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© 2018 by the authors; licensee Eastern Centre of Science and Education, USA 

 

Asian Business Research Journal 
Vol. 3, 41-47, 2018 
ISSN(E) : 2576-6759 
DOI: 10.20448/journal.518.2018.31.41.47 
© 2018 by the authors; licensee Eastern Centre of Science and Education, USA 

 
 

 
 
 

Determinants of Owner-manager Competencies for Small Business Operations: 
Evidence from a Small Restaurant Business in Tanzania 
 
 
 

Ruth Elias1    

Wilhelm Leonard2    

Joshua Mwakujonga3    

 

 
( Corresponding Author) 

 

 

1School of Business Studies, University of Dodoma, Dodoma, Tanzania  

 
2School of Public Administration and Management, Mzumbe University, Morogoro, Tanzania  

 
3Department of Business Studies, Mzumbe University, Dar Es Salaam Campus College, Tanzania  

 

 
Abstract 

This study examines the influence of owner-manager demographic characteristics on attainment 
of their competencies in Tanzania, because there are scant empirical evidences on the same.   The 
data used in this study were obtained through a survey of 392 small restaurant businesses from 
Ilala and Dodoma in Tanzania. Information was collected from the owner-managers of these 
entities by using structured questionnaires. Competencies of the owner-managers were measured 
subjectively by assessing their ability to perform entrepreneurial, managerial and functional 
works. Thus, the study uses Structural equation model to analyze the latent variable data 
collected. Study results have shown that among the demographic characteristics of the owner-
manager, formal education and family background in doing business are more important in 
explaining how competent an owner-manager is in all three competencies. Furthermore, age of 
the owner-manager is very important in explaining how competent the owner-manager is in 
terms of managing the business while their industrial working experiences are more important in 
explaining the owner-manager ability to fulfill functional activities. These results imply that, 
whoever wants to operate the small restaurant business should try to understand their 
demographic characteristics. That is, to match themselves with the competencies of fulfilling 
entrepreneurial, managerial and functional activities or decide on any other way of compensating 
for their weaknesses for better business performances. 

 
Keywords: Owner-manager, Demographic characteristics, Entrepreneurial, Managerial, Functional, Competencies. 
JEL Classification: M5, M10, J1, M13. 

 

1. Introduction 
In order for a business to perform successfully for a long term, individual competencies as the determinant tool 

to the performance of businesses should be ensured by the owner-manager’s competence in the entrepreneurial, 
managerial and functional areas (Becker, 1964; Bird, 1995; Frese, 2000; Ahmad et al., 2011). The determinant on 
how the individual attains competencies to affect the business depends on several issues. Literature shows that 
demographic characteristics like education, work and life experiences of an individual can help to attain 
competencies that are suitable for the business organization which could become the contribution of the individual 
towards a successful performance for the organization (Walker et al., 2007). To make use of attained competencies, 
employees of the large organization are selected through interviews based on individuals with best competence that 
suits the position being applied for and are backstopped with customized training and workshops that help to 
determine their competencies to perform (Samwel, 2018). 

Small business has its different experience; the competencies to perform are based on owner-manager himself. 
Unfortunately, in the majority of small businesses owner-managers initiate the business without strategically being 
interviewed if they have or not any competencies for the business performance before initiating the business 
(Webster et al., 2005). For most of the owner-managers, their prime motive in initiating a business is to earn 
income as an alternative survival endeavor after being disqualified from the established competences of formal 
employments (Walker et al., 2007). It is also acknowledged that small business owner-managers have low formal 
education levels compared to managers of larger businesses, and they participate less in competency development 
and training activities (Billett, 2001; Bartram, 2005). Furthermore, just by the fact that most of small restaurant 
businesses are dominated by owner-managers with no profession of restaurant management and many of whom 
have been disqualified from formal employment, their businesses are merely alternative survival endeavors to 

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simply fulfill their needs; hence their determination towards attainment of required owner-manager 
entrepreneurial, managerial and functional performance competencies appear different.  

Despite their inclusiveness to the wider range of society they serve in terms of self – employment, provision of 
services and an extended employment opportunity that preserves the local economic development of the country, 
for the small businesses, in which competence to perform is based on the owner-managers, their determinants has 
not been visualized (Bird, 2002; Inyang and Enuoh, 2009). As a result, most of these businesses suffer the entry and 
exit syndrome, but also can hardly advance to medium or large size (Tundui, 2012).  

This study values the importance of owner-manager competence for necessary performance of the business 
operation. They are only vision bearer for performance and long-term success in their small businesses. Owner 
manager competence in terms of knowledge, skills and attitude are acquired through intuition and by learning to 
which this study demonstrates how the demographic characteristic can determine owner manager entrepreneurial, 
managerial and functional competencies (Becker, 1964; Bird, 1995; Ahmad et al., 2011). This will help the owner-
manager and the government to arise in facilitation of the development of small businesses. Therefore, this article 
aims at providing empirical evidence from Tanzania on the extent to which demographic characteristics owned by 
the owner-manager influence the attainment of the entrepreneurial, managerial and functional competencies. 
 

2. Literature Review 
The characteristics of the owner-manager has been regarded as the most influential factors toward the 

attainment of the individual competencies (Becker, 1964; Bird, 1995; Ahmad, 2007; Santos, 2011). There has been 
reliable evidence that one factor results into different development of competencies basing on the learning 

environment and other individual characteristics (Reuber and Fischer, 1994; Quińones et al., 1995). Therefore, 
demographic factors such as industrial working experiences, formal education, and family background in doing 
business, age and sex of the owner-manager have been discussed in relation to the attainment of the competencies 
necessary for business performances. 
 

2.1. Industrial Work Experience  
Theoretically, industrial work experiences influence the attainment of individual competencies (Becker, 1964). 

Literature also shows that industrial working experience helps the individual to learn  by doing and with the 
accumulated practices, to attain the necessary competencies (Dyke et al., 1992; Sarwoko et al., 2013). However, 
these researches did not show clearly the contribution of industrial working experiences to each competency 
required by owner-managers.  Basing on the fact that small restaurant business is operated by an individual, and 
each competency contributes differently to the performance of the business, the determinants of entrepreneurial, 
managerial and functional competencies which have been neglected for long are still more important to find out 
(Ahmad, 2007; Wickramaratne et al., 2014).  
 

2.2. Formal Education 
Human capital theory states that education is one of the key investments that influences the attainment of 

owner’s competencies (Becker, 1964). When an owner increases his/her education level, s/he is expected to gain 
more stock of human knowledge which increases the ability to run the business successfully (Mitchelmore and 
Rowley, 2010; Sarwoko et al., 2013; Mahadalle and Kaplan, 2017). However, it is difficult to generalize these 
findings as the attainment of competencies from education investment depends on the type of competencies to be 

attained and the education environment (Reuber and Fischer, 1994; Quińones et al., 1995). This study therefore, 
goes far in contributing to the literature, the effect of formal education on attainment of entrepreneurial, 
managerial and functional competencies.  
 

2.3. Family Background in Doing Business 
Individuals determine their own social and personal value based on how we stack up against others (Festinger, 

1954). Children determine their competencies from their referees who are the parents or guardians. Evidence 
indicates that, some of owner-manager competencies are learned and acquired through observing parents and 
relatives doing business or through participating in the family business (Niittykangas and Tervo, 2005; Mungai 
and Velamuri, 2011). This study also aimed at finding the influence of family background in doing business on the 
attainment of owner-manager competencies.   
 

2.4. Age of the Owner-Manager 
Age has been an important characteristic used as one of the important variables in grouping individuals in a 

contemporary social science research and explains differences among them. Literature shows that, older owner-
managers are logically expected to attain more necessary competencies because they have more of experience, have 
gone through many challenges, which make them strong and confident (Raposo et al., 2008; Isaga, 2012). In 
contrast, evidence shows that younger owner-managers are more energetic, have higher ambitions and are more 
probable to be dedicated to working long hours, which are generally necessary competencies for business 
performance (Storey, 1994; Woldie et al., 2008). On the other way, Storey (1994) showed that middle-aged 
individuals are comparatively likely to be experienced and more energetic to work than younger or older owner-
managers. What is not yet clear is at what age the owner-manager archives all necessary competencies for business 
performance. This calls for more research in order to understand more the various differences in age of the owner-
manager at which owner attains the required entrepreneurial, managerial, and functional competencies.  
 

2.5. Sex of the Owner-Manager 
Literature indicated various demographic variables as the factors influencing owner’s competencies, but very 

few studies considered the influence of sex on the attainment of owner’s competencies (Sajilan et al., 2015). A 
research indicates that male and female have different socialization experiences, which shape their behaviour 



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towards the operation of the business. Furthermore, females have less competency to operate a business than males 
(Raposo et al., 2008). Thus, these differences predicted to affect the ability to attain competencies in operating the 
business (Díaz-García and Jiménez-Moreno, 2010; Yordanova and Tarrazon, 2010; Kefale and Chinnan, 2012). 
Futhermore, researchers indicate that, male and female are reported to have different motives and perception in 
initiating a business (Manolova et al., 2007). Females are said to have low motives toward the business compared to 
males. The kind of motivation an individual has affects development of competencies for business performance (Ali 
and Mahamud, 2013). Therefore, differences in motives in initiating a business lead to the different efforts in 
developing competencies (Cliff, 1998). For example, females perceiving business as a cooperative network, they 
make themselves to have more of managerial competencies in the business than males (Madichie and Gallant, 
2012). 

 
3. Methodology 
3.1. Research Approach and Design 

This study examines the influence of owner-manager demographic characteristics on the acquisition of the 
competencies necessary for performance of small restaurant businesses by using the quantitative method approach. 
Since this is a population-based survey, we have used cross sectional design to collect data on the entire study 
population.  
 

3.2. Sampling  
Our study surveyed a random sample of 392 entities from 459 small restaurant businesses with the specified 

criteria within the municipalities. Moreover, to avoid the diversity of the results, owner-managers were selected 
from the small restaurant business with 1-10 employees, with a 5-20 million capital and being in operation for at 
least three years and not more than 10 years. This is because most of the owner-managers are found within the 
business with such characteristics. Furthermore, within this range of business characteristics, owner-manager 
competencies are more needed than in large businesses where there are more of specialized employees with 
necessary competencies who can assist the owner. The selection of the small restaurant businesses was from the 
original list of licensed small restaurants businesses within Ilala and Dodoma municipality.  
 

3.3. Structured Questionnaire 
Since this is a survey based research, data was collected through a structured questionnaire. Moreover, proper 

questionnaires design is vital for data quality and minimisation of the measurement error. Therefore, as the 
interview involved owner-manager within the local community, the common language used is “Kiswahili”. 
Furthermore, after the design of the survey questionnaire, the instrument was subjected to pilot study in order to; 
first, guarantee the reliability of study results; second, ensure clarity and relevance of research instruments and 
methodology; third, test if the variables and measures were suitable. The pilot study was followed by refinement of 
the questionnaire; the original questionnaire was subjected to changes as per correction from the pilot study. The 
following changes were made; shortening of questionnaire and questions which were found to be ambiguous were 
dropped. Furthermore, refining the questionnaire which included, rephrasing and sequencing of questions was 
taken into account to ensure that all respondents have a common understanding of the questions.  
 

3.4. Owner-Manager Competencies  
Competencies are overall necessary skills and knowledge owned by an individual for the betterment of the 

performance. It is the ability of the individual to conduct the specified activities successfully. Owner-manager 
competency measures have been adopted from Man (2001) and grouped as proposed by Ahmad et al. (2011). 
Therefore, this study has measured the owner-manager competencies basing on the three main responsibilities of 
an owner-manager in the business. That is, entrepreneurial, managerial and functional competencies. 

For the purpose of this article, and taking into account the above explanation, owner-manager competencies 
articulated in terms of entrepreneurial, managerial, and functional is the dependent variable. This measure required 
the owner-manager to indicate their level of agreement on being able to undertake the described entrepreneurial, 
managerial and functional activities. Five scales were used for this purpose: strongly disagree, disagree, neither 
agree nor disagree, agree, strongly agree. For that way, they were indicating the competency they have for 
performing prescribed activities. 

The Independent Variables include the variables representing formal education, industrial working experience, 
and family background in doing business, age and sex of the owner-manager. Their measurement are given in table 
below 
 

Table-1. Measurement of the variable 

 Independent variable:  Owner-
manager demographic  characteristics 

Measurement  

1 Formal education  Categorical variable measured in level of education  
2 Industrial work experience Continuous variable measured in years of experience in 

food related businesses 
3 Family background in doing business Dummy variable measured as the owner-manager having 

a family background in doing business as Yes or No 
4 Age of the owner-manager Continuous variable measured as the time of life of the 

owner-manager in terms of years since born.  
5 Sex of the owner-manager Dummy variable measured as the sex of the owner-

manager, either male or female. 
           Source: Developed from Literature Review, 2017 
 
 



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3.5. Model Specification 
The objective of the study was to examine the influence of owner-manager characteristics on acquisition of 

owner-manager competencies. Basing on the nature of the study variable, specifically on the nature of dependent 
variable (owner-manager competencies) the structural equation modeling (SEM) was found to be appropriate for 
data analysis of this research. SEM has been used since it has the ability to model the relationship that has the 
unobserved variable. Furthermore, it has the advantage of examining complex patterns of relationship among the 
construct in an integrative way.  

Structural Equation Modeling (SEM) was perfumed through the STATA 15 software. SEM is the technique 
that combines confirmatory factor analysis (CFA) and regression analysis. CFA is the process of validating latent 
(unobserved) construct. Since the study objectives include the latent variable (owner-manager competencies) the 
researcher performed CFA for the latent constructs in the study before modeling their inter-relationship in SEM 
by using regression analysis.  
 

4. Results and Discussion 
4.1. Confirmatory Factor Analysis 

To examine the influence of owner-manager demographic characteristics on the attainment of their 
competencies; we first run confirmatory factor analysis among the owner-manager competencies (entrepreneurial, 
managerial and functional) construct. Confirmatory factor analysis was meant to test whether the measures of 
these construct are consistent with the researcher’s understanding of the nature of that construction. Likewise, all 
measurement models must be validated and accepted prior to modeling the structural model. 
 

Table-2. The CFA report for every construct in the model 

Construct  Item Factor Loading 

Entrepreneurial 
competency 

Processing food and services that customer wants 0.93 
Processing food that brings benefit to customers 0.98 
Sell food at a cheaper price 0.99 
Take new problem as an opportunity 0.99 
Assess the trend of small restaurant customers 0.99 
Prioritize work in alignment with the business goal 0.99 

Managerial 
competency 

Lead employees 0.98 
Motivate employees 0.99 
Delegate 0.94 
Interact with customers 0.89 
Networking 0.99 
Use of business support services 0.96 
Family support 0.90 

Functional 
competency  

Use modern processing facilities 0.92 

Use special knowledge in food processing 0.93 
Offering delivery services 0.90 

Visibility during processing of food 0.95 
Design restaurant environment 0.92 

                        Source: Data analysis, 2017 

 
In this study, we had 3 dimensions which are entrepreneurial competencies (6), managerial competencies (7) 

and functional competencies (5). According to Awang et al. (2015) the factor loadings for each item should be 0.6 or 
higher for an established item. It is apparent from Table 2 that, factor loading are above 0.6. Therefore, 
confirmatory factor analysis shows that all of the 18 measuring items from three competencies are relevant and 
were retained for analysis. 

The analysis goes on with the examination of the fitness indexes. Therefore, in order to retain or reject the 
hypothesized model, incremental fits, absolute fits and parsimonious fits were examined. The examination of the 
fitness indexes as presented in Table 3 below indicates that the indexes values obtained meet the required level of 
the model fit. Therefore, we confirmed that the data fit well the model.  

 
Table-3. The Fitness Indexes for the polled Measurement Model 

 Name of category  Name by index  Index value  Level of acceptance Comments  

1 Absolute fit  
 

Root mean square of error 
approximation (RMSEA)  

0.075  <0.08 The required level 
is achieved  

2 Incremental fit  
 

Turker-lewis index (TLI)  0.929  >0.90 The required level 
is achieved  

3 Parsimonious fit  
 

Chi-square/degree of 
freedom (Chisq/df ) 

3. 250  <0.30 The required level 
is achieved  

Source: Data analysis, 2017 

 
4.2. Structural Model 

After the fitness an index was archived, the study goes on modeling for structural equation model. The 
exogenous variable industrial work experience, family background, education level, age and sex of the owner-
manager have been regressed to latent endogenous variable entrepreneurial, managerial and functional 
competencies in one structural model. 

 
 
 
 



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Table-4. Results of the effect of owner-manager characteristics on development of owner-manager competencies 

  Coef  Std.err z P value 

Entrepreneurial  Age  -0.0145 0.0044 -3.25 0.001 
Industrial working 
Experience 

-0.03363 0.01126 -2.99 0.003 

Female  0.00122 0.075955 0.02 0.987 
Secondary 2.5132 0.1982 12.68 0.001 
Collage/university 
education  

2.2763 0.20588 11.06 0.001 

Family background (yes) 0.1727 0.07497 2.30 0.021 

      
Managerial  Age  0.019 0.006 3.02 0.003 

Industrial working 
Experience 

-0.036 0.015 -2.27 0.023 

Female  0.1709 0.1078 1.59 0.113 
Secondary 3.09 0.27 11.34 0.001 
Collage/university 
education 

2.78 0.28 9.76 0.001 

Family background (yes) 0.27 0.106 2.54 0.011 
Functional  Age  -0.012 0.004 -2.48 0.013 
 Industrial working 

Experience 
0.028 0.012 2.33 0.020 

 Female  -0.06 0.08 -0.83 0.408 
 Secondary 1.870 0.212 8.79 0.001 
 Collage/university 

education 
1.73 0.221 7.83 0.001 

 Family background (yes)  0.30 0.82 3.67 0.001 
              Source: Data analysis, 2017 

 
We found that the variable with P value less than the conventional value of 0.05 and with positive coefficient 

contributes significantly to the attainment of owner-manager competencies.  

 
5. Discussion 
Our research objective focused on the determinants of owner-manager competencies. Our results support greatly 
the expected notion that secondary and college level education have positive effects with respect to attainment of 
owner-manager competencies both in terms of entrepreneurial, managerial and functional. These results are in 
accord with earlier observations which showed that competencies of small business owners can be improved 
through education programs (Ahmad, 2007; Mitchelmore and Rowley, 2010; Sarwoko et al., 2013). However, the 
results of this study are in contrast to the former reviewed literature, for instance Wickramaratne et al. (2014) who 
revealed a negative relationship of formal education competencies of the owner-manager. An explanation for this 
may be that well-educated owner-managers are expected to make logical decisions that might be advantageous in 
improving performance. 

From the findings we observed that industrial working experiences of the owner-manager is important in 
explaining the attainment of functional competencies. The findings of this study might be related to the fact that, 
industrial work experience helps an owner-manager to learn specific ways of operating the specific business. It is 
encouraging to compare these findings with that revealed by Katozai (2005) and  Nsubuga (2009) who revealed 
that as one acquires more work experience, s/he acquires more skills, techniques and methods specifically in 
improving performance capabilities. However, our results found negative relationship on the industrial working 
experiences and attainment of necessary entrepreneurial and managerial competencies. These results may be 
because; it takes owner-manager energy, creativity, risk taking and motivation to act like attaining such 
competencies. Also, this study speculates that, the result from this study can be caused by failure of the owner-
manager to use previous experience. 

The results also revealed that, there is a positive relationship between the owner-manager coming from the 
family with background in doing business and attainment of owner-manager competencies in terms of 
entrepreneurial, managerial and functional. This can be explained by the fact that, owner-managers who came from 
families with background of doing business are more likely to learn and adopt skills from their parents or guardians 
in the ways of operating the business. The findings of this study are in line with that of Niittykangas and Tervo 
(2005); Mungai and Velamuri (2011) who provided some evidence that the competencies of an individual toward 
performance in their business are obtained through observing their parents and relatives or through participating 
in the family business.  

Our result also supports that there is positive and significant relationship on the influence of age of the owner-
manager and the attainment of managerial competencies.  It also shows that, the ability of the owner-manager to 
attain managerial competences increases slightly at age 24 until the age 36 where it sharply increases up to age 65 
when it starts to decrease. A strong relationship between age of the owner-manager and managerial competencies 
has been reported in the literature (Littunen and Virtanen, 2006). This result may be explained by the fact that, as 
owner-manager gets older, he/she acquires more experiences from the business as well as from the family. 
However, age of the owner-manager negatively influences the attainment of entrepreneurial and functional 
competencies. This finding corroborates the idea that, as the age of the owner-manager increases risk aversion 
increases. The reason for this may have something to do with the old individual becoming incapable of handling 
the challenges of new technology, innovation, searching for markets and obsolescence of their education level. 
However, the results are different with Raposo et al. (2008) who showed that, with increased age, individuals get 
more entrepreneurial competencies in identifying opportunities. 



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In relation to the variable sex, the result showed that in compared to male owner-manager; female owner-
managers have a negative significant relationship with the attainment of both competencies. For this result, this 
study considers it to be due to the difference in motives for initiating a business among male and female owner-
managers. It has been comparably shown that female owner-managers operate their business with lower 
motivation than their male counterparts. This is from the fact that, the motives to initiate the business derives the 
necessary efforts toward fulfilling it. The findings of this study are consistent with those of other studies which 
suggest that, women’s skills and knowledge of entrepreneurial activities are below average (Naudé, 2013). 
  

6. Conclusion and Policy Implication 
The aim of the current study was to determine the influence of owner-manager demographic characteristics on 

attainment of their entrepreneurial, managerial and functional competencies. Based on survey data collected from 
392 owner-managers of small restaurant businesses from two regions in Tanzania, it became clear that owner-
manager with secondary and college level education and coming from families with a background in doing business 
have greater influence on the attainment of entrepreneurial, managerial and functional competencies. Specifically, 
male owner-manager influences the attainment of entrepreneurial and managerial competencies. In addition, age of 
the owner-manager influences the attainment of managerial competencies while industrial working experience and 
female owner-manager significantly influence the attainment of functional competencies. 

The evidence from this study implies that attainment or failure to attain entrepreneurial, managerial and 
functional competencies can be traced back to demographic characteristics of the owner-manager. Therefore, 
whoever wants to start the small restaurant business should try to understand their strength and weaknesses that 
are coming from own demographic characteristics. In that way, it would be easier for owner-manager to match 
themselves with the task of running a business or decide on any other way of compensating for their weaknesses.  

This research extends knowledge on the previous studies that the attainment of necessary entrepreneurial, 
managerial and functional competencies for small restaurant business performance is greater from owner-manager 
who comes from family with business experiences and has at least secondary education level. The study also 
contradicts the common opinion and previous research that industrial working experiences of the owner-manager 
are important in developing entrepreneurial and managerial competencies that are necessary for business 
performance. It is not only important for the owner-manager to have large number of years in industry 
experiences, but the ability to learn and acquire the competencies through that time.  

It should also be noted that while the present study makes noteworthy contributions, there are important 
limitations which need to be considered for future research. The study findings are limited to the collection of the 
information on family background on doing business. The study did not cover the kind of the business the family 
was engaged on and whether the owner-manager participated in the business or only observed the family doing the 
business. It would be interesting to assess the effect of the kind of business the family was engaged in if the owner-
manager actually participated in the business or only observed the family doing the business. 
   

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Citation | Ruth Elias; Wilhelm Leonard; Joshua Mwakujonga 
(2018). Determinants of Owner-manager Competencies for Small 
Business Operations: Evidence from a Small Restaurant Business in 
Tanzania. Asian Business Research Journal, 3: 41-47. 
History:  
Received: 31 August 2018 
Revised: 2 October 2018 
Accepted: 8 November 2018 
Published: 4 December 2018 
Licensed: This work is licensed under a Creative Commons 

Attribution 3.0 License  
Publisher:  Eastern Centre of Science and Education 
 

Acknowledgement: All authors contributed to the conception and design of 
the study. 
Funding: This study received no specific financial support. 
Competing Interests: The authors declare that they have no conflict of 
interests. 
Transparency: The authors confirm that the manuscript is an honest, 
accurate, and transparent account of the study was reported; that no vital 
features of the study have been omitted; and that any discrepancies from the 
study as planned have been explained. 
Ethical: This study follows all ethical practices during writing.   

 

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