What keeps Nigerian small and medium enterprises (SMEs) from growing faster? This blog has already covered research on some of the external factors, such as Nigeria’s poor tech infrastructure and often inadequate institutional support. This time around Benjamin James Inyang and Rebecca Oliver Enuoh took a different approach; their study focuses on the shortcomings of Nigerian businesses and entrepreneurs to explain the slow growth rate of their firms with internal factors.
Inyang and Enuoh argue that the attitude, knowledge and skills of entrepreneurs deserve more attention, because they can make or break the future of a company. Going against the myth of failure as a beneficial experience, they mention that, often, Nigerian founders develop bad habits and repeat the same mistake over and over again. Meanwhile, they often ignore the negative impact of their business decisions, and attribute the failure of the business to external factors. Mistakes are unavoidable, but successful entrepreneurs tend to be more responsive to feedback so that they do not make the same mistake twice.
At a company level, resource management is one of the key weaknesses of Nigerian SMEs. The importance of good financial and human resource management is obvious, many young businesses fail because of owners who do not know how to use the funding they acquired effectively or do not pick the right candidate for a job. Inyang and Enuoh also mention reputation and time management as major issues. The mismanagement of these resources might not be instantly fatal but it can certainly hinder the growth of the company.
The authors also argue for the importance of business ethics and corporate social responsibility. SMEs might be hindered by local conditions but they are often partly responsible for them. Ignoring business ethics might lead to higher profit in the short run but it hurts companies in the long run as it lowers efficiency and erodes trust in the economy. Furthermore, they emphasize that even the smallest businesses could find a way to contribute to community development, for example in the form creating opportunity for apprenticeship training.
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Contributed by Bence Juhasz.