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Go Back       IAR Journal of Entrepreneurship, Innovation & Design Thinking | IAR J Ent Desg Thnk. 2(3) | Volume 2 Issue 3 ( June 10, 2021 ) : 1-7
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DOI : 10.47310/iajeidt2020.v02i03.001       Download PDF       HTML       XML

The Effect of Entrepreneurship Orientation on Profitability of Telecommunication Businesses in Taraba State


Article History

Received: 10.05.2021 Revision: 20.05.2021 Accepted: 30.05.2021 Published: 10.06.2021


Author Details

Jerome Nyameh PhD, Joseph Albasu PhD, Luna Banga Madanga and Odinaka Patrick


Authors Affiliations

Department of Business Administration Faculty of Management sciences Taraba state University Jalingo, Taraba State, Nigeria


Abstract: The study examines entrepreneurship orientation on the profitability of telecommunication business in Taraba state with the following objectives; (i)Examine the effects of Proactiveness on profitability of Airtel Networks LTD(ii) Determine the effects of innovation on profitability of Airtel Networks LTD (iii)Evaluate the effect of risk taking on the profitability of Airtel Networks LTD. The survey research design was employed for the study this was influenced by the research problem and its corresponding research question. The choice of survey research design was further considered appropriate because according to Zikmund, Babin, Carr and Griffin, (2012. the Population of the study were 270 staff of airtel network Limited. The sample size was 162 was drawn. Quantitative data collected through the copies of the questionnaire were analyzed using descriptive and inferential statistics. Statistical Package for Social Sciences SPSS 21.0 was used to analyze. The findings revealed that the three elements of entrepreneurship orientation taken together significantly affected profitability of telecommunication business (t=9.781, sig.=.000). however, the results indicate that the three elements of entrepreneurship orientation taken together accounted only 0.11% toward variations in profitability of telecommunication business (Adjusted R2 =.011). this means that the remaining 99.9% is a contribution of other factors not included in this study. This signifies that, the factors related to entrepreneurship orientation are important in determining the profitability of telecommunication business, whereas many other factors as well are important.


Keywords: Entrepreneurship Orientation, Profitability, Telecommunication Business And Airtel Ltd.


INTRODUCTION

Background of the Study

Entrepreneurship encourages innovation that has a positive effect on the growth of organizations (Hughes and Morgan 2007). The spread of globalization has created a competitive business environment, which has affected the way entrepreneurs create and sustain their business operations and strategy. Entrepreneurship orientation has therefore been seen as a key driving force for a free market economy. Hence the effect of entrepreneurial orientation is key to the competitive advantage of firm. Thus supported by Venter (2014) who studied the influence of entrepreneurial orientation on business success in selected MSMEs in South Africa findings from the investigation revealed the lowest performing dimension of risk-taking, which explains that the entrepreneurs are not recognizing and acting on opportunities simply because they have a negative perception towards the dimension of risk-taking. Campos et al., (2013) concluded their study by stating that it is necessary to continue the study of entrepreneurship orientation and its peculiarities in the small business context because these business acquire certain peculiarities that distinguish them from the large company. The internal contingent factors may be helpful to better understand the relationship between entrepreneurship orientation and firm profitability.


Miller (1987) used three dimensions to describe EO: innovativeness, proactiveness, and risk-taking. Innovativeness refers to the tendency for enterprises to adopt and support creative processes, which may bring new products, new technologies, new services, new inventions, new tests, and so on. Innovativeness motivates enterprises to increase investment to carry out technology innovation activities such as new technology acquisition, new product development, and so on; thus, it can improve enterprise technological innovation ability. Moreover, innovativeness can promote enterprise reform and innovation, accelerate the flow and transformation of new knowledge, and contribute to the generation of new knowledge and technology, which improves enterprise innovation performance.


Proactiveness refers to the tendency for enterprises to take the positive marketing strategy, proactive action, and leading strategy to introduce new products, new processes, new technologies, and new services in order to transcend the competitors. In order to gain the competitive advantage, proactive enterprises tend to take advantage of the market opportunities ahead of competitors, and take the lead in introducing new products and services


Risk-taking refers to the tendency for enterprises to take bold action in order to pursue high reward, and it can be explained from two aspects of technology and market. In the technological aspect, risk-taking reflects the willingness of enterprises to invest resources for technological innovation strategies or projects with a high risk of failure and uncertainty and is closely related to entrepreneurial risk preferences and attitudes towards new technologies.


Profitability is the ability of a business to earn a profit. A profit is what is left of the revenue a business generates after it pays all expenses directly related to the generation of the revenue, such as producing a product, and other expenses related to the conduct of the business activities. A company's net profit is the revenue after all the expenses related to the manufacture, production and selling of products are deducted (Murgor, 2014). It goes directly to the owners of a company or to the shareholders, or it is reinvested in the company.


Statement of the Problem

Venter (2014) studied the influence of entrepreneurial orienta tion on business success in selected MSMEs in South Africa findings from the investigation revealed the lowest performing dimension of risk-taking, proactiveness and innovation. It is a well-known fact that no business attains reasonable profitability without engaging the key variable of entrepreneurship orientation. It is on this note therefore that this study aimed to examine the effect of entrepreneurship orientation on profitability.


Objective of the Study.

The objectives of this study are to;

  • Examine the effects of Proactiveness on profitability of Airtel Networks LTD

  • Determine the effects of innovation on profitability of Airtel Networks LTD

  • Evaluate the effect of risk taking on the profitability of Airtel Networks LTD


Research Questions and Hypotheses

This study was guided by the following research questions;

  • What is the effects of Business Proactiveness on profitability of Airtel Networks LTD?

  • Does innovation affects profitability in Airtel Networks LT D?

  • Does risk taking in business contribute to profitability of Airtel Networks LTD


Research Hypotheses

H0: a) there is no positive and significant relationship between business proactiveness and profitability

H0: b) there is no positive and significant relationship between innovation and profitability

H0: c) there is no positive and significant relationship between risk taking and profitability


Significance of the Study

i. Contribution to practice

The study will ignite the spirit of proactiveness, innovation and risk taken against the initial fear venturing into it. Hence it will be of great importance for Airtel Networks LTD harmonize profit.


ii. Contribution to knowledge

Study of this nature evoke knowledge either from findings that validate or refute finding previous study on the similar area.


LITERATURE REVIEW

Theoretical Framework

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Researcher’s approach 2020


The variable the study synthesizes the following theories;

Schumpeter’s Theory of Innovation

Innovation theory proposed by Schumpeter, (1942) and propounded in 1949, the theory emphasizes on a process of “creative destruction” where wealth creation occurs through disruption of existing market structures due to introduction of new products and/or services that cause resources to move away from existing firms to new ones thus allowing the growth of the new firms. According to this theory innovation is the specific tool of entrepreneurs, the means by which entrepreneurs exploit change as an opportunity for a different business or a different service.


McClelland Theories

The theory of high achievement motivation was propounded by McClelland. Here, he identified two characteristics of entrepreneurship, namely; (1) Doing things in a new and better way and (2) Making decisions under uncertainty. He stated further that people with high achievement motivation were likely to become entrepreneurs. That these people are not influenced by money or external incentive, but consider profit making in any venture as a measure of success or competency.


Knight Risk theory

Knight Risk theory proposed by Knight, (1975) the theory emphasized that the main function of an entrepreneur is to ensure the uncertainty related to his/her activities. The theory viewed an entrepreneur in terms of risk, uncertainty, and profit. It recognized the distinction between risk and uncertainty.


Entrepreneurial Orientation

Entrepreneurial Orientation refers to “a process, practice, and decision making style of organizations that act entrepreneurially”. Many scholars agree that Entrepreneurial Orientation is “a combination of risk-taking, innovativeness, and proactiveness” (Covin and Slevin 1989)


Risk-taking is one of the internal organizational factors necessary to support entrepreneurship within organizations (Hornsby and Sort 2012). It refers to a firms tendency to engage and the willingness to commit significant resources to opportunities with uncertain outcomes (Schillo 2011; Lumpkin and Dess 1996). Risk taking ability helps firms to engage in bold rather than cautions actions (Ketchen and Short 2012). However, “entrepreneurship does not entail reckless decision-making, but reasonable awareness of the risks and being able to calculate and manage these risk” (Naldi et al., 2007).


The most suitable definition in terms of entrepreneurial orientation would be to acknowledge that risk-taking which is the degree to which managers and entrepreneurs are willing to make large and risky resource commitments (Lumpkin and Dess, 1996).


Innovativeness refers to the tendency of pursuing creativity and experimentation. It reflects on engaging in “new ideas and creative process that leads to new products, services, and process. Innovativeness is an important aspect of Entrepreneurial Orientation because “it helps firms to pursue new opportunities” (Ketchen and Short 2012). Innovativeness is of high importance because as the market nowadays changes in a rapid pace, maintaining competitive advantages is crucial. Innovativeness can be a source of significant progress and growth for a firm (Dess and Lumpkin, 2005).


Pro-activeness refers to “a process that aims at anticipating and acting on future opportunities in terms of products, technologies and markets. Proactiveness aims at introducing new products ahead of competitors, “strategically eliminating operations that are in the declining stages of the business life cycle” (Antoncic and Zorn 2004). Proactiveness shows “how firms relate to market opportunities by seizing the initiative in the market place (Ying-hong 2007).


Profitability

In a competitive marketplace, a business owner must learn to achieve a satisfactory level of profitability. Increasing profitability involves determining which areas of a financial strategy are working and which ones need improvement. Understanding the key factors determining profitability assists managers in developing an effective profitability strategy for their company.


Sales

Sales are an important factor in determining profitability. The return on sales ratio measures profits after taxes based upon the current year's sales. If sales numbers are high, a company is better prepared to handle adverse market conditions and economic downtrends. The gross profit margin is a measure of gross profit earned on sales. An effective sales strategy is essential in increasing a company's profitability.


Price

Price setting is a key factor in determining profit. Careful analysis is necessary in determining the correct pricing strategy for a company. A business owner must look at what competitors are charging and determine what prices he should charge to maximize profits. An important factor to consider in pricing strategy is determining what price customers are willing to pay for a product. Customers will pay more for niche products or services that are not readily available elsewhere. A business owner does not want to leave money on the table by undercutting the price charged for products and services.


Expenses

For a company to become profitable, income must exceed expenses. Expenses can be defined as the cost of resources used in the activities of a business. Profits for the company are determined by analyzing what is left over after expenses are subtracted from total revenue. Any cost-saving measures initiated by a company will bring expenses down and increase overall profitability.


Cost of Staying in Business

A consideration of a company's overall profitability is the cost of staying in business. Return on net worth shows how much profit a company generates on the money equity shareholders have invested. The return on net worth should at least be equal to the rate a business can borrow money from its creditors to achieve the cost of staying in business. A company that is showing a profit but has a low return on net worth still has profitability issues.


Measuring profitability

Measuring profitability is the same as measuring the success of a business. An income statement shows a breakdown of income and expenses during the business year. One measure of a company's profitability is the profitability ratio. Profitability ratios analyze the financial health of a business. A profitability ratio looks at how profit was earned in relation to sales, total assets and net worth.


Entrepreneurial Orientation (EO) and profitability

Entrepreneurial orientation is an important factor for the competitive advantage and profitability of a firm (Miller, 2014). Wambugu, Gichira and Wanjau (2016) in a study of influence of entrepreneurial orientation on firm profitability performance of Kenya’s agro processing small and medium, revealed that entrepreneurial orientation had a positive and statistically significant influence on firm profitability, although the study looked at entrepreneurial orientation as a uni-dimensional construct in predicting firm performance. study found a significant positive effect of proactiveness and risk-taking on profitability of micro enterprise that operate in the retail sector in Ghana. Rubera and Kirca (2012) also observed that firm innovativeness affects financial position from the profitability context.


The concept of entrepreneurial orientation has received much attention in empirical research in different disciplines and can be described along different dimensions such as newness or novelty and is also classified on the direction it focuses such as the product, market, process and/or business system. (Mukutu, 2017). Empirical research on the link between innovation and firm performance and development has shown evidence that innovation is a significant part for organization long-term survival.


RESEARCH METHODOLOGY

Research Design

The study employed survey research design. The survey research design was cross-sectional in nature and the adoption of this design was influenced by the research problem and its corresponding research question. The choice of survey research design was further considered appropriate because according to Zikmund, Babin, Carr and Griffin, (2012), it attempts to understand a particular population at a particular time and to ensure that the amount of uncertainty characterizing decision situation is clearly defined. Population of the study 270 staff of airtel network Limited. The sample size was 162 was drawn. The research instrument used for data collection was a self-developed questionnaire which covers the entire variables. Collection of data was done by using primary source of data through administration of structured questionnaire. Quantitative data collected through the copies of the questionnaire were analyzed using descriptive and inferential statistics. Statistical Package for Social Sciences SPSS 21.0 was used to analyze. The ethical aspect any research work was adhered to in order to prevent manipulation, falsification, and undue stress to the respondents.


RESULTS AND DISCUSSION

Objective (i). Examine the effects of Proactiveness on profitability of Airtel Networks LTD


Table 4.1 Effect of proactiveness on profitability of Airtel network

Model Summary

Model

R

R Square

Adjusted R Square

Std. Error of the Estimate

1

.009a

.000

.006

1.5547

a. Predictors: (Constant), Proactiveness


The model summary above shows that proactiveness accounted for only 0.6% toward variations in profitability (adjusted R2=.006). The remaining 99.4% is the contribution of other factors not included in this study. This implies that, other factors related to proactiveness as well, are important in determining the profitability in Airtel networks.


Table 4.2 Coefficient of standardized value

Coefficientsa

Model

Unstandardized Coefficients

Standardized Coefficients

t

Sig.

B

Std. Error

Beta

1

(Constant)

5.068

.396


12.807

.000

Proactiveness

.010

.095

.009

.109

.913

a. Dependent Variable: Profitability


The results further indicate that the coefficient of standardized value (βeta=.009) of proactiveness is significantly affected profitability at constant (5.068, t=12.807, sig.=.000). The magnitudes of the respective βeta suggested that, a one-unit increase/ improvement of proactiveness yields a .009 increase in profitability of Airtel networks (t=.109, sig.=.913).


Objective (ii). Determine the effects of innovation on profitability of Airtel Networks LTD


Table 4.3 Effect of innovation on profitability of Airtel telecommunication

Model Summary

Model

R

R Square

Adjusted R Square

Std. Error of the Estimate

1

.056a

.003

.003

1.5523

a. Predictors: (Constant), Innovation


The model summary above shows that innovation accounted for only 0.3% toward variations in profitability (adjusted R2=.003). The remaining 99.7% is the contribution of other factors not included in this study. This implies that, other factors related as well, are important in determining the profitability in Airtel communication.


Table 4.1.4 coefficient of standardized value

Coefficientsa

Model

Unstandardized Coefficients

Standardized Coefficients

T

Sig.

B

Std. Error

Beta

1

(Constant)

5.372

.386


13.918

.000

Innovation

.053

.074

.056

.718

.001

a. Dependent Variable: Profitability


The results further indicate that the coefficient of standardized value (βeta=.056) of innovation is significantly affected profitability at constant (B=5.372, t =13.918, sig.= 0.00). The magnitudes of the respective βeta suggested that, a one-unit increase/ improvement in innovation yields a .056 increase in profitability of Airtel communication (t=.718, sig.= .001).

Objective (iii). Evaluate the effect of risk taking on the profitability of Airtel Networks LTD


Table 4.1.5 Effect of risk taking on profitability of Airtel telecommunication

Model Summary

Model

R

R Square

Adjusted R Square

Std. Error of the Estimate

1

.066a

.004

.002

1.5514

a. Predictors: (Constant), Risk taking


The model summary above shows that risk taking accounted for only 0.2% toward variations in profitability (adjusted R2=.002). The remaining 99.8% is the contribution of other factors not included in this study. This implies that, other factors related as well, are important in determining the profitability in Airtel communication.


Table 4.1.6 Coefficient of standardized value

Coefficientsa

Model

Unstandardized Coefficients

Standardized Coefficients

T

Sig.

B

Std. Error

Beta

1

(Constant)

5.458

.429


12.730

.000

Risk taking

.057

.067

.066

.847

.000

a. Dependent Variable: Profitability


The results further indicate that the coefficient of standardized value (βeta=.066) of risk taking is significantly affected profitability at constant (B= 5.458, t =12.730, sig.= 0.00). The magnitudes of the respective βeta suggested that, a one-unit increase/ improvement of risk taking yields a .066 increase in profitability of Airtel communication (t=.847, sig.=.000).


Major Findings


Table 4.7 Effect of entrepreneurship orientation on profitability of telecommunication Business

Model Summary

Model

R

R Square

Adjusted R Square

Std. Error of the Estimate

1

.087a

.008

.011

1.5585

a. Predictors: (Constant), Risk taking, Proactiveness, Innovation


The results from the table reveal that the three elements of entrepreneurship orientation taken together significantly affected profitability of telecommunication business (t=9.781, sig.=.000). however, the results indicate that the three elements of entrepreneurship orientation taken together accounted only 0.11% toward variations in profitability of telecommunication business (Adjusted R2 =.011). this means that the remaining 99.9% is a contribution of other factors not included in this study. This signifies that, the factors related to entrepreneurship orientation are important in determining the profitability of telecommunication business, whereas many other factors as well are important.


Table 4.8 Coefficients

Coefficientsa

Model

Unstandardized Coefficients

Standardized Coefficients

t

Sig.

B

Std. Error

Beta

1

(Constant)

5.501

.562


9.781

.000

Proactiveness

.050

.104

.041

.481

.001

Innovation

.055

.082

.059

.677

.000

Risk taking

.051

.069

.060

.740

.000

a. Dependent Variable: Profitability


The results further explain that the risk taking (β =.060 sig. = .000) followed by innovation (β =.059, sig. =.000) are stronger determinants of profitability as compared to proactiveness is having (β =.041, sig. =.001), based on the respective magnitudes of the betas. The beta of .060 suggested that, a one units increase/improvement in risk taking is likely to bring a 0.060 increase in profitability of Airtel networks and this contribution is higher than 0.059 and 0.041 respectively in the case of improvement in innovation and proactiveness at constant unstandardized coefficients B =5.501 at 0.000 level of significant.


CONCLUSION AND RECOMMENDATIONS

Conclusion

Based on the findings of this study it is concluded that, lack of managerial skills in the areas of establishing goals, allocating resources, managing conflict, communication, measuring profitability, taking action and self-control is the main factor behind poor performance of SSBs in the areas of sales growth and profit as a result of lack managerial skills as asserted by Chuta, (2012) and Nnodim, (2012). This study shows that despite the different environmental complexity of entrepreneurs, they ball agreed to entrepreneurial skills influence on their business growth. Creativity thinking, communication and problem-solving skills were identified as the most useful skills for SMEs growth in both country contexts. The study concluded that there relationship between Entrepreneurial Orientation dimension-autonomy, risk-taking, and the skills such as managerial and marketing skills; and firm profitability in Baba Adama Airtel Office Jalin go with returns on assets and returns on sales as proxy.


Recommendation

Based on the findings, the following recommendations were made:

  • Government should intervene to provide training centers that give managerial training to the business owners. This should be done in such a way that the attendance period to be designed by the government representatives in collaboration with business owners’ union leaders and a valid and recognized certificate should accompany the training

  • The workers should be properly inform about marketing and everything it entails so that they can be making the most of it in their daily operations because marketing strategies are used to increase sales, launch new products and generally provide profit for a company. NGOs should in collaboration with small scale business owners union leaders organize workshops for the business men and women that will enhance their managerial capability

  • Entrepreneurs should be open and keen up entrepreneurial Orientation(EO) at higher level in order to bolster their performance, competitiveness, profitability and survival.

  • Entrepreneurs in Taraba State should avoid the use of excessive and uncalculated risk in their efforts to identify possible emerging opportunities and finding solutions for growing challenges in the economy.


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