Governance and Development of SMEs in the Kingdom of Saudi Arabia: Public Policy and the Role of Multiple Government Actors

Abstract

Small and Medium-sized Enterprises (SMEs) are key drivers of economic growth, job creation, and social development. In the Kingdom of Saudi Arabia, SMEs account for 99% of all businesses, yet their contribution remains modest relative to international benchmarks and face persistent growth obstacles. This research aims to explore how public policy, public governance and regulatory frameworks, implemented by multiple government actors (MGAs), affect the development, contribution and sustainability of SMEs in Saudi Arabia. It has three main objectives: to explore the factors that influence SME growth, development and contribution; to explore how government policies shape SME resilience and market adaptation amid economic, social and institutional transformations; and to assess the role of MGAs in addressing SME development challenges and identifying governance gaps in greater depth for improvement. Adopting a multidisciplinary public policy and management approach, the study draws on theoretical governance perspectives and SME development concepts to explain how policy design, implementation and coordination among MGAs shape SME outcomes in Saudi Arabia. A qualitative case study approach was adopted. Data were collected in Riyadh through semi-structured interviews with 45 participants recruited via snowball sampling. Participants included senior government officials as key informants, SME owners, and business executives and professionals, who shared their perceptions of public policy and SME development, particularly after the launch of national transformation in 2016. Data were coded and thematically analysed in alignment with the research questions. Findings reveal that the national transformation since the launch of Vision 2030 has reshaped the macro-environment affecting SMEs. Requirements to nationalise employment, comply with a rapidly evolving regulatory framework, and meet taxation and a variety of fees collected by MGAs have increased SMEs’ sensitivity to policy design and implementation and have raised the costs and burdens of doing business. Fragmented governance, limited institutional coordination, communication gaps, limited collaborative governance and SME engagement, rising compliance requirements, shifting market dynamics, limited resources, and skills gaps across public and private sectors increase risks to SMEs’ survival and growth, underscoring the role of MGAs in closing governance and performance gaps identified for improved developmental outcomes. Conceptually, the study shows how MGA governance design, coordination and enforcement, under central state steering, shape SME development and position SMEs as policy recipients and instruments of state reform. Empirically, it links lived implementation to outcomes within a contemporary administrative development context, offering original qualitative evidence from an embedded case study that informs governance and management scholarship. Implications reveal that policy should prioritise coordination, predictability and communication, a unified e-government system, transparent enforcement and accountability, SME engagement, a long-term set of defined policies that enable SMEs’ strategic planning, and targeted support guided by outcome-oriented indicators. SMEs should embed compliance readiness, manage costs and regulatory burdens, engage through formal channels, build supply-chain partnerships, strengthen digital capability, and adopt formal governance practices. For sustainable finance, promote legal and financial literacy and encourage investment in promising businesses as an alternative to starting a new venture while remaining in professional employment. Within this macro case limitation, recommended directions include policy-specific and sectoral analyses by firm size, comparative regional work, and longitudinal assessment of regulatory and performance-management effects on development outcomes.