Doctor of Business Administration
Faculty of Business
Small and medium enterprises (SMEs) are considered a cornerstone of any economy. They are engines of economic development, job creation, innovation and new business models. SMEs’ relatively small size and agility allows them to be more flexible and adaptable than larger enterprises. However, due to certain characteristics, such as their small size and limited access to resources, SMEs usually face various challenges in their business life cycle. Therefore, governments have introduced policies and support programs to help SMEs set-up their businesses and access development services that aid in advisory, capability development, access to finance and access to markets. Such programs and services are usually implemented for the long term and are a relatively large government expense, thus necessitating evidence of the resulting benefits to justify the programs’ continued funding.
In Dubai, United Arab Emirates, SMEs account for approximately 99% of the total enterprise population, employ around 50% of Dubai’s workforce and contribute around 46% of Dubai’s value-add. In 2002, the Dubai Government launched the Mohammed Bin Rashid Establishment for SME Development (Dubai SME) as the key government agency for supporting SMEs’ creation and growth. Dubai SME has since introduced many support programs to lower business start-up cost, develop SMEs’ capabilities and provide market access and growth opportunities.
This study focuses on one of these programs, the Government Procurement Program, which allocates 10% of annual public procurement contracts to enrolled SMEs. The total value of facilitated contracts since 2002 exceeds 7.5 billion AED, but there has been no assessment of SME growth resulting from the program. Such impact studies have great importance to policy makers to provide evidence on the effectiveness of such programs.
This study investigates the effect of government support on SMEs’ performance by investigating the mediating role of SMEs’ tendering capabilities and activity. The study uses resource-based view as a theoretical backdrop and builds on a new direction of research introduced by Flynn and Davis (2016a, 2017), which states that SMEs should possess certain capabilities to benefit from government procurement programs. The present study introduces a conceptual framework to empirically examine the mediating role of SMEs’ tendering capabilities on their performance. This framework was tested in the context of Dubai, focusing on the Government Procurement Program.
This study’s findings contribute to a growing body of research that aims to understand how government support programs affect and support SMEs’ performance. The study identified a significant path linking government support to SMEs’ growth via two stages of mediation. The first stage shows the mediation role that procedural capability plays in influencing the success rate of winning contracts. The second stage shows the mediation role that the achieved value of contracts plays in mediating the relationship between the success rate in winning contracts and SMEs’ growth performance.
Additional theoretical contributions of this research include the adopted operationalisation of SMEs’ growth performance by capturing their growth rates in sales, profitability and employment for the last three years. This gives a balanced view of the different measures of SMEs’ growth and allows for comparisons across industries, countries and regions.
This research also has important practical implications for policymakers and SME owners. The study findings indicate the importance of SMEs’ procedural capability in achieving higher performance, which can guide policymakers to implement government support programs that target enhancing SMEs’ procedural procurement capabilities to thereby increase their performance. The findings suggest that SMEs should focus on benefiting from available government support programs to build relevant tendering procedural capabilities and increase tendering activity. However, SMEs should be careful when allocating resources to potential contractual opportunities, as the number of contracts won should not be the only metric for success (e.g., total value of contracts won may be a superior target). As the SME usually has limited resources to manage different contracts, if the value of contracts won was not significant, this will not influence its overall growth performance.
This study followed a novel approach and succeeded to address the scarcity of research at the intersection of SMEs’ performance and public procurement programs. Such findings provide greater understanding on how government support can influence SME performance and pave the way to address the highlighted gaps. Therefore, more investigations are needed in this direction in order to strengthen results, provide comparable evidence and assist governments is designing effective support policies.
Disi, Essam Omran, An Empirical Investigation of the Impact of Government Support Programs on Small and Medium Enterprises Performance in Dubai: The Role of Tendering Capabilities and Tendering Activity, Doctor of Business Administration thesis, Faculty of Business, University of Wollongong, 2021. https://ro.uow.edu.au/theses1/1359
Unless otherwise indicated, the views expressed in this thesis are those of the author and do not necessarily represent the views of the University of Wollongong.