EFFECT OF FORMAL EDUCATION ON THE DEVELOPMENT OF ENTREPRENUERSHIP

CHAPTER ONE

INTRODUCTION

1.1BACKGROUND TO THE STUDY

The concept of entrepreneurship, which encompasses the creation of ideas, companies, and patents as well as the thought process behind these creations, even in cases where they are not put into practice, has been identified by various authors as one of the key components of economic growth and development . Entrepreneurship is inextricably tied to innovation, productivity growth, competitiveness, economic growth, job creation, and even personal achievement (Grilo and Thurik, 2005).

Along with the enormous growth in entrepreneurship rates over the last few decades, with estimations as high as 500 million individuals per year engaging in the formation of new businesses (Moya, 2008), scholarly interest has also expanded significantly. On the one hand, it aims to further our understanding of this phenomenon while also providing advise and assistance to users and regulators (for a review, see Dimitratos and Jones, 2005; Szyliowicz and Galvin, 2010).

Entrepreneurship is a multifaceted issue that requires responses at the individual, regional, sectoral, or, in this case, national levels (Wennekers and Thurik, 1999; Davidsson, 2004). Given that economic variables alone do not explain a major portion of entrepreneurial activity at this level (Freytag and Thurik, 2007; Uhlaner and Thurik, 2007), this study intends to widen the analysis by focusing on the influence of education on entrepreneurship rates. Individuals tend to gain information that can give entrepreneurs with useful talents and skills through (particularly formal) education, as Coduras et al. (2010) highlight. As a result, our study contributes to the literature on Institutional Economy (North, 1990) by conducting an in-depth analysis of the impact of education, which is one of the factors that defines social, economic, and political interactions within a country, and by explaining how different educational levels can have very different ramifications for each type of entrepreneurship.

The dominant view has typically believed, supported by the findings of various research, that greater rates of education will lead to higher rates of entrepreneurship (see, for example, Bates, 1995; Reynolds, 1997; Delmar and Davidsson, 2000). To the best of our knowledge, no research have been conducted that investigate the specific influence of different educational levels on entrepreneurship rates, differentiating between formal and informal entrepreneurship. We argue that the influence of each educational level will differ depending on whether it is studied in terms of formal or informal entrepreneurship. This is due not only to the fact that the determinants of each educational level frequently differ, but also to the fact that each has its own idiosyncrasies, techniques, aims, and resources. As a result, we contribute to the literature on entrepreneurship by emphasizing the contrast between formal and informal entrepreneurship and by offering theoretical explanations and empirical evidence that educational levels have different effects on each of them. To do so, we use multi-country data from the World Bank's World Development Indicators on secondary and tertiary enrollment rates, as well as data on formal and informal rates of entrepreneurship from the World Bank Group Entrepreneurship Snapshots (WBGES) and the Informal Entrepreneurship Index (IEI), respectively (Dau and Cuervo-Cazurra, 2009).

This study suggest that secondary and postsecondary education boosts formal entrepreneurship by increasing self-confidence, lowering perceived risk, and improving human capital (Schultz, 1959; Shane and Venkataraman, 2000; Davidsson and Honig, 2003; DeTienne and Chandler, 2004). Tertiary education, on the other hand, has a detrimental impact on informal entrepreneurship because it raises knowledge of and sensitivity to the potential negative consequences of such activities (Gössling, 2003; Bitros & Karayiannis, 2010). Secondary education, on the other hand, has little impact on informal business. Despite the fact that secondary education raises awareness of the potential negative consequences of informal entrepreneurship, this effect is offset by a lack of organizational, planning, administrative, bureaucratic, leadership, or human resource management skills (Lazear, 2005; Levie and Autio, 2008), forcing some entrepreneurs to join the informal sector as a last resort.

1.2     STATEMENT OF THE PROBLEM

Entrepreneurship is a complicated topic that need research at the individual, regional, sectoral, and, in this case, national levels (Wennekers and Thurik, 1999; Davidsson, 2004). Given that economic determinants alone do not explain a significant amount of entrepreneurial activity at this level (Freytag and Thurik, 2007; Uhlaner and Thurik, 2007), the purpose of this study is to broaden the analysis by concentrating on the impact of education on entrepreneurship rates. As Coduras et al. (2010) point out, individuals tend to learn information that can provide entrepreneurs with relevant abilities and skills through (especially formal) schooling.

Surprisingly, the dominant view has always believed, supported by the findings of multiple research, that higher rates of education will lead to higher rates of entrepreneurship. However, while this study has been conducted in other parts of Africa, only a few studies have focused on how formal education enhances entrepreneurship in Kwara State, Nigeria. Against this context, this study tries to investigate the impact of formal education on the growth of entrepreneurship.

1.3     OBJECTIVE OF THE STUDY

The broad objective of this study is to examine the effect of formal education on the development of entrepreneurship. Specifically, the study seeks:

i.          To determine the extent to which government policies and programs are critical to nation formation.

ii.        To evaluate if formal education improves self-employment.

iii.      To determine the significance of formal education on business sustainability.

iv.      To investigate if there is a difference between business established by  an  educated person and illiterate.

1.4  RESEARCH QUESTIONS

The research is guided by the following  research questions:

i.          What is the extent to which government policies and programs are critical to nation formation?

ii.        Does   formal education improves self-employment?

iii.      What is the significance of formal education on business sustainability?

iv.      Is there any difference between business established by  an  educated person and illiterate?

1.5    SIGNIFICANCE OF THE STUDY

 It is hoped that at the end of study, the findings will be of immense benefit to both government and most of our teeming unemployed graduates and non-graduate alike.

It is also the wish of the research to provide a better and clear understanding of the concepts and practice of Entrepreneurship so as to improve and qualities and skills of Entrepreneurs which reduce the  rate of unemployment and contribute to nation building. As a result, our study contributes to the literature on Institutional Economy (by conducting an in-depth analysis of the impact of education, which is one of the factors that defines social, economic, and political interactions within a country, and by explaining how different educational levels can have very different ramifications for each type of entrepreneurship. Findings of this study will serve as reference to scholars who wishes to conduct further study in related filed.

1.6     SCOPE OF THE STUDY

          The scope of the study  borders on   the effect of formal education on the development of entrepreneurship. Its however important that research of its type naturally should cover small scale business in Akure, Ondo State and environs and find out the general contribution to entrepreneurship development. Therefore, the study we must face, the enterprise in the above named and its contribution in the growth of entrepreneurship development in these areas.

1.7 LIMITATION OF THE STUDY

Like in every human endeavour, the researchers encountered slight constraints while carrying out the study. The significant constraint was the scanty literature on the subject owing that it is a new discourse thus the researcher incurred more financial expenses and much time was required in sourcing for the relevant materials, literature, or information and in the process of data collection, which is why the researcher resorted to a limited choice of sample size covering only small scale business in Akure, Ondo State Thus findings of this study cannot be used for generalization for other businesses in other  States within Nigeria. Additionally, the researcher will simultaneously engage in this study with other academic work will impede maximum devotion to the research. Howbeit, despite the constraint  encountered during the  research, all factors were downplayed in other to give the best and make the research successful.

1.8     OPERATIONAL DEFINITION OF TERMS

Micro Economic: This is a branch of economic focuses on explaining the economic behavior of small units such as the individuals, households, individuals firms, individuals market or industries.

Macro-Economic: This on the other hand concentrate on the study of aggregate economic activities. It looks at the economy as a whole rather than as individual unit.

Mixed Economy: This is one in which resources are allocated partly through the decision of private individuals or the private sector and partly through the decision of the government or public sector.

Gross Domestic Product (GDP): This could be defined as the total market of all final goods or services produced in a country at a given time. normally a year.

Per Capital Income: This is the national income of the country over the population of the country.

Education: This is the process of educating or teaching to develop the knowledge, skills or character of students.

Unemployment: Okeke (1994) defined unemployment as a situation where there are people who are willing and able to work, who are actually seeking for work but find no employment.

Entrepreneur: Is an individual who undertakes to supply goods and services to the market for profit. This will usually invest their own capital in a business and take on the risk associated with the investment.

Get this material NGN 5,000

Message Us on WhatsApp  »