Financing Practices of Entrepreneurs in Small and Medium Enterprises in Southwestern Nigeria: An Effectuation Perspective.

Author(s)

Ademola Adele , Afolabi, Yakibi Ayodele ,

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Volume 4 - August 2015 (08)

Abstract

This study investigated financing practices of entrepreneurs in small and medium enterprises (SMEs) in Southwestern Nigeria from the perspective of effectuation theory. The study explored the relevance of the effectuation theory as a useful framework to the financing practices of entrepreneurs in established small and medium enterprises. The methodology used to carry out this study was a mixed-method approach. That is, a qualitative approach within a dominant quantitative technique. Four owner-managers who were purposively selected were interviewed in depth, while 748 firms in the study area were surveyed with questionnaire. The tools of analysis, for the data obtained from the personal interview and survey questionnaire were descriptive statistics and effectuation framework logics. Findings revealed that entrepreneurs in SMEs make use of means-driven effectuation logics in their financing practices such as: pre-payment from customers (33.50%), credit purchase from suppliers (51.50%), personal credibility (86.00%), personal reputation (61.00%), experience from previous business activities (80.50%); support from trade associations (55.08) and assistance from competitors (26.00%). The study therefore concludes that SMEs in the South Western Nigeria, make use of effectuation logics in their financing practices and as a result the effectuation theory is a relevant framework to explain financing practices of these entrepreneurs. 

Keywords

Financing practices, entrepreneurship, entrepreneurs, small and medium enterprises, causation logic, effectuation theory.

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