Article snapshot: "Entrepreneurial Innovation and Policy Implications in the United Arab Emirates"

This blog post provides an article snapshot of our recently published article on SMEs and innovation in the United Arab Emirates. If you would like to cite the article please use the following:

Erogul, M. S., & Van Horne, C. (2014). Entrepreneurial Innovation and Policy Implications in the United Arab Emirates. Journal of Enterprising Culture,22(02), 185-208.

The link to the article is available here: Entrepreneurial Innovation in the UAE

Murat and I wrote this paper based on GEM data from 2009 and 2011 (Murat was an author of the 2009 report and I was an author of the 2011 report). We looked more closely at the data concerning the innovativeness of SMEs in the UAE - both newly formed and established. The goal was to analyse the data to develop some policy recommendations specifically targeted at getting fresh entrepreneurs to choose innovation over "me too" in terms of technologies used and in their products and services offered to customers.

The findings indicate that business activity in the UAE among Emiratis is concentrated in consumer and service oriented ventures, such as retail, restaurants, health, education and social services. Secondly, UAE businesses in general are skilled at technology adoption, but not technology innovation. Thirdly, it has been found that new and young businesses in the UAE have minimal involvement in the high/medium technology sectors. 

If we look at Figure 1 we can see that basically all newly formed SMEs in 2009 -2011 period were in low tech sectors - except for RAK, where nearly 15% of entrepreneurs felt that they were operating in the high tech sector.

Figure 1: Technology level of the sector by Emirate (2009 and 2011)

When it comes to technologies incorporated into the products and services developed by new SMEs the figures are a little more promising. Especially when it came to women entrepreneur, half of whom felt they offered products and services that incorporated the latest technology. This compared to men, where less than one in five felt they used the latest technology. Further research is needed to see what these differences are attributed to... but it would be very interesting to investigate.

As the goal of the UAE to become an innovative economy, innovation will also need to be the life blood of newly formed SMEs and not just large established enterprises. More students graduating from Science and Technology degrees will encourage more to form businesses in sectors other than the service industries and business education will enable entrepreneurs to understand innovation processes and how to adapt them to best fit market needs.


The UAE still has some of the most internationally focussed SMEs on the planet... But for SMEs to become truly competitive they will need to innovate in their products, services, marketing techniques, delivery and supply chain management mechanisms and more. Additionally, the strength and ease of technology transfers, advanced entrepreneurship education and networking opportunities, and significant amounts of early-stage funding are important areas for policy development.

Entrepreneurs and their networks in MENA: an article and project using big data (and policy recommendations too!)

This is a snapshot of an article written in collaboration with Dr. Lotfi (working in Sousse, Tunisia) and Dr. Taha (working in Sanaa, Yemen), it is part of a special issue published in the International Journal of Business and Globalisation. If you would like to cite the information in this blogpost (e.g. too lazy to read the full article, or better yet all the articles in the special issue, but think we did great work) please cite:

Van Horne, C., Belkacem, L., & Al Fusail, T. 2013. “The composition of entrepreneurship networks in MENA: A comparative analysis” International Journal of Business and Globalisation. 11(4), 337-352.

Finally, our special issue and article are published! We started this journey almost two years ago now - an innocent request from Thomas Schott (our tireless leader) to collaborate with GEM teams working in MENA on entrepreneurs and their networks. This request was possible with a generous grant from the IDRC - or the Canadian International Development Research Centre (website in English) whose aim is "IDRC funds researchers in the developing world so they can build healthier, more prosperous societies". An initial meeting planned for Spring 2012 in Egypt, was move to Tunisia and then finally took place in Jordan.

Of course, being me I wrote about what we did each day and posted it on my blog. If you are curious of the dynamics of multi-national/cultural/disciplinary research, then it is worth a read. This was day 1 and if you are interested there are 4 more days to read :) http://uaestrategy.blogspot.ae/2012/06/idrc-paper-development-workshop-or.html

Each of the cross-country teams were given a topic (we gave our preferences) and my team looked at the general composition of the advisory networks around entrepreneurs operating in the MENA region and compared them across the 14 countries for which we had data. Table 1 illustrates the rich amount of data we had at our fingertips (APS stands for the GEM adult population survey):

Table 1: Composition of data used from 14 MENA countries

	Years of APS surveys with networks	Adults in APS	Networks surveyed	Networks around future-start-ups	Networks around start-ups	Networks around owner-managers
Algeria	2009, 2011	5427	2187	1106	765	316
Egypt	2010	2769	996	496	125	375
Iran	2009,2010,2011	10061	3291	1470	620	1201
Jordan	2009	2006	326	0	124	202
Lebanon	2009	2000	610	0	143	467
Morocco	2009	1500	477	0	109	368
Pakistan	2010, 2011	4009	1534	907	298	329
Palestine	2009, 2010	4072	1057	468	234	355
Saudi Arabia	2010	2000	278	14	177	87
Syria	2009	2002	309	0	85	224
Tunisia	2010	2001	643	328	39	276
Turkey	2011	2401	680	156	178	346
U.A.E.	2011	2021	254	40	119	95
Yemen	2009	2065	570	0	555	15
All countries		44334	13212	4985	3571	4656

Through statistical modeling we found that there was significant difference between entrepreneurs at various stages of venture development for network size and network diversity and that entrepreneurs with larger networks (number of advisers and more diverse (from different environments, e.g. private, work, professional advisers are more likely to launch their business in a short time.

However, most entrepreneurs (read the paper to see country and environment specific detail) operating in the region have narrow and shallow networks... (see Figure 2). Most articles might end there, but we had bigger ambitions with this project.

Figure 2: Diversity of the network around an entrepreneur in MENA region

A primary goal of this research was to develop policy recommendations for programs governments, NGOs and other organisations could develop to foster greater and more successful entrepreneurship in this region. These are our policy recommendations (again, read the other GREAT articles in the special issue for a more complete story) that are based on "big data" - the biggest data base available in the region in fact.

Policy recommendations

While further study into all aspects of entrepreneurship in the MENA region is needed, the roles of networks are an important concept to support given the findings of this paper. The following recommendations are drawn from the analysis of the data provided in the GEM APS and the literature on entrepreneurs and their networks.

1.      Local governments, supported by NGOs, private foundations and private companies, should provide an “entrepreneurial space” in community centers or places of worship – where future or new entrepreneurs could have access to information about the process to start a new venture and also come to seek advice from other budding entrepreneurs or advice from professionals who would donate their services.

2.      With the heavy reliance of private networks, and the often times extremely limited resources of pre-start-up and start-up entrepreneurs, professionals should be encouraged to provide pro-bono advice which could be made available to entrepreneurs at local community centers.

The networks used by entrepreneurs, especially in the MENA region are mainly from the private sphere, however, efforts made from local, national and international agencies could supplement these networks for additional entrepreneurial activity currently and in the future.

This was an amazing project and I look forward to continue working with these researchers and this data into the future. En'shallah we will!

Huang & Van Horne Four E Entrepreneurship Policy Framework and Key Recommendations

This post provide a condensed exert from the GEM UAE 2011 Report and is copyrighted material of the authors of the report. It can be downloaded here: UAE 2011 GEM Report

If you would like to quote the report or this blogpost please use the following details: 

Van Horne, C., Huang, V., and Al Awad, M. 2012. “UAE GEM Report 2011”, Zayed University, UAE

This year the Global Entrepreneurship Monitor (GEM) 2011 UAE report presents the Huang & Van Horne Four E Entrepreneurship Policy Framework. This model is based on the assumption that entrepreneurship is the intersection of enterprising individuals and the availability of opportunity.

Huang & Van Horne 4 E Entrepreneurship Framework 

There are four interconnected components which support entrepreneurs and the opportunities they have recognized, from the birth of their ideas to scaling up and going global with successful products and services.

Education is at the heart of giving future entrepreneurs the confidence to make the leap, make wise decisions and to know where to go for guidance and assistance. It can also help build an entrepreneurial mindset in individuals, who might have ideas – but fear the unknown. Education about entrepreneurship helps reduce fear by equipping entrepreneurs with the tools and skills needed to bring dreams to life.

Ecosystem is the supporting infrastructure in which an entrepreneur operates. Regulations, licensing processes, incubation centres, banks, capital markets, and universities, all support entrepreneurs taking maximum advantage out of opportunities.

Export and looking outside of national and regional borders for ideas, for customers and suppliers is essential in a small market such as the UAE. Taking advantage of the unique geographical and demographic makeup of the UAE can give entrepreneurs operating here an edge over international competition.

Enthusiasm is all about supporting the passion that makes an entrepreneur tick. Being a successful entrepreneur means overcoming frustrations and putting in the long hours necessary to transform dreams into reality.

The following are recommendations and action steps that can be taken by policy makers to develop a coherent strategic entrepreneurial policy framework to support a diversified, innovative and competitive economy.

Education

•           Link knowledge creation and venture creation to speed the conversion of ideas into market-ready enterprises. Government as well as large business conglomerates need to invest in research and development activities, building industry-university collaboration through government facilitated and funded applied research project.

•           Improve the match between education and employment opportunities. Develop a job-ready workforce through various levels of education opportunities, training, and apprenticeships as well as other education-industry links, including new structures for schooling. Entrepreneurship ecosystems must contain the skills competitive enterprises need to grow and prosper and must connect people with opportunities to gain those skills.

•           Inject entrepreneurial mindset and behavior into national/regional curriculum at all levels - primary, secondary, vocational, higher education and non-formal education and training, alongside integration of profession-based teaching and learning in all disciplines and curriculum.

•           Encourage UAE youth to acquire some level of entrepreneurial experience before leaving secondary school either as a formal part of the curriculum or as an extra-curricular activity that is overseen by the school or a non-formal education body.

Ecosystem

•           Establish or invest in institutions that are sources of enduring strength, including centers of innovation zones, technology transfer (such as MASDAR, KUSTAR), knowledge creation, university based incubators or innovation academy, apprenticeships, and high-quality education linked to long-term human capital development.

•           Support integrated and coordinated solutions that direct resources to regional coalitions, initiatives, programs and public-private partnerships with coherent strategies, such as small company mentoring or ties between established businesses, corporate social responsibility projects and higher education institutions.

•           Review current small business regulatory environment against international best practices. Stringent immigration related labor regulations coupled with the current regulatory system negatively affect the number of high-impact entrepreneurs. This is an important point for policy makers to note because these entrepreneurs contribute greatly to job creation.

•           Develop strategies that improve the flexibility of labor, communications and market openness while eliminating bureaucracy and invariability of business start-up process across different Emirates, which will contribute to a more entrepreneurially-focused business environment.

•           Mediate the connection between small and large enterprises to promote the growth and success of SMEs in the UAE and revitalize large corporations through partnerships with innovative SMEs. When a small business becomes a corporate supplier, it can experience significant growth. For large companies, increased supplier capabilities could lower costs, improve performance, and simplify its supply chain.

•           Foster an efficient private and public mechanism for entrepreneurship finance. Governments can overcome finance and knowledge gaps through increasing the availability of financial and informational resources. Policies aimed at the development of a venture capital market, direct financial support and the knowledge base can be increased through access to capital market and dedicated small business finance schemes

Export

•           Build a holistic international export strategy by facilitating collaborations through strengthened partnership with rapidly advancing economies (i.e. BRICS countries), as well as building a government led SME cooperation platform and policy to deepen existing strong UAE trading partners such as China, Japan and South Korea.

•           Improve the information and advisory network (accountants, lawyers, investors, etc.) of start-up business owners with more than one stakeholder about their position towards each other, support and resources available. Policy makers have a role to play in defining the growing and competitive markets for the future in UAE and invest in small businesses to penetrate those markets.

•           Develop a dynamic, international competitive human capital strategy to attract and retain highly qualified talent in the UAE. Mobility and diversity of human capital are often key ingredients to enhanced global trade and internationalization. As one of the most international oriented, culturally diversified nation in the world, UAE is yet to reach its full potential.

Enthusiasm

•           Create energy for making positive social changes through entrepreneurship, facilitated by media attention, events, and awareness campaigns. Entrepreneurship is not a heroic act of a few individuals, but the accomplishments of many people who pursue their ambitions in a supportive cultural and institutional environment. GEM global data reveal that cultures which reward hard work and creativity, rather than social and personal connections, will encourage entrepreneurial development.

•           Develop a program for Emirati government employees to take an entrepreneurship leave, similar to an education leave, to reduce the high level of risk associated with leaving a secure and well-paid government job to start a new venture. A certain number of employees could even be provided with office space and basic support to incubate their ventures.  This type of sabbatical program can also be applied by the private sector which can also develop programs to incentivize and recognize innovation and entrepreneurial pursuits.

•           Identify and reward excellence, invest in the best ideas, and spread institutional innovations. National competitiveness requires the unique capabilities and involvement of organizations in collaborations that produce innovative solutions and businesses. Intrapreneurship training and initiatives (such as a short-term career break to pursue entrepreneurial venture for public sector employees) should be encouraged and launched. Leaders tomorrow can be institutional innovators.

•           Connect business, education, social leaders across different sectors to develop regional strategies and produce scalable models that build on local assets, capabilities, and attract new investment. Ecosystems are inherently local. In each emirate, city or cluster, government organizations together with educational institutes, community, social groups - must come together to enrich the ecosystem.