Investigating the Strategic Practices and Entrepreneurial Behaviour of Saudi Arabian SMEs During the Economic Transition and the Implementation of 2030 Vision: A Set of Longitudinal Case Studies

Abstract

This research presents a detailed empirical investigation of the strategy and entrepreneurial behaviour of Small and Medium Sized Enterprises (SMEs) in Saudi Arabia. The study seeks to explore SME activity inductively during the country’s economic transition in a period where the Saudi government is implementing a national development plan called 2030 Vision. SMEs are considered to be the backbone of an economy, playing a vital role in the creation of jobs, contributing to gross domestic product (GDP) and pushing on with economic growth. However, the ‘big bang’ approach accompanying economic transition in Saudi Arabia has created an uncertain and turbulent business environment in which SMEs are expected to struggle and survive. In emphasising the importance of business strategy for coping with a changing environment while managing internal resources successfully for business growth, this area of management studies has received significant attention in the research literature. However, the focus of earlier studies has mainly been on larger corporations, leaving a clear gap where researchers could otherwise be exploring cross-board SME strategy-making. Not only is the existing evidence still inconclusive as to whether strategy is important or not for SMEs’ growth, but there has been no consensus so far on the nature of strategy in SMEs and how it has evolved. Moreover, given the heterogeneity of the field and the radically different circumstances in which SMEs operate, including significant institutional and structural economic diversity (Van Burg et al., 2022; Abubakar et al, 2019; Welter et al, 2017; Xheneti & Bartlett, 2012), the study of SME activity in a transitional economy such as Saudi Arabia could contribute another valuable perspective to the many contexts that differ from the more traditional cases of developed economies. All these considerations have led this study to apply a theoretical lens able to engage critically with seminal works in discussion of business strategies and entrepreneurial behaviour in a transitional economy, taking into account the vital role of context from an institutional based view. These theoretical dimensions obtained from the strategy and learning theories which were able to explain the emergent concept of strategic awareness found in the study. As investigating the nature of strategy and entrepreneurial behaviour during Saudi Arabia’s transition was the primary research objective, the study deployed a qualitative case study approach of 12 SMEs conducted longitudinally over nearly two years using semi-structured interviews and direct observation for data collection. This long and advanced collection process is to be considered pioneering in the context of the study of business environments in Saudi Arabia and the broader Middle East region. The study findings illustrated, firstly, that the mode of strategy most frequently utilised by SMEs was informal meaning that, for the most part, no formal and long-term written plan was used by entrepreneurs as the approach of most of the principal entrepreneurs was implicitly connected to the concept of emergent strategy pioneered by Mintzberg et al. (2009) and the ability of the entrepreneurs for adaptability to the external changes (Vecchiato et al., 2020, Vecchiato, 2019; Vecchiato, 2012; Smallbone et al., 2012; Grant, 2003; Wiltbank et al., 2006). Therefore, the term ‘strategy’ has been used in this study to describe the type of management behaviour of entrepreneurs in responding and adjusting to the external environment and institutional changes which are; diversification and business portfolio, prospecting, evasion and circumvents, financial bootstrapping, inter-organisational network, coping with bureaucratic burdens, exiting the business, lean start-up, and brand reputation boost strategies and behaviours. Secondly, the operations of the majority of small and medium-sized Saudi companies displayed an absence of pure strategy, opting for a mixed strategy approach meaning that more than one strategy has been applied by companies in the sample. Thirdly, strategic awareness was key for entrepreneurs to overcome challenges and capture opportunities as the experiential learning capability of entrepreneurs served to enhance their awareness and adaptability of their wider environment. This enables them as owner-managers to respond accordingly and maintain company growth or, in a crisis, enact the actions necessary for the survival of their company. Finally, the study found that the role of formal and informal institutions is crucial in shaping entrepreneurial behaviours and activities, entailing that the selection of an entrepreneurial behaviours and institution-based approach was appropriate to examining strategy and entrepreneurial behaviours in Saudi Arabia SMEs within the specific context of the frequently changing market environment in a transitional economy. This descriptive and longitudinal study has contributed to the literature by illustrating how strategies and entrepreneurial behaviour has evolved in response to the changes in the environment offering new insight into linking the micro-individual level with the wider environment and demonstrating the role of experiential learning on enhancing the entrepreneur’s strategic awareness. Moreover, the practical contribution of this study was able to inform the policy maker, advisory bodies, and entrepreneurs of the challenging environment during this transition in Saudi Arabia and how to better anticipate them which led to the introduction of number of initiatives to develop policies, consultancy services and training programme.