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the business is taken as the medium for self-expression and self-actualisation, theproduction of higher quality goods and services are guaranteed. I n this respect, theentrepreneur knows no boundaries as far as business success is concerned becausehis/ her creativity, enthusiasm and vision are limitless. Entrepreneurship also has thepotential of enhancing the development of new markets as well as the developmentof entrepreneurial qualities and attitudes among potential entrepreneurs to bringabout significant improvements in societies.Furthermore, entrepreneurship is the key to the growth and development of localindustries through the processing of local raw materials into finished and semifinished goods for the domestic and foreign markets. I t also promotes the utilisationof improved and cost-effective technology in small and medium-scale enterpriseswhich enhances higher factor productivity at the local level especially in low-incomecountries where the traditional rural economy is predominant.2.2.2 The Costs of EntrepreneurshipI n spite of the numerous advantages associated with entrepreneurship, there arestill some costs that are connected with the profession apparently becauseentrepreneurship is usually a difficult undertaking with a relatively high failure rate.Some of the potential drawbacks associated with pursuing entrepreneurial venturesinclude uncertainty of the flow and size of income, working hard for long hourswhich could even be more than 60 hours per week4, and the risk of losing one’sentire investment. All these impose a considerable stress on the entrepreneur.The advantages and disadvantages of entrepreneurship notwithstanding, a rationalindividual would choose to participate in an economic activity such as becoming anentrepreneur provided he/ she can be certain that the utility of participation exceedsthe utility of non-participation. As far as private entrepreneurship is concerned, thepursuit of an entrepreneurial venture is also determined by whether or not, the4A survey by Dun and Bradstreet (2002) on small-scale business owners shows that 17% strictly devoted at least 60 hours aweek to their businesses. Again, about 50% of these entrepreneurs spend between 41 and 60 hours a week on theirbusinesses.7

individual is oriented towards opportunity-driven entrepreneurship or survival-drivenentrepreneurship, which is further, determined by the socioeconomic status of theindividual in context as well as his/ her entrepreneurial capabilities.2.3 Entrepreneurship, Employment, I ncome and Poverty: The TheoreticalNexusThe linkages of entrepreneurship with employment, income, poverty are quite simpleand straightforward. Development economists are of the opinion that economicgrowth is a necessary pre-condition for poverty reduction, and arguably the singlemost important factor influencing poverty. This view seems to have enjoyedtremendous universal empirical support as historically there has been a strongnegative correlat ion between per capita income and poverty indicators. Meanwhile,models of economic growth and development have been very consistent in assertingthat economic growth is driven primarily by private sector capital accumulation, andhence the economic objective of any modern economy is to promote the conditionsthat facilitate private sector investment by way of strengthening and motivating thesociety to develop their entrepreneurial potentials to the fullest.2.3.1 Entrepreneurship and Job CreationI n an entrepreneurial society, job creation is a common feature as new actors in theeconomy have new characterist ics through open-source culture. Such a societybreeds a strong network of angel investors and training activities for the futureventure capitalists and corporate leaders. Besides, entrepreneurial activity is alwaysabout value creation. Value creation enhances factor productivity which promotesfactor utilisation and intensity in a typical production process. Consequently, jobs arecreated within and outside a particular enterprise from any entrepreneurial activity.Entrepreneurship increases access to economic opportunities by providing usefulinformation on manpower training and skills development, access to capital andbusiness development. Through increased knowledge, entrepreneurs are able tobecome more competitive in the market. Accordingly, entrepreneurship creates jobs8

through forward and backward linkages. I n a vibrant economy, the development ofentrepreneurship breeds the emergence of ancillary enterprises which supply rawmaterials including energy and related industrial services such as packaging,advertising, insurance, banking and finance including microfinance, transport andcommunication. At the same time, some entrepreneurs may emerge to add value tothe bye-products generated by the parent firm.2.3.2 Entrepreneurship, I ncome Empowerment and Poverty ReductionEntrepreneurship is very rarely a get-rich-quick business undertaking similar togambling. Rather, the concept is, in fact, concerned with creating long-term valueand consistent cash flow streams for the future through the power of imagination,initiative and innovation. The long-term value creation focus of entrepreneurshiprequires that the entrepreneur strategizes towards maximizing profits and long-runexpansion. Enterprise growth is directly associat ed with increased demand forproductive resources including labour and the payment of realistic and competitiverewards to attract and retain these factor inputs to lend their services to theentrepreneur. I n this context, entrepreneurship offers a reliable source of incomeearning, not only to the entrepreneur and labour, but other factor inputs. Given thelong-term focus and the growth potential of entrepreneurial activities, theentrepreneur and labour, and indeed, all income earners from entrepreneurialactivities, become more economically independent and confident to confront thechallenges of life. I t can, therefore, be st ated that entrepreneurship promotesincome empowerment in an economy. I n the modern world, entrepreneurshipprovides a new approach for fighting poverty and stimulating economic growth indeveloping countries. Entrepreneurship, to a very large extent, narrows the incomegap and delivers a consistent mechanism for earning incomes and thereby reducingincome inequality and poverty substantially.I n practice, entrepreneurship is directly linked to higher productivity. The incentivefor higher factor productivity is higher income. I n order to sustain higher factorproductivity to achieve the long-run growth objective of an enterprise, the9

entrepreneur must be committed to paying higher incomes in real terms. As theentrepreneur and labour keep enjoying higher incomes in real terms, they arenaturally empowered economically through incomes, which push them above thepoverty-line more permanently.2.4 Entrepreneurship as a Tool for Breaking the Poverty ChainUntil a favourable external shock intervenes to break the cycle of poverty, the verypoor of the society are very likely to remain poor forever. This scenario is illustratedin Figure 1 below.2.4.1 The Vicious Cycle of PovertyFigure 1 : The Vicious Cycle of PovertySource : Author’s impressionFrom Figure 1 above, poverty is arising from low productivity as households facefinancial constraints and lack the other incentives of entrepreneurship. Low factorproductivity is the reason for earning low income which does not empower thehousehold to purchase sufficient basic life-sustaining goods and services despite the10

fact that the marginal propensity of consume is one or approximately one. The highpropensities to consume have left the household with nothing or very little to saveand accumulate capital for investment. The inability of a household to invest impliesthat the income of this household would remain low in the future and theirproductive resources will continue to be underemployed or unemployed. Thissuggests that the vicious cycle of poverty is set in motion. The only way out of thischain of apparent poverty perpetuity is access to essential external resources forboosting productivity which can result in improved household incomes abovesubsistence levels for surpluses to be generated for investment purposes.The presence of entrepreneurial capability in a household and the accessibility ofbasic infrastructure facilitating easy entrepreneurship are the two main factorsmotivating a household to pursue entrepreneurial activities. I deally, these pushfactors must be reinforced by conscious policy actions to boost demand for thegoods and services produced by the entrepreneur within the economy.2.5 The Entrepreneurial ProcessI n a typical market-based economy, an entrepreneurial process takes the form of aprofitable idea which commences with the identification and evaluation of a marketfor a product or a service as well as the resources required to systemat ically create anew finished product/ service to meet the needs of mankind. Economic resources areacquired and a value is created from these resources at a certain cost. The endproduct is sold at a price higher than the sum of manufacturing and distribution ofthe product into physically different products in an innovative and profitable manner.For entrepreneurs in a distribution chain, the process commences with theidentification of markets with prices for the same product varying across them. Theentrepreneur focuses on buying from a lowly-priced market and selling in a highlypriced market for profits in excess of purchases and cost of sales including the costof transportation, handling and distribution.11

Accordingly, entrepreneurial process begins with good business idea formulation. Abusiness good idea could be the realisation that a new distribution point at a specificlocation could be a profitable business undertaking. I t must be noted that anentrepreneurial activity involves the application of new knowledge through asystematic research which culminates in acquiring resources and application of costefficient production techniques. By implication, a good business idea in a form ofnew knowledge must have a commercial value so that this idea can be useful increating a product/ service which is physically different from the resources used toproduce them.3.0 EMPI RI CAL LI TERATURE REVI EWEmpirical studies have shown that owners of SMEs are content with theirindependence which motivates them to be diligent and generate personal incomerather than being an employee for someone else. The Gallup Organisation (2007),for instance, found that over 85 percent of owners of SMEs were delighted to haveowned their own enterprises than working for another person.The influx of entrepreneurial activities has contributed to the springing up ofancillary institutions such as microfinance institutions in recent years. owsthat,indirectly,entrepreneurship is the key to poverty reduction not just for the beneficiaries, butalso there with positive externalities to the rest of the society. Coleman (2006) andHulme (1999), however, argue that the ability of microcredit facilities to eradicatepoverty is dependent upon the socioeconomic environment of the household incontext. What appears evident is that the application of finance to entrepreneurialactivities is a more permanent and reliable way of eradicating poverty in aneconomy.12

3.1 Evidence of Positive Correlation betw een Entrepreneurship and WealthTable 1 : The Profile of the World's Richest People from the American EconomyName of EntrepreneurProfile of EntrepreneurStephen Girard(1750-1831)Largest investor in the First Bank of theUSA. Loaned the US Treasury US 8million to finance the War of 1812A German-born immigrant who began asa fur trader.Borrowed US 100 from his mother atage 12 to start what became the StateI sland FerryFounded the premier Department Storein the USA.Took advantage of a sudden increase indemand for lumber to become rich.Started as a bobbin boy but became thefounder of the US Steel.FirstAmericanbillionaire.CreatedAmerica's most powerful monopoly, theStandard OilCompanyLaunched Wal-Mart near his hometownof Bentonville, Arkansas, and developedit intothe largest company in the worldStarted Oracle Corporation with US 2000of his own money. Now the secondlargestmaker of computers behind Microsoft.Dropped out of Harvard and launchedMicrosoft Corporation with a colleague,Paul Allen. The wealthiest Americantoday.Started Dell Computer from his dormitoryroom at the University of Texas. Salesnowexceed US 70 billion a yearJohn Jacob Astor(1763-1848)Cornelius Vanderbilt(1794-1877)Alexander T. Andrew Carnegie(1835-1919)John D. Rockefeller(1839-1937)Sam Walton(1918-1992)Larry Ellison(1944 -)Bill Gates(1955 -)Michael Dell(1965-)Type ofBusinessShipping /BankingReal EstateRailroad eComputerSoftwareComputers* Computed by dividing entrepreneur's total wealth by t he US GDP at the time of Death, or if person is still living, by 2001GDP. Source : Aut hor’s compilation from "The World's Richest People," Forbes’ websit e, July, 2009.I n Table 1 above, it is shown that entrepreneurship is synonymous with wealthacquisition. Taking the American economy as a case study, there is a positivecorrelation between entrepreneurship and wealth. I ndeed, all over the world, therichest persons have been entrepreneurs. Examples abound in every community andeconomy irrespective of the level of development. For instance, in Ghana and13

Nigeria, the richest people of all-time have been entrepreneurs who own fleets ofmarine vessels, aircrafts, schools, oil marketing companies, hotels, commercialfarms, retail and departmental shops, telecommunication companies, advertisingcompanies, insurance and finance companies, or either engage in extensive importor export business, or manufacture/ assemble automobiles or computers. This is aclear testimony to the fact that entrepreneurship is the single most important meansto create jobs empower people through increased income, and reduce poverty in aneconomy.4.0 THE ANALYTI CAL FOUNDATI ON AND THE EMPI RI CAL MODEL4.1 The Analytical Foundation4.1.1 The Entrepreneurship Channel to Job Creation, I ncome Empowerment andPoverty Reduction in Low-I ncome EconomiesI n Figure 2 below, an attempt is made to explain how entrepreneurship can be usedto create jobs, generate income and reduce poverty in a low-income economy.Figure 2: A Framework of an Entrepreneurial Approach to Job Creation, I ncomeGeneration and Poverty Reduction in an EconomySource : Author’s own formulationTable 2 belowentrepreneurship,summarizes the main components ofentrepreneurialactivities,the determinants ofentrepreneurialperformanceandsocioeconomic impact of entrepreneurship as elements of an entrepreneurial processrelevant to job creat ion, income generation and empowerment, and povertyreduction on a typical economy. Access to capital, attitudes and investment culture,14

research and development (R&D) and technology, quality of entrepreneurialresources, economic environment, legal and regulatory framework and governmentpolicy are the essential factors influencing the development of entrepreneurship inan economy. Entrepreneurial activit ies include the identification/ creat ion of businessopportunities,evaluationofbusinessideas/ opportunities,businessplanning,mobilisation of requisite resources, self-involvement/ self-employmentsuch asmanagement of the enterprise, and combination of the resources through innovativepractices and value-addition.Table 2: Elements of Entrepreneurial Approach in Job Creation, I ncome Empowerment andPoverty ReductionDeterminants eneurial SocioeconomicPerformanceI mpactAccess to AdequateFinanceCulture and AttitudesI dentification/ Creationof OpportunitiesFormulation ofBusiness I deasBusiness PlanDevelopmentResource MobilisationSurvival Rate ofStart-upsGrowth ofEnterprisesLabour ForceJob Creation/ Rate &Size of EmploymentI ncome GenerationPenetration ofExport MarketsTurnover/ MarketDominanceProfit MarginsSaving & I nvestmentRatesPoverty ReductionTax and OtherStatutoryComplianceI nfrastructure/ CorporateSocial ResponsibilityEntrepreneurialResourcesR&D and TechnologyEconomicEnvironmentLegal and RegulatoryFrameworkGovernment PolicyValue-AdditionActivitiesI nnovative PracticesSelf-EmploymentConsumptionEconomic Growth RateSource : Author’s own compilationWith regard to the performance of an entrepreneurial accomplishment, the survivalrate of the enterprise, growth of the enterprise, labour force, turnover and domesticmarket dominance, penetration of external markets, profit margins, and tax andother statutory compliance are the key issues involved. I n examining thesocioeconomic impact of entrepreneurship in an economy, the critical factors oftentaken into account include job creation, income status of employees and theentrepreneur, level of consumption, rate of saving and investment, overall reduction15

in poverty levels of employees and the ent repreneur, contribution to the growthprocess of the economy as well as the direct contribution to infrastructuraldevelopment through corporate social responsibility.4.2 A Model for Poverty Reduction via Entrepreneurship in Low- I ncomeEconomiesI n the proposed model for job creation, income empowerment, and povertyreduction in low-income economies suggested in Figure 3 below, the government orthe appropriate institution is expected to identify and deliver the influential factor ofentrepreneurship inhibiting entrepreneurial initiatives within a typical household oran economy. The supply of this factor to the household/ economy should to beadequate enough to support the beneficiary to sustain the entrepreneurial venture.16

Figure 3 : A Model of an Entrepreneurial Approach to Poverty ReductionSource : Author’s own formulationEven though, in general, the availability and easy access to any of the essentialdeterminants of entrepreneurship through a policy intervention would be thebeginning of breaking the poverty cycle, in low-income countries, financial17

constraints – lack of adequate equity capital and high cost of borrowing arising fromexcess demand for investible funds – are probably the most prominent barrier forgrowth and development of entrepreneurship. I t is, thus, believed that holding allother factors constant, a policy intervention by way of making investible fundsavailable to potential entrepreneurs would go a long way in creating jobopportunities, raising incomes, and reducing the high incidence of poverty in lowincome economies.The underlying assumptions for the formulation of the model include:i.The poor of the society are aware of their socioeconomic conditions and areprepared to w

paper develops an entrepreneurial policy-relevant model for breaking the vicious cycle of poverty which has predominantly characterised low-income economies. . Income empowerment is the self-confidence, self-esteem and freedom from . Jobs are created directly and indirectly through the chain