THE IMPACTS OF ICT ON THE GROWTH AND DEVELOPMENT OF SMALL AND MEDIUM SCALE ENTERPRISE IN NIGERIA

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Price: 2000 Naira (BSC, MSC)

ABSTRACT

The title of this project is to examining the impacts of ICT on the growth and development of small and medium scale enterprise in Nigeria. The main objective of this study is to examine the impacts of ICT on the growth and development of small businesses in Osun State. However, the specific objectives are toevaluate the relationship that exists between information technology and the profitability of SMEs, examine the major constraints of information technology adoption by SMEs and assess the influence of ICT adoption on SME performance in Osun State.The following are the questions which this research give answer to: what is the relationship that exists between information technology and the profitability of SMEs, what are the major constraints of information technology adoption by SMEs,what are the impacts of information technology system on the growth of SMEs and what is the influence of ICT adoption on SME performance in Osun State. Yaro Yamane’s formula is used to calculate the sample size, the sample size to be used in this study is 150 SMEs which is gotten from the entire population of 240SMEs. Chi – square was used as the statistical tools used for testing more than two population using data base on two independent random samples. This test is based strictly on the primary data gotten from the use of questionnaire. The decision ruled is to reject Null Hypothesis if calculated value of (X2) is greater than the critical value and accept Null Hypothesis if calculated value of (X2) is less than the critical value.

CHAPTER ONE

INTRODUCTION

The ICT concept is an innovative development adapted as a result to world dynamics of which hastransformed the modes of performing stuffs ranging from government services, trade, commerce, agriculture, and manufacturing (Olusola & Oluwaseun, 2013). Today the adoption and use of InformationCommunicationTechnologyby theSmall and Medium Enterprises has rapidly change waytransaction and operations are conducted especially for the developed nations. In the global perspective theSMEs have empowered nations in both economic development and growth. Alam& Noor (2009) agreed thatInformation communication technology application currently has greatly impacted enterprises worldwideamong many businesses which have extensively change global yield, business procedures among customersand enterprises.

The contribution of Small and Medium Scale Enterprises (SMEs) has been recognized as main sustenance of the economy because of its capacity in enhancing the economy output and human welfare in a country.(Akinguola, 2006) SMEs’ role in the overall economy cannot be over-emphasized, because of its contribution to creating more jobs and development of the social-economy for the local community (Barba-Sanchez, 2007).

For Nigerian SMEs to become more advanced, it is imperative they leverageICT-based systems to facilitate global communications with their suppliers, customersand distributors. According to Teo and Tan (1998), the role of ICT in enabling businesstransformation is crucial as organizations are able to streamline and coordinate themmassive flow of information by redesigning or reengineering their business processes in order to improve productivity and enhance competitiveness. Dyerson R., Harindranath, G. and Barnes, (2009), statethat the adoption and use of ICT is widely seen as critical for the competitiveness of allSMEs in the emerging global market.

Technology is a realbusiness enabler and if competent levels of ICT maturity have been reached, successful delivery of the company strategies will be enabled. To continue to be competitive and ensure future growth, ICT infrastructure has to interface with the needs of the business and have the flexibility to adopt to changing markets (George Gathogo and Dr. Mary Ragui, (2001). Rogerson cited in George Gathogo and Dr. Mary Ragui, (2001) strongly advocate that they need access to appropriate technology if they are to have acompetitive advantage otherwise their inability to secure technology especially at start-up level impactnegatively on the entrepreneurship development process in today’s world of globalization. Tlhomola (2002) argues that the challenges in the political climate, some countries had out of necessity to steal ideas from the competitors in order to upgrade their technology to enable them meet the challenges of the changingenvironment. Successful entrepreneurs had to be technology oriented and willing to adapt to a changingenvironment, whereby innovation is a key to survival.

1.1   Statement of the Problem

The background of study highlighted a number of benefits derivable from Information and Communication Technology which affirms that Information and Communication Technology is germane to the growth and development of a business in any economy. Despite the number of identified benefits from the use of Information and Communication Technology to improve SMEs performance, a number of literature still report that the adoption level is relatively low in Africa when compared to developed countries. Ghobakhloo, Hong, Sabouri and Zulkifli, 2012 also reported that prior IT literature has shown that only a small number of studies focused on the adoption and use of IT in SMEs. Moreover, it has been found that in spite of the exponential growth of IT within SMEs, the rate of IT adoption by these businesses has remained relatively low, and large organizations have noticeably profited more than SMEs in both IT-enabled improved sale and costs savings. Previous researches in the western context have however revealed that many factors have contributed to a low or high level of Information and Communication Technology adoption for improved performance of SMEs. According to Ghobakhloo, M., Benitez-Amado, J. and Arias-Aranda, (2011), in looking for reasons for such differences in IT adoption in SMEs, unique characteristics of these businesses can be highlighted. SMEs generally have limited access to market information and suffer from globalization constraint (Madrid-Guijarro, Garcia, and Auken,2009). In addition, management techniques such as financial analysis, forecasting and project management are rarely used by SMEs (Dibrell, Davis, and Craig,2008). A tendency to employ generalists rather than specialists, reliance on short-term planning, informal and dynamic strategies and decision-making process, plus an unwillingness to develop and the use of standard operating procedures are other pdistinctive characteristics of SMEs (Thong, Yap and Raman, 1996). However, it is the restricted resources controlled by SMEs, commonly referred to as resource poverty (Thong,Yap, Raman,1997; Welsh and White, 1981) that is the major differentiator between SMEs and large organizations. Compared with large organizations, SMEs are relatively weaker at various levels (i.e., organizational, managerial, technological, individual and environmental). Therefore, IT adoption and usage in SMEs is at a disadvantage (Al-Qirim, 2007; MacGregor and Vrazalic, 2012).

Considering the low level of ICT adoption (Kuteyi,2009; Apulu and Lathman,2009) in Sub-Saharan Africa and Nigeria in particular and also environmental, socio-economic and demographic differences that exist in the composition of SMEs across regions. It is therefore imperative to investigate the impact of ICT on the growth and development of small and medium scale enterprise so as to gain an insight into the various factors that influence the adoption of Information and Communication Technology for improved performance of SMEs particularly in Osun State, Nigeria. This is because if factors influencing the adoption of Information and Communication Technology are identified it will help in formulating policies that will help in addressing the challenges they may present in the region – South west Nigeria. This important linkage is found missing in the literature, thus, this study fills the gap.

1.2   Research Objectives

The main objective of this study is to examine the impacts of ICT on the growth and development of small businesses in Osun State. However, the specific objectives are to:

(i) evaluate the relationship that exists between information technology and the profitability of SMEs in Osun State.

(ii) examine the major constraints of information technology adoption by SMEs in Osun State.

(iii) assess the influence of ICT adoption on SME performance in Osun State.

1.3   Research Questions

The following are the questions which this study intends to answer:

i)What is the relationship that exists between information technology and the profitability of SMEs in Osun State?

ii)What are the major constraints of information technology adoption by SMEs in Osun State?

iii) What are the impacts of information technology system on the growth of SMEs in Osun State?

iv) What is the influence of ICT adoption on SME performance in Osun State?

1.4 Significance of the Study

The empirical findings and the analysis of this study will have strong ramification for the growth and development of SMEs in Osun State as it will provide the bases for development policy in the SMEs sector. This is because when factor that militate against the adoption of ICT are indentified it will help in formulating polices to address the challenges they may present. The diverse needs of students, academics, policy makers will be met. For students, this work will pool together and provide them with disparate strands of thought and authoritative educational material for further research projects. For academics, it will contribute to SMEs development debate, and provide further scholarly information. For policy makers and development officials, the work will argument the data base and scholarly directions for effective ICT adoption for SMEs performances development policy and action.

1.5   Scope of the Study

Due to financial constraints and mostly academic workload, this research will not be able to cover the entirety of SMEs in Nigeria. Hence, this study deals with SMEs operating in Osun State as case study.

1.6   Definition of Terms

The following terms were used in the course of this study:

Small and Medium Scale Enterprises (SMEs): The Central Bank of Nigeria defined Small and Medium Scale Enterprises in according to asset base and in number of staff employed. The criteria are an asset base of ₦5Million and ₦500Million and a staff strength base of 20 to 300 employees.

Business Growth: This is the process of improving some measure of an enterprise’s success. Business growth can be achieved either by boosting the top line or revenue of the business with greater product sales or service income, or by increasing the bottom line or profitability of the operation by minimizing costs.

Information and Communications Technology (ICT): This is an umbrella term that includes any communication device or application, encompassing radio, television, phones, and computer hardware and software satellite systems and so on, as well as the various services and applications associated with them, such as videoconferencing and distance learning. ICTs are often spoken in a particular context such as ICTs in SMEs, ICTs in Health care or libraries and so on.

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