CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Attempts by developed and developing countries to eradicate poverty and unemployment initially focused on the development of large enterprises, based on the traditional economy of scale. This theory is predicted on the assumption that, “big” is “better” while “small is bad”(Lawal, Ajonbadi and Otokiti, 2014). Small enterprises were seen as outdated and synonymous with technological and economic backwardness. Ironically, almost all the businesses that were initially small eventually became large business enterprises (Sundar and Kumar, 2012).
Most of the Multinational Corporations like Phillips International of Netherland, Sony of Japan, among others started as family business ventures. In Nigeria, there are indigenous enterprises such as Adebowale Electricals, Doyin Groups of Companies, Dangote Groups, Eleganza Nigeria Limited, and JOAS Electrical Industry Limited that started as small outfits that later established big plants. These are evidently pointers to the pivotal roles of SMEs in developed and developing countries, which is a paradigm shift on the perceived role of SMEs in industrial and economic development of the Nigerian economy (Johari, 2012).
In acknowledgment of the role played by the SMEs’ sector, the past few decades have witnessed renewed interest in the development of small and medium enterprises (SMEs) in many countries. Various studies have acknowledged the importance of SMEs in economic growth (Hu, 2010; Afolabi, 2013, Oyeniran, David and Ajayi, 2015), referring to them as “the engine of growth” and as “catalysts for [the] socioeconomic transformation of any country” (Leegwater & Shaw, 2008). SMEs represent a means to attain key macroeconomic objectives such as employment generation, increased growth, and poverty reduction at low investment cost while developing a country’s entrepreneurial capabilities and indigenous technology (Adebiyi, 2004). They also improve regional and sectoral economic balance by enabling industrial dispersal across sectors and locations, and generally promote effective resource utilization, which is critical to engineering economic development and growth (Kongolo, 2010).
Ofoegbu, Akanbi and Joseph (2013) agree that SMEs are the panacea for the economic development of many developing countries including Nigeria. They believe that interest on SMEs would contribute to creation of jobs, reduction in income disparity, production of goods and services in the economy, as well as providing a fertile ground for skill development and acquisition, serve as a mechanism for backward integration and a vehicle for technological innovation and development especially in modifying and perfecting emerging technological breakthroughs.
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