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THE INFLUENCE OF ENTREPRENEURIAL SKILLS IN THE MANAGEMENT OF COMMERCIAL BANKS

Business Administration & Management Project Topics

CHAPTER ONE

  • INTRODUCTION

  1.1     BACKGROUND OF THE STUDY

Interestingly, in the middle of the last century, economists predicted the dominance of large firms. Size was needed to obtain economies of scale, to exploit foreign markets and to keep abreast with regulations and new opportunities in technology. Indeed, in the 1960s and 1970s, large companies dominated the economy. Since then, the trend has started to reverse (Audretsch et al, 2002).Today, there is growing evidence of a significant causal relationship between entrepreneurship, economic growth and poverty reduction. Small, micro and medium-sized enterprises (SMMEs) are often the backbone of the private sector in the developing world, creating jobs and providing a tax base for local government. SMMEs offer the only employment available to millions of poor people, yet many developing countries have been unable to create and maintain the favourable environment needed to foster SMMEs development (Bridges.org, 2002).

Entrepreneurship may be defined as the visualization and realisation of new ideas by insightful individuals, who are able to use information and mobilize resources to implement their visions. This view does not require entrepreneurs to be highly skilled in generating new ideas, but instead emphasizes promotion and implementation of radical change. Although entrepreneurs who excel in this endeavour often are highly creative, they just as often base their entrepreneurship on the ideas of others. At the same time, entrepreneurs with original ideas of their own are usually highly motivated to succeed, but whether they do so depends on the their ability to market their ideas , as well as their sensitivity and openness to other people’s viewpoints. Although some successful entrepreneurs are also creative inventors, this need not be and often is not the case. Many inventors, on the other hand, lack the entrepreneurial skills necessary to evaluate and promote their ideas. The entrepreneur is a visionary activist who excels in the creation of opportunities and the active handling of risks and uncertainties. He or she initially increase business risks by searching for new opportunities and experimenting to see if they are worthwhile. Simultaneously, and later on, entrepreneurs are strongly engaged in reducing risks, by actively changing prevailing conditions and also changing the rules of the game. The timing and balancing of risk creation and risk reduction is the hallmark of a successful entrepreneur (Nystrom, 1995, pp.67-68).This indicates that entrepreneurship is multi-dimensional and can occur in different contexts, economic or other, and in all type of organization. However, this paper focuses on entrepreneurship within a business context Why is entrepreneurship important for development? The number of poor people on the planet is increasing exponentially and digital divide statistics show that technology is exacerbating the problem of inequity, not helping to alleviate it. There are now 1.2 billion people living in abject poverty out of the six billion on the planet. More people have lifted themselves out of poverty in the past 50 years than in the previous 500 years; but because the world population has grown so significantly, there are more poor people than ever before. Political upheavals and natural disasters wreck havoc, but for those living close to the edge, so do smaller tragedies such as an extended illness, death, or one season with too little rain. Having a large percentage of the population thus exposed exacerbates the cycle of poverty and leaves national economies facing disaster, where a stable tax base is difficult to achieve and needed infrastructure difficult to build or maintain. Poverty and insecurity can lead to extremism, which threatens the safety and stability of everyone in every corner of the globe. Fostering the development of SMMEs to help people employ themselves and others may offer the best hope for breaking the poverty cycle in many developing countries and disadvantaged communities. The importance of entrepreneurship should not be underestimated, and the needs of this crucial sector must be understood to frame an effective and sustainable approach to modern development aid.
Moreover, the  challenges of the future will demand both a substantial increase in the volume of management development and increased focus on  entrepreneurial skills (Winterton, 2001). The considerable increase over the medium size firms in the recent time has important implications for the nature of the skills required by the growing number of SMEs owner/managers as well as the managers in large enterprises who increasingly are interacting with SMEs. Johnson and Winterton (1999) point out that the range of skills and competences required to run an SME are qualitatively as well as quantitatively different from those needed in a larger organization.

As Storey (1994) notes, the medium firm is not merely a scaled down version of a larger firm, managers of medium size firm have specific training needs especially in globalize and commercialized SMES. This thought has proofed or demonstrated that the incidence of formal training and especially of external training increases with firm size and that there has been very little increase in small firm training. Evidence that the poor performance of global SMES is caused by inadequate management skills is limited, but suggests that developing entrepreneurial skills among medium size firm managers contributes to profitability and growth. Thus, in the midst of this pursuit for better entrepreneurial and management skills in medium size firms, the organization set-out mission, opportunities and strategic management procedure to realize their objectives.

In the technology lead firm, for example there are four key factors that can dictate success for new ventures; talent technology, capital and know-how (Smilor, 1999). Developing these aspects may depend more on genetics, traits, skills than anything else, and understanding that patterning of behaviour for any individual may describe how they seek opportunity. One current view of how medium size firm find and evaluate opportunity is defined by “scanning” which describes certain behaviours when evaluating a given opportunity. Source scanning is one way in which relevant information is gained about events occurring inside or outside a company’s future course of action. In any propelling opportunity there are ways to extract talent from firm social network or to develop firm with a certain amount of know-how.

Smilor (1999), views those ways to include, sources  of capital (convincing  others  to  give or  deposit money), know-how from others (the ability to leverage knowledge in an  expanding enterprise), and talent or skills (recognizing market  opportunities and organizing  to take advantage  of  them)  may  all  trickledown from sources within a given social network. These three factors rely heavily on social skills, which can help develop a firm’s social  capital  ( the actual  and potential resources individual’s obtain from knowing others,  being part of their network  or  just from having a  good reputation), (Baron and  Markman, 2000). Together, social competence which is their ability to interact effectively with others as based on discrete social skills. Also, social skills needed to develop these networks and an entrepreneur’ social competence should never be neglected, whether they are inherent or   learned.

Baron and Markman (2000), explore that adaptability  to rapidly changing  situations  and  perception  of others moods, motives, and intentions has shown to  be predictor  of success. Developing these skills and utilizing them can lead to better communication and financial success, and it will ultimately enhance firm social capital, which can be a large competitive advantage. The encapsulating view of social competence pulls these concepts together because it printout that  although firm network may help  them gain access, their social skills  will  enable them to  take the opportunity  further(Baron and Marksonb,2003). Developing  social  skills such as perception, impression management, persuasiveness,  social adaptability, expensiveness,  and emotional intelligence could yield  large dividends  in  the capital market place. (Baron  and Markman,2003).

In the end, social  competence or  skills helps to  expand networks, build  business relationships and  alliances  and  provide competitive advantages  through privileged information (Baron and Markman, 2003).  Encouraging  firm’s to development entrepreneurial skills will enhance their  networks  and build social capital  which is  vital to the evolution of  the  entrepreneurial process.

According to Goleman (1995),reiterating  the reason why many different social skills appear  to  exist suggests that the  following are highly important a) social perception (accuracy in  perceiving others, including their traits,  motives,  and intentions  b) impression management (techniques  for inducing  them to form favourable impressions, c) persuasion and influence (techniques for changing others attitudes  or behaviour undesired directions. D) emotional  intelligence (ability to regulate one’s own emotions and to influence others emotional reactions e) long-term relationships (skills  that assist individual  in  establishing effective long-term relationships, such as providing positive and negative feedback  to  and proficiency in  managing  interpersonal  conflicts.

(See: also http://www.babson.edu)

Generally,  individuals with well-developed social skills grossly attain more favourable  outcomes than  other  persons who  are equally competent with respect  to  technical knowledge/skills, experience and training, but who fall short with respect to various social  skills.

Arguably, the performance indicator and  collective efficacy defined as  entrepreneurial team members  beliefs that their group has the abilities necessary to performance successfully, is equally  offered   as  a new  lens through which to  view  entrepreneurial team  performance. Many authorities has suggested  that there is a positive relationship between collective efficacy and group performance, and that collective efficacy  may be composed  of the  independent  conducts. Collective task efficacy and collective  interpersonal  efficacy. Collective  task  efficacy  is defined as  members beliefs that their  group  has the task related (or technical) competencies/skills  to perform  successfully while collective interpersonal  efficacy is defined as members beliefs that their  group has the interpersonal  competencies/skills to perform successfully (ie resolve conflicts, solve problems in a collaborative   manner, communicate effectively, set goals, co-ordinate task and span boundaries)

Conclusively, the effect of entrepreneurial skills on management of medium size firm will holistically look at firm as an entrepreneur (entrepreneurship) and focus on entrepreneurial skill as heterogeneous element to effectualised organizational growth and increase performance.

1:2  STATEMENT OF THE PROBLEM

 

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