CHAPTER ONE

Background of the Study

1.0 Introduction

When we hear about wealth creation it is usually presented as gaining

money and other valuable assets. Make money, and then invest it to grow

your net worth - a common formula. Those who look a little deeper see

that assets alone don't necessarily pay the bills, stressing making your

money and assets work for you to produce streams of income. In any case

the basic idea as understood by most people is that wealth creation is a

matter of accumulation.

There is a difference between creation and transference, though. And

simply "getting" money can be mistakenly called "making money." Let's

look at the difference.

If you make a bet with a friend on a football game and win, no new value

is created (except the minor pleasure of gambling). Money is simply

moved from the hands of your friend to yours. The same is true on a

larger scale when, for example, credit default swaps are used by financial

institutions not as insurance, but merely as a bet. Using financial

instruments like these, large banks and funds became gamblers in the

years leading up to the real estate slump that started in 2006. Many of

them were no longer creating any real value, instead just moving wealth

1
around.

If you buy a couch there is real value created and exchanged. The

manufacturer creates a comfortable piece of furniture that people want to

sit or lay on. To do so they buy materials ranging from wood to cloth and

nails. These things are real values created by others. Meanwhile you have

to create and trade something of value (your labor and skills if you're an

employee) to get the money needed to buy the couch. There is wealth

creation at every step of the process.

Even speculation can create value in the right context. For example,

those who trade futures contracts create a way for farmers to guarantee a

price for their crops months in advance so they don't go bankrupt if the

market price is down at harvest time. On the other end, a tortilla chip

maker can know ahead of time what his corn will cost, and so plan

effectively. Speculators take on the risk, creating a valuable system that

allows more consistent planning and production.

In other words, honest wealth creation serves the needs of people. To

trick a man out of money is to profit in a financial sense, but not to create.

To make something of value and sell it is creation. This is not difficult to

understand, but it is often forgotten.

For example, when most people think of how to make money they think

of a job or business. But they think of it in a mechanical way, meaning

they think of the steps to go through to have money handed over to them.

2
Go to work, do as you're told and collect a paycheck. Start a business,

follow what others have done and make a profit.

There isn't anything necessarily wrong with this, but it is a very

uncreative and limited approach. Someone else has to create the job to be

done or the business model to be followed. This also is not likely to lead

to much wealth creation on the part of the person who thinks this way.

The alternative ? Look at what value you actually can create and add to

the world. Starting at the simplest level, forget about the paycheck for a

moment and ask if you are providing much value to your employer, and

what you could do to create even more. In business, consider what

customers want and need and if there are better ways to provide that. See

if there are other needs not being met. The true wealth creators are not

just following what others do. They are looking for new ways to create

value. It is a much more satisfying way to make money than to simply

look for the quickest way to move dollars from other pockets to yours. Of

course you want to "get paid," and there are always ways to do that. But

wealth creation comes first. Only then is there something to pay the

employee or business owner.

The purpose of life is essentially to create and experience more life, and

to enable the true expression of life. Wealth creation in its fullest and

broadest meaning; fosters this expression. (Keeland Cunningham 2012)

In the article “Creating Wealth” by Jim Pinto writes: There are only three

3
sources of wealth; natural resources, labor, and knowledge. Natural

resources (oil, minerals and the like) are tied to geography. However, the

largest transfer of wealth in human history occurred within this half-

century, and it comes from the countries that generate wealth through

productive knowledge, innovation, and enterprise. Service industries and

government jobs do not increase wealth; they just circulate money.

Manufacturing creates wealth by taking goods of lower value, adding

knowledge and labor, and creating higher value. Mining and farming

create wealth for the same reasons. Labor is a commodity; the value of

which keeps increasing with education and training. Knowledge and

innovation are the key ingredients for productivity and wealth generation.

Through inexpensive, universal communications, knowledge-based work

is migrating worldwide to the highest-quality, lowest-cost providers.

Productivity has become a fierce, head-to-head competition between

regions and nations for the single reason that it is the source of wealth;

and the key to improvements in living standards. Those who can produce

cheaper, faster, better… are better positioned to create more wealth.

In the article “Who Creates the Wealth in Society?” by Uwe E.

Reinhardt writes: The wealth of modern societies is dictated not so much

by the natural resources at their disposal, but by their human capital; the

knowledge and skill of human beings and their ability to learn and apply

new knowledge on their own. Conscientious parents, especially mothers,

4
rank as the major wealth creators in modern societies… Next come

educators, especially the visionary and dedicated elementary and high

school teachers who succeed in getting their students interested in

learning and motivated to amass human capital. However, none of the

forgoing is to say that being highly educated and skilled is either a

necessary or a sufficient condition for contributing value and wealth to

society.

1.2 Statement of the Problem

The menace of unemployment, the lack of models for wealth creation and

the difficulty of how entrepreneurship causes wealth creation for

5
individuals, organizations and a nation are the issues that warrants this

research and study.

Unemployment is serious problem that our government faces. Our leaders

are trying their utmost best to solve it wisely.

Understanding the process of wealth creation is a key goal underlying

research throughout the orga-nizational sciences (Hitt et al., 2001). And

with this research also. Entrepreneurship’s attention to wealth creation

centers on identifying new and emerging opportunities in the marketplace

(Shane and Venkataraman, 2000).

1.3 Objectives of the Study

The following are the objectives of this study:

1. To assess the effects of entrepreneurship on wealth creation.

2. To examine the process of wealth creation

3. To identify the factors limiting entrepreneurship in wealth creation

4. To analyze how wealth creation engenders employment generation

in Jos north local government of plateau state and the entire nation.

6
 5. To investigate the importance of wealth creation in the global

market and it effect on the future of firms, organizations, and our

nation.

6. To profer solutions based on our findings.

1.4 Significance of the Study

|The following are the significance of this study:

1. The outcome of this study will be a useful guide to the government

of Nigeria, policy makers and the general public on the benefit

effect of entrepreneurship on wealth creation.

2. This research will also serve as a resource base to other scholars

and researchers interested in carrying out further research in this

field subsequently, if applied will go to an extent to provide new

explanation on the topic.

3. Contributes partially to the successful completion of my

undergraduate B.Sc. Entrepreneurial And Business Management

degree programme.

1.5 Research Hypothesis

HO: There is no significant relationship between entrepreneurship and

7
wealth creation.

HI: There is significant relationship between entrepreneurship and wealth

creation.

HO: Entrepreneurship has no effect on wealth creation.

HI: Entrepreneurship has a effect on wealth creation.

HO: Wealth creation is of no paramount importance to the economic

development of Jos north Local government, of Plateau State.

HI: Wealth creation is of paramount importance to the economic

development of Jos north local government, plateau State.

1.6 Scope of the Study

This study on the effect of entrepreneurship on wealth creation will cover

the process of wealth creation and the attendant entrepreneurial effects,

studying Jos north local government area.

Time Constraints Limitation: The researcher will simultaneously engage

in this study with other academic work. This consequently will cut down

8
on the time devoted for the research work.

This study covers the period of 3 months which starts from the 5th of

August 2016 and ends in October 2016.

1.7 Definition of Terms

Entrepreneurship: - Is an innovative act, which includes endowing

existing resources for new wealth – producing capacity (Afonja, B. 1999)

Entrepreneur: - An individual that identifies, developes and brings

vision to life under – condition of risk and a considerable uncertainty

(Bashar O. 2005)

Wealth: - Wealth measures the value of all the assets of worth owned by

a person, community, company or country. Wealth is determined by

9
taking the total market value of all physical and intangible assets owned,

then subtracting all debts. Essentially, wealth is the accumulation of

resources. Specific people, organizations and nations are said to be

wealthy when they are able to accumulate many valuable resources or

goods. (www.Investopedia.com/terms/w/wealth.asp)

Creation: - The act of creating; especially: the act of bringing the world

into ordered existence. And the act of making, inventing, or producing

as a) the act of investing with a new rank or office. b) The first

representation of a dramatic role

Innovation: The process of translating an idea or invention into a good

or service that creates value or for which customers will pay. To be

called an innovation, an idea must be replicable at an economical cost

and must satisfy a specific need. Innovation involves deliberate

application of information, imagination and initiative in deriving greater

or different values from resources, and includes all processes by which

new ideas are generated and converted into useful products. In

business, innovation often results when ideas are applied by the

company in order to further satisfy the needs and expectations of the

customers.

10
Wealth Creation: - 1.Accumulation of assets (especially those that

generate income) over a long period of time. A major example of wealth

creation is a retirement plan. 2. A byword for economic growth,

especially when used at the macroeconomic level.

11
 CHAPTER TWO

Review Of Related Literature

2.1 Introduction

Wealth creation theory mainly addresses the role of entrepreneurship

within the economy and explains the origin of entrepreneurial activity.

In order to take a more critical look at the concept of wealth creation, it

is pertinent to consider the term "Wealth". The concept of wealth varies

from one society to another. Therefore the word wealth means different

things to different people . For instance, the Webster Dictionary of

English sees "wealth as natural resources of a country whether or not

exploited the economic activity of a nation; anything which can be

exchanged for money or barter''.

Wealth measures the value of all the assets of worth owned by a person,

community, company or country. Wealth is determined by taking the total

market value of all physical and intangible assets owned, then subtracting

all debts. Essentially, wealth is the accumulation of resources. Specific

people, organizations and nations are said to be wealthy when they are

able to accumulate many valuable resources or goods.

Wikipedia, Wealth is the abundance of valuable resources or valuable

material possessions. This includes the core meaning as held in the

originating old English word weal, which is from an Indo-European word

stem. An individual, community, region or country that possesses an

12
abundance of such possessions or resources to the benefit of the common

good is known as wealthy.

The modern concept of wealth is of significance in all areas of

economics, and clearly so for growth economics and development

economics yet the meaning of wealth is context-dependent. At the most

general level, economists may define wealth as "anything of value" that

captures both the subjective nature of the idea and the idea that it is not a

fixed or static concept. Various definitions and concepts of wealth have

been asserted by various individuals and in different contexts. Defining

wealth can be a normative process with various ethical implications, since

often wealth maximization is seen as a goal or is thought to be a

normative principle of its own.

United Nations definition of inclusive wealth is a monetary measure

which includes the sum of natural, human and physical assets. Natural

capital includes land, forests, fossil fuels, and minerals. Human capital is

the population's education and skills. Physical (or "manufactured") capital

includes such things as machinery, buildings, and infrastructure.

The concept of‘wealth varies among societies. Therefore, the word

wealth means different things to different people. In its most narrow

sense, wealth refers to abundance of anything. But generally, wealth

refers to abundance possession of object(s) of value (e.g. gold, clay,

13
water, property, certain skills etc.) and the state of having

accumulated of these objects. The Webster Dictionary of English sees

wealth among others as: natural resources of a country, whether or not

exploited; the product of the economic activity of a nation; anything

which can be exchanged for money or barter. Just as the word wealth is

relative, the state of being wealthy is also relative. A person that is

wealthy is someone that has accumulated substantial wealth relative to

others in a given society of reference group.

2.2 Theoretical and conceptual frameworks

According to the18th century Scottish economist and moral philosopher

14
Adam Smith, wealth creation is the combination of materials, labour

land, and technology in such a way as to capture a profit. In the 21st

century we must add knowledge to this list of combinations.

From the journal of the 14th Annual wealth creation study (2004-

2009)seesWealth creation as the process by which a company enhances

the market Value of the capital entrusted to it by its share holders. It is a

basic measure of success for any commercial venture. Wealth creation is

achieved by the rational actions of a company in a sustained manner.

Drucker on wealth creation -- Drucker, 1995. Enterprises are paid to

create wealth, not control costs. But that obvious fact is not reflected in

traditional measurements. First-year accounting students are taught that

the balance sheet portrays the liquidation value of the enterprise and

provides creditors with worst case information. But enterprises are not

normally run to be liquidated. They have to be managed as going

concerns, that is, for wealth creation. To do that requires information that

enables executives to make informed judgments. It requires four sets of

diagnostic tools: foundation information, productivity information,

competence information, and information about the allocation of scarce

resources. Together, they constitute the executive's tool kit for managing

the current business.

From the book A Blue Print Of Wealth Creation by Msi Taylor. Wealth

creation is a term given to the structured and purposeful methods used to

15
grow the value of an asset or assets over an extended period of time.

Many people use wealth creation during their working years to fund an

enviable lifestyle in retirement or to provide an inheritance for their

families. Others need to feel financially secure and use it to create a

buffer between themselves and financial adversity in the event of ill

health and loss of income. Slow and Steady Wins the Race

Heller (2003) defines wealth creation in terms of income generation

or more broadly as the creation of assets, both in terms of physical and

human capital.

In the journal of sustainable development studies, for many

developing countries, entrepreneurship has been a powerful engine of

economic growth and wealth creation, and is crucial for improving the

quality, number and variety of employment opportunities for the poor. It

has several multiplier effects on the economy, spurs innovation, and

fosters investment in people, which is a better source of competitive

advantage than other natural, which can be depleted.

From matrium financial services website, There is never a better time

to start creating wealth than now. You don’t need a large lump sum to be

able to create wealth. Wealth creation is a process of combining your

current resources with investment strategies that will provide sufficient

capital to meet your immediate or future capital needs.

Moneycactus.com describes wealth creation as an equation which is

16
wealth creation equals, consistency all over time in mathematical form.

From the book The innovation advantage by Donna C.L Prestwood

And Paul A. Schumann, jr. Innovation is the means by which enterprises

create wealth. Entreprises that learn how to integrate innovation into

strategy, and strategy into the process of innovation , will gain a

competitive advantage and optimize the entreprise’s creation of wealth.

2.3 Entrepreneurship And Wealth Creation

Kao, Raymond W. Y. 1993, Singapore. Entrepreneurship is“the process

of doing something new and/or something different for the purpose of

creating wealth for the individual and adding value to society”.

I draw attention to one idea manifest in Kao’s definition. The idea that i

am speaking of is the domain of entrepreneurship. The domain of

entrepreneurship is not confined to business. By defining

entrepreneurship as a process, Kao also implied that adoption of the

17
definition and implementing it merely required a mindset change. Any

person could be an entrepreneur and it was not limited to the business

arena. We have observed the introduction of entrepreneurs into

governments with the book by David Obsorne and Ted Gaebler,

Reinventing Government : How the Entrepreneurial Spirit is

Transforming the Public Sector. Politicians have been called

entrepreneurs. Minister Mentor Lee Kuan Yew of Singapore in 1994

called his team of first generation ministers in Singapore entrepreneurs

(The Straits Times, 1994). Procedural entrepreneurship saw its way into

governments and public service without even in the midst of business

process re-engineering we saw the birth of entrepreneurship (e.g, Keys,

18
1988) Communities and non profits have also joined the

entrepreneurship movement with social entrepreneurship. Here there

have been two schools of thought–social entrepreneurship as a subset of

nonprofit management. In this sense it is just another way for existing

non profit organizations to extend their scope with new innovations

to address social needs and yet be self-sustaining. The second

school sees it as a new area related to entrepreneurship and yet

pertinent to the sphere of social problems.

The Global Entrepreneurship Monitor, a research program aimed at

assessing the national level of entrepreneurial activity in selected

countries, conducted an entrepreneurship and economic growth study

19
on 48 countries in 2008 [Global Entrepreneurship Monitor, 2008].

According to the study, the economic growth of a country is

directly correlated to its level of entrepreneurial activity. In

particular, there is a high correlation between economic growth and

entrepreneurial activity in industrialized countries.For instance, the

American economy is well known for its flexibility, adaptability, and

grasping of opportunity partly because of a prevalence of

entrepreneurial culture in the United States. According to the report,

Countries that are able to replenish the stock of businesses and jobs

and have the capacity to accommodate volatility and turbulence in

the entrepreneurial sector are best placed to compete effectively.

20
Entrepreneurs therefore play a key role in addressing poverty

through their contributions to wealth and job creation, economic

advancement and social empowerment.

Much has been written about the particular qualities and

characteristic of the entrepreneur. The crucial element in building a

nation of entrepreneurs is to identify those circumstances that are

conducive to turning a majority of the citizenry into productive

entrepreneurs. For example, a well developed legal property system

could foster entrepreneurship as Hernando de Soto, (2000), in his

study of emerging economies across Asia, Africa, the Middle East,

and Latin America, demonstrated that untitled assets that could not

21
be used as capital was a primary barrier to the kind of

entrepreneurship that leads to capital accumulation and wealth

creation. He demonstrated that emerging economies already have a

strong saving culture and already have the assets needed to launch

them into economic prosperity. With a legal property system, the

variable group of potential productive entrepreneurs could cooperate

imaginatively in creating new uses for the assets they already have.

To unleash the innovative potential in people and assets that they

already possess, Hernando de Soto recommends the implementation

of measures that will ensure that the legal framework provides the

infrastructure to ensure the fluid transmission of marketable titles.

22
This is equally an indication that in many instances, the removal of

barriers in the system often does more to foster entrepreneurship

than the creation of incentives. [De Soto, H. 2000]. De Soto’s

distinction between the entrepreneurs and the sole-proprietors is

particularly apt for the situation in Nigeria. He notes that the main

difference between these two categories is the contrasting

psychologies of the founder-owners, their attitudes towards trading,

and their orientation to capital accumulation. The entrepreneur is

committed to wealth creation, capital accumulation and to business

growth and is willing to forgo direct consumption in order to

expand the scale of her/his entrepreneurial activities. The proprietor

23
on the other hand, is more likely to consume and utilize economic

surpluses in order to maintain a certain standard of living or

lifestyle rather than reinvest available funds into the business.

Paul Schumann 2005. Never forget that innovation is about creating

wealth. Innovation is the way of transforming the resources of the

enterprise through the creativity of people into new resources and wealth.

Theft, exploitation and greed, among others, may make money for

individuals, but they do not create wealth. Innovation creates wealth.

What is common about these new spheres of entrepreneurship is

the departure from the early confines of prior definitions that a

business start up is the goal of the entrepreneurial efforts. They

24
extend entrepreneurship into new spheres at times calling upon the

power of the name of entrepreneurship to refer to innovations, at

times to refer to new ventures. But at most times to refer to the

spirit of entrepreneurship: - creativity, wealth creation and ideas.

2.4 Challenges of Wealth Creation

It is a well-known fact that African countries are richly endowed, yet

remain the poorest in developmental terms. The economic and social

conditions in Africa are such that the continent has continued to exhibit

severe symptoms of economic and social difficulties, under development,

and marginalisation in the global economy. While the share of Asia in

world-manufactured exports grew from 16 to about 27 percent since

1960, the African countries share declined from 4% to less than 2 percent

(World bank, 2000). Africa’s inability to participate effectively and

profitably in the globalisation process derives from its lack of capacity,

25
coupled with the structure of its production, trade and finance as well as

numbers of structural impediments to growth and development in the

form of debt burden, unfavourable terms of trade, rapid population

growth and failure of political leadership. Not to be underrated is the role

of corruption and economic mismanagement in stunting the development

of the continent. A major cause of poverty in Africa especially sub

Saharan Africa (SSA) is low levels of productivity and production

technology, particularly in the agricultural sector, which provides most of

the employment and a large share of the region’s Gross Domestic Product

(GDP). Other causes include high illiteracy and population growth rates,

frequent natural disasters, inadequate infrastructure, political instability,

and conflict in a good number of countries. Other development

challenges that Africa needs to address with adequate capacity include the

HIV/AIDS pandemic, conflict, including post conflict reconstruction,

private sector development, revitalisation of African universities and

research institutions, promotion of financial Institutions and regional

cooperation and integration as a major response to the forces of

globalisation. In view of the enormous development challenges outlined

above, conscious efforts must be put in place by African countries in

their quest for wealth creation as follows:

i. Reverse the phenomenon of low economic growth rates and poor

performance in almost all sectors; as the World Bank’s World

26
Development indicators, 2002 has reported: “Sub-Saharan Africa has

been nearly stagnant, with less than 0.2 percent annual growth over the

past 40years and declining growth rates. Fourteen major African countries

had negative growth. Even such resource-rich economies as Ghana,

Nigeria and Zambia, classified as lower middle –income economies in the

1960s, have become considerably poorer, in some cases, because of

political instability”. Other factors, however, include poor economic

policies and lack of capacity to reap from the benefits of globalisation.

ii.Significant reduction of poverty and backwardness, which stand in

contrast to the prosperity of the developed world. Africa remains the

poorest continent despite being one of the most richly endowed regions

of the world. Approximately 50 percent of Africans are income poor.

iii. Reversing the poor social and economic conditions under which 340

million people, or half of the population of Africa live on less then US$

1.0 a day

IV. Elimination of the heavy external debt burden, Sub-Saharan African

(SSA) countries are among the most indebted of developing countries

considering standard debt indicators and income levels.

V. Halting the malaise of marginalisation and exclusion in a rapidly

globalised world. While, for example, the exports of industrialised

countries grew at over 7 percent per annum within the last four decades,

those of Africa, suffered a decline of about 1 percent per annum within

27
the same period.

Summary of literature review

The researcher observed the relationship between entrepreneurship and

wealth creation with the goal of understanding the process of wealth

creation. Entrepreneurship’s attention to wealth creation centers on

identifying new and emerging opportunities in the marketplace (Shaneand

Venkataraman, 2000). Wealth Creation is not the end result. It is a

process. A process that requires planning, strategy and effort. The 21"1

century is characterized by a great influx of information. Thus we live in

an

information society, a knowledge driven economy and people constantly

need information to run the varied sectors effectively. Obama (2005),

says "we live in a 21st century knowledgeeconomy". where increasing

reliance on information creates an environment that is full of

opportunities for information professionals who have skills to harness and

be creators of

wealth and job, in this era of unemployment in most parts of the world. In

other words, honest wealth creation serves the needs of people, The true

wealth creators are not just following what others do. They are looking

for new ways to create value.

28
29