Barriers to Survival for Small Start-up Businesses in Saudi Arabia

Abstract

Small businesses are said to be the backbone of a nation’s economy, and the engine of economic growth, diversification, wealth generation, and job creation. In recent years, the Saudi government has heavily supported entrepreneurship as a means of diversifying the Saudi economy, following a massive drop in oil prices in 2016. Most strikingly, this support has formed part of a series of economic reforms within ‘Saudi Vision 2030’. Despite this enthusiasm and support, however, the complex challenges of running a start-up are perhaps more difficult than ever. Therefore, many small Saudi businesses currently do not survive more than three years. In light of this, understanding the barriers to small start-up survival is an increasingly urgent research topic. The aim of this study was to investigate the factors leading to the failure of small business start-ups in Saudi Arabia, thereby contributing to a Saudi perspective in the literature by empirically identifying the barriers to small start-up survival. While there is a mass of literature on small businesses and entrepreneurship, there is no generally agreed theoretical framework or list of factors for this field that contribute to failure outcomes. Thus, a framework of 48 factors was derived from the literature representing the potential barriers to small start-up survival. These were then divided into three main categories: Individual (’the owner or personal/entrepreneurial), enterprise (‘the firm’), and environmental ‘(the external’ or economic, political, socio-cultural and infrastructural). An explanatory sequential mixed-method approach was adopted for this study. Thus, following a pilot test, the researcher conducted 750 surveys, using the Qualtrics online survey tool, with 296 valid surveys returned. Subsequently, in order to add further depth to the research, 15 semi-structured interviews were conducted with government officials, a senior businessman, and both successful and unsuccessful entrepreneurs. The findings revealed significant barriers within each category of failure factors (individual, enterprise and environmental). Several of the barriers identified corresponded to those found in other studies from both developed and developing countries. The key findings related to political, economic and infrastructural perspectives, especially problems with the labour market financial institutions, regulatory and legal infrastructure, compliance costs, government support, bureaucracy, skills deficits, and poor communication between government institutions. This research is exploratory in nature, due to a dearth of existing research on the barriers facing entrepreneurs in Saudi Arabia. Identifying the key barriers will therefore help entrepreneurs, start-ups and policy-makers to take measures to eliminate or minimise these barriers, thereby supporting the growth of entrepreneurship in the Kingdom. Recommendations for further have been made, with tentative recommendations for entrepreneurs (practice) and policy-makers. Originality: There is currently no complete study of the same length and ambition of this work, which has sought to develop a comprehensive framework of barriers affecting small entrepreneurial start-ups in the context of modern-day Saudi Arabia.