Globally, small and medium scale enterprises play a great role in employment creation, income generation, and economic growth. This study examined the impact of socio-economic characteristics on the performance of small-scale enterprises. It also identified the salient impacts of socio-economic traits on the development and expansion of small-scale enterprises in the country and established the productive prospects of progressive small-scale enterprises in the study area. The study was carried out in Enugu state, Nigeria, where copies of structured questionnaire were purposively administered on selected respondents. Evidence from the study shows that socio-economic characteristics of small-scale enterprises tend to influence their profitability and productivity. Further analysis show that culture, age, and educational qualification, inflation and availability of financial resources had significant effect on the performance of the selected small-scale enterprises in the study area.
The analysis was conducted using the chi-square estimate. In testing the impact of culture on the productivity of small-scale enterprises, the Z-cal ?2 (17.96) is significantly greater than Z-tab ?2 (3.841). We reject the null hypothesis and accept the alternate which states that culture affects the productivity of small businesses. In testing for the impact of experience on the productivity of small businesses, the Z-cal ?2 (16.84) is significantly greater than Z-tab ?2 (3.841). Hence we conclude that experience significantly affects the productivity of small businesses. Finally, in testing for the impact of the availability of capital/financial resources on the profitability of small-scale enterprises, the Z-cal ?2 (4.6) is greater than Z-tab ?2 (3.841). Hence, we conclude that availability of capital/financial resources affects the profitability of small-scale enterprises.
Background of the Study
Over the past years, it has become increasingly apparent that Small and Medium Enterprises (SMEs) indeed contribute to employment, economic development, sustainable livelihood and the means through which accelerated economic growth and rapid industrialization has been achieved (Wube, 2010; Nigeria Investment Promotion Commission, 2003; Harris et al, 2006; Sauser, 2005). Studies have shown that small-scale industries in many countries provide the mechanism for promoting indigenous entrepreneurship, enhancing greater opportunities per unit of capital invested and aiding the development of local technology (Nils-Henrik & Morch, 1995). Recent work summarized in the background paper on small-scale industries has also shown that small-scale industries has also shown that small-scale forest-based processing enterprises form a very large part of the overall forest products processing total employment terms (FAO, 1995). In fact, the small business sector is recognized as an integral component of economic development and a crucial element in the effort to lift countries out o poverty (Wolfenson, 2001). Hence, it is widely recognized that they are a feeder of goods and services to large-scale industries.
On a global scale, the United Nations Economic Commission of Europe has posited that the number of small business enterprises in the non-primary private sector has grown to over 19 million in the European Economic area and Switzerland, providing employment for more than 110 million people (UNECE, 2002). In Nigeria, this assertion remains true as empirical studies have shown that the small and even medium scale enterprises have enhanced greater employment opportunities per unit of capital invested and aided the development of technology in many states. In fact, small-scale businesses represent about 90 percent of the industrial sector in terms of the number of enterprises. They also account for 70 percent of national industrial employment if the threshold is set at 10-50 employees. They contributed 10 percent of manufacturing output and 1 percent of Gross Domestic Product (GDP) in 2001 (Ajayi, 2002). This explains the profound interest which developing nations have shown towards the promotion and development of small-scale enterprises since the 1970s.
Although it is a widely held view that the availability of credit is the most critical to the performance of small and medium scale industries, some studies have shown that a large number of small and medium scale industries fail because of non-financial reasons such as infrastructural deficiencies (Liedhorm et al, 1994). In fact, a study by international Labour Organisation (1994) shows that inadequate entrepreneurial talent affects the development of small-scale manufacturing and processing industries. For Ezedum & Odigbo (2011), other factors affecting small business performance are political and legal (good governance, rule of law, efficient and transparent public administration), economic (capital, general price level, government and fiscal tax policy, availability of quality and quantity of labour, and the general growth of the economy), technological (new products, new tools, machines and new services), infrastructural (telecommunications, energy, transport and water), and social (attitudes, desires, expectations, general education attainment, culture, beliefs and philosophy of a group or society). According to Akabueze (2002), those factors are: lack of financial resources, poor location, law and regulations, general economic conditions, as well as critical factors such as poor infrastructure, corruption, low demand for products and services, and poverty. Others include: shortage of raw materials, handicap in obtaining finance, inadequate competent personnel, inability to control costs and problems of dumping of cheap foreign products and others.
In addition, Akabueze (2002); Cooper (1985); Hisrich (1990); Krueger (1993); Lussiers and Pfeifer (2001); Raman (2004) and Panda (2008) found the experience of the entrepreneur as a factor affecting the success and performance of the business. Hisrich (1990); Kallerberg & Leicht (1991); Krueger (1993), Rowe et al (1993), Lussiers & Pfeifer (2001); Masuo et al (2001); Thapa (2007); Indarti & Langenverg (2008) all found that education has positive effect on small business success. Kraut & Grambsch (1987), Hisrich (1990), Kallerberg & Leicht (1991), Krueger (1993), Rowe et al (1993) and Masuo et al (2001) also found that age and support networks have positive contributions to business. These factors have had far reaching effects on the general performance of small scale businesses and their contribution to the growth and development of the nation.
It is against this background that this study finds its relevance as it seeks to ascertain the impact of the afore mentioned socio-economic factors on the performance of small-scale enterprises in Nigeria with special reference to selected firms in Enugu state.
Statement of the Problem
Small businesses are constantly bedeviled by a lot of factors that could impede their continuous development if not properly handled. Scholars have indicated that starting a business is a risky venture and warn that the chances of small business owners making it past the five-year mark are very slim (ILO, 2005). Some researchers into small business development have shown that the rate of failure of small-scale businesses in developing countries is higher than in the developed world (Marlow, 2009). Despite the intensive support programmes and government incentives to small businesses over the years, it would seem reasonable to expect that small businesses would grow and flourish, but the rate of business failure continues to increase because of the obstacles affecting business performance (Akabueze, 2002).
Most Nigerian entrepreneurs