SOCIO-CULTURAL FACTORS IN ENTREPRENEURIAL EVENT FORMATION: A STUDY OF NIGERIAN ENTREPRENEURS

ABSTRACT

Entrepreneurship has been found to be a factor in socio-economic and human development. Its study has, however, been largely viewed from economic perspective in Nigeria. This work was an attempt to approach the issue of entrepreneurial event among Nigerian entrepreneurs from socio-cultural perspective.

This study was conducted in three selected organized associations of entrepreneurs in Lagos, Nigeria. The study covered the interactions between some socio-cultural factors such as, social capital, dissatisfaction/displacement experience, social status, and perceived instrumentality of wealth, on the one hand, and predictor variables (ethnic group, gender, age and level of education), on the other. The main objective of the study was to understand how considerations of social capital, dissatisfaction/displacement experience, social status and perceived instrumentality of wealth for engaging in entrepreneurial event were functions of some socio-demographic and background factors among Nigerian entrepreneurs. It also attempted to determine the abilities of the independent variables in predicting the degree to which individuals are motivated by the identified socio-cultural constructs to embark on entrepreneurial event.

Cross-sectional survey design was used with questionnaire as the major tool of data collection. Questionnaire was administered to 717 randomly selected respondents. A number of statistical techniques were employed. They include frequency count, mean comparison, simple regression analysis, multiple regression analysis, independent samples tests and path analysis.  

The result shows that ethnic group of origin has the capacity in predicting variation in how individuals consider social capital for entrepreneurial event formation. It is clear that all the ethnic categories show significant determining explanation for consideration of social capital for engaging in entrepreneurial event. In other words, ethnic group of origin has predictive capacity in explaining variations in consideration of social capital forces for engaging in entrepreneurial event. However, while North 1 (Hausa) and South 2 (Igbo) show significant determining force, North 2 (mini groups) and South 3 (mini groups) show significant negative determinants. All the ethnic variables that were regressed against social capital forces show significant determining power. The result of multiple regression analysis also supports this position. Three of the four ethnic variables in the analysis show strong significant coefficients. In a similar vein, the result of path analysis for model 1 (5a) as supported by the data confirms that the paths were valid for explaining the relationship under study.

Independent Samples t-test of gender against the dependent variable (social capital influence), with the result showing value of t at -2.736 and the degree of freedom at 715 and significant at p<.05, clearly indicates that there is a significant difference in social capital influence on entrepreneurial event formation between our female respondents and their male counterparts. The result of path analysis shows that education has no direct causal relationship with any of the dependent variables. The result of the analysis for model 3 as presented in the study shows a significant relationship between age category 21-30 and the propensity to regard social status as a precursor of entrepreneurial event formation. Looking at the path analysis result as shown in the report, one could see a strong causal connection between age and social status as reason for embarking on entrepreneurial event. There are gender differences in consideration of perceived instrumentality of wealth before engaging in entrepreneurial event formation. The female gender scored higher than their male counterpart did in this criterion variable. Of all the predictors studied, ethnic group was found to be most significant in predictive power. The import of this is the need to appreciate diversity while working for common goal. It must therefore be understood that needs and aspirations answer to particularities of situations and contexts.

The implication of these results for policy practitioners is that programmes should be designed to conform to characteristics and uniqueness of the setting rather than a blanket design and application. Effort should be made to emphasize a socio-cultural approach to the curriculum of entrepreneurship education in the nation’s education system.

CHAPTER ONE

BACKGROUND TO THE STUDY

1.1 INTRODUCTION

Entrepreneurship occupies an important place in the process of development. It has become a key concept in social and human development discourse; researchers have considered it a factor in economic and human development (Weber, 1904; Morris and Lewis, 1991). In his famous work The Protestant Ethic and the Spirit of Capitalism, Weber (1904) posits that the great development experienced in the Western world was a result of entrepreneurial features present in those societies.

The contemporary study of entrepreneurship and the importance of social embeddedness can be traced to the works of Max Weber (1904) and Joseph Schumpeter (1934); both have argued that the source of entrepreneurial behaviour lay in the social structure of societies and the value structures they produce. Cultural and social norms are emphasized as the major strength of entrepreneurial orientation and seem to be the differentiating factor for higher levels of entrepreneurial activity (Minniti and Bygrave, 2003). Akeredolu-Ale (1974) also writes on the importance of socio-cultural imperatives in entrepreneurial event.

Conceptual arguments for the link between culture and entrepreneurship have existed for decades (Schumpeter, 1934; Weber, 1904; McClelland, 1961), with more recent empirical research (Hayton, George, and Zahra, 2002; Marino, Strandholm, Steensma and Weaver, 2002) providing mixed findings on these links. Some studies suggest entrepreneurs share a common set of values regardless of culture (McGrath, Macmillan, Yang and Tsai, 1992), while other studies support the notion that culture will affect entrepreneurship (Busenitz and Lau, 1996; Shane, 1994). Studies in Africa generally conclude that psychological variables (Frese, 2000), and race and ethnicity (Ramachandran and Shah, 1999) are important predictors of entrepreneurial activity. Research among countries in transition (Luthans, Stajkovic & Ibrayeva, 2000). underlines the point that entrepreneurship exists in every country. This entrepreneurial spirit can be fostered with an appropriate cultural orientation and framework.

Entrepreneurial activities have been found to be functioning differently in different levels of socio-economic development. For example, in advanced industrialized nations, increased entrepreneurial activity serves to reposition dying industries; provides new jobs to compensate for employment problems created by corporate restructuring and downsizing; and to generally enhance economic flexibility and growth (Thomas and Mueller, 1999). It is also a catalyst for technological progress (Reynolds, 1987). Shapero (1981) describes entrepreneurship as key to self-renewing economies.

In less developed countries, on the other hand, entrepreneurship functions in the following areas: stimulation of economic growth (Harper, 1991); replacement of crumbling state-owned enterprises, some of which are legacies of colonial rule; a means of employment generation (Abumere, Arimah and Jerome, 1998); and an avenue for empowering the disadvantaged portion of the population.

This reality has led various levels of government in Nigeria, international agencies such as UNDP, UNIDO, and ILO amongst others and non-governmental organizations in Nigeria and abroad to institute measures that are meant to enhance entrepreneurial activities. Such measures are categorized into two:

1. entrepreneurship development programmes and institutions; and
2. finance and micro-credit programmes and institutions.

The first category comprises policies and programmes aimed at stimulating, developing and enhancing the productive capacities of entrepreneurs, while the second category consists of measures aimed at providing stress-free credit facilities for entrepreneurs as shown in table 1.1.

Table 1.1: Selected Macro Policy Programmes Put in Place in Nigeria to Encourage Entrepreneurship.

On the whole, the aggregate goals of these policies and programmes include, among others, stimulation of economic development, empowerment of the disadvantaged portion of the population, employment generation and invariably, poverty reduction.

One will, however, observe that entrepreneurship has not fared well in meeting some of the key functions it should serve in Nigeria. In the area of employment generation, unemployment situation is worrisome. Any useful analysis of Nigeria’s unemployment data is very difficult, if not impossible. The difficulty arises from the highly unreliable data sourcing process in the country. Between 1990 and 1999, unemployment rate averaged 2.92%, with the highest being 3.5% for 1990 and the lowest 1.8% for 1995. Fairly realistic estimates have been collected since 2000 through 2002. The average for the period is 14.67%, with 2000 rate being 18.1% (FOS, 2003).

Table 1.2: Unemployment Rate in Nigeria

Source: Federal Office of Statistics, Nigeria (2003).

To put the unemployment situation in the country in proper perspective, other reliable statistical indices could serve as guides. Between 1970 and 1990, average capacity utilization in the manufacturing sector fell from 85.2% to 40.3%. The rate further fell to 39.6% in 2001 from 42% in 1991. Though employment rose in the manufacturing sector from 129,032 in 1970 to 335,179 employees in 1985, by 1992, it has declined to 20,153. Between 1994 and 1998, job vacancies declared dropped significantly from 9,893 to 8,291 for the lower grade workers and from 3,731 to 3,670 for workers of the professional and executive categories (Abstract of Statistics, 2001:345). Though there was a decrease in the number of registered unemployed people from 96,121 in 1994 to 89,759 in 1998, the fall can be explained by the fact that sustained unemployment discourages the unemployed from doing fresh registration. Otherwise, such a fall is incompatible with shrinking number of job vacancies.

GDP grew by an average of 3.6% between 1999 and 2002 (CBN Annual Report, 2003:35), while the population growth was projected to be 2.83%. That growth rate can certainly not bring about significant reduction in the unemployment level. Though the activities of the informal sector have not been brought into focus due to data problem, the mere fact that about 70% of the population live below the poverty line (UNDP, 2003) indicates that the informal sector may not be growing at a rate that will allow it absorb a significant number of the unemployed in productive ventures.

The above picture implies that the policies and programmes meant to encourage entrepreneurship have not fared well in terms of socio-economic and human development in Nigeria. This may not be unconnected with the neglect of the study of entrepreneurial event from a socio-cultural perspective.

1.2 STATEMENT OF PROBLEM

Empirical investigations into entrepreneurial event formation and its importance to socio-economic development of a nation have primarily focused on the role of economic factors (Noorderhaven, Thurik, Wennekers and Van Stel, 2004). Socio-cultural variables have been given only limited attention (Hayton et al, 2002). Even where they are given attention, they tend to gloss over local peculiarities and character. That is, they ignore the importance of different contexts. For example, Weber (1904), Schumpeter (1934), Cole (1946) and McClelland (1961) whose works on entrepreneurship remain reference materials in entrepreneurship research, all present a universal approach to the understanding of entrepreneurial event.

Weber (1904) in his work The Protestant Ethic and the Spirit of Capitalism, reports that the abundance of individuals with traits that precipitate and enhance entrepreneurship accounts for the level of development of western societies. McClelland (1961) was influenced by Weber. He posits that the presence of quite a number of entrepreneurs is key supply condition, which precipitates economic success in societies characterized by achievement orientation. Most works on entrepreneurship are overt or subtle reflections of the underlying assumptions of the protestant work ethic, which was based on Calvinism (Mueller & Thomas, 2000). However, this does not hold for all contexts. This tendency goes on to inform the design and application of programmes, policies and intervention strategies to stimulate the practice of entrepreneurship.

The universalistic trend in entrepreneurship research also reflects in the work of Schumpeter (1934), which investigates the demand conditions that stimulate entrepreneurship growth and the impact of entrepreneurs on a nation’s economic growth and development. Subsequent entrepreneurship researches have tended to use the assumptions embedded in the works by Weber, Schumpeter, and McClelland to form the framework for their works. A subtle agreement with universal explanations is also noticed in Akeredolu-Ale’s (1975) work, The Underdevelopment of Indigenous Entrepreneurship.

Studies on the interaction between socio-cultural factors and entrepreneurial events have, of late, not been given much vent in Nigeria. Recent studies on the subject of entrepreneurship have mainly focused on government policies, the impact of these policies, and the role of financial institutions amongst others (Salako, 2004), without recourse to the socio-cultural milieu in which entrepreneurship takes place. The lack of research in different contexts has been a persistent problem in the application of entrepreneurship principle. Most researchers on entrepreneurship have focused their attention on the Western world and some Asian countries. Socio-cultural factors are important components in the lives of a people and given the deep-rooted and pervasiveness of these in the Nigerian societies, they must, therefore, feature as contextual variables in entrepreneurial research. It is, therefore, the focus of this work to subject the topic of entrepreneurship to sociological analysis in the Nigerian context. Particular reference will be made to the direction of interactions of ethnic grouping, gender, age and education with such socio-cultural factors as social capital, dissatisfaction/displacement experience, social status and instrumentality of wealth. 

1.3 RESEARCH QUESTIONS

This study is an effort at understanding the socio-cultural factors that bear on entrepreneurial event among entrepreneurs in the Nigerian context. In the light of the above, the study is hinged on the following questions:

1. Are socio-cultural factors relevant to entrepreneurial event formation?
2. Do the identified socio-cultural variables, that is, social capital, dissatisfaction/displacement experience, social status and perceived instrumentality of wealth depend on ethnic group, gender, age and level of education for direction?
3. What are the abilities of the independent variables (ethnic group, gender, age and level of education) in predicting the degree to which individuals are motivated by the identified socio-cultural constructs to embark on entrepreneurial event?

1.4 OBJECTIVES OF STUDY

The main objectives of this work include the following:

1. To place in socio-cultural context, the concept of entrepreneurial event.
2. To understand how social capital, dissatisfaction/displacement experience, social status and perceived instrumentality of wealth are functions of some socio-demographic and background factors among Nigerian entrepreneurs.
3. To examine the abilities of the independent variables in predicting the degree to which individuals are motivated by the identified socio-cultural constructs to embark on entrepreneurial event
4. To make recommendations for policy based on the findings.

1.5 JUSTIFICATION OF STUDY

Entrepreneurship is found to be a veritable factor in economic development (Schumpeter, 1934; Adejumo, 2001). With the current effort at social and economic development by Third World countries, a study like this is not out of place, as it is capable of contributing to the present knowledge in the area of interaction between socio-cultural factors and entrepreneurial event, which may be in terms of consequences for policy issues and development programmes.

Also, developing a better understanding of socio-cultural factors in entrepreneurial activities among Nigerian entrepreneurs can lead to more appropriate, culturally sensitive entrepreneurial education and training, which take into account, the peculiarities of the Nigerian context.

1.6 SCOPE OF STUDY

This work centres on an examination of the interaction of socio-cultural factors in entrepreneurial event formation among Nigerian entrepreneurs. This study, however, limits its scope to the study of entrepreneurs who are members of organized associations. This is occasioned by the difficulty in generating a national list of all entrepreneurs in Nigeria. The study specifically focuses on members of Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Nigerian Association of Small and Medium Enterprises (NASME) and Nigerian Association of Small Scale Industrialists (NASSI). These associations are selected because they conform to the different descriptions to which entrepreneurship has been subjected. For example, most members of NACCIMA are large scale entrepreneurs, which makes it fit the definition given by Carland et al. They define an entrepreneur as one who establishes and manages a business for the purpose of profit and growth while a small business owner is seen as an individual whose principal purpose of establishing a business is to further personal goals, which may not be in tandem with growth orientation. We, however, agree with the description of entrepreneurship posited by Greenfield and Strickon (1981). They argue that there is no difference between an entrepreneur and a small business owner. They operationally define entrepreneurs as owners and operators of business enterprises. We, therefore, believe that the three associations are capable of being representative of the features of the different descriptions, which has the potentials of making the work robust.

1.7 RESEARCH IMPLICATIONS AND DIRECTIONS

This research work is a step toward developing a socio-cultural entrepreneurship model, accounting for differences among Nigerian entrepreneurs. Nigerian entrepreneurs compose of different groups and interests. This work, therefore, is a step toward understanding the peculiarities of each group, and how these uniqueness inform decisions that bother on entrepreneurial event formation.  From a practical perspective, an understanding of the differences and characteristics of the groups will enhance informed decisions about programmes and policies that are meant to encourage entrepreneurial development.

In a similar vein, intervention strategies (western oriented) adopted to encourage entrepreneurship in the Nigerian society, will give way to more context-dependent strategies.

Tagged with: Entrepreneurial Event Formation, Nigerian Entrepreneurs, Socio-Cultural Factors