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CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Small and medium-sized enterprises (SMEs, sometimes small and medium-sized enterprises) or small and medium-sized enterprises (SMEs) are companies whose level of personnel is below certain limits. The abbreviation “PYMES” is used in the European Union and in international organizations such as the World Bank, the United Nations and the World Trade Organization (WTO). The technocrats have examined and proposed different definitions to define SMEs in different economies. These efforts have led to the understanding of the perception of SMEs in a variety of ways. Therefore, SMEs are perceived and defined differently in different countries and regions.
In Europe there are three main parameters that define SMEs: micro enterprises with up to 10 employees, small companies with up to 50 employees and medium companies with up to 250 employees (European Commission, 2013). The European definition of SMEs provides that the category of micro, small and medium-sized enterprises (SMEs) is formed by companies that employ less than 250 people and has an annual turnover of no more than 50 million euros and / or a general balance No more than 43 million euros, (Petrakis and Kostis, 2012). The EU Member States have individual definitions of what constitutes an SME. For example, the definition in Germany was limited to 255 employees, while in Belgium it was 100 (European Commission, 2013). The result is that a Belgian company with 249 employees in Belgium would have to pay taxes at the full rate, but would still be eligible for subsidies to SMEs in a program with the European label. According to the German economist Hans-Heinrich Bass, the empirical research of the middle class and the promotion policy of the middle class in West Germany has a long tradition and dates back to the 19th century. In the middle of the 20th century, most researchers considered SMEs as a barrier to greater economic development, and SME policy was shaped by social policy (Petrakis and Kostis, 2012). Only the liberal-liberal school, the founding fathers of the German social market economy, discovered its strengths, considered the middle class as a solution to the economic problems of the mid-twentieth century (mass unemployment, abuse of power) and set the bases to promote a non-selective (functional) industrial policy to promote SMEs (Walczak and Voss, 2010).
In accordance with Section 7 of the Micro, Small and Medium Enterprises Act (MSMED) of 2006, the Government of India defined the size of micro, small and medium enterprises, as in the case of companies that manufacture or manufacture every industry. in the First Annex of the Industries (Development and Regulation) Act of 1951, it appears as a microenterprise (Erasmus and Strydom, 2013), in which the investment in machinery and equipment does not exceed twenty-five lakh rupees; a small company in which the investment in machinery and equipment is more than 25 lakh rupees, but no more than 5 crore rupees; or a medium-sized company where the investment in machinery and equipment exceeds five million rupees, but no more than ten million rupees; in the case of companies that provide or provide services as microenterprises, where the investment in equipment does not exceed ten lakh rupees; a small company that invests more than ten lakh rupees, but no more than two crore rupees; or a medium-sized company where the investment in equipment is more than two rupees, but not more than five rupees (Erasmus and Strydom, 2013). Assets declared as MSMEs that are found in certain sectors and criteria can be requested to grant loans to “senior sectors” to reduce the cost of doing business. The banks have annual objectives established by the Prime Minister’s work team so that MSMEs can increase loans to different categories of MSMEs during the previous year.
In the United States, the Small Business Administration establishes criteria for small businesses according to industry, ownership structure, turnover and number of employees (which can be up to 1,500 in certain circumstances, although the upper limit is usually be 500). , Both the USA UU As the EU generally use the same threshold of less than 10 employees for small offices (Erasmus and Strydom, 2013). The Central Bank of Nigeria defines small and medium enterprises in Nigeria by asset base and number of employees. The criteria are a capital base of between 5 and 500 million N and a strength of between 10 and 300 employees. Law 26 of 2003 of the Small Business National Amendment of South Africa defines micro-enterprises in the various sectors, ranging from manufacturing to retail, with five employees or less and a turnover of up to ZAR 100,000 (Walczak and Voss , 2010). Very small companies employ between 20 and 50 employees, small businesses employ between 21 and 50 employees. The upper limit for the turnover of a small business is between R1 million in the agricultural sector and R13 million in the hotel industry, hotels and other industries and manufacturing. In wholesale, the maximum limit is R32 million. The medium-sized companies usually employ up to 200 employees (100 in the agricultural sector). The maximum turnover varies between R 5 million in the agricultural sector and R 51 million in the manufacturing sector, as well as R $ 64 million in wholesale sectors, commercial agents and related services. A full definition of an SME in South Africa is, therefore, a company with one or more of the following characteristics, with less than 200 employees and an annual turnover of less than R 64 million, capital of less than R 10 million and participation Direct Management of Owners (Walczak and Voss, 2010).
In Nigeria, the 2009 MSMEs bill included two criteria to define SMEs in general: number of people / employees and annual turnover of the company. For manufacturing companies, the definition takes into account investments in machinery and equipment, as well as registered capital. Micro-enterprises are defined as companies with no more than 10 employees. a small company with 11-50 employees; and a medium-sized company with 50 to 100 employees. In light of these divergent definitions, the need to study SMEs solely on the basis of different geographical and environmental factors is crucial, since SMEs throughout the world have the following homogenous characteristics: small businesses are much more numerous than SMEs. large companies and employ more people. It is also said that SMEs are responsible for promoting innovation and competition in many sectors of the economy (Petrakis and Kostis, 2012). The development of small and medium enterprises is considered the main engine of economic growth, based on a line of economic considerations called the innovation economy. According to a study conducted by the Global Entrepreneurship Monitor (GEM), there is approximately 63% of the world’s population “around 300 million people are trying to start about 150 million businesses, about a third start, about 50 million new births per year, or about 137,000 per day, since the birth and death rates of businesses are approximately equal, it is likely that the same number of active businesses, approximately 120,000, will stop trading daily (Mason, 2014, Paul D. Reynolds, 2013).
At the local level, according to the National Bureau of Statistics of Nigeria (NBS, 2017), three out of five companies fail in the first three years of operation. Such statistics show that only two companies achieve these objectives. After that, it is likely that one of the companies could move from a micro or small business to a medium business. The main challenges that explain this high mortality rate for the creation of companies range from capitalization, education, infrastructure, to access to information. Despite these challenges, few companies have managed to grow by accepting themselves. They have evolved to innovate these challenges through, among other things, the expansion of markets and the introduction of new technologies. The term information technology in the modern sense appeared for the first time in 1958 in an article published in the Harvard Business Review. Authors Harold J. Leavitt and Thomas L. Whisler commented: “The new technology does not have a single established name, we will call it Information Technology (IT).” However, this new technology has no name. It has evolved enormously to influence various sectors of the economy that lead to knowledge-based economies driven by the production, dissemination and use of knowledge and information (OECD, 2016).
The impact of information communication technologies in the information age has been that IT has achieved innumerable advances in society and the economy, such as: Computer and mobile networks such as the Internet, mobile technologies that have influenced attitudes, practices and benefits of human work. It is assumed that the global technological capacity to store information has increased from (539 MB per person) in 1986, approximately 60 times, to more than 30 GB per person in 2007, and computing capacity has increased over the last three decades. it has increased by more than 60% (Martin Hilbert, 2011). These statistics suggest that information communication technology plays a key role in our time by providing the necessary services for different sectors of the economy, where there are several established SMEs. With the rapid adoption of IT in various sectors of society and the constant decline in the prices of communications, markets in different parts of the world are more integrated and have a greater interest in the use of IT in companies (Erasmus and Strydom , 2013). IT-related proliferation technologies have been monitored by the ITU based on several indicators, such as: the number of Internet users, personal computers, primary telephone lines in service, mobile subscribers and, to a lesser extent, television receivers, subscribers of cable television and domestic satellite antennas.
Historically, the diffusion of IT is done through the digital distribution of information. This proliferation has helped differentiate early adopters from competitors who have not yet introduced IT. This has brought benefits to companies that are adopting IT before their competitors (Walczak and Voss, 2010). In developing countries, changes resulting from the use of IT are particularly visible when IT is widespread, especially in the middle class and in the urban environment, unlike areas that are not yet exposed to IT risks. Also with incentives from the government and other interested parties. The positive impact of IT is based on the consideration that the introduction of IT should result from the domestication of IT that involves other factors, such as: The best Internet penetration, the availability of qualified IT personnel and the content Local and integral digital, all being processed, are affecting the performance of SMEs, which play an important role in the development of the economy (Erasmus and Strydom, 2013).
1.2 Problem Statement
Information technology researchers have empirically demonstrated that investment in IT improves the productivity, management capabilities and comparative advantage of the company (Griffith, 1999). Studies in industrialized countries have confirmed that, given the adequate infrastructure, IT can be an engine for socioeconomic development. Some examples of developed countries where a significant investment in IT has had a significant impact are the increase in the US Gross Domestic Product (GDP). UU Of 7.8%, 8.0% of the United Kingdom, 8.3% of Singapore and 8.4% of Australia. % (Camel, Rateb & El – Tawil, 2013). Includes illustrations of studies on the impact of IT on performance; a study conducted by an information service provider of Pulley and Braunstein (2014), which found a connection with greater economies of scale; Another work comes from Diewert and Smith (2014), which provided an interesting case study of a major Canadian retailer. In accordance with its accounting framework, starting in the second quarter of 1988, the distributor registered an incredible quarterly productivity growth of 9.4% for six consecutive quarters. They argued that “these large increases in productivity were made possible by the computer revolution, which made it possible for a company to closely monitor the purchase and sale of inventory items and use the latest computer software to minimize inventory costs. “While Loveman (2011) found no evidence of an increase in the return on IT investment; Weill (1990) found that transactional IT had a positive impact on business performance, but strategic IT or information technology did not. Pourmirza (2016) found that IT staff achieved significant performance in the organization’s performance, but IT capital did not.
This study purposes to carry out a quantitative study to understand the impact of information technology among SMEs to propose viable models of information technology influence on determinants of performance of SMEs in developing countries, using Nigeria as a case study. Where “Small and medium enterprises (SMEs) are challenged by the globalization of production and the shift in the importance of the various determinants of performance. This study brings to focus the importance of IT in SMEs by relating the performance of SMEs to the influences of IT, observed as: types of ITs in SMEs, use of ITs in SMEs, the cost of ITs in SMEs, awareness and leadership in ITs in SMEs.
1.3 Objectives of the Study
This main purpose of this study is to carry out a quantitative study on the impact of information technology among small and medium enterprises in Nigeria. The study will be guided by the following specific objectives:
- To assess the different types of information technology and how they influence the performance of small and medium enterprises in Nigeria
- To find how the utilization of information technology influences the performance of small and medium enterprises in Nigeria