The Influence of Leadership Style on Innovation on SMEs

The Influence of Leadership Style on Innovation on SMEs

Chapter One

OBJECTIVES OF THE STUDY

The main objective of this study is to examine the influence of leadership style on organization performance. The subsidiary objectives include the following:

To find out the relationship between leadership styles and organizational performance.
To assess the effect of the response of leadership style to high-performance variables in promoting maximization of the organization’s objectives.
To find out the effect of subordinates’ perceptions of their managers’ leadership style on their relationship with management.
To examine the extent to which the size of an organization influences managers’ leadership style.

CHAPTER TWO

REVIEW OF RELATED LITERATURE

Introduction

This section of the research looked at all of the accessible and related literature. From both a theoretical and empirical standpoint, it attempted to gain insight into leadership style and its impact on staff performance. The conceptual framework was depicted in the end.

The Concept of Entrepreneurship

Shane (2013) defines entrepreneurship as the act of being an entrepreneur. The word entrepreneur which is a French word means “one who undertakes innovations, finance and business acumen in an effort to transform innovations in economic goods”. He continued that the result of entrepreneurship may be a new organization or a part of revitalizing mature organization in response to a perceived opportunity. The most obvious form of entrepreneurship to him is that of starting a new business. However, in recent years the term has been extended to cover such areas as socio-cultural, political, and educational forms of entrepreneurial activity. As a result when large companies venture into entrepreneurial activities within the organization, it is described as “intrapreneurship” or “corporate spin-off.

In today’s world, anybody, industry or business leader with innovative and creative business abilities is described as an entrepreneur or someone who engages in entrepreneurship (Okala, 2008). While the entrepreneur is the person venturing into the business of organizing and managing, entrepreneurship is the service rendered by the entrepreneur (Akanwa & Agu, 2005). These definitions view the entrepreneur as the person who perceives a business opportunity and takes advantage of the scarce resources to meet with unlimited opportunities profitably. To this end, the entrepreneur is one who bears non insurable risks and this directs the human and material resources to achieve economic, social, and financial goals of the enterprise. Adam Smith and Robert Cantillon in the late 17and 18centuries respectively, observed that the entrepreneur is an actor in macroeconomics but the study of entrepreneurship was ignored theoretically until 19^thand 20^th centuries, and empirically until a profound resurgence in business and economy in the last 50 years. The understanding of entrepreneurship was not clear until the 20 century. This giant leap is credited to the works of economist Joseph Schumpeter in the 1930sof economist Joseph Schumpeter in the 1930s and other Austrian economist such as Carl Menger, Ludwig Von Mises and Friedrich Von Hayek. Most credit definitely goes to Schumpeter who described the entrepreneur as a person who is willing and able to convert new ideas or invention into a successful innovation (Schumpeter, 1942 cited by Okala, 2008). Unlike most authors who described the entrepreneur as someone who bears risk, Schumpeter disagrees. The capitalist bears the risk. Drucker (1970) cited by Okala, 2008), agreeing with Knight (1921) cited by Akanwa & Agu, 2005) described entrepreneurship as being all about taking risks. He opined that the entrepreneur reflects a kind of person willing to put his or her career and financial security on the line and take risks in the name of an idea, spending much time as well as capital (wealth created in other to create further wealth) on an uncertain venture. Knight classified three types of uncertainty:

Risk: Measurable statistically

Ambiguity: Hard to measure statistically

True uncertainty: Impossible to estimate or predict statistically

Some authors see entrepreneurship as a service rendered by anyone who starts a new business. For instance, Akanwa and Agu (2005) saw anyone who creates a business, establishes it and nurse it to growth and profitability, or takes over an existing business because the founder is dead or has sold it, or who inherited it and continues to build and innovate it, or a man who runs a franchise, qualifies as an entrepreneur. This definition exposes two main view-points.

Firstly, entrepreneurship can be entered into through:

Self- establishment,
Taking over already existing business
Inherited business venture
Anyone can become an entrepreneur through any of these means.

Secondly any person who has the zeal and ability to discover and evaluate opportunities, generate resources and takes steps towards taking advantage of such opportunities can become an entrepreneur. As a result, Akanwa and Agu (2005) identified the functions of entrepreneurship in social and economic development of nation to include the following:

Identification of business opportunities,
Selection of opportunities, Decision on form of enterprise,
Allocation and distribution of resources,
Coordination of other factors of production such as land, labour, and capital,
Planning and controlling organizational programmes and activities,
Mobilization and utilization of local raw materials,
Risk bearing, Creating of employment opportunities,
Marketing activities for customer satisfaction, and
Innovation to meet with needs of local market.

CHAPTER THREE

RESEARCH METHODOLOGY

Introduction

The discussion of research methodology is an important part within the research work , because it has great influences on the overall research activities and thus to make good piece of research work with valid conclusion and recommendation in accordance with research aims, objectives and research questions.

Kothari (2004) describes that depending on the type of research, the research methodology helps the researcher to identify and explore key tools and techniques for the purpose of collecting different data and information. Thus, whatever the research type, there should be appropriate discussion about the research methodology to complete the research work and thus to make standard research report through collecting and gathering primary, secondary and/or tertiary data and information from various sources.

Thus, it can be said that research methodology is vital to set out appropriate ways and guidance by which the research will be complete in a most effective and efficient way. This chapter discussed and explained some major issues and concepts within the research methodology. These include- research philosophy, research approach, data collection methods, alternative research methods, data analysis tools and techniques, consideration of ethical issues in research methods, advantages of used research methods, limitations associated with used research methods , and overall reflection on the research methodology etc. Thus, the researcher would like to mention that this chapter has covered all of the relevant issues and concepts within the research methodology in relation to this research project- an investigation and analysis of the research topic.

Research Philosophy

The consideration of research philosophy is important and vital part within the research project in relation to make good piece of research report (Saunders et al. 2009). This research project is based on the cause-effect relationships, so the researcher believes that positivism research philosophy was most appropriate and relevant in relation to this research project. The reasons were as follows-

To identify the real scenarios from the case studied organization as either qualitative or quantitative or both; and
To enable and assist to evaluate different methodologies and methods and to avoid inappropriate use and unnecessary work by identifying the limitations of the particular approaches at an early stage.

CHAPTER FOUR

DATA ANALYSIS AND RESULT PRESENTATION

Respondents’ Socio- Demographic Characteristics

The following tables 4.2.1 shows the Socio-Demographic Characteristics of the respondents and these include Sex, Age, Marital Status, Occupation, Other Jobs, and Years in Occupation/Business. A major advantage of having these characteristics is that they help to differentiate the respondents and also help to explain certain differentiations that may account for similarities or differences in response to substantive issues of the research work.

CHAPTER FIVE

SUMMARY OF FINDINDS, CONCLUSION AND RECOMMENDATIONS

Introduction

This chapter presents the summary of the findings presented in chapter four according to the study objective. The objective of the study was to access the effect of entrepreneurship characteristics on business performance of small and medium enterprises in Nigeria, using selected SMEs in Lagos metropolis as a case study

Summary of Findings

The study explains the relationship between the different with entrepreneurial qualities. There is perfect positive relationship between transformational leadership with managing performance, it is observed that managing performances, managing culture are correlated with Transactional leadership style; all the entrepreneurial managerial behaviours are related with transformational leadership style; whereas from the table 5 exhibits Autocratic leadership styles is not correlated with entrepreneurial managerial behaviour qualities in MSMEs. In democratic leadership styles is correlated with managing vision, and also managing process, managing development, managing culture are highly correlated with this style, similarly managing culture, and managing performance are highly correlated with delegative style , managing process and managing vision are correlated with this style. Hence there is a synergic effect of transformational leadership style and entrepreneurial Managerial behaviour.

The major findings of the study includes the following:

Based on the responses and remarks from the respondents, it can be determined that leadership behaviours described by them are similar to what is described in the literature as transformational and transactional leadership (Bass, 1990). Statement such as, “I try to be a very good coach to them and try to reward them accordingly”

Almost all respondents agreed that by having the right kind of leadership behaviours especially towards their employees translated into better organisational performance. Since they are categorised as small and medium enterprises, they acknowledged the importance of a leader to demonstrate a strong vision and be able to provide supervision, guidance and direction to their employees.

They also thought that by having the opportunity to work directly with the leader of the organisation provided a better opportunity for success. They stated that employees seemed to be more motivated to perform at their very best especially when the leader was directly involved with the task at hand and this could lead to improve outcomes for the organisation.

It was also discovered that leadership style of management and entrepreneurial orientation are a pre-requisite for effective accomplishment in organizations.

Also the finding revealed that leadership styles and entrepreneurial orientation determine the level of subordinate participation in decision making and the way an organization is run administratively.

To comb it up the study also reveal that today’s organizations need effective leaders who understand the complexities of the rapidly changing global environment.

Conclusion

This study sought to contribute to the knowledge of entrepreneurial characteristic on small and medium enterprises (SMEs) in Nigeria as well as their effects on business performance. Significant conclusions from this study are that different leadership styles may affect performance, transformational leadership is significantly more correlated to the three major variables than transactional leadership and passive-avoidant leadership, and transformational leadership with higher entrepreneurial orientation can contribute to higher business performance..

By gaining knowledge about leadership and entrepreneurship, top-level managers of SMEs can understand how different leadership styles and entrepreneurial orientation affect business performance.

This study showed that transformational leadership was more strongly correlated with higher entrepreneurial characteristics, higher outcomes of leadership, and higher business performance than transactional leadership or passive-avoidant leadership. Building on this relationship, top-level managers of SMEs might do well to learn and apply transformational leadership behaviors.

Entrepreneurial characteristics was positively related to business performance; generally, entrepreneurial orientation contributed to improved business performance in this study. Entrepreneurial orientation and characteristics plays a critical role in organizational-level entrepreneurship. Top-level managers can benefit from being innovative and proactive and showing a higher degree of entrepreneurial orientation in their companies.

In addition, transformational leadership and higher entrepreneurial orientation contributed to higher business performance in this study. Top-level managers of SMEs might learn and apply transformational leadership behaviors and concepts of entrepreneurial orientation.

Transformational leadership has been recognized as an effective leadership style. Different leadership styles affect business performance. Today’s organizations need effective leaders who understand the complexities of the rapidly changing global environment (Nahavandi, 2002).

This study supports the idea of entrepreneurial leadership, which is viewed to be more transformational than transactional in nature but with some fundamental differences (Thornberry, 2006). Future research should examine the relationship between leadership and entrepreneurship as well as the effectiveness of entrepreneurial leadership.

Recommendations

In view of the findings of this study, the following recommendations would be helpful to the selected SMES and other organizations in Nigeria, to redress some of the challenges facing them, especially in the area entrepreneurial characteristic and general management of people at work.

Secondly, aside from the academic qualification and seniority, workers should be rewarded more on the basis of performance. Since this research work has shown that performance-related pay spurs employees to greater performance, it is strongly recommended that worker’s salaries be based more on performance than other parameters.

In other words, performance appraisal should play a greater role in the promotion process. And every level of responsibility and result achieved must be with a corresponding of remuneration.

Moreover, on performance, it is strongly recommended that workers should be periodically promoted or upgraded within a period of not more than four years. While this serves as recognition of their good work, it provides a larger scale for measuring their benefits. This brings satisfaction to the employee and encourages him/her to improve in performance.

Finally, organizations should, adopt the democratic style of leadership and humane management practices in order to adequately commit the workforce to the work activities. In summary, implementation of these recommendations in any SMES organization would lead to humanization of the work and working environment. It would make workers have a sense of belonging and positively affect their work behaviour or attitude to work. Ultimately, employees’ productivity and performance of the individual workers and those of the organization itself would remarkably increase.

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