International Journal of Economics, Commerce and Management

United Kingdom Vol. VI, Issue 3, March 2018

http://ijecm.co.uk/ ISSN 2348 0386

GLOBALIZATION AND BUSINESS ENVIRONMENT OF SMALL

AND MEDIUM SCALE ENTERPRISES: A CONCEPTUAL REVIEW

Okeowo Florence O.
Business Administration and Marketing, Babcock University, Ilishan Remo, Nigeria
okeowof@babcock.edu.ng

Susannash Limunga Esowe

PhD Research Scholar, Business Administration and Sustainable Development,
ICT University USA, Cameroon Campus, Cameroon
mboh.susannash@ictuniversity.org

Ngatchu Damen Nyinkeu

PhD Research Scholar, Department of Information Communication Technology,
ICT University USA, Cameroon Campus, Cameroon
ngatchu.damen@ictuniversity.org

Adeogun Olubukola Simeon

Regional Sales Manager, Multipro Consumer Products Ltd. Lagos, Nigeria
bukky_2001@yahoo.com

Abstract
Globalization has increased the challenges of small and medium scale enterprises (SMEs) in
today’s business environment. It has encouraged SMEs in the developed and developing
countries to make their presence felt in the world economy by competing not only with domestic
rivals, but also with foreign firms with superior competitive advantages in the global market. This
paradigm shift for SMEs created a need to examine the link between globalization and business
environment of SMEs, most especially in the developing countries. In this article, a conceptual
review of selected literature was used to establish the link between globalization and SMEs
activities, within the contexts of the Nigerian business environment. Scholarly articles of past
and extant studies were reviewed in this study to explore and provide matching ideas that give

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relevance to the topic. The finding of the study reveals that SMEs must not only analyze the
increasing complexity and challenges of their business activities within the global environment,
but also device various strategies to combat such challenges, in order to survive and grow in the
global markets. This study suggests that SMEs must have a clear understanding of their
business environment in order to respond to the forces of proactive change in the global market.

Keywords: Globalization, Business Environment, Small and Medium Enterprises, Conceptual

Review, Nigeria

INTRODUCTION
Globalization is a controversial subject. It encompasses many diverse disciplines and schools of
thought and shares inter-connected meaning to the fields of sociology, cultural anthropology,
economics, trade, marketing, philosophy, business management, technology, and political
science (Hendee, 2010). Economics focus on the transfer of goods, services and funds,
scholars in the field of political science, focus on the role of United Nations
Organizations(UNO),World Trade Organizations (WTO) and similar kind of international
institutions, while anthropologists and sociologists concentrate on the interconnectivity of
different cultures (Akram, 2011; Nayak, 2011). Although, pertinent issues on globalization
constitute key research in the field of management and social sciences, however, no single
generally accepted definition of globalization exists. Hill (2014) views globalization as a shift
toward a more integrated and interdependent world economy. Torgler and Piatti (2013) defines
globalization as a process of establishing networks of connections among actors in different
countries, mediated through a variety of flows including people, information, ideas, capital and
goods. Ireland et al. (2011) defines globalization as the increasing economic interdependence
among countries and their organizations as reflected in the flow of goods and services, financial
capital, and knowledge across borders. These variances in the definition of globalization show
that there is no consensus on a single definition of globalization between all disciplines of life. In
the meantime, the area of convergence of the various definitions lies in the aspect of a growing
interconnectedness, integration, interdependence, interaction, intensification, diffusion,
cooperation and changes among countries. Hence, in this paper, globalization refers to the
increasing interconnectedness, interdependence, intensification, interaction and integration of
compliant nations from a segregated economy to an open economy.
Globalization resulting in fierce competition in various product lines has forced SMEs to
adopt strategies in tune with the global trends. SMEs have been undergoing a metamorphosis

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in the era of globalization for over a decade and many developments of relevance to SMEs,
have taken place within the country and internationally (Nagayya and Rao, 2011). Although,
SMEs are the backbone of economy in many countries and often constitute more than 90% of
all the companies or enterprises in some countries, however, in spite of their prevalence, they
are very vulnerable and susceptible to competition in the global landscape (Gunasekaran, Rai &
Griffin, 2011). They opine further that over the years, globalization has greatly led to increase in
the rate of competition among SMEs in both the developed and the developing countries. Thus,
the increasingly global nature of competition has forced many firms in the developed and the
developing countries to develop and distribute their products more widely and rapidly globally,
adapt to environmental change, create new global alliances, become environmentally and
socially responsive in their dealings and be sensitive to cost reduction and well as local needs
(Aregbesola et al, 2011).
Although studies conducted in the field have pointed out that more than 90% of the firms
actually belong to SME category, there has been relatively limited research in the area involving
globalization, and their implications on SMEs competitiveness (Gunasekaran et al, 2011). Some
scholars believe that globalization offered the possibility of boundless benefits, growth and
prosperity in the developed and developing countries (Irani and Noruzi, 2011; Awuah, 2012;
Akor, 2012; Machida, 2012; Ajagbe et al., 2015). On the other hand, critics of globalization
assert that the benefits of globalization have not been shared equally among all nations (Nusta,
2013; Nayak, 2011; Nayak, 2011; Alstrom and Bruton, 2010). They argue further that
globalization during the second half of the 20th century favoured only a few developing nations
with access to critical resource base, competence, information and socio-political network, to
crystallize their resource bases and competences to reap the benefits of free markets.
Nigeria, like other countries has not been left out in the struggle to gain regional and
global recognition. Osotimehin et al (2012) opine that since the adoption of the Structural
Adjustment Programme (SAP) in Nigeria, in 1986, there has been a decisive switch of emphasis
from the grandiose, capital intensive, large scale industry towards micro, small and medium
scale enterprises, which has immense potentials for developing domestic linkages for rapid and
sustainable industrial development. In addition to the adoption of SAP in 1986, the federal
government of Nigeria also implemented a new industrial policy in 1988, which gave a pivot role
to private sectors and refocused the priority from large-scale industries to small and medium
scale enterprises (Osotimehin et al, 2012). However, in spite of the aforementioned benefits of
small and medium scale enterprises, such as enormous opportunities and huge employment
creation capacity, the Nigerian government has made several attempts to enhance the growth
and development of small and medium scale enterprises in the country. However, in spite of all

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these measures, SMEs in Nigeria continue to perform below expectations. Thus, this situation
constitutes great concern to the Nigerian government, citizens, SMEs operators, practitioners
and organized private sector groups in Nigeria (Anudu, 2013). Therefore, it is essential to find
out if the poor performance of small and medium scale enterprises in Nigeria could be attributed
to the growing pace of globalization that is sweeping across nations. This study seeks to
examine the link between globalization and SMEs, within the context of the Nigerian business
environment.
This paper is divided into four sections. The first section deals with the introduction
aspect of the study, the second section focuses on an extensive literature review on
globalization and the drivers of globalization, the third section provides an overview of SMEs
that help to provide insight into the factors that affect SMEs in the era of globalization. The
fourth section deals with the conclusion, recommendation, contributions of the study to
knowledge, as well as the potential avenues for future research.

LITERATURE REVIEW
Globalization
Globalization has become an inevitable phenomenon in human history that brings the world
closer through the exchange of goods and services, information, knowledge and culture.
Globalization is the growing interdependence of countries worldwide, through the increasing
volume and variety of cross-border transactions in goods and services, as well as international
capital flows (Aregbesola et al, 2011). As the world becomes more connected, people in all
nations achieve a greater level of interdependence in activities such as trade, communications,
travel, and political policy (Machida, 2012). This fundamental change towards the end of the
twentieth century has profoundly affected business, politics, society, citizens and the ways in
which various stakeholders interact with each other (Hill, 2014). Nayak (2011) also argues that
globalization comprises of the integration of socio-political, economic and cultural dimensions of
nations across the world. Globalization has become an inevitable phenomenon in human history
that brings the world closer through the exchange of goods and services, information,
knowledge and culture (Hill, 2014).
Proponents of globalization believe that it offers the possibility of boundless growth and
prosperity, for both developed and the developing countries that accepted the phenomenon of
an increasingly borderless world (Ajagbe et al., 2015). Awuah (2012) also opines that through
the complementary exchange relationships among interdependent actors, almost all countries,
firms, and private individuals have a greater access to products, services, technologies and
practices, which may be modern, effective, and superior to some existing ones. Machida (2012)

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also argues that as the world grows more connected, people in all nations achieve a greater
level of interdependence in activities such as trade, communications, travel, and political policy.
Equally, globalization has led to noticeable improvement in global communication through radio
and satellite television and other innovative technological equipments. For instance, manpower
training can be conducted from any place in the world with the aid of information technology
tools through internet facilities in today’s market (Akor, 2012; Solomon et al., 2014; Bilau et al.,
2015). In the same way, the modern banking system through electronic banking (e-banking) and
automated teller machine (ATM) facilitates fast and easy movement of cash that enhances
cashless operations. Also, rapid advancement in Information and Communication Technology
(ICT), such as global telecommunication infrastructure, cross border data flow, the internet,
satellite networks and wireless telephones are all credited to globalization which has brought
about major transformation in world communication and has made communication across the
globe to be easier than before Thus, unprecedented changes in communication, transportation
and computer technology have given the process of globalization new impetus and made the
world more interdependent than ever (Irani and Noruzi, 2011; Adesina, 2012; Awuah, 2012; Hill,
2014).
Conversely, while the advocates of globalization believe that it has led to substantial
economic growth in some part of the world, others refute such believe and claim that the
benefits of globalization have not been universal (Nusta, 2013; Alstrom and Bruton, 2010;
Czinkota, 2010). Nayak (2011) posits that the dynamics of globalization since the nineties
resemble a gradual destabilization process, like that of slow war-like situations in which large
firms through a complex web of government and institutional mechanism brought about a
gradual disruption of the normal order in the economy of the developing countries. He asserts
further that the stability of the industry, the speed of change, the problems and opportunities for
producers, and the availability of higher-quality or lower-priced goods and services to
consumers have all been changed. Thus, he concludes that what worked well during the late
19th and 20th centuries in economic and commercial terms is less likely to lead to success
today, either for firms or countries (Alstrom and Bruton, 2010). In the same way, Czinkota
(2010) claims that globalization facilitates the activities of entities that threaten safety and
security. He argues further that, the globalization of commerce, travel, and information transfer;
increases the salience of economic disparities and facilitates the ability of far-flung but like-
minded collaborators to undertake harmful activities. Also, in line with the view of the critics of
globalization, Nusta (2013) asserts that even though globalization enhances firm's market
opportunities, it also increases the level of competitiveness in the global market. He asserts

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further that the friendly competition that existed in previous time has been replaced with hyper-
competition around the world.
According to Naz et al. (2011) globalization has created various cultural, religious and
psychological identity crisis, such as; cultural imperialism and pluralism, changes in traditional
social structure, encouragement of secularization, decline in social solidarity and complexity in
social relation. Adesina (2012) also asserts that one major negative consequence of
technological globalization, most especially the advent of internet and cable networks in Nigeria,
is the exposure of the Nigerian youth to negative western culture. He asserts further that in spite
of the benefits of technological development, the internet which is an open, free and an
unregulated device has also brought with it negative challenges, such as changes in people’s
moral perspectives and ethical values. In line, with the preceding observation, Aregbesola et.
al., (2011) also reiterate that in spite of the unprecedented level of success recorded as a result
of globalization, there is also much evidence of the devastating injustice that people have
suffered, especially those people who should have benefitted immensely from this development.
Similarly, Czinkota (2010) believes that the liberalization of trade, investment and finance, has
increased the space in which illicit activity flourished beyond government control. He argues
further that globalization makes firms vulnerable to external forces. Awuah (2012) in his own
opinion posits that the interdependent exchange relationships among actors in the global world
will not leave many actors spared from the spread of pandemic and global crisis. He opines
further that the global financial meltdown of 2007-2009, which was triggered by the bursting of
the U.S. housing price bubble and the resulting increase in mortgage delinquencies, brought
financial crises to many countries. While, Nayak (2011) reiterates that globalization during the
second half of the 20th century favoured only a few developing nations with access to critical
resource base, competence, information and socio-political network.

Emergence of Globalization Era

For thousands of years, people have been buying and selling from one another across country
borders. Ball and McCulloch (2010) affirm that even before the time of Christ, Phoenician and
Greek merchants usually sent their representatives abroad, to buy and sell goods. They argue
further that an early form of globalized economy and culture known as archaic globalization,
existed during the Hellenistic Age. During this period, commercialized urban centres were
focused around the axis of Greek culture, which stretched from India to Spain, with cities like
Alexandria, Athens, and Antioch at its centre. According to Alstrom and Bruton (2010), the forty
percent tax levied on manufactured goods that were shipped and sold in other countries,
discouraged trade between nations after the end of World War II in 1945. However, the period

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of big unit capitalism which began from the end of World War II until 1971, was marked with
unmatched economic growth, whereby conveniences once available only to the rich became
accessible to nearly everyone. Hence, by 2005 the average tariff had fallen to four percent and
trade between firms in different countries had become the dominant factor in business (Alstrom
and Bruton, 2010).
Hill (2014) believes that the start of the second period of globalization can be traced to
1971. In that year, President Richard Nixon announced that the United States would no longer
redeem international dollar holdings at the rate of $35 per ounce of gold. This commitment
forms a central foundation of the international financial system, which was implemented at the
end of World War II. This financial system was referred to as the Bretton Woods System. The
outcome of the Bretton Woods agreement was to help tame the wild economic fluctuations that
occurred between World War I and World War II. Hence, Bretton Woods’ system created
mechanisms to support countries that ran into balance of payments difficulties. However, the
system became confining to member states and their economic flexibility. Subsequently, by
1971 President Nixon and other world leaders felt it was time to loosen those controls. This
resulted into a more flexible economic environment that further supported international trade
and the creation of the World Bank and International Monetary Fund (Alstrom and Bruton,
2010). Hill (2014) asserts further that, since the collapse of communism at the end of the
1980’s, the pendulum of public policy in nation after nation, has swung towards the free market
end of the economic spectrum. Hence, regulatory and administrative barriers to doing business
in foreign nations have been removed, and there has been a huge transformation in the
economy of former communist nations which has allowed businesses both large and small, from
both advanced nations and developing nations to expand internationally.

Drivers of Globalization
Several factors, such as; the growing decline in trade and investment barriers, the diffusion of
information and communication technology, changes in access to information, changes in how
people save, spend, and invest, social and cultural convergence, among other factors, have
helped drive the expansion of globalization since the collapse of Bretton Woods in 1971
(Ahlstrom and Bruton, 2010; Hill, 2014). For instance, in the 1920s and 30s many of the nation-
states of the world erected formidable barriers to international trade and foreign direct
investment. These barriers were in form of high tariffs on importation of manufactured goods.
The typical aim of such tariffs was to protect domestic industries from foreign competition.
However, this resulted into retaliatory trade policies, whereby countries progressively raise trade
barriers against each other, which contributed to the great depression of the 1930s (Ahlstrom

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and Bruton, 2010). Thus, the Bretton Woods Conference in 1944 after the great depression of
1930’s in the industrially advanced economies and the losses incurred due to the Second World
War set the tone for the current form of global trade and investment (Nayak, 2011).
Consequently, having learned from the experience of the great depression, the
advanced industrial nations of the West committed themselves after World War II to removing
barriers to the free flow of goods, services, and capital between nations. In addition to reducing
trade barriers, many countries have also been progressively removing restrictions to FDI
(Ahlstrom and Bruton, 2010). Since then, many countries have adopted free-market economic
systems, vastly increasing their productive potential and creating a myriad of new opportunities
for international trade and investment. Thus, it is evident that those countries which failed to
open their economies and adopt an export promotion strategy also failed to reap the benefits of
the globalization process. Equally, technological innovation and its diffusion have clearly played
a significant role in the re-definition and re-organization of commercial and economic space
known as globalization (Johnson & Turner, 2006). The emergence of science and technology
has enabled man to create devices, tools and machines through which the threats of the society
are being subdued and brought under his control.
Hill (2014) affirms that since the end of World War II, the world has seen major advances
in communication, information processing, and technology. Technology has brought about
tremendous speed and the high level of intensity which characterize the modern world. Thus,
technology development had led to a high rate of diffusion and transfer of knowledge which is
greatly superior to that of the past (Archibugi and Iammarino, 2002). In addition, a growing
number of people now have access to the internet which allows them to obtain information from
literally millions of sources, and the number of websites is rising sharply (Hodgets and Luthans,
2000). In view of all these, advancement in ICT have given most consumers, investors and
organizations valuable new tools for identifying and pursuing economic opportunities, such as;
faster and more informed analyses of economic trends around the world, easy transfers of
assets, and collaboration with partners worldwide (Kim & Pae, 2007; Ajagbe et al., 2016).
Also, noticeable changes in the amount of information available began with the
globalization of television network During the Cold War era, television and radio broadcasting
were restricted businesses, because the spectrums and technologies available for transmission
were limited. Governments either ran most television broadcasting directly or highly regulated it.
For businesses, this new access to information allows firms to assemble technologies, raw
materials, and funding for products or services for customers around the world. This access to
information also affects even the most remote location today (Ahlstrom and Bruton, 2010).
Similarly, at the end of the Cold War era, most large-scale domestic and international lending

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was done by big commercial banks, investment banks, and insurance companies. These firms
preferred to lend to companies that had good track records and investment grade ratings. This
made it difficult for an upstart or new business to get needed cash since the financing for firms
often depend more on one’s interpersonal business connections than the business idea.
Subsequently, the creation of the corporate bond market introduced some pluralism into the
world of finance and took away the monopoly of the banks (Ahlstrom and Bruton, 2010).
Traditionally constrained by adequate access to financial resources, the liberalization of
financial markets has enabled the larger SMEs to tap international capital markets. In fact, the
larger presence of foreign banks in domestic economies facilitated foreign investment of SMEs
following their larger counterpart abroad. Johnson and Turner (2006) opine that deregulation,
liberalization and technological change have indeed combined in recent decades to transform
the finance sector to support the growing number of transnational transactions. Hence,
transnational flows of goods and capital have driven globalization during recent years (Johnson
and Turner, 2006; Ahlstrom and Bruton, 2010). Bhavani (2010) also posits that developing
countries have also benefited significantly from increased flows of capital and other forms of
finance. He posits further that for many developing countries, the integration of capital markets
for SMEs has opened new avenues for financing. In the same way, there is a growing
interdependence between globalization and international mobility of not only highly skilled
professionals but also of semi-skilled personnel. Sukh (2013) states that two general trends are
noticeable for the migrating workers; the first trend relates to the highly skilled workers, such as;
academics, medical practitioners, engineers and scientists who migrate to developed nations for
better jobs, incomes and professional recognition. While, the second trend consists of technical
and managerial personnel who obtained education, training and experience in the West and
who return to their home countries for work, or to create competitive and new business ventures
(Lipsmeyer and Zhu, 2011).
Osotimeyin et al. (2012) also posits that globalization has created a global culture in
which identity is amalgamated to create a homogenous culture throughout the world. This may
facilitate the local beliefs and cultural values to be universalized rather than to be demolished.
On the contrary, such a cultural invasion is a threat that causes serious problems for some
conservative states, by virtue of the fact that the openness to foreign content can erode the
traditional values and indigenous cultural identity. Akor (2012) also believe that under
globalization political activity has transcended national borders through global movements and
other political integration schemes such as the EU and through intergovernmental organizations
such as the IMF, the World Bank and the WTO. Hendee (2010) argues that the global mobility

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of workers refers to a brain and skill circulation rather than just a brain drain from one country to
another.

OVERVIEW OF SMEs
SMEs are the foundation upon which large scale enterprises are built. Globally, there is no
consensus on the definition of SMEs, as the term small and medium is relative and differs from
industry to industry, and country to country. Ogunleye (2014) opines that what is being defined
as SMEs in a developed country can be regarded as a large-scale enterprise in the developing
country, using parameters as fixed investment and employment of the labour force. It is also
important to recognize that definitions change over time and hence, even in the developing
countries what was previously classified as SMEs could be regarded as large-scale industry
when the quantities of relevant parameters change during the production process. The major
criteria used for defining small scale enterprises include; sales value, financial strength, relative
size, initial capital outlay and independent ownership (Akingunola, 2011). Okwu et al (2013) also
opine that more general and comprehensive criteria for defining SMEs in different countries,
include the number of employees, annual turnover, local operations, sales volumes, financial
strength, managers and owners’ autonomy, relatively small markets compared to their industries
and capital usually supplied by individual or shareholders.
The global recognition and interest in small and medium scale enterprises (SMEs) is
justified by its potential in the areas of employment generation, capacity to reduce inequalities,
ability to mobilize domestic savings for investment, introduction of business methods, goods and
services that help to restructure weak agricultural sector or other uncompetitive transition
economies, enhancement of economic balance through industrial dispersal, promotion of
effective resource utilization and in linking participants in supply chain (Ben-Caleb et al, 2013).
Also, Asikhia (2010) states that SMEs are veritable vehicles for the achievement of macro-
economic objective, in terms of employment generation at low investment cost and the
development of entrepreneurial capabilities, indigenous technology, stemming rural-urban
migration, local resource utilization and poverty alleviation. Osotimehin et al. (2012) also assert
that SMEs enables firms to rely largely on local raw materials, thereby leading to greater
industrial development in the country.
In the United States of America, Britain and Canada, SMEs is defined in terms of annual
turnover and the number of paid employees. Britain conceives small scale business as an
industry with annual turnover of 2 million pounds or less, with fewer than 200 paid employees,
while Japan conceptualizes small scale enterprises as those firms with 100 million yen paid up
capital and 300 employees (Okwu et al., 2013). In the same way, Onou and Okieruovo (2009)

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asserts that in India, SMEs are enterprises with investment in plant and machinery not
exceeding N450, 000.00 equivalents. Malaysia on the other hand, sees SMEs as an enterprise
with a shareholders’ fund of less than N250, 000 in equivalent and less than 50 workers. Hence,
the difference among industries could be ascribed to the different capital requirement of each
business, while those among countries could arise as a result of differences in industrial
organizations of countries at different stages of economic development (Ogunleye, 2014).
In Nigeria, several attempts have been made to define and classify SMEs. According to
Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) small enterprises
are defined as those enterprises whose total assets (excluding land and building) are above five
(5) million naira but not exceeding fifty (50) million naira, with a total workforce of above ten
(10), but not exceeding forty-nine (49) employees. Equally, medium enterprise is seen as those
enterprises with total assets (excluding land and building) above fifty (50) million naira, but not
exceeding five hundred (500)million naira with a total workforce between fifty (50) and one-
hundred and ninety-nine (199) employees (SMEDAN, 2012). This definition adopts a
classification based on dual criteria, employment and assets (excluding land and buildings).

Table 1. Analysis of SMEs by Size Category, Employment and Assets.

S/N Size Category Employment Assets (=N= Million)
1 Micro enterprises Less than 10 Less than 5
2 Small enterprises 10 to 49 5 to less than 50
3 Medium enterprises 50 to 199 50 to less than 500
Source: Survey Report on Micro, Small and Medium Enterprises in Nigeria (2012)

Business environment of SMEs

According to Elmawazini and Nwankwo (2013), SMEs are open systems with multiple
interactions with their environment which imposes certain constraints on their operations and
provides them with resources and opportunities for market and product expansion. Manuel
(2010), reiterate that the business environment not only provides SMEs with resources and
opportunities for market expansion, but also imposes certain constraints on their operations.
Lipsmeyer and Zhu (2011) also argue that the business environment of SMEs is characterized
with a synergy of both internal and external uncertainties introduced daily by continuous
changes in opportunities and threats prevailing in the market place. They opine further that it
comprises of both opportunities and threats that are capable of causing major surprises and
shocks for SMEs. This view is in-line with the theory of dynamic capability which emphasis the
dynamic nature of the business environment and its role as a catalyst for determining the

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success and failure of business enterprises. The failure of the resource based view to explain
why certain firms have competitive advantage in situations of rapid and unpredictable market
change, termed high-velocity or dynamic markets led to the concept of dynamic capabilities.
Sukh (2013) defined dynamic capability as the ability of a firm to integrate, build, and
reconfigure internal and external competencies to address rapidly changing environments.
Conceptually, dynamic capability refers to the ability of the firm to recreate and execute
innovation options to achieve a competitive advantage. It deals with the process of integrating,
reconfiguring, gaining and administering resources to match and create market change
(Lipsmeyer and Zhu, 2011; Hendee, 2010; Kerosi and Kayisime, 2013). In such markets, the
mere existence of appropriate bundles of specific resources is not sufficient enough to sustain
competitive advantage rather; the firm must constantly reconfigure, gain and dispose of
resources to meet the demands of a shifting market. Lipsmeyer and Zhu (2011) mention that in
all markets, dynamic capabilities change in nature in high-velocity markets from their
embodiment in more stable markets. In stable markets they are detailed, analytic and stable
processes and resemble the traditional conception of routines (Hendee, 2010). In contrast,
Kerosi and Kayisime (2013), in high velocity markets, dynamic capabilities become simple,
experiential and fragile processes with unpredictable outcomes. The simplicity of these
capabilities means that there is little structure or routine for managers to rely on.
According to Okwu et al. (2013), the factors that determine the performance and
relevance of SMEs include policies of the government, such as regulation and deregulation,
infrastructure, access to external finance, technology, competition and corruption in the
business environment in which SMEs operate. Other factors, such as entrepreneurial skills,
technological capability, market share, service quality, financial capability among others also
determine the performance of SMEs (Ball and McCulloch, 2010; Adesina, 2012). Also,
technological capability attained through an organization’s innovative ability is one of the key to
developing core-competency among SMEs. Muritala et al. (2012) believes that to raise
efficiency or establish a better competitive position, SMEs’ efforts must be directed towards
developing capabilities to absorb, adapt and master technologies that have been developed
elsewhere in a process of technological learning. Technological innovation is regarded as a tool
for strengthening the competitiveness of a nation. Thus, SMEs can largely improve their
production abilities and profitability by improving their technological capabilities (Bakare and
Gold, 2012; Archibugi and Iammarino, 2002). Also, Kim and Pae (2007) assert that
technological capability enables firms to be competitive and to gain competitive edge in the
global market. Likewise, technological capability can boost the confidence of SMEs to enter a
foreign market even when other companies are already established there. It can also encourage

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major firms to form competitive alliances in which each partner shares technology and the high
costs of research and development. This is known as strategic technology leveraging (Ball and
McCulloch, 2010).
Likewise, Bhavani (2010) asserts that for majority of indigenous SMEs, access to
finance remains a problem as most are not aware of the financing options available or are
simply too small to tap either domestic or foreign capital markets. SMEs tend to face greater
financial constraints than do larger firms. Credit is mentioned more frequently by smaller firms
as a constraint on growth. Thus, adequate financing is necessary to help SMEs set up and
expand their operations, develop new products, and invest in new staff or production facilities.
However, in the developing countries SMEs often run into problems because they find it much
harder to obtain finance from banks, capital markets or other suppliers of credit. Hence, studies
recognize lack of finance as major constraint in SMEs development in developing countries
(Ayodeji and Balcioglu; 2010; Duru and Lawal; 2012; Ben-Caleb et al., 2013).
Similarly, SME’s efficiency largely depends on the ability and knowledge of both the
employer and the employees, that is, its human capital. Educated workers are not only more
productive but they have more learning and innovative abilities. Therefore, entrepreneurial skills
may be developed through training and education (Hendee, 2010). According to Kerosi and
Kayisime (2013), the myth that entrepreneurs are born, no more holds, rather it is well
recognized now that the entrepreneurs can be created and nurtured through appropriate
interventions in the form of entrepreneurship skills development programs. Umaru and Chinelo
(2014) also assert that good entrepreneurial skills of workers enhance the growth and
development of SMEs in developing economies. Meanwhile, notable scholars have identified a
wide range of competences as entrepreneurial skills, these include; the ability to multi-task,
adapt, manage time and people, take responsibility and make decisions, take risks, persevere,
make contacts, sell ideas and persuade others, work both as part of a team and independently,
work under pressure, innovate, carryout a thorough research, plan, coordinate and organize
effectively (Lipsmeyer and Zhu, 2011; Hendee, 2010; Kerosi and Kayisime, 2013).

SMEs and the Nigerian Business Environment

According to Anudu (2013) in spite the compelling growth potential of small and medium scale
enterprises, along with their enormous opportunities and huge employment creation capacity,
SMEs in Nigeria have been performing below expectations. Thus, this situation has been of
great concern to the government, citizenry, operators, practitioners and the organized private
sector groups in Nigeria The decline in the performance of SMEs in Nigeria can be largely
attributed to factors, such as low level of entrepreneurial skills, poor management practices,

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constrained access to money and capital markets, low equity participation from the promoters
because of insufficient personal savings, the level of poverty and low return on investment,
inadequate equity capital, poor infrastructural facilities, high rate of enterprise mortality,
shortages of skilled manpower, multiplicity of regulatory agencies and overbearing operating
environment, societal and attitudinal problems, integrity and transparency problems, restricted
market access, lack of skills in international trade; bureaucracy, lack of access to information
given that it is costly, time consuming and complicated at times, as well as unfavourable macro-
economic environments which are militating against the performance of the sector (Muritala et
al, 2012; Ben-Caleb et al, 2013).
In the same way, Dhungana (2010) believes that for the majority of indigenous SMEs,
access to finance remains a problem, because most SMEs are not aware of the available
financing options. Likewise, Ben-Caleb, Faboyede and Fakile, (2013) believe that aside from the
difficulties encountered in obtaining loans and funds from financial institutions, coupled with the
poor record keeping and managerial inefficiency of SMEs operators, most of the small and
medium enterprises promoters deliberately divert borrowed fund to ostentatious things such as
acquisition of more wives, chieftaincy titles and extravagant spending, thereby exacerbating
their financial difficulties (Ben-Caleb, Faboyede and Fakile, 2013). Some scholars also believe
that the main reason why Nigerian SMEs are performing below expectation is as a result of
government’s lacklustre attitude towards the implementation of policies to protect the sector
from external forces (Oduyoye et al., 2013; Okwu et al., 2013).
Equally, based on numerous factors militating against the performance of SMEs in
Nigeria, it is not surprising that various attempts by the government to restructure the economy
only worsened and wrecked further dislocation and hardship on many SMEs (Awuah, 2012).
The outcome of course was closure of some enterprises while many others drastically reduced
their scale of operation at the expense of labour. According to Asiedu and Freeman (2006),
firms with large intangible assets are more productive than small firms based on their ability to
absorb risks and take advantage of economies of scale. Akor (2012) also states that SMEs
globally are showing renewed optimism as they seek to grow their domestic market share and
diversify their product offering. Bakare and Gold (2012) affirms that in the face of uneven
competition many more industries face the grim possibility of closure unless the government
applies urgent brake to the present full liberalization policy.

CONCLUSION
Globalization increases the range of opportunities for companies operating in the current
competitive global market. However, though, globalization offers potential benefits to firms, it is

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 ©Author(s)

not without risks. Thus, SMEs in the global market must anticipate the increasing complexity in
their business activities as goods, services, people, and so forth move freely across geographic
borders and throughout different economic markets. This study presents issues that SMEs are
facing in the era of globalization. The study reveals that in order for SMEs to perform effectively
in a competitive global environment, they must adapt to the changes in the global business
environment. Also, to remain competitive, the SMEs need to re-examine their business
strategies and judiciously utilize the opportunities that globalization presents in today’s market
for meeting the changing global market needs and to gain competitive advantage in the
domestic and foreign market. Equally, owners and operators of SMEs must have a clear
understanding of their environment in order to respond to the forces for proactive change. This
study augments the findings of past researchers in this field and also serves as a foundation for
future researchers to build on. This study can examine whether globalization has contributed to
the problem of resource-curse in the developing countries that are endowed with abundant
natural resources. Also, for a more robust and generalizable findings, future researcher can use
mixed research method to conduct similar studies for other developing countries.

Acknowledgement: The authors wish to thank Dr. Musibau Akintunde Ajagbe for his useful review and comments
on this article. Dr. Ajagbe was an adjunct senior lecturer and external post graduate supervisor to ICT University
USA, Cameroon campus. He is currently an external post graduate supervisor to Durban University of Technology,
Durban, South Africa and Oxford University, Namibia.

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