1.1 Introduction
Entrepreneurship is defined as the process of identifying, developing, and bringing a vision to life, which often involves the creation of new business ventures and the assumption of financial risk in the hope of profit (Hisrich, Peters, & Shepherd, 2013). Small-scale entrepreneurship, in particular, refers to businesses that operate on a limited scale with modest capital investment, fewer employees, and localized market operations, yet contribute significantly to economic development through employment generation, innovation, and wealth creation (Beck & Demirguc-Kunt, 2006).
The hospitality industry is a critical component of a nation's economy as it facilitates tourism, promotes cultural exchange, and generates revenue through services provided to both domestic and international visitors (Baum, 2007). Small-scale entrepreneurs in this sector have the potential to drive economic growth by offering niche services, fostering competition, and enhancing the quality of customer experiences (Fatoki, 2014; Olawale & Garwe, 2010).
As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitation of the study and Definition of terms.
1.2 Background of Study
Small-scale entrepreneurship has long been recognized as a key driver of economic development, particularly in developing economies where it supports job creation, innovation, and community-based economic activities. According to Hisrich, Peters and Shepherd (2013), entrepreneurship represents the process through which individuals identify opportunities and mobilize resources to create value. In the context of the hospitality industry, small-scale enterprises include guesthouses, small hotels, local restaurants, catering outfits, leisure services, and travel-support businesses that offer essential services to both local and international customers. Beck and Demirguc-Kunt (2006) asserted that small enterprises contribute significantly to national productivity by expanding service options and stimulating competition within the market.
The hospitality industry plays a vital role in socio-economic development by promoting tourism, facilitating cultural interaction, and generating substantial revenue. Baum (2007) reported that the hospitality sector supports a wide range of economic activities, making it an important pillar for national development. However, the growth and sustainability of small-scale hospitality entrepreneurs are constrained by multiple challenges that limit their competitiveness. According to Abor and Quartey (2010), limited access to finance remains a recurring obstacle, as small entrepreneurs often struggle with inadequate credit facilities, high interest rates, and rigid collateral requirements. These financial limitations reduce their ability to invest in modern equipment, expand service offerings, and improve operational efficiency.
Managerial competencies also influence business survival in the hospitality sector. Fatoki (2014) stated that many small-scale entrepreneurs lack formal training in strategic management, customer relations, digital marketing, and financial planning, which affects their capacity to deliver quality services in a highly competitive environment. On the other hand, institutional and regulatory challenges compound the problem. Olawale and Garwe (2010) affirmed that excessive bureaucratic procedures, inconsistent government policies, and high taxation discourage small operators and weaken their potential for growth. Furthermore, technological advancement has transformed the global hospitality landscape, yet Agyapong (2011) contends that many small businesses struggle to adopt digital tools for online booking, electronic payment systems, and customer engagement platforms, thereby limiting their market reach.
Infrastructure remains another pressing issue affecting small-scale hospitality entrepreneurship. Poor road networks, unreliable electricity supply, and insufficient water resources increase operational costs and reduce overall service quality. Neneh (2014) asserted that inadequate support structures hinder the ability of small businesses to operate efficiently, making it difficult for them to compete with larger, better-resourced firms. Socio-cultural factors, including limited entrepreneurial networks and insufficient mentorship opportunities, further restrict knowledge sharing and innovation, which are essential components for sustaining growth in the hospitality industry. This study is set against the backdrop of exploring these challenges to understand how they shape the experiences, operations, and developmental prospects of small-scale entrepreneurs in the hospitality industry.
1.3 Statement of Problems
Investigation revealed that many small-scale hospitality entrepreneurs lack formal training in business management, marketing, and customer service, which is essential for competing effectively in a dynamic industry (Fatoki, 2014). On the other hand, regulatory frameworks and bureaucratic procedures pose additional hurdles. Entrepreneurs are often confronted with complex licensing requirements, inconsistent policy implementation, and high taxation, which reduce their operational efficiency and discourage potential entrants (Olawale & Garwe, 2010).
Additionally, competition in the hospitality industry is intense, and small-scale operators are often overshadowed by larger, more established businesses. They struggle with brand recognition, marketing reach, and maintaining service quality at par with larger organizations (Agyapong, 2011).
Furthermore, infrastructural challenges such as unreliable power supply, poor road networks, and inadequate water provision impact the daily operations of small hospitality businesses, leading to increased operational costs and reduced profitability (Neneh, 2014). It is against this backdrop that this study seeks to examine the challenges in small-scale entrepreneurship development in the hospitality industry.
1.4 Aim and Objectives of Study
The aim of this study is to examine the challenges affecting small-scale entrepreneurship development in the hospitality industry. To achieve this aim, the study has the following objectives:
- To examine the financial constraints faced by small-scale hospitality entrepreneurs.
- To assess the impact of managerial skills and business knowledge on small-scale hospitality enterprises.
- To evaluate regulatory and infrastructural challenges affecting small-scale entrepreneurs.
- To investigate the role of technology adoption in improving competitiveness among small hospitality businesses.
- To propose practical strategies for overcoming challenges and promoting sustainable growth in the hospitality sector.
1.5 Research Questions
Based on the stated objectives, the research will address the following questions:
- What financial constraints affect small-scale hospitality entrepreneurs?
- How do managerial skills and business knowledge influence the performance of small-scale hospitality enterprises?
- What regulatory and infrastructural challenges hinder the growth of small-scale entrepreneurs in the hospitality industry?
- How does technology adoption affect the competitiveness of small-scale hospitality businesses?
- What strategies can be implemented to overcome these challenges and enhance business sustainability?
1.6 Research Hypotheses
In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.
Hypothesis One
- H0: There is no significant relationship between the challenges faced by small-scale entrepreneurs and the performance of hospitality businesses.
- H1: There is a significant relationship between the challenges faced by small-scale entrepreneurs and the performance of hospitality businesses.
1.7 Significance of Study
It is believed that at the completion of the study, the findings will guide policymakers in formulating effective programs to support the growth of small hospitality businesses. In addition, financial institutions and development organizations will gain insights to design suitable funding mechanisms and capacity-building initiatives.
Furthermore, the study will raise awareness among stakeholders about the importance of supporting small-scale hospitality businesses, which are vital for economic growth, job creation, and community development.
Lastly, academics and researchers will find the study useful for advancing knowledge in small-scale entrepreneurship and hospitality management. The study will also contribute to academic literature by filling existing gaps regarding the specific difficulties encountered by small-scale operators in this sector.
1.8 Scope of Study
The scope of this research is focused on the challenges in small scale entrepreneurship development in the hospitality industry.
The study is confined to small-scale hospitality enterprises operating with limited capital, staff, and market reach in Lagos State, Nigeria.
1.9 Limitations of the Study
A study of this nature is bound to experience certain problems as such the constraints imposed on the research include:
- Time Constraints: A study of this nature needs relatively long time during which information for accurate or at least near accurate inference could be drawn. The period of the study was short, time posed as constraints to the research.
- Financial Constraints: The research would have extended the survey to other area at the empirical level, but limitation as included cost of transportation to the source of material and the cost of time setting of the already completed work.
- Lack of Cooperation: Many of the respondents are usually aggressive on issue that border cooperation among the respondents border.
- Response Bias: The study will involve surveys and interviews with cooperative managers and members. Response bias may occur if respondents provide socially desirable answers or if there is reluctance to disclose negative financial information due to privacy concerns or fear of repercussions.
1.10 Definition of Terms
Entrepreneurship:
Entrepreneurship is the process of creating, developing, and managing a new business venture while assuming financial risks in order to achieve profit and growth (Hisrich, Peters & Shepherd, 2013). In this study, it refers to the activities of small-scale business owners in the hospitality sector.
Small-scale Enterprise:
A small-scale enterprise is a business that operates with limited capital investment, fewer employees, and serves a local or regional market (Beck & Demirguc-Kunt, 2006).
Hospitality Industry:
The hospitality industry encompasses businesses that provide services such as accommodation, food, beverage, and leisure to customers (Baum, 2007).
Financial Constraint:
Financial constraint refers to the difficulty in accessing funds or credit to support business operations and growth (Abor & Quartey, 2010).
Technology Adoption:
Technology adoption is the use of modern digital tools and systems such as online booking, digital payment platforms, and marketing software to improve business efficiency and competitiveness (Agyapong, 2011).
Infrastructural Challenge:
Infrastructural challenge refers to limitations arising from poor electricity, water supply, transport, and other physical facilities that affect business operations (Neneh, 2014).
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