Risk Attitudes, Risk Management And Business Success Of Micro And Small Informal Agribusiness Entrepreneurs In Ghana: The Case Of Agri-Food Processors
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Date
2017-07
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University of Ghana
Abstract
Entrepreneurs operating micro and small informal firms including agribusinesses in
Ghana face many risks which adversely affect the growth of their firms and subsequent
business success. Although risk management is very critical to agriculture related firms,
agricultural policies in Ghana have been designed without much consideration to this
important aspect of firm management. The impending ‘one-district-one-factory’ policy
of the current government for example would need to consider risk management of the
firms that would be involved since risk management would influence managerial
decisions. The success of the policy would partly be hinged on the ability of
entrepreneurs involved to manage risks in a more informed position. The aim of this
study was three-pronged. First, it elicited the risk attitudes of entrepreneurs, assessed the
factors that influenced the attitudes and examined how entrepreneurs perceived certain
risk sources as important to the agribusiness environment in Ghana. Second, the study
sought to estimate the effect of entrepreneurs’ risk management practices on agribusiness
firm growth. Linear regression models were utilised in achieving these two objectives.
Third, the study sought to understand the personality traits of entrepreneurs and what
accounted for their business success applying the personality trait theory as attribution to
business success of the entrepreneur using an ordered logit model. To elicit
entrepreneurs’ risk attitudes, the psychometric theory was utilised. The Domain-Specific
Risk-Taking (DOSPERT) instrument which lists hypothetical questions that elicit risk
perception and risk propensity was used to elicit the risk attitudes of entrepreneurs. Risk
attitude was measured as a combination of the scores from risk perception and
propensity. The sample analysis utilised data from 159 entrepreneurs (owners) of micro
and small firms in agri-food processing in the Greater Accra and Ashanti regions of
Ghana. The results showed that about 61% of entrepreneurs were risk seeking
individuals. Using a linear regression model, aged and married entrepreneurs showed
more risk aversion behaviour. Education exerted no effect on risk attitudes. Male
entrepreneurs were more risk seeking compared to females. Results showed that aged
entrepreneurs do not give much credence to general economic/political risk as an
important risk source to affect them but considered human risk (sickness and death) as
important. Female entrepreneurs did not consider market risk as important enough to
affect the business environment probably because they had found innovative ways in
marketing and these innovations reduced the effect of market risks on their businesses.
Subscription to formal insurance showed a positive and highly significant impact on firm
growth. To further understand the underlying factors responsible for levels of business
success achieved by entrepreneurs, their personality traits using three dimensions (locus
of control, self-efficacy and motivation) were estimated. The general conclusion was that
the entrepreneur’s psychological disposition has significant effects on business success.
Recommendations for this study include initiation and facilitation for the development of
marketing cooperatives (as a risk management tool for entrepreneurs) to negotiate fair
prices to help mitigate marketing risks. Again, targeted education on the importance of
subscription to insurance packages (a risk management tool which significantly and
positively affected firm growth) to alert entrepreneurs of the need to insure their
businesses and enjoy the inherent benefits is suggested.
Description
Thesis (PhD)
Keywords
Risk Attitudes, Risk Management, Business Success, Informal Agribusiness Entrepreneurs, Agri-Food Processors