Micro, small and medium‐sized enterprises development in the Kingdom of Saudi Arabia. Problems and constraints
| DOI | https://doi.org/10.1108/20425961211276606 |
| Published date | 01 April 2012 |
| Date | 01 April 2012 |
| Pages | 217-232 |
| Author | Syed Zamberi Ahmad |
| Subject Matter | Public policy & environmental management |
Micro, small and medium-sized
enterprises development in the
Kingdom of Saudi Arabia
Problems and constraints
Syed Zamberi Ahmad
Marketing & Management Department, College of Business Administration,
Abu Dhabi University, Abu Dhabi, United Arab Emirates
Abstract
Purpose – The purpose of this paper is to shed light on the main problems and constraints faced by
micro, small and medium-sized entrepreneurs (MSMEs) in the Kingdom of Saudi Arabia.
Design/methodology/approach – To attain the above objective, the study employed a mixed
methodology research design where both quantitative and qualitative methods were used. A su rvey
method was used to gather data from 177 MSMEs located in selected cities in Saudi Arabia
(i.e. Riyadh, Jeddah, Jubail and Al-Khobar), and, in addition, 15 of these entrepreneurs were
purposefully selected and interviewed. Statistical analysis was conducted to identify the facto rs
constraining the growth and survival of MSMEs in the country. The relevant literature review
pinpoints salient issues in the environment of the small business enterprises.
Findings – The results show that the difficulties in obtaining financial support, bureaucracy, lack of
credit options and unfriendly business environment are the main problems and constraints faced by
the analysed MSMEs. Other important problems include unfriendly business environment, inadequate
government support, unpredictable policy changes, and lack of training. These barriers vary
according to the field of activity of the enterprises.
Research limitations/implications – The instruments used for this study need to be subjected to
more statistical tests in order to establish a more robust validity and reliability. In addition, replication
of this study using larger samples with more types of business sectors and a broader geographic base
is suggested for cross-validation purposes.
Practical implications – Policy makers – such as governments (federal, state, local), NGOs, and
other stakeholders – can strengthen their MSME entrepreneurs by launching promotional schemes
that could lead to entrepreneurial success and design targeted policies and related support
programmes that will actively stimulate the development of MSME businesses.
Originality/value – The paper serves to enrich the understanding on the subject of entrepreneurship
in an Arab country and will specially help to fill the lack of academic research available about MSMEs
businesses in the Kingdom of Saudi Arabia. In addition, the insights gained from this study contribute
to the future development of this line of research, particularly in a non-Western context. Proper
attention to the issues raised and recommendations made could give a significant boost to
entrepreneurial activities in the region.
Keywords Kingdom of Saudi Arabia, Small to medium-sized enterprises, Business development,
Arab countries, Micro, small and medium-sized business enterprises
Paper type Research p aper
Introduction
The entrepreneurship literature has increasingly acknowledged the role of micro-,
small- and medium-sized enterprises (MSMEs) in facilitating global economic
development. The sector is seen as an important contri butor in the transition to
a market economy, through the processes of creativity, fostering technological
advancement, organisational innovation and changes, employment creation, income
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/2042-5961.htm
World Journal of Entrepreneurship,
Management and Sustainable
Development
Vol. 8 No.4, 2012
pp. 217-232
rEmeraldGroup Publishing Limited
2042-5961
DOI 10.1108/20425961211276606
217
MSMEs
development in
Saudi Arabia
generation, competitiveness of the economy and other asp ects of social development in
general, and industrial expansion, in particular (Ahmad et al., 2010). Significant
research in this area has contributed to the well-being of the MSME business sector
albeit mostly in developed and industrial natio ns. One of the main agenda is the
scarcity of research and supporting literature behind the problems and constraints
of the MSMEs conducted in developing countries (Ahmad, 2011b; Ahmad et al., 2010).
While some studies have been conducted on MSME businesses in developing and
transition economies in other parts of the world, the scope and findings of these studies
vary widely and are incomparable with each other since they had different objectives
(Nilufer, 2001). Mark et al. (2006) also pointed out that research on entrepreneurial
activity is both widespread and multidisciplinary in nature. In the context of Saudi
Arabia, a limited number of studies have been undertaken in regard to the development
of MSMEs and entrepreneurial activities; despite it being considered a valid
diversification strategy to expand the productive base of the Saudi economy (Kayed
and Hassan, 2011). Therefore, this study has been undertaken to bridge the gap. Since
this study is the first of its kind – to reflect on the Saudi Arabia experience, its primary
aim is to provide exploratory findings, rather than concrete conc lusions.
Study objectives
It has been claimed that o1 per cent of the 236 papers published in the ten-year period
between 1990 and 1999 in a prestigious international journal focused on the Arab
world (Robertson et al., 2001). An even more rare exception is research involving
entrepreneurial activities in the Middle East and North Africa region (Ahmad, 2011a,
2012; Ahmad and Xavier, 2011). The present study takes a step to fill this gap by
critically analysing the problems and constraints encountered by the MS ME business
entrepreneurs not only in starting but also in survival, as well as the development
and progression of their businesses in four primary districts of the Kingdom of Saudi
Arabia. In order to achieve the primary objecti ve, secondary objectives were also
formulated as follows:
.to identify the reasons for the start-up of MSMEs in the country;
.to investigate the factors that inhibit business survival and development; and
.to suggest a number of recommendations in light of the findings.
The findings of such research are helpful and useful to individual entrepreneurs as well
as to economic development planners (Wijewardena and Tibbits, 1999).
Classification of enterprise development in Saudi A rabia
A comparative analysis of MSME definitions across various Gulf countries has proved
inconclusive (Hertog, 2010). In Saudi Arabia, there is no official definition of MSMEs or
large enterprises. Adopting any other country’s definition would be inappropriate and
imprecise. Generally, the definition of MSME in Saudi Arabia uses various quantitative
criterions, which categorises MSMEs by the number of employees. More sp ecifically,
according to the Saudi Arabian General Investment Authority (SAGIA):
.micro enterprises have o25 employees;
.small enterprises have between 25 and 59 employees;
.medium-size companies have between 60 and 99 employees; and
.large-size companies are those with 4100 employees.
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