Essay Sample on Small-Medium Enterprises: Driving Economic Growth

Introduction

The significance of the small-medium enterprises in contributing to the economy of a nation is immeasurable. Most of the countries attribute their economic growth to the expansion of the small-medium enterprises in those countries. The reason for this is that small-medium enterprises serve more people than banks would do. The small-medium enterprises serve those in the low class, middle class, and upper class. The number of customers seeking small-medium enterprise services has increased tremendously as more people seek to venture into business and farming (Avolio & Bass, 2014). This flourishing of small-medium enterprises has contributed to economic growth and the creation of employment of a very large number of people. Despite the increased number and impact of small-medium enterprises, research has shown that many of the small-medium enterprises usually have a poor start.

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Those that seek to enter the market for the first time encounter various challenges, with the main one being incompetent leadership. The leader who takes charge of the small-medium enterprises has a great role to play in determining whether the small-medium enterprises progresses or not. The decisions that he or she makes have dire consequences on the future of the small-medium enterprises. Thus, the leaders of small-medium enterprises such as managers must lead the employees in a manner that will boost the operation of small-medium enterprises. Proper leadership will ensure that there are growth and survival of the business (Avolio & Bass, 2014). The success of small-medium enterprises is majorly pegged on the leadership style applied. One leadership style may apply to one company but fail in another.

In developing countries, there is a growing importance for small-medium enterprises due to the benefits that they bring to society. Most of the developing countries have high unemployment rates and poor development track record. To solve such challenges, small-medium enterprises have come in handy. Studies have posed small-medium enterprises as the surest antidote for countries that need to grow economically and also reduce cases of unemployment. The issue of unemployment is so terse since it affects mostly affects the youth (Glueck, 2010). In many countries, the youth forms the greatest section of the population and are also the most vibrant. As such, keeping them unemployed is preventing the economy from benefiting from their vibrancy. While the impacts of small-medium enterprises cannot be underestimated, many of them do not live beyond their fifth year. When small-medium enterprises start and close within no time, it experiences loses and also renders those who had been employed jobless. The major reason for the early premature deaths of some small-medium enterprises is poor leadership styles applied by the managers of those small-medium enterprises. This calls for the need for the manager to be able to determine the best leadership style for the corporation depending on the prevailing environment. Small-medium enterprises fall due to external and internal elements, which can be avoided if the manager becomes aware of them before they affect the corporation (Glueck, 2010). Besides, small-medium enterprises can also fall due to the weaknesses in the strategic framework that they set. They can also fall due to their inability to fit in the environment that they are in. With a wise manager, some of these pitfalls can be avoided.

Entrepreneurial orientation is another major cause of the premature death of small-medium enterprises. As researchers have found out, managers of small-medium enterprises need to be wary of the entrepreneurial orientation of they have to safeguard their position in the market. Managers who are aware of the entrepreneurial orientation will develop mechanisms within the corporation that are able to make the corporation risk-tolerant, proactive, and innovative (Glueck, 2010). In current times, the use of technology in innovation cannot be ignored. The world as gone digital, and small-medium enterprises must equally innovate to stay competitive in the market.

With this in mind, this study needs to look at the concept of entrepreneurial orientation and its relationship with the leadership style. The manager determines the leadership style. While there exist different leadership styles, every corporation is unique in its own way, and the leadership style used in one enterprise may not be fit for another enterprise. Additionally, the manager's personality has a great influence on the leadership style that is applied in a corporation.

Effective leadership has the ability to influence the competitiveness of the small-medium enterprises in a number of ways such as satisfied and loyal customers, motivated employees, increased profitability, and increased growth positively. As such, for small-medium enterprises to stay vibrant in the market and overcome the economic challenges that businesses face, there is the need to have effective and dynamic leadership which will guide the employees to achieve the goals that have been set. Scholars advise that it is almost impossible for small-medium enterprises to flourish if there lacks effective leadership. Without effective leadership, the small-medium enterprises will lack innovation, productivity, and profits will also be highly compromised (Fielder, 2017). The future of the business will also be at stake as without making profits, a business will gradually fall. This shows that there is a great role played by the leadership style employed in the running of small-medium enterprises.

Studies that have looked at the importance of leadership styles in businesses have majorly focused on big corporations but ignored small and medium corporations. Shoham (2008) has agreed that leadership in small and medium corporations is yet to attract a lot of interest from researchers. This confirms that there is a gap that needs to be studied. Based on this proposition, this study seeks to fill this gap by studying the impacts of leadership styles and their rules in managing small-medium enterprises. After this study, the outcome is expected to enhance small-medium enterprise owners' and managers' leadership styles in a bid to guide their employees to achieve the goals set for small-medium enterprises. Additionally, policymakers will benefit a lot from this study as they seek to develop effective and appropriate support mechanisms for the advancement of the small-medium enterprises' sector.

Statement of the Problem

For any effective accomplishment in an organization, leadership style is a requisite. The kind of leadership style applied determines the success of an organization; besides, it determines how the employees will behavior towards their work. The level of subordinate participation in the learning of an organization, as well as the decision-making process, is determined by the leadership style applied. Leaders who are highly bossy tend to produce organizations that are low inefficiency. Such leaders hold absolute power, and they make all the decisions in the organization. They do not involve their employees and subordinates in the decision-making process. When employees and subordinates are involved in the decision-making process, it makes the individual feel appreciated and as a part of the organization. This enables the person to contribute to the building of the organization. Besides, it instills morale in them and helps them to contribute to group goals as well as share responsibility for them.

However, small and medium scale enterprises are faced with a major problem since most of the leaders running them are not democratic in the way that they relate with the subordinates. This creates a conflict between them and their subordinates, making the organizational goals fail to be achieved. Many of the leaders in small and medium enterprises use authoritarian leadership style (Fielder, 2017). This means that they dictate the tune and determine all that must be achieved in the organization. This denies them the opportunity to benefit from the vast experience and knowledge of the employees. Free people usually show greater results than people whose freedom is limited. In the same manner, employees who are involved in the decision making process feel free to share their ideas, and they feel appreciated as important assets in the organization.

The other major factor for leadership problems in small and medium enterprises is that most of the leaders appointed are not very competent. Studies have shown that some appointments within the small and medium enterprises lack merit. When the leaders are incompetent, there is a high likelihood that they are not going to apply the correct leadership style. This will have far-reaching impacts on the organization. A competent leader is supposed to assess the requirements of an organization and be able to know the best leadership to apply in such a situation (Fielder, 2017). He or she will make the desired changes and adjustments, and this will lead to an improvement in the organization. However, an incompetent leader will not know which leadership style to apply, and this will affect the organization negatively.

Despite the fact that there have been a lot of pieces of literature discussing the relationship between leadership style and organizational performance, most of it has been focused on large organizations and established firms. Research on large organizations assumes that the findings obtained can be generalized to other organizations. However, this is not the case for small and medium enterprises. Small and medium enterprises are operated in a manner that is not related to that of large organizations. As a result, the findings for large organizations cannot be generalized for small and medium enterprises. Thus, there is a need to conduct the link between leadership style and the performance of small and medium enterprises. The findings from such a study will help scholars and managers to understand the best ways to operate and run small and medium enterprises. The findings will also help to devise solutions to the challenges that affect small and medium enterprises.

Thesis Aim

The aim of this thesis is to look at the impacts of leadership styles and rules on the performance of small and medium enterprises.

Research Questions

• What are the impacts of leadership styles on the performance of small and medium enterprises?
• How does transformational and transactional leadership styles compare in enhancing the performance of small and medium enterprises?

Research Range

This research focuses the employees and managers of small and medium enterprises.

Research Tool

To collect data from employees and managers, this research uses questionnaires and interviews as the major tools.

Generalized Literature

Uchenwamgbe (2013) conducted a study in leadership and shown that there exist numerous definitions of leadership, and scholars have not come with a common definition. Although all definitions seem to point at the same thing and use similar concepts, there is not a universally agreed definition of leadership. As a result, there exists considerable controversy regarding the conceptualization of leadership based on meaning, measure, and categorization of leadership. To clarify this, Uchenwamgbe (2013) looked at both the autocratic and participative leadership styles and their influence on the leadership of an organization. Sam et al. (2012) also looked at managerial and entrepreneurial leadership styles and how they impact the running of organizations. Additionally, Arhan (2014) conducted a study on transactional and transformational leadership styles in small and medium...