Pathways and Barriers to Entrepreneurship and Innovation in Kuwait - Dissertation Example

? 28 June, Research Proposal Study of the pathways to entrepreneurship and barriers to innovation in Kuwait. Abstract There has conventionally been great contribution of small and medium size companies (SMEs) in the economic growth of countries. Kuwait also assumes great potential to strengthen her economy by increasing investment in SMEs. In order to achieve this, Kuwait has recently raised one billion pounds for investment in SMEs. The sum has been given to four organizations, three of which are private and one is state-owned, for distribution to the demanding entrepreneurs. However, no more than 300 entrepreneurs have applied for the subsidy, which is a number small enough to make the study of exploration of barriers in the way of entrepreneurship and innovation in Kuwait as done in this research, worthwhile. Research question The research question is; What are the pathways to entrepreneurship and barriers to the establishment of SMEs in Kuwait? Research objectives This research tends to Study the historic contribution of SMEs in the economy of Kuwait Identify the pathways to entrepreneurship and barriers to innovation in Kuwait Develop a concise and objective method of capturing and evaluating the business ideas proposed by the SMEs. Devise ways to improve the tendency of entrepreneurs to take financial aid from the government to establish SMEs. Literature review Small businesses and entrepreneurship is a separate and quite developed field of study in UK supported by a lot of research in the past. Research on SMEs largely commenced in UK in 1970s (Blackburn and Smallbone). Such a late start as compared to US can be attributed to the difference of the external conditions. In the 1970s, UK had the lowest new firm formation and small business ownership rate in the West (Bolton). “It is from this research base that we launch our attempt to describe developments since 1971 and make projections through the next decade” (Curran and Stanworth 16). Small business cultivated in UK in 1980s and in the 1990s, this field was institutionalized, consolidated, and legitimized (Blackburn and Smallbone 22). Past research has conventionally explored the link between entrepreneurial competitiveness and ethnic diversity (Kitching and Hill). Last two decades have shown a tremendous growth in the literature of SMEs (Castel-Branco 1). There is no specific definition of small firms. At sectoral level, the definition of small firms narrates the objective measure of the firm’s size which includes the sales turnover, number of workers, net worth of the business and its profitability. Thus, all firms may be considered small in some sectors, and yet there can be sectors where no firm is considered small (Storey). Entrepreneurship has been largely considered as a means of “decentralisation, economic restructuring and movement in the direction of market economy” (Venesaar and Loomets 1). According to (Frazer 15), there are three factors necessary for entrepreneurial endeavor, namely the trigger, pre-disposing factors, and the enabling factors. The triggers are basically of three types of triggers i.e. need for money which may be instigated by loss of job, health scare and divorce. Prior experience of job and formal education are two pre-disposing factors controlling an individual’s entrepreneurial endeavor. Availability of finance, socioeconomic factors and societal support are some of the potential enabling factors for the entrepreneurs. Kuwait has recently taken certain steps to improve her economical strength. After a careful study of the important economic factors, Macinzee Consulting Company passed certain recommendations one of which was to strengthen the economy of Kuwait by investment in SMEs. The government released 1 billion pounds to be managed by the Kuwait Investment Authority. The funds were to be distributed among the willing entrepreneurs via four organizations, three of which were private and one organization was state-owned. ASME is one the four organizations that have been appointed by the government of Kuwait in order to distribute the funds. ASME is: A non-governmental, non profit Association under the initiatives of a group of academics, businessmen and women establishing to support Small & Medium Businesses which are considered the most important pillars of our economy, playing an important role in our Social and economic development. (ASME). These organizations provide young businessmen and entrepreneurs with valuable advice, guidance and technical, administrative and legal support besides offering them the government subsidies. Although Kuwait has spent more than ?UK 200 billion on investing in SMEs, yet the number of applicants who applied for the subsidy has not passed 500 in spite of the numerous benefits of this scheme. Neither the law prescribes any national (KU) SME classification nor is there any officially recommended designation that is uniformly applied in the KU public or private sectors. Nevertheless, there are important criteria which can and should be employed to define SMEs some of which are as follows:  Manpower: The Ministry of Planning requires every company which employs over 20 employees to participate in the Annual Private Establishments Survey by completing the questionnaire sent to them (it is sectoral: industrial, construction, etc.). The bottom line, however, is that a single-minded application of this criterion alone will result a skewed results: for example, a small retail shop selling jewelry, art, or even coffee may employ 2-3 employees but it may generate a turnover of over KD 5M which makes it hard to decide if it is an SME or a large company. Banks may treat such establishments as “major accounts” but they are really “micro” from the point of view of the people employed.  Capital base (equity, paid up capital): The Industrial Bank of Kuwait treats companies with a capital base smaller than KWD 500,000 as SMEs. Turnover: This is hard to apply to KU because of the absence of Income and Corporation taxes and yearly filing requirements.  Sector: Some sectors are highly capital or manpower intensive. Therefore, sectoral classification may be employed to determine the size of a company e.g. a concrete manufacturing company or a bank are most likely to be large companies. There are sectors in which one may increase capital intensity and thus reduce the number of people employed e.g. Crude oil production, etc. There are financial companies (e.g. Banks, insurance companies, exchange companies, stock brokers, syndicated loans companies, etc.) whose capital base is not smaller than KD 3M. The benchmark for determining whether a financial company is an SME is KD 3M.  There are many applications and formal ways of capturing and evaluating the business ideas proposed by the SMEs. The current manual process involves an analyst conducting an interview with the representative of the SME. During the interview the analyst tries to perceive the business idea, occasionally using some informal diagrams in the form of personal notes. The analyst later uses these notes to develop a Business plan. There are well known models for business plans. The analyst decides if the business plans should be forwarded to the committee within the organization or not. If forwarded, the organization decides whether or not that SME is to be found. Nonetheless, there is no formal mechanism for the evaluation of business plan. The initial states that need to be automated are currently the bottleneck of the process.  This research will attempt to highlight the main challenges that discourage the Kuwaities to establish their businesses and try to identify amicable solutions for the respective problems. Successful completion of this research will allow reliable formal evaluation of a large number of applications. This will make the system error-free. The evaluation will be fairer and will allow the founding committee to review a larger number of proposals aiding greatly to the optimal distribution of founds among the SMEs. A computerized survey of the research work in the form of a web site can be used to measure the current issue. Applicants will be able to use this computerized system to upload their business ideas and be informed that their proposal has been forwarded for consideration. Case studies from Kuwait will be used for evaluation. Research on the effectiveness and the factors influential upon the SMEs is plenty, but almost all of it pertains to its study in the European countries or US. Little to no work has been done to date upon any aspect of SMEs in Kuwait in particular. This comes into conflict with the fact that the economy of Kuwait is quite sensitive towards the role of SMEs. Thus, there exists a gap in the literature regarding the determinants of entrepreneurship in the Arab World, and specifically Kuwait. Methodology: The research will be fundamentally of a quantitative nature. Data will be collected from 500 college graduates with five years of practical experience who may or may not be currently working as well as from 500 current small business owners and also officials in Kuwait. The focus groups will help the researcher analyze the factors that influence the tendency of workers to establish small business from their own point of view. After conducting the focus groups, the factors identified will be offered to the respondents to grade them on a questionnaire as per their impact of their tendency to establish small business of their own on a Likert scale of 1 to 5 with 1 indicating “no impact”, 1 indicating “mild impact”, 3 indicating “medium impact”, 4 indicating “strong impact” and 5 indicating “very strong impact”. Then factor analysis will be conducted to identify common variables that control the entrepreneurs’ psyche. One of the major risks in a research is the availability of the required data for analysis. In my case, this would not be a problem because my network due to my job and previous links is strong enough to provide me with easy access to all relevant data. Summary Review A lot of research pertaining to small and medium size companies (SMEs) has been conducted in the past, and SMEs have played an important role in strengthening the economy of different countries. Factors influencing an entrepreneur have been classified into three fundamental types including the trigger, pre-disposing factors, and the enabling factors. This research will tend to identify pathways to entrepreneurship and the potential barriers to innovation in Kuwait. This research will not only add to the scanty body of literature about functioning and significance of SMEs in Kuwait, but will also generate useful information for government and agencies that are concerned with the abundance and promotion of SMEs in Kuwait. Kuwait is my country of birth. It is where I belong. I want to benefit my country with my research endeavors, and want to produce information that she can utilize to improve her socioeconomic status. I want to play my part in making the government’s attempt to increase SMEs in Kuwait by offering subsidy successful. Thus, I shall identify the factors that tend to hinder an entrepreneurs competency and tendency to establish new business or expand an existing one. This research will be of great value to the Kuwait decision maker who has conventionally suffered from a lack of guiding literature pertinent to SMEs. When I shall achieve the aforementioned goals with the supervision and guidance of professors from WBS in UK, this will not only be a matter of great pride for me, but will also be a great contribution of WBS in improving the business scenario of Kuwait. Besides, my PhD is fully sponsored by the Kuwait Government. So I do not have to compete for the grants that WBS provides. Proposed timetable of activities Activity Time (Start to Finish) Thesis approval Literature review Focus groups Formulation of questionnaire Data collection Data analysis Report writing Thesis presentation Prospective supervisors Works Cited: Association of Small & Medium Enterprises, Kuwait. “ASME Kuwait: Collaborating to grow.” 2011. Web. 28 Jun. 2011. . Blackburn, Robert A., and Smallbone, David. “From the Margins to the Mainstream: The Development of Research on Small Business and Entrepreneurship in the UK.” Kingston University. 2007. Web. 28 Jun. 2011. . Blackburn, Robert A., and Smallbone, David. “Researching small firms and entrepreneurship in the U.K.: developments and distinctiveness.” Entrepreneurship: Theory and Practice. 1 Mar. 2008. Web. 28 Jun. 2011. . Bolton, J. E. Small Firms: Report of the Committee of Inquiry on Small Firms Cmnd. 4811 London: HMSO, 1971. Print. Castel-Branco, Carlos N. “A Critique of SME-led Approaches to Economic Development.” 2003. Web. 28 Jun. 2011. . Curran, J., and Stanworth, J. “The Small Firm in Britain – Past, Present and Future.” European Small Business Journal, vol. 1. issue 1. (1982): 16-25. Kitching, John, and Hill, Kingston. “Ethnic Diversity and Competitiveness: Does the Evidence Justify Policy Action.” Institute for Small Business & Entrepreneurship. 2007. Web. 28 Jun. 2011. . Logan, Julie; Hendry, Chris; Courtney, Nigel, and Brown, James. “Unlocking the potential of the UK’s Hidden Innovators.” Cass Business School. 2008. Web. 28 Jun. 2011. . Storey, D. J. Understanding the small business sector. London: International Thomson Business Press, 1994. Print. Venesaar, Urve, and Loomets, Piret. “The Role of Entrepreneurship in Economic Development and Implications for SME Policy in Estonia.” Tallinn University of Technology. 2006. Web. 28 Jun. 2011. . Read More