American International Journal of Business Management (AIJBM)

ISSN- 2379-106X, www.aijbm.com Volume 07, Issue 08 (August- 2024), PP 150-166

Business Growth of Manufacturing SMEs: A portfolio

entrepreneurship perspective

Abiodun Taiwo Olafenwa

12, Felcia Coker Street, Fagba, Lagos, Nigeria

Abstract: The study empirically tested the relationship between portfolio entrepreneurship and business growth
moderated by managerial competencies and locus of control. According to the literature, business growth has
been a catalyst for national development, making businesses bigger and more successful over time. However, in
the manufacturing sector, studies have shown that the growth of Small and Medium-Sized Enterprises (SMEs)
has declined, likely because of the lack of portfolio entrepreneurship. Several authors have documented the role
of portfolio entrepreneurship in generating wealth in developed economies, but there has been little attention
given to manufacturing SMEs in Nigeria. The study was conducted by quantitative examination of primary
objective data obtained through a structured questionnaire administered to 343 owners or managers of selected
manufacturing SMEs in Lagos State, Nigeria. The results revealed a significant positive relationship between
portfolio entrepreneurship and business growth when jointly moderated by managerial competencies and locus
of control. Thus, the study found that portfolio entrepreneurship aided business growth.

I. Introduction
The uncertainties in the global business environment and relentless competition have made it difficult for
companies to grow. This challenge is particularly acute for small and medium-sized enterprises (SMEs) that are
seeking ways to increase their growth. Although the contribution of SMEs to the world‘s gross domestic product
(GDP) is significant (European Commission, 2022; ILO, 2021; World Bank, 2023), the complexities of
manufacturing often undermine their growth potential. This presents hurdles to business owners and market
operators seeking ways to expand their enterprises through portfolio entrepreneurship. Recognized as a means to
spread inherent risk and optimize resource utilization, portfolio entrepreneurship involves owning and managing
multiple businesses simultaneously (Santamaria, 2021).

One question that remains is how to enable a greater number of growth-oriented manufacturing SMEs to emerge
and reach scale (FORBES, 2022; Grand View Research, 2023). This issue has gained attention in light of the
high failure rate of new enterprises. In 2023 alone in Nigeria, more than four million small businesses shut
down, 767 manufacturing enterprises exited the market, and 335 manufacturing outlets continuously
experienced distress due to the harsh economy, leaving 350-billion-naira ($236.4 million) worth of goods unsold
(Nairametrics, 2024; VenturesAfrica, 2023). Thus, only a fraction of firms that succeed become ―high-growth‖
entities that create disproportionate value in terms of the number of enterprises, employment creation, and
revenue generation (Olafsen & Cook, 2016; Fictiv, 2022).

To achieve growth, SME owners and managers need to identify and use external resources and information that
can boost competitiveness, value creation, sustainability, and performance (Ele et al., 2024). Moreover, their
orientation toward both internal and external forces markedly influences the financial and non-financial
outcomes of their businesses (Bergami, Morandin, and Bagozzi, 2020; Thompson et al., 2019). However,
empirical evidence on the evolution of enterprises is mixed, with some companies expanding while others
decline (Colombo, 2016). The literature reveals that portfolio entrepreneurship faces unique challenges related
to their founding, growth, business group development, creative entrepreneurialism, management of multiple
ventures, and barriers to SMEs expansion (Akhtar, Sieger, and Chirico, 2016; Alsos, Carter, & Ljunggren, 2014;
Isac & Badshah, 2020; Morris, Neumeyer, and Kuratko, 2015; Morrish, 2008; Prashantham et al., 2019; Putica,
2019; Rautiainen and Pihkala, 2019; Zięba and Golik, 2019). Further investigation into portfolio
entrepreneurship‘s impact on the growth of SMEs is needed, especially concerning the entrepreneurial
motivations behind existing and new ventures (Ismail, 2022; Kutzewski, Bahlmann, and Stam, 2020).
Moreover, research is also needed to examine the effect of locus of control as a moderator, considering both its
positive and negative aspects on organizational outcomes (Galvin et al., 2018). Specifically, the influences of
managerial competencies on organizational outcomes have also been identified in literature (Almutairi and
Bahari, 2021; Gansonré and Ouédraogo, 2022; Lara, Mogorrón-Guerrero, and Ribeiro-Navarrete, 2020; Ma et
al., 2020; Mersha and Sriram, 2018; Reese, Rieger, and Engelen, 2020).

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This study is motivated by the need to address these research gaps and provide additional evidence from the
perspective of manufacturing SMEs. It aims to determine whether portfolio entrepreneurship, managerial
competencies, and locus of control influence business growth. Unlike previous studies that focused on large and
listed firms (Chen et al., 2015; Chen and Huang, 2023; Martin et al., 2005), our study provides a comprehensive
conceptual framework for understanding the components of portfolio entrepreneurship and business growth
indicators in unlisted manufacturing SMEs .

Specifically, by integrating insights from resource dependency theory (RDT), this study explores how
manufacturing companies acquire, transfer, and harness resources to bolster organizational successes. This
approach extends the application of RDT to the context of manufacturing SMEs in a developing economy.
Through this theoretical lens, the study advances understanding of the mechanisms underlying portfolio
entrepreneurship and offers valuable insights for scholars and practitioners in the field of entrepreneurship and
management theory.

[1] Literature Review

2.1.1 Portfolio Entrepreneurship
Alsos et al. (2014) define portfolio entrepreneurship as the development of business clusters and the
addition of new business activities in response to new opportunities (Ahmad, 2016). According to Fierro et al.
(2017), portfolio entrepreneurship is the creation and management of multiple ventures in a concurrent manner
or an effective strategy for venture creation that can provide stable wage-paying employment in African
economies. Rosa and Hamilton (1994) and Rautiainen and Pihkala (2019) view it as a process through which
entrepreneurial diversification occurs and a distinctive phenomenon among high-growth businesses (Tran,
Carbonara, and Santarelli, 2017).

Portfolio entrepreneurship has been linked to pluriactivity—an embryonic form of habitual entrepreneurship that
involves managing more than one enterprise (Rosa, Howorth, and Cruz., 2014), developing business clusters
(Alsos et al., 2014), and employing diversification or exit strategies (Wakeel and Ekundayo, 2016; Ugbomhe
amd Bagudu, 2010). It includes income diversification through non-interest business activities (Nguyen, Perera,
and Skully, 2016: 2023) and profit-making that encourages entrepreneurs to take risks to invest in a multiple
business (Sharif and Islam, 2018). It is regarded as a chief survival strategy necessitated by insufficient incomes
from the smallest business holdings (Radicic, Bennett, and Newton, 2017).

The dimensions of portfolio entrepreneurship include serial, novice, nascent, habitual, and restart
entrepreneurship (Lechner, Kirschenhofer, and Dowling, 2016; Westhead and Wright, 2015). Serial
entrepreneurship involves running several businesses sequentially, while novice entrepreneurship entails
running one business at a time (Parker, 2014). Habitual entrepreneurs have unlimited access to resources and
unique ideas for transforming these resources into new products and services (Shane and Venkataraman, 2000).
Restart entrepreneurs are those who failed once but are engaged in an intensive process of reflection, likely
leading to the creation of a new business (Bauer, 2016).

Portfolio entrepreneurship has a proven record for generating wealth in developed ―Western‖ nations (Lechner
and Leyronas, 2009) as well as developing African economies (Fierro et al., 2017). The majority of the
businesses generated from its use are trading companies mostly associated with some form of entrepreneurial
diversification (Rosa, Howorth, and Cruz, 2014). It allows individuals to overcome the limits to growth
encountered by single business ownership (Sarasvathy, Menon, and Kuechle, 2013). It also paves the way for
multiple venture business ownership, improving resource acquisition, and business performance (Kuzweski et
al., 2020). Santamaria (2021) highlighted portfolio entrepreneurs‘ main advantage as their ability to redeploy
human and capital resources across businesses to enhance firm performance and sustainability while selecting
the best financial opportunities.

To attract new investors, portfolio entrepreneurs rely more on continuous and ongoing financing relationships
with previous and current investors, while serial entrepreneurs rely more on signaling effects of
entrepreneurship competences compared with novice entrepreneurs (Lechner et al., 2016). Portfolio
entrepreneurs are likely to report superior firm performance (Dahlqvist and Davidsson, 2000; Westhead, et al.,
2005) in sales and employment growth (Westhead and Wright, 2015). They are also able to leverage their
strength to encourage potential entrepreneurs by presenting them with new opportunities while utilizing
resources from their current ventures for new projects, especially support functions (Lechner et al., 2016).
The literature makes clear that portfolio entrepreneurs are dependent on competent partners to be able to
implement projects (Iacobucci and Rosa, 2010, Huovinen & Tihula, 2008).

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2.2 Business Growth
According to Ekinci, Gordon-Wilson, and Slade (2020), business growth is associated with increased
employment, branches, operations, assets, or finances. It depends on entrepreneurs‘ roles, competencies,
mindset, motivations, and competitive strategies (McKelvie and Wiklund, 2010). It can be categorized into
family and non-family business growth (Kang and Kim, 2020; Miroshnychenko et al., 2020; Sanchez-Bueno,
Muñoz-Bullón, and Galan, 2019), organic growth (innovation, internationalization, and new appointments in a
firm), and inorganic growth through mergers, acquisitions, and joint ventures (Miller and Siegger, 2017).

Additionally, it can be measured by firm growth, sales growth, growth rates, and venture growth (Abolarinwa et
al., 2020; Miroshnychenko, et al., 2020; Ogundana, 2020). Growth is often measured by the number of
employees and sales (Farja, 2016, Zhou Kim, and Yeung, 2013). Picken (2017) identified business growth as
occurring in the scaling stage of an entrepreneurial firm‘s lifecycle, where the objective is rapid growth before
the final or exit stage (Oladele and Oladele, 2016).

Business growth is crucial to achieve competitive scale and sustainable market leadership (Picken, 2017). It can
challenge entrepreneurs‘ core identities (Ekinci et al., 2020) and reduce poverty and boost the personal wealth
for women entrepreneurs (Misango and Ongiti, 2013; IFC, 2014 and Bulanova, Isaksen, and Kolvereid, 2016).
as healthy economies depend on business growth and development (Burge, 2017). However, growth limitations
can lead to undesirable effects; studies revealed that entrepreneurial women felt business growth mandated an
increase in the number of hours spent at work, which could cause work-family conflicts (Davidson,
Achtenhagen, and Naldi, 2010; Burns, 2016; Ukanwa, Xiong, and Anderson, 2018).

2.1.2 Managerial Competencies

Managerial competencies are the knowledge, skills and abilities that enable managers to successfully direct firm
operations (Olafenwa, Ojikutu, and Owoeye, 2021). They include habits, motives, attitudes, information, and
services necessary for effective management (Indeed, 2022). These competencies differentiate medium-level
managers from exceptional ones and encompass leadership, human capabilities, personnel recruitment,
deployment competencies, and financial competencies (Ma et al., 2020).
Components of managerial competencies, such as human capital and relationship quality, help SMEs leverage
international relationships and overcome resource scarcity (Ismail et al., 2010). Cultural perspectives also play
a role, with competencies influenced by communication, technical talent, and interpersonal abilities (Lara et al.,
2020). Managerial competencies aid the traditional performance management process, benefiting both
individuals and companies (Agnihotri & Misra, 2023).

2.1.3 Locus of Control

Locus of control is a state reflecting individuals‘ perception of whether their actions or external factors influence
their outcomes (Galvin et al., 2018; Thompson et al., 2019). Farnier et al. (2021) describes locus of control as a
subjective perception concerning the degree to which individuals‘ psychology and well-being is influenced by
their own behavior or external variables. Thus, locus of control can be internal, with individuals believing they
control outcomes, or external, where they attribute outcomes to outside forces (Padmanabhan, 2021; Zigarmi,
Galloway, and Roberts, 2016). Internal locus of control is linked to positive work-related outcomes including
job satisfaction, organizational satisfaction, affective commitment, and job performance (Johnson et al., 2015;
Judge & Bono, 2001; Keller, 2012; Ng, Sorensen, and Eby, 2006; Organ and Greene, 1974; Reitz & Jewell,
1979; Wang, Bowling, and Eschleman, 2010). Internal locus of control is also tied with favorable perceptions of
the environment, such as perceived organizational support (Aube, Rousseau, and Morin, 2007; Wang et al.,
2010), organizational trust (Lilly and Virick, 2006), and ethical climate fit, which in turn is positively related to
organizational commitment (Domino, Wingreen, and Blanton., 2015).

Individuals with a high internal locus of control are likely to think, feel, and behave positively and have the
confidence to manage external situations based on their ability, experience, or self-efficacy (Mahmoud et al.,
2022; Qurrahtulain et al., 2020). When members have an internal locus of control, the organization is likely to
exhibit superior team performance, with positive effects on both information acquisition and return on equity, or
ROE (Boone van Olffen, and van Witteloostuijn, 2005). Those with a high internal locus of control tend to be
better at information processing than external-inclined individuals, which can benefit team performance.

Locus of control can help explain differential performance in personal, academic and professional environments
(Kormanik and Rocco, 2009). However, people with internal control who lack a positive coping strategy are
more vulnerable to workplace threats and less likely to maintain positive attitudes and behaviors (Ajzen, 2012).
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Controlling behaviors enhance the capabilities of individuals to cope with environmental factors and events;
thus, internal locus of control is associated with well-being (Qurrahtulain et al., 2020). Boone et al. (2005)
posits that a team with a high average external locus-of-control score performs better when it has a leader, with
the opposite being the case for an internal team.

Internal locus of control has been linked to opportunity recognition (Asante and Affum-Osei, 2019), career
motives (Baldegger, Schroeder, and Furtner, 2017), learning from failure, and recovery capabilities (Zhao and
Wibowo, 2021). One‘s perceived personal control of business outcomes is more internally oriented for
entrepreneurs than non-entrepreneurs (Jain, 2011). But in general, internal and external loci of control have been
found to be both positive and negative for employees as a moderating influence.

2.2 Theoretical Review

Resource Dependency Theory
Resource dependence theory (RDT) posits that organizations operate in environments where they depend on
limited and valuable resources and face uncertainties regarding access to them (Pfeffer, 1972). The view of the
environment from the lenses of uncertainty (Barnard, 1938; Duncan, 1972; Lawrence and Lorsch, 1967) in
resource dependency theory (RDT; Pfeffer & Salancik, 1978; Thompson, 1967) assumes that decisions are
influenced by the level of uncertainty (Dickson and Weaver, 1997; Milliken, 1987) or the lack of information
and/or the scarcity of necessary external resources (Child, 1972; Dess and Beard, 1984; Mahoney and Pandian,
1992). Small manufacturing enterprises, in particular, need critical resources such as raw materials, land, or
labor, or strategic locations to enhance growth (Hafiz et al., 2021). According to Zehir, Findikli, and Çeltekligil
(2019), as uncertainties increase, smaller firms should focus more on ―relationships of dependence on power‖
through formal contracts, embeddedness, and strategic alliances such as joint ventures or mergers and
acquisitions (M&A). However, there is no consensus among scholars on how to measure or operationalize the
environment in organizational studies, nor are there studies that have considered variables appropriate for the
manufacturing sector (Yeager et al., 2014).

2.3 Prior Studies

Various authors (Almutairi and Bahari, 2021; Gansonré & Ouédraogo, 2022; Ma et al., 2020; Mersha and
Sriram, 2018; Reese et al., 2020) examined the effect of portfolio entrepreneurship and business growth
moderated by managerial competencies and locus of control. Their studies revealed that deep expertise in
managerial competencies benefits new venture funding, while strong shared entrepreneurial competencies
positively influence new ventures' performance. Huang and Shang (2019) and Amini et al. (2021) maintained
that social capital prompts managers to avoid value-destroying actions and preserve their reputation.

Sundry authors have found that an internal locus of control in employees strengthens the relationship between
inclusive leadership and vigor at work, resulting in better employee performance (Galvin et al., 2018; Hou et al.,
2017; Kay, Rogger, and Sen 2020; Qurrahtulain et al., 2020). A high internal locus of control correlated with
favorable academic performance among MBA students‘ academic performance but did not significantly
correlate with other loci of control (LoCs) (Thompson et al., 2019). Chen, Li, and Leung (2015) discovered that
externally controlled employees are more likely to develop negative emotions, have poorer customer orientation
and reduced organizational citizenship behavior (OCB) due to pandemic-triggered job insecurity, leading to
lower job satisfaction than among those with an internal locus of control.

Lappalainen and Niskanen (2012) revealed that firms with family, CEO, and managerial competencies are
highly profitable but exhibit lower growth, giving some indication of owner-managers‘ locus of control. Velieui
and Manxhari (2017) examined the effect of managerial competencies on business operation of SMEs in
Kosovo, and their findings showed a significant positive relationship between managerial competencies and
business performance. Managerial competencies were also reported to enhance firms‘ competitive advantage,
indirectly affecting thefinancial performance of commercial banks (Kamukama et al., 2017). The study of Steyn
and Van-Staden (2018) demonstrated significant relationships between components of self-administration
competencies—managers‘ mindedness and ethical conduct, personal drive and resilience, work-life balance,
self-awareness, and self-development. The effective application of self-management competencies significantly
improves corporate success and firms‘ competitiveness.

2.4 Econometric Model

2.4.1 Variable Identification
Independent Variable
X = Portfolio Entrepreneurship (PE)
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Dependent Variable
Y = Business Growth (BGW)
Moderating Variables
Z1 = Managerial Competencies (MC)
Z2 = Locus of Control (LoC)
Variable equations
Business Growth (BGW) = f(X, Z1)
BGW = β0 + β1X + β2 Z1Z2 + β3X * Z1Z2 + μi ………….equation1
2.4.2 Functional Relationship
BGW = f(PE, LoC *MC) ………………………………...Regression equation1

2.4.3 Estimation Model

BGW = β0 + β1PE + β2MC * β3LoC + β4PE * LoC * MC + ԑi ----------Regression equation1

Figure 1
Independent Variable Dependent Variable

Portfolio Entrepreneurship (X) Business Growth (Y)

(Risk-taking Propensity, Business Reputation,
Human Capital, Social Capital, Motivation H01
Propensity)

Managerial Competencies (z1) Locus of Control (z2)

Source: Researchers‘ Model (2024)

[2] Methodology
The target group for this study were 9,445 manufacturing SMEs operating in Lagos State, Nigeria. This
list represents 22.5% of the total number of SMEs in Lagos State (SMEDAN, 2021). The sample for the study
was 343 manufacturing SMEs, as determined by the Raosoft sample size calculator. Primary data was used for
this study, and the information was obtained using a structured questionnaire. The self-administered
questionnaire was pre-tested among managerial staffers of medium-sized pharmaceutical manufacturing
enterprises who were not part of the study‘s final sample. The questionnaire was administered to owners and
managers of the manufacturing SMEs using both electronic and paper-based methods. The structured
questionnaire sought information about firm characteristics, including managerial competencies and locus of
control. At the end of the survey, 289 copies of questionnaire were returned, representing an 82.8% response
rate.

[3] Results and Discussion of Findings

H01: Portfolio entrepreneurship has no significant combined effect on business growth of the selected
manufacturing SMEs as moderated by managerial competencies and locus of control.
Hierarchical Regression on the moderating effect of managerial competencies and locus of control on
portfolio entrepreneurship and business growth of the selected manufacturing SMEs in Lagos State,
Nigeria.

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Table 4.1 Model Summary

Model Summary
Std. Change Statistics
R Error of
Mo Squar Adjusted the R Square F Sig. F
del R e R Square Estimate Change Change df1 df2 Change
1 .487a .237 .234 1.80299 .237 89.208 1 287 .000
2 .498b .248 .243 1.79306 .011 4.186 1 286 .042
c
3 .516 .266 .258 1.77466 .018 6.963 1 285 .009
d
4 .549 .302 .292 1.73423 .036 14.440 1 284 .000
a. Predictors: (Constant), Portfolio Entrepreneurship
b. Predictors: (Constant), Portfolio Entrepreneurship, Managerial Competencies
c. Predictors: (Constant), Portfolio Entrepreneurship, Managerial Competencies, Locus of
Control
d. Predictors: (Constant), Portfolio Entrepreneurship, Managerial Competencies, Locus of
Control, PE*MC*LOC

Table 4.2 ANOVAa

Sum of Mean
Model Squares Df Square F Sig.
1 Regression 289.995 1 289.995 89.208 .000b
Residual 932.967 287 3.251
Total 1222.962 288
2 Regression 303.454 2 151.727 47.192 .000c
Residual 919.509 286 3.215
Total 1222.962 288
3 Regression 325.383 3 108.461 34.439 .000d
Residual 897.579 285 3.149
Total 1222.962 288
4 Regression 368.813 4 92.203 30.657 .000e
Residual 854.150 284 3.008
Total 1222.962 288
a. Dependent Variable: Business Growth
b. Predictors: (Constant), Portfolio Entrepreneurship
c. Predictors: (Constant), Portfolio Entrepreneurship, Managerial Competencies
d. Predictors: (Constant), Portfolio Entrepreneurship, Managerial Competencies,
Locus of Control
e. Predictors: (Constant), Portfolio Entrepreneurship, Managerial Competencies,
Locus of Control, PE*MC*LOC

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Table 4.3 Coefficientsa

Standard
ized
Unstandardized Coefficie
Coefficients nts Correlations
Std. Zero- Parti
Model B Error Beta t Sig. order al Part
1 (Constant) 10.252 1.222 8.389 .000
Portfolio .472 .050 .487 9.445 .000 .487 .487 .487
Entrepreneurship
2 (Constant) 9.424 1.281 7.358 .000
Portfolio .433 .053 .447 8.136 .000 .487 .434 .417
Entrepreneurship
Managerial .356 .174 .112 2.046 .042 .272 .120 .105
Competencies
3 (Constant) 9.083 1.274 7.128 .000
Portfolio .403 .054 .416 7.490 .000 .487 .406 .380
Entrepreneurship

4.1 Interpretation of the Tables on Hypothesis One

In step one, portfolio entrepreneurship dimensions (risk-taking propensity, business reputation, human capital,
social capital, and motivation propensity) were regressed on business growth of selected manufacturing SMEs.
The findings in Table 4.1 show the result of hierarchical regression analysis for Model 1 when only portfolio
entrepreneurship components and business growth of selected manufacturing SMEs in Lagos State, Nigeria,
variables are in the equation model (R = 0.487, R2= 0.237, AdjustedR2 = 0.234, p = 0.000<0.05, R2 change =
0.237). These indicate that portfolio entrepreneurship dimensions account for 23.4% of the variability in
business growth of selected manufacturing SMEs. Furthermore, Table 4.3 shows beta coefficient is 0.472,
p<0.05 when portfolio entrepreneurship dimensions are in the model. These results indicate that for every unit
increase in portfolio entrepreneurship dimensions, business growth of selected manufacturing SMEs increased
by 0.472. The overall model was also significant (F(1,287)= 89.208, p<0.05) as evident from Table 4.1.

The introduction of the moderator (managerial competencies) in Model 2 significantly improved the effect of
portfolio entrepreneurship components (risk-taking propensity, business reputation, human capital, social
capital, and motivation propensity) and business growth of selected manufacturing SMEs in Lagos State,
Nigeria (R= 0.498, R2 = 0.248, Adjusted R2 = 0.243, p=0.000<0.05, R2 change = 0.011). This means that
portfolio entrepreneurship dimensions and managerial competencies explained about 24.3% of the variation in
business growth of selected manufacturing SMEs, against 23.4% changes that occurred when only portfolio
entrepreneurship dimensions were regressed against business growth. The F value is statistically significant
(F(2,286)= 47.192, p<0.05), indicating that the influence of the independent variable and the moderator
(managerial competencies) were noteworthy in the model, as seen in Table 4.2.

In addition, Table 4.3 shows the beta coefficients of portfolio entrepreneurship (β = 0.433, p<0.05) and
managerial competencies (β = 0.356, p<0.05). For every unit increase in portfolio entrepreneurship dimensions

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The Moderating effect of managerial competencies and locus of control on portfolio …
(risk-taking propensity, business reputation, human capital, social capital, and motivation propensity) and
managerial competencies, business growth of the selected manufacturing SMEs increases by 0.433 and 0.356,
respectively. Model 3 of the hierarchical regression analysis showed how the moderating effect of locus of
control affects the relationship between portfolio entrepreneurship components and business growth of selected
manufacturing SMEs in Lagos State, Nigeria. The results in Table 4.3 (Model 3) provide values of coefficient of
multiple correlation, r = 0.516, and a coefficient of determination, R2 = 0.266. When portfolio entrepreneurship
components and business growth were moderated by locus of control, results showed an improvement as against
an r value of 0.498 and an R2 of 0.248 when moderated by managerial competencies.
The coefficient of multiple correlations (0.266) indicates a moderate relationship exists between the independent
variable, the moderating variable, and the dependent variable. Furthermore, the coefficient of determination
shows that about 26.6% of the variance in business growth is jointly explained by the dimensions of portfolio
entrepreneurship, business growth and the interaction term (portfolio entrepreneurship components * locus of
control). The remaining 73.4% are attributed to other factors not studied in this research work. Model 3 also
shows the changes that occurred when the interaction term was introduced. All the variables of portfolio
entrepreneurship (risk-taking propensity, business reputation, human capital, social capital, and motivation
propensity), locus of control, and the interaction term were included in the regression model.

The change statistics reveal that the R2 change increased by 0.018 from 0.248 to 0.266 (R 2 change = 0.007)
when the interaction variable (portfolio entrepreneurship component * locus of control) was added. The change
was statistically significant at p=0.000 (p-value<0.05). The data show a statistically significant relationship
between portfolio entrepreneurship dimensions, locus of control, and the interaction term (F(3,285)= 33.436,
p<0.05). In Table 4.8, the F statistics decreased from 47.192 to 33.436 (F change = 6.963) when the interaction
term was added. The F ratio confirms that the regression of portfolio entrepreneurship dimensions, locus of
control, and business growth of the selected manufacturing SMEs is statistically significant.

The results in Model 1 Table 4.1 (for step one) show statistically significant regression coefficients for portfolio
entrepreneurship components (β=0.472, p<0.05), indicating a linear dependence between portfolio
entrepreneurship dimensions and business growth of the selected manufacturing SMEs. In Model 2, portfolio
entrepreneurship dimensions and managerial competencies were statistically significant [portfolio
entrepreneurship (β = 0.433, p<0.05) and managerial competencies (β = 0.356, p<0.05)]. In Model 3, portfolio
entrepreneurship, managerial competencies, and the interaction effect were statistically insignificant [portfolio
entrepreneurship (β = 0.403, p<0.05); managerial competencies (β = 0.114, p>0.05]. When the interaction term
was introduced, the beta coefficient (β) was 0.114, meaning that for every unit change in the interaction term,
business growth of the selected manufacturing SMEs increased by 0.114. Furthermore, the interaction term
showed a positive (β = 0.114, p>0.05) but statistically insignificant effect. The results suggest that managerial
competencies have a statistically positive but insignificant moderating effect on the relationship between
portfolio entrepreneurship and business growth of the selected manufacturing SMEs in Lagos State, Nigeria.

The results in Model 4, Table 4.3 showed what happens when all the variables of portfolio entrepreneurship
dimensions, managerial competencies, locus of control and the interaction term were entered in the regression
model. The coefficient of multiple correlations (0.302) revealed a moderate relationship between the
independent variable, the moderating variables, and the dependent variable. Furthermore, the coefficient of
determination indicates that about 30.2% of the variance in business growth is collectively explained by the
portfolio entrepreneurship dimensions, business growth and the interaction terms (portfolio entrepreneurship
components* managerial competencies*locus of control), with the remaining 69.8% attributed to unexplored
factors.

Moreover, with the introduction of the interaction term, the beta coefficient (β) was 0.011, meaning that for
every unit change in the interaction term, business growth of the selected manufacturing SMEs increases by
0.011. What‘s more, the interaction term showed a positive effect (β = 0.011, p>0.05) that was statistically
significant. The results suggest that both managerial competencies and locus of control have a statistically
positive significant moderating effect on the relationship between portfolio entrepreneurship and business
growth of the selected manufacturing SMEs in Lagos State, Nigeria. However, the beta coefficient of
managerial competencies (moderator) (β = -0.692, p<0.05) was negative and significant while that of locus of
control (moderator) (β = -0.557, p>0.05) was also negative but insignificant. The confirmed regression equation
from the results is stated as follows:

BGW = 19.327 + 0.076PE - 0.692MC - 0.557LoC + 0.011(PE *MC *LoC)……..Equ1.

Where:
BGW = Business Growth
*Corresponding Author: Abiodun Taiwo Olafenwa1 www.aijbm.com 157 | Page
The Moderating effect of managerial competencies and locus of control on portfolio …
PE = Portfolio Entrepreneurship
MC = Managerial Competencies
LoC = Locus of Control
PE*MC*LoC = The interaction of Portfolio Entrepreneurship, Managerial Competencies, and Locus of
Control

The results suggest that managerial competencies have a statistically negative significant moderating effect
while locus of control has a statistically negative insignificant moderating effect on the relationship between
portfolio entrepreneurship and business growth of the selected manufacturing SMEs in Lagos State, Nigeria.
Based on these findings, the null Hypothesis Three (H 03), which states that portfolio entrepreneurship and
business growth are not significantly moderated by managerial competencies and locus of control of the selected
manufacturing SMEs in Nigeria, was rejected.

4.2 Discussion of Findings of Hypothesis One

The multiple regression for Hypothesis Three on the effect of portfolio entrepreneurship dimensions (risk-taking
propensity, business reputation, human capital, social capital, and motivation propensity) on business growth of
the selected manufacturing SMEs in Lagos State, Nigeria moderated by managerial competencies and locus of
control (Adj. R2 = 0.302; PE = 0.076, MC = -0.692, LoC = -0.557, (PE *MC *LoC) = 0.011, p < 0.05) revealed
that portfolio entrepreneurship dimensions are positive predictors of business growth of the selected
manufacturing SMEs in Lagos State. The results revealed that managerial competencies and locus of control are
separately negative predictors of business growth of the selected manufacturing SMEs. Jointly, these factors
positively influence business growth of the selected manufacturing SMEs, highlighting significant empirical,
theoretical, and conceptual implications.

Empirically, the results suggest that Lagos State manufacturing SMEs operate in a highly discretionary
environment, where owners-managers significantly influence their firms‘ decisions and strategies for business
growth. The results aligned with James et al. (2020), who found negative and significant interaction terms
between top management team discretion and business outcomes. Similarly, Hamzah and Othman (2023)
discovered that an internal locus of control indirectly affects enterprise outcomes via entrepreneurial
competency. However, Dumitriu et al. (2014) earlier pointed out significant differences in decision-making
capacities between managers with internal and external loci of control, leading to varied business outcomes due
to their responses to business climate uncertainty.

The study findings aligned with the view of Mahmoud et al. (2022), who found that externally controlled
employees are more likely to develop negative emotions and poorer customer orientation and engagement in
organizational behavior. The findings also supported the view of Hoang et al. (2022) and Asante and Offum-
Osie (2019), who reported that an external locus of control weakens opportunity recognition, disrupting
entrepreneurial thoughts and actions, especially in uncertain and dynamic business environments. Specifically,
the study findings supported Qurrahtulain (2020), who showed that employees‘ internal locus of control
strengthens the relationship between inclusive leadership (managerial competence) and work vigor, resulting in
positive employee performance.

Further supporting these findings, Thompson et al. (2019) indicated that developing an internal locus of control
can enhance individual performance. Similarly, Bergami et al. (2020) posit that the effects of firm reputation on
customer satisfaction are significant when locus of control and customer satisfaction-related meetings are low
and moderate. Coincidentally, Chen and Leung (2015) reported a moderating effect of an internal locus of
control between intrinsic motivation—a portfolio entrepreneurship dimension—and employee innovative
behavior. The findings align with the view of Reese et al. (2020) demonstrating a positive association between
shared managerial skills and entrepreneurial competencies, which is positively related to new enterprise
performance. Danso, Adamoko, and Ofori-Domoah (2016) earlier reported that in developing economies, the
level of entrepreneurs‘ risk-taking propensity positively relates to firm performance when enhanced by
managerial network ties.

Similarly, the study‘s findings agreed with Ying, Hassan, and Ahmad (2019), who revealed a significant
moderating effect of intangible managerial skills on the relationship between resource acquisition (human
capital, social capital, relational capital, and external financial resources) and sustainable competitive
performance of SMEs. The relevance of managerial competencies in driving SMEs growth was also highlighted
in the work of Escriba-Esteve et al. (2009), who linked managerial competencies to strategic behavior and
organizational performance of SMEs. Additionally, the findings supported the claims of Kinuu (2014) in
showing positive significant effects of top management psychological characteristics on non-financial
*Corresponding Author: Abiodun Taiwo Olafenwa1 www.aijbm.com 158 | Page
The Moderating effect of managerial competencies and locus of control on portfolio …
performance and earnings per share of Nairobi SMEs. Similarly, the findings supported the argument of Ele et
al. (2024), who highlighted management expertise as a driver of business expansion in SMEs.

Moreover, the study findings are in tandem with the report of Cao and Yu (2023), who observed that the
stability of top management, regulated by social and emotional capital, promotes enterprise innovation and
performance. The study is also in line with the empirical investigation of Chen and Huang (2023), who reported
that CEOs with better reputations can increase firm value by promoting corporate risk-taking through
managerial competence. Furthermore, the findings aligned with the claims of Chung and Low (2022), Hambrick
(2018), and Bekos and Chari (2023), who revealed that owner/manager characteristics (proactivity, career
experience, timeliness, risk-taking propensity, and personality) partly influence organizational results through
effective knowledge processing, resulting in business growth.

Theoretically, owners and managers of SMEs, who are predominantly internally oriented think, feel, and behave
positively toward their organization, viewing themselves as capable of managing external situations arising from
social exchanges and resource dependencies. They rely on their ability, experience, or self-efficacy in
demonstrating inclusive leadership and vigor at work, which translates to positive business performance
((Hamzah and Othman, 2023; Mahmoud et al., 2022; Qurrahtulain et al., 2020). Moreover, manufacturing
SMEs are influenced by environmental dimensions (munificence, dynamism, and complexity) and the
characteristic behavior of their owners and managers is a function of their attempt to navigate resource
dependencies (Yeager et al., 2014). While some of these top executives entered into alliances with suppliers,
government agencies and clients, others controlled their environments through interdependencies with other
organizations (Daily et al., 2002; Hillman, Withers, and Collins, 2009).

However, such attempts to control external interdependencies can produce unintended consequences, such as
new patterns of dependence, requiring managerial expertise to reduce environmental uncertainty (Ncube and
Chimucheka, 2019; Ozcan and Eisenhardt, 2009; Steyn, 2014). SMEs need ―relationships of dependence on
power‖ through portfolio entrepreneurship dimensions (human capital, social capital, and business reputation) to
secure contracts and establish strategic alliances to improve business growth (Hafiz et al., 2021; Zehir et al.,
2019).

Considering the substantial empirical and theoretical support for the significant effect of portfolio
entrepreneurship dimensions on business growth of selected manufacturing SMEs when moderated by
managerial competencies and locus of control, the null hypothesis (H01) that these dimensions have no
significant effect on business growth when moderated by managerial competencies and locus of control is
rejected.

[4] Summary and Conclusion

This study examined the effect of portfolio entrepreneurship on the business growth of manufacturing SMEs in
Lagos State, moderated by managerial competencies and locus of control. The multiple regression analysis
revealed that the simultaneous introduction of managerial competencies and locus of control significantly
improves the effect of portfolio entrepreneurship dimensions (risk-taking propensity, business reputation, human
capital, social capital, and motivation propensity) on the business growth of the selected manufacturing SMEs in
Lagos State.

5.1 Implications of the Findings

From a societal perspective, the findings show the importance of a strong and competitive manufacturing sector
for economic growth, employment creation, and financial stability. By pursuing portfolio entrepreneurship,
manufacturers can increase their production capacity and inter-organizational networks to drive competitiveness
and meet consumer preferences. Moreover, through human capital development and organizational
identification, manufacturing companies can contribute to societal well-being and economic conditions.

In addition, the positive moderating effects of managerial competencies and locus of control emphasize the
importance of positive media coverage, time management, and organizational identification in enhancing
product perception and presentation. This, in turn, fosters corporate attractiveness and enables the selected
manufacturing SMEs to secure market leadership, encouraging environmental and social responsibility
initiatives through the adoption of green and lean manufacturing practices. Society benefits from diverseproduct
offerings and cleaner environmental initiatives.

*Corresponding Author: Abiodun Taiwo Olafenwa1 www.aijbm.com 159 | Page

The Moderating effect of managerial competencies and locus of control on portfolio …
The findings carry significant implications for government, policymakers, and regulatory bodies in sub-Saharan
Africa, particularly in the business world and profitable development enterprises. The positive and significant
effects of portfolio entrepreneurship dimensions on business growth show the need to promote an environment
conducive to business operations and the setup of facilities within the manufacturing sub-sectors (food,
beverage, and tobacco; rubber, plastic and foam; pharmaceuticals, paints and industrial chemicals, paper, paper
pulp and toiletries; wood, wood pulp and furniture; cosmetics, soaps and detergents; basic electrical and
electronic components; automobiles and assembly parts; as well as veterinary and agro-allied SMEs).
Government agencies can prioritize policies and programs aimed at providing resources, incentives, and support
mechanisms to help companies enhance their portfolio entrepreneurship execution. Such support could take the
form of sponsoring research programs and workshops on venture creation, resource allocation, grants for small
experimental projects, and incentives for companies investing in business portfolio diversification.

Furthermore, the moderating effects of managerial competencies and locus of control spotlight the
interconnectedness between portfolio entrepreneurship and business growth. Government bodies can collaborate
with industry stakeholders to develop industry-specific guidelines and standards that minimize external control
orientation. Moreover, by fostering collaboration between businesses and regulatory agencies, policymakers can
ensure that portfolio entrepreneurship dimensions (risk-taking propensity, business reputation, human capital,
social capital, and motivation propensity) align with customer expectations, industry standards, and regulatory
requirements.

Additionally, the government can promote business education and youth awareness campaigns to highlight the
importance of portfolio entrepreneurship and its role in driving business growth. By supporting portfolio
entrepreneurship and championing business-friendly policies, government authorities can drive the growth and
competitiveness of manufacturing SMEs in developing and developed economies.

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