ANALYSIS OF GROWTH STAGES IN SMALL FIRMS A STUDY OF SELECTED FIRMS IN ENUGU METROPOLIS

TABLE OF CONTENT

Title page                                                                                          i

Dedication                                                                                         ii

Acknowledgments                                                                                      iii

Certification                                                                                                iv

Approval page                                                                                  v

Table of contents                                                                               vi

Abstract                                                                                            ix

CHAPTER ONE

INTRODUCTION                                                                           1

1. Background of the Study                                                                  1
2. Statement of the Problem                                                                  5
3. Objectives of the Study                                                           6
4. Research Questions                                                                 7
5. Research Hypotheses                                                              7
6. Scope of the Study                                                                            9
7. Limitations of the Study                                                                   10
8. Operational Definition of Key Terms                                               12

Organisation of the Study                                                       11

Profile of Selected Small Firms                                                         11

References                                                                                         13

CHAPTER TWO

REVIEW OF RELATED LITERATURE                                         14

• The Importance of Entrepreneurship to Economic Development     14
• Stages of Development and their Differing Skills Needs                   21
• The Growth Stages of Small Scale Firms in an Economy                 24

Financing the Growth Stages of Small Scale Firms                          31

• Managing a Growing Business: The Internal Strategies          36
• Critical Issues in the Management of Growth Stages of Small

Scale Firms                                                                              43

• Challenges of Managing the Growth Stages of Small Scale
• Firms                                                                                       51

• Managerial Orientation and Goals                                          52

2.81.  Human Resource Management                                                         53

2.8.2  Managerial Capacity                                                               54

2.8.3  Customer Base                                                                        55

2.8.4  Policy Implications and Adoptions                                         56

2.8.5  ICT and Commerce                                                                 58

2.8.6  Policy Consistency                                                                            59

• Summary                                                                                 60

Reference                                                                                          62

CHAPTER THREE

RESEARCH METHODOLOGY                                                      65

• Introduction                                                                                      65
• Research Design                                                                      65
• Sources of Data                                                                       66
• Method of Data Collection                                                      67
• Population of the Study                                                          68
• Sampling Procedure/sample Size Determination                     68
• Questionnaire Design and Administration                              70

Techniques(s) from Data Analysis                                           71

• Degree of Freedom                                                                  72
• Confidence Level/Level of Significance                                    72
• Decision Criterion                                                                             73

Reference                                                                                          74

CHAPTER FOUR

PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA               75

• Introduction                                                                                      75
• Presentation of Data                                                                75
• Analysis of Data                                                                     80
• Interpretation of Data                                                             82

CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION    

• Introduction                                                                                      90
• Summary of Findings                                                              90
• Conclusion                                                                              91
• Recommendations                                                                             92
• Suggested areas for Further Research Study                                    

Research Paper                                                                        98

Journals                                                                                   99

Bibliography                                                                        100

ABSTRACT

Analysis of growth stages in small firms, a study of selected firms in Enugu metropolis is a research aimed at critical assessment of the metamorphosis in the growth stages of small firms and the factors incidental to the growth or retardation in the life of the firms in the state.

Considering the critical role small firms play in catalyzing rapid economic development, growth in stages of a firm depicts a favourable business environment where the available resources are efficiently utilized to achieve organisational objectives. But when growth become less dynamic or retards, firms shrink in size thereby showing the pace or prospect of economic growth. The variable responsible for these phenomenon are encapsulated in the chapters as follows: Chapter one introduces the background of the study, statement of the problem, objectives of the study, research questions, research hypothesis, scope of the study, organisation of the study and the profile of selected small firms. Chapter two literatures review. Chapter three dwelt on the research methodology used for analysis of research findings. Chapter four presents the data gathered, analysis and interpretation of the data, while chapter five summarizes research findings, conclusion and recommendations as well as suggested areas for further research study.

CHAPTER ONE

INTRODUCTION

1.1     BACK GROUND OF THE STUDY

          Every business passes through identifiable stages in its life span. Several growth strategies related to business management approaches have been presented in the literature. Managing growth is a major strategic issue for a growing firm (Arbaugh and Camp, 2000). Strategy is the most important determinant of firm’s growth (Weinzimmer, 2000). Among high-growth firms, Dsouza (1990) identifies three primary strategic clusters

• Build strategy, emphasis on vertical integration.
• Expand strategy, emphasis on resource allocation and product differentiation; and
• Maintain strategy, emphasis on market dominance and/or efficiency.

 Patel, (1995) gives an insight into how firm, particularly small firms, graduate from one stage of growth to another. In his analysis, (Patel, 1995) asserts that firms can be understood as progressing linearly overtime from one stage to another as one management problem after another is solved. Some firms remain small for years, while other small firms grow into medium- sized or even large organisations in a relatively short period. The possibility of small firms re-experiencing early crisis stages would also be seen to be excluded.

          A key contribution of the framework of growth stages of small firms in the view of (Churchill and Lewis, 1984) is the identification of the success-disengagement stage, wherein, after reaching a level of stability, the firm’s owner-manager may voluntarily choose not to pursue further growth as an objective.

          Literature in industrial economics typically views owner-managed firms as being “equally if not more likely to pursue growth oriented policies than management controlled companies”. (Hay and Morris, 1991). This is normally due to principal-agent problems associated with management-controlled firms. Thus, the expectation that growth is a desired objective for all small firms underlies most policy intervention tools which try to create conditions in which small and medium firm can grow.

          Meanwhile, a growth state analysis of small firms needs to integrate issues specific to family firms since many small firms are owner-managed. Fundamental factors that make family firms different from other small businesses include:  a strong identification of individuals with the business itself and the challenge of establishing a balance between family and business concerns (Kets, 1996).

 Harvey and Evans, (1994) use a six-stage life cycle model for family businesses to integrate these issues with the growth stage literature; these studies indicate how family firms manage the issues of control and how owner’s involvements can affect the firm’s growth orientation. Thus the separation of growing firms into the success growth and the success disengage stages in the view of (Churchill and Levis, 1983) may be of greater importance to owner-managed firms than in other types of firms.

          Meanwhile, available literature on small scale firms/industry contains a wealth of empirical information on the static aspects of their life cycle. Most of the information is the extent, composition, characteristics, factor proportions, and consumption patterns among others of the sector are based on cross-sectional data. According to (Chuta, 1995), time series data on the sub-sector are however not available for most developing countries including Nigeria. As such, discussions relating to the dynamism and growth of the sector have not yielded fruitful results. Policy formulation, project and programme design over the years have focused on the problem of short-term employment creation without proper understanding of their long-term implications.

          Traditionally, scholars have used a biological analogy to explain the growth patterns of organisations (Kazanjian, 1988). A basic assumption in an organisation life cycle is that regularities occur in organisational development, and these regularities can be segmented into stages (Dodge and Robbins, 1992). Previous research according to (Lee, 2005) has contained varying numbers of life cycle stages. As noted by (Dodge and Robbins, 1992), there is a fair broad range in the number of stages specified as the organisation emerges from birth through maturity and eventually decline. Four general stages appear common to all, a start up or conceptual and developmental stage, a growth or commercialisation stage, a domain protection or expansion stage and stability or consolidation stage (Dodge and Robbins, 1992; Hanks and Chandler, 1994; Miller and Friesen, 1994).

          This study as initiated is aimed at assessing the growth orientation of a small firms located in different industries in Eastern Nigeria. These firms belong to the pharmaceutical, oil (petroleum) and manufacturing industries respectively.

          Nigerian small firms at present experience a lot of problems and thus is not just as an effect of the economic downturn. There are a number of bottlenecks, including under-capitalisation, difficult in gaining access to bank credits and other financial markets; corruption and a lack of transparency, high bureaucratic costs, but most of all, lack of government interest and support for the roles that the small firms play in national economic development and competitiveness.

          In an investigation into the reasons why some small firms grow and others do not, (Hay, 1994) concludes that over the long term, it is rather an external barriers to growth, that exert the decisive influence upon small firms production cost and its rate of growth. The key internal growth constraint is managerial capacity and the unwillingness on the part of the owner-manager to incur the risks associated with growth. In another study that draws lessons for Indians small firms on the basis of inter-country case study comparisons, (Nanjundan, 1994) observes “the size of enterprises does not crucially determine business performance measured either in economic or social terms. Instead, business performance depends decisively on organisation structure, public and private policies which influence growth and development”.

1.2              STATEMENT OF THE PROBLEM