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Entrepreneurship And Innovation In China And Nigeria Commerce Essay

Paper Type: Free Essay Subject: Commerce
Wordcount: 3242 words Published: 1st Jan 2015

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In today’s business sectors in the world, innovation idea is seen as the key product when differentiating with the ability to generate new product and create a new market or transform an industry, whereas entrepreneurship is often associated with true uncertainty especially when it involves bringing new idea to the business (Deakins et al… 2005). Given the pace of change in China, the ability to constantly refresh what to innovate is the integral part of a long-term of successful survival for entrepreneurs in China. According to (Schumpeter 1999.p 285) who described and sees entrepreneurship as innovation and simply defined it as someone who does make a new combination of existing materials and forces. Furthermore entrepreneurship consists of creating innovation rather than inventions, in China entrepreneurs are highly innovated and know how to use inventions, but most of the businesses are been owned by the state government.

In this essay we are going to examine China and Nigeria entrepreneurship and innovation. Entrepreneurship is an important factor in the development of any country. Entrepreneurs are responsible for taking calculated risks that open up doors to progressively higher levels of economic growth.

Entrepreneurs not only create jobs and opportunities for the people but they also fill the space in the economy not provided by stated owned enterprise. (Malik 1997).

However some factors that hinders entrepreneurial in some developing countries are cultural social context, population structure, education training and government operation etc. Nevertheless, since the global economic crisis China has been a popular figure in today’s global economy. We are going to look at entrepreneurship in the private and public sectors, using their own money to start up a business and therefore they are mostly privately owned. In Nigeria the government don’t support the entrepreneurs with social amenities like electricity, technology due to bad government had made entrepreneurial less innovative. There are some gender differences amongst these two countries, comparison of the TEA rate in China and Nigeria for both men and women is provided for about 41 countries and the data (Global Entrepreneurship Monitor 2003). Entrepreneurs are the veritable backbone on which the world and modern ideas continue to develop. The magnitude and reach of their contributions, to extend much beyond the world of business and economy, and to them goes irrefutable credit for the growth and evolution of societies at large. Developed nations across the world owe their current prosperity to the collective effort of intrepid entrepreneurs, on whose innovation also rests the future prosperity of much of the developing world.(Schumpeter 1999).

Entrepreneurship in China

In 1978, the first year of reform in China, the state owned sector accounted for over 90 per cent of the country’s GDP, by 2005, this had fallen to less than half. In fact not all of China’s growth achievements can be attributed to entrepreneurs. In the Rural areas industries in the township and village business contributed to a growing proportion from the early 1980s onwards and accounted for nearly a third of GDP in the mid-1990s. And foreign investors also played a significant role from around that period. However since the late 1990s, China’s entrepreneurs have created new firms and have been the key driver of growth in recent times. Their firms are innovative and dynamic contributing to the private sector. ( Wu, 2002, and Zhang et al, 2006). In 2002, there were a huge turnover of 2.4 million private enterprises in the republic of China, due to the massive turn up, entrepreneurs accounted for employing 34.1million people (Lang and Hu,2004). Private entrepreneurs were ranked third largest social class after the government and managers of stated-owned enterprises, after a research carried out on social stratification (Lu, 2002, 2004).

A Chinese Entrepreneur Story ” Lenovo computers: East meets West” from (Johnson et al 2008,p321).

At the age of 40 Liu Chuanzhi, was a researcher working for a computer institute of Chinese Academy of sciences. . In 1984 Liu Chuanzhi started with $25,000 capital which he borrowed from the Computer Institute where he works and promised his boss that he would grow a business with revenues of $250,000. He started the business from his company warehouse and also borrowed office facilities from the his company. However his early carrier had included disassembling captured America radar systems during the Vietnam War also planting of rice during the Chinese Cultural Revolution. Furthermore, one of his first idea was to resell coloured televisions, in two years Lenovo did not gain its market share, in the following year which was 1987 lenovo hits his first success and was the first company to package Chinese character software with imported PCs.

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Although the success of Lenovo started to take off, with Liu using the support of his father political influence, well placed in the Chinese government, to help import cheap PCs through Hong Kong .In 1988 lenovo placed its first job advertisement, and recruited 58 young people to join the firm. Amongst the new people recruited was Yang Yuanqing, running Lenovo PC business before he turned 30, and later became chairman of the new Lenovo -IBM venture at 41.The first Lenovo PC was launched in 1990 by the new team and drove the company to a 30 per cent market share within China in 2005.However the company that stated by an entrepreneur is now a multinational company, Chinese government owned about 27% share of Lenovo. A research was been carried out about what motivate Chinese people to take the risk and start their own business, the research on entrepreneurship tends to suggest that motivation takes the form of push or pull factors.(Chen et al 2006).Push factors simply means did not get on well with management, unemployment and lack of alternative career choice. Pull factors can be independence, achievement and recognition, personal development and wealth creation. The results are showed in table 1.

It appears that entrepreneurial are been motivated by pull factors in 1997, and 2002 surveys which over weighed push factors. The awesome motive to become private entrepreneurs was been link with achievement and personal development. Nevertheless a higher proportion of individuals were been motivated by personal wealth, why unemployment and job insecurity came out to be second most important motivation factor in 1993.(Chen et al 2006).The access to capital it’s another factor that hinders entrepreneurs in the rural area of China, basically most Chinese people borrow money from informal investors, which help the entrepreneurial in the rural area to start up their own business.(Tsai 2002).In the urban area larger business start up, access to wider sources of capital has a key element in choosing the relevant organisational form. A Survey was carried in 2000, private businesses in china involved on average four investors. Founding members made up 74.5 per cent of start up capital, and other individual investors have 20.4 per cent, see table 2 in appendix.

The dramatic growth in share for private entrepreneurs workforce started in the mid 1990.Therefore no single record of data in the Rural area for private enterprise not until 1994, the upward growth in the Urban area still continues but in rural area private business tend o be falling.(GEM 2008) .The increase for entrepreneurship in China its been phenomenal to sustain economic growth. By guaranteeing lifetime employment in urban area has made Chinese people not to be self-employed, see table 3 in appendix.

After the dismantling in the mid 1990 of employment system and the massive layoff of employees and restructuring of state-owned enterprises, private Chinese businesses began to excel.(Knight and Yueh 2004).Another challenges faced by entrepreneurs has been access to capital ,in a recent survey carried out in china 2006 by the first Chinese Chief economist of World Bank shows that out of 40 million Small and medium-sized enterprise in China less than 1 per cent could borrow loans from banks.(Lin 2007).Entrepreneurs also experience the lack of property and land in China due to the local government been in control of these assets not until 2004 that the government started privatisation of buildings and Land. According to (GEM 2008 ).Survey in Chinese gender differences in 2006-2007 the proportion of male entrepreneurs was 74.2% and female was 25.8%, the proportion of male has reduced in 2008-2009 to 73.0% while for female entrepreneurs rose to 27.0% .Although this happened because of the global financial crisis unemployment became a key issue in people’s lives. Since September 2008 the global financial crisis had a serious impact in entrepreneurial environment in China, 3,306 questionnaire was shared across 62.5% of entrepreneurs said that the financial crisis has had a tremendous effect on their businesses to fold up. The firms affected were joint-stock and private enterprise that are affected more in the external environment. In the industry the proportion of consumer is the biggest 18.4%, agriculture is the smallest 5.2%.Most companies, few entrepreneurs thought that the financial crisis had no impact in their business with the proportion of 14.7% .Both domestic business and international economic environment changed, exporting decreased due to financial crisis with the loss of 30% of private business, many private businesses have reduced cost through layoff and pay cuts. However the research showed that less than 50persons were laid off in domestic companies. Furthermore, the financial crisis brought opportunities for entrepreneurs to improve business processes. As entrepreneurs generally expand the size of the market, improve corporate governance and improve product quality through internal cost savings, the government is taking measures through improving the financial environment, policy support and tax incentives .(GEM 2008) .

Entrepreneurship in Nigeria

The return of democracy in 1999 ushered in a period of economic reforms and a renewed focus on entrepreneurs development as the only viable means to sustainable growth. Nigerian leaders initiated a massive programme of disinvestment and financial deregulation aimed at boosting businesses development across the Micro, Small and Medium Enterprise (MSME) space. Progress has been held back by institutional deficiencies and widespread bureaucratic and political corruption, although it is still too early to comment on the long-term accomplishments of Abuja’s renewed efforts at jumpstarting the economy. Entrepreneurship is a gradual process for any developing nation. For Nigeria to reap the full benefits of a dynamic and evolving economy, thus requires the overcoming of entrench social, financial and political hurdles. Informed government policy, education and international participation are crucial for Nigeria to shake off its third world heritage and achieve the full breadth of its economic stability. According to Prof. Adedeji who was been interview in vanguard newspaper describe the government to be in the forefront of placing the Nigerian economy on a sound footing, reiterating that we want to promote a new culture of quality assurance in our goods and services produced in this country in order for entrepreneurs to compete effectively in the Africa and global market. He also noted that the banking sector is equally important in advancing Nigeria’s entrepreneurs. Professor Adedeji, contributed that banking industry should develop loan packages that will essentially empower the small business.

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Global Entrepreneurial Monitor (GEM 2008) which covers 44 countries excluding Nigeria. Developing country like Nigeria is considered low income country with annual per capita income less than $1,025 and an inability to borrow from the IBRD International Bank for Reconstruction and Development. Although Nigeria suffer from low income, they have experienced better than average economic growth rather than comparing to others. According to (Chu and Benzing 2009) Table 1 shows us the economic and business factors of entrepreneurs in Nigeria. In 2005 Nigeria has the 2nd highest GDP of 6.9% in Africa, and the rate of inflation in 2005 was 26.9% compare to other country like China . Nigeria Entrepreneurial has contributed to economic growth and enhances the development of the country economy. Economies have significantly improved during the last few years, and provide moderate business environment for entrepreneurial. (World Bank, 2007) .The 31.4 % tax rate in Nigeria is an example of motivation to improve businesses which favours entrepreneurs a lot to save capital and start-up enterprise. However these policies showed us in this table 4 illustrated that Nigeria is a conducive environment for business and specifically designed to meet the goals and needs of the entrepreneurs.

Nevertheless, developing country like Nigeria lack exposure and solid technology base of trained scientists and world-class research universities. Lead to many entrepreneurial innovations in Nigeria. The level of exposure of the entrepreneurial does have a significant effect. Take for example in the western world; individuals are exposed to several credit facilities. Credit facilities like loans, bonds, credit cards, mortgages, etc. The availability and readiness of these facilities can create innovation and encourage the entrepreneurial spirit. If one is able to have access to a mortgage for example, the individual is able to use his or her assets to obtain capital, to fund his or her start up business. Its different with developing countries, with low level of exposure and these are mainly less developed world or third world countries where access to capital is difficult to acquire or not easily available. For example entrepreneurial forces in my home country Nigeria is relatively strong, as there’s high level of unemployment and rise in poverty. Entrepreneurship activity in Nigeria is primarily based on necessity and the economic decline since the 1980’s has created a hostile environment that is unfavourable to entrepreneurial success. In other words getting venture capital to finance entrepreneurial endeavour in Nigeria is very difficult because of the political and economic instability. The policies of the Nigeria government it’s a barrier to the success of large-scale entrepreneurial success for many Nigerians. Although it is difficult due to the lack of resources. Capital is often inadequate to finance entrepreneurial business transactions in Nigeria banks are been very careful to give out loans to small businesses, inadequate power supply businesses are hard to start up due to the high cost of generator maintenance. The initial capital for the take-off of the business may not be adequate or it may be non-existent all together. Due to lack of funds acquisition of entrepreneurial skill is not a yard stick or prerequisite for establishing small businesses. A research that was carried out in Africa below is Table 2 shows us Nigerian sample has moved higher per cent of older married entrepreneurs. Furthermore, the groups are quite different with respect to their education levels. In total 40 of Nigerian claimed to have graduated from universities, while female entrepreneurs are slightly lower. Basically the result of higher concentration of Muslims in Nigeria than other West Africa countries. In many Africa countries the Muslim faith does not encourage females to own their businesses. The sample is shown in table 5 showing a lower overall percent of female business owners in Nigeria.

In Nigeria, government help to develop electricity supply, financial inducement, subsidies and other utilities to encourage entrepreneurship development. However the government provides security to safe guard life and property, maintaining law, order and freedom to do business. The role of government intervention in entrepreneurship development in Nigeria became significant after the Nigeria civil war in (1967-1970).Fundamentally Nigeria government promotes entrepreneurial culture through initiatives that builds business confidence, positive attitude, and pride in success, support and encouragement of new ideas, technological supports, and encouraging inter-firm linkages and promote R&D. Also cheap financial resources, free access to market, registration/advisory service to businesses, promotion of entrepreneurial skills acquisition through education and manpower development, production of infrastructure, export incentives, stable macroeconomic environment, security of investment, stable political climate . In 2000 entrepreneurship studies have been introduced into the Nigerian educational system especially higher institutions as a mandatory course. The Centre for Entrepreneurship Development (CED) which has the objective of gingering and teaching students of higher institutions especially in science, engineering and technological to acquire entrepreneurial, innovative, and management skills, was established. Therefore to make the graduates self-employed, create job opportunities for others and generates wealth.

Why are some countries more entrepreneurial than others and conclusion

The entrepreneur is the single most important player in a modern economy and in some countries, some have the entrepreneurial spirit than others. This is due to development as some countries are more developed than other.

Developing countries like Nigeria are less entrepreneurial due to reasons like political instability, presence of inflation, inadequate of infrastructural facilities, improper information gathering, capital, inadequate government support, corruption etc. These problems are usually existent in underdeveloped nations and they tend to also affect the mindset of the citizens of these countries GEM report (2008). Issues like culture make a significant effect to the where business owners operate and conduct their business practices. Some culture are more conservative than others, China being one, where almost 1 in 5 then to save including the government with its supply reserves. another is the fear of failure, it is known that the Chinese people have a collective nature rather than an individualistic nature, this has been pointed out to the fact that failure is not acceptable. Thus might explain the successive growth and innovation experienced in the country and the nature of most business where there are usually more than one investors/entrepreneurs.

Finally it is in no doubt that entrepreneurship stimulates growth and improve the private sector, although most of the times, they are not encouraged by their governments and environment. however a better understanding of entrepreneurs and entrepreneurship by policymakers on motivation, capital and most especially policies that might indirectly or directly affect business owners. Regardless motivation differ across countries therefore governments would have to design policies to meet the goals and needs of the entrepreneurs within each country ( Cynthia 2009).


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