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DETERMINANTS OF ATTRITION IN SMALL AND MEDIUM
TEXTILE ENTERPRISES IN NIGERIA
ABSTRACT
This study
focused on attrition determinants of textile (SMES) in Nigeria. The study
became necessary because the textile industry in Nigeria which was the second
largest employer of labour after government declined in productivity rapidly
and between 1995 and 2003, 83 textiles closed shop. The main objective of this
study therefore is to investigate the determinants of attrition of textile SMEs
in Nigeria. Past studies have focused on firm success, with only few on firm
attrition. Again most studies of firm longevity have focused on large firms.
The problem is more acute from Nigerian sources. This study reviewed both the
theoretical framework and conceptual framework employing independent variables
such as government policy, managerial skills, marketing, technology and
finance, while the dependent variable is the “attrition of textile SMEs” to
examine the past empirical studies. The study identified a gap, since the past
studies were not firm specific and did not compare failed and standing firms.
This present study focuses on the SME textile sub-sector. The study will be
conducted in six textile zones of Kaduna, Kano, Lagos Aba, Onitsha and Asaba.
These geographical areas have the largest concentration of textile firms in
Nigeria. The study will compare the failed textile SMEs with those standing. The
findings of this study can therefore be grossed up to national level. The
collapsed SME firms and those standing whose list is with the textile
manufacturers association located at No. 4 Kachia Road Kaduna forms the
sampling frame. Purposive sampling will be used to enlist 3 entrepreneurs each for
both failed and standing firms and 10 senior managers of failed and 3 senior
managers of standing firms for a pilot study. A snow-balling method will be
employed to enlist the 273 top/senior executives of the sampled failed firms while
a simple random sampling will be employed to enlist 100 executives of standing
firms for the administration of a four point likert questionnaire. Both
qualitative and quantitative data will be generated through depth-interviews and
questionnaire administration. The interview will be analyzed through content
analysis while principal component analysis will be applied on the survey data
to arrive at the findings. Also, independent sample t-test will be conducted to
address hypothesis 1 to 4, by making comparison between the failed and
functional textile firms in Nigeria.
TABLE OF
CONTENTS
CONTENTS PAGE
Title page - - - - - - - - - i
Declaration - - - - - - - - - ii
Dedication - - - - - - - - - iii
Acknowledgement - - - - - - - iv
Abstract - - - - - - - - - v
Table of
contents - - - - - - - - vi
List of Tables - - - - - - - ix
List of figures - - - - - - - x
Abbreviations
& Acronyms - - - - - - xi
CHAPTER
ONE: INTRODUCTION - - - - 1
1.1 Background
of the Study - - - - - - 1
1.1.1 Small and Medium Enterprises - - - - 3
1.1.2 Attrition - - - - - - - 6
1.1.3 Textile Industry - - - - - - 7
1.1.4 Small and Medium Textile Industry in Nigeria - 8
1.2 Statement
of the problem - - - - - 9
1.3 Objectives
of the Study - - - - - - 10
1.3.1 General Objectives - - - - - 10
1.3.2 Specific Objectives - - - - - 10
1.4 Research
hypothesis - - - - - 11
1.5 Significance
of the study - - - - - - 12
1.6 Scope
of the study - - - - - - - 12
1.7 Limitations
of the study - - - - - - 13
1.8 Definition
of terms - - - - - - 14
CHAPTER
TWO: LITERATURE REVIEW - - - 17
2.1 Introduction
- - - - - - - 17
2.2 Theoretical
Review - - - - - - 17
2.2.1 Technology - - - - - - - 19
2.2.2 Marketing - - - - - - - 25
2.2.3 Managerial Skills - - - - - - 35
2.2.4 Finance - - - - - - - 41
2.2.5 Government Policy - - - - - 44
2.2.6 Attrition/Failure - - - - - - 50
2.3 Conceptual
Framework - - - - - - 54
2.4 Review
of Important Literature - - - - - 59
2.4.1 Technology - - - - - - - 59
2.4.2 Marketing - - - - - - - 66
2.4.3 Managerial Skills - - - - - - 74
2.4.4 Finance - - - - - - - 82
2.4.5 Government Policy - - - - - 87
2.4.6 Attrition/Failure - - - - - - 96
2.5 Empirical
Review - - - - - - - 98
2.5.1 Technology - - - - - - - 99
2.5.2 Marketing - - - - - - - 105
2.5.3 Managerial Skills - - - - - - 106
2.5.4 Finance - - - - - - - 111
2.6 Attrition
- - - - - - - - 116
2.7 Critique
of Review - - - - - - 120
2.8 Research
Gap - - - - - - 122
CHAPTER
THREE: RESEARCH METHODOLOGY - 123
3.1 Introduction
- - - - - - - 123
3.2 Research
Philosophy - - - - - - 123
3.3 Research
Design - - - - - - - 124
3.4 Study
Population - - - - - - - 125
3.5 Sampling
Techniques - - - - - - 125
3.6 Data
Collection Procedure - - - - - 127
3.6.1 Interviews Schedule - - - - - 128
3.6.2 Questionnaire - - - - - - 128
3.6.3 Validity of the Research Instruments - - - 130
3.7 Pilot
Study - - - - - - - - 131
3.8 Administration
of Research Instruments - - - 132
3.9 Data
Processing and Analysis - - - - - 132
3.9 Ethical
Issues - - - - - - - 134
References
Appendices
Appendix I. - Introduction Letter
Appendix II. - Interview Schedule & Questionnaire
Appendix III. - Working Plan
Appendix IV - Budgeting
Appendix V - Association Members mills that closed
since 1995
Association Member mills that are
still standing
Appendix
VI - Main qualitative indicators that may be used to
differentiate between SMEs and large companies
Appendix VII - Non defined
population optimal sample size calculation
LIST
OF TABLES
Table 2.1: Causes
of Failure - - - - - - - 76
LIST
OF FIGURES
1.1 Enterprise Life Cycle 6
2.1 Conceptual Model for Technology Acceptance 19
2.1.2 TAM Application 20
2.1.3 A Model of Five Stages
in the Innovation-Decision Process:
Diffusion of Innovations 23
2.1.4 A Basic Task-Technology Fit Model 25
2.1.5 A Schematic Model of the Resource Advantage
Theory of Competition 30
2.1.6 A Schematic Model of
the Extended Resource Advantage Theory of Competition 31
2.1.7 The Three Circles of IMC Theory Development 34
2.1.8 Contingency Model 38
2.1.9 Moderated Relationship among Variables 57
2.10 Conceptual Framework Model 58
2.11 The Textile Chain 61
2.12 Managerial Skills required by Managers 79
ACRONYMS
AND ABBREVIATIONS
BDS Business Development Services
CBN Central Bank of Nigeria
FOS Federal Office of Statistics
GDP Gross Domestic Product
MSME Micro, Small and Medium Enterprises
PRISMS Promoting Improved Sustainable Micro
Finance Service
R
& D Research and Development
SME Small and Medium Enterprises
SMEDAN Small and Medium Enterprises Development
Agency of Nigeria
SMEEIS Small and Medium Enterprises, Equity,
Investment Scheme
SPSS Statistical Package for Social
Sciences
U.K United Kingdom
UNIDO United Nations Industrial Development
Organization
USA United States of America
OECD Organization for Economic Cooperation
and Development
NEPAD New Partnership for Africa’s Development
AGOA African Growth and Opportunity Act
ECA Economic Commission for Africa
ICT Information
and Communication Technology
CHAPTER
ONE
INTRODUCTION
1.1 Background
of the Study
The
world’s leading textile country is China which holds approximately 45 percent
of global textile and garment production, while India holds a share of around
20 percent and yet in both countries, their textile SMEs are the biggest
contributors to the National economy (National Union of Textile Garments and Tailoring
Workers of Nigeria Publication 2008).
The
textile industry belongs to the so-called first generation industry. The textile industry in Nigeria was the third
largest in Africa after Egypt and South Africa. (Eneji, Onyinye, Kennedy, &
Rong, 2012). The global textile and garment market is valued at around $400
billion which is an interesting figure that attracts entrepreneurs from around
the world to venture e into the sphere (http//www.com.ng). Unfortunately, for
the African sub-continent and for Nigeria in particular, the trade has not been
profitable because of the state of its textile industry, and also with
particular reference to its textile SMEs (Aguiyi, Ukaoha, Onyegbulam &
Nwankwo, 2011). The modern textile industry in Nigeria, typically represents
simple input substitution industrialization of the post-colonial state (Aremu
2003). The sector in the past was the largest employer of labour after
government as it employed over one million Nigerians either directly or indirectly and secured
250,000 tons of raw cotton for growers (Umar, 2008). While a large number of African countries are
further taking advantage of the opportunity thrown open by African Growth and
Opportunity Act (AGOA) and other preferential trade concessions, the Nigerian
industry is still grappling to find a space in the international market. A former Minister of communications; Audu Ogbe
captured the picture when he said:
The
private sector which should indeed be the engine of growth is encumbered by
impossible obstacles. For about 18years now, industrial growth has almost come
to a half, not only are new industries impossible to establish, most old ones
have nearly all shut down. (Quoted in Umar, 2008).
By
and large, the contribution to economic development by small and medium
enterprises which is the segment under study is not in doubt. The best estimates
available, suggest that MSME comprise 87% of all firms operating in Nigeria,
although the total number of registered firms is unknown (Oyelaran-Oyeyinka,
2011). The scenario is that if the general industrial outlook is bleak, the
segment under study could equally be affected and it raises fears.
Generally,
it is believed that firms survival is at least in the long run a prerequisite
for success which is often measured in terms of market share or profitability. To
date, however, studies of firm longevity have focused on large companies
(Pasanam 2003). For the Nigerian, small and medium textiles, there has been
practically no empirical study so far undertaken. Public commentaries on the
state of the Nigerian textiles cannot provide the desired solution, and thus
calls for proper investigation. A preliminary interview with a senior lecturer in the department of textile
technology of Kaduna Polytechnic on the dearth of local works, hinted that the
students and the general academic population to sustain such works has
diminished considerably (Raji, 2011).
1.1.1 SMEs
The
Small and Medium Sized Enterprises (SMEs) are heterogeneous and can be found in
a number of business activities. They may embody different levels of skills and
maybe found in either the formal or informal economy. (OECD, 2004).
SMEs
definition can be broadly categorised into two: economic and statistical. Under
the economic definition, a firm is regarded as small, if it has a relatively
small share of the market, and is managed by owners in a personalized way and
not through the medium of a formalized management structure; while statistical
definition varies by country and is usually based on the number of employees,
and the value of sales and/or value of assets (Makenbe, 2011). Due to its ease
of collection however, the most commonly used variable is the number of
employees (OECD, 2004).
Small
and medium enterprises contribute substantially to output and employment in
both developed and developing countries. Recent empirical studies show that SMEs
contribute to over 55% of GDP and over 65% of total employment in high-income
countries. Similarly, they contribute 60% of GDP and over 70% of total
employment in low income countries, while they contribute over 95% of total
employment and about 70% of GDP in middle-income countries (OECD, 2004).
A
comparison of SMEs in different developing countries shows that there is no
uniformity in the definition (Khrystya, Melina, & Rita, 2010). The major
indices used, however are number of employees and net worth. In Thailand, any
manufacturing outfit that employs less than 50 workers is regarded as a small
enterprise, while those employing between 51 and 200 workers fall within the
medium sector. (www.adfiap.org/w.p.contents/uploads/2011/06). In Egypt, where a
firm employs between 10 and 50 workers with a turnover of 3 million dollars,
the business is regarded as small; whereas those that employ between 30 and 50
workers with a turnover of $15 million dollars are regarded as medium
enterprises. (www.citasal.org./inglish/informationcentre/ibr-MSME
database). The assessment of the profile
of SMEs in South Africa reveals that they are categorized by the number of employees.
Between 10 and 20 workers in any organization is regarded as small while
organizations employing between 100 and 200 workers are regarded as medium. In
Nigeria, there was a time, when small-scale enterprise was defined by the
Federal Ministry of Industries as that in which the value of the total assets
including working capital but excluding land does not exceed N15,000,000 or
where the number of employees does not exceed 50. (Inegbenebor, 2006). Considering the inherent conflicts in the
definitions of SMES which vary from one country to another, UNIDO generally
advises countries to take into account the quantitative and qualitative
indicators for SMEs definitions (see appendix VI). On the current industrial policy
of Nigeria, small and medium enterprises are now defined on the basis of
employment. In line with this, Inegbenebor (2006) gives concise differences
between micro, small, medium and large scale firms. The micro/cottage firms are
those that employ between 1 and 10 workers; while the small scale firms are
those that employ between 11 and 100 workers; medium firms employ between 101
and 300 workers, whilst the large scale firm employs above 300 workers. This
study is thus using the terms defined above which is contained in Nigeria’s current
industrial policy.
1.1.2 Attrition
Attrition
has been defined as a reduction or decrease in numbers, size or strength. It
can also be seen as the wearing down or weakening of resistance, especially as
a result of continuous pressure or harassment. There can be decrease in
employee numbers and there can also be a decrease of firms within an industry.
(Dictionary.reference.com/browse/attrition). For this study, attrition can be
measured by the number of SME textiles that stopped production between 1995 and
2012.
|
Decline
|
|
Figure 1.1: Enterprise life cycle
diagram (Source:
|
|
Rejuvenation
|
|
Maturity
|
|
Time
|
|
Growth stage breakthrough
|
|
Start-up stage
|
|
Pre-start-up (incubation)
|
Source: Stokes & Wilson,
2006.
1.1.3 Textile Industry
Traditional
textiles (handmade) have been produced in Nigeria for many years, but real
industrial production of textiles has been a recent activity (Aguiyi, Oroha,
Onyegbulam, & Nwankwo 2011). The Kaduna textiles mills being the first
textile mill was established in 1956, whilst the Nigerian textile mill was
established in 1962. These industries were setup to be vertically integrated
mills, designed to process locally sourced cotton, through spinning for yarn
production and weaving for the production of grey cloth, dyeing, printing and
finishing for the production of fully finished textile clothing.
The
sector produces a variety of fabrics annually and markets the goods within the
country and also extends the marketing to neigbouring West African countries.
The fabrics range from African prints, shirtings, embroideries, guinea brocades
and wax prints. Between 60% and 70% of the cotton is sourced locally (Eneji,
Onyinye, Kennedy & Rong 2012).
The
industry raises millions of middlemen, marketers of finished goods, tailors and
garment makers. The popular traditional fabrics include the Asoke, Adire,
Whasa, Akwete, Okene and traditional mat.
1.1.4 Small and Medium Textile Industry in Nigeria
Nigeria’s
small and medium textile sector has developed to incorporate fibre production,
spinning, weaving, knitting, lace and embroidery making, carpet production,
packaging, dyeing, printing and finishing (Mohammed, 2011). The sector produces
a varied series of fabrics annually ranging from African prints, shirtings, embroideries
(Okene), to guinea brocades, wax prints, jute and other products (www.mbendi.com/a.sndmsg/org.srch.asp).
The Central Bank of Nigeria (CBN) annual report as far back as 1995 showed that
out of 13 sub-sectors in the manufacturing sector, the textile sub-sector
comprising cotton textile and synthetic fabrics accounted for a significant
proportion of the over all growth of manufacturing production. Between 60% and
70% of the raw materials used in the industry is sourced locally, the main
exception being high quality cotton and synthetic materials (www.mbendi.com.indy/txte/at/ng/p005.htm)
. The SME textile industry in Nigeria is labour intensive with little
mechanization, while the use of hand looms is prevalent (Banjoko, 2009). The
textile firms are scattered all over the country, but there is greater
concentration around Kano and Kaduna in the North, Lagos in the South-West and
Aba, Port-Harcourt in the South East, and also Asaba and Benin. (See appendix 5)
for the location of failed and standing textile firms.
1.2 Statement of the Problem
The
recent world production of textiles is estimated to be around 25million tones
annually (Nina, 2012). In the last decade, the world cotton production
increased from 20 million to 27 million tones, but in Africa, it dropped from
1.8 million to 1.5 million tones (Olarewaju, 2008). The importance of the cotton
crop to the Nigeria economy cannot be over emphasized as the lint removed from
the seed is used as raw materials for the textile industry (Chukwumaeze, 2009).
The textile industry in Nigeria generally includes cotton growers, those who
make the thread into cloth, chemical manufacturers and those who dye, bleach
and the textile merchants. Although statistics is not readily available for the
cotton growers and those engaged in other ancillary cotton services, Navdep
(2009): indicated that those who have lost their jobs as a result of the
attrition/closure of these textiles mills is estimated at about 250,000.
According to Banjoko (2009), the industrial estates in Kaduna, Lagos, Aba and
Sherada as well as Bompai in Kano which thrived on textile manufacturing activities
have turned into ghost towns as mills after mills have shut down production in the last five years (Banjoko,
2009). The state of the textile industry is particularly pathetic as most
operators have converted their mills into the production of other goods like
Alkem Textile Company that has creatively redesigned the extruders to
manufacture plastics and artificial hairs for women. (Osuji, 2011). Those that
do not re-adjust themselves close down causing unemployment and this has become
prevalent since 1995 (see Appendix 5 for closed textiles). Many public
commentators have blamed the dwindling fortune of the sub-sector on a number of
perceived constraining factors mentioning power, poor technology, dumping of
foreign textiles, lack of finance, lack of government commitment to the textile
sub-sector as well as poor management, but nobody really knows the answer (Kwajafa,
2013). What is therefore the cause of this attrition in the textile industry?
This is the subject of this study.
1.3 Objectives of the Study
1.3.1 General
Objective
To
investigate the determinants of attrition of textiles SMEs in Nigeria
1.3.2 Specific
Objectives
i. To
investigate the influence of technology on attrition of textile SMEs in
Nigeria.
ii. To
determine how marketing efforts contribute to the attrition of textile SMEs in
Nigeria
iii. To
establish if poor managerial skills contribute to attrition of textile SMEs in
Nigeria.
iv. To
find out if cost of capital/access to capital contribute to attrition of
textile SMEs in Nigeria
v. To
establish if government policy moderates the attrition of textile SMEs in
Nigeria.
1.4 Research Hypothesis
i. Ho: There is no relationship between technology and attrition of
textile SMEs in Nigeria.
ii. Ho: There is no relationship between marketing efforts and attrition
of textile SMEs in Nigeria
iii. Ho: There is no relationship between managerial skills and attrition
of textile SMEs in Nigeria
iv. Ho: Financial factors are not related to the attrition of textile
SMEs in Nigeria.
v. Government
policy is not a moderating factor between the independent and dependent
variables in the attrition of textile SMEs in Nigeria.
1.5 Significance of the Study
The
textile SMEs contribution to the economy is very substantial to be ignored.
However, there are very few empirical studies on attrition/failure factors and in
Nigeria in particular, the literature is scanty, with most commentaries on the
pages of newspapers. According to Welter (2005) only few studies in
entrepreneurship focus on failed ventures and failed entrepreneurs as business failure
is often equated with personal failure and entrepreneurs might be reluctant to
admit that they have not achieved their goals. This study will provide useful
insights on the determinants of attrition for the textile manufacturers whilst
the government and other stakeholder will use the recommendations for policy
decisions. The study will equally contribute to knowledge, as other incoming
researchers will also find this work a useful material for further empirical
studies on attrition/failure of SMEs. Providers of BDS. (Business development
Services) such as SMEDAN (The Small and Medium Enterprises Development Agency of
Nigeria) will find the work very germane to their strategic goals.
1.6 Scope of the Study
The
SMEs textiles that have gone out of operation are scattered all over the
country, but this research will however focus on only the registered textile
SMEs. These registered textiles even though are out of business, their
addresses are still available with the textile manufacturers association at
No.4 Kachia Road, Kaduna. The list to be used, includes all the textile SMEs
into the production of textile materials in clearly identifiable cities of Kano
and Kaduna in the North, Aba and Onitsha in the East; Port-Harcourt and Asaba
in the South-South and Lagos in the South West. These are the cities with the
largest concentration of textile producers and Lagos has the highest number. It
is believed, that the results of the study can be generalized considering the
geographical dispersion of the firms, and the external validity that will be
achieved through proper instrumentation.
1.7 Limitations of the Study
The
study is delimited to textile SMEs that are registered and therefore those in
the informal sector such as farmers are not included in this study. However,
this provides avenue for further research. Because of the interpretative nature
of the part of the research that is qualitative, there is a possibility of an
element of bias. A research of this nature might experience some difficulties
in assessing information, because of the difficulty that might arise in
extracting information from these founders who might show reluctance because of
a feeling of personal failure. This assertion is supported by Ooghe and De
Frijcker (2008) who observed that once a population of distressed firms has
been identified and delimited, it is difficult to contact their leaders and to
get information about the fundamental causes of their failure. Also Barker (2006)
said that “individuals have a natural reticence to discuss failure and its
causes”. This perceived difficulty will however not have a significant effect
on the generalizability of findings because there is active support from the
Textile Manufacturers Association of Nigeria, who will assist with contacts.
1.8 Definition of Terminologies
Small
and medium textiles (SME textiles). There is no single universally accepted
definition of SMEs as these definitions vary from country to country
(Inegbenebor 2006). In Nigeria the classification in largely based on the
current industrial policy. The specification is that firms that employ between
I and 10 workers are classified as micro or cottage; whilst the small scale
firms are those that employ between 11 and 100 workers. In contrast, medium
firms are those that employ between 101 and 300 whilst large scale firms employ
above 300 workers (Inegbenebor 2006). This has been adopted in this study.
Attrition/Failure
Many
researchers see attrition from many perspectives. According to Carter &
Auken (2006), sponsors might view attrition or failure as inability to provide
adequate returns for their investment. Bakaen & Ooghe (2005) regard a firm
as a failure when it involuntarily becomes unable to attract new debt or equity
funding to reverse decline. In this study, attrition/failure is seen from that
broad spectrum of firm closure which might be bankruptcy, loss-cutting or
whatever acronym as long as it is a closure or exit which prevents the firm
from operation.
Entrepreneurship
Schumpeter
(1934) has defined an entrepreneur as an innovator who implements
entrepreneurial change within markets. Someone who organizes a business venture and
assumes the risk for it (Abu-Saitan 2012). This definition is adopted for this
study.
Innovation
Something
original and new that breaks into the market or into society. A successful exploitation
of new ideas. (Eveleens, 2010).
Creativity
This
can be defined as the tendency to generate or recognize ideas, alternatives or
possibilities that maybe useful in solving problems, communicating with others
and entertaining ourselves and others. (Franken 2010).
Locus
of Control
Originally
conceptualized by Julian Rotter (1966). It refers specifically to people’s
perceptions of control over access to reinforcements. Expanding the original
concept, it refers to an individual’s perception about the underlying main
causes of events in his/her life, which might either be external or internal
locus (Anderson, Hattie, & Hamilton 2005). This concept is applied in this
study.
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