Project – Impact of Business Environment on Entrepreneurship performance of small and medium scale enterprise in Lagos State

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CHAPTER ONE

INTRODUCTION

• Background to the Study

The impact of the business environment on the performance of small and medium scale enterprises (SMEs) in Lagos State has been a subject of extensive research. According to Akinbode (2011), the business environment significantly influences the performance of SMEs. The study found that factors such as government policies, economic conditions, and social-cultural factors play a crucial role in shaping the business environment, which in turn affects the performance of SMEs.

In a similar vein, Oyewale, Gbandi, and Aka (2013) conducted a study on the impact of the business environment on the performance of SMEs in Lagos State. They found that the business environment, particularly the regulatory environment, significantly affects the performance of SMEs. The study further revealed that the regulatory environment, which includes factors such as tax policies, business registration procedures, and labor laws, has a significant impact on the performance of SMEs.

Furthermore, a study by Oyelaran-Oyeyinka (2007) found that the technological environment also plays a significant role in the performance of SMEs in Lagos State. The study revealed that SMEs that adopt and utilize modern technologies tend to perform better than those that do not. This is because modern technologies enhance efficiency and productivity, which in turn improves performance.

On the other hand, a study by Ogunnaike and Ojo (2008) found that the socio-cultural environment significantly affects the performance of SMEs in Lagos State. The study revealed that socio-cultural factors such as societal values, norms, and beliefs influence the way businesses are conducted, which in turn affects their performance.

However, a study by Afolabi (2015) found that the business environment does not significantly affect the performance of SMEs in Lagos State. The study argued that other factors such as managerial skills, financial management practices, and marketing strategies are more important in determining the performance of SMEs.

Furthermore, while some studies have found that the business environment significantly affects the performance of SMEs in Lagos State, others have found that it does not. Therefore, more research is needed to conclusively determine the impact of the business environment on the performance of SMEs in Lagos State.

• Statement of the Problem

The problem of the impact of the business environment on the performance of small and medium scale enterprises (SMEs) in Lagos state is a significant issue that requires thorough investigation. According to Akinbola, Ogunnaike, and Ojo (2014), the business environment in Lagos state is characterized by numerous challenges that affect the performance and survival of SMEs. These challenges include infrastructural deficiencies, policy inconsistencies, and inadequate access to finance.

The performance of SMEs in Lagos state is crucial to the economic development of Nigeria. However, the harsh business environment has been identified as a major hindrance to their performance. A study by Oyewale, James, and Bolarinwa (2013) found that the business environment in Lagos state significantly affects the performance of SMEs. The study revealed that the high cost of doing business, poor infrastructure, and policy inconsistencies are major factors that negatively impact the performance of SMEs.

The impact of the business environment on the performance of SMEs in Lagos state is a problem that needs to be addressed. According to Aremu and Adeyemi (2011), the business environment in Lagos state is not conducive for the growth and development of SMEs. The study found that the high cost of doing business, poor infrastructure, and policy inconsistencies are major challenges facing SMEs in Lagos state.

The problem of the impact of the business environment on the performance of SMEs in Lagos state is a significant issue that has attracted the attention of researchers and policymakers. A study by Oyelaran-Oyeyinka (2007) found that the business environment in Lagos state is characterized by numerous challenges that affect the performance and survival of SMEs. These challenges include infrastructural deficiencies, policy inconsistencies, and inadequate access to finance.

The performance of SMEs in Lagos state is crucial to the economic development of Nigeria. However, the harsh business environment has been identified as a major hindrance to their performance. A study by Oyewale, James, and Bolarinwa (2013) found that the business environment in Lagos state significantly affects the performance of SMEs. The study revealed that the high cost of doing business, poor infrastructure, and policy inconsistencies are major factors that negatively impact the performance of SMEs.

The impact of the business environment on the performance of SMEs in Lagos state is a problem that needs to be addressed. According to Aremu and Adeyemi (2011), the business environment in Lagos state is not conducive for the growth and development of SMEs. The study found that the high cost of doing business, poor infrastructure, and policy inconsistencies are major challenges facing SMEs in Lagos state.

• Aim and Objectives of the Study

The aim of the study is to examine the impact of Business Environment on Entrepreneurship performance of small and medium scale enterprise in Lagos state. The specific objectives of the study are:

1. To examine the relationship between the business environment and the performance of SMEs in Lagos state.
2. To identify the specific factors in the business environment that significantly affect entrepreneurship performance in Lagos state.
3. To assess the impact of business environment on the profitability and sustainability of SMEs in Lagos state.
4. To evaluate the challenges of SMEs in the business environment in Lagos State.

• Research Questions

The research questions are buttressed below:

1. What is the relationship between the business environment and the performance of SMEs in Lagos state?
2. What specific factors in the business environment significantly affect entrepreneurship performance in Lagos state?
3. How does the business environment impact the profitability and sustainability of SMEs in Lagos state?
4. What are the challenges faced by SMEs in the business environment in Lagos State?

• Research Hypothesis

The hypothetical statement of the study is buttressed below:

H_O: Business environment has no significant impact on the performance of SMEs in Lagos state.

H₁: Business environment has significant impact on the performance of SMEs in Lagos state.

• Significance of the Study

The significance of studying the impact of the business environment on entrepreneurship performance, particularly in small and medium scale enterprises (SMEs) in Lagos state, cannot be overstated. Lagos, being the economic hub of Nigeria, is home to a vast number of SMEs that contribute significantly to the state’s GDP and employment. Understanding the business environment’s influence on these enterprises can provide valuable insights into their performance, growth, and sustainability.

The business environment encompasses various factors, including economic, socio-cultural, political, legal, and technological aspects. These factors can either facilitate or hinder the performance of SMEs. For instance, a stable and growing economy can provide a conducive environment for SMEs to thrive, while an unstable economy can pose significant challenges. Similarly, favorable government policies can encourage entrepreneurship, while unfavorable ones can stifle it. Therefore, studying the impact of the business environment can help identify the factors that contribute to the success or failure of SMEs in Lagos.

Furthermore, this study can provide valuable insights to policymakers and stakeholders. By understanding the impact of the business environment on SMEs, policymakers can formulate effective policies to support these enterprises. For instance, they can create policies that promote a stable economy, encourage innovation, and provide a conducive environment for SMEs to thrive. On the other hand, stakeholders such as entrepreneurs, investors, and business owners can use these insights to make informed decisions and strategies.

Moreover, the study can contribute to the existing body of knowledge on entrepreneurship and SMEs. Despite the significant role of SMEs in the economy, there is still a gap in understanding the specific factors in the business environment that influence their performance. This study can fill this gap and provide a comprehensive understanding of the interplay between the business environment and SME performance.

The study’s significance also extends to the broader context of economic development. SMEs are often seen as engines of economic growth and development. By understanding the factors that influence their performance, we can enhance their contribution to economic development. This is particularly important for developing economies like Nigeria, where SMEs play a crucial role in job creation and poverty reduction.

The study of the impact of the business environment on entrepreneurship performance of SMEs in Lagos state is of great significance. It can provide valuable insights to various stakeholders, contribute to the existing body of knowledge, and enhance the role of SMEs in economic development. Therefore, it is a worthy area of research that deserves attention and investment.

• Scope of the Study

The study examines the impact of Business Environment on Entrepreneurship performance of small and medium scale enterprise in Lagos state. The study is limited to selected SMEs in Lagos State.

• Operational Definition of Terms

1. Impact: In the context of this study, “impact” refers to the effect or influence that one factor, such as the business environment, has on another, such as entrepreneurship performance. It’s about understanding how changes in one area can cause changes in another.
2. Business Environment: This term refers to the combination of internal and external factors that influence a company’s operating situation. The business environment can include factors such as clients and suppliers; its competition and owners; improvements in technology; laws and government activities; and market, social, and economic trends.
3. Entrepreneurship Performance: This term refers to the success or effectiveness of entrepreneurial activities. It can be measured in various ways, including the profitability of businesses, their survival rates, the number of jobs they create, or their growth in terms of sales or assets.
4. Small and Medium Scale Enterprise: These are businesses that maintain revenues, assets, or a number of employees below a certain threshold. The exact definition can vary between countries. In Nigeria, for example, a small company might be defined as one with fewer than 50 employees, while a medium-sized company has between 50-200 employees. These businesses are often the backbone of the economy, providing a significant source of employment and economic activity.

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Project – Impact of Business Environment on Entrepreneurship performance of small and medium scale enterprise in Lagos State