Entrepreneurial Competencies and Success of Small and Medium Enterprises (SMEs): Evidence from Ethiopia

Abstract

Small business success has been a central phenomenon in business studies across time and remains to be the major concern across nations because SMEs play a vital role in economic development. However, it has been frequently quoted that the failure rate for smaller businesses is high due to the influences of a variety of internal and external factors. Past research for the most part has focused on the role of external factors in affecting small business success. Yet such focus on external factors though important to enhance our understanding of the entrepreneurship phenomenon, it overlooks the role played by the entrepreneur’s competencies and behaviors. The purpose of this study hence is to examine the effect of personal entrepreneurial competencies (goal setting, systematic planning and monitoring, commitment, and persistence) on business performance on a sample of 462 small and medium enterprises (SMEs) in Amhara Regional State, Ethiopia. In addition to individual main effects, the combined effect of entrepreneurial competencies on business success is examined. The structural equation modeling was used to test the proposed SMEs performance model. The findings of the present study well suggest that the personal entrepreneurial competencies exhibited by the SMEs owners were the determining factors for the performance of SMEs. In addition to main effects, the interaction effects of competencies on business performance were more strongly evident when the business owners exhibit a considerable level of persistence and commitment competencies. Business owner-managers with motivational goals, plans and hard work (persistence and commitment) are able to look for opportunities, assess and exploit them to generate acceptable business outcomes. These resources are important to facilitate small business success particularly when the business owners possess a considerable level of these resources and integrate them for the pursuit of business success. Success in business results from a combination of inspiration and hard work. These core competencies are key characteristics of successful business people which enable them to convert an entrepreneurial vision into successful products or services that are required to meet or surpass market needs. Managerial and policy implications are also provided.

Keywords:Entrepreneurial behavior; entrepreneurial competencies; goal setting; systematic planning; commitment; persistence

DOI: 10.7176/EJBM/11-19-02

Publication date:July 31^st 2019