The Impact Of Entrepreneurial Features In Pakistan

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The Impact Of Entrepreneurial Features In Pakistan

The Small and Medium Enterprises (SME) play a very significant part in the success & development of any economy. Agreeing to the SME policy 2007, “SME sector is the backbone of Pakistan’s Economy”. “Globally, this sector is the major growing force behind the fastest developing economy of China, in term of contribution to the national GDP, scale of assets, diversification of products and the creation of work. Likewise, the role of SME is well acknowledged in the other countries such as Japan & Korea, and all other industrialized economies in terms of economic growth” (Hand Book on Islamic SME Financing Islamic Banking Department, State Bank of Pakistan, 2009).

On that point are some hidden and apparent obstacles in the way of maturation of minor and medium enterprises in Pakistan as pointed out in the SME Policy development-2007; the poor national performance on the Human Development Index of the UN has its issues for SMEs in Pakistan. These include short and genetic education and insufficient, poorly focused and under-serving training infrastructure. SME's mostly draw their human resource (including the owners) from either the higher education institutions or the technical training infrastructure, both of which are not attuned to the SME needs nor are they equipped to direct them. This position determines the mental ability and capability of SME's to innovate, The SME sector neither possesses the financial strength nor the collective wisdom to climb its way out of this low equilibrium’ enterprise activity. In improver to these components, according to the Hand Book on Islamic SME Financing (2007), “political instability, legal philosophy and order situation, fiscal restraints, energy crisis, taxation problems, project matters, lack of coordination and regular data exchange mechanism among institutions are contributing adversely to all the efforts done for the SME’s development”. Shabbir Kashif president of the Rawalpindi Chamber of Commerce & Industry, (2009, Nov) pointed out the access of the new entrants in the business and as a big campaign of their failure, “People come to us & say we accept such amount of money and we are dying to endow in that occupation. But the period is that prior to Investment they don’t think about the future of that Business in next few years, what would be the market demand in future? Rather, they copy the current styles and current needs of the marketplace, which lead them to the failure”.

In these types of problems and uncertain situations, the entrepreneurs can do allot for the growth and success of the SME’s. According to Thompson, L (2004) “In today’s universe of change and uncertainty, we need the talent of entrepreneurs more than ever, we need them to take up new jobs, we ask them to champion the change agenda in establishing a corporation and the public sector”. Simpsin , M., Tuck, N. & Bellany, S (2004), “Entrepreneurs or owners-managers are individuals and possess their own unique features”.

The previous studies conducted on the Owner characteristics support that Owner characteristics are the important constituent for the success of a firm like Lumpkin & Dess (1996), Ferreira & Azevedo. (2007), Smith J.R, Okhomina & Mosley (2006).

Research Aims & Objectives

The aim of the research is to investigate empirically the influence of owner characteristics on the SME performance in Pakistan. Owner Characteristics that will be examined are related to personal hobbies that are viewed the most important characteristics Naldi, Lucia.’ Nordqvist, Mattias., Sjoberg, Karin., Wiklund, Johan, (2007), like Innovativeness, Risk Taking, Proactive ness.

Meaning of the subject

This work will contribute to the Knowledge base regarding the Owner Characteristics that contribute to the firms' performance, According to Bhutta, M., Rana, A. & Asad, U (2008) “A major defeat for most policy researchers in the SME area is the virtual non-existence of scientific information on this sector in the rural area (i.e. Pakistan)”.

Secondly, it will help entrepreneurs to realize their own military capabilities and potential, and key out those characteristics that contribute more to the achiever of a firm.

Thirdly, to the policy shapers in this sector to key out and refine the existing entrepreneurs and the people who designate to build new lines.

Problem Statement

The impact of entrepreneur’s characteristics on the firm’s performance: An empirical study conducted along the surgical equipment manufacturing units in vicinity of Sialkot, Pakistan.

Research Question

What is the impact of entrepreneurial characteristics like innovativeness, proactive-ness, risk taking, on the firm’s performance?

Literature review

As quoted by the Bhutan et al (2008), “Entrepreneurship is the human activity of being an entrepreneur which is a French word meaning one who takes on an enterprise. Entrepreneurs set up resources, including innovations, finance and business acumen in an attempt to translate innovations into economic goods. This may result in new organizations or may be part of revitalizing mature organizations in response to a perceived opportunity. The most obvious sort of entrepreneurship is that of beginning new businesses; even so, in recent years, the term has been expanded to include social and political patterns of entrepreneurial activity. When entrepreneurship is describing the actions inside a firm or large organization, it is referred to as intra-preneurship and may include corporate venturing, when large entities start spin-off organizations”.

Whereas according to Lumpkin, G. T. & Dess, G. G. (1996) the term Entrepreneurial orientation means “the organizational process, methods and styles that firms use to act entrepreneurially”.

Entrepreneur’s Characteristics and Firms Performance

Entrepreneurial characteristic is an independent variable in our study. Levelling out the importance of the owner’ characteristics regarding the firm's success and safe execution. Ferreira & Azevedo (2007, p. 15) commented that “the firms which grow more, are those which are entrepreneurial oriented that detect opportunities and get an advantage when looking for those chances. Nevertheless, not all firms search for opportunities, a possible explanation could the entrepreneur’s attitude, this is, the desire to grow or not”.

In the previous literature the ownership characteristics have been set differently by the researchers. According to Lumpkin & Dess (1996) “Efforts have helped to sharpen out the several dimensions of the entrepreneurial process; they have not gone to any widely held consensus regarding how to characterize entrepreneurship. This lack of consensus has impeded progress for researchers towards building and examining a wider theory of entrepreneurship and has made it especially, difficult for them to look into the relationship of entrepreneurship to perform”.

As shown by the previous literature, the researchers have identified different ownership characteristics that determine the success and operation of an establishment. These characteristics are autonomous, innovativeness, risk taking, proactiveness, (Ferreira & Azevedo, 2007 & Keh, H.., Nguyen, T. & Ng, H 2007), competitiveness, aggressiveness, (Hughes et al. 2007& Lumpkin & Dess, 1996).

Smith, Okhomina & Mosly (2006) took psychological traits, e.g. need for achievement, internal locus of control, tolerance for ambiguity and risk taking propensity, and social components such as training, a supportive environment the researchers i.e. Smith, J. R. & Mosley, Alisa L (2006) also indicated that personality traits viewed alone are inappropriate to explain the phenomenon of entrepreneurship.

According to Bhutan et al (2008) “ There is a dearth of knowledge in Pakistan of this sector (S.M.E)” further more he studied the owner characteristics/ orientation like education, media-related habits, use of information technology, number of investor and generation in the business (and found a positive relation) with the health of the firm.

In a study of O’Regan, Sims & Ghobadian (2005) demonstrated the relationship between ownership, decision making and employee deployment and the operation of the house. Their findings showed that the ownership profile is a key constituent in the success of any SME. As cited by Ferreira & Azevedo (2007) “Covin & Slevin (1991) supported Miller point of view by referring that organizations and not only individuals, can have entrepreneurial. They also use defend, use of risk taking innovativeness and proactiveness, as the relevant dimensions of the entrepreneurship. Nevertheless refer to this as a type of behavior labeled as entrepreneur posture. Also cited, Miller (1983), the concept of Entrepreneur orientation was seen as a combination of three dimensions.

Innovativeness: is concerned with suffering and promoting new ideas, experimentation and creativity likely to result in new products, services or processes (Miller and Friesen, 1982 and Yusuf, A. 2002).

Risk Taking: Measuring the extent to which individuals differ in their willingness to take risk is contentious (Lumpkin and Dess, 1996).

Proactive ness: is concerned with first mover and other actions aimed at seeking to secure and protect market share and with the forward looking perspective reflected in action taken anticipation of future demand (Lumpkin and Dess, 1996, Ferreira et al, 2007).

In this paper the focus of the work is on the owners' characteristics like innovativeness, risk taking behavior and proactiveness (Naldi, et al. , 2007), an important role as firms which grow better, have the propensity to develop an EO supported by proactiveness, innovativeness and risk contracting.(Ferreira and Azevedo, 2007, p. 15) (Yusuf A., 2002).