A STUDY OF THE EFFECT OF ENTREPRENEURSHIP SKILLS ON THE

PERFOMRANCE OF SMALL AND MEDIUM ENTERPRISES

(A CASE STUDY OF MBALE MAIN MARKET)

BY

ABWA LINOS

EJ18B05/001

A DESERTATION SUBMITTED TO THE FACULTY OF BUSINESS

AND ADMINISTRATION IN PARTIAL FULFILMENT OF

A BACHELOR’S DEGREE IN BUSINESS

ADMINISTRATION OF UGANDA

CHRISTIAN UNIVERSITY

AUGUST 2019
 DECLARATION

I, Abwa Linos, do hereby declare that this dissertation is my own original work and that it has
been presented and will not be submitted to any other university for a similar or any other award.

……………………………………
Signature

…………………………………………
Date

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 APPROVAL

This is to certify that this research report titled “Effects of Entrepreneurship Skills on the
Performance of Small and Medium Enterprises” has been under my supervision and now is ready
for submission by my approval.

Sign......................................................... Date............................................................
MRS. KHAKUSUMA DOREEN

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 DEDICATION

I dedicate this work to my loving Father and Mother not forgetting my Sisters and Brothers
whose support, endurance and affection gave me strength to complete this work.

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 ACKNOWLEDGEMENT

First and foremost, I would like to thank the Almighty God the giver of life and wisdom. . I take
the pleasure to acknowledge the advice, support and encouragement extended to me at various
stages.
No one ever accomplishes a research project single-handedly, and in my case this is particularly
true. This dissertation has come to be, not through my ideas alone but because of many other
people who gave of their time, talent and contributed ideas.
I extend my sincere gratitude to my supervisor Mrs.Khakusuma Doreen for her unfailing
guidance, invaluable comments and unreserved intellectual assistance in undertaking this study.

My sincere thanks also go to all my lecturers and fellow students who made valuable
contribution and offered encouragement throughout the programme.

Last but not least, I am still learning, and probably you too are. However, the only excuse is that
it is very difficult to be right in all instances and thus I would like to offer an apology for any
errors of substance, slip of the pen and language that may be found in this dissertation.

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 Table of Content
APPROVAL....................................................................................................................................ii
DEDICATION...............................................................................................................................iii
ACKNOWLEDGEMENT..............................................................................................................iv
LIST OF TABLE..........................................................................................................................viii
LIST OF FIGURES........................................................................................................................ix
ABSTRACT...................................................................................................................................xi
CHAPTER ONE..............................................................................................................................1
1.0 Introduction................................................................................................................................1
1.1.1 Historical background.............................................................................................................1
1.1.2 Conceptual background..........................................................................................................3
Entrepreneurship..............................................................................................................................3
1.2 Problem statement...................................................................................................................10
1.3 Purpose of the study.................................................................................................................10
1.4 Objectives of the study............................................................................................................10
1.5 Research questions...................................................................................................................10
1.6 Scope of the study....................................................................................................................11
1.6.1 Content scope........................................................................................................................11
1.6.2 Time scope............................................................................................................................11
1.6.3 Geographical scope...............................................................................................................11
1.7 Significance of the study.........................................................................................................11
CHAPTER TWO...........................................................................................................................13
LITERATURE REVIEW..............................................................................................................13
2.0 Introduction..............................................................................................................................13
2.4 Conceptual framework:...........................................................................................................30
CHAPTER THREE.......................................................................................................................31
METHODOLOGY........................................................................................................................31
3.0 Introduction..............................................................................................................................31
3.1 Research design.......................................................................................................................31
3.2 Research Population................................................................................................................32
3.3 Sample size..........................................................................................................................32

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Table 3.1. Population and sample size table..................................................................................33
3.4 Sampling Techniques...............................................................................................................33
3.4.1 Stratified Random Sampling.................................................................................................34
3.5.1.2 Purposive Sampling...........................................................................................................34
3.6 Sources of Data and Data Collection Instruments...................................................................34
3.6.1 Data Sources.....................................................................................................................34
3.6.1.1 Primary Data............................................................................................................35
3.6.1.2 Secondary Data........................................................................................................35
3.5 Research Instruments...............................................................................................................35
3.5.1 Questionnaires...................................................................................................................35
3.6 Data Analysis...........................................................................................................................36
3.7 Validity and Reliability of the instruments..............................................................................37
3.7.1 Validity..............................................................................................................................37
3.7.2 Reliability..........................................................................................................................37
3.8 Ethical considerations..............................................................................................................37
CHAPTER FOUR.........................................................................................................................39
FINDINGS AND DISCUSSION..................................................................................................39
4.0 Introduction..............................................................................................................................39
4.1 Background Information of the Respondents..........................................................................39
4.1.1Categories of Respondents.................................................................................................39
4.2.2 Respondents’ Gender........................................................................................................40
4.2.3 Age of the Entrepreneurs..................................................................................................42
4.2.4 Respondents’ Marital Status.............................................................................................43
4.2.5 Entrepreneurs’ Educational Level.....................................................................................45
4.2.6 Entrepreneurs’ Number of Dependents.............................................................................46
4.2.7 Respondents’ Monthly Income.........................................................................................47
4.3 Findings on Research Objectives of the Study........................................................................48
4.3.1 Research Objective 1: To define and understand Entrepreneurship skills........................48
4.3.2 Applicability of Entrepreneurship Skills by Business Entrepreneurs in Mbale Main
Market........................................................................................................................................50
4.3.3 Business Types..................................................................................................................50

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 4.3.4 Form of Business Ownership............................................................................................51
4.4 Research Objective 2: To determine the performance indicators of SME’S...........................52
4.4.1 Period the Business been in Operation.............................................................................52
4.4.2 Effect of Entrepreneurship Skills on SME Performances in Mbale Main Market...........54
4.4.3 Source of Business Idea....................................................................................................54
4.4.4 Respondents’ Personal Traits............................................................................................56
4.4.5 Type of Entrepreneurship Skill Possessed........................................................................57
4.4.6 Impact of Entrepreneurship Skills on Respondents’ Businesses......................................59
4.4.7 Ranking of Entrepreneurship Skills..................................................................................60
CHAPTER FIVE...........................................................................................................................62
CONCLUSIONS AND RECOMMENDATIONS........................................................................62
5.0 Introduction..............................................................................................................................62
5.1 Conclusions According to Objective One...............................................................................62
5.2 Conclusion According to Objective Two................................................................................64
5.3 Conclusion According to Objective Three..............................................................................65
5.4 Recommendations....................................................................................................................66
5.5 Areas for Further Research......................................................................................................67
REFFERENCES............................................................................................................................68
APPENDICES...............................................................................................................................75

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 LIST OF TABLE

Table 2.1: Entrepreneurship Skill ………………………………………………………..……15

Table 2.2: Entrepreneurship Skill ……………………………………………………………..18
Table 3.1. Population and sample size table …………………………………………………..33

Table 4.1: Categories of Respondents ………………………………………………………....39

Table 4.2: Respondents’ Gender ……………………………………………………………….40

Table 4.3: Age of the Entrepreneurs …………………………………………………………...42

Table 4.4: Entrepreneurs’ Marital Status ……………………………………………………....43
Table 4.5: Respondents’ Level of Education ………………………………………..…………45
Table 4.6: Number of Dependents ……………………………………………………………..46
Table 4.7: Monthly Income …………………………………………………………………….47
Table 4.8: Training on Entrepreneurship …………………………………………………...…..48

Table 4.9: Entrepreneurs’ Business Type ………………………………………………………50

Table 4.10: Form of Business …………………………………………………………………..51
Table 4.11: Age of Business ……………………………………………………………………52
Table 4.12: Source of Business Idea …………………………………………………………....54
Table 4.13: Personal Trait ……………………………………………………………………....56
Table 4.14: Skills Possessed by Entrepreneurs ………………………………………………....57
Table 4.15: Impact of Skill used in Business …………………………………….……………..59

Table 4.116: Ranking Entrepreneurship Skills …………………..…………………………..…60

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 LIST OF FIGURES

Figure 2.1 Conceptual Framework ……………………………………………………………..30

Figure 4.1: Categories of Respondents …………………………………………………………40
Figure 4.17: Respondents’ Gender …………………………………………………………….41
Figure 4.18: Age of the Entrepreneurs ………………………………………………………...43
Figure 4.19: Entrepreneurs’ Marital Status ……………………………………………………44
Figure 4.20: Respondents’ Level of Education ……………………………………………….45
Figure 4.21: Number of Dependents …………………………………………………..………46
Figure 4.22: Monthly Income ………………………………………………………………….47
Figure 4.23: Training on Entrepreneurship …………………………………………………...49
Figure 4.24: Entrepreneurs’ Business Type …………………………………………………..50
Figure 4.25: Form of Business ………………………………………………………………….51
Figure 4.26: Age of Business …………………………………………………………………...53
Figure 4.27: Source of Business Idea …………………………………………………………...55
Figure 4.28: Personal Trait ……………………………………………………………………...56
Figure 4.29: Skills Possessed by Entrepreneurs ………………………………………………...58
Figure 4.30: Impact of Skill used in Business …………………………………………..………60
Figure 4.31: Ranking Entrepreneurship Skills ……………..……………………………………61

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 LIST OF ABBREVATION

ADB African Development Bank

CEO’s Chief Executive Officer

CVI Content Validity Index

FGDs Focus Group Discussion

FY Financial Year

GDP Gross Domestic Product

GEM Global Entrepreneurship Monitor

HR Human Resource

ILO International Labour Organization

IMP Investment Mentoring Platform

MDG’s Millennium Development Goals

MMM Mbale Main Market

NDP National Development Plan

PLCC Pearson’s Correlation Coefficient

SME’s Small and Medium Enterprises

UIA Uganda Investment Authority

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 ABSTRACT

The study was aimed at the effects of entrepreneurship skills on the performance of small and
medium enterprises. It was guided by three objectives these include; to define and understand
entrepreneurship, to determine the performance indicators of SME and finally to establish the
relationship between Entrepreneurship skills and SME performance.

A descriptive design was used in the study to ascertain whether this relationship exists. This
research design was used because of its surveying, observational and case-study nature which is
an in-depth study of an individual or group of individuals. In this design both qualitative and
quantitative approaches were used in carrying out the study. A population of 200 was considered
appropriate for this study.

The study showed that majority of entrepreneurs in Mbale Main Market had no or very little
training on Entrepreneurship and were engaged in several Small and Medium Enterprises
(SMEs) which were necessity-based rather than opportunity-based. The finding indicates that
Entrepreneurs who had Entrepreneurship skills performed above average. They had the ability to
recognize potentially profitable business opportunities, were risk takers and had the ability to
align available resources to pursue business opportunities. Prior knowledge of customers’ needs
and management skills were also important but were rated low. Several challenges were noted to
affect growth and performance of SMEs; including poor access to finance, lack of adequate
market for their products and services, lack of business training and absence of government
support and assistance.

The study concludes that; entrepreneurs in Mbale Main Market were mostly middle age people
with majority of them having attained primary school education, few respondents had some
training on entrepreneurship and many were involved in a variety of enterprises. The study
recommends training on entrepreneurship skills and provision of support services to SME
owners. Finally, the study suggests more extensive survey in other rural districts in Uganda
before generalizing the findings to the entire country.

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 CHAPTER ONE

1.0 Introduction.

This chapter presents the background to the study, the problem statement, general objectives, the
specific objectives of the study, the research questions, the hypotheses, the scope of the study,
the significance, Justification and operational definition of terms and concepts.
1.1 Background of the study
1.1.1 Historical background
Entrepreneurship is defined as the process of starting a business. Today, entrepreneurs are
romanticized as being the cornerstones of a successful capitalist economy.

In a global economy, the first entrepreneurs can be traced back to nearly 20,000 years ago. The
first known trading between humans took place in New Guinea around 17,000 BCE, where
locals would exchange obsidian (a volcanic glass prized for its use in hunting tools) for other
needed goods like tools, skins, and food. This early type of entrepreneurship continued for
millennia. Hunter-gatherer tribes would trade goods from different parts of their respective
regions to provide an overall benefit for their tribe.

The first big shift in entrepreneurship took place during the Agricultural Revolution, which
occurred about 12,000 years ago where humans started to domesticate plants and animals.
Instead of having to roam, forage, and hunt for their food in different regions throughout the
year, human populations could remain stationary in one location and farm the land.

This was a fundamental shift in human history. Villages and towns started developing close to
fertile lands. There was no longer a need for everyone in the community to be directly involved
with food production. People didn’t need to spend all day hunting and gathering for their own
sustenance it was more efficient to let a smaller number of farmers handle food production while
the rest of the population focused on other tasks by specializing in different professions,
members of the community could trade valuable goods for food. These were the earliest
entrepreneurs in human civilization.

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Contrary to the assumption of Western-based models that entrepreneurial career is chosen, in
Africa, most entrepreneurs are forced into it by the urgent need to earn a living and survive
(Olomi and Rutashobya, 2014). In Africa the expansion of entrepreneurship is curtailed by legal,
administrative, socio-economic and political factors rather than the characteristics of
entrepreneurs themselves (Lydall, 2016). Given this background, concerted entrepreneurship
development is imperative in order to cultivate entrepreneurial talents in the business
community.

What has been written about entrepreneurship in Africa paints a gloomy picture (Elkan, 2017). It
stresses the difficulties that Africans have sometimes experienced in running large and even
small businesses (Elkan, 2017). Part of the gloom stems from viewing entrepreneurship in the
wrong context. In a less restrictive economic environment, entrepreneurship is not likely to prove
the bottleneck that is often feared. In particular, African entrepreneurship is more likely to
succeed in relatively small businesses than in the large undertakings.

An initial upsurge of development of most societies has often been attributable to the enterprise
of a minority group as it is the case with the Chinese in Southeast Asia; "Levantines" in West
Africa; Asians in East Africa; Parsees in India; Samurai in nineteenth-century Japan; and Non-
Conformists, especially Quakers in seventeenth-century England. They did not share a common
race or beliefs that predisposed them to entrepreneurial aptitudes. However, they were all
minorities, and their feelings of insecurity may have encouraged them to seek economic success
(Hoselitz, 2015; Elkan, 2017). Schatz (2015) writing specifically about Nigerians, found them
"responsive to the possibility of gain and ready to pursue economic advantage vigorously and
strenuously.” He also describes them as "flexible and venturesome, willing to seek far and wide
and to take risks in the quest for profit.”

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1.1.2 Conceptual background

Entrepreneurship
Kilby (2014) defined entrepreneurship on three essential attributes. First is the ability to perceive
potentially profitable business opportunities. Second is the willingness to act on what is
perceived. Third is the necessary organizing ability to align all available resources into a
profitable combination with a profit generating potential. Entrepreneurship operates in an
environment greatly influenced by government policy.

Timmons & Spinneli (2017) define entrepreneurship as a way of thinking, reasoning and acting
that is opportunity obsessed, holistic in approach, and based on leadership balance. From the
selected definitions of entrepreneurship in this study, there is agreement that we are talking about
a kind of behavior that includes: - initiative taking, the organizing and re-organizing of social and
economic mechanisms to turn resources and situations to practical account and finally the
acceptance of risk or failure. Nevertheless, in the case of this study, the researcher opted for a
combination of Kilby’s (2014) and Timmons & Spinneli (2017) definition of entrepreneurship.

The capacity and willingness to develop organize and manage a business venture along with any
of its risks in order to make a profit. The most obvious example of entrepreneurship is the
starting of new businesses. In economics, entrepreneurship combined with land, labor, natural
resources and capital can produce profit. Entrepreneurial spirit is characterized by innovation and
risk-taking and is an essential part of a nation’s ability to succeed in an ever changing and
increasingly competitive global market place

http://www.businessdictionary.com/definition/entrepreneurship.html,27-08-2019,1:45pm.

Small and Medium Enterprises (SME)

Small and medium enterprises are a heterogeneous group, which include a wide verity of firms
that possesses a wide range of sophistication and skilled workers and operate in a very difficult
markets and institutional environment. The statistical definition of SME’s varies by country and
it’s usually based on the number of employees or value of an asset. (Hallberg, 2014)

Small and medium-sized enterprises (SMEs) are non-subsidiary, independent firms which
employ less than a given number of employees. This number varies across countries. The most

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frequent upper limit designating an SME is 250 employees, as in the European Union. However,
some countries set the limit at 200 employees, while the United States considers SMEs to include
Firms with fewer than 500 employees. According to the Organization for Economic Co-
operation and Development (OECD, 2015)

Divestopedia explains small and medium enterprises as, by definition, small; however, they
outnumber large firms by a wide margin. Though they do not have the resources of large
companies, their essence is entrepreneurial and, therefore, they are very important to the
innovation and growth of a country's economy.

Performance
Global Entrepreneurship Monitor (GEM) defined performance in relation to positive outcome as
a result of equitable use of resources. Performance entails the act of doing something
successfully using knowledge as distinguished from merely possessing it (GEM, 2014).

According to Ogutu (2014), performance is defined in terms of output terms such as quantified
objectives or profitability. Performance has been the subject of extensive and increasing
empirical and conceptual investigation in the small business literature

The accomplishment of a given task measured against preset known standards of accuracy,
completeness, cost, and speed. In a contract, performance is deemed to be the fulfillment of an
obligation, in a manner that releases the performer from all liabilities under the contract.
http://www.businessdictionary.com/definition/performance.html

Enterprises
Is a legal entity whose primary goal is earning profits by producing or supplying goods and
services in the market, The definition differs slightly from one by the (Ministry of Trade and
Cooperatives, 2014). According to which enterprises are Commercial venture other than
Technological and Consultancy services.
An enterprise refers to an Entrepreneurial activity, especially when accompanied by initiative
and resourcefulness. Read more: http://www.businessdictionary.com/definition/enterprise.html

4
According to (Merriam Webster 2014), an enterprise is a project or undertaking that is
especially difficult, complicated, or risky or is a unit of economic organization or activity
especially a business organization. Furthermore, she defined an enterprise as systematic
purposeful activity and readiness to engage in daring or difficult action.

Small Enterprise
A business engaged in commercial activities whose capital is exceeding 20,000 and not
exceeding 50,000 shillings, other than high Technological and Consultancy service Institutions
(Ministry of Trade and cooperatives, 2014).

Small businesses are privately owned corporations, partnerships, or sole proprietorships that

have fewer employees and/or less annual revenue than a regular-sized business or corporation.
Businesses are defined as "small" in terms of being able to apply for government support and
qualify for preferential tax policy varies depending on the country and industry. Small businesses
range from fifteen employees under the Australian Fair Work Act 2019, fifty employees
according to the definition used by the European Union, and fewer than five hundred employees
to qualify for many U.S.

https://en.wikipedia.org,29 August 2019.3pm

Medium Enterprise

Mbilinyi and Shundi (2018) defined Medium enterprises as those enterprises employing more
than five paid or unpaid employees including the owner. In this study, Medium Enterprises were
taken to be those businesses employing up to 49 persons as defined by URT (2017).

Entrepreneurship Skills
Skills that complement the ability of the entrepreneur to analyze situations, opportunities and
environments and assist the entrepreneur to organize, manage and assume the risks and rewards
of a business or enterprise (Kuratko and Hodgetts, 2018).

Entrepreneurship is ‘an individual’s ability to turn ideas into action. It includes creativity,
innovation and risk-taking, as well as the ability to plan and manage projects in order to achieve
objectives. It is seen as vital to promoting innovation, competitiveness and economic growth.

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Fostering entrepreneurial spirit supports the creation of new firms and business growth.
However, entrepreneurship skills also provide benefits regardless of whether a person sees their
future as starting a business. They can be used across people’s personal and working lives as
they encompass ‘creativity, initiative, tenacity, teamwork, understanding of risk, and a sense of
responsibility.

https://skillspanorama.cedefop.europa.eu,29 Agust 2019,2:30pm.

Schumpeter (Joseph Alois Schumpeter, who was an Austrian-born American Economist and
Political Scientist 2014) presented that the coming together of various disparate theories forms a
generalized set of entrepreneurship skills and guidelines. He then listed the characteristics of
entrepreneurs as given below; Risk-Bearers, Coordinators and organizers, Gap-Fillers, Leaders,
Innovators and Creative Imitators. He concedes that although these features are not the only
ones, but they do go a long way in explaining why some people become entrepreneurs while
others do not.

1.1.3 Theoretical background

Sociological Theories

The sociological theories on the other hand try to explain the social conditions from which
entrepreneurs emerge and the social factors that influence their decision (Osborne, 2014). Weber
and others hypothesized that the adoring entrepreneurial energies are generated by the adoption
of exogenously supplied religious beliefs (Weber, 2014). For the faithful, these beliefs, both in
their direct implications for practical conduct and in the entrained anxiety to generate signs of
favorable predestination, produce intensive exertion in occupational pursuit (Weber, 2015). The
occupational pursuit is presumed to be a systematic order of means to ends (rather than end
itself) and the accumulation of productive assets.

Opportunity–Based Entrepreneurship Theory

The opportunity-based theory is anchored by names such as Peter Drucker and Howard
Stevenson. An opportunity-based approach provides a wide-ranging conceptual framework for
entrepreneurship research (Fiet, 2015; Shane, 2016)

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Entrepreneurs do not cause change (as claimed by the Schumpeterian or Austrian school) but
exploit the opportunities that change (in technology, consumer preferences etc.) creates
(Drucker, 2015). He further says, “This defines entrepreneur and entrepreneurship, the
entrepreneur always searches for change, responds to it, exploits it as an opportunity”. What is
apparent in Drucker’s opportunity construct is that entrepreneurs have an eye more for
possibilities created by change than problem.
Stevenson (2014) extends Drucker’s opportunity-based construct to include resourcefulness. This
is based on research to determine the differences between entrepreneurial management and
administrative management. He concludes that the hub of entrepreneurial management is the
“pursuit of opportunity without regards to resources currently controlled”.

Psychological Theories

Psychological or personal theory brings out the difference in individuals’ attitudes. According to
these psychological theories, the difference in attitudes (i.e. the internal attitudes) and the ability
to judge and forecast the situation lead a person to become a successful entrepreneur (Holt,
2016). Islam (2017) observed that, perhaps the first and certainly, the most important theory of
Entrepreneurship’s psychological roots was put forward in early 1960’s by David McClelland,
who found that certain kinds of people, including and especially those who become
entrepreneurs have a high need for achievement, high need for affiliation, and high need for
power.

According to McClelland, high need for achievement (N-ach) is the desire to do well, not so
much for the sake of social recognition or prestige but for the sake of an inner feeling of personal
accomplishment. McClelland proposes that people with high N-ach have a strong desire to solve
problems on their own; enjoy setting goals and achieving them through their own efforts; like
receiving feedback on how well they are doing; are highly motivated; are likely to take
calculated risks and like autonomy (McClelland, 2014). According to McClelland these desires
are formed during middle childhood. Despite its wide acceptance, McClelland’s theory faced
criticism as it failed to discuss competence and ignored the influence of external environment.

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One of the elements in McClelland’s theory is willingness for risk taking (Risk taking
propensity). New venture creation involves taking risk and financing of such a venture is called
risk capital. McClelland and Everett Hagan attribute that the inculcation of the achievement
motive is associated to child rearing practices which stress standard of excellence, material
wealth, self-reliance training and low father dominance. These traits are formed during childhood
and produced by reasonably high standards of excellence imposed at a time when the child can
attain them (McClelland, 2014).

Furthermore, Shane (2015) notes that there are several ideas as to why someone becomes an
entrepreneur. Some of these ideas belong to the psychological theories of entrepreneurship,
which basically suggests that there are a number of psychological traits possessed by the
entrepreneur which allow him or her to undertake such a task. The following are the
psychological traits noted by Shane (2015) to be associated with an entrepreneur: - there is a
leader, the entrepreneur, who is the driving force behind economic events; inside the mind of this
entrepreneur is a vision of a future state that is preferred to the present state through a
semiconscious process of intuition and insight rooted in experience. The Entrepreneur develops
this vision and a strategy of how to implement it; this vision is promoted diligently and
passionately by the entrepreneur.

The job for many people provides a feeling of being “alive” or the satisfaction of serving society;
the strategy is deliberate and the overall vision is clear, however details may be malleable,
incomplete, and emergent; Entrepreneurial strategies tend to go along with simple centralized
organizational structures that respond quickly to the entrepreneur’s directives; Entrepreneurial
strategies tend to be used in niche markets that have not been noticed by the large industry
leaders. Essentially, Shane (2015) proposed that entrepreneur ought to see things that other
people are not to see as business opportunities and be able to act on them (risk taking). This kind
of inclination of behavior or traits can also be learned through training and other kinds of
education programs.
1.1.4 Contextual background

Today, entrepreneurs are the lifeblood of economies all over the world. Even in command
economies like China, entrepreneurs are valued for their contributions to the economy and
encouraged to innovate to compete with companies around the world.

8
The global economy combined with modern infrastructure and communications has introduced a
new age of competition to the world of entrepreneurship. No longer are you competing with
entrepreneurs in your tribe, town, village, or city: you’re competing with entrepreneurs all over
the world.
Many of these entrepreneurs can access cheaper means of production than you. They may have
better access to raw resources of cheap labor, for example. This has made modern
entrepreneurship more challenging and arguably more rewarding than ever before.

In Africa today, entrepreneurship is seen as one of the most sustainable job generation tools in
Africa. Roselyn Vusia, a  human rights advocate, points out that Uganda’s youth unemployment
estimated to be 83% according to the African Development Bank’s 2014 report, is one of the
highest in Africa.
Unemployment around the continent is also worrying. A 2014 study by Brookings Institution, a
Washington DC based think tank, found that African youth (15-24 years) constitute about 37%
of the working age population. The same age group, however, accounts for about 60% of jobless
people in Africa.

Kwame Owino of the Institute of Economic Affairs (IEA), a think tank based in Nairobi, says:
“High youth population, poor policy choices and a lack of comprehensive employment plans in
many African nations precipitate the high rates of unemployment.”

Ms. Vusia comments on one proactive approach: “The government of Uganda has implemented
an entrepreneurship strategy that is focused on skills development, resource provision and access
to markets. This seems to be bearing fruit,” she says.

The importance of entrepreneurship  was underscored at the July 2015 Global Entrepreneurship
Summit (GES) held in the Kenyan capital Nairobi,  attended by US President Barack Obama,
entrepreneurs from over 100 countries and a group of American investors, among others.

Speaking at the summit, President Obama lauded entrepreneurship for its promise for Africa with
participants at the GES agreeing with him that entrepreneurship is one of the key ingredients in
the toolbox to address youth unemployment in Africa, the region with the youngest population in
the world. 

9
1.2 Problem statement

SMEs are considered to be important in the economic development in Uganda as they are one of
the main sources of employment and income for the majority of Ugandans. The growth and
performance of SMEs in both formal and informal sectors has been increasing over the last
decade and their importance cannot be underestimated. A most recent Uganda study by Gakure,
Ngugi, Waititu and Keraro (2015) examined the effect of entrepreneurial skills on the
sustainability of Small and Medium Enterprises after the exit of the founders. The study
established that entrepreneurial skills have a great positive influence on sustainability of Small
and Medium Enterprises. However, to date, limited study has been conducted and availed to the
public on the effect of entrepreneurship skills on the performance of SMEs in Uganda despite the
various entrepreneurship development programs in the country. With this consideration, the
researcher seeks to ascertain the effect of the entrepreneurship skills on the performance of
Uganda’s small and medium size enterprises.
1.3 Purpose of the study

The purpose of this study was to examine the effect of Entrepreneurship skills on the
performance of Small and Medium Enterprises.
1.4 Objectives of the study

1. To define and understand Entrepreneurship skills.

2. To determine the performance indicators of SME
3. To establish the relationship between Entrepreneurship skills and SME performance.

1.5 Research questions

1.    What is an Entrepreneurship skill?

2.   What are the performance indicators of SME?  
3.    What is the relationship between Entrepreneurship skills and SME performance? 

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1.6 Scope of the study

1.6.1 Content scope

The study investigated the Management of small and medium enterprises and their performance
in Uganda; it scrutinized the effect of entrepreneurship skills on the SME performance.

1.6.2 Time scope.

The study considered a four year period from (2014 to 2017). This period was chosen so as to
enable new knowledge to be gained in relation to the more recent socio-economic trends,
policies and regulations relating to Uganda’s SME management and their performance.

1.6.3 Geographical scope.

The study was conducted in Mbale Main Market in Mbale district. It’s chosen because of its
location and the business nature in the area associated with fast growing investment
opportunities.

1.7 Significance of the study

The significance of the study was to contribute to the existing body of knowledge on the subject.
It was also meant to help policy makers to address the issues of management and performance of
small businesses. In particular, this study helped entrepreneurs to realize the challenges they face
in the small and medium enterprises' sector and it was also hoped that this study would make
some recommendations to overcome those challenges. The study also aids the efforts of other
scholars and libraries.

The findings of the study would also help the private sector to lobby for Asset financing policies
they make SMEs to thrive in developing countries like Uganda.

11
The study enabled the promoters of SMEs to sensitize management and entrepreneurship skill in
a way that help firms to perform well thus reducing the failure rate.

The findings of the study brought to light the relevance of development competences in
achievement of organizational goals at an SME level and acted as a feedback to all existing
providers of SME strengthening initiatives such as Enterprise Uganda and Private Sector
Foundation that have been involved in training SME Managers in an attempt to improve their
competences.

12
 CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

The previous chapter provided the introduction to this study. This chapter covers detailed
literature review of the main concepts of this research work namely entrepreneurship skills,
performance indicators of SME and the relationship between entrepreneurship skills and SME
performance.
2.1 Literature reviewed according to objective one: Defining and understanding
Entrepreneurship skills
An entrepreneur

According to Moore et al. (2017) define an entrepreneur as an individual who discovers market
needs and launches new firms to meet these needs. Kuratko and Hodgetts (2016) define
entrepreneurs as individuals who recognize opportunities where others see chaos or confusion
and are aggressive catalysts for change within the marketplace. Entrepreneurship is more than
the mere act of enterprise creation. Enterprise creation is an important facet in entrepreneurship.
The characteristics of seeking opportunity, taking risks beyond security and having the vigor to
push an idea through to reality make people with an important mindset (Holt, 2015).

In more recent times, the term entrepreneurship has been extended to include elements not
necessarily related to enterprise formation (Hisrich, 2014). Activities like conceptualization of
entrepreneurship are a specific mindset resulting in entrepreneurial initiatives like social
entrepreneurship, political entrepreneurship and knowledge entrepreneurship.

Entrepreneurship Skills
This are skills that complement the ability of the entrepreneur to analyze situations, opportunities
and environments and assist the entrepreneur/manager to organize, manage and assume the risks

13
and rewards of a business or enterprise (Kuratko and Hodgetts, 2017). That is, Entrepreneurship
skills are particularly important to performance in emerging market economies such as Uganda.
The skills may ignite more entrepreneurial opportunities and nature attractive innovative
enterprises that will eventually create successful entrepreneurs. Several researchers have
acknowledged the fact that skills such as management skills can be acquired. Personal qualities
have a strong influence on the management skills/ competencies of the entrepreneur (Baum et
al., 2014; Westerberg et al, 2016, Chandler and Jansen, 2016).
According to Shane (2015), an entrepreneur can discover only those opportunities related to
his/her prior knowledge. It is presumed that prior knowledge creates a “knowledge corridor” that
allows an entrepreneur to recognize certain business opportunities, but not others (Ardichvili et
al., 2014). Furthermore, literature reveals that the management skills of an entrepreneur refer to
knowledge, skills, and/or abilities required for managing a venture (Sambasivan et al., 2015).
Another study by Hood and Young (2016) found that financial management, accounting,
marketing and sales were meaningful skill areas of successful entrepreneurs.

Thus, to be successful, Malecki (2015) argues that entrepreneurs must know how to integrate
scientific knowledge, facts, and management techniques with contextual experience. This
implies that an entrepreneur’s management skills are favorable to business performance and
development (Cooper & Gimeno-Gascon, 2014; Bird, 2015). In addition, it has been
acknowledged that new ventures rely on whatever knowledge resources are brought to the table
by the founders (Brush et al., 2014).

Schumpeter’s innovation theory characterizes an entrepreneur with these two abilities innovative
or creative and foresight. This argument denotes that entrepreneurship takes place the production
of a new product, find an existing or new market for a product. The Schumpeter theory of
entrepreneurship focus more on profit of innovators and ignores the aspect of organizational
skills or what it takes for entrepreneurs to carry out a successful task (Nichter & Goldmark,
2017). By contrast to the view of Schumpeter, the study of “Alfred Marshall” cited in Scudder
(2016) argued that entrepreneurs are the driving factor that brings labor, land, capital and
organization together. Therefore, the characteristic of an entrepreneur should include; foresight,
understanding of the market, and ability to identify opportunities. Similarly, the study of (Coric,

14
Katavic, and Kopecki, 2014) review that successful Small and Medium Enterprise gather
information relating to the business environment than those who are less successful. This unique
skill gives the entrepreneur an overview of the business climate and helps to formulate a larger
picture of the business activities. Another study by (Stevenson, 2016) argues that entrepreneur
needs an innovative skill which comprises of the cognitive skills like creative; behavioral skills
like problem-solving skills are the type of cognitive ability. The study further argues that the
main reason entrepreneurs are successful is their abilities to imagine, innovates and work around
challenges within their environment. Nevertheless, skills along are not largely effective as the
local government should be involved directly in providing funds for capital investment in order
to promote entrepreneurial ventures (Faizan & Haque, 2016).
As empirical studies of (Hamm, 2014; Whetten & Cameron, 2015; Scudder 2013) have reviewed
that entrepreneurial skills influence the growth and operations of SMEs, the success of
entrepreneurial rely on the identification of competencies for start-ups and established
businesses, as well as their survival and early-year growth. The study of Whetten and Cameron
(2015) categories these skills into three groups namely “personal, interpersonal and basic
management skills”. Managerial level personnel are more adaptive and use social support
constructively (Haque, Aston, & Kozlovski, 2018). Hence, adaptability is a skill that could be
used by having higher social orientation. Different from the above authors, the research of
Whetten and Cameron (2015) was able to group all skills identified by past authors into these
three groups. Model of vital Entrepreneurship skills are listed in table 2.1 below.

Table 2.1: Entrepreneurship Skill.

Personal skills Problem-solving, creative thinking.

Interpersonal skills Motivating others, Managing Conflicts
Group skills Leading others, teamwork
Additional management skills Communication
Source: Whetten and Cameron (2015).
This study therefore matches the identified skills to broaden the scope of the study; therefore,
this study has chosen communication, problem-solving, leadership, creative thinking and
teamwork as identified by (Stevenson, 2016; Whetten and Cameron, 2015; Scudder 2013)

Creative Thinking

15
Globalization in today’s business world has brought the international market which makes it easy
for manufacturers to transport their products internationally. Therefore, there is an easy access to
product everywhere for both consumers all sorts of qualities and type. The debate over the
definition of creativity and the link between creativity and entrepreneurship is limited. Creativity
according to the study of (Ward, Finke & Smith 2014) is the development of right and new
solutions. While Creativity was described as the capacity to produce new or unique work that fits
with some assignment restraints (Lubart, 2017). Deducing from these definitions is quite obvious
that creativity describes a novel and valuable ideas. According to Schumpeter’s creativity and
innovation goes hand in hand. Therefore, creativity conceals ideas and innovation implements
the ideas. On the other hand, Haque, Faizan, & Cockrill (2017) argued that creativity is essential
component in determining the competitiveness. Investment theory of creativity proposed by
Sternberg implies creativity to be a personal choice, so far there is an investment of time and
effort into the creative method. The theory further describes the kind of creativity as “intellectual
abilities, knowledge, ways of thinking, personality, motivation, and the environment” (Sternberg,
2017). The intellectual skills give the potential to differentiate a good idea from bad ones.
However, a creative mind needs entrepreneurial skills to actualize the ideas to business. Through
creative thinking, an entrepreneur does not just have ideas but assess the requirement of how to
execute and establish the success of those ideas. Thus, an entrepreneur demonstrates the
difference between creative intellect and old-style business method.

Problem solving
Adaption-innovation theory (AIT) founded on the assumption that each person is creative and
solves problems (Buttner & Gryskiewicz, 2014). According to Kirton entrepreneurs should be an
adaptor and innovator, that is strive to do things better (adaptor) and differently (innovation).
Research has proved that this skill is important to any profession (Woods et.al, 2016). Problems
are viewed as “complex systems which each correspond to a large number of decisions that
interact in a difficult way” (Simon, 2015, p. 486). Problem-solving is the ability to use facts,
knowledge, and data efficiently in resolving any complications (Kerzner, 2017). Similarly,
(Gardiner, 2005) defined problem-solving as the process of seeking best answer to an unknown
subject. Entrepreneurs face several problems while managing their small or medium scale
businesses. However, the ability to develop solution within a short is an extraordinary skill.
Therefore, creative and problem-solving skills are considered by the study of (Buttner, &

16
Gryskiewicz, 2014) as the most important key to the growth of entrepreneurial. Also,
entrepreneurs were described as a problem solver who seeks to resolve either economy or
personal difficulties with the right styles.

Teamwork skills
Entrepreneurs are often encouraged to work with a team of other people so as to increase the
possibility of idea commercialization (Marks and Richards, 2014). The empirical study of
(Gardiner, 2015) argues that entrepreneur with high-quality projects need a partner for a financial
assistant or idea development. On the other hand, team work is effective to overcome challenges
(Zehra & Faizan, 2017). The theory of “entrepreneurship with specialization and business
transfer” developed by Holmes and Schmitz (2016) denotes that individual has different abilities
in developing ideas and opportunities. However, the theory finding was that person with an
advantage in entrepreneurship might find it best to specialize in the creation of business and the
administrative to someone qualified in management. Therefore, successful entrepreneur leverage
teamwork to enable the growth and success of its venture.

Communication skills
Communication is the act of transferring ideas to ensure a clear meaning (Barret, 2016).
Similarly, Hergie (2017) argue that communication is a social skill that is essential for business
growth. The effect of communication in business growth hangs on some practices that should be
in place. According to the model of communication, there should be regularity and an excellent
information network to ensure communication success (PMI, 2018). The research of Dollinger
(2013) implies that communication is the bedrock of entrepreneurship business. Thus, this
depends on particular skills such as listening, speaking and writing. This unique skill will help
entrepreneur pass information to their customers through the use of words, adverts, body
language, reports and so on.

Leadership skills
Research has identified leadership ability as one of the most important skills an entrepreneur
should possess for business growth (Hamm, 2014). The research according to Yang (2016)
describes leadership as the ability to sustain innovation and adapt to an uncertain environment.
Quality Work Life is more effective for employees when working under specific leadership style
(Faizan & Zehra, 2016).The study also stated that entrepreneurs should be “team-oriented,

17
transformational, and value-based.” The growth of an organization is not recorded without the
assistance of individual and collective efforts; thus, business growth needs “human agency”
(Bass & Bass, 2018). Leaders of SMEs need the ability to grow their businesses, stirring their
team by ensuring adequate communication, appreciating the views of other and encouraging
contributions.

One of the necessary Entrepreneurship skills that entrepreneurs need to have is a good plan. This
in turn can help the entrepreneurs in business marketing and earn the trust of customers and
suppliers (Batten, 2014) and thereby contribute to business success. Perelman (2015) reviewed
the management style of women entrepreneurs in high technology industries, in a rapidly
changing environment. These entrepreneurs were found to make decisions in an environment
that is clouded by uncertainty and ambiguity, thus, good decision is largely dependent on their
judgment. Perelman found that to be successful in their businesses, decisions that they made
needed to reflect the changing needs of high-tech industries. In addition, they were flexible in
risk-taking, focus, personal involvement in day-to-day running of the business, creativity, energy
renewal (innovation), understanding (insight) and business impulse (intuition) (Timmons and
Spinelli, 2017; Hilsrich et al., 2014). All these were required to ensure good management skills.
In summary, based on the literature reviewed above, some of the most important
Entrepreneurship skills which affect entrepreneurial success are listed in Table 2.2
Table 2.2: Entrepreneurship Skill

S/N Skills

1 Opportunity recognition

2 Willingness to act on opportunity

3 Aligning available resources to maximize profit

4 Using prior knowledge of customer needs and ways to meet them

5 Risk propensity and Management skills

Source: Compiled from Literature Review (Timmons and Spinelli, 2014)

18
2.2 Literature reviewed according to objective two: Performance indicators of small and
medium enterprises

This section reviews the key performance indicators of small and medium enterprise, those
included in this study include, Business size, Liquidity, Growth revenue, firms age, production
costs, Operating expenses and Profitability.
Business Size
Small and medium enterprise’s performance is positively related with firm’s size. Arguments
were floated by Hardwick (2016) that there is a positive relationship between performance and
company size due to operating cost efficiencies through increasing output and economizing on
unit of cost. Large corporate size also enables investors to effectively diversify their assumed
risks and respond more quickly to market conditions.

A positive relationship between firm size and profitability was found by Vijayakumar and
Tamizhselva (2017). In their study, which was based on a simple semi logarithmic specification
of the model, the authors used different measures of size (sales and total assets) and profitability
(profit margin and profit on total assets) while applying model on a sample of 15 companies
operating in South India. Papadognas (2017) conducted analysis on a sample of 3035 Greek
manufacturing firms for the period 1995-1999. After dividing firms into four size classes he
applied regression analysis which revealed that for all size classes, firm’s Profitability is
positively influenced by size.

Liquidity
Liquidity of the firm is a key determinant of the firm’s financial performance. Liquidity risk can
be measured by two main methods: liquidity gap and liquidity ratios. The liquidity gap is the
difference between assets and liabilities at both present and future dates (Pelg, 2016). Liquidity
ratios are various balance sheet ratios which should identify main liquidity trends. These ratios
reflect the fact that a firm should be sure that appropriate, low cost funding is available in a short
time. This might involve holding a portfolio of assets that can be easily sold, cash reserves,
minimum required reserves or government securities. (Santalo and Becerra, 2018).

19
Liquidity as studies done by Shiu (2014) proves that companies with more liquid assets are likely
to perform better as they are able to realize cash at any point of time to meet its obligations and
are less exposed to liquidity risks. By not having sufficient cash or liquid assets, companies may
be forced to sell investment securities at a substantial loss in order to settle claims promptly. This
in effect will affect their performance.

Recognizing the limitations of relying solely on either the financial or non-financial measures,
owner-managers of the modern small businesses have adopted a hybrid approach using both the
financial and non-financial measures (Chou, 2018). In this study enterprise performance will be
measured in terms of sales revenue, asset accumulation, employment creation and loan
repayment.
Revenue Growth Rate
Profitability and growth are the key variables in economic analysis of a firm’s performance.
Growth can occur in many different aspects of a firm’s operations such as its cash flow, net
income, and customer base, sales and market share (Murphy et al, 2014). To examine the growth
of small and medium-sized British firms. Robson and Bennett, (2016) in their study observed a
positive relationship between both profitability and sales growth.

Better growing firms increase their profitability. If there is an increase in total assets it means it
has a high growth and it tends to be more profitable. We will measure growth as a percentage
increase in total assets. Thus we expect positive relationship between growth rate and
profitability of firms (Nousheen and Arshad, 2013).

Kalleberg & Leicht (2016) developed the following key performance measures after a study on
400 entrepreneurs. Firstly, primary performance measures (Number of employees, growth in
employees, number of customers, sales turnover and value of capital assets); secondly, proxy
performance measures (geographical range of markets- national versus international markets,
and formal business; thirdly, subjective measures (including the ability of the business and
domestic needs- confidence in running a business); and fourthly, entrepreneurial performance

20
measures (the desire to start a business or the desire for growth and ownership of multiple
businesses).
Among the most frequently used indicators are business survival, growth in employee volume
and profitability (Bidzakin, 2016). A business enterprise could measure its performance using the
financial and non-financial measures. The financial measures include sales revenue, profit before
tax and turnover, while the non-financial measures focus on issues pertaining to customer
satisfaction and customer referral rates, delivery time, waiting time and employee turnover or
creation of employment (Bidzakin, 2016).

Age of the Firm

Age is a key indicator of performance of the firm. The period of operation that a firm has been in
operation highly indicates the performance of the firm. Firms that have a vast experience in the
market are able to gain economies of scale from the suppliers and other stakeholders of the firm
as a result of good relationships and trust. Such a firm is more likely to perform better than a firm
that is new in an environment. The firm might spend a lot of money before it gets adapted to the
new environment (Santalo and Becerre, 2018).

A growing asset (Size) is related to the age of the organization (Shekhar & Lekshmy, 2017). The
quality of assets is a very important criterion that determines the ability of an Organization to
earn consistently. It basically determines the profitability of the Organization. It also explains the
suitability and growth in earnings in the future.

Kolvereid (2014) found that individuals with prior entrepreneurial experience had significantly
higher entrepreneurial intentions than those without such experience. Conversely, Mazzarol, et
al. (2015) found that respondents with previous government employment experience were less
likely to be successful founders of small-businesses. However, the authors did not investigate the
relationship between previous employment experience in private companies and entrepreneurial
intentions. A research by Charney and Libecap (2014) found that entrepreneurship education
produces self-sufficient enterprising individuals. Furthermore, they found that entrepreneurship
education increases the formation of new ventures, the likelihood of self-employment, the
likelihood of developing new products, and the likelihood of self-employed graduates owning a

21
high-technology business. Also, the study revealed that entrepreneurship education given to
employee increases the sales growth rates of emerging firms and graduates’ assets.
Production Costs and Operating Expenses
Rivera and Oliva, (2013) cites that production costs are expenses, such as materials and labor
that a company incurs in the course of producing the product to sell to consumers. While
operating expenses refer to selling, general and administrative expenses. In general, the lower the
costs, the higher the profit, or the amount left over after subtracting expenses from sales revenue.
However, low production costs do not necessarily guarantee a high profit. A business may have
unsustainably high fixed costs, such as rent, or may cut production costs of producing an inferior
product that nobody wants.

A firm maximizes profit by operating where marginal revenue equal marginal costs. A change in
fixed costs has no effect on the profit maximizing output or price. The firm merely treats short
term fixed costs as sunk costs and continues to operate as before. This can be confirmed
graphically (Faizan, 2016). Using the diagram illustrating the total cost, total revenue
perspective, the firm maximizes profit at the point where the slopes of the total cost line and total
revenue line are equal. An increase in fixed cost would cause the total cost curve to shift up by
the amount of the change. There would be no effect on the total revenue curve or the shape of the
total cost curve. Consequently, the profit maximizing point would remain the same. This point
can also be illustrated using the diagram for the marginal revenue-marginal cost perspective. A
change in fixed cost would have no effect on the position or shape of these curves (Palepu et al,
2016).

Stoner (2014) adds that performance entrails effectiveness which refers to the firm’s ability to
serve and produce what the market requires at a particular time and efficiency, which means
achieving the objectives at the lowest cost possible with highest possible benefits. Balunywa
(2015) looked at performance in terms of competitive performance, financial performance, and
quality of service, flexibility, resource utilization and innovation.

Profitability

22
Profitability is the primary goal of all business ventures. Without profitability the business will
not survive in the long run. Profitability results from the excess of income over expenses. A firm
that is highly profitable has the ability to reward its owners with a large return on investment
(Hovakimian et al, 2014).

Firms facing financial constraints are unlikely to meet their investment obligations. The firm
may be paying out more than it is receiving and more likely to go bankrupt (Stewart, 2016). This
implies that in the long run the chances of survival of the firm are low and this would yield a
lower valuation. On the contrary firms with adequate cash flow are likely to meet their financial
obligations on time and hence improved performance.

Studies by Whyte (2010), show that performance can be measured at both organization and
individual levels and this measurement is sometimes referred to as performance appraisal. He
urges that organizations have desired potentials in terms of capacity attraction, market share and
financial strength and that performance is the difference between those potentials and what has
been achieved.

Furthermore, performance would be looked at in terms of financial strength of the enterprise.

Stoner (2014) reveals that profitability has been the most widely used measure of financial
performance. Profitability is the excess of income and expenditure which can be expressed by
ratios of Gross profit margin, net profit and return on equity.

23
2.3 Literature reviewed according to objective three: The relationship between
Entrepreneurship skills and the Performance of small and medium enterprises.

Tahlil and Muzahid (2015) postulated that the economic growth of the country largely depends
upon the entrepreneurial skills of its people. Entrepreneurial skills are among the critical success
factors for SMEs (Suk Lee and Stean, 2013, Nehete et al., 2014). Various studies have been
conducted to examine the relationship between entrepreneurial skills and the success of SMEs.

Ahmed, 2014 and Bula, 2013, Suggests that both entrepreneurship skills and small and medium
businesses are recognized as significant players in socio-economic development. They both have
been noted for employment creation, economic growth, economic development and economic
transformation. Uma (2013) supports this view by pointing out that, SMEs and entrepreneurship
play a significant role in socio-economic transformation of national economy. Thus, both SMEs
and entrepreneurship skills aim towards the same objectives (Lucky, 2014).

Lucky and Minai (2014) acknowledge that, in spite of their differences, the following similarities
can be identified between SMEs and entrepreneurship: they are both affected by the same
factors. Thus, their success or failure is determined by some set of similar factors. For example
environment, culture, location, individual characteristics, and firm characteristics, among others.
The authors advise that in the study of SMEs and entrepreneurship skills, these factors cannot be
neglected as they significantly determine the outcome of both concepts.

SMEs in Uganda are not only substance of change and growth in the economy at large, but they
are also the bedrock of the nation (Ihua,2017). Innovation is an essential characteristic of SMEs
(Levy and Powell 2015). Thus, globalization has brought about changes in customer’s demand
so pressuring SMEs to greater demands (Morrison, 2016). According to Morrison (2016), the
ability of suppliers to listen to customers and understand their expectation of product is very
crucial to business growth. According to Vanguard Media (2015) highlights the lack of skilled
labor among youth population is an obstacle to small businesses development and inability to
business owners to communicate with their customers. Hence, it is difficult for them to employ
highly skilled expertise as a result of expensive labor turnover.

24
Lind (2015) argues that entrepreneurship growth entails the development of business skills such
as communication and ability to solve problems. Correspondingly, Osalor (2016), who argue that
an SMEs growth will require entrepreneurial, creative skills, ability to work with others and a
good method of communicating product to customers which can be developed through training.
Reports on entrepreneurial in the “Asia productivity organization” context review that working
with others and ability to lead others associate with SMEs growth and guarantee competitive
opportunities (APO, 2017). The empirical research of Coric, Katavic, and Kopecki, (2014)
concluded that entrepreneurs need more sophisticated skills such as managing conflict,
leadership, creativity and communication before their meaningful growth. Furthermore, the study
of Bosire and Nzaramba identified creativity and communication as skills needed by
entrepreneurs for business expansion

Furthermore, Lucky and Olusegun (2012) concede that SME owners/managers and entrepreneurs
tend to possess the same or similar characteristics or traits for business management. They list
the following as some traits both possess: initiative (self-initiated individuals), perseverance
(strong determination and patience), emphasis on diligence, commitment to agreement/contract,
orientation towards perseverance (patience), systematic planning, creative problem-solving, self-
confidence, use of influencing strategy (ability to influence other people), integrity and
reliability. According to the authors, these traits have assisted both SME owners/managers and
Entrepreneurs to effectively and successfully excel in their various endeavors (Ihua, 2017).

Excellent entrepreneurship skills are of highest importance in order to lead an innovative firm to
success. However, while many entrepreneurs need to acquire an excellent education and
experience in their specific scientific area, they often lack business management capabilities
(Hamm, 2015). This constitutes a threat to their survival and is a major constraint and obstacle to
their growth and development, which often prevents them from transforming the excellent
scientific and technological competencies into the real economy.

This is the most commonly occurring ‘internal’ factor in business failure among SMEs (Levy
and Powell 2015). Even other internal causes of business failure are often linked to poor
management. Most small businesses are set up by one entrepreneur, or a small group of them,
who have what they believe, are a good idea for creating a product or service. Many SME

25
owners/managers however do not always have skills and experience in areas such as business
planning, financial reporting, marketing, customer relations and financial management (Lubart,
2017). The company is at risk when you, as an entrepreneur do not possess the appropriate
knowledge and either does not recognize this lack of expertise or are not willing to ask for
advice.

To support the creation and growth of SMEs, entrepreneurial capacity building is a key aspect.
Indeed, without the necessary entrepreneurship skills, many viable companies with good product
offers never reach their potential or might even risk being led out of business, by competition or
by lack of treasury for example (Buttner, 2014).

The smaller the size of the SME, the more the attitudes and entrepreneurship skills of the head of
the SME are critical to ensure the success of the SME and the potential development (Simon,
2015). Heads of SMEs’ outlook on training and entrepreneur development have a determinant
impact on the whole management capacity of the SME.

Regarding the openness of the head of SME towards challenging his/her daily routines and the
established patters of the SME, it is noteworthy to take into account that one of the main drivers
for setting up one’s own venture is a drive for autonomy (Homes & Schmitz, 2016). This drive,
often correlated with a strong personality and/or power/control issues, might be counter-
productive with regard to the willingness to acquire knowledge from outside sources or the
ability to acknowledge in time weak points in the functioning of the business. Some control
oriented entrepreneurs are reluctant to developing their business as they would need to employ
more people and delegate tasks and thus lose some grip on their business (Papadoganas, 2017).
Those traits also influence the preferred ways in which the entrepreneur is likely to acquire
knowledge, i.e. through an activist hands-on problem solving approach and from trusted sources,
not through being lectured in a class-room type of setting.

Thus, as regards the entrepreneurship aspects influencing the competitiveness of each SME and
its future prospects, two elements are especially relevant (Vanguard Media (2015): The financial
aspects of managing treasury and profitability on the one hand, as well as an understanding of
the SME’s competitive position on the market and its environment on the other hand.

26
SME managers face delegation and lack-of-time problems when attending a training activity,
since they cannot be away from the enterprise too long. Additionally, most SME managers are
subject to the uncertainty of how business will develop and the resulting undesirability of
enrolling for training months in advance. These difficulties result in an obvious demand for short
and flexible courses (Drucker, 2015). Training costs seem to be a less relevant barrier for
management training in comparison to other issues such as location, duration or contents of the
course

‘To transform the economy, the Government of Uganda finalized a new five year National
Development Plan (NDP) spanning FY2011-2015 in February 2010. The NDP’s main theme is
“Growth, Employment and socio-Economic Transformation for Prosperity,” marking a
broadening of the country’s development strategy from poverty reduction to structural
transformation with the aim to raise growth and living standards and transforming Uganda over
into a modern and prosperous country within thirty years. (Uganda Investment Authority
Quarterly Report, 2011).

The Uganda Investment Authority (UIA) charged with the management of legal advocacy,
promotion, facilitation and oversight of the Ugandan environment partnered with UNIDO
implemented the Investment Monitoring Platform (IMP) and demonstrated its application 7to
11th November 2011 at Hotel Africana, Kampala, Uganda. It is a web-based interactive data base
that will provide information on foreign and domestic enterprises in more than twenty countries
in sub-Saharan Africa (Uganda Investment Authority Quarterly Report, 2011).

The role of small and medium industries or enterprises is inevitably important in the world
economy (Stevenson, 2014). Small and medium enterprises (SMEs) have been exposed to
business competition and business environment which show the importance of competitive
strategy for their export performance so that they can compete or deal directly with large
companies. In this condition, the performance of SMEs is largely determined by their
competitive strategies which are supported by the ability to obtain and manage information in the
market.

Evidences have shown that for any small scale enterprise to be successful, owner manager must
possess appropriate skills and abilities to run the business (Orisanaiye, 2016, Okpara and Wynn,

27
2017). It is therefore, very important for entrepreneurs in Uganda to develop all necessary skills
required for setting and effective running of the enterprises in order to contribute meaningfully to
development and self-reliance of the nation’s economy toward the achievement of the MDGs.

To succeed in today’s competitive market as an entrepreneur; one needs a broad array of

entrepreneurial skills. Terry (2015) argued that business owner needs to possess basic skills
necessary to start, develop, finance and market own business. Entrepreneurial skills compares
favourably with the basic skills required for starting, developing, financing and marketing
business enterprise as opined by Lyve (2015). Furthering this, Akande, (2016) described
entrepreneurial skills as qualities or attributes required for an entrepreneur to start and
successfully manage a business in a competitive environment.

While the contributions of small business to development are generally acknowledged,

entrepreneurs face many obstacles that limit their long term performance and invariably, their
development and growth. Research on small business development has shown that the rate of
failure in developing countries is higher than in the developed world (Arinaitwe, 2016). The
reason for the increased failure rate is worth investigating. For instance, Oladejo (2018) argued
that accounting skill is necessary for successful entrepreneurial and small business development
in Nigeria. This is because the inability to install a proper accounting system would disallow
business monitoring, reporting, and performance evaluation that are germane to the business
survival. Small business has failed in the past for ignoring this vital measurement apparatus.

Hardono (2013) suggests that principally SMEs have some classic barriers, i.e. barriers
associated with low quality of human resources (HR), lack of business management, low access
to sources of financing and markets, as well as the lack of information and technology. SMEs
face business barriers and limitations in export which are classified into two categories: internal
and external.

The potential and ability to carry out innovations based on skills, mastery of technology, human
resources and capital accumulation of medium sized enterprises are better than those of small
businesses (Jansen & Chandler, 2016). Similarly, their ability to access markets, information and
funding are too. In addition, flexibility in responding the market enables the medium-sized
enterprise to be tougher to survive than large businesses are. Thus, in the context of free

28
competition, it is necessary to promote medium-sized enterprises by improving efficiency and
innovation and encouraging competitiveness.

Neneh (2014) says that business success in the new economy is merely not a function of relevant
skills but also requires people who have entrepreneurial mindsets. The author further asserts that
as much as entrepreneurial mindset is important for business success, it is also vital to understand
the current level of entrepreneurial mindsets in each entrepreneurial community by identifying
which factors are lacking and need to be improved as a means of fostering success of
entrepreneurs. According to Lalkaka (2017), business incubators help in tackling the obstacles
faced by the entrepreneurs and thus facilitate venture creation and development process. In
addition, Kark (2014) notes that nurturing of intensive small and medium firms through
incubators have been recognized as one of the main devices of Korean economic policy.

29
2.4 Conceptual framework:
A conceptual framework is a research tool for developing awareness and understanding of the
situation under scrutiny and to communicate it. It assists a researcher to make meaning of
subsequent findings (Guba and Lincoln, 2014). A conceptual framework explains the possible
connection between the variables and answers the why questions (Smyth, 2014). By examining
the entrepreneurial skills possessed by the SME owners, the study brought to attention the effect
of these skills on business performance of the respective entrepreneurs. This relationship is
represented as below in Figure 2.1.

Figure 2.1 Conceptual framework

Independent Variable Dependent Variable

Entrepreneurship skills Performance indicators

Creative thinking of SME
Problem solving Business size
Communication skills Revenue growth rates
Teamwork skills Liquidity
Profitability
Leadership skill
Age of the firm
Perseverance
Production costs
Risk Taking

Intervening Variables
Government policies
Economic Climate
Cultural issues

Source: Developed for this research (2019)

30
 CHAPTER THREE
METHODOLOGY

3.0 Introduction

This chapter outlines the methods adopted in order to answer the research questions detailed in

chapter one. It looks at the research design, research population, sampling techniques, data

collection instruments and procedure of data collection, mode of data analysis and presentation

as well as ethical consideration and limitations of the study.

3.1 Research design.

Research design is the conceptual structure within which research is conducted. It constitutes the
blueprint for the collection, measurement and analysis of data (Kothari, 2008). There are three
categories of research designs namely exploratory, explanatory, and descriptive (Yin, 1994;
Easwaran and Singh, 2010).
In this study descriptive research was adopted because this research was concerned with
describing the characteristics of the problem with narration of facts and characteristics of
individuals, group or situation that the research is investigating (Kothari 2008). Furthermore, this
study adopted a descriptive research design, which according to Cooper and Schindler (2013)
involves surveying people and recording their responses for analysis. The justification for the
adoption of descriptive research design was based on its ability to generate the required data
from the sampled respondents for analysis.

In addition, this study incorporates both quantitative and qualitative research approaches within
the descriptive design in order to better understand relationship between variables in the research
problem. The quantitative approach was through questionnaire while qualitative approach
through use of interviews that allowed the researcher to collect information for understating
characteristics of respondents in situations and helped to uncover rationale for their decisions
(Saharan, 2014).

31
In general a combination of quantitative and qualitative approaches was used for several reasons.
First, since this is not a statistical research, what is needed is to gather views of the population
and the number of participants is not critical but rather attempts is made to be representative.
Secondly, the research sought to understand the phenomenon in terms of effects of
entrepreneurs’ skills on enterprise performance. Thirdly information is intended to complement
data from interviews. Finally, there is little theory about the phenomenon and little or no research
as the case in this study. The use of combination of both quantitative and qualitative research
designs is recommended (Newman, 2014; Patton, 2017).

3.2 Research Population.

Sekeran (2014) basically defined population as the universe of units from which the sample is to
be selected. The term ‘units’ is employed because it is not necessarily people alone who are
sampled. It can also be defined as the entire group of people, events, or things of interest that the
researcher wishes to investigate. According to the Census of Business Establishments in Uganda
of 2014, a sampling frame of 484,604 enterprises was identified from the whole country. Tshe
study therefore used data that was collected from businesses located in Mbale Main Market,
Mbale District. The population of businesses in Mbale Main Market is just 10.6% (200
establishments) (National Small Business Survey Report, 2015). These SMEs were selected
because they are growth-oriented in order to understand the effect of entrepreneurship skills on
the performance of small and medium enterprises case Mbale Main Market.

3.3 Sample size

A sample size is a portion or subset of the study population which is used to represent the
population of the study (McDaniel and Gates, 2013; Kothari, 2008). Information gathered from
the sample can be generalized to the general population of the study if samples are carefully
selected to reflect the population characteristics. There are several methods of determining
sample size and these include use of mathematical formula, statistical tables (Kotrik and
Higgins, 2016) and general rule of 40% of the population (Huysamen 2017). Furthermore,
Godfrey (2014) proposed a 25% general rule for a population that contains 400 - 1000 research
participants who are highly dispersed. In this research, Huysamen (2015) rule of 40% of the

32
population method will be used to determine the sample size of 80 i.e. (40% of 200). These are
small and medium enterprises from various business categories that operate businesses which
have been operating for at least 2 years.
Other rules that will be used in determining sample size in this research. For example, Bartlett et
al. (2016) suggests that, for a population which is less than 100 units, the researchers has to take
the entire population because it is not large enough to generate scientifically useful statistics.
Since the population of Entrepreneurs in this study was less than 100, the entire population of 30
and 25 respectively was taken. Given that this is not a statistical study a sample size of 40
respondents was considered appropriate for this study (80 small and medium enterprises, 25
entrepreneurs). Table 3.1 shows the sample size in each stratum from target population.
Table 3.1. Population and sample size table.

Categories Population Sample size

Small and enterprises 200 80
Entrepreneurs 30 25
Total 230 105
Source field, 2019

3.4 Sampling Techniques

Sampling is a systematic process of selecting the number of individual cases/units to provide

information needed for the study (Kombo and Tromp 2016). Thus, sampling is important in
research due to the limitations in studying the whole population and reduction of both costs and
time required since a small number of units have to be investigated (Easwaran and Singh, 2016;
Robinson, 2017).
There are two major categories of sampling techniques: probability sampling (random sampling,
systematic sampling, stratified sampling and cluster sampling), and non- probability sampling
(purposive sampling, judgmental sampling, convenience sampling and snow-ball sampling). This
research used stratified sampling and purposeful sampling designs (techniques) to obtain samples
used in each population category as explained in the following sections.

33
3.4.1 Stratified Random Sampling

The study used a stratified probability sampling in the selection of respondents (Entrepreneurs)
who are operating different businesses. Kothari (2008) recommends that if the population from
which a sample is to be drawn does not constitute a homogenous group as in this study then
stratified technique should be applied so at to obtain a representative sample.

This stratified random sampling technique was implemented as follows: first organizing the
population in homogenous business categories (such as wholesale, retail, and hotel/restaurants)
before sampling and then drawing a sample from each subset using their clients as the sampling
frame by taking every third from the group. This technique is also in synch with concept of
dividing respondents based on their demographic characteristics that is underpinning this
research effort. Hence, using this sampling technique, 40% was proportionately selected from
each business category in the district to form the study sample.

3.5.1.2 Purposive Sampling

For the interview, the researcher used purposive sampling to select a sample of 80 small and
medium enterprises) from the 40 respondents. This was considered reliable and was able to
provide resourceful information for the study. This involved using personal judgment by the
researcher’s perception that those persons is in a better position to provide the information
needed for the study. This approach is in line with Kombo and Tromp (2016) who recommend
that purposive sampling procedure can be used with both qualitative and quantitative researches
where the intention of the study is to understand the audience and their behavior. Other issues of
gender, geographical location and mix of business categories are incorporated in selecting the
study sample within purposive sampling procedure.
3.6 Sources of Data and Data Collection Instruments

3.6.1 Data Sources

Data are facts and other relevant materials, past and present, serving as basis for study and
analysis (Krishnaswami and Ranagnatham, 2016). In social research such as this the data needed

34
may be broadly classified as primary and secondary data. Data for this study was collected from
the field both as primary and secondary data.

3.6.1.1 Primary Data

Kothari (2008) defined primary data as those data collected afresh and for the first time and
mostly are original in character. In this study, various research instruments will be used to collect
primary data and these include self-administered questionnaires and interviews. The primary data
was based on the research questions of the study.

3.6.1.2 Secondary Data

Secondary data is the data that is already in existence and found in published reports, books and
internet (Saunders et al, 2013; Easwaran and Singh, 2014) and may be used by researchers for
their studies (Krishnaswami and Ranagnatham, 2016). In this research, the secondary data was
collected from reviewing existing entrepreneur’s database.

3.5 Research Instruments

This study will use questionnaires, guided interviews, guided observation, and record
sheets .This is because of the nature of data to be collected, the time available, as well as by the
objectives of the study. The overall aim of this study is to evaluate the effect of entrepreneurship
skills on the performance of small and medium enterprises. The researcher was concerned with
views, option, perception and feelings from the environment. Such information was corrected
through the questionnaires, and interviews, and because the study was conversed with variable
that cannot be directly observed (Brush et al, 2014).
The sample size is also quite large, and given the time constraints and target population was
literate and unlikely to have difficulties in responding to questionnaire items, questionnaire was
ideal tool for collecting data.

3.5.1 Questionnaires
A questionnaire is a data collection instrument used to gather data over a large sample or
number of respondents. (Saunders et al., 2014). This structured questionnaire was developed
with the aid of suggested guidelines by Sekeran (2013). The first section of the instrument
probed for background and demographic data, while the subsequent section delved into the

35
respondents’ insights about the study objectives. In each section, the respondents were given
clear instructions on how to complete the item. The questionnaire was refined during the piloting
of the instrument. A total of 100 questionnaires was sent out and properly monitored to allow for
a satisfactory response rate.

(ii) In-depth Interview

The second primary data collection instrument is semi-structured in-depth interview and this is
used to collect qualitative data (Krishnaswami and Ranganatham, 2016). Interview method of
collecting data involves presentation of oral-verbal stimuli and reply in terms of oral-verbal
response (Kothari, 2008).
The guiding questions on each research objective will be prepared in advance as indicated in the
interview protocol (Appendix II). Interviewees will be selected from the small and medium
enterprises workers, and different entrepreneurs. This gave the researcher an opportunity to
explore information about the research questions to compliment and corroborate data from
questionnaires and interview.

(iii) Documentary Review

The researcher shall take necessary precautions to corroborate questionnaire and interview data
with data from other sources such as documents (Kothari, 2008). In this study, the secondary
data obtained from the documentary review of reports in workers book, business performance
report from different entrepreneurs. In brief, using a variety of data sources helped the researcher
to get a broader picture of the effects of the effect of entrepreneurship skills on the performance
of SME in Mbale Main Market.
3.6 Data Analysis
Descriptive statistics of frequency tables were used to analyze and present the data from
questionnaires as proposed by Amin (2015). In particular, the researcher used SPSS software
package version 16.0 to generate frequency tables as means of presenting data. The data was
summarized, analyzed and interpreted as on each research objective. In contrast, qualitative data
from Interview scripts, notes and statements was systematically coded and classified into broad
descriptive categories while exploring themes, meanings and/or issues that emerged from the

36
information gained from the interview. These data were further linked to the research
objectives/questions to generate meaning and explanation on the study topic.

3.7 Validity and Reliability of the instruments

3.7.1 Validity
Validity of an instrument refers to the appropriateness of the instrument to measure what it
intends to measure (Amin, 2015). To insure the validity of the questionnaire and interview guide,
some two experts in research was involved. In this regard, after constructing the questionnaires
and interview guide, they were submitted to two experts to ensure their validity through their
duties ‘basis. This was based on alpha coefficient value of 0.7 and more. Thus, after the expert
judgments, the compilation of the responses from raters was computed to determine the content
validity index (CVI). If the coefficient computed is from 0.7 and above, the instruments shall be
considered to be valid but if it is less, the instruments shall be considered to be invalid so new
ones shall be made.

3.7.2 Reliability
Reliability is defined by Vogt (2017) as the consistency of either measurement or design to give
the same conclusions if used at different times. To ensure the content reliability, the research
used either the test -retest method or cron batch alpha, method for the two tests, results was
analyzed using peason’s correlation coefficient (PLCC) and the T-test for PLCC if the
significance will be equal or inferior to 0.05 then instrument will be reliable for T test, if
significance will be equal or greater than 0.05, the instrument will be reliable.

3.8 Ethical considerations

Privacy and confidentiality are the major ethical considerations in any research study (Emory
and Cooper, 2014). Caution was taken against source bias (conditions or circumstances which
affect the external validity of statistical results), errors in methodology, interpretation of results
and their application to real world issues (Kombo and Tromp, 2016).
Ethical issues in data collection are adhered to specifically in the following areas:

37
(i) The study was justified via an analysis of the balance of costs. There are benefits from the
study that outweighed costs. The presentation of the research problem justified beyond any
reasonable doubt the need for data collection.
(ii) Confidentiality was maintained at all times. Only certain people involved in the study may
know the identity of the participants (Kombo and Tromp, 2016). The researcher was
responsible for the conduct of the research and the consequences of that research. Thus the
researchers accepted individual responsibility of the entire process.
(iii) Informed consent was obtained from subjects who participated in the study and it ensures
that all subjects participated voluntarily. The researcher explained clearly the study in
advance and promised to de-brief subjects afterwards (Kombo and Tromp, 2016). The
explanation was key to gaining informed consent from the participants. Informing the
participants about the results of the study built trust and justified the study to the
participants. The results of the study and the recommendations proposed impacted on the
participants’ future actions and perceptions.
(iv) The respondents were assured that their names and other personal information would not
be disclosed.
(v) The respondents are free to withdraw anytime during the course of data collection. That is,
the researcher ensured as much as possible that participation in the research was voluntary.
(vi) The collected data was presented as a group instead of individual analysis.
(vii) The researcher respected the rights of the institution whose clients were under study by
conducting the research objectively.
The researcher was affected by the following challenges during the study.
It was hard to find the right respondents willing to provide accurate required information
concerning their businesses since the study involves the need for some vital information
concerning their enterprises.
The research was tire some because it was hard to fix the researchers plans in to the plans of
respondents who are always busy doing their work.

38
 CHAPTER FOUR
FINDINGS AND DISCUSSION

4.0 Introduction
This chapter therefore presents the findings of the study, discussion of the findings and makes
overall summary based on the presented findings.
Out of the 100 intended respondents, only 80 respondents returned fully completed and
questionnaires giving a response return rate of 80.4%. This response rate is favorable according
to Mugenda & Mugenda (2014) in which they asserted that 50% response rate is adequate, 60%
is good and above 70% is rated very well. This reasonable response rate was realized after the
researcher made visits to drop and made personal calls to remind the respondents to fill and
return the questionnaires.
4.1 Background Information of the Respondents

4.1.1Categories of Respondents
This study examined three categories of respondents, that is, the entrepreneurs (the main object
of study and main source of information for this study), Employees and Customers as shown in
Table 4.32: Categories of Respondents

Respondents Frequency Percent Cumulative %

Entrepreneurs 68 85 85

Employees 8 10 95

Customers 4 5 100.0

Total 80 100.0

Source: Field data (2019)

39
Table 4.1 shows that the majority of respondents (85 %) were Entrepreneurs, while employees
made 10%. and customers were 5% of the total target sample. This was expected since the
purpose of this research was to survey entrepreneurs in Mbale Main Market. The employees and
the Customers by virtue of serving the entrepreneurs had some helpful information about the
entrepreneurs. That is the reason they were included.
Figure 4.1: Categories of Respondents

Respondents Rate
Entrepreneurs Employees Customers

10%
5%

85%

The figure above shows that entrepreneurs were more interested in the study with a respondent
rate of over 85% thus meeting the purpose of this research which was aimed at surveying the
effects of entrepreneurship skills on SME’s performance in Mbale Main Market.

4.2.2 Respondents’ Gender

Table 4.33: Respondents’ Gender

Gender Frequency Percent Cumulative %

Female 60 75 75

Male 20 25 100.0

Total 80 100.0

Source: Field data (2019)

40
Table 4.2 shows that 75% of the Entrepreneurs were female and 25% were male. These results
suggest the sample was reasonably representative as in rural Uganda most females rather than
males are the ones engaged in business activities, while males are in salaried/wage employment
or merely playing the fathers’ role of sitting back and demanding the other family members to
provide for the family.
Also, image played a great role in decision to join a lending institution. Women are free to join
and even face the challenges of strict adherence to rules and regulations set up by the lending
institutions. Men are reluctant to be submissive to conditions of borrowing thus at times decide
to use their wives instead.
Figure 4.34: Respondents’ Gender

Respondents Gender
Series1

75%

25%

Female Male

From the above, the researcher found out that females where more engaged in to entrepreneurial
activities than males with over 75%. These results concluded that the sample was reasonably
representative as in rural Uganda where most females rather than males are the ones engaged in
business activities. While males are in salaried/wage employment or merely playing the fathers’
role of sitting back and demanding the other family members to provide for the family.

41
4.2.3 Age of the Entrepreneurs
Table 4.35: Age of the Entrepreneurs

Age Frequency Percent Cumulative %

18yrs-25yrs 18 22.5 22.5

26yrs-35yrs 50 62.5 85

36yrs-45yrs 8 10 95

46yrs-55yrs 2 2.5 97.5

Above 55yrs 2 2.5 100.0

Total 80 100.0

Source: Field data (2019)

Table 4.3 shows that 85% of the Entrepreneurs were 18-35 years of age, 10% in 36-45 age range
and the rest 5% were 46 years and above. These results portrayed that most of the Entrepreneurs
in Mbale District were young people who took up small business as source of employment. The
demands of travel to markets required a lot of energy and movement that served the youth well.
Legal prohibitions and government inconsistency also required that one be ready for abrupt and
dangerous maneuvers in case the law enforcement teams were engaged in dispersing small
traders who operated on political statements about controversial business sites and procedures.
These constant frictions made business hard for the older people thus setting up the youth for the
opportunities. The 18-35 age brackets also represented the most active segment of society. This
was in agreement with the ILO findings on youth involvement in economic activities (ILO
2014).

42
Figure 4.36: Age of the Entrepreneurs

Respondent's Age

Percent

Above 55yrs 2.5%

46yrs-55yrs 2.5%

36yrs-45yrs 10.0%

26yrs-35yrs 62.5%

18yrs-25yrs 22.5%

As shown above, the respondents age of entrepreneurs in this study indicated that youth ranging
from 18-35yrs where more engaged in to entrepreneurial activities with over 85%. These results
portrayed that most of the Entrepreneurs in Mbale Main Market were young people who took up
small business as source of employment. This age bracket also represents the most active
segment of the society.

4.2.4 Respondents’ Marital Status

Table 4.37: Entrepreneurs’ Marital Status

Marital Status Frequency Percent Cumulative %

Single 18 22.5 22.5

Married 50 62.5 85

Divorced 9 11.25 96.25

Widow/widower 3 3.75 100.0

Total 80 100.0
Source: Field data (2019)
Table 4.4 indicates that 62.5% of Entrepreneurs were married, 22.5% were single, 11.25% were
widow/widower and only 3.75% were divorced. These results implied that entrepreneurs in

43
Mbale were mostly married people who conducted small businesses to supplement their spouse’s
income. The age criteria in Table 4.3 gave results that showed that majority were active segment
of society, whom according to the society living around Mbale, had to settle for marriage as a
sign of maturity. The community living around Mbale town considers marriage as the first form
of responsibility in life.

Figure 4.38: Entrepreneurs’ Marital Status

Respondents' Marital Status

Percent

62.5%

22.5%
11.3%
3.8%
Single Married Divorced Widow/
widower

From the above, the researcher found out that Married people were more interested and engaged
in entrepreneurial activities with over 62.5% implying that entrepreneurs in Mbale Main Market
were mostly married people who conducted small businesses to supplement their spouse’s
income and to be able to provide for the family.

44
4.2.5 Entrepreneurs’ Educational Level
Table 4.39: Respondents’ Level of Education

Literacy Level Frequency Percent Cumulative %

Illiterate 3 3.75 3.75

Primary school 50 62.5 66.25

Secondary school 20 25 91.25

Tertiary education 7 8.75 100.0

Total 80 100.0

Source: Field data (2019)

Table 4.5 shows that 62.5% of Entrepreneurs were of primary level education, 25%
secondary/high school level, followed by illiterate (3.75%) and least are those of tertiary
Education (diploma university graduate) (8.75%).

Figure 4.40: Respondents’ Level of Education

Respondents Level of Education

Percent
62.5%

25.0%
3.8% 8.8%

te l ol n
ra hoo ho tio
ite sc sc a
Ill y ry uc
ar a ed
im nd ry
Pr co tia
Se r
Te

In conclusion, the result above shows that the majority of entrepreneurs had attained primary
educational status (62.5%). This explains why the Entrepreneurs were mostly in common
business activities because they did not have much experience and innovation skills to be

45
creative in business formation. Furthermore, they were involved in these enterprises because
there were less employment opportunities for them in formal employment sectors (public and
private).

4.2.6 Entrepreneurs’ Number of Dependents

Table 4.41: Number of Dependents

Number of Dependents Frequency Percent Cumulative %

1-2 10 12.5 12.5

3-5 50 62.5 75

6-10 15 18.75 93.75

Above 10 5 6.25 100.0

Total 80 100.0

Source: Field data (2019)

Table 4.6 indicates that respondents with 3-5 dependents were 62.5%, 6-10 dependents were
18.75%, those with 1-2 dependents were 12.5% and few (6.52%) had more than 10 dependents.

Figure 4.42: Number of Dependents

Respondents' Number of Dependant

1<2 3<5 6<10 Above 10

6%
19% 13%

63%

46
From the above, the researcher concluded that most entrepreneurs in Mbale Main Market had
large families (3-10) dependents (81.25%). Their enterprises remained small because most of the
earnings were spent on maintaining large number of dependents rather than re-investing the
earnings through expansion or new business start-ups. Extra effort was used to get enough to pay
loans and meet family expenses. This was responsible for poor business growth and
development.

4.2.7 Respondents’ Monthly Income

Table 4.43: Monthly Income

Monthly Income Frequency Percent Cumulative %

100,001-300,000 15 18.75 18.75

300,001-500,000 50 62.5 81.25

500,001-1,000,000 10 12.5 93.75

greater than 1,000,000 5 6.25 100.0

Total 80 100.0

Source: Field data (2019)

Table 4.7 indicates that 62.5% of Entrepreneurs had monthly income of 300,001-500,000,
18.75% had incomes of 100,001-300,000, 12.5% incomes of 500,001-1,000,000 and 6.25%
incomes of over 1,000,000.

47
Figure 4.44: Monthly Income

Respondents Monthly Income

Percent

greater than 6.25%

1,000,000

12.5%
500,001-1,000,000

62.5%
300,001-500,000

18.75%
100,001-300,000

In conclusion, this result indicates that the majority of entrepreneurs in Mbale Main Market were
low income earners (100,000-500,000). With large families to support, much of the income was
spent on food and other immediate family needs. Hence this was responsible for poor business
growth and development.
4.3 Findings on Research Objectives of the Study
This study took into account the Entrepreneurs’ characteristics and general information
considered useful in explaining the relationship between variables in the study as shown in the
Conceptual Framework in Figure 1.1. The findings in regard to each research objective as
outlined in chapter one are discussed in the following sections:

4.3.1 Research Objective 1: To define and understand Entrepreneurship skills.

Table 4.45: Training on Entrepreneurship

Entrepreneurship Training Frequency Percent Cumulative %

No 70 87.5 87.5

Yes 10 12.5 100.0

Total 80 100.0

48
Source: Field Data (2019)
Table 4.8 shown shows that 87.5% of the Entrepreneurs had not received any kind of training on
entrepreneurship skills and only 12.5% had some training on entrepreneurship skills. As findings
showed that most of enterprises started were based on other people’s ideas, this assertion is
supported by comments from one interviewee:

“Here in Uganda, we have the culture of copying other people’s businesses rather
than starting a business by using prior knowledge of customers’ needs and ways to
meet them. Identifying and recognizing potentially profitable business opportunity is
very difficult given our level of understanding of business. This happens a lot of time.
So you see same kind of business being duplicated and we scramble for the small
market in Mbale district. So we cannot grow beyond certain points.”(30st.07.2019)
Figure 4.46: Training on Entrepreneurship

Enterpreneurship Training

Yes
13%

No
87%

As shown above, the researcher found out that the majority (87.5%) of entrepreneurs in Mbale
Main Market were starting or running their enterprises with limited or without entrepreneurship
skills identified in the literature studied in this study. This may have contributed to their
stagnating business performance for a long time.

49
4.3.2 Applicability of Entrepreneurship Skills by Business Entrepreneurs in Mbale Main
Market
The study used specific questions to find out the respondents’ choice of business and how
specific skills contributed to formation and eventual operation of the business. The findings are
presented next:

4.3.3 Business Types

Table 4.47: Entrepreneurs’ Business Type

Business Type Frequency Percent Cumulative %

Retail 45 56.25 56.25

Wholesalers 5 6.25 62.5

Restaurants 10 12.5 74.75

Agricultural produce 20 25 100

Total 80 100.0
Source: Field data (2019)

Table 4.9 shows that 56.25% of respondents were in retail business, 25% Agricultural produce
activitis, 12.5% in Restaurant services while 6.25% in Wholesale trade.
Figure 4.48: Entrepreneurs’ Business Type

Enterpreneurs Business Type

Percent
56.25%

25.00%
6.25% 12.50%

Retail
Wholesalers
Restaurants
Agricultural
produce

50
Finally in conclusion, the above result portrayed that most respondents were involved in two
major business activities, namely, retail trade (buy and sell) and farming & agricultural produce
since it had a ready market.

4.3.4 Form of Business Ownership

Table 4.49: Form of Business

Business Form Frequency Percent Cumulative %

Sole proprietorship 20 25 25

Partnership 8 10 35

Company 2 2.5 37.5

informal (not registered) 50 62.5 100.0

Total 80 100.0

Source: Field data (2019)

As noted in Table 4.10, 62.5% of businesses were informal and not registered, 25% of
Entrepreneurs operated as sole proprietors, 10% of respondents were in partnership and 2.5% of
respondents were operating some form of company. One respondent commented:

“We operate unregistered businesses because the process of registration is too

complicated and requires a lot of money. We cannot afford the money to set up
permanent premises or rent strategically located buildings. By not registering the
businesses, we save on taxes. Registration only makes you visible and thus regular
visits by tax authorities.’(Research, 30st-07-2019)
Businesses which were not registered had a limited scope of the customer base. Such businesses
only served household consumption based on strict daily budgets on small quantities of
purchases.
It became obvious that lack of knowledge on business registration and the advantages attached to
registration contributed to the rise of informally run businesses. But also, as a consequence of
poor government planning and monitoring procedures, people opted for the cheaper option of
ignoring formal business registration requirements.

51
Figure 4.50: Form of Business

Form of Business Ownership

Sole pro-
prietorship
25%
Informal
(not regis-
tered)
63% Partnership
10%
Company
3%

The above result shows that most respondents were either not registered because of bureaucratic
hurdles in registration processes (Tin Number, presentation of cash flow estimates, Trade license
regulations and yeasrly tax/Levy payments to TRA) or simply did business single handedly by
bearing all risks as a sole proprietor with little or no knowledge on business registration.

4.4 Research Objective 2: To determine the performance indicators of SME’S

4.4.1 Period the Business been in Operation

Table 4.51: Age of Business

Age of Business Frequency Percent Cumulative %

2-4years 20 25 25

5-7years 45 56.25 81.25

8-10years 10 12.5 93.75

more than 10 years 5 6.25 100.0

Total 80 100.0
Source: Field data (2019)

52
Table 4.11 shows that 56.25% of Entrepreneurs had been operating for 5-7 years, 25% had been
operating for 2-4 years, 12.5% 8-10 years and only 6.25% had been operating for over 10 years.
To probe on the possible causes of this phenomenon, it was noted from the interviewees that fear
of the unknown made majority of entrepreneurs to stick to what they had some idea on. A
shopkeeper would remain a shopkeeper even if competition was high, sales were low and losses
were huge and there was an opportunity to change to another more promising business. One
interviewee said:
“I have been running my shop for 7 years and I am comfortable with it. When I
harvest my rice crop, I sell the produce and then go to the wholesalers to buy
more stock. When I see the stock going down, I wait for another harvest season to
buy more stock. This is my trusted way of operating my shop. I know it may sound
ridiculous but that is what I do year in year out”.(Research, 2019).

Figure 4.52: Age of Business

Age of the Business

Percent
56.25

25

12.5
6.25
2-4years 5-7years 8-10years more than 10
years

In conclusion, it’s found out that majority of the respondents (65%) had been running their
enterprises for many years (5 - >10). However because of limited access to capital and limited
entrepreneurship skills they remained small in nature and operated mostly for survival and
meeting loan repayment obligations.

53
4.4.2 Effect of Entrepreneurship Skills on SME Performances in Mbale Main Market.
Having identified the Entrepreneurship Skills from the Literature review, the researcher was
interested in finding out if there was a relationship between successes in business performance in
relation to the Entrepreneurship skills identified. The findings are presented as shown:

4.4.3 Source of Business Idea

Table 4.53: Source of Business Idea

Source of Idea Frequency Percent Cumulative %

Copy from other established businesses 60 75 75

Recognized profitable opportunity 10 12.5 87.5

Experience/knowledge of customer needs 6 7.5 95

Necessity to survive (own employment) 2 2.5 97.5

Other sources 2 2.5 100.0

Total 80 100.0
Source: Field data (2019)
Table 4.12 shows that 75% of Entrepreneurs obtained ideas to start new or expand existing
business from copying other established businesses, 12.5% used own experience or knowledge
of business, 7.5% of entrepreneurs started their business through recognizing profitable business
opportunities, 2.5% as necessity to survive and 2.5% from other sources such as travel
experience, utilizing own talent/skills, inherited the business or was convinced by a friend.

54
Figure 4.54: Source of Business Idea

Source of Business Idea

Percent

75%

12.5%
7.5%
2.5% 2.5%

Copy from Recognized Experience/ Necessity to Other

other estab- profitable knowledge of survive (own sources
lished busi- opportunity customer employment)
nesses needs

From the above, this result concludes that entrepreneurs in Mbale Main Market had some limited
entrepreneurship skills to start or run opportunity based businesses as the majority of them were
in copied businesses category. There is need for development of entrepreneurship programs for
people in rural communities such as Mbale.

55
4.4.4 Respondents’ Personal Traits
Table 4.55: Personal Trait

Trait Frequency Percent Cumulative %

Entrepreneurship education/knowledge 17 21.25 21.25

Business experience 48 60 81.25

Willingness to take risk 8 10 91.25

Ability to get information before starting a

2 2.5 93.75
business

Ability to study customer needs in a market 5 6.25 100.0

Total 80 100.0

Source: Field data (2019)

Table 4.13 shows that 60% of Entrepreneurs had experience in running their businesses, 21.25%
had some form of entrepreneurship education, and 10% were willing to take risks, 6.25% studied
customer needs in the local markets during and before business start-up while 2.5% searched for
more information about business opportunities.

Figure 4.56: Personal Trait

Personal Trait
Ability to study cus-
Ability to get informa- tomer needs in a
tion before starting a market
business 6%
3%

Entrepreneurship ed-
ucation/knowledge
Willingness to take risk 21%
10% Business experience
60%

In conclusion, these results suggested that the entrepreneurs lacked basic opportunity based
skills in running their enterprises. They were just comfortable with doing the same kind of

56
business for extended periods of time through experience learnt by observation. They neither
bothered to seek for more information about business opportunities nor take calculated risks.
Thus, they remained small and did business as a necessity for survival.

4.4.5 Type of Entrepreneurship Skill Possessed

Table 4.57: Skills Possessed by Entrepreneurs

Skills Frequency Percent Cumulative %

Ability to recognize profitable opportunity 6 7.5 7.5

Willingness to act on opportunity 20 25 32.5

Ability to align resources to produce

2 2.5 35
opportunity

Prior knowledge of customer needs and

48 60 95
meeting them

Management skills (managing a business) 4 5 100.0

Total 80 100.0

Source: Field data (2019)

Table 4.14 shows that entrepreneurs were divided in terms of entrepreneurship skills they
possessed. That is, 60% had prior knowledge of customers’ needs in the market and duly
responded to those needs, 25% were ready and willing to act on business opportunity (risk
taking), and 7.5% had the ability to recognize potentially profitable business opportunities. A
small percentage of 5% of respondents had management skills and 2.5% of the respondents had
the ability to organize resources to pursue business opportunities.

57
Figure 4.58: Skills Possessed by Entrepreneurs

Enterpreneur's Skill
Percent

Management skills (managing a business) 5%

Prior knowledge of customer needs and meeting

60%
them

Ability to align resources to produce opportunity 2.5%

Willingness to act on opportunity 25%

Ability to recognize profitable opportunity 7.5%

These results suggested that entrepreneurs had some entrepreneurship skills to carry out business
but most of these skills had not been developed. A small percentage of the respondents had
received some form of entrepreneurship training as noted in Tables 4.8 and 4.13. This calls for
entrepreneurship training if entrepreneurs are to move from survival based business practices to
opportunity based business opportunities. These responses could not be confirmed as true
because the respondents did self-assessment and decided on the skill (skills) that he /she thought
was relevant to how he/she did business.

58
4.4.6 Impact of Entrepreneurship Skills on Respondents’ Businesses
Table 4.59: Impact of Skill used in Business

Impact of skill used Frequency Percent Cumulative %

Business has expanded 3 3.75 12.5

Increase in sales 48 60 53.5

Employment creation 1 1.25 58.5

Increase in enterprise asset value 18 22.5 82.5

Ability to repay loans 10 12.5 100.0

Total 80 100.0

Source: Field data (2019)

Table 4.15 indicates that 60% of the entrepreneurs who applied the entrepreneurship skills were
able to increase sales revenue, 22.5% increased enterprise’ asset value, 12.5% paid their loan
obligations in time. Also 3.75% expanded their businesses or started completely new businesses
and only 1.25% of the respondents managed to employ more workers. This was summarized by
one interviewee:
“Having skills in entrepreneurship has helped me to see opportunities rather than
copy from others. These skills helped me to outperform my colleagues. So the
training on entrepreneurship and business management I attended in Trade Shows
was the best thing I received. It helped me on how to see opportunities and how to
manage and market my business. It also gave me the courage to act on
opportunities and organize resources such that I can rally capital and human
resources to pursue the opportunities in the market. I am now reaping the benefits
of that training”,(Research, 2019)
These results are in agreement with studies by Messy and Temu (2018) that showed that
enterprises owned by recipients of business training had higher level of assets and sales revenue
compared to enterprises owned by non-recipients of training. In that study, insignificant
differential impact on employment creation was demonstrated. Implications from this study was
that training in business skills for Ugandan small and medium entrepreneurs was vital for
enterprises’ performance, growth and improved owners living standards.

59
Figure 4.60: Impact of Skill used in Business

Impact of Skill Used in Business

Percent
60%

22.5%
12.5%
3.75% 1.25%
Business has Increase in Employment Increase in Ability to
expanded sales creation enterprise repay loans
asset value

To conclude, these results suggested that entrepreneurship skills and knowledge had positive
impact on enterprise performance. Results became greater with increase in the level of
entrepreneurship skills. It was also noted from the interview that those entrepreneurs who
received entrepreneurship training performed far better than those who never received any
training.

4.4.7 Ranking of Entrepreneurship Skills

Table 4.161: Ranking Entrepreneurship Skills

Skill used in business Frequency Percent Cumulative %

Ability to recognize profitable business

15 18.75 18.75
opportunity

Willingness to act on opportunity 3 3.75 22.5

Ability to organize and align resources 50 62.5 85

Prior knowledge of customer needs and

2 2.5 87.5
ways to meet them

Management skills (ability and

10 12.5 100.0
knowledge to manage a business)

Total 80 100.0

Source: Field data (2019)

60
Table 4.16 shows that respondents ranked ability to organize resources and aligning them to
pursue business opportunities high in the list of entrepreneurship skill they use (62.5%). This was
followed by ability to recognize profitable business opportunity (18.75%). Other skills as ranked
by respondents were Management skills (12.5%), willingness to act on business opportunity
3.75%; another 2.5% cited prior knowledge of customers’ needs and ways to meet them as vital
for enterprise success. This was understandable because posed with these questions in the
interview, an interviewee responded:
“Knowing customer needs may at times be costly because needs change with
consumer preference. Prices also affect what the market need. You may go for a
particular good that is currently marketable but by the time you come back with the
good you find the market is flooded or consumers have switched to something else.
So knowing customer needs and ways to meet them alone may not be very important
for success.”(Research, 2019)

Figure 4.62: Ranking Entrepreneurship Skills

Ranking Enterpreneuraship skill

Ability to recognize profitable business opportunity

Willingness to act on opportunity
Ability to organize and align resources
Prior knowledge of customer needs and ways to meet them
Management skills (ability and knowledge to manage a business)
13%
3% 19%
4%

63%

In conclusion, these results further re-enforce the findings by recent studies that entrepreneurs
are highly risk averse and only pursue those businesses opportunities that are viewed as safe and
do not seek opportunity based enterprises
61
 CHAPTER FIVE
CONCLUSIONS AND RECOMMENDATIONS
5.0 Introduction
The purpose of this chapter is to present the summary of the major findings on each research
objective as given in chapter four. Conclusions are drawn based on the findings. This chapter
further gives recommendations to various stakeholders in entrepreneurship development based
on the views of the respondents and findings from the study. Finally, suggestions of the areas for
further research are presented.

5.1 Conclusions According to Objective One

The findings of this study indicated that Entrepreneurs in Mbale District were mostly Middle
aged people with majority of them having attained primary school education. It was also noted
that most entrepreneurs were married and supported 3-5 dependents. The high number of
dependents and low education offered little to improve on business performance. Most ventures
were informal in nature thus responsible for the low levels of income. The study revealed that
entrepreneurs in Mbale started small businesses for survival or necessity rather than opportunity
based ventures.

Furthermore, the study further revealed that only very few respondents had some training on
entrepreneurship. Thus the majority of Entrepreneurs in Mbale Main Market District were
starting or running their enterprises with limited or no Entrepreneurship skills and this may have
contributed to their poor business performance. It can be concluded that Entrepreneurs in Mbale
Main Market were small business operators in an informal sector and their motive for starting
and running business was to create own employment. There is a need to deliberately sensitize
these entrepreneurs into a mind-set of developing their business to grow into large enterprises
rather than commit resources to only cater for daily household needs.

The study found that entrepreneurs in Mbale Main Market were involved in a variety of
enterprises. These included retail trade, manufacturing and small industries (posho milling,
welding, bakery, and juice making), professional services (saloon and barber shops, secretarial
services), hospitality and tourism (small food and beverage services, guest house and pubs) and

62
agricultural produce (poultry, dairy, vegetables, and piggery). These business activities were
mostly situated in and within the surroundings of Mbale Main Market. Most of these businesses
were informal in nature. Sole proprietorship was slowly picking up and very few were formally
registered. Furthermore, most of these enterprises had been operating for 3-7 years implying that
they were well established in the market.

The study also showed that Entrepreneurs were involved in businesses that met customers’ needs
on daily basis (those that satisfy basic needs such as food, accommodation and beauty). They
pursued these kinds of businesses because they required low capital for startup, needed no prior
experience and the input raw materials were easily accessed locally.

The findings of the study showed that most of Entrepreneurs in Mbale Main Market started their
business ventures by copying from other existing successful businesses in the area. The few
market opportunities in the exhausted venture meant that entrepreneurs relied on the same
suppliers and same customers. This duplication of businesses contributed to the low earnings
revealed through this study.

A reasonable number of entrepreneurs used their previous experience and knowledge on business
to start up the venture they were running at the time of this study and a small number got their
business start-up idea from recognizing potentially profitable business opportunities. This
outcome in the study suggested that there were few businesses started to exploit opportunities in
the market. This group had some element of risk taking and was calculating in their business
endeavors. The only setbacks that hindered their growth were lack of affordable loans (capital),
unfavorable government policies and large households to take care of. It also emerged that there
was no one dominant Entrepreneurship skill although the ability to organize and align available
resources to pursue the opportunities was ranked first, followed by the ability to recognize
profitable business opportunities.

These results implied that Entrepreneurship skills had not been developed among rural
Entrepreneurs due to absence of support programs to offer affordable training in
Entrepreneurship. The results also showed that Entrepreneurs with the relevant skills to run their

63
enterprises were able to make more sales, created more opportunities for others and met their
loan repayment obligations in time compared to those with limited or no Entrepreneurship skills.
This study found that the use of social networks (collective group dynamics) enabled the
Entrepreneurs to realize more business opportunities. Collective responsibility in loan
guarantorship as emphasized by Banks also helped members get support from each other and last
but not least enhanced monitoring of each other’s performance. This relationship between
Entrepreneurs in group loan schemes resulted to more productivity and limited group
destabilizing factors.

5.2 Conclusion According to Objective Two

The findings of this research indicated that Entrepreneurs encountered several constraints in the
course of running and developing their businesses. These included lack of access to finance, lack
of adequate and sustainable market, lack of business training, and too much government
regulation regarding operation of SMEs in the district.

Other constraints were competition and absence of government support and assistance to SMEs
in the informal sector. Of these constraints lack of access to affordable finance was viewed by
respondents as the greatest impediment to development and expansion of SMEs. Lack of
adequate market was the second most listed constraint. However, most respondents thought
access to market was not critical because the market they were serving was local.

The findings also indicated that Entrepreneurs applied different strategies to overcome these
constraints. For lack of access to finance, respondents overcome this constraint by sourcing
finance from friends and relatives rather than rely solely on Banks. In the case of lack of
adequate market, respondents overcome it by constantly moving with goods to large markets in
regional towns such as Kindu market in Mbale. For lack of business training, Entrepreneurs
thought that knowledge from books, attending seminars and workshops would bridge the
information gap. Furthermore, in case of government restrictions, Entrepreneurs negotiated with
trading Centre officials to understand their pleas in times when business was at lowest cycle by
skipping levy payments and lesser fines.

64
It can be concluded that Entrepreneurs developed innovative strategies to overcome constraints,
some of which were institutional and others were inherent to SMEs. The business activities in the
study area were predominantly informal in nature, thus the study findings indicated that
entrepreneurship Skills contributed to positive performance of the SMEs, particularly, moving
from informal businesses to formal Economy. These Entrepreneurship Skills in order of
importance were: Ability to organize and align resources, ability to recognize profitable business
opportunities, and Management skills. Other Entrepreneurship Skills considered important but
not ranked high were: Willingness to act on opportunity and prior knowledge of customer needs
and ways to meet them.

5.3 Conclusion According to Objective Three

The results further showed that Entrepreneurs who adopted the relevant entrepreneurship skills to
run their businesses were able to create more sales, created more opportunities for others and met
their Loan repayment obligations with ease compared to those with limited or no
entrepreneurship Skills. However, SMEs were not able to exploit business opportunities because
of the following reasons: - Lack of access to affordable Loans; lack of adequate markets and lack
of relevant entrepreneurship training.

It can be concluded that entrepreneurial culture and entrepreneurship skills possessed by

entrepreneurs drive enterprises to perform above average in terms of sales revenue, capital
invested and firms’ asset value. The study recognized other factors such as level of finances an
entrepreneur had access to, social network between group members and management skills also
played a significant role in the performance and growth of SMEs.

With utmost regard to the originality of the findings, it emerged that possession of
entrepreneurship skills was vital for the successful repayment of loans advanced to individual.
As a result of prudent business practices and timely loan repayment, the lending institution
achieved its objective of business growth and development and the individual loan recipient got a
chance to take more loans to increase their capital.

65
5.4 Recommendations
The findings of this study have indicated issues that need immediate attention and the following
are recommendations to address them as discussed next. The results of these findings have
revealed that most Enterprises are small in nature and necessity based. They are informal in
nature and grow slowly over a period of time. This has hampered their transition to formalized
business entities. The Ugandan government through its Small Business Development program
should develop strategies and policies to motivate entrepreneurs to formalize their business.

This will help SMEs to expand into larger businesses that will solve some chronic national
problems of poverty, lack of markets, and waste of resources such as Fruits, grains that go to
waste as soon as the market is flooded with the yearly harvests. Through entrepreneurial
discoveries and developments, entrepreneurs may devise value-adding skills through packaging
and preservation to allow exportation and storage. This will result to employment creation. Once
the enterprises are formalized, the government through its revenue agency will benefit through
levies and taxes imposed on these enterprises and the incomes associated with employment.

The findings of this study also showed that most entrepreneurs had attained lower education
level and these were the productive and active segment of Uganda’s population (18-45Years).
This group has little entrepreneurship skills and engaged mostly in “cut and paste” type of
business just to survive. The Ugandan government through relevant National and Regional
entrepreneurship development programs should support these SMEs through provision of
business training together with development and support services to new business start-ups. This
will ensure that entrepreneurs will engage in businesses that have growth potential to expand to
not only increase Uganda’s Gross Domestic Product (GDP) but also become a source of
employment to other Ugandans.

The findings of the study further revealed that entrepreneurs after accessing finance were able to
grow their businesses to levels that created jobs for others. Those who had no access to credit
from lending institution nevertheless remained a very large majority (394,300 male and females
18yrs and above; 2014 national Census figures). The ministries dealing with Labor and Small
business development should implement the current Small Business Entrepreneurship policy

66
(2014) in order to motivate entrepreneurs such as those in Mbale District to access affordable
business loans by favorable Credit pricing so as to help them expand their enterprises. By doing
that, entrepreneurs will create not only jobs for the underprivileged in rural areas but will also
play a role in reducing National poverty levels and reducing crime rates in rural communities
given that the youth will have found alternative sources of finance.

The research also revealed that entrepreneurs encounter several constraints in running their
enterprises and these included: - lack of market information; absence of government support and
assistance, as well as lack of Business training. This resulted in continued underperformance of
these enterprises. The Ugandan government through its agencies such as SIDO should mobilize
SMEs to develop and offer small business management training programs to improve their
entrepreneurship skills and offer ongoing support such as regular supervision and mentoring.
Such support services will instill confidence in the poorly trained members of the community, re-
enforce the acquisition and assimilation of entrepreneurship skills and help to boost their
business.

5.5 Areas for Further Research

1. There is need to conduct more extensive survey in other rural districts in Uganda before
generalizing the findings to the entire country.

2. There is need to conduct other studies that will include the use of other methods such as
focus group discussion (FGDs) to see any developmental changes in poverty and employment
linked directly to Entrepreneurship skills.

3. There is a need to investigate in detail each category of Entrepreneurship skills to understand

the areas of entrepreneurial processes that require specific training programs.

67
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 APPENDICES

I am a student at Uganda Christian University studying a degree in Business administration. I

have designed the following questionnaire for the study of Effect of Entrepreneurship Skills on
The Performance of Small and Medium Enterprises In Mbale District, Uganda: A Case of Mbale
Main Market”

I would highly appreciate if you would fill-in the responses to the questions in this questionnaire.

It will take approximately 10 – 15 minutes of your time.

PART A: PERSONAL CHARACTERISTICS

1. Gender
(i) Male ( )
(ii) Female ( )

2. Would you kindly give your age?

(i) 18-25 ( ) (ii) 26-35 ( ) (iii) 36-45 ( )
(iv) 46-55 ( ) (v) >55 ( )

3. What is your Marital status

(i) Single ( )
(ii) Married ( )
(iii) Divorced ( )
(iv) Widow/widower ( )

4. What is your Level of education?

(i) Illiterate ( )
(ii) Primary school ( )
(iii) Secondary school ( )

75
 (iv) Tertiary education ( )

5. How many dependants do you have in your household?

(i) 1-2 ( )
(ii) 3-5 ( )
(iii) 6-10 ( )
(iv) >10 ( )

6. What is Your Monthly Income?

(i) <100,000 ( )
(ii) 100,000-300,000 ( )
(iii) 300,001-500,000 ( )
(iv) 500,001-1,000,000 ( )
(v) >1,000,000 ( )

7. Do you have any training on Entrepreneurship?

(i) Has had training on Entrepreneurship ( )
(ii) No Entrepreneurship training ( )

8. What Type of business do you run?

(i) Retail (buy & sell) ( )
(ii) Professional services (secretarial, salon, mechanics) ( )
(iii) Manufacturing & small industries ( )
(iv) Farming and agricultural produce ( )
(v) Hospitality and tourism ( )

9. What is your business form?

(i) Sole proprietorship ( )
(ii) Partnership ( )
(iii) Company ( )
(iv) Not registered (informal) ( )

76
10. For how long have you been operating your current business?
(i) 2-4 ( )
(ii) 5-7 ( )
(iii) 8-10 ( )
(iv) >10 ( )

11. What was the source of your business idea?

(i) Copy other established business ( )
(ii) Recognized potentially profitable business opportunity ( )
(iii) Use of prior experience and knowledge of customers’ needs and meeting them ( )
(iv) Necessity to survive or create own employment ( )
(v) Other (please specify) ………………………………………………........
.....................................................................................................................

12. Which of the following do you think best explains your Personal traits?
(i) Entrepreneurship education/knowledge ( )
(ii) Business experience ( )
(iii) Willingness to take risks ( )
(iv) Search for more information about business prior to Starting business ( )
(v) Studying customer needs in the local market ( )

13. What entrepreneurship skill(s) do you think you posses?

(i) Ability to recognize potentially profitable business opportunities ( )
(ii) Willingness to act on business opportunities (take risks) ( )
(iii) Ability to align available resources to produce business Opportunities ( )
(iv) Prior knowledge of customers’ needs and ways to meet them ( )
(v) Management skills (knowledge to manage a venture) ( )

14. How has the entrepreneurship skill(s) contributed to the success of your business?
(i) Has been able to expand my business activities ( )
(ii) Has been able to increase sales revenue ( )

77
 (iii) Has employed more workers ( )
(iv) Has increased the level of enterprise’s asset value ( )
(v) Has been able to meet my loan repayment ( )

15. Rank the following entrepreneurship skills (i, ii, iii, iv, and v) according to how important
they are to the performance of your business.

Rank-: (i) = Most important skill; (ii) = Very important; (iii) = Important;
(iv) = Fairly important; (v) = Least important skill
(i) Ability to recognize potentially profitable business opportunity ( )
(ii) Willingness to act on business opportunities (risk taking) ( )
(iii) Ability to organize resources to align to available opportunity ( )
(iv) Prior knowledge of customer’s need and ways to meet them ( )
(v) Management skills (ability and knowledge to manage a business venture) ( )
16. What major constraint do you face that limit your business growth and performance? (pick
1 answer only among the given options)
(i) Lack of access to affordable loans ( )
(ii) Lack of adequate market ( )
(iii) Lack of entrepreneurship training ( )
(iv) Competition from other entrepreneurs ( )
(v) Unfavorable government policies and the bureaucracy involved in pushing things
through ( )
(vi) Absence of government support and assistance ( )
17. What strategy(s) do you use to overcome these constraints?
(i) Source finance from relatives/friends ( )
(ii) Conduct regular market research ( )
(iii) Buy and read books rather than go for formal training ( )
(iv) Pooling resources together with other micro-entrepreneurs ( )
(v) Introducing new business strategies ( )
(vi) Negotiating with government officials ( )

78
18. What other comments can you make on:-
(a) Ownership and management of your business
.........................................................................................................................................
...................................................................................................
(b) Entrepreneurship skills and knowledge
……………………………………………………………………………
.....................................................................................................................

19. Do you agree with this statement? “Entrepreneurship Skills are important in running a
business successfully” (Tick in the appropriate box)
(i) I agree completely ( )
(ii) I somehow agree ( )
(iii) I agree ( )
(iv) I somehow disagree ( )
(v) I disagree completely ( )

Appendix 1: Interview Questions

I am a student at Uganda Christian University studying a degree in Business administration. I

have designed the following interview for the study of Effect Of Entrepreneurship Skills On The
Performance of Small and Medium Enterprises In Mbale District, Uganda: A Case of Mbale
Main Market” .
I would highly appreciate if you would fill-in the responses to the questions in this questionnaire.

It will take approximately 10 – 15 minutes of your time.

1. Please tell me your experience about use of Entrepreneurship skills in running your
business.
………………………………………………………………………………………………
……………………………………………………………………

79
2. What business types are you engaged in and why?
………………………………………………………………………………………………
……………………………………………………………………

3. Where did you get the idea of starting your own business?
………………………………………………………………………………………………
……………………………………………………………………

1. Which Entrepreneurship Skill(s) do you possess and is/are helping you in business growth
and development?
………………………………………………………………………………………………
……………………………………………………………………

2. What constraints do you face in the course of conducting your business?

………………………………………………………………………………………………
……………………………………………………………………
3. What other comments can you make about Entrepreneurship skills in the Mbale Main
Market business environment?
……………………………...
………………………………………………………………………………...
…………………………………………………………...............................
4. Do you agree with this statement? “Entrepreneurship Skills are important in running a
business successfully” (Tick in the appropriate box)
(i) I agree completely ( )
(ii) I somehow agree ( )
(iii) I agree ( )
(iv) I somehow disagree ( )
(v) I disagree completely ( )

80