CHAPTER ONE

INTRODUCTION

1.1. BACKGROUND OF THE STUDY

Entrepreneurship has historically played a central role in economic organization and development. Early economic activities were largely driven by individuals who coordinated production, trade, and exchange while bearing uncertainty and risk. Classical economic thought recognized the entrepreneur as a key economic actor, particularly in relation to innovation and economic change. Schumpeter (1934) emphasized the entrepreneur’s role in introducing new products, production methods, and market structures, arguing that entrepreneurial activity is a driving force behind economic development and transformation.

As economies evolved through industrialization and later into post-industrial systems, small businesses became increasingly significant. The decline of lifetime employment in large firms and the rise of flexible production systems created space for small enterprises to thrive. During periods of economic restructuring and crisis, small businesses demonstrated a capacity to absorb labor, stimulate innovation, and support local economies (Audretsch, 2007). This historical evolution positioned small businesses as essential contributors to employment creation and economic resilience.

In recent decades, globalization, technological advancement, and market liberalization have further increased the importance of entrepreneurship. Governments and international development institutions now widely promote small business development as a strategy for economic growth, poverty reduction, and social inclusion. As attention shifted from business creation to long-term survival, scholars began to focus on the factors that influence the sustainability of small enterprises. Within this historical context, entrepreneurial skills emerged as a critical determinant of whether small businesses can survive and remain viable over time.

Entrepreneurial skills refer to the abilities and competencies that enable individuals to successfully identify opportunities, mobilize resources, manage risks, and operate businesses effectively. Contemporary research views these skills as learnable rather than innate, emphasizing education, training, and experience as key pathways for their development (Lans et al., 2014). Entrepreneurial skills commonly discussed in the literature include opportunity recognition, innovation, strategic planning, financial management, leadership, communication, and problem-solving.

Small business sustainability refers to the capacity of an enterprise to maintain continuous operations, achieve financial stability, adapt to environmental changes, and pursue growth over the long term. Sustainability goes beyond short-term survival and focuses on resilience, adaptability, and long-term value creation. It includes economic sustainability, reflected in consistent revenue and profitability; operational sustainability, reflected in efficient processes and adaptability; and social sustainability, reflected in responsible employment practices and community engagement (Elkington, 1997).

In small businesses, the entrepreneur plays a central role in shaping sustainability outcomes. Unlike large firms where decision-making is distributed, small business owners are directly responsible for strategic planning, financial decisions, marketing, and daily operations. As a result, the quality of entrepreneurial skills largely determines how effectively businesses respond to challenges and opportunities. Strong entrepreneurial skills enable owners to make informed decisions, manage uncertainty, and pursue strategies that support long-term sustainability.

This study is anchored in the Resource-Based View (RBV) of the firm, which explains business sustainability in terms of internal resources and capabilities. According to Barney (1991), firms achieve sustained competitive advantage when they possess valuable, rare, inimitable, and non-substitutable resources. Entrepreneurial skills represent an important intangible resource that influences how physical and financial resources are utilized. In small businesses, where tangible resources are often limited, entrepreneurial skills become especially important for achieving sustainable outcomes.

Human Capital Theory also provides a relevant framework for understanding the role of entrepreneurial skills. Becker (1964) argues that investment in education, training, and experience enhances individual productivity and economic outcomes. Entrepreneurs with higher levels of human capital are more capable of planning effectively, managing risks, and adapting to changing environments. Entrepreneurial skills, therefore, represent a form of human capital that contributes directly to small business sustainability.

Schumpeter’s theory of innovation further explains how entrepreneurial skills influence sustainability. Innovation allows businesses to remain competitive by responding to changing consumer needs and market conditions. Entrepreneurs with creative and innovative skills are better positioned to introduce new products, improve processes, and adapt business models, thereby supporting long-term sustainability (Schumpeter, 1934).

Empirical studies across different regions demonstrate a strong relationship between entrepreneurial skills and small business outcomes. Research shows that entrepreneurial competencies significantly influence business performance, productivity, and growth (Campos, 2021). However, performance alone does not guarantee sustainability. Sustainable businesses require continuous learning, effective resource management, and long-term strategic orientation, all of which depend heavily on entrepreneurial skills.

Recent studies increasingly emphasize sustainability as a key outcome of entrepreneurship. Seraj et al. (2022) found that entrepreneurial competency has a significant positive effect on sustainable performance among small and medium-sized enterprises. Their study highlights the importance of financial literacy, adaptability, and resilience in supporting long-term business stability. Entrepreneurs who possess these skills are better able to manage financial challenges, respond to environmental shocks, and maintain consistent operations.

Global reports further confirm the importance of entrepreneurship for economic resilience. The Global Entrepreneurship Monitor reports consistently show that small businesses contribute significantly to employment and economic stability, especially in economies facing uncertainty (Global Entrepreneurship Monitor, 2023). These findings reinforce the view that entrepreneurial skills are central not only to business success but also to sustainability.

In Cameroon, small businesses form a critical part of the national economy. They contribute significantly to employment creation, income generation, and local economic development. The government has identified small and medium-sized enterprises as key drivers of economic growth, particularly in the context of limited public-sector employment opportunities. Despite this recognition, many small businesses struggle to remain sustainable due to financial constraints, limited access to credit, weak infrastructure, and an unstable business environment (World Bank, 2023).

In the North West Region, particularly in Bamenda II Municipality, small businesses operate under additional socio-economic pressures. Ongoing socio-political challenges, reduced consumer purchasing power, and disruptions to normal business activities have increased the difficulty of sustaining enterprises. In this context, entrepreneurs rely heavily on personal skills such as adaptability, resilience, and innovation to maintain business operations. Entrepreneurial skills therefore play a crucial role in determining whether small businesses in Bamenda II can survive and remain sustainable.

Despite the growing importance of small businesses in Bamenda II, there is limited empirical research examining how entrepreneurial skills influence their sustainability. This study therefore seeks to examine the effect of entrepreneurial skills on small businesses’ sustainability in Bamenda II, Cameroon.

 1.2. PROBLEM STATEMENT

Small and medium‑sized enterprises (SMEs) are widely recognized as essential drivers of economic growth, job creation, and poverty reduction in developing economies, including Cameroon, where they constitute approximately 99–99.8% of all business entities and contribute significantly to employment and GDP (Foretia Foundation, 2020; World Bank, 2023). Despite their dominant role in the Cameroonian economy, these enterprises face persistent challenges that undermine their sustainability. Many SMEs struggle with limited access to formal finance, weak managerial capacity, regulatory burdens, and operational inefficiencies, which increase the risk of failure within a few years of establishment (Foretia Foundation, 2020; World Bank, 2023). Research in similar African contexts shows that a large proportion of small businesses fail to sustain operations beyond the first five years due to inadequate entrepreneurial competencies and structural constraints (e.g., more than 50–60% failure within five years reported in Côte d’Ivoire) .

In Cameroon specifically, sustainability challenges include informal operations, financial exclusion, and limited business skills, which constrain the ability of entrepreneurs to adapt to changing economic conditions (World Bank, 2023). Although entrepreneurial skills such as opportunity recognition, financial management, and adaptability are widely believed to enhance business performance, there is limited empirical evidence on how these skills influence the long‑term sustainability of small businesses in local contexts such as Bamenda II Municipality. This gap limits policymakers’ and development practitioners’ ability to design targeted interventions that strengthen small business resilience and reduce high failure rates. Therefore, it is necessary to investigate the effect of entrepreneurial skills on small business sustainability in Bamenda II, Cameroon.

1.3 RESEARCH QUESTIONS

1.3.1 Main Research Question

• How do entrepreneurial skills influence the sustainability of small businesses in Bamenda II Municipality, Cameroon?

1.3.2 Specific Research Questions

1. How do interpersonal skills affect the sustainability of small businesses in Bamenda II?
2. What is the effect of personal skills on the sustainability of small businesses in Bamenda II?
3. To what extent do technical skills  impact the sustainability of small businesses in Bamenda II?

1.4 RESEARCH OBJECTIVES

1.4.1 Main Research Objective

• To examine the effect of entrepreneurial skills on the sustainability of small businesses in Bamenda II Municipality, Cameroon.

1.4.2 Specific Research Objectives

1. To assess the influence of interpersonal skills  on small business sustainability in Bamenda II.
2. To determine the impact of personal skills on small business sustainability in Bamenda II.
3. To evaluate the effect of technical skills on small business sustainability in Bamenda II.