise close supervision and control of every minor aspect of the business. However, the size of operations makes close supervision and control practically impossible. As a result, indigenous firms at the second stage of development are characterized by low productivity, under-utilization of machinery, pilfering of funds by trusted subordinates, and high labor turnover.

4. Technological Problems

African entrepreneurs glibly assume that the acquisition of modern technology will automatically raise the level and standard of operations to that observed elsewhere. Implicitly built into modern technology is an organization system that is capable of handling the production process and output of the technology. Previously we saw the organizational problems which African entrepreneurs face when their businesses increase in size. In the same way, plant organization, workflow, production planning and control and poorly handled.

Many African entrepreneurs face difficult problems, in the selection and purchase of the technology needed to run their businesses. While some general purpose equipment is retailed within the country, entrepreneurs or their agents have to travel to other countries to shop for special-purpose equipment. Even if entrepreneurs can place orders for the equipment from the country, foreign exchange requirements, shipping delays and difficulties in clearing the equipment from the ports increase their cost substantially. Installation is almost invariably undertaken by an expatriate, further increasing the cost of the equipment.

African entrepreneurs have not developed the habit of caring for machines and equipment. Machines are operated without any regards for operating instructions and guidelines. Apart from the foregoing, entrepreneurs face other infrastructural problems. Operators are unskilled and unable to do minor maintenance services. There are very few other business enterprises capable of providing efficient maintenance services. Spare parts have to be ordered from overseas, and technicians specially flew into the country, to undertake sometimes minor repair works. In spite of all these problems, technology being used in Africa is more likely to need repairs, than similar ones being used in advanced countries. This is due to poor handling by operators, voltage fluctuations which are rampant in the country, and general lack of strict maintenance policies. This is why machines which ought to have a lifespan of upwards of fifteen years are often discarded after only five years, not due to obsolescence, but because they can no longer be repaired.

5. Competition From Expatriate Companies and Foreign-Made Products

Technological and other problems faced by indigenous enterprises raise their cost of production and lower the quality of their products. However, these products are sold in the same market place as those produced by technological superior expatriate companies, at home and overseas. Besides, since indigenous entrepreneurs do not possess efficient sales, organization, they have difficulties marketing their products.

Indigenous entrepreneurs also face stiff competition from fellow entrepreneurs. The entry of one entrepreneur into one line of business is an invitation to a swarm of others to go into the same field, especially if the technology and organizations needed are simple.

6. Infrastructural Problems

Infrastructural development in the country is low, although huge sums of money are being invested in this area annually. Road network, postal and telegraphic communication, power, water supply, banking services, social infrastructures such as schools and hospitals, are generally inadequate.

What is available is poorly distributed, such that there is an apparent shortage of these facilities everywhere. Lack of infrastructural support affects both foreign and indigenous enterprises since they are largely marginal firms. For example, inadequate and irregular power supply causes business enterprises to invest huge sums of money in power generating plants, to maintain minimum levels of production. While this cost can be absorbed by large-scale industry, it is often ruinous to a small or medium-scale industry, or an indigenous firm. Also, long delays at banks and ports often mean that experienced personnel is kept away from supervision and control of the business. This has a greater impact on indigenous firms than expatriate enterprises.

7. Government Assistance Programme

Apart from general incentives by which the government hopes to facilitate the industrialization of the economy, and which apply to all industries located in the country, there are special programmes designed to alleviate the problems faced by indigenous entrepreneurs.

General Incentives Programme

The followings are some of the general incentives from which all qualified firms benefit, whether they are indigenous or not.

1. Pioneer Status

This is granted to public companies, operating in an industry already declared to be pioneer industry. The pioneer status exempts the company from income tax for a period between 2 to 5 years, depending on the volume of investment. Pioneer industries already approved spread around the entire range of industries, such as preserved and canned foodstuff, animal food, processing of oil, seeds, surgical dressings, nuts and bolts, wood screws and wire rails, bicycle tyres and tubes, etc.

2. Accelerated Depreciation

This scheme enables public and private companies to quickly write-down their capital assets during their formative years. It also enables them to build up liquid reserves relatively quickly. The capital allowances that cannot be claimed because of loss may be carried forward for up to ten years. This enables the affected companies to pay less tax in their formative years.

3. Approved User Scheme

The objective of this scheme is to reduce the worth of importing raw materials to local manufacturers. With the approval of the Minister of Finance, and entrepreneur can import raw materials for the manufacture of certain goods at reduced rates, while the raw materials for the manufacture of certain other goods can be imported duty-free.

4. Tariff Protection

The use of tariff as an instrument of protection for local industries emerged in Nigeria in the early sixties. By that time, it was recognized that infant industries had to be protected from competition from better-endowed manufacturers in developed countries. While recognizing the need for protection, the government is also concerned that industrial firms strive to be efficient and ready to compete in the export market. Thus, the policy of tariff protection is used with extreme caution and direction.

Special Incentive Programmes for Indigenous Entrepreneurs

Among the special programmes designed to assist indigenous entrepreneurs are the Small-Scale Industries Credit Scheme (SSIC), Industrial Development Centres, Industrial Estates, Provision of Industrial Extension Services, and training of entrepreneurs and their staff.

1. Small-Scale Industries Credit Scheme

The objective of the Small-Scale Industries Credit Scheme is to give loans to entrepreneurs, especially those that are educated and technically qualified, to purchase machinery and equipment, or to modernize current operations. Working capital loans can also be given to entrepreneurs under the scheme. Fixed capital loans may be given for up to 75% of the cost of machinery, and working capital loan up to 50% of the requirement, provided that the total loans do not exceed N80,000 and the working capital loan does not exceed N10,000.00.

The Small-Scale Industries Credit Scheme is operated by the State Ministries of Industry, through a Loan Management Committee. Funds for the loans are provided by the Federal and State Governments, and loans may only be given to entrepreneurs who are the judge to have technical or managerial ability, integrity and are credit-worthy. Loan recipients must also provide acceptable security, in the form of fixed assets, including the machinery and equipment purchased with the loan.

Loans under this scheme are given out under very liberal conditions, low-interest rates, repayment over a period of five to seven years, a moratorium of 1 to 2 years, and an acceptable guarantee. The loan recipient must also accept supervision of the loan by the Loan Management Committee, maintain proper records of the financial position of the enterprise, and permit the inspection of the business and accounts of the enterprise.

To ensure that the loan is used for the purpose it is obtained for, payments out of the loan are made directly to suppliers of equipment and materials rather than to the entrepreneur.

2. Industrial Development Centres

This programme is designed to remove the technical and management deficiencies of small-scale industries.

The main functions of the Industrial Development Centres are:

  • Technical advice and assistance on selection of appropriate machinery and equipment, installation and operation of machinery;
  • Technical appraisal of loan applications and supervision of the loans;
  • Provision of industrial extension services;
  • Training of entrepreneurs and staff. The center also undertakes management training, guidance, and advice to proprietors in their workshops on production, planning and control, marketing of products, and general management of the enterprise.

A unique feature of the Industrial Development Centre is that it is designed to provide industrial and management extension services to entrepreneurs and their staff in their factories. In this way, operational problems are solved with minimal disruption of production.

3. Small-Scale Industrial Estates

The problem of inadequate infrastructural development is being tackled by the Federal and State Government, by building industrial estates. Industrial estates are areas where infrastructural facilities such as factory sheds, water, telecommunications, power, and drainage are concentrated, to provide facilities for the rapid development of small-scale and other industries. In this manner, industrial establishments are relieved of the heavy initial cost of providing these infrastructural facilities for themselves. Industrial estates also enable the firms that are located in it to enjoy certain external economies, while extension services could easily be brought to them by government agencies.

Appraisal of Governmental Assistance Programmes

A programme is considered effective and useful if it is able to reduce or eliminate the problems for which it is designed. Therefore, the first criterion for assessing government assistance programmes to indigenous entrepreneurs listed above is the extent to which government objectives have been met. What is the impact of these programmes and policies on the growth and development of indigenous enterprises?

Incentives have the advantage of increasing profitably and liquidity. However, there is no evidence that incentives per se, are considered to be of crucial importance in the investment decisions of investors. Rather, survey results have indicated that market opportunities and competitive strategies are major considerations by foreign investors. As for indigenous entrepreneurs, a majority of them are not aware of the incentives, and may in fact not take advantage of them, because of the bureaucratic processes involved.

Several critical assessments of government lending programme to indigenous entrepreneurs have indicated that capital shortage is not a major limiting factor in the development of the enterprises. Instead, problems of organization inefficiency, poor management, and an environment fraught with uncertainties have kept indigenous enterprises small. Even though this might be an extreme view, government lending programmes have been criticized by many observers. There are administrative as well as political problems. Shortage of staff in the loan agency, for instance, means that there will be long delays in processing applications, to the frustration of the loan applicants. There is also administrative ineptitude in ensuring that the loans are used as contracted. Collaterals are always ever a problem to both the loan applicant and the staff administering the loans. The political problems related to the pressure on officials to grant loans to obviously less-deserving applicants. When loans are given on political grounds rather than strict economics, loan recovery is difficult, and the objective of granting the loan is defeated. These problems have resulted in the dismal failure of government loan programmes.

The industrial development centers, as well as industrial estates, have not made any impact on indigenous entrepreneurs. The area of coverage of the pioneer industrial development centers was too large for any meaningful impact to be made. The various centers proposed for the States have not taken off. Nevertheless, the centers have severe manpower problems. There is very few experienced personnel in these centers to provide the services needed by entrepreneurs. Entrepreneurs are hardly aware of the existence of the centers and may not take advantage of the services rendered.

Development of Indigenous Entrepreneurship

Substantial research evidence has been accumulated in the last few years to support the proposition that ability rather than willingness is the primary deterrent to the expansion of the effective entrepreneurship in Nigeria. If this proposition is true, the development strategies of entrepreneurship in Nigeria must emphasize:

  1. A general increase in opportunities for entrepreneurs;
  2. Identification of specific investment opportunities;
  3. Increase in the entrepreneur’s capacity to exploit the available opportunities.

A general increase in opportunities involves adopting economic policies to stimulate the production of goods and services in the economy, to satisfy the needs of a growing population and industrial sector. Import substitution policy, selective and effective tariff protection measures and improvement in infrastructure are bound to have a positive impact on the development of entrepreneurs. Large companies and institutions provide substantial markets for entrepreneurs to exploit. A policy that consciously discourages undue forward or backward linkages of large industrial plants will stimulate the development of entrepreneurship. For example, several companies have been established to manufacture parts and accessories tor the vehicle assembly plants in the country, and services for the oil industry. It is, however, important to establish business opportunity advisory services agencies, to study the needs of large plants and institutions with a view to identifying those areas in which profitable investments can be made.

Increasing the capacity of entrepreneur involves technical and managerial training for the entrepreneurs and their staff, advisory services in the area or choice of technology and installation, plant and equipment maintenance, facilitation of raw material purchasing liberalization of access to capital and credit, etc Managerial training tor entrepreneurs, will, for example, enable them to adopt new techniques and policies in the management of enterprises.

An effective manpower training programme will not only make resourceful and competent personnel readily available to entrepreneurs, but it will also reduce the direct cost or training new employees. There is no doubt that the availability of competent personnel will eliminate most of the organizational problems that characterize entrepreneurship in Nigeria.

The development of entrepreneurship cannot be achieved by adopting a single-factor approach. Manpower training, for example, cannot by itself result in entrepreneurial development, not can liberalization of access to capital and credit. What is required is an integrated programme in which all the critical factors are simultaneously improved. This might seem difficult, but it is possible.


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