Development of Small Businesses in Saudi Arabia - Dissertation Example

?RESEARCH PROPOSAL Working Business Development of Small and Medium Scale Businesses in Saudi Arabia Research Topic For its research topic, this paper will seek to answer the question: What are the potential drivers of successful business development of small and medium scale enterprises in Saudi Arabia? By “drivers of success” is meant that those factors that, if adequately present, would assure the success of the development of a small to medium scale enterprise. Background and Academic (brief scan of theory) A brief review of the important theories about the factors that impact on the performance of small and medium scale enterprises, show that the most common concerns include firm size, life cycle vis-a-vis age, the structure, innovativeness, and strategic alliances that the firm has built up. A brief scan of the important theories and the challenges to them are as follows: Firm size: According to Schiffer and Weder, the prevailing assumption is that SMEs have more problems than large firms because of their size. The reasons favoring large firms include economies of scale and entry costs; political influence; and greater visibility. Life Cycle vs Age: Masurel & Montfort (2006) analysed the stages in the life cycle of small and medium scale enterprises, in particular in the professional services sector, and distinguishing one stage from the other. Four stages were distinguished – starting; growth; maturity; and decline. First three stages show a diversification in sales, increase in differentiation of labor force, and increase in labor productivity. In the last stage, all these measures decrease. These stages, rather than the firm’s age, are what determine its growth. Age and Innovativeness: On the other hand, Hausman (2005) established that younger and small firms will tend to be more innovative than older small firms, because small firms become less innovative over time, because they tend to become “less aware of environmental changes or innovative solutions” (Hausman, 2005; Hausman & Fotentot, 1999). These results were contested by research by Laforet and Tann (2006), Radas & Bozic (2009), and Rothwell and Zegfeld (1986), which found that the company’s age has little to do with its innovativeness, and therefore does not impact on the SME’s success. As to innovativeness as a factor in itself, Masurel, et al (2003), Nijkamp (2000) found that the element of leadership fosters creativity in the management of SMEs are determinative of innovative behaviour. Structure: Laforet and Tann (2006) and Tidd, et al. (2001) state that there is a highly significant difference between structure and innovation. This indicates that innovation does not develop well under hierarchical structures, mainly because of high levels of bureaucracy, and flatter SME structures tend to lead to more successful innovative efforts. On the other hand, Wei Xiuli and Juan Zhao (2009) qualifies this, stating that the optimum line structure of SMEs should take into consideration the typical organizational structure of the industry, the maturity of the firm, the specific stage it is in, and other factors that impact on the firm’s performance. Strategic Alliances: Booz, Allen & Hamilton, (n.d.) showed in their studies that SMEs will benefit through the establishment of cooperative arrangements with other organizations and businesses. Joining forces helps ease expenses by sharing expertise, assets, expenses, and risk without the need for cash, debt or trading equity. In many instances, cooperating groups resort to bartering. Research objectives It is understandable that small and medium scale industries are seldom made the topic of academic research, because of the many factors that are perceived to influence this segment of the business, the studies appear to be fragmented in that so many assumptions are made as to the type of industry and the specifications of the company (high-tech or low-tech, service or manufacture, start-up or mature, mass production or custom designed, and so forth). This study therefore proposes to create a comprehensive survey and rationalization of the academic literature on the topic of SMEs, and apply this theoretical consensus concerning the various factors to the conditions present particularly in Saudi Arabia. This objective points to a two-fold purpose: firstly, it aims to integrate the existing studies of SMEs as they apply to other developing countries, in order to create a more comprehensive picture of important drivers for success; and secondly, it intends to apply these factors to a cursory scan of Saudi Arabian small and medium scale enterprises as a whole, in order to determine whether such factors appear consistent with the Saudi experience. Important observations are expected to come to light, particularly concerning the influence of Saudi culture, its historical and economic development and structure, and the regional peculiarities and political sensitivities that would influence SME’s performance. The study is intended to be an exploratory study, to determine the possible factors that may be tested in a possible empirical study that may be designed pursuant to the findings that may be gathered here. It intends to create coherence among the many contradictory studies on factors contributing to SME performance and success, before it may determine which of these factors are applicable and plausible in Saudi Arabia. From the findings intended here, it is expected that more specific empirical studies on SMEs in Saudi Arabia. Methodology As an exploratory study, which in itself is a complex and broad-ranged project, the existing secondary data from published academic literature, professional journals, and data from the databases and research papers of business and economic institutions of known credible standing, will be used to arrive at an integrated and comprehensive understanding of SME performance. The studies intended for review would pertain to both SMEs in other countries and those conducted in the context of SMEs in Saudi Arabia. This study also intends to conduct a preliminary survey of opinion of Saudi Arabian small and medium scale operators concerning the factors that may be drawn from the literature review. This strategy is intended to provide a grounded rationale for the identification of factors that drive SMEs, the main research topic. The research strategy to be used is a combination of documentary search and opinion survey. The reason for this is that the purpose of the study is intimately linked to existing literature and publications, because it seeks to create a logical composite of the academic findings. Since the study intends to determine the applicability and consistency of these findings with the actual conditions prevailing in Saudi Arabia, it is but natural to consult the agents of the subjects of research – the proprietors, entrepreneurs, and general managers of the small and medium scale enterprises in Saudi Arabia. The findings should be able to link actual experience with surveyed theory, to provide a foundation for future empirical researches with more precise data and analytical methods for hypotheses testing. The geographical setting of the research is ultimately Saudi Arabia, although it may rely on secondary data that were drawn for small and medium scale industries in other countries. The time setting for this segment is not limited, that is, it shall try to create a historical progression of the research on performance drivers of SMEs. On the other hand, the survey is intended to be a cross-sectional study, that is, it will be relevant for a single point in time, because the survey shall be performed only once for this research. It may be a basis for future research that may assume a longitudinal approach, but inasmuch as no similar survey appears as yet to have been done for Saudi Arabia, there is no possibility of a longitudinal study for this particular research. Ideally, a time series study would have been a better strategy, to chart the development of a select sample of SMEs. Unfortunately, unlike the larger listed corporations, SMEs do not have the annual record of public disclosures that is required of companies publicly held and traded on the stock exchanges. This is the reason why a cross-sectional approach to acquire the primary data through survey questionnaire will have to be necessary, that will result in a descriptive study. The data will be obtained through two methods. The survey of academic literature will be acquired through a broad search of academic and professional journals available through the online search facilities of EBSCO, JSTOR, Academic Source Complete and Business Source Complete. Information also from databases of institutions such as the IMF and World Bank, detailing studies already conducted on SMEs, will be conducted to supplement the academic studies. Data obtained through the survey questionnaire will be gathered by electronic media, through online survey facilities such as surveygizmo.com, and directly through colleagues in the geographical vicinity where the respondents are located. Personal surveys shall be conducted for those eligible respondents who may be in close proximity to the researcher, as Saudi Arabian entrepreneurs also occasionally sojourn in other areas where their businesses may have ongoing transactions. Because of the convenience of new media facilities, there is every assurance that the needed data may be acquired, both for the document search and the opinion survey. Research ethics An opinion survey is intended to be conducted on this study. Therefore, there are ethical considerations that the researcher shall assure in the conduct of the survey. First, the researcher shall undertake to fully inform all respondents and participants of the procedure and rationale of the project. Full disclosure shall be assured prior to the conduct of the survey. Second, the researcher shall also undertake to assure the respondents that the confidentiality of their responses shall be maintained. Finally, in compliance with this promise the study shall perform its intention to maintain the confidentiality of the identities and individual responses of the respondents. What shall be divulged would be the aggregate figures and collated statistics of the responses, without reference to the matters the respondents expect to be kept out of public scrutiny. Time and scale resources The expected time schedule shall abide by the following table: Activity Description Time duration Time schedule Forecasted Resources Document search Survey of the available articles online and in the library 1 week Document review The collected articles and documents shall be read and summarised 1 week Collation Information from the documents shall be analyzed and integrated 1 week Questionnaire construction and validation The questionnaire shall be formulated and validated by administering it to a small sample group of respondents 1 week Conduct of survey The questionnaires shall be deployed and answers gathered Collation of questionnaire responses Results of the questionnaire are gathered and tabulated 1 week Statistical analysis The statistical analysis shall be performed and findings drawn 2 days Writing of the dissertation The findings shall be reduced to writing and the dissertation written out. 4 weeks Preliminary References Al-hawari, M.; AL–Yamani, H.; Izwawa, B. 2008 Small Businesses' Decision to have a Website Saudi Arabia Case Study.. 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