Critical Success Factors for Small Business: Perceptions of South Pacific Entrepreneurs

Abstract

The South Pacific is inhabited by three groups of people: the Polynesians who are the light-skinned, straight haired inhabitants of islands such as Western Samoa and Tonga, the Micronesians from some tiny islands dotting the region, and finally the Melanesians who are the dark-skinned inhabitants of the region in countries such as Papua New Guinea, Solomon Islands, and Vanuatu (formally New Hebrides). This article discusses a study of critical success factors that are perceived by South Pacific entrepreneurs as being necessary for successful operation of small businesses in the region. It is based on the recognition that entrepreneurship and enterprise have a critical role to play in economic development, especially in developing societies such as the island nations of the South Pacific. Lately, there is a proliferation of small businesses in the South Pacific, attributable mainly to promotion and assistance given to the small business sector by governments and government agencies (such as Small Business Development Corporations), foreign donors and foreign development agencies (such as USAID and CIDA), and voluntary organizations (such as the Friedrick Ebert Foundation). Promotion and assistance are generally in the form of the construction of industrial parks to alleviate location and infrastructural problems; bookkeeping courses to improve financial recording systems, marketing assistance, and management; and technical consulting to provide on-site advice. These are thought to be important ingredients for successful small business development. However, as noted by some researchers of entrepreneurship in developing nations, programs and strategies that succeed in one country may not necessarily succeed in another because of cultural and governmental differences. There are also virtually no empirical data identifying critical success factors for small business development in the South Pacific region - hence our decision to find out these factors from the small business people themselves. Small businesses in the South Pacific dominate the retail, road transportation, tourism, and handicraft sectors. They also participate (to a lesser degree) in the construction, maintenance, domestic agriculture, and manufacturing sectors. The research questions addressed by this study are as follows: (1) What critical success factors do South Pacific entrepreneurs perceive as necessary for small business development? (2) Do non-indigenous entrepreneurs and indigenous entrepreneurs perceive the critical success factors for small business development differently? (3) Do entrepreneurs with formal educations and entrepreneurs without formal educations perceive critical success factors for small business development differently? Results A random sample of 220 entrepreneurs (180 males and 40 females) was selected from Melanesian Papua New Guinea (PNG) and Vanuatu, Polynesian Western Samoa, the Micronesian state of Marshall Islands, and Fiji. Of the entrepreneurs surveyed in the study, 65 percent were indigenous Pacific entrepreneurs, and 35 percent were non-indigenous Pacific entrepreneurs such as the Chinese in PNG and Western Samoa, Vietnamese and French in Vanuatu, and Indo-Fijians in Fiji. Indigenous enterprises are typically small with few employees, low sales volume, inadequate assets, and low profit margins. These enterprises offer retail outlets, urban and inter-village transport systems, and goods and services appropriate to the local communities. Non-indigenous enterprises, on the other hand, are mainly in light manufacturing, hotel/tourist accommodations, fast food, and restaurants. The overall educational level of the entrepreneurs was found to be above the national average. Eighty percent of our respondents had gone through the formal school system at one level or the other. Of this, 40 percent were primary school graduates, 35 percent were high school graduates, and the remaining 25 percent had achieved post-high school education. …

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