Impact of Human Capital on the Performance of Small and Medium Enterprises in South West

Abstract

This study examined the impact of Human Capital on the performance of SMEs in South West Nigeria. The specific objectives were to determine the effect of Human Capital on profitability and sales of SMEs in South West Nigeria. Data were collected using questionnaires administered to three hundred and ninety three (393) out of which three hundred and two were returned from the samples. Analysis of data was carried out using multiple regression analysis to determine the nature of relationship amongst variables. Findings from the study showed that there is a significant relationship between Human Capital, and Profitability of SMEs. Result showed a relationship R value = 0.503 indicated a strong positive relationship between Human Capital (independent variable) and profitability level (dependent variable) of the firm. While R square (0.253) specify the degree of which the independent variables can explain the variance in the dependent variable. Independent variable (Human capital) can explain 25% variance in dependent variable (profitability level). While the remaining percentages of 75% was explained by other factors which are not included in the model. More so, F-test was employed to test the relationship between human capital and profitability level. ANOVA test shows that the ‘F’ value is 29.096 with a significance of P value = 0.000 which is less than 0.05, meaning that null hypothesis is rejected and concluded that there is a significant relationship between the two variables. Also, the results on the beta coefficient of the resulting model, shows that the constant α 0.787 is significant different from 0, since the ‘P’ value 0.000 is less than 0.05 (level of significant). The coefficient ‘β’ which is 0.143 is also significantly different from 0 with a p-value of 0.000 which is less than 0.05. The‘t’ value for constant is 2.116, while the ‘t’ value for Human capital is 2.644, which indicated that there is significant relationship between Human capital and profitability of SMEs. This implies that the null hypothesis (that is β=0) is rejected and the alternative hypothesis β = 0 is accepted indicating that the model Y = 0.787 + 0.372 (Human capital) is significantly fit. In Conclusion, building on Human Capital by SMEs Operators will improve the firms’ profitability and increase the sales revenue of the firm.