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European Journal of Business and Social Sciences, Vol. 3, No.3, pp 104-112, June 2014. P.P. 104 - 112

URL: http://www.ejbss.com/recent.aspx

ISSN: 2235 -767X








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he paper examines entrepreneurship, corruption and the T challenge of development in Nigeria. The manifestations and problems associated with corruption have various dimensions which have constrained authentic entrepreneurial development in both urban and rural communities. Among these are project substitution, development programme distortion, misrepresentation of project finances, diversion of resources to uses which they were not meant, even conversion of public funds to private uses, etc. Corruption stalls innovation in materially backward societies. Entrepreneurship is one of the significant predictors of development and is moderated by social, psychological and economic forces. These forces are corruption- prone and over the years have significantly marred entrepreneurship in Nigeria.

Key words: Entrepreneurship, corruption and development.



European Journal of Business and Social Sciences, Vol. 3, No.3,pp 104-112, June 2014. P.P. 104 - 112 URL: http://www.ejbss.com/recent.aspx ISSN: 2235 -767X


Nigeria is blessed with abundant human and natural resources which if properly harnessed would have turned this country into a developed economy. But given the massive corruption, lack of commitment, the dominant role of the public sector in the economic life of the nation, the country has lost opportunities for growth and sustainable development. Corruption has become a common phenomenon in many developing economies. There are different views on the effects of corruption on entrepreneurship. What is clear is that entrepreneurship is paramount for economic growth. Entrepreneurship development is driven by a number of factors principally social, psychological and economic. All these factors are subject to corruption and consequently can deter entrepreneurship and therefore pose serious challenge to development.

One of the primary determinants of the wealth of a nation is entrepreneurship. The ability of a nation’s citizen and foreign investors to engage in building new businesses or in reconstructing existing establishments in order to adjust to changes in the economic and political environment is the hallmark of entrepreneurial development. This energizes economic growth. Entrepreneurship and economic growth are Siamese twins, that is, economic growth and entrepreneurship are mutually reinforcing. Therefore, any government interested in promoting growth should examine the factors which contribute to or deter entrepreneurship, among these is corruption (Wilkin 1979). This symbiotic relationship makes separating cause and effect difficult. Nevertheless, economists from Schumpeter to Rostow have argued that the innovational part of entrepreneurship is crucial for economic development and growth. It is entrepreneurship that leads to higher productivity, the ability to produce more from the same amount of work equals to economic prosperity (Palifka, 2006) Corruption drastically affects economic development by causing a misallocation and misappropriation of resources (human, material and informational). What is damaging to an economy is the fact that in endemically corrupt systems, a larger segment of the population are not getting served by the government and as they do not trust the government they do not interact with the government. As these people have to get things done, they create their own systems to do things and in the process carry out unethical actions detrimental to development. Economic development depends on change. The agent of change is the individual entrepreneur responding to the incentives embodied in the institutional framework.

Corruption is an informal institution that is antithetical to entrepreneurship (Mbaku, 1996).


An entrepreneur is conceptualized as an economic agent- individual, firm, or institution that acts in the allocation of resources – raw materials, intermediate goods, and physical, human, and social capitaleither to increase the efficiency of production of existing commodities, or to create new products. In most cases, the entrepreneur operates under conditions of imperfect information about their market or productive processes (Leibenstein 1995).

Economic growth is aided by entrepreneurship. Entrepreneurship, in turn may be facilitated by economic growth (Wilkin, 1979). The influence of the role of entrepreneurship on economic development has been explained by a number of scholars ( Audretsch and Acs, 2003; Reynolds, 2000).

Schumpeter (1934) argues that the entrepreneur is the prime mover and force in economic development and his function is to innovate and to introduce new activities into the market Acs and Audrestch (1990). Acs (1992) argues that entrepreneurs play an important role in the economy, serving as agents of change, being a considerate source of innovation activity, stimulating industry evolution and 105


European Journal of Business and Social Sciences, Vol. 3, No.3, pp 104-112, June 2014. P.P. 104 - 112 URL: http://www.ejbss.com/recent.aspx ISSN: 2235 -767X cluster emergence and acting as the main source of job creation. Acs (2006) stresses that entrepreneurs create new businesses, and new businesses in turn create new jobs, intensify competition, and may even increase productivity through technological change. Moreover, entrepreneurship is important to long term economic growth because it is a fundamental source of transferring new knowledge into economic commercialized knowledge (Audretsch, D. B, Keilbach, M. & Lehman, E. 2006; Carree and Thuril 2005;

Wennekers and Thurik, 1999). More specifically, Audretsch and Fritsch (2002) suggest that since the 1990s the engine of economic growth shifted from general knowledge generation towards entrepreneurship based knowledge. Thus, high measured levels of entrepreneurship have the propensity to translate into high levels of economic growth (Acs, 2006).


If entrepreneurship is important for growth then it is necessary to identify ways to encourage entrepreneurship. These may be divided into three groups: Psychological factors, social factors and economic factors.

3.1 Psychological factor These consist primarily of individual characteristics, determined genetically or in the home and they allow little scope for policy. Ehigie (2003) stresses self- concept, perceived managerial competence, and work stress and business commitment as important psychological variables for perceived entrepreneurial success among female entrepreneurs in Nigeria. These same social variables could equally ignite entrepreneurial spirit among the male.

Hagen (1962) introduces the notion of innovative personality as the prerequisite for economic growth, spread of entrepreneurship and capital formation. The main psychological requirement is an innovational personality for an individual with imagination is less risk averse, and is more likely to undertake investment projects (Leff 1979).

3.2 Social factors Social factors like social mobility, the degree of social integration, political insecurity and social/ cultural legitimacy of entrepreneurial activities can affect the supply and activities of entrepreneurs. The marginalization of some groups, especially the exclusion of educated groups from the political process, has been identified by Rostow (1975) as contributing to dearth of entrepreneurship, while excessive marginalization critically detrimental (Wilkin 1996). Several of the social factors are vulnerable to corruption. Social mobility, for example will be stunted especially by traditional forms of corruption such as nepotism; only those with close family connections will be able to move up. The enforcement of patent and other laws is an area that offers opportunities for corruption.

3.3 Economic factor Market incentives determine the demand for entrepreneurs. This demand will interact with the supply of entrepreneurs to arrive at the level of entrepreneurship in a given country. The most important incentives are the demand for industrial and other products, the availability of labour and raw inputs, the level of inflation, taxes, and barriers to the imports of necessary inputs. All these may be affected by public policy; all may be subject to corruption. Further determinants of the demand for entrepreneurs are the cost of attaining information about markets, the distribution of income, and access to resources. These are especially important in relation to corruption. High information costs and limited access to resources may increase the potential gains from corruption which subsequently limits access to resources and preserves the disparate distribution of income in a vicious self perpetuating circle.



European Journal of Business and Social Sciences, Vol. 3, No.3, pp 104-112, June 2014. P.P. 104 - 112 URL: http://www.ejbss.com/recent.aspx ISSN: 2235 -767X


The evil of corruption exists in every facet of society. For instance, you bribe to get your child into school, you pay to secure a job and also continue to pay in some cases to retain it; you pay 10 percent to any contract obtained; you dash (bribe) the tax officers to avoid paying taxes; you pay a hospital doctor or nurse to get proper attention; you pay the policeman to evade arrest. You find government officials embezzling funds meant for development programmes and often make the programme a family affair (Baye, 1995).

Nwankwo (2010) states that the nation has peculiar cases of corruption and management problems.

Chinua Achebe (1983) argues that Nigeria is a country recording a high level of corruption and mismanagement of the national resources and this has been the bane of entrepreneurship. Amadi (2000) maintains that corruption and weak accountability remains threats to accelerated development. Abiola (1998) asserts that many years ago, it was uncommon for anyone to embezzle funds meant for the common good of the society, but today anybody can siphon public funds without being persecuted.

Tracing the cause of inadequate infrastructure in our society to corruption, Ihejiamaizu (2001), agrees with Aderinwale (2005) that corrupt practices have led to the implementation of badly designed projects with no economic or commercial viability. Cost escalation has resulted in pricing policies which have kept the services beyond the reach of ordinary masses who are expected to be the beneficiaries. In some cases, projects have been abandoned, both complete and uncompleted after substantial public funds have been expended. In fact, abandoned projects, particularly those of small scale industries are major problems in the Niger Delta of Nigeria. Ponder how much money is alleged to have been spent on Green Revolution (GR), Operation Feed the Nation(OFN),Directorate of Food Roads and Rural Infrastructure(DFRRI), SAP,Better Life for Rural Women(BLRW), Family Economic Advancement Programme(FEAP), Family Support Programme (FSP),Petroleum Trust Fund(PTF) NAPEP and YES (Youth Empowerment Scheme),Niger Delta Development Commission(NDDC) and other Niger Delta oriented development programmes all to no avail. Many others exist at other communities and local governments, even in our universities the reason being that funds were diverted to serve private or groups end. Therefore, these factors have perpetuated a vicious circle of underdevelopment while at the same time mortgaging development sustainability. In other words, scare resources instead of being allocated and judiciously used on development priorities are wasted if not out rightly diverted on projects that have little, if any direct bearing on socio-economic wellbeing (Ihejiamaizu, 2001).

Ihejiamaizu maintains that corruption has led to the poor running and maintenance of public institutions charged with the responsibility of rendering service. In this way, the capacity and efficient programme of those institutions are subverted. The poor state of societal institutions resulting from corruption has stifled entrepreneurial activities. It has rendered the socio- political/economic environments very challenging for entrepreneurs. Multifarious problems such as dearth of infrastructure that is sustainable, that can support life; unemployment, and a plethora of social problems defying social interventions are sustained on corruption.

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