EFFECTS OF CREATIVITY AND INNOVATION ON THE ENTREPRENEURIAL PERFORMANCE OF FAMILY BUSINESS 

ABSTRACT

This research study examined the effects of creativity and innovation on the Entrepreneurial performance of family businesses. The objective of the research was to examine the effects of creativity and innovation on the entrepreneurial performance of family businesses. Both primary and secondary data were used for the data gathered. The survey research method was used through the distribution of 200 questionnaires to 20 family businesses in the Lagos metropolis. The family businesses used for this study included the following Techoquip Limited, Deorenik Limited, Ajoke Stores Limited, Eagles Path Limited, Olaolu Trading Stores, Obosi & Co Limited,  Howard Daffinone Consulting, Rotimi Williams Firm, BraithWhyte Group, and Emmalesson Group, Ibru Group of Companies, and OBAT petroleum group. ANOVA test statistics were used to test the three hypotheses of the research. In an analysis of the data gathered, it was found that creativity and innovation through product quality, new technology, and new product development significantly affect the performance of family businesses. The study recommends that family businesses should engage more in technology in improving the quality of their product to sustain their organization’s position in the face of competition.

 

Table of Contents

Cover Page                                                                                                                                 Pages

Title Page………………………………………………………………………………………………..ii Certification…………………………………………………………………………………………….iii

Declaration…………………………………………………………………….………………….iv

Dedication…………………………………………………………………………………………v

Acknowledgements……………………………………………………………………………….vi

Abstracts…………………………………………………………………………………………vii

Table of Contents………………………………………………………………………………..viii List of Tables……………………………………………………………………………………..xi

 

CHAPTER ONE: INTRODUCTION

1.0 Background to the Study………………………………………………………………………1

1.1 Statement of Research Problems………………………………………………………………3

1.2 Objectives of the Study………………………………………………………………………..5

1.3 Research Questions……………………………………………………………………………5

1.4 Research Hypotheses………………………………………………………………………….5

1.5 Significance of the Study………………………………………………………………………6

1.6 Methodology……………………………………………………………………………….….7

1.7 Scope of Study…………………………………………………………………………………7

1.8 Limitation of the Study………………………………………………………………………..8

1.9 Outline of Chapters……………………………………………………………………………8

1.10 Operationalization of Variables………………………………………………….…………..9

1.11 Definition of Terms…………………………………………………………………………10

 

CHAPTER TWO: LITERATURE REVIEW

2.0 Introduction…………………………………………………………………………………..12

2.1 Conceptual Framework………………………………………………………………………12

2.1.1 Family Business……………………………………………………………………………12

2.1.2 Importance of Family Business……………………………………………………………16

2.1.3 Characteristics of Family Business…………………………………………………………17

2.1.4 Challenges of Family Business…………………………………………………………….19

2.1.5 Creativity……………………………………………………………………………………21

2.1.6 Enhancing Creativity in Organization……………………………………………………..22

2.1.7 Innovation………………………………………………………………………………….23

2.1.8 Classification of Innovation………………………………………………………………..24

2.1.9 Managing Creativity and Innovation……………………………………………………….25

2.1.10 The Need for Creativity and Innovation in Family Business……………………………..27

2.2 Theoretical Framework………………………………………………………………………27

2.2.1 The Disruptive Technology Theories……………………………………………………………27

2.3 Empirical Framework……………………………………………………………………………..30

2.3.1 Creativity, Innovation, and Performance……………………………………………………30

2.3.2 Product Quality and Business Performance………………………………………………..32

2.3.3 Technology and Business Performance……………………………………………………32

 

CHAPTER THREE: RESEARCH METHODOLOGY

3.0 Introduction…………………………………………………………………………………..34

3.1 Research Methods………………………………………………………………………………….34

3.2 Research Design………………………………………………………………………………35

3.3 Population of the Study………………………………………………………………………36

3.4 Sample Size Determination……………………………………………………………………36

3.5 Sampling Technique and Procedures…………………………………………………………37

3.6 Source of Data………………………………………………………………………………..37

3.7 Research Instruments…………………………………………………………………………38

3.8 Validity of Research Instrument…………….……………………………………………….38

3.9 Reliability of Research Instrument.………………………………………………………….39

3.10 Method of Data Analysis…..……………………………………………………………….40

 

CHAPTER FOUR: DATA PRESENTATION, ANALYSIS, AND INTERPRETATION

4.0 Introduction…………………………………………………………………………………..41

4.1 Data Presentation…………………………………………………………………………………..41

4.2 Analysis of Data and Interpretation..…………………………………………………………41 4.3 Testing of Hypotheses and Discussion of Results……………………………………………54

 

CHAPTER FIVE: SUMMARY OF THE FINDINGS, CONCLUSION, AND        RECOMMENDATIONS

5.1 Summary of work……………………………………………………………………………60

5.2 Summary of the Findings……………………………………………………………………..61

5.2.1 Theoretical Findings……………………………………………………………………….61

5.2.2 Empirical Findings…………………………………………………………………………61

5.3 Conclusion………………………………………………………………………………………………………………62

5.4 Recommendations……..……………………………………………………………………..63

5.5 Suggestions for Further Studies………………………………………………………………63

Bibliography……………………………………………………………………………………..65

Appendices……………………………………………………………………………………….72

 

CHAPTER ONE

INTRODUCTION

1.0 Background to the Study

The Nigerian economy thrives on proceeds from oil and contributions of the private sector. Family businesses constitute a larger part of the private sector. Thus they contribute a significant amount to the national income. Nigeria was one of the richest 50 countries in the early 1970s but has retrogressed to become one of the 25 poorest countries at the threshold of the 21^st century. Ironically, Nigeria is one of the largest exporters of crude oil and at the same time inhibits the third largest number of poor people after China and India (Igbuzor, 2006). Adogamhe (2007) claimed that despite Nigeria’s vast oil wealth and abundant human resources, fluctuating oil prices, endemic corruption, and mismanagement of resources have undermined economic progress and made the majority of the population live in abysmal poverty.

Thus, given the present state of the economy of Nigeria, there is a need for the promotion and encouragement of entrepreneurial activities and establishments, such as family businesses among others, which assist in growing and increasing the national income of the country.  Despite the availability of several other kinds of businesses, the focus of this study was on family businesses. According to Oketola and Nnodim (2011), a family business was defined as a business in which one or more members of one or more families have a significant ownership interest and commitment towards the business’ overall well-being.

Kurato and Richard (2004) opined that today, most of the businesses we see are family businesses and these businesses have been noted to account for the largest percentage of businesses in many nations. Family firms are essential for economic growth and development through new business start-ups and the growth of existing family firms (Kellermanns, Eddleston, Barnett, Pearson, 2008). Family firms that engage in the innovative, proactive, and risk-taking behaviors that characterized firm-level entrepreneurship are major contributors to the economic development and growth in the USA and world economies (Zahra, Hayton, and Salvato, 2004). Family businesses are essential in enhancing economic development and growth by creating and funding new businesses as well as growing existing firms (Kellermanns, Eddleston, Barnett, Pearson, 2008). The impact of family firms on the development and growth of an economy cannot be overemphasized as it helps to reduce the unemployment rate by creating job opportunities and contributing to government revenue in form of taxes.

However family-owned businesses, regardless of size, face significant challenges of continuity, longevity, and success with many of the business families failing to sustain their firms beyond the first generation. (Oketola and Nnodim, 2011).  In Nigeria, the story of the growth of family-owned businesses is generally considered dramatic because of the number of pitfalls that are faced by these firms before they go on to be successful. While some of these family businesses have become successful, many have also failed while others are simply basking in the shadow of their former selves.

Creativity according to Pfieffer (1979) is the ability to realize creative products. Ignacio defined creativity as a piece of work that is first to a significant extent new, original, and unique and second shows a high degree of success in its field. Kuczmarski, Middlebrooks, and Swaddling (2000) suggested that innovation brings a new perceived benefit or value to a customer, employee, or shareholder. The new perceived benefit ranges from minimal to massive and may be functional, psychological, emotional, or financial. For example, a process innovation could bring a time-saving benefit to employees.

According to Adair and Thomas (2004) to innovate is to introduce something new – an idea, method, or device – it is a combination of processes: generating new ideas and the following implementation. Thus creativity and innovation bring into the business place new ideas and ways of doing things which in the long run leads to efficiency and effectiveness in the production process or service rendering as the case may be and in most cases the development of new products as well as the packaging and rebranding of old products. Because of the constant failure of the family businesses and how creativity and innovation can help to solve these challenges, this research focused to examine the effect of creativity and innovation on the entrepreneurial performance of the family businesses.

1.1 Statement of the Research Problem

The concept of family business has been in existence for a long time now. Esuh, Mohd, and Adebayo (2011) stated that family business has been in existence for a long time ago and has been known to water economy most especially during the dry days. Bird, Welsch, Astrachan, and Pistrui (2002) posited that family business has been the strength and the power of different nations since the ancient economies. Ramona, Hoy, Poutziouris, and Steier (2008) asserted that family business is an emerging aspect of entrepreneurship that has evolved over the decades and is still in its developing stage.  Past studies on family businesses have concentrated on diverse perspectives. Hoy and Verser (1994, cited by Esuh, Mohd, and Adebayo, 2011) provided six general perspectives which comprise leadership, culture, boards of directors, life cycles, strategic management processes, and ethics and value. Focusing on family business continuity, a lot of research has been done on the succession process of family businesses as it relates to continuity. Stalk and Foley (2009) suggested the training and screening of the members of the next generation of a family business ensure only committed and qualified relatives join the business, devising strategies to grow the business and creating responsibilities for additional family employees, and the business should minimize the time employees spend working for immediate relatives and assign an experienced non-family mentor to each younger family member to avoid the traps that destroy family businesses. Esuh, Mohd, and Adebayo (2011) thought that three factors which are founder, successor, and environment affect succession in family businesses. According to Esuh, Mohd, and Adebayo, “the presence of these three key factors reflects a true succession which would ensure family business continuity. Thus, a succession without any of these key factors could jeopardize the future and continuity of the family business. The key factors would serve as essential ingredients to the true succession as well as to family business continuity.” Lee, Lim, and Lim (2008) examined how the degree of the idiosyncrasy of a family business and the ability of the family’s offspring affect succession. They proposed that the likelihood the successor to a family business will be an offspring will increase with business idiosyncrasy and that business idiosyncrasy will interact with the competency of both the offspring and agent to affect successor choice.

Despite the numerous studies that exist on family businesses, there are still many evident cases of family business failure. This shows that a gap still exists in the literature on the effective execution of family businesses for greater impact on the economy. Hence this study examined the effect of creativity and innovation on the entrepreneurial performance of the family businesses.

1.2 Objectives of the Study

The general objective of the study was to examine the effects of creativity and innovation on the entrepreneurial performance of family businesses. The specific objectives of the study were as follows:

1. To determine the effect of high-quality products on the profitability of the family businesses.
2. To determine the effect of the introduction of new technology on the profitability of the family business. iii. To determine the effect of new product development on the sales turnover of the family businesses.

1.3 Research Questions

To achieve the above-mentioned objectives, the following questions were addressed

1. To what extent does the quality of products/services affect the profitability of the family business?
2. How does the introduction of new technology affect the productivity of family business?

• To what extent does new product development affect the sales turnover of the family businesses?

1.4 Research Hypotheses

This research was predicated on the following hypotheses

Hypothesis 1

H₀: The quality of the product does not increase the profitability of the family business

H₁: The quality of the product increases the profitability of the family business.

Hypothesis 2

H₀: New technology does not affect the productivity of family business

H₁: New technology affects the productivity of family businesses.

Hypothesis 3

H₀: New product development does not increase the sales turnover of the family business

H₁:       New product development increases the sales turnover of the family businesses.

1.5 Significance of the Study

As earlier mentioned in the above section, family firms that engage in the innovative, proactive, and risk-taking behavior that characterized firm-level entrepreneurship are major contributors to the economic development and growth of world economies. Thus, the findings of this study were relevant to the Nigerian economy as the continuous birth of family businesses as well as the sustenance of these businesses lead to a robust economy, especially in this time of economic crunch.

This study was also significant to the entrepreneurial development in Nigeria as well as helping family businesses engage in creative and innovative processes to ensure the sustainability of the businesses. Evaluation of family business performance is a topic that has attracted the interest of several researchers but it is still at its nascent stage in Nigeria. Thus this study added to knowledge in that area and was a base for further research and academic criticisms.

 

1.6 Methodology

In other to accurately capture the effects of creativity and innovation on the entrepreneurial performance of the family businesses, both primary and secondary data were used. Quality of product and technology was used to measure creativity, and new product development was used to measure innovation. Profitability, productivity, and sales turnover were used to measure the entrepreneurial performance of family businesses. The Primary data was obtained through the administration of questionnaires while the secondary sources used included information on the activities of the firms obtained from business journals, periodicals, textbooks, dissertations, abstracts, magazines, newspapers, etc.

A quantitative approach in designing the questionnaire was adopted to be able to capture the variables that can effectively measure the dependent and independent constructs of the research. Data was collected from selected family businesses operating in Lagos state. The list of these family businesses is listed in Appendix B. There was no restriction to the type of industry the family business is operating in. The data collected were analyzed with the Statistical Package for Social Sciences (SPSS) software program (version 15.0)

1.7 Scope of Study

This study examined the effects of creativity and innovation on the entrepreneurial performance of family businesses in Lagos state. Family businesses cover a vast range of firms in different sectors and sizes. They range from sole proprietors to large-scale enterprises. This study considered the following family businesses in Lagos state; Techoquip Limited, Deorenik Limited, Ajoke Stores Limited, Eagles Path Limited, Olaolu Trading Stores, Obosi & Co

Limited, Eleganza, Bode Best & Co Limited, AA Shittu & Co Limited, Elizade Nigeria Limited, Ekenedilichukwu Transport, CN Okoli Motors, Diya Fatimileyin & Co Limited, Jide Taiwo &

Co Limited, Howard Daffinone Consulting, Rotimi Williams Firm, BraithWhyte Group, Emmalesson Group, Ibru Group of Companies, and OBAT petroleum group. To effectively measure creativity, innovation, and entrepreneurial performance in family businesses, this study considered family businesses that have been in existence for five years and above irrespective of their sector and nature of business.

1.8 Limitations of the Study

In the course of carrying out the study, some constraints were encountered which somehow affected the successful completion of the study. These include:

1. Financial constraints
2. Limited time is available for the research work. iii. The reluctance of respondents to answer questions.

1.9 Outline of Chapters

1. Chapter One: contains the introduction of the research study. It is the “what” of the study i.e. this chapter outlined what the researcher intends to study. It is made up of the background of the study, research aim, research questions, hypotheses, and objectives of the study. It also contained the research methodology.
2. Chapter Two: deals with the literature review of the study. It is also known as the “why” of the study. This chapter reviewed the work of past researchers on the same area of discourse that this research studied.
3. Chapter Three: Here is the method by which the researcher carried out the study and the kind of data that was used. The researcher here also stated the statistical method that was used in testing the hypotheses. This chapter is known as the “how” of the study.
4. Chapter Four: In this chapter, the data that was collected was presented and analyzed for results. The hypotheses were also tested and the result was discussed in this chapter.
5. Chapter Five: this is the last chapter of the research work. The summary, findings of the research, recommendations, and conclusion of the study were done in this chapter.

Suggestions for further study were also stated by the researcher in this chapter.

1.10 Operationalization of Research Variable

To effectively study the impact of creativity and innovation on the sustainability of family businesses, this study inadvertently specified family business sustainability as a function of creativity and innovation. This was expressed functionally as

Y = f(X₁, X₂)               —————————————- equ 1

Where

Y= Performance

X₁= Creativity

X₂= Innovation

Breaking creativity and innovation into measurable variables and expressing the above functional equation (equ 1) in a linear equation, the function was written as

Y = x₁ + x₂ + x₃—————————————- equ 2

Where

x₁ = Quality of Product. x₂ = Technology. x₃ = New Product Development

Y = y₁, y₂, y₃ y₁ = Profitability y₂ = Productivity y₃ = Sales turnover

1.10 Definitions of Terms

Creativity: means the production of novel and useful ideas in any domain.  Creativity refers to the generation of novel, useful ideas, and employees’ ability to create new practical ideas. It is the starting point of innovation.

Innovation: is the successful implementation of novel ideas within an organization. Innovation can be viewed as a novel idea that has been implemented and generally accepted which makes an organization unique or produce a unique product or service.

Entrepreneurial Performance: this study defines sustainability as the continued existence of a firm as a result of its productivity, profitability, sales turnover, increased consumer base, etc.

Product Quality: Product quality is defined as a product that is made through innovation to efficiently meet the needs of consumers.

Productivity: This is a measure of the efficiency of production. Productivity is the ratio of production output (finished product) to what is required to produce it (raw materials). The measure of productivity is defined as the total output per one unit of a total input.

Profitability: This is the ability of a business to make a profit from the sales of its product or the rendering of a service over time.

Sales turnover: the number of times a product of a firm is sold in a period

New technology: is defined as the machine as well as information used in production which makes the production process easier.

New product development: this is the term used to describe the complete process of bringing a new product to the market.

Product Innovation: the introduction of a new product or a significant qualitative change in an existing product.

Process Innovation: the introduction of a new process for making or delivering goods and services.

Technological Innovation: encompasses the introduction of a set of production techniques used to design, make, package, and deliver goods and services in the economy.

EFFECTS OF CREATIVITY AND INNOVATION ON THE ENTREPRENEURIAL PERFORMANCE OF FAMILY BUSINESS, GET MORE ENTREPRENEURSHIP PROJECT TOPICS AND MATERIALS

 

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